NEW YORK (CBS.MW) -- Applied Digital Solutions' shares soared more than 21 percent
Tuesday on astronomical volume of more than 54 million shares.
after the closing bell.
The shares closed at $1.09, up 19 cents. It
traded as high as $1.23 earlier in the session.
The company hasn't issued a press release
since last Thursday when it announced that it
would post positive EBITDA (earnings before
interest, taxes, depreciation and amortization)
for the first quarter. At that time, the stock was
trading at 66 cents per share.
Earlier in the month, Applied Digital disclosed
that the Food and Drug Administration had
determined that its VeriChip product wasn't a
regulated medical device, clearing the
implantable radio frequency identification device
for sales in the U.S.
The company envisions VeriChip will be used for
a number of security, emergency, and
health-care applications. The dormant VeriChip
is the size of a grain of rice, and it's activated by
a proprietary scanner that reads a verification
number, leading to access to information of the
subscriber's choice, such as medical records.
Restructured
Scott Silverman, Applied Digital's president, told
CBS.MarketWatch.com that he thinks the
stock's recent jump results from a number of
moves to restructure the company and place its
focus on wireless medical and security
products, rather than providing telecommunications infrastructure equipment.
He noted that the company sold 26 business units over the past year, and realized a gain on its
original investment in Digital Angel as a result of that unit's merger with Medical Advisory Systems.
Applied Digital owns 82 percent of the combined company, which now trades on the Amex as Digital
Angel Corp. (DOC: news, chart, profile). All of these events, as well as execution, are expected to
give Applied Digital positive earnings for the first time in two years.
Silverman also pointed to recent media coverage of the company's products as positive catalysts for
the stock price. On April 5, the VeriChip product was featured on NBC's "Today Show." Company
executives appeared with a South Florida family that will be the first group to receive the device.
VeriChip is expected to provide revenue in the current quarter, according to Silverman, who explained
the company's three-pronged initial marketing approach. Applied Digital has been marketing the
product in South America, where it has seen interest due to safety concerns about kidnappings.
Ready for U.S. sales
Now that the product is cleared for sale in the U.S., the company plans to ramp up marketing on its
home turf of Florida with a focus on the considerable elderly population in the Sunshine State. The
product will be offered through doctors but the company eventually plans to develop a distribution
system that would license clinics to perform the implantations.
Also on the radar as a target market are extreme sports enthusiasts who have expressed excitement
about VeriChip because they often engage in dangerous activities in out of the way locations.
Silverman said VeriChip has been appearing near the top of search-engine keyword lists for the past
few weeks.
Asked about a price point for the subscriber aspect of the VeriChip service, Silverman said that
Applied Digital hadn't determined one yet but that it would be well below the cost of a cellular phone.
"We're looking at right around $10 per month," he said.
Applied Digital is launching a Global VeriChip subscriber registry service on May 1 in conjunction
with Digital Angel, which is making available its proprietary biosensor technology and its
FDA-compliant physician call center.
On April 1, Applied Digital reported a loss from continuing operations of $198 million, or $1.23 per
share, in 2001. These results included a charge of $128 million related to asset impairment,
phase-out costs and restructuring. Revenue for the year totaled $156 million, a 16 percent increase
from $135 million in 2000.
