## Digital Angel Corporation is Awarded United States Patent
for Next-Generation, Enhanced-Performance Implantable Microchip

> Press Release Source: Digital Angel Corporation

> ##### Technology Breakthrough is Expected to Create Growth Opportunities With New Marketplace Applications; New Patent (#6,400,338) for 'Passive Integrated Transponder Tag With Unitary Antenna Core' Builds on the Company's 'Keystone' Implantable Microchip Patent (#5,211,129) - Worldwide Patents Pending

> Thursday October 3, 7:30 am ET

> ST. PAUL, Minn., Oct. 3 /PRNewswire/ -- Digital Angel Corporation (Amex: DOC - News) announced today that it has been granted a United States patent for its next-generation, enhanced-performance implantable microchip. The subdermal, radio frequency identification (RFID) technology is expected to find a wide range of new marketplace applications. Worldwide patents are pending for this implantable microchip breakthrough.

> The next-generation microchip significantly improves the performance of the Company's existing subdermal chip, extending the range of the radio signal emitted by the chip and increasing the speed at which the information on the chip can be read by the Company's proprietary scanners. These performance enhancements are expected to open up growth opportunities with a variety of new marketplace applications for the implanted microchip.

> In essence, the technological advance involves a revolutionary and proprietary new "unitary core" design. This proprietary "unitary core" frees up more space within the surrounding tube for a bigger, more powerful antenna, which substantially increases the range of the chip's radio signal. The new design improvement also yields a doubling in the chip's magnetic field, which helps to open up new applications -- such as doorway-type, walk-through scanners -- required for a variety of security-related, building-access applications.

> Commenting on the new patent, Randolph K. Geissler, CEO of Digital Angel Corporation, stated: "This is a major breakthrough for the Company, for our customers, and for our shareholders. A real tribute to our microchip R&D engineers, this patent builds on our leadership in the implantable microchip industry. We invented and pioneered this technology, and we continue to lead through the ownership of various patents and proprietary technologies surrounding the subdermal microchip. The new design and enhanced performance will open up exciting applications and growth opportunities for Digital Angel Corporation and its customers."

> The new patent builds on the Company's underlying "keystone" patent for its implantable RFID microchip. The technological advance will become the enhanced-performance platform for the Company's entire line of implantable microchips. The new design -- which has the added benefit of making the microchip more susceptible to an automated production process -- is the result of a three-year research and development effort. The new, automated manufacturing process will enable the Company to cost-effectively increase production capacity to meet ever-growing demand, especially with regard to emerging marketplace applications.

> The next-generation, patented microchips will be included in production runs beginning in the fourth quarter of 2002. The new subdermal chips are fully compatible with the Company's proprietary scanners so animal shelters and veterinary clinics will not need to replace their existing scanners. The performance of those scanners will be enhanced due to the improved RFID chip technology.

> The new proprietary chip's extended range and enhanced magnetic field will expand its utility in various animal applications, including certain fish-related applications. Some salmon species, for example, have been officially declared an endangered species in the Pacific Northwest region of the United States. In response, the U.S. Department of Energy has recognized the need for more efficient identification and research programs for salmon migratory patterns. Digital Angel's next-generation chip will assist in this effort. Digital Angel pioneered the first microchip system, enabling the government to begin migratory tracking of microchipped salmon through U.S. waterways.

> The "unitary core" microchips should also aid in the adoption of the Company's livestock tracking and identification systems. The enhanced performance of the implantable RFID chips will simplify the data-collection (scanning) process while making the systems more cost-effective to install and easier to maintain in this very demanding market.

> About Digital Angel Corporation

> On March 27, 2002 Digital Angel Corporation completed a merger with Medical Advisory Systems, Inc., which for two decades has operated a 24/7, physician-staffed call center in Owings, Maryland. Prior to the merger, Digital Angel Corporation was a 93% owned subsidiary of Applied Digital Solutions, Inc. (Nasdaq: ADSX - News), which now is the beneficial owner of a majority position in the Company. Digital Angel(TM) technology and patents represent the first-ever combination of advanced sensors and Web-enabled wireless telecommunications linked to Global Positioning Systems (GPS). By utilizing advanced sensor capabilities, Digital Angel will be able to monitor key functions -- such as ambient temperature and physical movement -- and transmit that data, along with accurate emergency location information, to a ground station or monitoring facility. The Company also invented, manufactures and markets implantable identification microchips the size of a grain of rice for use in companion pets, fish, and livestock. Digital Angel Corporation owns patents for its inventions in applications of the implantable microchip technology for animals and humans. For more information about Digital Angel Corporation, visit http://www.digitalangel.net .

> Statements about the company's future expectations, including future revenues and earnings, and all other statements in this press release other than historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and as that term is defined in the Private Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and are subject to change at any time, and the company's actual results could differ materially from expected results. The company undertakes no obligation to update forward-looking statements to reflect subsequently occurring events or circumstances.

> ## Microchips Under the Skin Offer ID, Raise Questions

> By Kevin Krolicki

> LOS ANGELES (Reuters) - Picture a chip the size of a grain of rice that can be injected into your body and give detailed information about you to anyone with the right scanning equipment.

> A scene from a bad science fiction film? A radical research project in some secret government laboratory?

> The chip is neither fiction nor obscure science, but instead it is a soon-to-be-marketed product ready to make its way to customers in the year ahead.

> The use of high-powered chips melded to the body has been a recurrent theme of sci-fi from the 1984 cyberpunk novel ''Neuromancer'' to the 1999 blockbuster film ``The Matrix,'' but the announcement of a commercial-ready product by Applied Digital Solutions (Nasdaq: ADSX) this week will focus real-world attention on the potential and risks of such technology, experts said.

> Designed to store critical personal medical data, the chip could mark the start of a more urgent debate about potential privacy invasions at a time when privacy advocates are on the defensive over anti-terror initiatives after Sept. 11.

> ``It's certainly going to raise issues that we haven't dealt with before,'' said Stephen Keating, executive director of the Denver-based Privacy Foundation.

> Such radio-activated chips are already used to track cattle, house pets and salmon.

> But this would mark the first attempt to apply the technology to human beings, offering a potentially controversial means for hospitals to ``scan'' patients in emergency rooms and for governments to pick out convicted criminals.

> Applied Digital said Wednesday it would begin marketing its implantable VeriChip in South America and Europe, initially as a means to convey information about medical devices to doctors who need a quick way to find out how and where patients with pacemakers, artificial joints and other surgically implanted devices have been treated.

> When activated by a radio scanner, the chip would emit a radio signal of its own from under the skin that would transmit stored data to a nearby Internet-equipped computer or via the telephone, the company said.

> The chip itself could be implanted in a doctor's office with a local anesthesia and the site of the injection could be closed without stitches, it said.

> But the company already has its sights on more ambitious applications for the chips, which are currently capable of carrying the equivalent of about 6 lines of text. Future versions could emit a tracking beacon or serve as a form of personal identification, an executive said.

> ``There are enough benefits that outweigh the concerns people have about privacy,'' said Applied Digital Chairman and Chief Executive Richard Sullivan.

> Other experts remain skeptical, citing immediate practical problems, such as the need to set standards that would make such chips more universally readable, and longer-term concerns over civil liberties.

> Even so, such implants are certain to become more widespread, said technology forecaster Paul Saffo.

> ``Of course, we will do this,'' said Saffo of the Silicon Valley-based Institute for the Future ``And it won't be just for the functionality. It will also be for fashion. You've got a generation that's already piercing themselves. Of course, they're going to put electronics under their skin.''

> TOUCHED BY A DIGITAL ANGEL

> Applied Digital, which has a $95-million market value and has been scarcely followed on Wall Street, plans to file an application with the Food and Drug Administration in January to market the chip in the United States, a process that could take another year to 18 months, Sullivan said.

> The Federal Communications Commission has already licensed the chip's use of radio frequencies because of an existing version used to track runaway pets, said Sullivan.

> The Palm Beach, Fla.-based company is just coming through a two-year-long restructuring, reorganizing a far-flung telecommunications business around a patent it acquired in December 1999 for a transmitter that could be implanted in the body and powered by muscle movements.

> The first related commercial application was a remote-monitoring device called Digital Angel, introduced at the end of November, which combines a wristwatch-like sensor linked to a wireless transmitter and a global positioning system.

> The device can transmit information on body temperature, pulse and location and has been sold as a way to track Alzheimer's patients and children who might wander from home.

> The company has also won a three-year trial contract with California to supply a version of the product that would track paroled prisoners in Los Angeles and alert authorities when they had violated the terms of their parole by leaving a set area.

> Sales of the new implanted chip could total $2.5 million to $5 million in 2002, Sullivan estimated, a small fraction of a potential market the company has projected could be worth $70 billion or more.

> Wall Street is excited about the chip. Applied Digital, which saw its stock rise 18 percent to 45 cents on the Nasdaq on its initial product announcement on Wednesday, is in talks with major pacemaker manufacturers about a joint-marketing plan that would see the VeriChip implanted at the same time as the heart-regulating devices, he said.

> Some see new opportunities for high-tech security after the hijacking attacks on New York and the Pentagon killed nearly 3,300 on Sept. 11. The attacks brought new support for the use of such technology by government and more interest in its future commercial applications, Sullivan said.

> ``People are becoming less concerned about what information is out there,'' he said.

> Erwin Chemerinsky, a civil rights expert and law professor at the University of Southern California, conceded that the public mood has shifted, but said: ``It all depends on how this is used ... when the government is invading the body there are always special privacy concerns.''

> ``This is rightly going to prompt debate, as you can imagine, but the good news is that we'll have years to figure it out,'' said futurist Saffo.

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