##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 or
 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: 001-33297
 POSITIVEID CORPORATION
 (Exact name of registrant as specified in its charter)
 DELAWARE
    
    06-1637809(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1690 South Congress Avenue, Suite 200
Delray Beach, Florida 33445
(Address of principal executive offices) (Zip code)
 (561) 805-8008
(Registrants telephone number, including area code)
  Common Stock, par value $0.01 per share
    
    The NASDAQ Stock Market LLC(Title of each class)
    
    (Name of each exchange on which registered)
  Yes
o No
þ
 Yes
o No
þ
 þ o
 Yes
o No
o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if smaller reporting company)
 o þ




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##### 



Item
    
    Description
    
    PageSpecial
Note Regarding Forward-Looking Statements
    
    
    3Part I
    
    
    51.
    
    Business
    
    
    51A.
    
    Risk Factors
    
    
    151B.
    
    Unresolved Staff Comments
    
    
    242.
    
    Properties
    
    
    243.
    
    Legal Proceedings
    
    
    24Part II
    
    
    244.
    
    Market for Registrants Common Equity, Related Stockholder Matters, and
Issuer Purchases of Equity Securities
    
    
    245.
    
    Selected Financial Data
    
    
    256.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    256A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    357.
    
    Financial Statements and Supplementary Data
    
    
    358.
    
    Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
    
    
    358A(T).
    
    Controls and Procedures
    
    
    358B.
    
    Other Information
    
    
    36Part III
    
    
    389.
    
    Directors, Executive Officers and Corporate Governance
    
    
    3810.
    
    Executive Compensation
    
    
    4111.
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    4712.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    4913.
    

Principal
Accountant Fees and Services
    
    
    55Part IV
    
    
    5614.
    
    Exhibits, Financial Statement Schedules
    
    
    56Signatures
    
    
    57Index to Consolidated Financial Statements and Financial Schedules
    
    
    F-1Exhibit 2.7Exhibit 3.2Exhibit 4.1Exhibit 10.6Exhibit 10.12Exhibit 10.13Exhibit 10.14Exhibit 10.15Exhibit 10.16Exhibit 10.17Exhibit 10.18Exhibit 10.19Exhibit 10.41Exhibit 10.42Exhibit 10.43Exhibit 10.49Exhibit 10.50Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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Special Note Regarding Forward-Looking Statements
  
    
    the ability of the Company to improve diabetics lives while helping
them manage their healthy glucose levels, thereby decreasing the risk
of diabetes-related complications and reducing medical costs;
    
    the ability of the sensing system to demonstrate a glucose
concentration response in model blood and interstitial fluid matrices;
    
    that patients implanted with our glucose-sensing microchip, if
successfully developed, could get a rapid reading of their blood sugar
with a simple wave of a handheld scanner;
    
    the ability of iGlucose to provide next generation, real time data to
improve diabetes management and help ensure patient compliance, data
accuracy and insurance reimbursement;
    
    the iGlucose wireless communication device being the first to address
the Medicare requirement for durable medical equipment manufacturers
and pharmacies to maintain glucose level logs and records for the
millions of high-frequency diabetes patients;
    
    that the use of a heavy molecule to generate a chemical reaction that
can be reliably measured may prove the close correlation between
acetone concentration found in a patients exhaled breath and glucose
found in his or her blood and the possible elimination of a patients
need to prick his or her finger multiple times per day;
    
    that the rapid sub-type classification of flu strains at the point of
care will allow for improved treatment, thereby discouraging
antibiotic overuse, preventing central lab overloading and improving
overall health outcomes; and
    
    that the rapid flu sub-type test will give an early warning of the
rise of new sub-types of influenza so that containment measures can be
implemented and pandemic proportions can be avoided.
   
    
    our ability to continue listing our common stock on the Nasdaq Stock Market (Nasdaq);
    
    our ability to successfully consider, review, and if appropriate, implement other strategic opportunities;
  3




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
    
    our expectation that we will incur losses, on a consolidated basis, for the foreseeable future;
    
    our ability to fund our operations and continued development of our products, including the Rapid Flu
Detection System, the glucose-sensing microchip, the Easy Check breath glucose detection system and the
iGlucose wireless communication system;
    
    our ability to complete the Phase II of the Rapid Flu Detection System by the end of 2010 or at all and
Phase II of the glucose-sensing microchip development program by mid 2010 or at all;
    
    our ability to pursue our strategy to offer identification tools and technologies for consumers and
businesses;
    
    our ability to maximize the amount of capital that we will have available to pursue business
opportunities in the healthcare and energy sectors;
    
    our ability to successfully develop and commercialize the breath glucose detection system and the
iGlucose wireless communication device and the glucose-sensing microchip, and the market acceptance of
these devices and the microchip;
    
    our ability to obtain patents on our products, including the Easy Check breath glucose detection system
and the iGlucose wireless communication device, the validity, scope and enforceability of our patents,
and the protection afforded by our patents;
    
    we may become subject to costly product liability claims and claims that our products infringe the
intellectual property rights of others;
    
    our ability to comply with current and future regulations relating to our businesses;
    
    uncertainty as to whether a market for our VeriMed system will develop and whether we will be able to
generate more than a nominal level of revenue from this business;
    
    the potential for patent infringement claims to be brought against us asserting that we hold no rights
for the use of the implantable microchip technology and that we are violating another partys
intellectual property rights. If such a claim is successful, we could be enjoined from engaging in
activities to market the systems that utilize the implantable microchip and be required to pay
substantial damages;
    
    our ability to provide uninterrupted, secure access to the Health Link and VeriMed databases; and
    
    our ability to establish and maintain proper and effective internal accounting and financial controls.
   4




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PART I
 
 ITEM 1. BUSINESS
 The Company
       iGlucose iGlucose
  5




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VeriChip, Health Link, VeriMed, VeriTrace, iGlucose and NationalCreditReport.com are our
registered trademarks. This Annual Report on Form 10-K contains trademarks and trade names of other
organizations and corporations.
 Available Information
  Overview
  iGlucose
   iGlucose
 Our Businesses
 Healthcare Products
   6




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iGlucose
  iGlucose iGlucose iGlucose iGlucose
  7




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
    
    a glass-encapsulated microchip-equipped transponder, antenna, and capacitor;
    
    a fixed location, or a wireless handheld, scanner; and
    
    a secure, web-enabled database containing patient-approved information.
 TM
 Identity Security Products and Services
     Health Link Personal Health Record
   8




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VeriMed System
   Other Applications
    9




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Sales, Marketing and Distribution
    Manufacturing; Supply Arrangements
   Environmental Regulation
  Government Regulation
 Laws and Regulations Pertaining to RFID Technologies
  U.S. Federal Communications Commission Regulations
   10




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Regulation by the FDA
  FDA Premarket Clearance and Approval Requirements
 Guidance for Industry and FDA Staff, Class
II Special Controls Guidance Document: Implantable Radiofrequency Transponder System for Patient
Identification and Health Information
 Radio-Frequency Wireless
Technology in Medical Devices.
  11




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Pervasive and Continuing Regulation
 
    
    quality system regulations, or QSR, which require manufacturers,
including third-party manufacturers, to follow stringent design,
testing, control, documentation and other quality assurance procedures
during all aspects of the manufacturing process;
    
    labeling regulations and FDA prohibitions against the promotion of
regulated products for uncleared, unapproved or off-label uses;
    
    clearance or approval of product modifications that could
significantly affect safety or effectiveness or that would constitute
a major change in intended use;
    
    medical device reporting, or MDR, regulations, which require that a
manufacturer report to the FDA if the manufacturers device may have
caused or contributed to a death or serious injury or malfunctioned in
a way that would likely cause or contribute to a death or serious
injury if the malfunction were to recur; and
    
    post-market surveillance regulations, which apply when necessary to
protect the public health or to provide additional safety and
effectiveness data for the device.
 Regulation of Identity Security Products
       12




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Fraud and Abuse
  Anti-Kickback Laws
  Federal False Claims Act
  State Laws and Regulations
  Privacy Laws and Regulations
   13




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U.S. Federal Trade Commission Oversight
   State Legislation
      14




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The European Union
 Directive 95/46/EC of the European
Parliament and of the Council of 24 October 1995 on the Protection of Individuals With Regard to
the Processing of Personal Data and On the Free Movement of Such Data
 Commission Recommendation
on the Implementation of Privacy and Data Protection Principles in Applications Supported by
Radio-Frequency Identification
 Health Insurance Portability and Accountability Act of 1996
  Employees
  
 ITEM 1A. RISK FACTORS
 The following risks and the risks described elsewhere in this Annual Report on Form 10-K ,
including the section entitled Managements Discussion and Analysis of Financial Condition and
Results of Operations, could materially affect our business, prospects, financial condition,
operating results and cash flows. If any these risks materialize, the trading price of our common
stock could decline, and you may lose all or part of your investment.
  15




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Risks Related to the Operations and Business of PositiveID
 PositiveID has a history of losses, and expects to incur additional losses in the future.
PositiveID is unable to predict the extent of future losses or when it will become profitable.
  PositiveID s long-term capital needs may require additional sources of capital, and there can
be no assurances that it will be successful in negotiating additional sources of long-term capital.
  Compliance with changing regulations concerning corporate governance and public disclosure may
result in additional expenses.
  PositiveID depends on key personnel to manage its business effectively, and, if it is unable
to hire, retain or motivate qualified personnel, its ability to design, develop, market and sell
its systems could be harmed.
  During 2009, PositiveID failed to meet applicable Nasdaq Stock Market requirements. If in the
future PositiveID were to fail to meet one of these requirements, its stock could be delisted by
the Nasdaq Stock Market. If delisting occurs, it would adversely affect the market liquidity of its
common stock and harm its businesses.
   16




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We will continue to incur the expenses of complying with public company reporting
requirements.
  Directors, executive officers, principal stockholders and affiliated entities own a
significant percentage of PositiveIDs capital stock, and they may make decisions that you do not
consider to be in the best interests of its stockholders.
  Risks Related to PositiveIDs Product Development Efforts
 PositiveID
and its development partner Receptors LLC are in the early stages of developing a
rapid influenza detection system for the H1N1 virus and an in vivo glucose-sensing RFID microchip,
the effectiveness of both of which is unproven.
 TM TM
 PositiveIDs product research and development activities may not result in a
commercially-viable rapid influenza detection system, in vivo glucose-sensing RFID microchip, Easy
Check breath glucose detection system, or iGlucose wireless communication device.
    17




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The success and timing of development efforts, clinical trials, regulatory approvals, product
introductions, collaboration and licensing arrangements, any termination of development efforts and
other material events could cause volatility in our stock price.
  
    
    success of the development partnership between PositiveID
and Receptors and related development costs;
 
    
    success and timing of regulatory filings and approvals for
the rapid influenza detection system and the in vivo
glucose-sensing RFID microchip, the Easy Check breath
glucose detection system, and the iGlucosewireless
communication device;
 
    
    success and timing of commercialization and product
introductions of the rapid influenza detection system and
the in vivoglucose-sensing RFID microchip, the Easy Check
breath glucose detection system, and the iGlucosewireless
communication device;
 
    
    introduction of competitive products into the market;
 
    
    results of clinical trials for the rapid influenza
detection system and the in vivoglucose-sensing RFID
microchip, the Easy Check breath glucose detection system,
and the iGlucosewireless communication device;
 
    
    a finding that Receptors patented AFFINITY by
DESIGNtm CARAtm
platform is invalid or unenforceable, the Easy Check breath
glucose detection system, and the iGlucosewireless
communication device;
 
    
    a finding that the rapid influenza detection system or the
in vivoglucose-sensing RFID microchip, the Easy Check
breath glucose detection system, and the iGlucosewireless
communication device infringes the patents of a third party;
 
    
    our ability to obtain a patent on the Easy Check breath
glucose detection system and the iGlucosewireless
communication device;
 
    
    our ability to obtain a patent on the Easy Check breath glucose
detection system and the iGlucosewireless communication device;
 
    
    payment of any royalty payments under licensing agreements;
 
    
    unfavorable publicity regarding PositiveID, Receptors, or
either of the companies products or competitive products;
 
    
    termination of development efforts for the rapid influenza
detection system, the in vivoglucose-sensing RFID microchip, the
Easy Check breath glucose detection system, or the iGlucose
wireless communication device;
 
    
    timing of expenses PositiveID may incur with respect to any
license or acquisition of products or technologies; and
 
    
    termination of development efforts of any product under
development or any development or collaboration agreement.
  18




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PositiveID anticipates future losses and may require additional financing, and PositiveIDs
failure to obtain additional financing when needed could force PositiveID to delay, reduce or
eliminate PositiveIDs product development programs or commercialization efforts.
 in vivo iGlucose
 in vivo iGlucose
 PositiveIDs future product development efforts may not yield marketable products due to
results of studies or trials, failure to achieve regulatory approvals or market acceptance,
proprietary rights of others or manufacturing issues.
  PositiveIDs industry changes rapidly as a result of technological and product developments,
which may quickly render PositiveIDs product candidates less desirable or even obsolete. If
PositiveID is unable or unsuccessful in supplementing its product offerings, its revenue and
operating results may be materially adversely affected.
   19




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If PositiveID or Receptors are unable to develop and later market the products under
development in a timely manner or at all, or if competitors develop or introduce similar products
that achieve commercialization before the products enter the market, the demand for the products
may decrease or the products could become obsolete.
  ,
  Risks Occasioned by the Xmark Transaction
 PositiveID will be unable to compete with Xmarks business for four years from the date of
closing.
  Industry and Business Risks Related to Our ID Security Business
 PositiveID is unable to control many of the factors affecting consumer spending, and declines
in consumer spending could reduce demand for PositiveIDs products.
   20




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The identity security market including PositiveID faces a significant amount of subscriber
churn. As a result, PositiveID must obtain the subscribers it loses in the ordinary course of
business and, if it fails to do so, its revenue and subscriber base will decline.
  
    
    changing subscriber preferences;
 
    
    competitive price pressures;
 
    
    general economic conditions;
 
    
    cancellation of subscribers due to credit card declines; and
 
    
    credit or charge card holder turnover.
  Marketing laws and regulations may materially limit PositiveIDs or its clients ability to
offer PositiveID products and services to consumers.
  If PositiveID loses its ability to purchase data from a credit data reseller, some of which
are PositiveIDs competitor, which credit data reseller purchases the data from the three major
credit reporting repositories, demand for its services would decrease.
  PositiveIDs competitors, including those who have greater resources and experience than
PositiveID has, may commercialize technologies that make PositiveIDs obsolete or noncompetitive.
  Industry and
Business Risks Related to Our HealthID Business
 PositiveID may never achieve market acceptance or significant sales of its healthcare products or
systems.
   21




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Implantation of PositiveIDs implantable microchip may be found to cause risks to a persons
health, which could adversely affect sales of its systems that incorporate the implantable
microchip.
  If PositiveID is required to effect a recall of its implantable microchip, its reputation
could be materially and adversely affected and the cost of any such recall could be substantial,
which could adversely affect its results of operations and financial condition.
  Interruptions in access to, or the hacking into, PositiveIDs Health Link PHR or its VeriMed
patient information database may have a negative impact on its revenue, damage its reputation and
expose PositiveID to litigation.
    22




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Regulation of products and services that collect personally-identifiable information or
otherwise monitor an individuals activities may make the provision of PositiveIDs services more
difficult or expensive and could jeopardize its growth prospects.
    If PositiveID fails to comply with anti-kickback and false claims laws, it could be subject to
costly and time-consuming litigation and possible fines or other penalties.
     23




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ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. PROPERTIES
  
 ITEM 3. LEGAL PROCEEDINGS
  
 PART II
 
 ITEM 4. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
  Fiscal Year Ended December 31, 2009
    
    High
    
    
    LowQuarter ended December 31, 2009
    
    $
    2.94
    
    
    $
    0.90Quarter ended September 30, 2009
    
    $
    4.10
    
    
    $
    0.40Quarter ended June 30, 2009
    
    $
    0.70
    
    
    $
    0.40Quarter ended March 31, 2009
    
    $
    0.64
    
    
    $
    0.26
 Fiscal Year Ended December 31, 2008
    
    High
    
    
    LowQuarter ended December 31, 2008
    
    $
    0.86
    
    
    $
    0.25Quarter ended September 30, 2008
    
    $
    2.22
    
    
    $
    0.35Quarter ended June 30, 2008
    
    $
    2.50
    
    
    $
    1.53Quarter ended March 31, 2008
    
    $
    2.77
    
    
    $
    1.89
 Holders
  Dividend Policy
   24




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Equity Compensation Plan Information
  (c)Number ofsecuritiesremaining(a)
    
    
    (b)
    
    
    available forNumber of
    
    
    Weighted-
    
    
    future issuancesecurities to be
    
    
    average
    
    
    under equityissued upon
    
    
    exercise price
    
    
    compensationexercise of
    
    
    per share of
    
    
    plansoutstanding
    
    
    outstanding
    
    
    (excludingoptions,
    
    
    options,
    
    
    securitieswarrants and
    
    
    warrants and
    
    
    reflected inPlan Category(1)
    
    rights
    
    
    rights
    
    
    column (a))Equity compensation plans
approved by security holders
    
    
    3,902,067
    
    
    $
    1.32
    
    
    
    3,311,680Equity compensation plans not
approved by security
holders(2)
    
    
    313,122
    
    
    $
    6.83
    
    
    
    Total
    
    
    4,215,189
    
    
    $
    1.73
    
    
    
    3,311,680
 (1)
    
    A narrative description of the material terms of our equity compensation plans is set forth
in Note 6 to our consolidated financial statements for the year ended December 31, 2009.(2)
    
    In addition, we have made grants outside of our equity plans and have outstanding options
exercisable for 313,122 shares of our common stock. These options were granted as an
inducement for employment or for the rendering of consulting services. Sales of Unregistered Securities
  
 ITEM 5. SELECTED FINANCIAL DATA
  
 ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our audited annual financial statements and the notes to those
financial statements included elsewhere in this Annual Report on Form 10-K .
 Overview
  HealthID Segment
   25




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ID Security Segment
  iGlucose
 Recent Developments
       26




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iGlucose iGlucose
  For the Year EndedDecember 31, 2009HealthID
    
    
    ID Security
    
    
    TotalRevenue
    
    $
    162
    
    
    $
    191
    
    
    
    353Cost of sales
    
    
    54
    
    
    
    40
    
    
    
    94Gross Profit/Loss
    
    
    108
    
    
    
    151
    
    
    
    259Operating expenses:Selling, general and administrative
    
    
    5,270
    
    
    
    483
    
    
    
    5,753Research and development
    
    
    393
    
    
    
    
    
    
    
    393Charge attributable to adjustment of goodwill
    
    
    
    
    
    
    10,170
    
    
    
    10,170Total operating expenses
    
    
    5,663
    
    
    
    10,653
    
    
    
    16,316Operating loss
    
    
    (5,555
    )
    
    
    (10,502
    )
    
    
    (16,057
    )Gain on sale
    
    
    4,385
    
    
    
    
    
    
    
    4,385Interest / other income and (expense), net
    
    
    74
    
    
    
    
    
    
    
    74Total other income
    
    
    4,459
    
    
    
    
    
    
    
    4,459Loss from continuing operations
    
    $
    (1,096
    )
    
    $
    (10,502
    )
    
    
    (11,598
    )
 Results of Operations
  HealthID Segment
 Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Revenue
   27




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Gross Profit and Gross Profit Margin
   Selling, General and Administrative Expense
     Research and Development
  Interest Expense
  ID Security Segment
  Year Ended December 31, 2009
 Revenue
  Gross Profit and Gross Profit Margin
     28




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Selling, General and Administrative Expense
   Charge attributable to adjustment of goodwill
  Liquidity and Capital Resources
  Cash Flows Used in Operating Activities
  Cash Flows from Investing Activities
  Cash Flows from Financing Activities
  Preferred Stock Offering
    29




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Financial Condition
   Critical Accounting Policies and Estimates
  Revenue Recognition
   30




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Product Sales
  
    
    a purchase order has been received or a contract has been executed;
    
    the product is shipped;
    
    title has transferred;
    
    the price is fixed or determinable;
    
    there are no uncertainties regarding customer acceptance;
    
    collection of the sales proceeds is reasonably assured; and
    
    the period during which the distributor or physician has a right to return the product has elapsed.
  Health Link and VeriMed Services
   ID Security Services
    31




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Inventory
  Intangible Assets
 Intangibles  Goodwill and Other (ASC 350)
  Stock-Based Compensation
     
    
    the estimated value of our common stock;
    
    the expected life of issued stock options;
    
    the expected volatility of our stock price;
    
    the expected dividend yield to be realized over the life of the stock options; and
    
    the risk-free interest rate over the expected life of the stock options.
   32




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Accounting for Income Taxes
    
    
    income tax benefits are recognized when, based on the technical
merits of a tax position, the entity believes that if a dispute arose
with the taxing authority and were taken to a court of last resort, it
is more likely than not (i.e., a probability of greater than 50
percent) that the tax position would be sustained as filed; and
    
    if a position is determined to be more likely than not of being
sustained, the reporting enterprise recognizes the largest
amount of tax benefit that is greater than 50 percent likely of being
realized upon ultimate settlement with the taxing authority.
  Impact of Recently Issued Accounting Standards
   33




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34




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Improving Disclosures about Fair Value
Measurements.
  
 ITEM 6A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 8A(T). CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
 Evaluation of Disclosure Controls
  35




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Objective of Controls.
 Conclusion
 Changes in Internal Control Over Financial Reporting
  Managements Annual Report on Internal Control Over Financial Reporting
    
 ITEM 8B. OTHER INFORMATION
 Annual and Special Meeting
     36




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Name of Director
    
    For
    
    
    WithheldScott R. Silverman
    
    
    11,736,807
    
    
    
    168,745Jeffrey S. Cobb
    
    
    11,750,818
    
    
    
    154,734Barry M. Edelstein
    
    
    11,746,107
    
    
    
    159,445Steven R. Foland
    
    
    11,651,318
    
    
    
    254,234Michael E. Krawitz
    
    
    11,748,471
    
    
    
    157,081
      PositiveID Animal Health Corporation 2010 Flexible Stock Plan
     Amendment to Amended and Restated Bylaws
   37




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PART III
 
 Item 9. Directors, Executive Officers and Corporate Governance
  Name
    
    Positions with the CompanyScott R. Silverman
    
    Chief Executive Officer and Chairman of the BoardWilliam J. Caragol
    
    President and Chief Financial Officer, DirectorJeffrey S. Cobb
    
    DirectorBarry M. Edelstein
    
    DirectorSteven R. Foland
    
    DirectorMichael E. Krawitz
    
    Director
      38




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Audit Committee
 www.positiveidcorp.com
  
    
    our accounting, financial reporting processes, audits and the integrity of our financial statements;
    
    our independent auditors qualifications, independence and performance;
    
    our compliance with legal and regulatory requirements;
    
    our internal accounting and financial controls; and
    
    our audited financial statements and reports, and the discussion of the statements and reports with
management, including any significant adjustments, management judgments and estimates, new
accounting polices and disagreements with management.
  39




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Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Business Conduct and Ethics
   40




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##### Table of Contents



Item 10. Executive Compensation
 EXECUTIVE COMPENSATION
 Summary Compensation Table
  
    
    each person who served as our chief executive officer in 2009; and
    
    each person who served as our chief financial officer in 2009.
  Summary Compensation Table
 Non-EquityStock
    
    
    Option
    
    
    Incentive Plan
    
    
    All OtherName and
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    TotalPrincipal Position
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Scott R. Silverman (1)
Chairman and Chief
Executive Officer
    
    
    2009
    
    
    
    222,685
    (2)
    
    
    140,000
    
    
    
    1,650,000
    (3)
    
    
    
    
    
    
    
    
    
    
    16,466
    (4)
    
    
    2,029,1512008
    
    
    
    254,101
    (5)
    
    
    1,200,000
    
    
    
    104,000
    (3)
    
    
    
    
    
    
    
    
    
    
    5,497,592
    (6)
    
    
    7,055,693William J. Caragol(7)
President and Chief
Financial Officer
    
    
    2009
    
    
    
    212,593
    (8)
    
    
    70,000
    
    
    
    1,650,000
    (9)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,932,5932008
    
    
    
    216,206
    (10)
    
    
    
    
    
    
    104,000
    (9)
    
    
    
    
    
    
    
    
    
    
    1,276,400
    (11)
    
    
    1,596,606
 (1)
    
    Mr. Silverman became our chief executive officer on December 5, 2006. The Company terminated him without cause on July 18, 2008, in connection with the Xmark Transaction. On November 12, 2008, in connection with the purchase by R & R Consulting Partners, LLC (an
entity that is owned and controlled by Mr. Silverman) of 45.7% of the then outstanding shares of our common stock from Digital Angel, Mr. Silverman again became the chairman of our Board of Directors. On December 31, 2008, we entered into a letter agreement with
Mr. Silverman effective December 1, 2008, which provided that Mr. Silverman would serve as our executive chairman from December 1, 2008 through December 31, 2009. On August 27, 2009, the Board of Directors appointed Mr. Silverman as the Companys chief executive
officer, and he also continues to serve as Chairman of our Board of Directors.(2)
    
    Represents the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of 601,852 shares of restricted company common stock received in lieu of salary. See Narrative Disclosure to Summary Compensation Table below for more information.(3)
    
    Represents the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of 1,000,000 shares of Company common stock received during 2009, and 50,000 shares of Company common stock received during 2008.(4)
    
    The amount shown includes (i) $3600 in respect of group term life insurance provided to Mr. Silverman; and (ii) perquisites aggregating $12,866 as follows: $12,322 for an automobile allowance, maintenance and gasoline expenses and $534 for home security.(5)
    
    Amount represents 2008 salary paid to Mr. Silverman until his termination on July 18, 2008.  41




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(6)
    
    The amount shown includes (i) $300 in respect of group term life insurance provided to Mr. Silverman; (ii) a dividend of $1,162,500 paid to Mr. Silverman, which amount was not factored into the grant date fair value required to be reported for the stock award;
(iii) $38,879 paid as vacation accrued in connection with Mr. Silvermans termination; and (iv) $4,242,273 paid to Mr. Silverman under a separation agreement. See Potential Payments upon Termination or Change in Control below for more information regarding the
$4,242,273 payment. The amount shown also includes perquisites and other personal benefits aggregating $53,640, which were as follows: AmountofNature of Expense
    
    ExpenseExpense allowance
    
    $
    45,000Automobile allowance for automobile, maintenance and gasoline expenses
    
    
    8,640Total
    
    $
    53,640
 (7)
    
    Mr. Caragol became our chief financial officer as of August 21, 2006 and our president as of May 4, 2007. Effective January 1, 2009, Mr. Caragol became our acting chief financial officer. On November 10, 2009, In conjunction with Steel Vault merger
Mr. Caragol became our president, chief financial officer and a director.(8)
    
    Represents the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of 518,519 shares of restricted company common stock received in lieu of salary. See Narrative Disclosure to Summary Compensation Table below for more
information.(9)
    
    Represents the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of 1,000,000 shares of Company common stock received during 2009, and 50,000 shares of Company common stock received during 2008.(10)
    
    On May 4, 2007, in connection with our Boards decision to appoint Mr. Caragol to serve as our president, our compensation committee approved an increase in Mr. Caragols base salary to $185,000. In 2008, our compensation committee approved a further
increase in Mr. Caragols base salary to $203,500. Included in 2008 was vacation paid in connection with the letter agreement dated December 31, 2008 which terminated the May 15, 2008 letter agreement.(11)
    
    The amount represents payments made to Mr. Caragol (i) related to a change in control payment received in connection with the Xmark Transaction in the amount of $1,141,400; and (ii) a dividend payment in the amount of $135,000, which amount was not
factored into the grant date fair value, as the Company had no plans, nor did it expect, to issue dividend distributions at that time. Narrative Disclosure to Summary Compensation Table
 Executive Employment Arrangements
 Scott R. Silverman
   42




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43




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William J. Caragol
         2010 Executive Employment Arrangements
   44




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##### Table of Contents



Outstanding Equity Awards as Of December 31, 2009
  Outstanding Equity Awards as Of December 31, 2009
 Option Awards
    
    
    Stock AwardsEquityEquity



IncentiveIncentive
    
    
    PlanPlan
    
    
    Awards:Awards:
    
    
    MarketEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    or PayoutIncentive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    of
    
    
    Value ofPlan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unearned
    
    
    UnearnedAwards:
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    Market

    
    
    Shares,
    
    
    Shares,Number of
    
    
    
    
    
    Number of
    
    
    
    
    
    
    
    
    
    
    of Shares
    
    
    Value of
    
    
    Units or
    
    
    Units orSecurities
    
    
    Number of
    
    
    Securities
    
    
    
    
    
    
    
    
    
    
    or Units
    
    
    Shares or
    
    
    Other
    
    
    OtherUnderlying
    
    
    Securities
    
    
    Underlying
    
    
    
    
    
    
    
    
    
    of Stock
    
    
    Units of
    
    
    Rights
    
    
    RightsUnexercised
    
    
    Underlying
    
    
    Unexercised
    
    
    Option
    
    
    
    
    
    
    That
    
    
    Stock That
    
    
    That
    
    
    ThatOptions
    
    
    Unexercised
    
    
    Unearned
    
    
    Exercise
    
    
    Option

    
    
    Have Not
    
    
    Have Not
    
    
    Have Not
    
    
    Have Not(#)
    
    
    Options(#)
    
    
    Options
    
    
    Price
    
    
    Expiration
    
    
    Vested
    
    
    Vested
    
    
    Vested
    
    
    VestedName
    
    Exercisable
    
    
    Unexercisable
    
    
    (#)
    
    
    ($)
    
    
    Date
    
    
    (#)(1)
    
    
    ($)(2)
    
    
    (#)
    
    
    ($)Scott R. Silverman
    
    
    50,000
    (3)
    
    
    
    
    
    
    
    
    
    $
    0.68
    
    
    
    3/23/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,000
    (3)
    
    
    
    
    
    
    
    
    
    $
    0.56
    
    
    
    6/28/2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000
    (3)
    
    
    
    
    
    
    
    
    
    $
    0.42
    
    
    
    7/25/2018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    1,100,000
    
    
    
    
    
    
    
    William J. Caragol
    
    
    50,000
    (4)
    
    
    
    
    
    
    
    
    
    $
    10.00
    (5)
    
    
    8/21/2016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    1,100,000
    
    
    
    
    
    
    
    
 (1)
    
    50% vest on January 1, 2011 and 50% vest on January 1, 2012.(2)
    
    Computed by multiplying the closing market price of a share of our common stock on December 31, 2009, or $1.10, by the number of shares of common stock that have not vested.(3)
    
    This option was originally issued by Steel Vault and was converted into an option to purchase shares of our common stock pursuant to the Agreement and Plan of Reorganization, dated September 4, 2009, as amended, among the Company, Steel
Vault and VeriChip Acquisition Corp.(4)
    
    On July 18, 2008, all stock option awards and restricted stock awards that had previously been granted under our 2002 Flexible Stock Plan, our 2005 Flexible Stock Plan, and our 2007 Stock Incentive Plan vested upon the closing of Xmark
Transaction.(5)
    
    The exercise price of Company stock options reflected in the table represents the estimated fair market value of our common stock on the date of grant, as determined by our management and Board of Directors. Potential Payments upon Termination or Change in Control
 Scott R. Silverman
   45




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William J. Caragol
      46




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Director Compensation
  2009 Director Compensation
 FeesEarned
    
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    
    Nonqualifiedor Paid
    
    
    Stock
    
    
    Option
    
    
    Incentive Plan
    
    
    Deferred
    
    
    All Otherin Cash
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    Compensation
    
    
    TotalName
    
    ($)
    
    
    ($)(1)
    
    
    ($) (1)
    
    
    ($)
    
    
    Earnings
    
    
    ($)
    
    
    ($)Jeffrey S. Cobb (2)
    
    
    30,000
    
    
    
    37,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,000Barry M. Edelstein (3)
    
    
    50,000
    
    
    
    49,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,250Steven R. Foland (4)
    
    
    55,000
    
    
    
    49,250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104,250Michael E. Krawitz (5)
    
    
    22,500
    
    
    
    37,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,500
 (1)
    
    The dollar amount of this award reflected in the table represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.(2)
    
    As of December 31, 2009, Mr. Cobb held options to purchase 218,750 shares of our common stock. Mr. Cobb was awarded 100,000 shares of restricted stock on February 20,
2009, which vested on January 1, 2010.(3)
    
    As of December 31, 2009, Mr. Edelstein held options to purchase 75,000 shares of our common stock. Mr. Edelstein was awarded 100,000 shares of restricted stock on
February 20, 2009, which vested on January 1, 2010 and 25,000 shares of restricted stock on August 17, 2009, which vested on January 1, 2010.(4)
    
    As of December 31, 2009, Mr. Foland held no options to purchase shares of our common stock. Mr. Foland was awarded 100,000 shares of restricted stock on February 20,
2009, which vested on January 1, 2010 and 25,000 shares of restricted stock on August 17, 2009 which vested on January 1, 2010.(5)
    
    As of December 31, 2009, Mr. Krawitz held 325,000 options to purchase shares of our common stock. Mr. Krawitz was awarded 100,000 shares of restricted stock on February
20, 2009, which vested on January 1, 2010.   
 Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
   47




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Security Ownership of Certain Beneficial Owners and Management
  
    
    each of our directors;
    
    each of our named executive officers;
    
    all of our executive officers and directors as a group; and
    
    each person, or group of affiliated persons, known to us to be the
beneficial owner of more than 5% of our outstanding shares of common
stock.
  Number ofShares
    
    
    Percent ofBeneficially
    
    
    OutstandingName and Address of Beneficial Owner
    
    Owned(#)
    
    
    Shares(%)Five percent stockholders:Scott R. Silverman (1)
    
    
    11,267,013
    
    
    
    46.9
    %R & R Consulting Partners, LLC (3)
    
    
    2,055,556
    
    
    
    8.9
    %Named Executive Officers and Directors:Scott R. Silverman (1)
    
    
    11,267,013
    
    
    
    46.9
    %William J. Caragol (2)
    
    
    1,907,519
    
    
    
    8.2
    %Jeffrey S. Cobb (4)
    
    
    458,750
    
    
    
    2.0
    %Barry M. Edelstein (5)
    
    
    325,000
    
    
    
    1.4
    %Steven R. Foland (6)
    
    
    325,600
    
    
    
    1.4
    %Michael E. Krawitz (7)
    
    
    500,000
    
    
    
    2.1
    %Executive Officers and Directors as a group (6 persons) (8)
    
    
    13,694,882
    
    
    
    55.6
    %
 *
    
    Less than 1%(1)
    
    Mr. Silverman has sole voting power over 11,267,013 shares of our common stock. These shares consist of (i) 2,742,963 shares held directly by Mr.
Silverman and (ii) 8,524,050 shares over which Mr. Silverman has sole voting power pursuant to a Voting Agreement, dated November 10, 2009, among Mr.
Silverman, Blue Moon Energy Partners LLC (Blue Moon), R & R Consulting Partners, LLC (R&R), Jared Shaw and William Caragol (the Voting
Agreement), consisting of the 1,089,000 shares held by Blue Moon, the 4,755,556 shares held by R&R, the 860,975 shares held by Jared Shaw, and the
1,818,519 shares held directly by Mr. Caragol. Mr. Silverman has sole dispositive power over 1,742,963 shares which are held directly by Mr. Silverman.
Mr. Silverman lacks dispositive power over 1,000,000 Shares held directly by Mr. Silverman which are restricted as to transfer until January 1, 2011
(500,000 Shares) and January 1, 2012 (500,000 Shares). Mr. Silverman shares dispositive power over 3,144,556 shares. These shares consist of (i)
1,089,000 shares that Mr. Silverman, as a manager of Blue Moon, may be deemed to share beneficial ownership with Blue Moon and Mr. Caragol and (ii)
2,055,556 shares that Mr. Silverman, as the control person of R&R, may be deemed to share beneficial ownership with R&R.(2)
    
    Includes 304,000 shares issuable upon the exercise of warrants and 50,000 shares issuable upon the exercise of stock options that are currently
exercisable or exercisable within 60 days of March 5, 2010. Mr. Caragol lacks voting power over the 1,907,519 Shares that he beneficially owns,
pursuant to the Voting Agreement. Mr. Caragol has sole dispositive power over 818,519 shares that he beneficially owns and shares dispositive power
over 1,089,000 shares that Mr. Caragol, as a manager of Blue Moon, may be deemed to share beneficial ownership with Blue Moon and Mr. Silverman. Mr.
Caragol lacks dispositive power over 1,000,000 shares, which are restricted as to transfer until January 1, 2011 (500,000 Shares) and January 1, 2012
(500,000 Shares), and lacks voting power over the 1,000,000 shares pursuant to the Voting Agreement.  48




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##### Table of Contents



(3)
    
    R&R lacks voting power over the 2,055,556 shares pursuant to the Voting Agreement. Mr. Silverman, as the control person of R&R, may be deemed to share
dispositive power with R&R over the 2,055,556 shares. R&R also holds of record 2,700,000 shares, which have been borrowed by Optimus pursuant to the
terms of the Stock Loan Agreements described above in Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operations 
Liquidity and Capital Resources  Preferred Stock Offering. However, R&R lacks both dispositive power and voting power over the 2,700,000 shares,
and therefore does not beneficially own such shares. Pursuant to the Stock Loan Agreements, Optimus has dispositive power over the 2,700,000 shares
and pursuant to the Voting Agreement, Mr. Silverman has the voting power over the 2,700,000 shares.(4)
    
    Includes 240,000 shares of our common stock and 218,750 shares of our common stock issuable upon the exercise of stock options that are currently
exercisable or exercisable within 60 days of March 5, 2010. Mr. Cobb lacks dispositive power over 90,000 shares, which are restricted until January 1,
2011.(5)
    
    Includes 250,000 shares of our common stock and 75,000 shares of our common stock issuable upon the exercise of stock options that are currently
exercisable or exercisable within 60 days of March 5, 2010. Mr. Edelstein lacks dispositive power over 75,000 shares, which are restricted until
January 1, 2011.(6)
    
    Mr. Foland lacks dispositive power over 145,000 shares, which are restricted until January 1, 2011.(7)
    
    Includes 175,000 shares of our common stock and 325,000 shares of our common stock issuable upon the exercise of stock options that are currently
exercisable or exercisable within 60 days of March 5, 2010. Mr. Krawitz lacks dispositive power over 75,000 shares, which are restricted until January
1, 2011.(8)
    
    Includes shares of our common stock beneficially owned by current executive officers and directors and shares issuable upon the exercise of stock
options that are currently exercisable or exercisable within 60 days of March 5, 2010, in each case as set forth in the footnotes to this table.  
 Item 12. Certain Relationships and Related Transactions, and Director Independence.
  Director and Officer Roles and Relationships with Digital Angel and Other Affiliates
   49




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
    
    Our chairman and chief executive officer, Scott R. Silverman, served
on the Board of Directors of Digital Angel from March 2002 until July
2007, and, from March 2003 until the end of his term of service, in
the capacity of chairman.
    
    Mr. Silverman served on the Board of Directors of Destron Fearing from
July 2003 until December 2007 and, from February 2004 until the end of
his term of service, in the capacity of chairman.
    
    Mr. Silverman served as chairman of the Board of Directors of Steel
Vault until November 10, 2009, in which Digital Angel held a 49.9%
ownership interest until August 1, 2008 and is a manager of Blue Moon,
which holds 1,035,000 shares of our common stock.
    
    Mr. Silverman is the managing member of R & R Consulting Partners,
LLC, which holds 5,355,556 shares of our common stock.
    
    Barry M. Edelstein served as interim chief executive officer and
president of Destron Fearing from August 2007 through December 2007,
as well as a member of the Board of Directors of Destron Fearing from
June 2005 until January 2008.
    
    Jeffrey S. Cobb serves as a member of our compensation, audit, and
nominating and governance committees and served as a member of the
compensation, audit, and nominating committees of Steel Vault until
his resignation on July 22, 2008.
    
    In 2008 Michael E. Krawitz provided legal services to us on a
consulting basis in 2008 and received approximately $70,000 in fees.
Mr. Krawitz served on the Board of Directors of Steel Vault until
November 10, 2009. Mr. Krawitz served as the chief executive officer
and president of Digital Angel from September 2006 to December 2007.
Prior to that, during his time at Digital Angel, he served as
assistant vice president and general counsel beginning in April 1999,
and was appointed vice president and assistant secretary in December
1999, senior vice president in December 2000, secretary in March 2003,
executive vice president in April 2003 and chief privacy officer in
November 2004.
    
    Blue Moon owns 1,035,000 shares of our common stock and a warrant to
purchase 54,000 shares of our common stock. Mr. Silverman is a
manager and controls a member of Blue Moon (i.e., R & R Consulting
Partners, LLC). William J. Caragol is also a manager and member of
Blue Moon. In addition, Jeffrey S. Cobb and Barry M. Edelstein, both
of whom are members of our board of directors, each own a 16.67%
interest in Blue Moon.
    
    Mr. Silverman served as president of Digital Angel from March 2002 to
March 2003, acting president of Digital Angel from April 2005 to
December 2006, and as the chief executive officer of Digital Angel
from March 2003 to December 2006, until he assumed the position of our
chief executive officer on December 5, 2006.
    
    William J. Caragol, our president and chief financial officer, served
as chief executive officer, president, acting chief financial officer
and director of Steel Vault before the Merger and is a manager of Blue
Moon, which holds 1,035,000 shares of our common stock.
  Transactions with Digital Angel   Our Former Majority Stockholder
 Transition Services Agreement
   50




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Loan Agreement with Digital Angel
     51




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Valens Financing
   February 2008 Letter Agreement with Digital Angel
   Supply and Development Agreement
  May 2008 Letter Agreement with Digital Angel
    52




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##### Table of Contents



Asset Purchase Agreement with Digital Angel
   Purchase Order with Digital Angel
  Other Agreements
 Transaction between Blue Moon and Steel Vault
   Related Party Financing
   53




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##### Table of Contents



Financing Transaction with Optimus
  Review, Approval or Ratification of Transactions with Related Parties
  Director Independence
   54




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Item 13. Principal Accountant Fees and Services
  2009
    
    
    2008Audit Fees
    
    $
    185,600
    
    
    $
    451,143Audit Related Fees (review of registration statements and other SEC filings)
    
    $
    80,300
    
    
    $
    44,320Tax Fees (tax-related services, including income tax advice regarding
income taxes within the United States)
    
    
    
    
    
    
    All other fees (acquisition due diligence services)
    
    
    
    
    
    
    Total Fees
    
    $
    265,900
    
    
    $
    495,463
 Pre-Approval Policies and Procedures
    55




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##### Table of Contents



PART IV
 
 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
  (a)(1)
    
    List of Financial Statements Filed as Part of this Annual Report on Form 10-K:A list of the consolidated financial statements, notes to consolidated
financial statements, and accompanying report of independent registered
public accounting firm appears on page F-1 of the Index to Consolidated
Financial Statements and Financial Statement Schedules, which is filed as
part of this Annual Report on Form 10-K.(a)(2)
    
    Financial Statement Schedules:All other schedules are omitted because they are not applicable, the amounts
are not significant, or the required information is shown in our consolidated
financial statements or the notes thereto.(a)(3)
    
    Exhibits:See the Exhibit Index filed as part of this Annual Report on Form 10-K.
  56




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SIGNATURES
  POSITIVEID CORPORATIONDate: March 17, 2010
    By:
    /s/ William J. CaragolWilliam J. CaragolPresident and Chief Financial Officer  Signature
    
    Title
    
    Date/s/ Scott R. Silverman

Scott R. Silverman
    
    Chief Executive Officer and Chairman
of the Board
(Principal Executive Officer)
    
    March 17, 2010/s/ William J. Caragol

William J. Caragol
    
    President and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
    
    March 17, 2010/s/ Jeffrey S. Cobb

Jeffrey S. Cobb
    
    Director
    
    March 17, 2010/s/ Barry M. Edelstein

Barry M. Edelstein
    
    Director
    
    March 17, 2010/s/ Steven R. Foland

Steven R. Foland
    
    Director
    
    March 17, 2010/s/ Michael E. Krawitz

Michael E. Krawitz
    
    Director
    
    March 17, 2010
  57




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##### Table of Contents



INDEX TO FINANCIAL STATEMENTS
 PagePOSITIVEID CORPORATIONReport of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2009 and 2008
    
    
    F-3Consolidated Statements of Operations for the years ended December 31, 2009 and 2008
    
    
    F-4Consolidated Statements of Stockholders Equity for the years ended December 31,
2009 and 2008
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
  F-1




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
 
    
  F-2




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##### Table of Contents



POSITIVEID CORPORATION
 
 Consolidated Balance Sheets
  December 31,
    
    
    December 31,2009
    
    
    2008AssetsCurrent Assets:Cash
    
    $
    6,423
    
    
    $
    3,229Prepaid expenses and other current assets
    
    
    193
    
    
    
    275Total Current Assets
    
    
    6,616
    
    
    
    3,504Equipment, net of accumulated depreciation
    
    
    122
    
    
    
    39Restricted cash
    
    
    
    
    
    
    4,543Other assets
    
    
    34
    
    
    
    Goodwill
    
    
    4,200
    
    
    
    $
    10,972
    
    
    $
    8,086Liabilities and Stockholders EquityCurrent Liabilities:Accounts payable
    
    $
    576
    
    
    $
    72Accrued expenses and other current liabilities
    
    
    775
    
    
    
    1,094Accrued preferred stock dividend payable
    
    
    90
    
    
    
    Total Current Liabilities
    
    
    1,441
    
    
    
    1,166Deferred gain
    
    
    
    
    
    
    4,500Total Liabilities
    
    
    1,441
    
    
    
    5,666Commitments and contingenciesStockholders Equity:Preferred stock, Authorized 5,000,000 shares
of $.001 par value; 462 and nil shares issued
and outstanding at December 31, 2009 and
2008, respectively (liquidation preference of $4,620 and nil December 31, 2009 and 2008, respectively)
    
    
    
    
    
    
    Common
stock, authorized 70,000,000 shares
of $.01 par value; issued and outstanding
21,840,433 and 11,730,209 shares at
December 31, 2009 and 2008, respectively
    
    
    218
    
    
    
    117Additional paid-in capital
    
    
    63,018
    
    
    
    44,410Accumulated deficit
    
    
    (53,705
    )
    
    
    (42,107
    )Total Stockholders Equity
    
    
    9,531
    
    
    
    2,420$
    10,972
    
    
    $
    8,086
   F-3




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##### Table of Contents



POSITIVEID CORPORATION
 
 Consolidated Statements of Operations
  For the Years EndedDecember 31,2009
    
    
    2008Revenue
    
    $
    353
    
    
    $
    43Cost of sales
    
    
    94
    
    
    
    275Gross profit (loss)
    
    
    259
    
    
    
    (232
    )Operating expenses:Selling, general and administrative
    
    
    5,753
    
    
    
    19,775Research and development
    
    
    393
    
    
    
    712Charge attributable to adjustment of goodwill
    
    
    10,170
    
    
    
    Total operating expenses
    
    
    16,316
    
    
    
    20,487Operating loss
    
    
    (16,057
    )
    
    
    (20,719
    )Gain on sale of Xmark Corporation
    
    
    4,385
    
    
    
    6,174Gain on settlement of debt
    
    
    
    
    
    
    1,823Other income (expense), net
    
    
    74
    
    
    
    (334
    )Interest expense
    
    
    
    
    
    
    (879
    )Total other (expense) income
    
    
    4,459
    
    
    
    6,784Loss from continuing operations
    
    
    (11,598
    )
    
    
    (13,935
    )Income from
discontinued operations (net of tax expense of $233 in 2008)
    
    
    
    
    
    
    787Net loss
    
    
    (11,598
    )
    
    
    (13,148
    )Preferred stock dividend
    
    
    (90
    )
    
    
    Net loss attributable to common stockholders
    
    $
    (11,688
    )
    
    $
    (13,148
    )Net loss
attributable to common shareholders per common share from continuing operations  basic and
diluted
    
    $
    (0.90
    )
    
    $
    (1.31
    )Net income
per common share from discontinued operations  basic and diluted
    
    
    
    
    
    
    0.07Net loss
attributable to common shareholders per common share  basic and diluted
    
    $
    (0.90
    )
    
    $
    (1.24
    )Weighted average number of shares outstanding  basic and diluted
    
    
    13,020
    
    
    
    10,597
   F-4




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##### Table of Contents



POSITIVEID CORPORATION
 
 Consolidated Statement of Stockholders Equity
 For the Years Ended December 31, 2009 and 2008
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalPreferred Shares
    
    
Common Shares
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    StockholdersNumber
    
    
    Amount
    
    
    Number
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    EquityBalance January 1, 2008
    
    
    
    
    
    
    
    
    
    
    10,144
    
    
    $
    101
    
    
    $
    54,486
    
    
    $
    (28,959
    )
    
    $
    (37
    )
    
    $
    25,591Net loss
    
    
      
    
    
    
    
    
    
    
  
    
    
    
    
    
    
    
    
    
    
    
    (13,148
    )
    
    
    
    
    
    
    (13,148
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    622
    
    
    
    6
    
    
    
    5,026
    
    
    
    
    
    
    
    
    
    
    
    5,032Issuance of shares to lender
    
    
    
    
    
    
    
    
    
    
    120
    
    
    
    2
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    302Issuance of shares from
option exercises
    
    
    
    
    
    
    
    
    
    
    844
    
    
    
    8
    
    
    
    434
    
    
    
    
    
    
    
    
    
    
    
    442Dividend to stockholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,836
    )
    
    
    
    
    
    
    
    
    
    
    (15,836
    )Sale of Xmark Corporation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    37Balance December 31, 2008
    
    
    
    
    
    
    
    
    
    
    11,730
    
    
    
    117
    
    
    
    44,410
    
    
    $
    (42,107
    )
    
    $
    
    
    
    
    2,420Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,598
    )
    
    
    
    
    
    
    (11,598
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    4,395
    
    
    
    44
    
    
    
    1,505
    
    
    
    
    
    
    
    
    
    
    
    1,549Issuance of preferred
shares, net of $800 financing costs
    
    
    462
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,806
    
    
    
    
    
    
    
    
    
    
    
    3,806Issuance of shares from
option exercises
    
    
    
    
    
    
    
    
    
    
    138
    
    
    
    1
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    60Issuance of shares for
settlement of litigation
    
    
    
    
    
    
    
    
    
    
    510
    
    
    
    5
    
    
    
    245
    
    
    
    
    
    
    
    
    
    
    
    250Preferred stock dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (90
    )
    

     
    
    
    
    
    
    
    
    
    (90
    )Issuance of shares for
Steel Vault merger
    
    
    
    
    
    
    
    
    
    
    5,067
    

    
    
    51
    
    
    
    13,083
    
    
    
    
    
    
    
    
    
    
    
    13,134Balance December 31, 2009
    
    
    462
    
    
    
    
    
    
    
    21,840
    
    
    $
    218
    
    
    $
    63,018
    
    
    $
    (53,705
    )
    
    $
    
    
    
    $
    9,531
   F-5




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##### Table of Contents



POSITIVEID CORPORATION
 
 Consolidated Statements of Cash Flows
  For the Years EndedDecember 31,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (11,598
    )
    
    $
    (13,148
    )Adjustments to reconcile net loss to net cash used in operating
activities:Depreciation and amortization
    
    
    29
    
    
    
    52Stock based compensation
    
    
    1,549
    
    
    
    5,032Bad debt expense
    
    
    
    
    
    
    14Impairment of assets
    
    
    
    
    
    
    44Non cash interest income
    
    
    (7
    )
    
    
    (43
    )Charge attributable to adjustment of goodwill
    
    
    10,170
    
    
    
    Gain on settlement of debt
    
    
    
    
    
    
    (1,823
    )Stock issued for settlement of litigation
    
    
    250
    
    
    
    Gain on sale of Xmark Corporation
    
    
    (4,385
    )
    
    
    (6,174
    )Allowance for inventory excess
    
    
    
    
    
    
    213Changes in operating assets and liabilities:Decrease in accounts receivable
    
    
    
    
    
    
    32Increase in inventories
    
    
    
    
    
    
    (117
    )Decrease in prepaid expenses and other current assets
    
    
    137
    
    
    
    344Decrease in deferred revenue
    
    
    (16
    )
    
    
    Decrease in accounts payable and accrued expenses
    
    
    (1,043
    )
    
    
    (225
    )Net cash used in continuing operations
    
    
    (4,914
    )
    
    
    (15,799
    )Net cash used in discontinued operations
    
    
    (60
    )
    
    
    (2,887
    )Net cash used in operating activities
    
    
    (4,974
    )
    
    
    (18,686
    )Cash flows from investing activities:Proceeds from sale of Xmark Corporation, net
    
    
    4,434
    
    
    
    43,363Proceeds from sale of assets
    
    
    3
    
    
    
    Payments for equipment and other assets
    
    
    (11
    )
    
    
    (22
    )Payments for the merger of SteelVault, net of cash acquired
    
    
    72Net cash
(used in) discontinued operations
    
    
    
    
    
    
    (114
    )Net cash provided by investing activities
    
    
    4,498
    
    
    
    43,227Cash flows from financing activities:Proceeds
from short-term borrowing
    
    
    
    
    
    
    8,000Repayment of short-term borrowing
    
    
    
    
    
    
    (8,000
    )Financing costs
    
    
    
    
    
    
    (701
    )Principal payments to former stockholder
    
    
    
    
    
    
    (10,423
    )Guarantee fee paid to former stockholder
    
    
    
    
    
    
    (500
    )Proceeds from exercise of stock options
    
    
    60
    
    
    
    442Proceeds from preferred stock financing, net
    
    
    3,806
    
    
    
    Repayment of debt financing, net
    
    
    (196
    )
    
    
    Payment of dividend
    
    
    
    
    
    
    (15,836
    )Net cash provided by discontinued operations
    
    
    
    
    
    
    (1,515
    )Net cash provided by (used in) financing activities
    
    
    3,670
    
    
    
    (28,533
    )Net (decrease) increase in cash
    
    
    3,194
    
    
    
    (3,992
    )Cash, beginning of year
    
    
    3,229
    
    
    
    7,221Cash, end of year
    
    $
    6,423
    
    
    $
    3,229
   F-6




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##### Table of Contents



POSITIVEID CORPORATION
 
 Notes to Consolidated Financial Statements
 (tabulated amounts in thousands of dollars, except per share amounts)
 1
Organization, Basis of Presentation and Accounting Policies
          F-7




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##### Table of Contents



POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
   iGlucose
   Accounting Policies
 Principles of Consolidation
  Use of Estimates
   F-8




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##### Table of Contents



POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
 Concentration of Credit Risk
   Inventories
  Equipment
  Intangible Assets
   Revenue Recognition
  Product Sales
  
    
    a purchase order has been received or a contract has been executed;
    
    the product is shipped;
    
    title has transferred;
    
    the price is fixed or determinable;
    
    there are no uncertainties regarding customer acceptance;
    
    collection of the sales proceeds is reasonably assured; and
    
    the period during which the distributor or physician has a right to return the product has elapsed.
  F-9




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##### Table of Contents



POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
 
  Health Link and VeriMed Services
   ID Security Services
     Share-Based Compensation
    F-10




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##### Table of Contents



POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
 Income Taxes
   Research and Development
  Loss Per Common Share and Common Share Equivalent
     Years EndedDecember 31,2009
    
    
    2008Convertible
preferred stock and dividends
    
    
    2,038
    
    
    
    Stock options
    
    
    4,215
    
    
    
    1,225Warrants
    
    
    454
    
    
    
    0Unvested restricted common stock
    
    
    4,192
    
    
    
    010,899
    
    
    
    1,225
 Impact of Recently Issued Accounting Standards
    F-11
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
      F-12
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
      F-13
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
 2 Inventories
 December 31,
    
    
    December 31,2009
    
    
    2008Finished goods
    
    $
    213
    
    
    $
    213Allowance for excess and obsolescence
    
    
    (213
    )
    
    
    (213
    )$
    
    
    
    $
    
 3 Equipment
 December 31,
    
    
    December 31,2009
    
    
    2008Equipment
    
    $
    303
    
    
    $
    292Hardware
    
    
    113
    
    
    
    76Purchased software
    
    
    136
    
    
    
    57552
    
    
    
    425Less accumulated depreciation
    
    
    (430
    )
    
    
    (386
    )$
    122
    
    
    $
    39
  4 Acquisitions
  Cash
    
    $
    72Equipment
and other assets
    
    
    142Goodwill
    
    
    4,200Current liabilities
    
    
    (910
    )Total
    
    
    3,504Charge attributable to adjustment of goodwill
    
    
    10,170Total price paid
    
    $
    13,674
   F-14
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
    Years EndedDecember 31,(In thousands, except per share amounts)
    
    2009
    
    

2008Revenue
    
    $
    1,581
    

$
59Net loss from continuing operations attributable to common shareholder
    
    $
    (14,454
    )

$
(15,451
)Net loss
attributable to common shareholders from continuing operations per common share  basic and diluted
    
    $
    (0.83
    )

$
(0.99
)
 5 Financing Agreements
    Dividends and Other Distributions.
 Liquidation.
 Redemption
  F-15
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
    6 Stockholders Equity
 Stock Option Plans
         F-16
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
  2009
    
    
    2008Weighted-
    
    
    
    
    
    
    Weighted-Number
    
    
    Average
    
    
    Number
    
    
    Averageof
    
    
    Exercise
    
    
    of
    
    
    ExerciseOptions
    
    
    Price
    
    
    Options
    
    
    PriceOutstanding on January 1
    
    
    1,225
    
    
    $
    4.52
    
    
    
    1,963
    
    
    $
    3.26Granted(1)
    
    
    3,349
    
    
    
    0.58
    
    
    
    195
    
    
    
    0.58Exercised
    
    
    (138
    )
    
    
    0.44
    
    
    
    (844
    )
    
    
    0.54Cancelled and forfeited
    
    
    (221
    )
    
    
    0.56
    
    
    
    (89
    )
    
    
    5.88Outstanding on December 31(2)
    
    
    4,215
    
    
    
    1.73
    
    
    
    1,225
    
    
    
    4.52Exercisable on December 31
    
    
    4,102
    
    
    $
    1.77
    
    
    
    1,055
    
    
    
    5.24Shares available on December 31 for options that may be granted
    
    
    3,312
    
    
    
    
    
    
    
    2,023
 (1)
    
    Options granted to former option holders
of Steel Vault pursuant to the Merger. The
total compensation expense associated with
the options granted in 2009 and 2008 was
nil and approximately $21,000,
respectively. As of December 31, 2009 and
2008, the remaining amount of the
compensation expense to be recorded over
the remaining vesting period of the
options was approximately nil and $31,000,
respectively.(2)
    
    The intrinsic value of a stock option is
the amount by which the fair value of the
underlying stock exceeds the exercise
price of the option. The fair value of the
Companys common stock was estimated to be
$1.10 and $0.37 at December 31, 2009 and
2008, respectively, based upon its closing
price on the NASDAQ. As of December 31,
2009 and 2008, the intrinsic value for all
options outstanding was approximately $1.9
million and $34,000, respectively.  Outstanding Stock Options
    
    
    Exercisable Stock OptionsWeighted-Average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Remaining
    
    
    Average
    
    
    
    
    
    
    AverageRange of
    
    
    
    
    
    Contractual
    
    
    Exercise
    
    
    
    
    
    
    ExerciseExercise Prices
    
    Shares
    
    
    Life
    
    
    Price
    
    
    Shares
    
    
    Price$0.00 to $0.36
    
    
    1,075
    
    
    
    8.72
    
    
    $
    0.36
    
    
    
    1,075
    
    
    $
    0.36$0.37 to $0.62
    
    
    1,557
    
    
    
    4.66
    
    
    
    0.49
    
    
    
    1,444
    
    
    
    5.59$0.68 to $1.99
    
    
    631
    
    
    
    2.53
    
    
    
    0.83
    
    
    
    631
    
    
    
    0.83$2.00 to $5.75
    
    
    523
    
    
    
    4.74
    
    
    
    4.39
    
    
    
    523
    
    
    
    4.39Above $5.75
    
    
    429
    
    
    
    4.09
    
    
    
    7.78
    
    
    
    429
    
    
    
    7.784,215
    
    
    
    5.90
    
    
    $
    1.73
    
    
    
    4,102
    
    
    $
    1.77Vested options
    
    
    4,102
    
    
    
    5.23
    
    
    $
    1.77
   2009
    
    
    2008Unvested at
January 1
    
    
    
    
    
    
    600Issued
    
    
    4,395
    
    
    
    700Vested
    
    
    (203
    )
    
    
    (1,250
    )Forfeited or
Expired
    
    
    
    
    
    
    (50
    )Unvested at
December 31
    
    
    4,192
    
    
    
    
   F-17
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
  
    
    the estimated value of the Companys common stock;
    
    the expected life of issued stock options;
    
    the expected volatility of the Companys stock price;
    
    the expected dividend yield to be realized over the life of the stock option; and
    
    the risk-free interest rate over the expected life of the stock options.
   2009
    
    
    2008Expected dividend yield
    
    
    
    
    
    
    Expected stock price volatility
    
    
    100
    %
    
    
    35
    %Risk-free interest rate
    
    
    0.36
    %
    
    
    1.79-3.44
    %Expected term (in years)
    
    
    1.0
    
    
    
    6.0
 Warrants
  Share-Based Compensation
      F-18
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
            F-19
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
     7 Selling, general and administrative expense
 Years EndedDecember 31,2009
    
    
    2008Salaries and benefits (1)
    
    $
    2,058
    
    
    $
    14,567Legal and accounting
    
    
    1,536
    
    
    
    2,226Sales and marketing
    
    
    716
    
    
    
    1,424Consulting
    
    
    432
    
    
    
    255Insurance
    
    
    192
    
    
    
    217Travel and entertainment
    
    
    140
    
    
    
    280Depreciation and amortization
    
    
    29
    
    
    
    52Other
    
    
    650
    
    
    
    754$
    5,753
    
    
    $
    19,775
 (1)
    
    Included in salaries and benefits is $1.4 million and $5.0
million of share-based compensation expense for the years 2009 and
2008, respectively, associated with stock compensation (includes
stock options and restricted stock). See Note 6 to the
Consolidated Financial Statements. 8 Income Taxes
   December 31,2009
    
    
    2008Deferred tax
assets (liabilities):Accrued expenses and reserves
    
    $
    290
    
    
    $
    228Stock-based compensation
    
    
    4,349
    
    
    
    4,162Property and equipment
    
    
    (11
    )
    
    
    12Net operating loss carryforwards
    
    
    17,933
    
    
    
    11,362Gross deferred tax assets
    
    
    22,561
    
    
    
    15,764Valuation allowance
    
    
    (22,561
    )
    
    
    (15,764
    )Net deferred taxes
    
    $
    
    
    
    $
    
  F-20
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
     Years EndedDecember 31,2009
    
    
    2008Current:United States
    
    $
    
    
    
    $
    Canada
    
    
    
    
    
    
    233Current income tax provision
    
    
    
    
    
    
    233
 2009
    
    
    2008Deferred:United States
    
    $
    
    
    
    $
    Canada
    
    
    
    
    
    
    Deferred income tax benefit
    
    
    
    
    
    
    $
    
    
    
    $
    233
  2009
    
    
    2008Continuing operations
    
    $
    
    
    
    $
    Discontinued operations
    
    
    
    
    
    
    233$
    
    
    
    
    233
  2009
    
    
    2008%
    
    
    %Statutory tax benefit
    
    
    (34
    )
    
    
    (34
    )State income
taxes, net of federal effects
    
    
    (6
    )
    
    
    (6
    )Permanent
tax basis difference in stock of subsidiary (permanent difference)
    
    
    (12
    )
    
    
    (12
    )Write-down
in Investment in Steel Vault (permanent difference)
    
    
    28
    
    
    
    Net
operating losses of acquired subsidiary
    
    
    (34
    )
    
    
    Change in deferred tax asset valuation allowance
    
    
    58
    
    
    
    52
    
    
    
    
  § 1.1502-21T(b)(2)(iv),
  F-21
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
   9 Commitments and Contingencies
 Employment Contract
   F-22
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
      Legal proceedings
   F-23
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
 Artigliere
   10 Related Party Transactions
 Blue
Moon
  Sublease
with Digital Angel
  Asset Purchase Agreement with Digital Angel
  Letter Agreement with Digital Angel
   F-24
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
 Pledge Agreement of Digital Angel
   11 Discontinued Operations
    Year EndedDecember 31,2008Revenue
    
    $
    20,002Cost of sales
    
    
    8,289Gross profit
    
    
    11,713Selling, general and administrative
expenses
    
    
    9,093Research and development expenses
    
    
    2,277Other (income) expense
    
    
    (650
    )Interest (income) expense
    
    
    (27
    )Income before income taxes
    
    
    1,020Provision for income taxes
    
    
    233Income from discontinued operations
    
    $
    787
  F-25
    Table of Contents  POSITIVEID CORPORATION
Notes to Consolidated Financial Statements
(tabulated amounts in thousands of dollars, except per share amounts)
 12 Segments
  HealthID Segment
 iGlucose
  ID Security Segment
     Total FromHealth
    
    
    ID
    
    
    ContinuingID
    
    
    Security
    
    
    OperationsAs of and For the Year Ended December 31, 2009Revenue
    
    $
    162
    
    
    $
    191
    
    
    $
    353Operating
loss
    
    
    (5,555
    )
    
    
    (332
    )
    
    
    (5,887
    )Loss from continuing operations before income taxes
    
    
    (1,096
    )
    
    
    (10,502
    )
    
    
    (11,598
    )Total assets of continuing operations
    
    $
    6,502
    
    
    $
    4,470
    
    
    $
    10,972
 13 Supplementary Cash Flow Information
 Years EndedDecember 31,2009
    
    
    2008Income taxes paid
    
    $
    
    
    
    $
    Interest paid
    
    
    
    
    
    
    285$
    
    
    
    $
    285
  Years EndedDecember 31,2009
    
    
    2008Non-cash financing and investing activities:Debt financing costs
    
    $
    
    
    
    $
    331Accrued dividend payable
    
    
    90
    
    
    
    Issuance of common stock and options for Steel Vault Acquisition
    
    
    13,134
    
    
    
    $
    13,224
    
    
    $
    331
  F-26
    Table of Contents  EXHIBIT INDEX
 ExhibitNo.
    
    Description2.1
    
    
    Stock Purchase Agreement, dated May 15, 2008, between PositiveID Corporation and The Stanley Works
(1)2.2
    
    
    Voting Agreement, dated May 15, 2008, between Applied Digital Solutions, Inc. and The Stanley
Works (1)2.3
    
    
    Voting Agreement, dated May 15, 2008, between Scott R. Silverman and The Stanley Works
(1)2.4
    
    
    Agreement and Plan of Reorganization dated September 4, 2009, among PositiveID Corporation, Steel
Vault Corporation, and VeriChip Acquisition Corp. (2)2.5
    
    
    Amendment No. 1 to Agreement and Plan of Reorganization, dated October 1, 2009, among PositiveID
Corporation, Steel Vault Corporation, and VeriChip Acquisition Corp. (3)2.6
    
    
    Asset Purchase Agreement, dated November 12, 2008, among PositiveID Corporation, Digital Angel
Corporation and Destron Fearing Corporation (4)2.7
    
    
    Voting Agreement, dated November 10, 2009, among Scott R. Silverman, William J. Caragol, Jared
Shaw, R & R Consulting Partners LLC and Blue Moon Energy Partners, LLC3.1
    
    
    Second Amended and Restated Certificate of Incorporation of PositiveID Corporation filed with the
Secretary of State of Delaware on December 18, 2006, as amended on November 10, 2009
(5)3.2
    
    
    Amended and Restated By-laws
of PositiveID Corporation adopted as of December 12, 2005, as
amended on March 16, 20104.1
    
    
    Form of Specimen Common Stock Certificate10.1
    *
    
    VeriChip Corporation 2002 Flexible Stock Plan, as amended through December 21, 2006 (6)10.2
    *
    
    VeriChip Corporation 2005 Flexible Stock Plan, as amended through December 21, 2006 (6)10.3
    *
    
    VeriChip Corporation 2007 Stock Incentive Plan, as amended and restated (7)10.4
    *
    
    VeriChip Corporation 2009 Stock Incentive Plan (8)10.5
    *
    
    VeriGreen Energy Corporation 2009 Flexible Stock Plan (9)10.6
    *
    
    PositiveID Animal Health Corporation 2010 Flexible Stock Plan10.7
    
    
    Syscomm International Corporation 2001 Flexible Stock Plan, as amended and restated (19)10.8
    *
    
    Form of Restricted Stock Award Agreement under the 2002/2005 Flexible Stock Plan(6)10.9
    *
    
    Form of Non-Qualified Stock Option Award Agreement under the 2002/2005 Flexible Stock Plan
(6)10.10
    *
    
    Form of Non-Qualified Option Award Agreement under the VeriChip Corporation 2007 Stock Incentive
Plan
(10)
  F-27
    Table of Contents  ExhibitNo.
    
    Description10.11
    *
    
    Form of Stock Award Agreement under the VeriChip Corporation 2007 Stock Incentive Plan
(11)10.12
    *
    
    Form of Non-Qualified Option Award Agreement under the VeriChip Corporation 2009 Stock Incentive
Plan10.13
    *
    
    Form of Stock Award Agreement under the VeriChip Corporation 2009 Stock Incentive Plan10.14
    *
    
    Form of Restricted Stock Award Agreement under the VeriGreen Energy Corporation 2009 Flexible
Stock Plan10.15
    *
    
    Form of Non-Qualified Stock Option Award Agreement under the VeriGreen Energy Corporation 2009
Flexible Stock Plan10.16
    *
    
    Form of Restricted Stock Award Agreement under the PositiveID Animal Health Corporation 2010
Flexible Stock Plan10.17
    *
    
    Form of Non-Qualified Stock Option Award Agreement under PositiveID Animal Health Corporation 2010
Flexible Stock Plan10.18
    *
    
    Form of Restricted Stock Award Agreement under the Syscomm International Corporation 2001 Flexible
Stock Plan, as amended and restated10.19
    *
    
    Form of Non-Qualified Stock Option Award Agreement under the Syscomm International Corporation
2001 Flexible Stock Plan, as amended and restated10.20
    
    
    Consulting Agreement dated as of August 8, 2007 between PositiveID Corporation and Randolph K.
Geissler
(10)10.21
    *
    
    Separation Agreement, dated May 15, 2008, between PositiveID Corporation and Scott R. Silverman
(1)10.22
    *
    
    Amendment to Separation Agreement, dated July 9, 2008, between PositiveID Corporation and Scott R.
Silverman (12)10.23
    *
    
    Letter Agreement, dated December 31, 2008, between PositiveID Corporation and Scott R. Silverman
(13)10.24
    *
    
    Letter Agreement, dated May 15, 2008, between PositiveID Corporation and William J. Caragol
(1)10.25
    *
    
    Letter Agreement, dated December 31, 2008, between PositiveID Corporation and William J. Caragol
(13)10.26
    *
    
    Letter Agreement, dated March 27, 2009, between PositiveID Corporation and William J. Caragol
(14)10.27
    
    
    Letter Agreement, dated May 15, 2008, between PositiveID Corporation and Digital Angel Corporation
(1)10.28
    
    
    Amended and Restated Supply, License and Development Agreement dated as of December 27, 2005
between PositiveID Corporation and Digital Angel Corporation (15)
  F-28
    Table of Contents  ExhibitNo.
    
    Description10.29
    
    
    First Amendment to Amended and Restated Supply, License and Development Agreement dated as of May
9, 2007 between the Registrant and Digital Angel Corporation. (16)10.30
    
    
    Guarantee, dated May 15, 2008, between Digital Angel Corporation and The Stanley Works
(1)10.31
    
    
    Settlement Agreement and General Release, dated March 3, 2009, among PositiveID Corporation,
Jerome C. Artigliere, Clark & Martino, P.A., Baker & Hostetler, LLP, Digital Angel Corporation,
Scott Silverman, Michael Krawitz and Kevin McLaughlin (9)10.32
    
    
    Development and Supply Agreement, dated March 17, 2009, between PositiveID Corporation and Medical
Components, Inc. (9)10.33
    
    
    Secured Convertible Promissory Note, dated June 4, 2009, between Steel Vault Corporation and
PositiveID Corporation (17)10.34
    
    
    Common Stock Purchase Warrant, dated June 4, 2009, between Steel Vault Corporation and PositiveID
Corporation (17)10.35
    
    
    Convertible Note and Warrant Subscription Agreement, dated June 4, 2009, between Steel Vault
Corporation and PositiveID Corporation (17)10.36
    
    
    Security Agreement, dated June 4, 2009, between Steel Vault Corporation and PositiveID Corporation
(17)10.37
    
    
    Security Agreement, dated June 4, 2009, between National Credit Report.com, LLC and PositiveID
Corporation (17)10.38
    
    
    Subordination and Intercreditor Agreement, dated June 4, 2009, between Blue Moon Energy Partners
LLC and PositiveID Corporation (17)10.39
    
    
    Common Stock Purchase Warrant, dated June 4, 2009, between Steel Vault Corporation and William J.
Caragol (17)10.40
    
    
    Guaranty of Collection, dated June 4, 2009, among Steel Vault Corporation, William J. Caragol and
PositiveID Corporation (17)10.41
    
    
    Secured Convertible Promissory Note, dated March 20, 2009, between Steel Vault Corporation and
Blue Moon Energy Partners LLC10.42
    
    
    Security Agreement, dated March 20, 2009, between Steel Vault Corporation and Blue Moon Energy
Partners LLC10.43
    
    
    Warrant to Purchase Common Stock of Steel Vault Corporation, dated March 20, 2009, given to Blue
Moon Energy Partners LLC10.44
    
    
    License Agreement, dated September 21, 2009, between PositiveID Corporation and Receptors LLC
(5)10.45
    
    
    Development/Master Agreement, dated September 21, 2009, between PositiveID Corporation and
Receptors LLC (5)10.46
    
    
    Convertible Preferred Stock Purchase Agreement, dated September 29, 2009, between PositiveID
Corporation and Optimus Capital Partners, LLC (18)
  F-29
    Table of Contents  ExhibitNo.
    
    Description10.47
    
    
    License Agreement, dated October 6, 2009, between PositiveID Corporation and Receptors LLC
(5)10.48
    
    
    Development/Master Agreement, dated October 6, 2009, between PositiveID Corporation and Receptors
LLC
(5)10.49
    
    
    Amended and Restated License Agreement, dated February 26, 2010, between PositiveID Corporation
and Receptors LLC10.50
    
    
    Amended and Restated Development/Master Agreement, dated February 26, 2010, between PositiveID
Corporation and Receptors LLC21.1
    
    
    List of Subsidiaries of PositiveID Corporation23.1
    
    
    Consent of Eisner LLP31.1
    
    
    Certification by Scott R. Silverman, Chief Executive Officer, pursuant to Exchange Act Rules
13A-14(a) and 15d-14(a)31.2
    
    
    Certification by William J. Caragol, Chief Financial Officer, pursuant to Exchange Act Rules
13A-14(a) and 15d-14(a)32.1
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
 (1)
    
    Incorporated by reference to the Form 8-K previously filed by PositiveID Corporation on May
16, 2008.(2)
    
    Incorporated by reference to the Form 8-K previously filed by PositiveID Corporation on
September 8, 2009.(3)
    
    Incorporated by reference to the Form 8-K previously filed by PositiveID Corporation on
October 1, 2009.(4)
    
    Incorporated by reference to the Form 10-Q previously filed by PositiveID Corporation on
November 14, 2008.(5)
    
    Incorporated by reference to the Form 10-Q previously filed by PositiveID Corporation on
November 12, 2009.(6)
    
    Incorporated by reference to the Form 10-K previously filed by PositiveID Corporation on
April 2, 2007.(7)
    
    Incorporated by reference to the Form 10-K previously filed by PositiveID Corporation on
February 12, 2009.(8)
    
    Incorporated by reference to the Registration Statement on Form S-8 previously filed by
PositiveID Corporation on November 12, 2009 (Registration No. 333-163066).(9)
    
    Incorporated by reference to the Form 10-Q previously filed by PositiveID Corporation on May
14, 2009.(10)
    
    Incorporated by reference to the Form 10-Q previously filed by PositiveID Corporation on
August 8, 2007.(11)
    
    Incorporated by reference to the Form 10-Q previously filed by PositiveID Corporation on
November 8, 2007.(12)
    
    Incorporated by reference to the Form 10-Q previously filed by PositiveID Corporation on
August 14, 2008.(13)
    
    Incorporated by reference to the Form 8-K previously filed by PositiveID Corporation on
January 6, 2009.(14)
    
    Incorporated by reference to the Form 8-K previously filed by PositiveID Corporation on March
30, 2009.(15)
    
    Incorporated by reference to the Registration Statement on Form S-1 previously filed by
PositiveID Corporation on December 29, 2005 (Registration No. 333-130754).(16)
    
    Incorporated by reference to the Form 10-Q previously filed by PositiveID Corporation on May
15, 2007.(17)
    
    Incorporated by reference to the Form 10-Q previously filed by PositiveID Corporation on
August 13, 2009(18)
    
    Incorporated by reference to the Form 8-K previously filed by PositiveID Corporation on
September 29, 2009.(19)
    
    Incorporated by reference to the Post Effective Amendment No. 1 on Form S-8 to Form S-4
previously filed by PositiveID Corporation on November 12, 2009 (Registration No. 333-161991).*
    
    Management contract or compensatory plan.
    
    Confidential treatment has been obtained with respect to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange Commission.  F-30