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TWST: Would you give us a brief historical sketch of the company and a
picture of the things you are doing at the present time?
Mr. McGrath: The company was founded in its current form around 2001
when several assets owned by Applied Digital Solutions were merged into
a company called Medical Advisory Services. At the time, Medical
Advisory Services (MAS) was a public company listed on AMEX. As a result
of that merger, all of these assets became a public company on AMEX, and
the name of the company was changed to Digital Angel. It is a company in
the business of tracking, identifying, and communicating with high-value
assets. There are really two broad divisions of the company ' an Animal
Applications division and a GPS division. The Animal Applications
business basically surrounds (as you might guess from the title)
tracking and identifying animals, whether it be visual tags for
livestock (we are the oldest livestock tag company in the United States)
or RFID tagging for animals, whether it be fish, cats, dogs or, again,
livestock with RFID tags. We are the largest manufacturer of RFID
products for animals in the world and have been for quite a while. On
the other side, we have the GPS business where we are one of the premier
manufacturers of search and rescue beacons for military pilots. These
are radios that are body-mounted on pilots that are flying either behind
enemy lines or, in peacetime situations, are activated when the pilot is
ejected from an aircraft. We also manufacture a GPS product that works
primarily in helicopters and allows you to communicate with and track
helicopters flying below radar and in a lot of ground clutter. TWST: What is the competitive landscape like regarding the GPS side?
Mr. McGrath: Our niche is military GPS radios. There are probably six or
seven significant companies globally. We probably have about a 25%
global market share in terms of these products. We are the incumbent in
about 40 countries in the world, which means that we are the primary, if
not the sole, manufacturer of search and rescue beacons for many
companies. The only major market in the world that we have never
penetrated is the United States. However, we are in the process of
refocusing our business to win some business in the United States. As a
matter of fact, we have just won a major contract for the US Air Force
to develop a replacement search and rescue beacon for the URT33. This is
an important time for search and rescue beacons because there are
roughly 100,000 of these military beacons in the world today, and
essentially all 100,000 of them (with the sole exception of a very small
group in India) need to be replaced in the next three to four years. It
has to do with the fact that there is a new satellite system coming into
being, which changes the frequencies from the existing frequencies, and
there is no easy way to retrofit the existing radios. So the 100,000
search and rescue beacons probably will be a $250 million to $350
million type replacement. Obviously, if we are 25% of the market, we
ought to pick up a nice share of that, and I think that we have the
opportunity to actually increase our market share.
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