924642--3/17/2008--APPLIED_DIGITAL_SOLUTIONS

related topics

{tax, income, asset}

{product, liability, claim}

{property, intellectual, protect}

{stock, price, share}

{operation, natural, condition}

{personnel, key, retain}

{system, service, information}

Our stock price has reflected a great deal of volatility, including a significant decrease over the past few years. The volatility may mean that, at times, our stockholders may be unable to resell their shares at or above the price at which they acquired them. The combined company may be unable to successfully integrate GT Acquisition Sub, Inc. s operations or to realize the anticipated benefits of the GTC Merger. As a result, the value of our common stock may be adversely affected. We depend on a small team of senior management and key employees, and we may have difficulty attracting and retaining additional personnel. We may be subject to costly product liability claims from the use of our systems, which could damage our reputation, impair the marketability of our systems and force us to pay costs and damages that may not be covered by adequate insurance. We believe that sales of our implantable microchip, and the extent to which our VeriMed system achieves market acceptance, will depend, in part, on the availability of insurance reimbursement from third-party payers, including federal and state governments under programs, such as Medicare and Medicaid, and private insurance plans. Insurers may not determine to cover the cost of the implant procedure, or it may take a considerable period of time for this to occur. VeriChip obtains the implantable microchip used in its VeriMed and VeriTrace systems and DAC obtains the implantable microchip used in its Animal Applications segment s products from a single supplier, making us vulnerable to supply disruptions that could constrain our sales of such systems and/or increase the per-unit cost of production of the microchip. The expiration of patents in 2008 and 2009 covering the implantable microchip technology used in our Animal Applications segment will expose us to potential competition that may have a material adverse effect on its sales and results of operations. Our efforts to protect our intellectual property may be less effective in some foreign countries where intellectual property rights are not as well protected as in the U.S.. Regulation of products and services that collect personally-identifiable information or otherwise monitor an individual s activities may make the provision of VeriChip s services more difficult or expensive and could jeopardize its growth prospects. Domestic and foreign government regulation and other factors could impair our ability to develop and sell our products in certain markets. Our results of operations may be adversely affected if we write-off goodwill and other intangible assets.

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924642--3/17/2008--APPLIED_DIGITAL_SOLUTIONS_INC