Item 1.01 Entry into a Material Definitive Agreement.

On January 5, 2008, Digital Angel Corporation, a Delaware corporation ("Digital Angel"), a wholly-owned subsidiary of Applied Digital Solutions, Inc., a Delaware corporation, entered into Amendment No. 1 to the Product Supply and Distribution Agreement dated February 13, 2007 (the "Amended Agreement"), by and between Digital Angel and Schering-Plough Home Again LLC ("Schering"). The Amended Agreement governs the terms pursuant to which Digital Angel has agreed to provide Schering electronic identification microchips and scanners as part of the Home AgainŽ Proactive Pet Recovery Network. During the term of the Amended Agreement, Digital Angel will exclusively manufacture, supply and sell to Schering and Schering will exclusively purchase from Digital Angel certain Products (as defined in the Amended Agreement). The Amended Agreement contains, among other things, minimum purchase requirements by Schering. The Amended Agreement prohibits Digital Angel from manufacturing, supplying or selling the Products to any other person, governmental authority or entity in the Territory (as defined in the Amended Agreement). The initial term began February 13, 2007 for a period of 24 months with an option for Schering to extend the term for an additional 12 months. The Amended Agreement also grants to Schering exclusive distribution, marketing and sale rights to Digital Angel's RFID products in the Companion Animal market in the Territory and non-exclusive distribution, marketing and sale rights to Digital Angel's RFID Biotherm Product in the Designated Animal market in the Designated Animal Territory subject to a maximum amount of units of such RFID Biotherm Products.

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