A class action lawsuit has been filed in the United States District Court for the Southern District of Florida on behalf of persons who acquired the securities of Applied Digital Solutions, Inc. ("Applied Digital" or the "Company") (NASDAQ:ADSX) between February 11, 2000 and May 10, 2002 (the "Class Period").
The complaint alleges that Applied Digital and its Chief Executive Officer violated the federal securities laws by issuing false and misleading statements during the Class Period. Contrary to their positive statements, defendants were in possession of materially adverse information regarding the Company's lack of proper accounting controls and improper revenue recognition at certain subsidiaries, but failed to disclose this information to investors for more than two years.
On April 18, 2002, Applied Digital disclosed that during the fiscal year ended December 31, 2001, one of the Company's subsidiaries had been recognizing revenue without "evidence of customer acceptance prior to the recognition of certain revenue." The Company also disclosed that during the fiscal year ended December 31, 2000, a second subsidiary of Applied Digital "lacked monitoring controls over its accounts receivable and was unable to provide certain detailed inventory listings for certain general ledger balances." The April 18, 2002 disclosure of the Company's accounting irregularities caused the price of Applied Digital stock to plummet 40%. Approximately three weeks later, on May 9, 2002, defendants claimed that nearly every major hospital in the West Palm Beach, Florida area would be equipped with VeriChip scanners, an indispensable component of the Company's VeriChip technology. However, one day later on May 10, 2002, the truth was disclosed that no hospital had accepted a scanner, an essential device for retrieving the VeriChip's information. Following the May 10, 2002 disclosure, the price of Applied Digital stock again fell sharply, dropping nearly 30% in a single day.
The complaint alleges that as a result of the defendants' conduct, plaintiff and other members of the Class suffered damages.
The complaint alleges that as a result of the defendants' conduct, plaintiff and other members of the Class suffered damages.

Update

This case has settled. Proofs of claim are no longer being accepted. This case has been settled. The Claims Administrator for this litigation is The Garden City Group, Inc. The deadline for submitting a proof of claim was March 15, 2004. If you would like further information about the settlement, please go to www.gardencitygroup.com.