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Old 27-08-2007, 05:28 PM   #19
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Implantable chip maker merges with its biggest investor

Bernie Monegain
Healthcare IT News
Monday Aug 13, 2007

DELRAY BEACH, FL – Applied Digital, an ID and security technology company is buying St. Paul, Minn. -based Digital Angel, the company that makes implantable patient data chips marketed and sold by VeriChip Corp.

The all-stock deal is valued at $31 million.

Applied Digital created VeriChip, also based in Delray Beach, Fla. , to market and sell the medical record chips that are about the size of a grain of rice. The chips make it possible for individuals to carry their medical history at all times. Proponents say they help prevent medical errors. Others complain about privacy risks.

VeriChip lost $2.6 million on sales of $8.2 million in the quarter that ended June 30. Most of its revenue came from products other than the implantable chip, such as its infant protection systems.

Applied Digital will acquire the remaining 45 percent minority interest it does not currently own in Digital Angel. Once the transaction is complete, the companies will name a new CEO. Applied Digital officials said the new company would trade on the Nasdaq, probably under a new name.

The merger will give Digital Angel stockholders ownership in VeriChip Corp. , which went public in February.

Applied Digital executives say the merger strips away unnecessary corporate overhead and holding company structure, allowing significant streamlining of operations and reduction of costs, expected to be in excess of $2 million per year

“In a single transaction, we will create a financially stronger, more robust and better capitalized company, and substantially reduce overhead costs. We also eliminate Applied Digital’s majority ownership overhang position in Digital Angel, which has created uncertainty among investors and customers,” said Michael Krawitz, Applied Digital’s CEO.

Each of the boards of directors of Applied Digital and Digital Angel unanimously approved the merger agreement.
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