Let the Chips Fall where they May

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Press Release

SOURCE: Applied Digital Solutions Inc.

VeriChip's First-ever ``Chipping'' Procedures Attracting Worldwide Media Attention - ABC's Good Morning America to Provide Extended, Two-day Coverage

PALM BEACH, Fla.--(BUSINESS WIRE)--May 7, 2002--Applied Digital Solutions (NASDAQ:ADSX - news)

GMA plans live coverage of Jacobs family "chipping" on Friday morning May 10, 2002, with follow-up interview on Monday morning May 13, 2002

CBS Evening News will cover VeriChip story Friday, May 10, 2002,

including early stage Alzheimer's patient Nate Isaacson

Applied Digital Solutions, Inc. (Nasdaq: ADSX - news), an advanced technology development company, announced today that it is expecting extensive, worldwide media coverage of the first-ever "chipping" procedures scheduled for May 10, 2002.

ABC's Good Morning America will provide live coverage of the Jacobs family "chipping" procedure that morning, with a follow-up interview on Monday morning, May 13, 2002.

In addition, CBS Evening News will air an in-depth story on May 10, 2002, including the "chipping" of early stage Alzheimer's patient Nate Isaacson.

As previously announced, the Jacobs family will be the first family in the world to "get chipped" with VeriChip's personal verification microchip. The historic "chipping" procedure will take place in the first Authorized VeriChip Center in Palm Beach County, Florida, followed by a press conference and an invitation-only brunch for business partners and community leaders. During the press conference and the business brunch, Applied Digital executives will unveil more details about VeriChip's rollout plans.

Commenting on the extensive media interest in the event, Scott R. Silverman, President of Applied Digital Solutions, said: "VeriChip has been the subject of widespread media attention for the past few months, everything from Time Magazine to the Today Show, the Early Show, CNN's American Morning with Paula Zahn, CBS Weekend Evening News, and the O'Reilly Factor on Fox News. We're delighted that Good Morning America and CBS Evening News will cover the first-ever "chipping" procedures on May 10th.

Many other television networks, magazines and newspapers from around the world are expected to be there. CNN, Telemundo, Tech TV, Nick News, Inside Edition, and Fox News all plan to be there. Reporters and photographers from the Associated Press and Reuters will cover the story. We've also heard from The Financial Times Magazine in London, the Washington Post, the Los Angeles Times, Wired News, the BBC, French television, German television, Nippon TV in Japan, Brazil, Italy, Mexico, you name it. Major media outlets throughout Europe, Asia, Latin America and North America have expressed interest in covering this historic international news event, along with details of VeriChip's initial market launch in the United States."

About VeriChip(TM)

VeriChip, first announced on December 19, 2001, is a miniaturized, implantable, radio frequency identification device (RFID) that can be used in a variety of security, emergency and healthcare applications. On April 4, 2002, the company announced that it had received written guidance that the U.S. Food and Drug Administration (FDA) does not consider VeriChip's personal verification device to be a regulated medical device, enabling the company to begin sales, marketing and distribution of VeriChip in the United States. About the size of a grain of rice, each VeriChip is composed of FDA-accepted materials and contains a unique verification number. That number is captured by briefly passing a proprietary, external scanner over the VeriChip. A small amount of radio frequency energy passes through the skin energizing the dormant VeriChip, which then emits a radio frequency signal transmitting the verification number. The company believes its first-mover advantage will enable it to gain significant market share in the emergency information and verification market that is estimated to exceed $15 billion. VeriChip Corporation is a wholly owned subsidiary of Applied Digital Solutions.

About Digital Angel(TM)

Digital Angel(TM) technology represents the first-ever combination of advanced biosensors and Web-enabled wireless telecommunications linked to the Global Positioning System (GPS). By utilizing advanced biosensor capabilities, Digital Angel will be able to monitor key body functions - such as temperature and pulse - and transmit that data, along with accurate emergency location information, to a ground station or monitoring facility. Digital Angel Corporation (Amex: DOC - news) was formed on March 27, 2002, in a merger between Digital Angel Corporation and Medical Advisory Systems, a global leader in telemedicine that has operated a 24/7, physician-staffed call center in Owings, Maryland, for two decades. Prior to the merger, Digital Angel Corporation was a wholly owned subsidiary of Applied Digital Solutions. Applied Digital Solutions is the beneficial owner of 19.6 million shares of Digital Angel Corporation. For more information about Digital Angel, visit www.digitalangel.net.

About Thermo Life(TM)

Thermo Life is a proprietary, thermoelectric generator powered by body heat. Thermo Life is intended to provide a miniaturized power source for a wide range of consumer electronic devices, including attachable or implantable medical devices and wristwatches.

About Computer Equity, Inc. and Government Telecommunications, Inc. (GTI)

Computer Equity, Inc. (Compec) - including its subsidiary, GTI - is a wholly owned subsidiary of Applied Digital Solutions. With a revenue base that exceeds $30 million, Compec specializes in providing a full array of telecommunications, wireless and network integration services to government agencies. Compec's customers include major agencies of the Federal government such as the Social Security Administration, the Department of Justice and the Department of Defense.

About Applied Digital Solutions, Inc.

Applied Digital Solutions (Nasdaq: ADSX - news) is an advanced technology development company that focuses on a range of early warning alert, miniaturized power sources and security monitoring systems combined with the comprehensive data management services required to support them. Through its Advanced Technology Group, the company specializes in security-related data collection, value-added data intelligence and complex data delivery systems for a wide variety of end users including commercial operations, government agencies and consumers. For more information, visit the company's website at http://www.adsx.com.

Statements about the Company's future expectations, including future revenues and earnings, and all other statements in this press release other than historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and as that term is defined in the Private Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are subject to change at any time, and the Company's actual results could differ materially from expected results. The Company undertakes no obligation to update forward-looking statements to reflect subsequently occurring events or circumstances.


Applied Digital Solutions Inc., Palm Beach Investor Contact, Lynn Anderson, 561/805-8007 Media Contact, Matthew Cossolotto, 914/245-9721

-- Doreen (bisquit@here.com), May 09, 2002


it's far to early in the morning to be throwing up over such yech! So I'll not read it all right now!

-- Novina in ND (homespun@stellarnet.com), May 09, 2002.

I wouldn't get too concerned about this. ADSX is just taking the opportunity to hype things up. I highly doubt the actual product goes anywhere. Many companies could make a similar product if a market for it existed. ADSX is all about hype and scam. I've traded their stock a few times in the past few months, started following them around .50 cents right when they started showing up in the media. Definitely not a stock to invest or sit in for long even though it's $2 now. It's already been halted once and I wouldn't be surprised to see it halted again while it totally falls apart, which is usually how these things end up. The financials of this company are horrible and I really think all this hype is a last ditch effort to pull some money out of a failing venture. Below is an excerpt from a well known shortselling firm called Pacific Equity Investigations. They're well known for sniffing out scams, especially on penny stock shell companies like this one;

After trading as low as 11 cents/share last fall, Applied Digital Solutions, Inc. (ADSX) has rocketed more than 320% in recent days from below 50 cents to as high as $2.25/share. While ignited by another bout of the kind of self-promotion that has characterized its history, with no record of commercial success of any kind, this run-up has now become a low-priced momentum play without regard to the company’s very limited fundamental picture.

While ADSX management has tried to portray its company as one “that is now EBITDA positive and will have earnings per share in the first quarter of 2002, the true picture is apparently quite different. In reality, the vast majority of the company’s revenues, after the disposition of a number of different businesses, consist of telecommunications and computer reselling. The former is via its 100% ownership of a business called Computer Equity, a small telecommunications provider, and the latter is via booking 100% of the revenues of a public company called Syscomm International (SYCM), an OTC BB company described as a “value-added systems integrator of computer hardware and software”, which has lost money for 11 consecutive quarters and has a total market value of $1.2 million. It is currently traded at 26 cents per share. ADSX owns 52% of the outstanding shares, but the stock is so thin that it has traded on only 21 days in all of 2002. These are both miserable businesses by all accounts.

Since the greatly self-hyped VeriChip still has not begun so-called marketing, how can ADSX claim that it was profitable in the first quarter? Well, we won’t know for sure until the company finally reports earnings in mid-May, but it is apparently based on a combination of accounting gains being taken on the disposition of various assets and the massive lay-offs that have been conducted by the company, not exactly the kind of thing on which successful companies are made.

The reality is that ADSX is so weak that its auditor, PricewaterhouseCoopers, in its opinion in the Company’s 10-K dated March 27, 2002, cited factors that "raise substantial doubt about the Company's ability to continue as a going concern”. It is so weak that IBM Credit Corporation, which is owed $87 million by ADSX, has completely encumbered all of ADSX’s assets and has forbid them from borrowing a single penny from any other entity. It has exacted an extraordinary 17% annual interest rate over the 12 months ending February 27, 2003, and is able to accelerate the entire loan unless ADSX is able to come up with 40% of the principal and interest owed at that time. This is an absolute pipe dream. As other collateral for this loan, ADSX has been forced to place its entire ownership of Digital Angel Corp (AMEX:DOC) in a trust, which IBM can direct to be sold to help meet the debt obligation next February. Because of the lack of liquidity and likely prospects for DOC, it is not likely that the value of these shares will meet the entire obligation at that time.

This brings us to the vaunted VeriChip, which apparently and unfortunately is the basis on which ADSX has laid its future. According to company filings, the VeriChip is “a miniaturized, implantable identification chip that can be used in variety of medical, security and emergency applications”. Insidetruth is of the opinion that even if there is more than an extremely modest demand for this product for use in humans, the attempt to try to make it an economically sound commercial enterprise is preposterous.

First of all, a medical bracelet, which can be acquired for a tiny one-time cost provides any benefits that such an implantable chip would, and give the patient absolute certainty that a medical professional would know his or her pertinent medical history. Meanwhile, even if the average consumer was willing to pay a monthly fee to have such a chip implanted in his or her body, there is a tacit assumption that the logistics, legal issues, privacy issues, and cost of assembling and maintaining the required data base system would be viable. Even without the legal and privacy issues, how could ADSX cover any of its substantial costs without charging significant fees to subscribers and consumers. What would possibly compel all healthcare providers to pay to subscribe to this database? Why would a potential patient risk his or her life on the chance that system will be no good to them at a critical time? How would any medical personnel know that the chip is there in the first place.

ADSX does not give a lot of insight into this matter. It has estimated that the chip itself would sell for $200, and the company’s CEO said in a CBS Marketwatch interview recently that the company might charge the patient $10 per month as an additional fee. It has also been estimated that the chip scanner that would be required to read the chip would cost up to $3,000, but that ADSX would consider giving that away to hospitals and medical clinics. This all adds up to a terrible business model for a product with very questionable demand.

ADSX has pumped the VeriChip like few untested technology” products we have ever seen. It has put out PR’s on four different occasions this year already ahead of appearances on morning news shows. They have even promised to show the first chipping of a family on the Today Show. We are equally skeptical of the appeal to consumers of seeing such a procedure on television as we are of the use of the product in the first place. And although you wouldn’t know it from all the hype, the company seems to agree. Last October, in an interview with USA Today, company spokesman Mathew Cossolotto said in reply to a question about implantation of Digital Angel technology under the skin, he said, “marketing research shows that consumers have expressed the most interest in a wearable device”. It is hard to understand why it would be any different for the VeriChip.

Meanwhile, there does appear to be a method to the madness. In an extraordinary ramp-up in share issuance over the last 15 months, including to insiders, ADSX now has over 268 million shares. Because of outstanding sweetheart options to management and shares reserved for more stock grants to so-called key employees, and the obvious upcoming need for more money, it was disclosed in the recent annual shareholder proxy that the company is requesting an increased authorization of 90 million shares to 435 million shares.

The proxy also disclosed something that should be even more troubling to ADSX shareholders but is not surprising to us here at Insidetruth. It turns out that the Board allowed the exercise price of every existing executive management stock option to be reduced to 15 cents per share, virtually the low price of 2001. Not content with that, it made additional grants to the same group, with an exercise price of the same 15 cents. In total, the group got a total of 13,276,000 of either new or re-priced options during the year. The bulk of both went to the Chairman and CEO, Richard Sullivan, who also elected to exercise 2,353,703 options during the year, later filing to sell 3 million shares.

These option grants were not the only form of sweetheart stock arrangements for Mr. Sullivan. As part of the company's February 12th registration of 52.5 million shares of stock, Mr. Sullivan received nearly 3.4 million shares of stock “in lieu of cash compensation” for 2001. To complete the picture, Richard Sullivan’s wife, Angela, is also on the ADSX Board, registering 100,000 shares herself in that February 12th filing, as “shares issued in lieu of cash payments for directors fees”.

This brings us back to Digital Angel Corp (AMEX: DOC)., where the practice of granting low-priced options to insiders has been cloned. The company just filed an S-8 registering for insiders 5.2 million options with an average exercise price of 41.5 cents, even as the stock was trading above $4. Based on a company press release, some insiders apparently took immediate advantage of these grants by exercising them and selling the stock. Given IBM Credit Corp.’s interest in the matter, perhaps it might have been better served to ask for 100 million or so shares of ADSX stock to sell into the market to extinguish its loan to ADSX. Perhaps they will.

Meanwhile, the pumping of its stock by ADSX knows no bounds. Digital Angel apparently has elected to use its own resources to try to design a product tracing livestock for consideration by Embrapa, a Brazilian corporation that makes recommendations to the Brazilian agricultural community in hopes they will be used. According to the press release, Embrapa has made more than 9000 recommendations for Brazilian agriculture. It is not known how many of those were ever actually employed.

Naturally, because this arrangement is so nebulous, Digital Angel says, “the total value of the contract is undefined”

-- Dave (multiplierx9@hotmail.com), May 09, 2002.

here's a good illustration of what hype press releases and exposure can do for a company and the insiders that hold the stock. INVN is a fairly legit company that makes bomb detection equipment but nothing they do merits their stock going from $2.50 to $50 in about 8 weeks time. They and people holding an interest took the opportunity to hype it up following the events of 9/11. Basically the same thing ADSX is doing, using current events and concerns as a vehicle to hype their stock up.

-- Dave (multiplierx9@hotmail.com), May 09, 2002.

Good point Dave.

Outsiders (commoners) can also profit from this type of hype IF they pay attention. A lot of people made a lot of money off the terrorist attack in NY. Was it evil to do so, or just trying to make a buck ?? Could be either or both.

Talk to you later.

-- Bob in WI (bjwick@hotmail.com), May 09, 2002.

Thanks, Dave. I had wondered. Is there no honor among the thieves (chuckle). Its ironic, to be protected from the brave new world by the old corrupt one.

-- charles (cr@dixienet.com), May 09, 2002.

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