##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K/A
 Amendment No. 1
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 000-26020
 DIGITAL ANGEL CORPORATION
  Delaware
    
    43-1641533(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 490 Villaume Avenue
South Saint Paul, Minnesota 55075
 
 (Title of each class)
    
    (Name of each exchange on which registered)Common Stock, $0.01 par value
    
    NASDAQ Capital Market
  Yes o No þ
 Yes o No þ
 þ o
 o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   Class
    
    Outstanding at April 24, 2009Common Stock, $.01 par value per share
    
    18,327,584 shares




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##### 



DIGITAL ANGEL CORPORATION
TABLE OF CONTENTS
 Item
    
    Description
    
    PagePART III10
    
    Directors, Executive Officers and Corporate Governance
    
    
    311
    
    Executive Compensation
    
    
    512
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    1613
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    1714
    
    Principal Accountant Fees and Services
    
    
    20PART IV15
    
    Exhibits and Financial Statement Schedules
    
    
    20Signatures
    
    
    21Exhibit 31.1Exhibit 31.2
   2




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##### Table of Contents



EXPLANATORY NOTE
   
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 BOARD OF DIRECTORS
   Name
    
    Positions with the CompanyJoseph J. Grillo
    
    President, Chief Executive Officer and DirectorDaniel E. Penni
    
    Chairman of the BoardJohn R. Block
    
    DirectorDennis G. Rawan
    
    DirectorConstance K. Weaver
    
    DirectorMichael S. Zarriello
    
    Director
   Joseph J. Grillo:
 Daniel E. Penni:
 John R. (Jack) Block:
  3




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##### Table of Contents



Dennis G. Rawan:
 Constance K. Weaver:
 Michael S. Zarriello:
 Audit and Governance Committee
  EXECUTIVE OFFICERS
  Name
    
    Age
    
    
    PositionJoseph J. Grillo
    
    
    51
    
    
    Chief Executive Officer and PresidentLorraine M. Breece
    
    
    56
    
    
    Senior Vice President, Chief Financial Officer and Chief Accounting OfficerParke H. Hess
    
    
    51
    
    
    Chief Operating Officer
   4




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##### Table of Contents



Lorraine M. Breece:
 Parke H. Hess:
 Code of Conduct and Corporate Ethics General Policy Statement
  Section 16(a) Beneficial Ownership Reporting Compliance
  
 ITEM 11. EXECUTIVE COMPENSATION
 Compensation committee Report
  
 Compensation Discussion and Analysis
 General
   5




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##### Table of Contents



Principal Components of Compensation of Our Executive Officers
  
    
    base salary;
 
    
    cash incentive compensation (or bonuses) under the terms of individual incentive and
recognition policies established for our executive officers; and
 
    
    equity compensation, generally in the form of grants of stock options.
  Allocation of Compensation among Principal Components
  Base Salary
 Chief Executive Officer and President
   Remaining 2008 base salary
    
    $
    288,462Stock premium (30% of remaining 2008 base salary)
    
    
    86,538Hold premium (12 % of the combined remaining 2008 base salary and stock premium)
    
    
    45,000Total
    
    
    420,000Less: Tax and benefit withholdings
    
    
    149,695Amount paid in shares of our common stock
    
    $
    270,305Divided by: Market price of our common stock at issuance
    
    $
    5.44Total shares issued to Mr. Grillo
    
    
    49,688
 Senior Vice President, Chief Financial Officer, and Chief Accounting Officer
   6




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##### Table of Contents



Chief Operating Officer
   Remaining 2008 base salary and bonus
    
    $
    192,500Stock premium (30% of remaining 2008 base salary)
    
    
    57,750Hold premium (12 % of the combined remaining 2008 base salary and stock premium)
    
    
    30,030Total
    
    
    280,280Less: tax and benefit withholdings
    
    
    93,102Amount paid in shares of our common stock
    
    $
    187,178Divided by: Market price of our common stock at issuance
    
    $
    5.44Total shares issued to Mr. Grillo
    
    
    34,407
 Performance-Based Non-Equity Incentive Compensation
   Non-Performance-Based Bonus Compensation
  Equity Compensation
   7




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##### Table of Contents



Equity Swap Program
   2008 Base salary
    
    $
    120,000Election percentage
    
    
    30
    %Salary to be paid in shares of common stock
    
    $
    36,000Stock premium (30%)
    
    
    130
    %$
    46,800Hold premium (1% for 10 months)
    
    
    110
    %Total amount to be received in shares of common stock
    
    $
    51,480
 Severance and Change-in-Control Payments
    8




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##### Table of Contents



Other Benefits
  Perquisites
  Section 162(m) of the Internal Revenue Code
  Board Process
  Executive Employment Arrangements with Named Executive Officers
  Joseph J. Grillo
    Parke H. Hess
 Base Salary
  9




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##### Table of Contents



EXECUTIVE COMPENSATION
  
    
    each person who served as our chief executive officer in 2008;
 
    
    each person who served as our chief financial officer in 2008; and
 
    
    each person who served as our chief operating officer in 2008.
  Summary Compensation Table
 NonqualifiedNon-Equity
    
    
    DeferredName and Principal
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Option
    
    
    Incentive Plan
    
    
    Compensation
    
    
    All OtherPosition
    
    Year
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation(1)
    
    
    Earnings
    
    
    Compensation
    
    
    TotalJoseph J. Grillo(2)
    
    
    2008
    
    
    $
    367,789
    (5)
    
    $
    
    
    
    $
    
    
    
    $
    168,691
    (8)
    
    $
    400,000
    
    
    $
    
    
    
    $
    146,355
    (12)
    
    $
    1,082,835Chief Executive Officer
    
    
    2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    and President
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lorraine M. Breece(3)
    
    
    2008
    
    
    $
    208,385
    
    
    $
    
    
    
    $
    
    
    
    $
    5,156
    (9)
    
    $
    70,000
    
    
    $
    
    
    
    $
    32,312
    (13)
    
    $
    315,853Chief Financial Officer,
    
    
    2007
    
    
    
    153,462
    
    
    
    58,600
    
    
    
    
    
    
    
    103,252
    (10)
    
    
    225,000
    
    
    
    
    
    
    
    1,290
    (14)
    
    
    541,604Chief Accounting
    
    
    2006
    
    
    
    150,000
    
    
    
    6,800
    (7)
    
    
    
    
    
    
    
    
    
    
    54,000
    
    
    
    
    
    
    
    690
    (15)
    
    
    211,490Officer and Senior
Vice PresidentParke H. Hess(4)
    
    
    2008
    
    
    $
    150,000
    (6)
    
    $
    50,000
    (6)
    
    $
    
    
    
    $
    53,584
    (11)
    
    $
    100,000
    
    
    $
    
    
    
    $
    169,969
    (16)
    
    $
    523,553Chief Operating Officer
    
    
    2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (1)
    
    The amounts shown in this column were paid under the terms of incentive and recognition
policies for fiscal year 2008, 2007 and 2006, which were entered into with each of our
named executive officers for the achievement of specified performance objectives. For a
description of the material terms of each of these policies, see the discussion under Our
2008 Incentive and Recognition Policies below.(2)
    
    Mr. Grillo became our chief executive officer and president effective January 3, 2008.(3)
    
    On March 1, 2007, we appointed Ms. Breece as our senior vice president, acting chief
financial officer, chief accounting officer, and assistant secretary. On March 9, 2007, she
was also appointed treasurer. In March of 2008, Ms. Breece was appointed chief financial
officer and she is currently our senior vice president, chief financial officer and chief
accounting officer.(4)
    
    On March 24 2008, we appointed Mr. Hess as our chief operating officer.(5)
    
    Amount represents the contractual salary amount per the Grillo Employment Agreement. On
March 13, 2008 Mr. Grillo elected to accept the balance of his 2008 base salary,
after customary withholdings, in unrestricted shares of our common stock. As a result, Mr.
Grillo received a 30% premium on the remaining balance of his 2008 salary. In addition,
since Mr. Grillo agreed not to sell this stock for twelve months from the date on which he
received the shares, he received an additional premium of 12%, compounded on the gross
amount issued to him.(6)
    
    Amount represents the contractual salary amount per the Hess Employment Agreement. Mr.
Hess elected to accept his 2008 base salary and signing bonus, after customary
withholdings, in unrestricted shares of our common stock. As a result, Mr. Hess received a
30% premium on his 2008 salary and bonus. In addition, since Mr. Hess agreed not to sell
this stock for twelve months from the date on which he received the shares, he received an
additional premium of 12%, compounded on the gross amount issued to him.(7)
    
    Ms. Breece was awarded $6,800 as a bonus in connection with VeriChips initial public
offering.(8)
    
    We issued the following options to purchase shares of our common stock to Mr. Grillo
during 2008: 68,750 options with an exercise price of $5.36 were issued on January 3, 2008;
27,370 options with an exercise price of $5.04 were issued on January 30, 2008; 31,250
options with an exercise price of $2.64 were issued on September 29, 2008; and 50,000
options with an exercise price of $0.52 were issued on December 12, 2008. All of the
options vest ratably over three years. The value of the option awards is the amount of the
awards that we recognized for financial reporting purposes under SFAS No. 123(R). Refer to
Item 8. Financial Statements and Supplementary Data  Footnote 1, Organization and Summary
of Significant Accounting Policies  Stock-Based Compensation in our Annual Report on
Form 10-K for the year ended December 31, 2008 for discussion of the assumptions used in
the calculating the expense under SFAS No. 123(R). See also Outstanding Equity Awards as
of December 31, 2008 table.  10




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##### Table of Contents



(9)
    
    On December 12, 2008, we issued 25,000 options to purchase shares of our common stock
to Ms. Breece. These options were issued with an exercise price of $0.52 and vest ratably
over three years. SEC regulations require us to disclose the award of options measured in
dollars and calculated in accordance with FAS 123(R). During 2008, we expensed $158 for
these options in accordance with FAS 123(R). In addition, on June 20, 2008, we extended the
exercise term of 312 stock options to July 18, 2011 and extended the term of 1,499 stock
options to June 20, 2018. All of these options are fully vested The value of the option
awards is the amount of the awards that we recognized for financial reporting purposes
under SFAS No. 123(R). Refer to Item 8. Financial Statements and Supplementary Data 
Footnote 1, Organization and Summary of Significant Accounting Policies  Stock-Based
Compensation in our Annual Report on Form 10-K for the year ended December 31, 2008 for
discussion of the assumptions used in the calculating the expense under SFAS No. 123(R).
See also Outstanding Equity Awards as of December 31, 2008 table.(10)
    
    This option to purchase 100,000 shares of Destron Fearing common stock at $1.55 per
share was issued by Destron Fearing in connection with Ms. Breeces appointment as Destron
Fearings acting CFO. This option was cancelled and converted into an option to purchase
1.4 shares of our common stock for every share of Destron Fearing common stock, or 140,000
shares, at $1.55 per share divided by 1.4, or $1.11, pursuant to a merger agreement between
us and Destron Fearing, which was effectuated in December 2007. SEC regulations require us
to disclose the award of options measured in dollars and calculated in accordance with FAS
123(R). In accordance with FAS 123(R), Destron Fearing expensed this option ratably over
the vesting period. During 2007, Destron Fearing expensed $7,744 for this option. Then in
December 2007, in connection with the merger with us, this option became fully vested and
Destron Fearing recorded the remaining $95,508 of expense for this option. Subsequent to
our reverse stock split on November 10, 2008, these were converted into 17,500 options with
an exercise price of $8.88.(11)
    
    We issued the following options to purchase shares of our common stock to Mr. Hess
during 2008: 37,500 options with an exercise price of $5.44 were issued on March 24, 2008;
and 25,000 options with an exercise price of $0.52 were issued on December 12, 2008. All of
the options vest ratably over three years. The value of the option awards is the amount of
the awards that we recognized for financial reporting purposes under SFAS No. 123(R). Refer
to Item 8. Financial Statements and Supplementary Data  Footnote 1, Organization and
Summary of Significant Accounting Policies  Stock-Based Compensation in our Annual
Report on Form 10-K for the year ended December 31, 2008 for discussion of the assumptions
used in the calculating the expense under SFAS No. 123(R). See also Outstanding Equity
Awards as of December 31, 2008 table.(12)
    
    Amount represents $131,538 of the combined value of the stock and hold premiums Mr.
Grillo received as a result of electing to take his 2008 base salary in shares of our
common stock (see footnote 5), $9,200 of a 401(k) match and $5,617 for Mr. Grillos
personal cellular telephone and internet services paid for during 2008.(13)
    
    Amount represents $21,889 realized upon exercise of 22,222 options to purchase VeriChip
common stock, $468 worth of life insurance premiums we paid on behalf of Ms. Breece, $4,729
of a 401(k) match and $5,226 of personal cellular telephone and internet services paid for
during 2008.(14)
    
    Amount represents the cost of life insurance premiums we paid on behalf of Ms. Breece
during 2007.(15)
    
    Amount represents the cost of life insurance premiums we paid on behalf of Ms. Breece
during 2006.(16)
    
    Amount represents $87,780 of the combined value of the stock and hold premiums Mr. Hess
received as a result of electing to take his 2008 base salary and signing bonus in shares
of our common stock (see footnote 6), $74,000 of consulting fees paid to Mr. Hess prior to
employment with the Company, $7,391 of a 401(k) match and $798 for Mr. Hesss personal
internet services paid for during 2008. Our 2008 Incentive and Recognition Policies
   All otherOptionDate of
    
    
    All other
    
    
    Awards:
    
    
    
    
    
    
    Grant DateEstimated Future Payouts Under
    
    
    
    
    
    
    Board or
    
    
    Stock
    
    
    Number of
    
    
    Exercise or
    
    
    Fair Value ofNon-Equity Incentive Plan
    
    
    
    
    
    
    Compensation
    
    
    Awards:
    
    
    Securities
    
    
    Base Price
    
    
    Stock andAwards(1)
    
    
    Grant
    
    
    Committee
    
    
    Number of
    
    
    Underlying
    
    
    of Option
    
    
    OptionName
    
    Threshold
    
    
    Target
    
    
    Maximum
    
    
    Date
    
    
    Action
    
    
    Securities
    
    
    Options
    
    
    Awards
    
    
    AwardsJoseph J. Grillo(3)
    
    $
    
    
    
    $
    375,000
    
    
    $
    750,000
    
    
    
    01/30/08
    
    
    
    01/03/08
    
    
    
    
    
    
    
    23,370
    
    
    $
    5.04
    
    
    $
    73,44409/29/08
    
    
    
    09/25/08
    
    
    
    
    
    
    
    31,250
    
    
    
    2.64
    
    
    
    43,82212/12/08
    
    
    
    12/12/08
    
    
    
    
    
    
    
    50,000
    
    
    
    0.52
    
    
    
    18,342Lorraine M. Breece(4)
    
    $
    
    
    
    $
    126,000
    
    
    $
    252,000
    
    
    
    06/20/08
    (2)
    
    
    06/20/08
    
    
    
    
    
    
    
    1,062
    
    
    $
    12.00
    
    
    $
    2,35006/20/08
    (2)
    
    
    06/20/08
    
    
    
    
    
    
    
    437
    
    
    
    25.60
    
    
    
    53112/12/08
    
    
    
    12/12/08
    
    
    
    
    
    
    
    25,000
    
    
    
    0.52
    
    
    
    9,171Parke H. Hess(5)
    
    $
    92,712
    
    
    $
    120,000
    
    
    $
    240,000
    
    
    
    12/12/08
    
    
    
    12/12/08
    
    
    
    
    
    
    
    25,000
    
    
    $
    0.52
    
    
    $
    9,171
 (1)
    
    Our non-equity incentive plans, under which our named executive officers have been, or
may have been, paid incentive compensation, in cash, with respect to fiscal year 2008,
consist of incentive and recognition policies tailored for each of Mr. Grillo, Ms. Breece
and Mr. Hess. The terms of the incentive and recognition policies with respect to 2008, to
which each of Mr. Grillo, Ms. Breece and Mr. Hess are parties, provide for target/maximum
amounts of incentive compensation based upon the achievement of specified performance
objectives.
The amounts listed in the Target column represent the amount of incentive compensation that
could have been earned by our named executive officers under their respective incentive and
recognition policies for 2008, based on their achievement of all specified performance
objectives (as discussed below). The Hess Employment Agreement provides for a guaranteed
minimum amount of incentive compensation; therefore, the amount is listed in the Threshold
column.  11




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##### Table of Contents



(2)
    
    We re-granted certain options that had expired to Ms. Breece as additional incentive
during 2008. The options were granted at the same exercise price as the expired options.(3)
    
    On January 3, 2008, we granted Mr. Grillo 68,750 options to purchase shares of our
common stock outside of our option plans as inducement for employment. The exercise price
of the options is $5.36 per share and the fair value at the date of the grant was $198,261.(4)
    
    On June 20, 2008, we extended the term of 312 options currently exercisable by Ms.
Breece for $22.40 per share. The fair value of the option modification was $379.(5)
    
    On March 24, 2008, we granted Mr. Hess 37,500 options to purchase shares of our common
stock outside of our option plans as inducement for employment. The exercise price of the
options is $5.44 per share and the fair value at the date of the grant was $109,955.  
    
    The performance objectives applicable to his or her incentive and recognition policy for
2008; and
 
    
    The weighting of such performance objectives, stated as a dollar amount.
  Joseph J. Grillo
 Performance Objective
    
    WeightingRevenue(1)
    
    $
    Operating income(1)
    
    
    Cash(1)
    
    
    Discretionary(2)
    
    
    400,000Total
    
    $
    400,000
 (1)
    
    Mr. Grillo did not achieve this objective.(2)
    
    Mr. Grillo earned $400,000 under his 2008 incentive and recognition policy based on the
board of directors decision to provide Mr. Grillo a discretionary cash bonus for the
achievement of certain individual goals. This amount has been reflected as the amount
earned by Mr. Grillo as non-equity incentive plan compensation in the Summary Compensation
Table above. Lorraine M. Breece
 Performance Objective
    
    WeightingRevenue(3)
    
    $
    Operating income(3)
    
    
    Cash(3)
    
    
    Discretionary(4)
    
    
    70,000Total
    
    $
    70,000
 (3)
    
    Ms. Breece did not achieve this objective.(4)
    
    Ms. Breece earned $70,000 under her 2008 incentive and recognition policy based on the
board of directors decision to provide Ms. Breece a discretionary cash bonus for the
achievement of certain individual goals. This amount has been reflected as the amount
earned by Ms. Breece as non-equity incentive plan compensation in the Summary Compensation
Table above. Parke H. Hess
   12




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##### Table of Contents



Outstanding Equity Awards as of December 31, 2008
  Option Awards
    
    
    Stock AwardsEquityIncentive PlanEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity
    
    
    Awards:Incentive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Incentive Plan
    
    
    Market orPlan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Awards:
    
    
    Payout ValueNumber of
    
    
    Number of
    
    
    Awards:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number of
    
    
    of UnearnedSecurities
    
    
    Securities
    
    
    Number of
    
    
    
    
    
    
    
    
    
    
    Number of
    
    
    Market Value
    
    
    Unearned
    
    
    Shares, UnitsUnderlying
    
    
    Underlying
    
    
    Securities
    
    
    
    
    
    
    
    
    
    
    Shares or
    
    
    of Shares of
    
    
    Units or
    
    
    or OtherUnexercised
    
    
    Unexercised
    
    
    Underlying
    
    
    Option
    
    
    Option
    
    
    Units of Stock
    
    
    Units of Stock
    
    
    Other Rights
    
    
    Rights ThatOptions
    
    
    Options
    
    
    Unearned
    
    
    Exercise
    
    
    Expiration
    
    
    That Have
    
    
    That Have Not
    
    
    That Have
    
    
    Have NotName
    
    Exercisable
    
    
    Unexercisable
    
    
    Options
    
    
    Price
    
    
    Date
    
    
    Not Vested
    
    
    Vested
    
    
    Not Vested
    
    
    VestedJoseph J. Grillo
Digital Angel
    
    
    68,750
    
    
    
    45,833
    
    
    
    
    
    
    $
    5.36
    
    
    
    01/03/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,370
    
    
    
    18,246
    
    
    
    
    
    
    $
    5.04
    
    
    
    01/30/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,250
    
    
    
    31,250
    
    
    
    
    
    
    $
    2.64
    
    
    
    09/29/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    50,000
    
    
    
    
    
    
    $
    0.52
    
    
    
    12/12/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lorraine M. Breece
Digital Angel
    
    
    1,128
    
    
    
    
    
    
    
    
    
    
    $
    3.84
    
    
    
    01/01/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    208
    
    
    
    
    
    
    
    
    
    
    $
    12.00
    
    
    
    04/24/2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    312
    
    
    
    
    
    
    
    
    
    
    $
    22.40
    
    
    
    07/25/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,250
    
    
    
    
    
    
    
    
    
    
    $
    31.20
    
    
    
    11/03/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,104
    
    
    
    
    
    
    
    
    
    
    $
    20.24
    
    
    
    07/29/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,750
    
    
    
    
    
    
    
    
    
    
    $
    24.88
    
    
    
    05/02/2015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,250
    
    
    
    
    
    
    
    
    
    
    $
    25.84
    
    
    
    07/06/2013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,500
    
    
    
    
    
    
    
    
    
    
    $
    8.88
    
    
    
    08/15/2017
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    437
    
    
    
    
    
    
    
    
    
    
    $
    12.00
    
    
    
    06/20/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    437
    
    
    
    
    
    
    
    
    
    
    $
    25.60
    
    
    
    06/20/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    625
    
    
    
    
    
    
    
    
    
    
    $
    12.00
    
    
    
    06/20/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    25,000
    
    
    
    
    
    
    $
    0.52
    
    
    
    12/12/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Thermo Life
    
    
    70,000
    
    
    
    
    
    
    
    
    
    
    $
    0.05
    
    
    
    04/18/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Parke H. Hess
Digital Angel
    
    
    37,500
    
    
    
    25,000
    
    
    
    
    
    
    $
    5.44
    
    
    
    03/25/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    25,000
    
    
    
    
    
    
    $
    0.52
    
    
    
    12/12/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 2008 Option Exercises and Stock Vested
  Pension Benefits
  Nonqualified Deferred Compensation
  Potential Payments Upon Termination or Change in Control
 Executive Employment Arrangements with Named Executive Officers
   13




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##### Table of Contents



Name
    
    Potential PaymentJoseph J. Grillo
    
    $
    1,125,000Lorraine M. Breece
    
    
    336,000Parke H. Hess
    
    
    320,000Total
    
    $
    1,781,000
 Stock Option and Other Compensation Plans
 Stock Options and Other Awards Granted under the 1996 Non-Qualified Stock Option Plan, the 1999
Flexible Stock Plan, the 2003 Flexible Stock Plan and the Amended and Restated Digital Angel
Corporation Transition Stock Option Plan.
    Stock Options Granted under the 1999 Employees Stock Purchase Plan.
 i.e.
 Securities Authorized for Issuance Under Equity Compensation Plans
  Equity Compensation Plan Information(c)(a)
    
    
    (b)
    
    
    Number of securitiesNumber of
    
    
    Weighted-average
    
    
    remaining available forsecurities to be
    
    
    exercise price per
    
    
    future issuance underissued upon exercise
    
    
    share of outstanding
    
    
    equity compensation plansof outstanding options
    
    
    options, warrants
    
    
    (excluding securitiesPlan Category (1)
    
    warrants and rights
    
    
    and rights
    
    
    reflected in column (a))Equity compensation plans approved by security holders
    
    
    3,036,309
    
    
    $
    19.32
    
    
    
    20,732
    (2)Equity compensation plans not approved by security holders
(3)
    
    
    303,870
    
    
    
    11.08
    
    
    
    Total
    
    
    3,340,179
    
    
    
    18.58
    
    
    
    20,732
 (1)
    
    A narrative description of the material terms of our equity compensation plans is set forth in Note 12 to our consolidated financial statements.(2)
    
    Includes 119 shares available for future issuance under our 1999 Employees Stock Purchase Plan.(3)
    
    We have made grants outside of our equity plans and have outstanding options exercisable for shares of our common stock. These options were granted as an
inducement for employment or for the rendering of consulting services.  14




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##### Table of Contents



2008 Director Compensation
 Change in PensionValue andNonqualifiedNon-Equity
    
    
    DeferredFees Earned or
    
    
    Stock
    
    
    Option
    
    
    Incentive Plan
    
    
    Compensation
    
    
    All OtherName
    
    Paid in Cash
    
    
    Awards(6)
    
    
    Awards(7)(8)
    
    
    Compensation
    
    
    Earnings
    
    
    Compensation
    
    
    TotalJohn R. Block(1)
    
    $
    36,000
    
    
    $
    31,500
    
    
    $
    9,171
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    76,671Daniel E. Penni(2)
    
    
    86,000
    
    
    
    31,500
    
    
    
    19,808
    
    
    
    
    
    
    
    
    
    
    
    2,356
    (9)
    
    
    137,308Dennis G. Rawan(3)
    
    
    40,000
    
    
    
    31,500
    
    
    
    9,171
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,671Constance K. Weaver(4)
    
    
    40,000
    
    
    
    31,500
    
    
    
    19,808
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91,308Michael S. Zarriello(5)
    
    
    52,000
    
    
    
    31,500
    
    
    
    9,171
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,671
 (1)
    
    As of December 31, 2008, Mr. Block held options to purchase 134,375 shares of our
common stock.(2)
    
    As of December 31, 2008, Mr. Penni held options to purchase 82,222 shares of our common
stock.(3)
    
    As of December 31, 2008, Mr. Rawan held options to purchase 44,062 shares of our common
stock.(4)
    
    As of December 31, 2008, Ms. Weaver held options to purchase 79,864 shares of our
common stock.(5)
    
    As of December 31, 2008, Mr. Zarriello held options to purchase 167,499 shares of our
common stock.(6)
    
    On January 25, 2008, we granted each of our directors 6,250 shares of restricted stock
that vests ratably over five years. The grant date fair value of the restricted stock
calculated in accordance with FAS 123(R) was $31,500 for each grant.(7)
    
    On June 20, 2008, we granted Mr. Penni and Ms. Weaver each 4,687 options that vest
ratably over three years. On the same date, we extended the term of 2,500 options (Mr.
Penni  1,250 and Ms. Weaver  1,250) to July 25, 2011. The value of these stock option
grants and term extension was calculated in accordance with FAS 123(R) and was $10,637 for
each Mr. Penni and Ms. Weaver.(8)
    
    On December 12, 2008, we granted each of our directors 25,000 options to purchase
shares of our common stock that vest ratably over three years. The value of the stock
option calculated in accordance with FAS 123(R) was $9,171 for each option grant.(9)
    
    Amount represents payments for personal cellular telephone usage during 2008.   
    
    Mr. Penni  200,000 shares
 
    
    Mr. Rawan  200,000 shares
 
    
    Ms. Weaver  200,000 shares
  Compensation committee Interlocks and Insider Participation
   15




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##### Table of Contents



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
  AggregateNumber of Shares
    
    
    Percent ofBeneficially
    
    
    OutstandingName of Beneficial Owner
    
    Owned(1)
    
    
    SharesFive Percent Stockholders:Valens Capital Management, LLC(2)
    
    
    943,959
    
    
    
    5.2
    %Randolph K. Geissler(3)
    
    
    957,500
    
    
    
    5.2
    %Executive Officers and Directors(3):Joseph J. Grillo
    
    
    270,135
    
    
    
    1.5Lorraine M. Breece
    
    
    36,191
    
    
    
    *Parke H. Hess
    
    
    46,907
    
    
    
    *John R. Block
    
    
    130,625
    
    
    
    *Daniel E. Penni
    
    
    118,248
    
    
    
    *Dennis G. Rawan
    
    
    38,337
    
    
    
    *Constance K. Weaver
    
    
    87,237
    
    
    
    *Michael S. Zarriello
    
    
    149,880
    
    
    
    *All current directors and executive officers as a group (8 persons)
    
    
    877,370
    
    
    
    4.7
 *
    
    Represents less than 1% of the issued and outstanding shares
of common stock of the Company.(1)
    
    This table includes presently exercisable stock options and options that are
exercisable within sixty days of April 9, 2009, in accordance with Rule 13d-3(d) under the
Exchange Act. The following directors and executive officers hold the number of exercisable
options set forth following their respective names: Joseph J. Grillo  32,041; Lorraine M.
Breece  36,001; Parke H. Hess  12,500; John R. Block  109,375; Daniel E. Penni  57,222;
Dennis G. Rawan  19,062; Constance K. Weaver  54,864; Michael S. Zarriello  142,499; and
all current directors and officers as a group  463,564.(2)
    
    Valens Capital Management, LLC has shared voting power and dispositive power with
Laurus Capital Management, LLC, a Delaware limited liability company, Valens U.S. SPV I,
LLC, a Delaware limited liability company (Valens US), Valens Offshore SPV I, Ltd., an
exempted company incorporated with limited liability under the laws of the Cayman Islands
(Valens SPV I), Laurus Master Fund, Ltd., an exempted company incorporated with limited
liability under the laws of the Cayman Islands (Laurus), Kallina Corporation, a Delaware
corporation (Kallina), and PSource Structured Debt Limited, a closed-ended company
incorporated with limited liability in Guernsey (PSource), Eugene Grin and David Grin. As
of December 31, 2008, Laurus, Kallina, Valens US, and PSource held 943,959 shares of our
common stock. The information included in the table is based solely on the Schedule 13G/A
filed with the SEC on February 12, 2009. Valens Capital Management, LLCs address is 335
Madison Avenue, 10th Floor, New York, NY 10017.(3)
    
    All of these individuals share the same business address: 490 Villaume Avenue, South
Saint Paul, Minnesota 55075.  AggregateNumber of Shares
    
    
    Percent ofBeneficially
    
    
    OutstandingName of Beneficial Owner
    
    Owned(1)
    
    
    SharesJoseph J. Grillo
    
    
    
    
    
    
    *
    %Lorraine M. Breece
    
    
    70,000
    
    
    
    *Parke H. Hess
    
    
    
    
    
    
    *John R. Block
    
    
    
    
    
    
    *Daniel E. Penni
    
    
    200,000
    
    
    
    1.1Dennis G. Rawan
    
    
    200,000
    
    
    
    1.1Constance K Weaver
    
    
    200,000
    
    
    
    1.1Michael S. Zarriello
    
    
    
    
    
    
    *All current directors and executive officers as a group (8 persons)
    
    
    670,000
    
    
    
    3.7
 *
    
    Represents less than 1% of the issued and outstanding shares of Thermo Lifes common stock.(1)
    
    This table includes presently exercisable stock options and options that are
exercisable within sixty days of April 9, 2009, in accordance with Rule 13d-3(d) under the
Exchange Act. The following directors and executive officers hold the number of exercisable
options set forth following their respective names: Joseph J. Grillo  0; Lorraine M.
Breece  70,000; Parke H. Hess  0; John R. Block  0; Daniel E. Penni  200,000; Dennis G.
Rawan  200,000; Constance K. Weaver  200,000; Michael S. Zarriello  0; and all current
directors and officers as a group  670,000.  16




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##### Table of Contents



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  Director and Officer Roles and Relationships with Our Subsidiaries
  Transactions with and between Subsidiaries
 VeriChip
 Supply and Development Agreement
  Transition Services Agreement
   Intercompany Loan Agreement with VeriChip
   17




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##### Table of Contents



VeriChips Stock Purchase Agreement
  
    
    A Voting Agreement (the Voting Agreement) in which we granted an irrevocable proxy in favor of the Transaction and
against any alternative proposal. The Voting Agreement limited our ability to transfer shares of stock we held in VeriChip
or vote for any alternative deal during the period prior to the consummation of the Transaction.
    
    A Guarantee (the Guarantee) in favor of Stanley holding Stanley harmless from certain liabilities under the VeriChip SPA.
    
    A Non-Competition Agreement (the Non-Competition Agreement) in which we agreed that we would not compete with Xmark for
3 years following the consummation of the Transaction. (We do not operate in any of these businesses today). The
Non-Competition Agreement terminates upon a Change in Control Effective Date (as defined in the Non-Competition
Agreement).
   18




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##### Table of Contents



Sale of VeriChip Shares
     InfoTech
 Purchase Agreement with Blue Moon
  Review, Approval or Ratification of Transactions with Related Parties
   19




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Audit and Non-Audit Fees
  2008
    
    
    2007(1)Audit Fees
    
    $
    834,775
    
    
    $
    923,888Audit-Related Fees (review of registration statements and other SEC filings)
    
    
    31,213
    
    
    
    110,400Tax Fees (tax-related services, including income tax advice regarding
income taxes within the United States;
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    Total Fees
    
    $
    865,988
    
    
    $
    1,034,288
 (1)
    
    Fees for services provided by Eisner LLP to Destron Fearing excluded above in 2007
were: Audit Fees  $135,668; Audit-Related Fees  $112,450; Tax Fees  $0; and All Other
fees  $0.  Compatibility of Fees
  Pre-Approval Policies and Procedures
   
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a) Documents filed as part of this report
  ExhibitNumber
    
    Description31.1
    
    
    Certification by Joseph J. Grillo, Chief Executive Officer and
President, pursuant to Exchange Ace Rules 13a-14(a) and 15d-14(a)31.2
    
    
    Certification by Lorraine M. Breece, Senior Vice President and
Chief Financial Officer, pursuant to Exchange Ace Rules 13a-14(a)
and 15d-14(a)
  20




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##### Table of Contents



DIGITAL ANGEL CORPORATIONDate: April 30, 2009
    By:
    /s/ Joseph J. GrilloJoseph J. GrilloPresident and Chief Executive Officer  Signature
    
    Title
    
    Date/s/ Joseph J. Grillo

(Joseph J. Grillo)
    
    President, Chief Executive
Officer and Director (Principal
Executive Officer)
    
    April 30, 2009/s/ Lorraine M. Breece

(Lorraine M. Breece)
    
    Senior Vice President and Chief
Financial Officer (Principal
Accounting Officer)
    
    April 30, 2009/s/ Daniel E. Penni

(Daniel E. Penni)
    
    Chairman of the Board of Directors
    
    April 30, 2009/s/ John R. Block

(John R. Block)
    
    Director
    
    April 30, 2009/s/ Dennis G. Rawan

(Dennis G. Rawan)
    
    Director
    
    April 30, 2009/s/ Constance K. Weaver

(Constance K. Weaver)
    
    Director
    
    April 30, 2009/s/ Michael S. Zarriello

(Michael S. Zarriello)
    
    Director
    
    April 30, 2009
  21




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description31.1
    
    
    Certification by Joseph
J. Grillo, Chief Executive Officer and President, pursuant to Exchange Act Rules 13a-14(a)
and 15d-14(a)31.2
    
    
    Certification by Lorraine
M. Breece, Senior Vice President and Chief Financial Officer, pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a)
  22