5/24/02 6:33:29 PM Pacific Daylight Time


The Electric Warrior : News May 24, 2002


*** In the aftermath of a highly publicized implant campaign,
the human ID chip encounters FDA regulation, stock market
delisting and a short-sell trading scandal ***

» photo - VeriChip

(The Electric Warrior) - VeriChip, the first human implantable
ID device, is being investigated by the FDA because of company
claims that the device offers potential medical benefits.
Applied Digital Solutions also faces financial woes involving
a pending Nasdaq delisting and an alleged short-selling stock
manipulation scheme.

The company's dispute with the FDA involves ADS marketing
claims that VeriChip can link to medical databases. The issue
dates back to a letter sent to the FDA's Office of Compliance
on behalf of ADS, which described VeriChip as having no
medical purpose: "It is for security or financial or other
identification purposes only."

Based on that description, the FDA agreed that VeriChip did
not appear to be a regulated device. As reported by TechTV,
"The email exchange appears to be the sole basis for Applied
Digital's announcement on April 4 that the company had
received favorable FDA guidance."

On May 10th, VeriChip was implanted into eight people, with
the whole world watching. The event gathered so much media
attention that ADS could choose between rival television
networks offering to provide live coverage. Big Media promoted
the medical benefits VeriChip had been promising all along.

Company statements about VeriChip's use as a non-medical
device are in apparent conflict with what ADS has said both
before and after contact with the FDA. Following the historic
Jacobs family "chipping", an ADS press release aggressively
promoted VeriChip applications in the healthcare arena.

The FDA launched their formal investigation into ADS following
media reports exposing VeriChip's linkage to medical databases.


As reported by this blog, ADS commenced their controversial
human implantation by promoting the notion that their device
could uniquely identify a human being, and that ID could be
used to index some database somewhere.

Obstacles to realizing any benefits from VeriChip are many.
News reports following the notorious effort to "Get Chipped"
revealed that neither hospitals nor emergency medical
technicians (EMT) have agreed to accept the hand-held scanners
needed to read the device.

Furthermore, the Los Angeles Times reported that ADS plans
to charge a monthly service fee for storage of medical data
linked to VeriChip. So, any long-term medical benefits appear
to hinge on a subscription to Global VeriChip Subscriber
(GVS) service.

The Nasdaq stock market halted trading in ADSX stocks following
news of the FDA investigation. At that time, ADS issued a press
release saying the FDA had asked for additional information
regarding the linking of the VeriChip verification number with
a medical database.

Trading resumed on Monday this week, but on Tuesday an FDA
spokeswoman reiterated that ADS had not raised the possibility
of linking the chip to medical databases, nor had the agency
approved such links.


Without embedded medical data, and with no linkage to external
medical databases, VeriChip remains primarily a human
identification technology. A human "Bar Code."

ADS describes its core business as "implementing e-business
solutions for the Internet", and for technology like VeriChip
that means the device must be ubiquitous. In other words, a
lot of people need to be implanted with the chip. The idea is
easy to understand: Like telephones and networked computers,
some technology is only useful when many people use it.

Beyond that, privacy advocates have warned that VeriChip's
security system can be easily "spoofed". That means, even if
you have the chip embedded in your body, a malicious computer
expert could hack the device and steal your identity. The
potential risks are even more damaging when you add biometric
and GPS locational data, proposed by future Digital Angel chips.


ADS is currently seeking guidance from the SEC regarding the
filing of unaudited financial statements. In a press release
unrelated to the pending Nasdaq delisting, ADS's Chairman and
CEO said company stocks were involved in an alleged stock
manipulation scheme involving the FBI.

On Wednesday May 22, the company received warning that ADS
was in danger of being delisted from the Nasdaq stock exchange.
The ruling changed the company ticker symbol from "ADSX" to
"ADSXE". Delisting means ADS stocks would be of little
interest to institutional investors.

Whereas the company has assured its investors that their
accounting deficiency is of a temporary nature, ADSXE stocks
are also apparently embroiled in an illegal stock manipulation
scam, allegedly involving a con-artist and two FBI agents.

In a May 24 press release, ADS Chairman and CEO Richard J.
Sullivan said the company may have been victimized by a
short-selling stock scheme. Short-selling is a strategy in
which an investor profits when a company's stock price falls.

According to a report from WorldNetDaily, the company promoting
"digital angels" is now looking for "angel investors" in the
form of federally funded government contracts. WorldNetDaily
reports a long list of proposed government uses for the ADS
biochips, including soldiers, people under house arrest,
prisoners and parolees.

ADS has recently launched Computer Equity (Compec) and a
subsidiary, Government Telecommunications, Inc. (GTI).
"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."


Pay attention to VeriChip's standing with the FDA as a non-
regulated medical device. Without obvious medical benefits,
the implant competes with other biometric identification
technologies such as thumb-print, human eye, and even DNA
scanning, which are both less invasive and far less
frightening to the public.

The financially ailing company holds numerous patents that
protect VeriChip and Digital Angel technologies, and Applied
Digital Solutions could generate significant revenue from
spin-offs that involve human tracking or implant devices,
perhaps funded by your own taxed dollars.

The company that got worldwide media attention pushing their
trademarked agenda to "Get Chipped" is just one example of a
biotech boom that will rival last century's advances in
silicon and software.


FDA Launches Investigation Into VeriChip

(TechTV) - Nasdaq halted trading in shares of VeriChip-maker
Applied Digital Solutions Friday morning, a day after TechTV
reported that the Food and Drug Administration has launched a
formal investigation into the company...Pellerite told TechTV
that Applied Digital may have violated the law when Bolton
claimed, "There's more information that can be pulled out of
the FDA-compliant database."

Florida family gets medical data chip implants

(ABC News Online) - For the moment, no hospitals or emergency
medicine technicians in the area where the Jacobs live have
agreed to accept scanners, which the company is offering free
to hospitals in Palm Beach, Broward and Miami-Dade counties,
company spokesmen said.

ADS Ticker Symbol on Nasdaq Exchange Will Appear as ADSXE

(ADS Press Release) - Late yesterday afternoon, the company
received a letter from the Nasdaq staff indicating that the
Form 10-Q does not comply with Marketplace Rule 4310(c)(14),
and accordingly, an "E" will be added to its trading symbol.
The letter indicated that the company's common stock is
subject to delisting unless the company requests a hearing
before a Nasdaq listing qualifications panel.

Shortseller, FBI agents nabbed for stock fraud

(Reuters) NEW YORK - It's a dream for a dishonest stock trader
and nightmare for law enforcement: tap into confidential FBI
databases and get information about companies in regulatory
or criminal peril...Even worse, two of the alleged conspirators
were agents of the Federal Bureau of Investigation.

Implanted chip firm seeks financial 'angel'

(WorldNetDaily) - Now the big push is on to convert all the
media coverage into dollars, as the financially troubled
company tries to score a federal procurement touchdown by
signing up the U.S. government as a customer.

May 24, 2002
Silicon Valley, CA

Graphics & Gonzo

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