Applied Digital Solutions (NASDAQ:ADSX)
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Digital Angel Corporation Announces 2004 Third Quarter,
Nine-Month Results
Q3 Revenues Up 40%, Gross Profit Up 44%, Company Raises Guidance for 2004
SO. ST. PAUL, Minn., Nov. 2 /PRNewswire-FirstCall/ -- Digital Angel
Corporation (AMEX:DOC), an advanced technology company in the field of rapid
and accurate identification, location tracking and condition monitoring of
high-value assets, today announced results for its third quarter and nine
months ended September 30, 2004. Revenues were up 40 percent in the third
quarter and 21 percent in the nine months, compared to the prior-year periods
as the Company continued to accelerate top-line growth and gross profit.
Revenue for the third quarter of 2004 was $11.2 million and the net loss was
$527,000 or $0.01 loss per share, compared to revenue of $8.0 million and a net
loss of $2.6 million or $0.10 loss per share in the same period of 2003.
Revenue for the first nine months of 2004 was $32.0 million and the net loss
was $6.3 million, or $0.20 loss per share, compared to revenue of $26.6 million
and a net loss of $4.9 million, or $0.18 loss per share in 2003. The results
for the first nine months of 2004 were negatively affected by a non-operating
charge of $2.9 million to recognize realized and unrealized losses on an
investment in common shares of Applied Digital (NASDAQ:ADSX) that the Company
received in March 2004. Applied Digital is a majority stockholder of Digital
Angel Corporation. On October 14, 2004 the Company sold the remaining
1,070,000 shares for net cash proceeds of $4.0 million recording a gain of $1.7
million, which will be recorded in the fourth quarter.
CEO and President Kevin McGrath commented, "I am extremely pleased with the
performance of the management team in the third quarter. In Animal
Applications, we've had a solid performance related to livestock and companion
pet microchips at the top-line and at the bottom-line. All of our Signature
Industries business units had strong performances. Moreover, I am pleased
that, after some normal production start-up challenges, we are finally reaching
reasonable production levels on our new SARBE G2R search and rescue beacon
product."
McGrath continued, "Highlights for the third quarter included the completion of
the sale of the Medical Advisory Services related real estate and the signing
of a renewed 10-year contract with Schering Plough (NYSE:SGP) for the companion
pet 'Home Again(R)' product for the United States.
"In addition, as we indicated earlier in the year, the ADSX shares we acquired
from Applied Digital were targeted solely for liquidity purposes. Completion of
that sale in the month of October significantly strengthens our balance sheet
and positions us for rapid growth in the months ahead."
The Company increased its revenue guidance for the year from the prior estimate
of $45 million to a range of $46-$47 million. Moreover, independent of the
gain on the ADSX share discussed above, the Company reaffirms its prior
guidance that it expects to be net income positive in the fourth quarter.
Revenue for the Company's Animal Applications segment of the business increased
2.9 percent, from $5.4 million to $5.5 million in the third quarter, and 1.9
percent, from $18.3 million to $18.7 million, in the first nine months of 2004
compared to the prior year periods. In the GPS and Radio Communications
segment, revenue increased by 113.7 percent, from $2.7 million to $5.7 million
in the third quarter, and by 62.1 percent, from $8.2 million to $13.3 million,
for the first nine months of 2004 compared to the year earlier periods. The
increases in the GPS and Radio Communications segment were primarily due to
increased revenue at the Signature Industries subsidiary, based in the United
Kingdom, and revenue from OuterLink Corporation, which was purchased in
January.
CFO James P. Santelli commented, "Our strengthened cash position coupled with
our modest level of debt positions the Company well to fund the working capital
investments necessary to support the introduction of our Bio-Thermo(TM)
transponder as well as the growing demand for electronic identification tags in
the livestock market."
Results Conference Call
A conference call for institutional investors to discuss the results for the
third quarter of fiscal year 2004 will take place today at 10:00 am EDT, and
will be broadcast live over the Internet. The live webcast may be accessed by
visiting the Company's site at http://www.digitalangelcorp.com/ or by going to
PrecisionIR's webcast site at http://www.vcall.com/. Web participants are
encouraged to go to the website at least 15 minutes prior to the start of the
call to register, download and install any necessary audio software. The
online archive will be available immediately and continue for five days.
About Digital Angel Corporation
Digital Angel Corporation develops and deploys sensor and communications
technologies that enable rapid and accurate identification, location tracking,
and condition monitoring of high-value assets. Applications for the Company's
products include identification and monitoring of humans, pets, fish and
livestock through its patented implantable microchips; location tracking and
message monitoring of vehicles and aircraft in remote locations through systems
that integrate GPS and geosynchronous satellite communications; and monitoring
of asset conditions such as temperature and movement, through advanced
miniature sensors.
Digital Angel Corporation is majority-owned by Applied Digital, Inc.
(NASDAQ:ADSX). For more information about Digital Angel, please visit
http://www.digitalangelcorp.com/.
The statements in this press release that are not strictly historical, are
"forward-looking" statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934
and are intended to be covered by the safe harbors created by these sections.
The forward-looking statements are subject to risks and uncertainties and the
actual results that the Company achieves may differ materially from these
forward-looking statements due to such risks and uncertainties, including, but
not limited to, that recent changes in the Company's senior management could
have an adverse effect on the Company's financial results that the Company's
stockholders will experience dilution if certain debt owned by the Company is
converted into common stock; the risk of foreclosure on substantially all of
the Company's assets; that the Company's majority stockholder, Applied Digital
Inc. is able to completely control the board of directors and may support
actions that conflict with the interests of other stockholders; that the
Company's earnings will decline if it writes off additional goodwill and other
intangible assets; that exercises of the Company's options and warrants
outstanding and available for issuance may adversely affect the market price of
the Company's common stock, the Company's inability to generate income, the
Company's ability to maintain patent and trade secret protection, domestic and
foreign government regulation, the Company's sales to government contractors of
animal identification products, dependence on a single production arrangement
for its patented syringe-injectable microchips, dependence on principal
customers, competition in the visual and electronic identification markets,
foreign currency rate fluctuation, dependence on a small team of senior
management and the Company's ability to develop, integrate, miniaturize and
market the Digital Angel (TM) technology. A detailed statement of risks and
uncertainties is contained in the Company's reports to the Securities and
Exchange Commission, including in particular the Company's Form 10-K for the
fiscal year ended December 31, 2003. Investors and stockholders are urged to
read this document carefully. The Company can offer no assurances that any
projections, assumptions or forecasts made or discussed in this release will be
met, and investors should understand the risks of investing solely due to such
projections. The Company undertakes no obligation to revise any
forward-looking statements in order to reflect events or circumstances that may
arise after the date of this press release.
For further information please contact: investors, Michael Lucarelli,
+1-212-691-8087, , or media, Len Hall, +1-949-474-4300, , both of Allen & Caron
Inc, for Digital Angel Corporation
DIGITAL ANGEL CORPORATION AND SUBSIDIARIES
Condensed Balance Sheets
(in thousands)
Sept. 30, December 31,
2004 2003
(Unaudited)
Total Current Assets $16,891 $13,638
Property and
Equipment, net 5,985 6,528
Goodwill and Other
Intangible Assets, net 53,170 45,119
Other Assets, net 1,157 942
Total Assets $77,203 $66,227
Current Liabilities $13,804 $14,926
Long-term Debt and 2,300 2,818
Notes Payable
Deferred Revenue 700 --
Minority Interest 136 --
Stockholders' Equity 60,263 48,483
Total Liabilities and
Stockholders' Equity $77,203 $66,227
Statement of Operations Data
(in thousands, except per share data)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2004 2003 2004 2003
(Unaudited)
Total Revenue, net $11,180 $8,011 $32,021 $26,566
Gross Profit 5,016 3,487 13,701 11,541
Net Loss (527) (2,640) (6,260) (4,907)
Net Loss per
Common Share
(basic and diluted) (0.01) (0.10) (0.20) (0.18)
Weighted Average
Number of
Common Shares
Outstanding
(basic and
diluted) 32,892 26,993 32,036 26,839
Selected Cash Flow Data
(in thousands)
For the Nine Months Ended
September 30,
2004 2003
(Unaudited)
Net Cash Used in Operating Activities $(3,671) $(3,470)
Net Cash Provided by (Used in)
Investing Activities 4,039 (769)
Net Cash (Used in) Provided by
Financing Activities (951) 4,270
Net Decrease in Cash and Cash Equivalents (587) (204)
DATASOURCE: Digital Angel Corporation
CONTACT: investors, Michael Lucarelli, +1-212-691-8087,
, or media, Len Hall, +1-949-474-4300,
, both of Allen & Caron Inc, for Digital Angel Corporation
Web site: http://www.digitalangelcorp.com/