UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-K/A

(Amendment
No. 1)

(Mark One)



|þ |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ------------------------------------------------------------------------------------



For the fiscal year ended December 31,
2014



or



| ̈ |  | 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 201

Delray Beach, Florida 33445

(Address of principal executive offices)
(Zip code)



(561) 805-8000

(Registrant’s telephone number,
including area code)



Securities registered pursuant to Section 12(b)
of the Act:



|Common Stock, par value $0.01 per share |  | None                                       
|--------------------------------------- |  | -------------------------------------------
|(Title of each class)                   |  | (Name of each exchange on which registered)



Securities registered pursuant to Section 12(g)
of the Act: None



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ̈Noþ



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ̈Noþ



Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. YesþNo ̈



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YesþNo ̈



Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.þ



Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):



|Large accelerated filero |  | Accelerated filero |  | Non-accelerated filero                      |  | Smaller reporting companyþ
|------------------------ |  | ------------------ |  | ------------------------------------------- |  | --------------------------
|                         |  |                    |  | (Do not check if smaller reporting company) |  |                           



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YesoNoþ



The aggregate market value of the registrant’s common
stock held by non-affiliates of the registrant computed by reference to the price at which the common stock was last sold on the
OTC Bulletin Board on June 30, 2014 was $4,895,734. For purposes of this calculation, shares of common stock held by each officer
and director and by each person who owns 10% or more of the outstanding common stock have been excluded in that such persons may
be deemed to be affiliates. The determination of affiliate status is not necessarily a conclusive determination for other purposes.



At March 19, 2015, 221,441,067 shares of our common stock
were outstanding.















EXPLANATORY NOTE



On March 30, 2015,
PositiveID Corporation (the “Company”) filed its Annual Report on Form 10-K for the fiscal year ended December 31,
2014 (the “Original 2014 10-K”) with the Securities and Exchange Commission (the “SEC”). The Report of
Independent Registered Public Accounting Firm on page F-2 of the Original 2014 10-K included a typographical error when it stated
the net loss of the Company was $8,606,000. It should have stated the net loss of the Company was $7,191,000.



This Amendment No.
1 is being filed solely for the purpose of correcting that typographical error. For convenience, the entire audited financial statements
are being included in this Amendment No. 1.



In accordance with
applicable SEC rules and as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Amendment No. 1
includes new certifications from our Principal Executive Officer and Principal Financial Officer dated as of the date of filing
of this Amendment No. 1.



Except for the items
noted above, no other information included in the Original 2014 10-K is being amended or updated by this Amendment No. 1. This
Amendment No. 1 continues to describe the conditions as of the date of the Original 2014 10-K and we have not updated or modified
the disclosures contained in the Original 2014 10-K. Accordingly, this Amendment No. 1 should be read in conjunction with our filings
made with the SEC subsequent to the filing of the Original 2014 10-K, including any amendment to those filings.







1







Item 8. Financial Statements and Supplementary Data



The consolidated financial statements, including
supplementary data and the accompanying report of independent registered public accounting firm filed as part of this Annual Report
on Form 10-K/A, are listed in the Index to Consolidated Financial Statements and Financial Statement Schedules on page F-1.





2









PART IV



Item 15. Exhibits, Financial
Statement Schedules



The following documents are filed
as a part of this Annual Report on Form 10-K:



|(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.                                                                                                                                                                                                                                                                          



3







SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.



|                        | POSITIVEID CORPORATION
|----------------------- | ----------------------
|                        |                       
|Date: December 31, 2015 | By:                   
|                        |                       
|                        |                       



Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.



|Signature                  |  | Title                                                                                                                                 |  | Date             
|-------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------
|                           |  |                                                                                                                                       |  |                  
|/s/
    William J. Caragol |  | Chief Executive Officer,
    Chairman                                                                                                 |  | December 31, 2015
|William J. Caragol         |  | of the Board and Acting
        Chief Financial Officer
        (Principal Executive Officer
        and Principal Financial Officer) |  |                  
|                           |  |                                                                                                                                       |  |                  
|/s/
    Jeffrey S. Cobb    |  | Director                                                                                                                              |  | December 31, 2015
|Jeffrey S. Cobb            |  |                                                                                                                                       |  |                  
|                           |  |                                                                                                                                       |  |                  
|/s/
    Michael E. Krawitz |  | Director                                                                                                                              |  | December 31, 2015
|Michael E. Krawitz         |  |                                                                                                                                       |  |                  
|                           |  |                                                                                                                                       |  |                  
|/s/
    Ned L. Siegel      |  | Director                                                                                                                              |  | December 31, 2015
|Ned L. Siegel              |  |                                                                                                                                       |  |                  





4







INDEX TO
CONSOLIDATED FINANCIAL STATEMENTS





|Reports of Independent Registered Public Accounting Firms                                       | F-2
|----------------------------------------------------------------------------------------------- | ---
|                                                                                                |    
|Consolidated Balance Sheets as of December 31, 2014 and 2013                                    | F-4
|                                                                                                |    
|Consolidated Statements of Operations for the years ended December 31, 2014 and 2013            | F-5
|                                                                                                |    
|Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2014 and 2013 | F-6
|                                                                                                |    
|Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013            | F-7
|                                                                                                |    
|Notes to Consolidated Financial Statements                                                      | F-8





F-1













Report of
Independent Registered Public Accounting Firm



To the Board
of Directors and Stockholders of:



PositiveID
Corporation,



We have audited
the accompanying consolidated balance sheet of PositiveID Corporation and its Subsidiaries as of December 31, 2014 and the related
consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion
on these consolidated financial statements based on our audit.



We conducted
our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the consolidated financial statements.  An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.



In our opinion,
the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position
of PositiveID Corporation and its Subsidiaries as of December 31, 2014 and the consolidated results of its operations and its
cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.



The accompanying
consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note
1 to the consolidated financial statements, the Company reported a net loss, and used cash for operating activities of approximately
$7,191,000 and $2,569,000 respectively, in 2014. At December 31, 2014, the Company had a working capital deficiency, stockholders’
deficit and accumulated deficit of approximately $8,076,000, $8,446,000 and $132,757,000 respectively. These matters raise substantial
doubt about the Company’s ability to continue as a going concern. Management’s plans as to these matters are also
described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of
this uncertainty.



/s/ Salberg & Company, P.A.

SALBERG &
COMPANY, P.A.

Boca Raton,
Florida

March 30, 2015



2295
NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7328

Phone:
(561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920

www.salbergco.com
• info@salbergco.com

Member
National Association of Certified Valuation Analysts • Registered with the PCAOB

Member
CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality





F-2









REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM



The Board of Directors and Stockholders

PositiveID Corporation





We have audited the accompanying consolidated
balance sheet of PositiveID Corporation (the “Company”) as of December 31, 2013, and the related consolidated statements
of operations, stockholders’ equity (deficit) and cash flows for the year ended December 31, 2013. The consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audit.



We conducted our audit in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.



In our opinion, the financial statements
referred to above present fairly, in all material respects, the consolidated financial position of Positive ID Corporation as of
December 31, 2013, and the consolidated results of its operations and its cash flows for the year ended December 31, 2013, in conformity
with accounting principles generally accepted in the United States of America.



The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated
financial statements, at December 31, 2013 the Company has a working capital deficiency and an accumulated deficit. Additionally,
the Company has incurred operating losses since its inception and expects operating losses to continue during 2014. These conditions
raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are
also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome
of this uncertainty.





/s/ EisnerAmper LLP



New York, NY

April 11, 2014







F-3







POSITIVEID
CORPORATION AND SUBSIDIARIES

Consolidated
Balance Sheets

(In thousands,
except share data)



|                                                                                                                                                                                                                                                                                                              |  | December 31, 2014 |          |   | December 31, 2013 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | -------- | - | ----------------- | -
|                                                                                                                                                                                                                                                                                                              |  |                   |          |   |                   |  
|Assets                                                                                                                                                                                                                                                                                                        |  |                   |          |   |                   |  
|Current Assets:                                                                                                                                                                                                                                                                                               |  |                   |          |   |                   |  
|Cash and cash equivalents                                                                                                                                                                                                                                                                                     |  | $                 | 145      |   |                   | $
|Prepaid expenses and other current assets                                                                                                                                                                                                                                                                     |  |                   | 5        |   |                   |  
|Total Current Assets                                                                                                                                                                                                                                                                                          |  |                   | 150      |   |                   |  
|                                                                                                                                                                                                                                                                                                              |  |                   |          |   |                   |  
|Equipment, net                                                                                                                                                                                                                                                                                                |  |                   | 3        |   |                   |  
|Goodwill                                                                                                                                                                                                                                                                                                      |  |                   | 510      |   |                   |  
|Intangibles, net                                                                                                                                                                                                                                                                                              |  |                   | 347      |   |                   |  
|Other assets                                                                                                                                                                                                                                                                                                  |  |                   | 11       |   |                   |  
|Total Assets                                                                                                                                                                                                                                                                                                  |  | $                 | 1,021    |   |                   | $
|                                                                                                                                                                                                                                                                                                              |  |                   |          |   |                   |  
|Liabilities and Stockholders’ Deficit                                                                                                                                                                                                                                                                         |  |                   |          |   |                   |  
|Current Liabilities:                                                                                                                                                                                                                                                                                          |  |                   |          |   |                   |  
|Accounts payable                                                                                                                                                                                                                                                                                              |  | $                 | 127      |   |                   | $
|Deferred revenue                                                                                                                                                                                                                                                                                              |  |                   | 2,571    |   |                   |  
|Accrued expenses and other current liabilities                                                                                                                                                                                                                                                                |  |                   | 693      |   |                   |  
|Short-term convertible debt, net of discounts and premiums                                                                                                                                                                                                                                                    |  |                   | 1,527    |   |                   |  
|Notes payable, net of discounts                                                                                                                                                                                                                                                                               |  |                   | 676      |   |                   |  
|Embedded conversion option liability                                                                                                                                                                                                                                                                          |  |                   | 2,152    |   |                   |  
|Tax contingency                                                                                                                                                                                                                                                                                               |  |                   | 480      |   |                   |  
|Contingent earn-out liability                                                                                                                                                                                                                                                                                 |  |                   | —        |   |                   |  
|Total Current Liabilities                                                                                                                                                                                                                                                                                     |  |                   | 8,226    |   |                   |  
|                                                                                                                                                                                                                                                                                                              |  |                   |          |   |                   |  
|Long Term Liabilities:                                                                                                                                                                                                                                                                                        |  |                   |          |   |                   |  
|Mandatorily  redeemable preferred stock, 2,500 shares authorized; $0.001 par value; Series I Preferred – 1,000 and 488 shares issued and outstanding at December 31, 2014 and 2013, respectively; liquidation preference and redemption value of $1,065 and $494 at December 31, 2014 and 2013, respectively. |  |                   | 1,241    |   |                   |  
|Total Liabilities                                                                                                                                                                                                                                                                                             |  |                   | 9,467    |   |                   |  
|                                                                                                                                                                                                                                                                                                              |  |                   |          |   |                   |  
|Commitments and contingencies (Note 9)                                                                                                                                                                                                                                                                        |  |                   |          |   |                   |  
|                                                                                                                                                                                                                                                                                                              |  |                   |          |   |                   |  
|Stockholders’ Deficit:                                                                                                                                                                                                                                                                                        |  |                   |          |   |                   |  
|Convertible preferred stock, 5,000,000 shares authorized, $.001 par value; Series F Preferred – nil and 600 shares issued and outstanding at December 31, 2014 and 2013, respectively; liquidation preference of nil and $615, at December 31, 2014 and 2013, respectively                                    |  |                   | —        |   |                   |  
|Common stock, 970,000,000 shares authorized, $.01 par value; 169,531,322 and 45,425,186  shares issued and outstanding at December 31, 2014 and 2013, respectively                                                                                                                                            |  |                   | 1,695    |   |                   |  
|Additional paid-in capital                                                                                                                                                                                                                                                                                    |  |                   | 122,616  |   |                   |  
|Accumulated deficit                                                                                                                                                                                                                                                                                           |  |                   | (132,757 | ) |                   |  
|Total Stockholders’ Deficit                                                                                                                                                                                                                                                                                   |  |                   | (8,446   | ) |                   |  
|Total Liabilities and Stockholders’ Deficit                                                                                                                                                                                                                                                                   |  | $                 | 1,021    |   |                   | $



See accompanying
notes to consolidated financial statements.





F-4







POSITIVEID
CORPORATION AND SUBSIDIARIES

Consolidated
Statements of Operations

(In thousands,
except per share data)



|                                                                                  |  | Year Ended December 31, |       
|--------------------------------------------------------------------------------- |  | ----------------------- | ------
|                                                                                  |  | 2014                    |       
|                                                                                  |  |                         |       
|Revenue                                                                           |  | $                       | 945   
|                                                                                  |  |                         |       
|Operating expenses:                                                               |  |                         |       
|Direct labor                                                                      |  |                         | 294   
|Selling, general and administrative                                               |  |                         | 4,313 
|Research and development                                                          |  |                         | 588   
|Total operating expenses                                                          |  |                         | 5,195 
|                                                                                  |  |                         |       
|Operating loss                                                                    |  |                         | (4,250
|                                                                                  |  |                         |       
|Other income (expense)                                                            |  |                         |       
|Interest expense                                                                  |  |                         | (3,010
|Change in contingent earn-out liability                                           |  |                         | 514   
|Change in fair value of embedded conversion option liability                      |  |                         | (198  
|Loss on extinguishment of debt                                                    |  |                         | (246  
|Other income (expense)                                                            |  |                         | (1    
|Total other income (expense)                                                      |  |                         | (2,941
|                                                                                  |  |                         |       
|Net loss before income tax provision                                              |  |                         | (7,191
|                                                                                  |  |                         |       
|Income tax expense                                                                |  |                         | —     
|Net loss                                                                          |  |                         | (7,191
|                                                                                  |  |                         |       
|Preferred stock dividends                                                         |  |                         | (89   
|Beneficial conversion dividend on preferred stock                                 |  |                         | (943  
|Net loss attributable to common stockholders                                      |  | $                       | (8,223
|                                                                                  |  |                         |       
|Net loss per common share attributable to common stockholders – basic and diluted |  | $                       | (0.09 
|Weighted average shares outstanding – basic and diluted                           |  |                         | 96,602



See accompanying
notes to consolidated financial statements.





F-5









POSITIVEID
CORPORATION AND SUBSIDIARIES

Consolidated
Statements of Stockholders’ Deficit

For the Years
Ended December 31, 2014 and 2013

(In thousands)





|                                                                                           |  | Series F Preferred
    Shares |        |   | Common Shares |   |    | Additional
    Paid-in |  |  | Accumulated |  |  | Note Receivable
    for Shares |        |   | Total
    Stockholders’ |  
|------------------------------------------------------------------------------------------ |  | ----------------------------- | ------ | - | ------------- | - | -- | ---------------------- |  |  | ----------- |  |  | ------------------------------ | ------ | - | ----------------------- | -
|                                                                                           |  | Shares                        |        |   | Amount        |   |    | Shares                 |  |  | Amount      |  |  | Capital                        |        |   | Deficit                 |  
|                                                                                           |  |                               |        |   |               |   |    |                        |  |  |             |  |  |                                |        |   |                         |  
|Balance at at December 31, 2012                                                            |  |                               | 776    |   |               | $ | —  |                        |  |  | 9,541       |  |  | $                              | 2,385  |   |                         | $
|Net loss                                                                                   |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Stock based compensation                                                                   |  |                               | —      |   |               |   | —  |                        |  |  | 5,458       |  |  |                                | 55     |   |                         |  
|Conversion of Series F Preferred
    shares and repayment of note receivable               |  |                               | (776   | ) |               |   | —  |                        |  |  | 12,750      |  |  |                                | 127    |   |                         |  
|Issuance of Series F Preferred
    shares, net of costs                                    |  |                               | 600    |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Beneficial conversion dividends
    for Series F Preferred conversion                      |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Common stock issued pursuant
    to equity line agreement                                  |  |                               | —      |   |               |   | —— |                        |  |  | 4,716       |  |  |                                | 48     |   |                         |  
|Common Stock issued pursuant
    to convertible note conversions                           |  |                               | —      |   |               |   | —  |                        |  |  | 8,934       |  |  |                                | 89     |   |                         |  
|Beneficial conversion feature
    and issuance of warrants related to financing agreements |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Cost of debt related to Debenture
    Agreement                                            |  |                               |        |   |               |   | —  |                        |  |  | 244         |  |  |                                | 2      |   |                         |  
|Common Stock issued pursuant
    to debt to equity settlement including discount on shares |  |                               | —      |   |               |   | —  |                        |  |  | 3,638       |  |  |                                | 36     |   |                         |  
|Costs related to equity line
    agreement                                                 |  |                               | —      |   |               |   | —  |                        |  |  | 144         |  |  |                                | 2      |   |                         |  
|Debt discount pursuant to
    securities purchase agreements                               |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Preferred stock dividends                                                                  |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Reverse
    stock-split adjustment                                                         |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | (2,290 | ) |                         |  
|Balance at December 31, 2013                                                               |  |                               | 600    |   |               | $ | —  |                        |  |  | 45,425      |  |  | $                              | 454    |   |                         | $
|                                                                                           |  |                               |        |   |               |   |    |                        |  |  |             |  |  |                                |        |   |                         |  
|Net loss                                                                                   |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Stock based compensation                                                                   |  |                               | —      |   |               |   | —  |                        |  |  | 9,330       |  |  |                                | 93     |   |                         |  
|Issuance of Series F Preferred
    shares, net of costs                                    |  |                               | 450    |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Conversion of Series F Preferred
    shares and accrued dividends payable                  |  |                               | (1,050 | ) |               |   | —  |                        |  |  | 44,084      |  |  |                                | 441    |   |                         |  
|Beneficial conversion dividends
    for Series F Preferred conversion                      |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Common Stock issued pursuant
    to convertible note conversions                           |  |                               | —      |   |               |   | —  |                        |  |  | 62,161      |  |  |                                | 622    |   |                         |  
|Relative fair-value of warrant
    issued with debt                                        |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Reclassification of premium
    upon debt conversion and redemption                        |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Reclassification of derivative
    liability upon debt conversion                          |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Cashless exercise of warrants
    issued related to financing agreements                   |  |                               | —      |   |               |   | —  |                        |  |  | 8,531       |  |  |                                | 85     |   |                         |  
|Reclassification of warrant
    liability upon conversion of warrants                      |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Preferred
    stock dividends                                                              |  |                               | —      |   |               |   | —  |                        |  |  | —           |  |  |                                | —      |   |                         |  
|Balance at December 31,
    2014                                                           |  |                               | —      |   |               | $ | —  |                        |  |  | 169,532     |  |  | $                              | 1,695  |   |                         | $





See accompanying
notes to consolidated financial statements.





F-6







POSITIVEID
CORPORATION AND SUBSIDIARIES

Consolidated
Statements of Cash Flows

(In thousands)



|                                                                                 |  | Year Ended December 31, |       
|-------------------------------------------------------------------------------- |  | ----------------------- | ------
|                                                                                 |  | 2014                    |       
|                                                                                 |  |                         |       
|Cash flows from operating activities:                                            |  |                         |       
|Net loss                                                                         |  | $                       | (7,191
|                                                                                 |  |                         |       
|Adjustments to reconcile net loss  to net cash used in operating activities:     |  |                         |       
|Depreciation and amortization                                                    |  |                         | 288   
|Stock-based compensation                                                         |  |                         | 1,701 
|Allowance on note receivable                                                     |  |                         | 60    
|Series F preferred stock issued as penalty fee                                   |  |                         | 250   
|Loss on extinguishment of debt                                                   |  |                         | 246   
|Convertible debt discounts and premium amortization                              |  |                         | 2,719 
|Discount on liability settlement                                                 |  |                         | —     
|Relative value of warrants and fair-value adjustments                            |  |                         | —     
|Gain on sale of marketable securities                                            |  |                         | —     
|Non-cash interest expense and financing costs                                    |  |                         | —     
|Change in fair value of embedded conversion option liability                     |  |                         | 198   
|Decrease in fair value of contingent earn-out liability                          |  |                         | (514  
|Changes in operating assets and liabilities:                                     |  |                         |       
|Increase (decrease) in prepaid expenses and other current
    assets             |  |                         | (76   
|Decrease in accounts payable and accrued expenses                                |  |                         | (321  
|Increase in deferred revenue                                                     |  |                         | 71    
|Net cash used in operating activities                                            |  |                         | (2,569
|Cash flows from investing activities:                                            |  |                         |       
|Purchase of equipment                                                            |  |                         | (5    
|Proceeds from sale of VeriTeQ common stock and note                              |  |                         | —     
|Net cash provided by (used) investing activities                                 |  |                         | (5    
|Cash flows from financing activities:                                            |  |                         |       
|Proceeds from issuances of Series F Preferred Stock, net of fees                 |  |                         | 100   
|Proceeds from convertible debt financing, net of fees                            |  |                         | 2,582 
|Principal payments of short-term debt                                            |  |                         | (128  
|Net cash provided by financing activities                                        |  |                         | 2,554 
|Net increase (decrease) in cash and cash equivalents                             |  |                         | (20   
|Cash and cash equivalents, beginning of year                                     |  |                         | 165   
|Cash and cash equivalents, end of year                                           |  | $                       | 145   
|Supplementary Cash Flow Information:                                             |  |                         |       
|Cash paid for interest                                                           |  | $                       | —     
|Cash paid for income taxes                                                       |  | $                       | —     
|                                                                                 |  |                         |       
|Non-cash financing and investing activities:                                     |  |                         |       
|Preferred dividends converted into common stock                                  |  | $                       | 45    
|Conversion of promissory notes into common stock                                 |  | $                       | 1,394 
|Issuance of shares for commitment fees                                           |  | $                       | —     
|Relative fair value of warrants issued with debt                                 |  | $                       | 70    
|Reclassification of embedded conversion option liability upon conversion of debt |  | $                       | 207   
|Reclassification of warrant liability upon exercise of warrants                  |  | $                       | 22    
|Issuance of shares for fee                                                       |  | $                       | 409   
|Issuance of warrants for advisory services                                       |  | $                       | —     
|Embedded conversion option liability recorded as debt discount                   |  | $                       | 2,161 
|Payment of accrued compensation payable through issuance of:                     |  |                         |       
|Common Stock                                                                     |  | $                       | —     
|Series I Preferred Shares                                                        |  | $                       | —     
|Settlement of compensation with exchange of marketable securities                |  | $                       | —     



See accompanying
notes to consolidated financial statements.





F-7









POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013







1.   Organization



PositiveID,
including its wholly owned subsidiary MicroFluidic Systems (“MFS”) (collectively, the “Company” or “PositiveID”),
develops molecular diagnostic systems for bio-threat detection, for rapid diagnostic testing, and also develops assays to detect
a range of biological threats. The Company’s M-BAND (Microfluidic Bio-agent Autonomous Networked Detector) system is an
airborne bio-threat detection system developed for the homeland defense industry, to detect biological weapons of mass destruction.  The
Company is also developing the handheld automated pathogen detection system Firefly Dx for rapid diagnostics, both for point of
need and clinical applications.



PositiveID
is a Delaware corporation formed in 2001. The Company commenced operations in 2002 as VeriChip Corporation. In 2007, the Company
completed an initial public offering of its common stock.



Authorized
Common Stock (Reverse Stock Split)



As
of December 31, 2014, the Company was authorized to issue 970 million shares of common stock.  On April 18, 2013, our
stockholders approved a reverse stock split within a range of between 1-for-10 to 1-for-25. On that same date our Board of Directors
approved a reverse stock split in the ratio of 1-for-25 and we filed a Certificate of Amendment to our Second Amended and Restated
Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware to affect the reverse stock split.
On April 23, 2013, the reverse stock split became effective. All share and per share amounts in this Annual Report have been adjusted
to reflect the 1-for 25 reverse stock split.



Going Concern





The
Company’s consolidated financial statements have been prepared assuming the Company will continue as a going concern. As
of December 31, 2014, we had a working capital deficiency of approximately $8.1 million and an accumulated deficit of approximately
$132.8 million, compared to a working capital deficit of approximately $5.6 million and an accumulated deficit of approximately
$124.6 million as of December 31, 2013. The decrease in working capital was primarily due to operating losses in 2014,
offset by cash received from an agreement, in a form of a purchase order, from with UTC Aerospace Systems to support a contract
for the DoD (“UTAS Agreement”), and capital raised through preferred stock and convertible debt financings.



We
have incurred operating losses prior to and since the merger that created PositiveID. The current 2014 operating losses are the
result of research and development expenditures, selling, general and administrative expenses related to our molecular diagnostics
and detection products.  We expect our operating losses to continue through 2015. These conditions raise substantial
doubt about our ability to continue as a going concern.



Our
ability to continue as a going concern is dependent upon our ability to obtain financing to fund the continued development of
our products and to support working capital requirements. Until we are able to achieve operating profits, we will continue to
seek to access the capital markets.  In 2013 and 2014, we raised approximately $1.8 and $2.7 million, respectively from the
issuance of convertible preferred stock and convertible debt. In addition, we received $1.5 under the Boeing License in 2013 and
$1.0 million in 2014 under the UTAS Agreement.



The
Company intends to continue to access capital to provide funds to meet its working capital requirements for the near-term future.
In addition and if necessary, the Company could reduce and/or delay certain discretionary research, development and related activities
and costs. However, there can be no assurances that the Company will be able to negotiate additional sources of equity or credit
for its long term capital needs. The Company’s inability to have continuous access to such financing at reasonable costs
could materially and adversely impact its financial condition, results of operations and cash flows, and result in significant
dilution to the Company’s existing stockholders. The Company’s consolidated financial statements do not include any
adjustments relating to recoverability of assets and classifications of assets and liabilities that might be necessary should
the Company be unable to continue as a going concern.







Concentrations



Concentration
of Deferred Revenue



At December
31, 2014 and 2013, customers that each accounted for more than 10% of our deferred revenue were as follows:



|           | 2014 | 2013
|---------- | ---- | ----
|Customer 1 | 97%  | 100%



Concentration
of Revenues



For the
years ended December 31, 2014 and 2013, customers that each represented more than 10% of our revenues were as follows:



|           | 2014 | 2013
|---------- | ---- | ----
|Customer 2 | 99%  | -   



2.  Summary
of Significant Accounting Policies



Principles
of Consolidations



The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries of which all are
inactive except for MFS. All significant intercompany transactions have been eliminated in the consolidation.



Use of Estimates



The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those
estimates. Significant estimates during the reported periods include allowance for doubtful accounts receivable, valuation of
goodwill and intangible assets, valuation of derivatives, valuation of beneficial conversion features, estimate of the contingent
earn-out liability, valuation of stock-based compensation and an estimate of the deferred tax asset valuation allowance.





F-8











POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



Cash and
Cash Equivalents



For
the purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with an original
maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at December 31, 2014 or
2013 respectively. The Company maintained its cash in one financial institution during the years ended December 31, 2014
and 2013. Balances were insured up to Federal Deposit Insurance Corporation (“FDIC”) limits. At times, cash deposits
exceeded the federally insured limits.



Accounts
receivable



Accounts
receivable are stated at their estimated net realizable value. The Company reviews its accounts to estimate losses resulting from
the inability of its customers to make required payments. Any required allowance is based on specific analysis of past due accounts
and also considers historical trends of write-offs. Past due status is based on how recently payments have been received from
customers. The Company’s collection experience has been favorable reflecting a limited number of customers. No allowance
was deemed necessary at December 31, 2014 and 2013 as all accounts receivable were collected.



Equipment



Equipment
is carried at cost less accumulated depreciation, computed using the straight-line method over the estimated useful lives. Leasehold
improvements are depreciated over the shorter of the lease term or useful life, software is depreciated over 2 years, and
equipment is depreciated over periods ranging from 3 to 5 years. Repairs and maintenance which do not extend the useful life
of the asset are charged to expense as incurred. Gains and losses on sales and retirements are reflected in the consolidated statements
of operations.



Intangible
Assets and Goodwill



Intangible
assets are carried at cost less accumulated amortization, computed using the straight-line method over the estimated useful lives.
Customer contracts and relationships are being amortized over 3 years, patents are being amortized over 5 years, and non-compete
agreements are being amortized over 2 years.



The
Company continually evaluates whether events or circumstances have occurred that indicate the remaining estimated useful lives
of its definite-lived intangible assets may warrant revision or that the remaining balance of such assets may not be recoverable.
The Company uses an estimate of the related undiscounted cash flows attributable to such asset over the remaining life of the
asset in measuring whether the asset is recoverable.



The
Company records goodwill as the excess of the purchase price over the fair values assigned to the net assets acquired in business
combinations. Goodwill is allocated to reporting units as of the acquisition date for the purpose of goodwill impairment testing.
The Company’s reporting units are those businesses for which discrete financial information is available and upon which
segment management makes operating decisions. Goodwill of a reporting unit is tested for impairment at year-end, or between testing
dates if an impairment condition or event is determined to have occurred.



In
assessing potential impairment of the intangible assets recorded in connection with the MFS acquisition as of December 31, 2014,
we considered the likelihood of future cash flows attributable to such assets, including but not limited to cash received from
Boeing and the probability and extent of our participation in the DHS’s next generation BioWatch program and the what we
believe to be a large market opportunity for our Firefly Dx product, once development is complete. Based on our analysis, we have
concluded based on information currently available, that no impairment of the intangible assets exists as of December 31, 2014.



The Company
performed its annual impairment test of goodwill as of December 31, 2014.  As a result of this annual test, using the market
capitalization method of valuation, it was determined that the goodwill balance of $510 thousand as of December 31, 2014 was not
impaired.



Revenue
Recognition



Revenue
is recognized when persuasive evidence of an arrangement exists, collectability of arrangement consideration is reasonably assured,
the arrangement fees are fixed or determinable and delivery of the product or service has been completed.



If
at the outset of an arrangement, the Company determines that collectability is not reasonably assured, revenue is deferred until
the earlier of when collectability becomes probable or the receipt of payment. If there is uncertainty as to the customer’s
acceptance of the Company’s deliverables, revenue is not recognized until the earlier of receipt of customer acceptance
or expiration of the acceptance period. If at the outset of an arrangement, the Company determines that the arrangement fee is
not fixed or determinable, revenue is deferred until the arrangement fee becomes estimable, assuming all other revenue recognition
criteria have been met.





F-9







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



To
date, the Company has generated revenue from two sources: (1) professional services (consulting & advisory), and (2) technology
licensing.



Specific revenue
recognition criteria for each source of revenue is as follows:



| | (1) | Revenues
    for professional services, which are of short term duration, are recognized when services are provided,
| | --- | --------------------------------------------------------------------------------------------------------------------



| | (2) | Technology license revenue is recognized upon the completion of all terms of that
    license. Payments received in advance of completion of the license terms are recorded as deferred revenue.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Convertible
Notes With Variable Conversion Options



The
Company has entered into convertible notes, some of which contain variable conversion options, whereby the outstanding principal
and accrued interest may be converted, by the holder, into common shares at a fixed discount to the price of the common stock
at the time of conversion. The Company measures the fair value of the notes at the time of issuance, which is the result of the
share price discount at the time of conversion, and records the premium as accretion to interest expense to the date of first
conversion.



The
Company accounts for debt issuance cost paid to lenders, or on behalf of lenders, in accordance with ASC 470, Debt. The costs associated
with the issuance of debt are recorded as debt discount and amortized over the life of the underlying debt instrument.



Accounting for Derivatives



The
Company evaluates its convertible debt, options, warrants or other contracts to determine if those contracts or embedded components
of those contracts qualify as derivatives to be separately accounted for.  The result of this accounting treatment is
that under certain circumstances the fair value of the derivative is marked-to-market each balance sheet date and recorded as
a liability.  In the event that the fair value is recorded as a liability, the change in fair value is recorded in the
statement of operations as other income or expense.  Upon conversion or exercise of a derivative instrument, the instrument
is marked to fair value at the conversion date and then that fair value is reclassified to equity.  Equity instruments
that are initially classified as equity that become subject to reclassification under this accounting standard are reclassified
to liability at the fair value of the instrument on the reclassification date.



Fair Value of Financial Instruments
and Fair Value Measurements



The
Company measures its financial and non-financial assets and liabilities, as well as makes related disclosures, in accordance with
ASC Topic 820, Fair Value Measurements and Disclosures (“ASC Topic 820”). For certain of our financial instruments,
including cash, accounts receivable, accounts payable and accrued liabilities, the carrying amounts approximate fair value due
to their short maturities. Amounts recorded for notes payable, net of discount, also approximate fair value because current interest
rates available to the Company for debt with similar terms and maturities are substantially the same.



ASC
Topic 820 provides guidance with respect to valuation techniques to be utilized in the determination of fair value of assets and
liabilities. Approaches include, (i) the market approach (comparable market prices), (ii) the income approach (present value of
future income or cash flow), and (iii) the cost approach (cost to replace the service capacity of an asset or replacement cost).
ASC Topic 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into
three broad levels. The following is a brief description of those three levels:



| | Level 1: | Observable inputs such as
quoted prices (unadjusted) in active markets for identical assets or liabilities.
| | -------- | -----------------------------------------------------------------------------------------------------------



| | Level 2: | Inputs other than quoted prices
that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets
and quoted prices for identical or similar assets or liabilities in markets that are not active.
| | -------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Level 3: | Unobservable inputs in which
little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that
a market participant would use.
| | -------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Stock-Based
Compensation



Stock-based
compensation expenses are reflected in the Company’s consolidated statements of operations under selling, general and administrative
expenses and research and development expenses.



Compensation
expense for all stock-based employee and director compensation awards granted is based on the grant date fair value estimated
in accordance with the provisions of ASC Topic 718, Stock Compensation (“ASC Topic 718”). The Company recognizes these
compensation costs on a straight-line basis over the requisite service period of the award, which is generally the vesting term.
Vesting terms vary based on the individual grant terms.





F-10







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



The
Company estimates the fair value of stock-based compensation awards on the date of grant using the Black-Scholes-Merton (“BSM”)
option pricing model, which was developed for use in estimating the value of traded options that have no vesting restrictions
and are freely transferable. In addition, option valuation models require the input of highly subjective assumptions including
the expected stock price volatility. The BSM option pricing model considers, among other factors, the expected term of the award
and the expected volatility of the Company’s stock price. Expected terms are calculated using the Simplified Method, volatility
is determined based on the Company's historical stock price trends and the discount rate is based upon treasury rates with instruments
of similar expected terms. Warrants granted to non-employees are accounted for in accordance with the measurement and recognition
criteria of ASC Topic 505-50, Equity Based Payments to Non-Employees.



Income
Taxes



The
Company accounts for income taxes under the asset and liability approach for the financial accounting and reporting of income
taxes. Deferred taxes are recorded based upon the tax impact of items affecting financial reporting and tax filings in different
periods. A valuation allowance is provided against net deferred tax assets when the Company determines realization is not currently
judged to be more likely than not.



The
Company follows a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax
position for recognition purposes by determining if the weight of available evidence indicates it is more likely than not that
the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step
is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.
The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic
adjustments and which may not accurately anticipate actual outcomes.  Accordingly, the Company reports a liability for
unrecognized tax benefits resulting from the uncertain tax positions taken or expected to be taken on a tax return and recognizes
interest and penalties, if any, related to uncertain tax positions as interest expense. The Company does not have any uncertain
tax positions at December 31, 2014 and 2013.



Research
and Development Costs



The
principal objective of our research and development program is to develop high-value molecular diagnostic products such as M-BAND
and Firefly Dx. We focus our efforts on four main areas: 1) engineering efforts to extend the capabilities of our systems and
to develop new systems; 2) assay development efforts to design, optimize and produce specific tests that leverage the systems
and chemistry we have developed; 3) target discovery research to identify novel micro RNA targets to be used in the development
of future assays; 4) chemistry research to develop innovative and proprietary methods to design and synthesize oligonucleotide
primers, probes and dyes to optimize the speed, performance and ease-of-use of our assays. Research and development cost are expensed
as incurred. Total research and development expense was $588,000 and $691,000 for the years ended December 31, 2014 and 2013,
respectively.



Segments



The
Company follows the guidance of ASC 280-10 for “Disclosures about Segments of an Enterprise and Related Information."
During 2013 and 2012, the Company only operated in one segment; therefore, segment information has not been presented.



New Accounting
Pronouncements



There
are no new accounting pronouncements during the year ended December 31, 2014 that affect the consolidated financial position of
the Company or the results of its’ operations. Accounting Standard Updates which are not effective until after December
31, 2014, including the pronouncements discussed below, are not expected to have a significant effect on the Company’s consolidated
financial position or results of its’ operations.



ASU 2014 –
09:



In
June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue
from Contracts with Customers”. The update gives entities a
single comprehensive model to use in reporting information about the amount and timing of revenue resulting from contracts to
provide goods or services to customers. The proposed ASU, which would apply to any entity that enters into contracts to provide
goods or services, would supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific
guidance throughout the Industry Topics of the Codification. Additionally, the update would supersede some cost guidance included
in Subtopic 605-35, Revenue Recognition – Construction-Type and Production-Type Contracts. The update removes inconsistencies
and weaknesses in revenue requirements and provides a more robust framework for addressing revenue issues and more useful information
to users of financial statements through improved disclosure requirements. In addition, the update improves comparability of revenue
recognition practices across entities, industries, jurisdictions, and capital markets and simplifies the preparation of financial
statements by reducing the number of requirements to which an entity must refer. The update is effective for annual reporting
periods beginning after December 15, 2016, including interim periods within that reporting period. This updated guidance is not
expected to have a material impact on our results of operations, cash flows or financial condition.





F-11







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



ASU 2014-12:



In
June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-12, “Compensation
– Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance
Target Could Be Achieved after the Requisite Service Period”. The
amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the
award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments
require that a performance target that affects vesting and that could be achieved after the requisite service period be treated
as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance
conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual
periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The
effective date is the same for both public business entities and all other entities.



Entities
may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b)
retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period
presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the
cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements
should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition
is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. This updated guidance is not expected
to have a material impact on our results of operations, cash flows or financial condition.



ASU 2014-15:





In
August 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update 2014-15, “Presentation
of Financial Statements - Going Concern (Subtopic 205-40); Disclosure of Uncertainties about an Entity’s Ability to Continue
as a Going Concern”. This update requires management of the Company to evaluate whether there is substantial doubt about
the Company’s ability to continue as a going concern. This update is effective for the annual period ending after December
15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company does not expect this standard
to have an impact on the Company’s consolidated financial statements upon adoption.



Loss Per
Common Share



The
Company presents basic income (loss) per common share and, if applicable, diluted income (loss) per share. Basic income (loss)
per common share is based on the weighted average number of common shares outstanding during the year and after preferred stock
dividend requirements. The calculation of diluted income (loss) per common share assumes that any dilutive convertible preferred
shares outstanding at the beginning of each year or the date issued were convertible at those dates, with preferred stock dividend
requirements and outstanding common shares adjusted accordingly. It also assumes that outstanding common shares were increased
by shares issuable upon exercise of those stock options and warrants for which the average period market price exceeds the exercise
price, less shares that could have been purchased by the Company with related proceeds. Additionally, shares issued upon conversion
of convertible debt are included.



The
following potentially dilutive equity securities outstanding as of December 31, 2014 and 2013 were not included in the computation
of dilutive loss per common share because the effect would have been anti-dilutive (in thousands):



|                                     |  | December 31, 2014 |         |  | December 31, 2013 | 
|------------------------------------ |  | ----------------- | ------- |  | ----------------- | 
|Common shares issuable under:        |  |                   |         |  |                   | 
|Convertible notes                    |  |                   | 84,784  |  |                   | 
|Convertible Series F Preferred Stock |  |                   | -       |  |                   | 
|Convertible Series I Preferred Stock |  |                   | 38,078  |  |                   | 
|Stock options                        |  |                   | 2,856   |  |                   | 
|Warrants                             |  |                   | 4,490   |  |                   | 
|Unvested restricted common stock     |  |                   | 3,432   |  |                   | 
|                                     |  |                   | 133,640 |  |                   | 





F-12







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



3.   Acquisitions/Dispositions



Microfluidic
Acquisition



On
May 23, 2011, the Company acquired all of the outstanding capital stock of MFS in a transaction accounted for using the purchase
method of accounting (the “Acquisition”). Since MFS's inception, its key personnel have had an important role in developing
technologies to automate the process of biological pathogen detection. MFS’s substantial portfolio of intellectual property
related to sample preparation and rapid medical testing applications is complementary to the Company’s portfolio of virus
detection and diabetes management products in development.



In
connection with the Acquisition, the Company was also required to make certain earn-out payments, which as of January 1, 2014
could total up to a maximum of $2,000,000 payable in shares of the Company’s common stock, upon certain conditions being
achieved in 2014 (the “Earn-Out Payment”). There was also opportunity for the MFS sellers to achieve Earn-Out Payments
in 2011 through 2013.  Targets were not met in any of the years 2011 - 2014.  The earn-out for 2014 was based
on MFS achieving certain earnings targets for the respective year, subject to a maximum Earn-Out Payment of $2,000,000.  Additionally,
approximately two-thirds of the earn-out is capped at $8.00 per share.  Further, the Company is prohibited from making
any Earn-Out Payment until stockholder approval is obtained if the aggregate number of shares to be issued exceeds 19.99% of the
Company’s common stock outstanding immediately prior to the closing. In the event the Company is unable to obtain any required
stockholder approval, the Company is obligated to pay the applicable Earn-Out Payment in cash to the sellers. As of December 31,
2014, the earn-out period has expired and no monies are owed.



The
original estimated purchase price of the Acquisition included the contingent earnout consideration of approximately $750,000.
The fair value of the contingent consideration at each balance sheet date was estimated based upon the present value of the probability-weighted
expected future payouts under the earn-out arrangement. On October 31, 2011, the Company entered into an agreement with two of
the selling MFS shareholders pursuant to which the two individuals waived their right to any earn-out compensation for 2011 in
settlement of the closing working capital adjustment provisions of the purchase agreement. The two individuals, who had a combined
ownership interest in MFS of 68% also agreed to receive any future earnout consideration at a price of no lower than $8 per share.



|                                                                |  | (In thousands) |     
|--------------------------------------------------------------- |  | -------------- | ----
|Balance of contingent earnout liability as of January 1, 2013   |  | $              | 645 
|Change in liability during 2013                                 |  |                | (131
|Balance of contingent earnout liability as of December 31, 2013 |  |                | 514 
|Change in liability during year ended December 31, 2014         |  |                | (514
|Balance of contingent earnout liability as of December 31, 2014 |  | $              | -   



Sale of
Subsidiary to Related Party



On
January 11, 2012, VeriTeQ Acquisition Corporation, or VAC, which was owned and controlled by our former chairman and chief executive
officer, purchased all of the outstanding capital stock of PositiveID Animal Health, or Animal Health, in exchange for a secured
promissory note in the amount of $200,000, or the Note, and 4 million shares of common stock of VAC representing a 10% ownership
interest, to which no value was ascribed. The Note accrued interest at 5% per annum. Payments under the Note were to begin on
January 11, 2013 and are due and payable monthly, and the Note matures on January 11, 2015. The Note was secured by substantially
all of the assets of Animal Health pursuant to a security agreement dated January 11, 2012, or the VeriTeQ Security Agreement.
Mr. Caragol our CEO was a director of VAC until July 8, 2013. Mr. Krawitz, a director of the Company, was a director of VAC and
VeriTeQ Corporation (“VeriTeQ”), its successor, until June 17, 2014.



In
connection with the sale, we entered into a license agreement with VAC dated January 11, 2012, or the Original License Agreement,
which granted VAC a nonexclusive, perpetual, nontransferable, license to utilize our biosensor implantable radio frequency identification
(RFID) device that is protected under United States Patent No. 7,125,382, “Embedded Bio Sensor System,” or the Patent,
for the purpose of designing and constructing, using, selling and offering to sell products or services related to the VeriChip
business, but excluding the GlucoChip or any product or application involving blood glucose detection or diabetes management.
Pursuant to the Original License Agreement, we were to receive royalties in the amount of 10% on all gross revenues arising out
of or relating to VAC’s sale of products, whether by license or otherwise, specifically relating to the Patent, and a royalty
of 20% on gross revenues that are generated under the Development and Supply Agreement between us and Medical Components, Inc.,
or Medcomp, dated April 2, 2009, to be calculated quarterly with royalty payments due within 30 days of each quarter end. The
total cumulative royalty payments under the agreement with Medcomp will not exceed $600,000.



We
also entered into a shared services agreement with VAC on January 11, 2012, or the Shared Services Agreement, pursuant to which
we agreed to provide certain services to VAC in exchange for $30,000 per month. The term of the Shared Services Agreement commenced
on January 23, 2012. The first payment for such services is not payable until VAC receives gross proceeds of a financing of at
least $500,000. On June 25, 2012, the Shared Services Agreement was amended, pursuant to which all amounts owed to us under the
Shared Services Agreement as of May 31, 2012 were converted into shares of common stock of VAC. In addition, effective June 1,
2012, the level of shared services was decreased and the monthly charge for the shared services under the Shared Services Agreement
was reduced from $30,000 to $12,000. Furthermore, on June 26, 2012, the Original License Agreement was amended pursuant to which
the license was converted from a nonexclusive license to an exclusive license, subject to VAC meeting certain minimum royalty
requirements as follows: 2013 $400,000; 2014 $800,000; and 2015 and thereafter $1,600,000.





F-13







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



On
August 28, 2012, we entered into an Asset Purchase Agreement with VAC, or the VeriTeQ Asset Purchase Agreement, whereby VAC purchased
all of the intellectual property, including patents and patents pending, related to our embedded biosensor portfolio of intellectual
property. Under the VeriTeQ Asset Purchase Agreement, we are to receive royalties in the amount of ten percent (10%) on all gross
revenues arising out of or relating to VAC’s sale of products, whether by license or otherwise, specifically relating to
the embedded biosensor intellectual property, to be calculated quarterly with royalty payments due within 30 days of each quarter
end. In 2012, there are no minimum royalty requirements. Minimum royalty requirements thereafter, and through the remaining life
of any of the patents and patents pending, are identical to the minimum royalties due under the Original License Agreement.



Simultaneously
with the VeriTeQ Asset Purchase Agreement, we entered into a license agreement with VAC which granted us an exclusive, perpetual,
transferable, worldwide and royalty-free license to the Patent and patents pending that are a component of the GlucoChip in the
fields of blood glucose monitoring and diabetes management. In connection with the VeriTeQ Asset Purchase Agreement, the Original
License Agreement, as amended June 26, 2012, was terminated. Also on August 28, 2012, the VeriTeQ Security Agreement was amended,
pursuant to which the assets sold by us to VAC under the VeriTeQ Asset Purchase Agreement and the related royalty payments were
added as collateral under the Security Agreement.



On
August 28, 2012, the Shared Services Agreement was further amended, pursuant to which, effective September 1, 2012, the level
of services provided was decreased and the monthly charge for the shared services under the Shared Services Agreement was reduced
from $12,000 to $5,000. On April 22, 2013, the Company entered into a non-binding letter agreement with VAC in which the Company
agreed to provide up to an additional $60,000 of support during April and May 2013.



The
new agreements and amendments to existing agreements between the Company and VeriTeQ Acquisition Corporation on August 28, 2012
were entered into to transfer ownership of the underlying intellectual property, primarily patents, to VAC, with a license back
to the Company for the one application that the Company retained (the GlucoChip). The royalty rates set in the original license
were maintained and the rates in the Shared Services Agreement, as amended, were adjusted to reflect a decreased level of support
between the two companies. The intent of these agreements and amendments, and all agreements that followed in 2012 through 2013,
was to better position VeriTeQ Acquisition Corporation for a third party capital transaction and were negotiated at arm's length.
No additional financial consideration was conveyed in conjunction with these agreements and amendments. It was the Company's intent
in its transactions with VAC and its successor, VeriTeQ Corporation to maximize and monetize its returns for the benefit of the
Company.





On
July 8, 2013, the Company entered into a Letter Agreement with VAC, to amend certain terms of several agreements between PositiveID
and VAC. The Letter Agreement amended certain terms of the Shared Services Agreement entered into between PositiveID and VAC on
January 11, 2012, as amended; the Asset Purchase Agreement entered into on August 28, 2012, as amended; and the Secured Promissory
Note dated January 11, 2012.  The Letter Agreement defines the conditions of termination of the Shared Services Agreement,
including payment of the approximate $290,000 owed from VAC to PositiveID, the elimination of minimum royalties payable to PositiveID
under the Asset Purchase Agreement, as well as certain remedies if VAC fails to meet certain sales levels, and to amend the Note,
which has a current balance of $228,000, to include a conversion feature under which the Note may be repaid, at VAC’s option,
in equity in lieu of cash. The agreements entered into on July 8, 2013 were negotiated in conjunction with VeriTeQ Acquisition
Corporation’s merger transaction with Digital Angel Corporation, resulting in a public company now called VeriTeQ Corporation.
The terms of the agreements were made to benefit both the Company and VeriTeQ. The Company benefitted as its equity interest in
VAC became an equity interest in a public company, allowing future realization of the Company’s holdings. No additional
financial consideration was conveyed in conjunction with these agreements and amendments. The changes were also a condition to
closing of the merger agreement set by Digital Angel, VAC’s merger partner.



During
October 2013 VeriTeQ arranged a financing with a group of eight buyers (the “Buyers”). In conjunction with that transaction
the Buyers offered the Company a choice of either selling its interest in VeriTeQ, including 871,754 shares and its convertible
promissory note (which had a balance of $203,694 at the time of the transaction), which was convertible into 135,793 shares of
VeriTeQ stock, for $750,000, or alternatively, to lock up its shares for a period of one year. The Board of Directors of the Company
considered a number of factors, including the Company’s liquidity and access to capital, and the prospects for return on
the VeriTeQ shares in twelve months. The Board concluded that it was in the best interest of Company to sell its interest in VeriTeQ
to the Buyers.



As
a result, on November 8, 2013 the Company entered into a letter agreement (the “November Letter Agreement”) with VeriTeQ
and on November 13, 2013, the Company entered into a Stock Purchase Agreement (“SPA”) with the Buyers. On November
13, 2013 VeriTeQ entered into a financing transaction with Hudson Bay Master Fund Ltd. (“Hudson”) and other participants,
including most of the Buyers. On the one year anniversary of the transaction, or November 13, 2014, the shares and share equivalents
sold to the Buyers would have had a combined value of approximately $3,000.



Pursuant
to the November Letter Agreement, VeriTeQ delivered to the Company a warrant to purchase 300,000 shares of VeriTeQ common stock
at price of $2.84. The warrant has the same terms as the warrant entered into between Hudson and VeriTeQ, including a term of
5 years and full quantity and pricing reset provisions. The November Letter Agreement also specified that the remaining outstanding
payable balance owed from VeriTeQ to the Company would be repaid pursuant to the following schedule: (a) $100,000 paid upon VeriTeQ
raising capital in excess of $3 million (excluding the November 18, 2013 financing with Hudson), (b) within 30 and 60 days after
the initial $100,000 payment, VeriTeQ shall pay $50,000 each (total of and additional $100,000) to the Company, and (c) the remaining
balance of the payable (approximately $12,000) will be paid within 90 days after the initial $100,000 payment. The Letter Agreement
also included several administrative corrections to previous agreements between the Company and VeriTeQ.





F-14







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



On
October 20, 2014, the Company entered into a GlucoChip and Settlement Agreement (the “GlucoChip Agreement”) with VeriTeQ,
the purpose of which is to transfer the final element of the Company’s implantable microchip business to VeriTeQ, to provide
for a period of financial support to VeriTeQ to develop that technology, and to provide for settlement of the $222,115 owed by
VeriTeQ to the Company under a shared services agreement under which the Company had provided financial support to VeriTeQ during
2012 and early 2013.



The
GlucoChip Agreement provides for the termination of the License Agreement entered into between the Company and VeriTeQ on August
28, 2012, whereby the Company had retained an exclusive license to the GlucoChip technology. Pursuant to the GlucoChip Agreement,
the Company retains its right to any future royalties from the sale of GlucoChip or any other implantable bio-sensor applications.
The GlucoChip Agreement also provided for the settlement of the amounts owed pursuant to the Shared Services Agreement entered
into between the Company and VeriTeQ on January 11, 2012, as amended. The current outstanding amount of $222,115, pursuant to
the Shared Services Agreement was settled by VeriTeQ issuing a Convertible Promissory Note to the Company (“Note I”).
Note I bears interest at the rate of 10% per annum; is due and payable on October 20, 2016; and may be converted by the Company
at any time after 190 days of the date of closing into shares of VeriTeQ common stock at a conversion price equal to a 40% discount
of the average of the three lowest daily trading prices (as set forth in Note I) calculated at the time of conversion. Note I
also contains certain representations, warranties, covenants and events of default, and increases in the amount of the principal
and interest rates under Note I in the event of such defaults. Additionally, pursuant to the GlucoChip Agreement, VeriTeQ has
agreed to provide an initial common share reserve of 10,000,000 shares of common stock under its outstanding warrant with the
Company. In addition, VeriTeQ has agreed to increase the reserved shares to cover twice the number of shares of common stock due
if the warrant were exercised in full and maintain the number of reserved shares of common stock at that level.



Pursuant
to the GlucoChip Agreement, the Company also agreed to provide financial support to VeriTeQ, for a period of up to two years,
in the form of convertible promissory notes. On October 20, 2014, the Company funded VeriTeQ $60,000 and VeriTeQ issued the Company
a Convertible Promissory Note (“Note II”) in the principal amount of $60,000. Note II bears interest at the rate of
10% per annum; is due and payable on October 20, 2015; and may be converted by the Company at any time after 190 days of the date
of closing into shares of VeriTeQ common stock at a conversion price equal to a 40% discount of the average of the three lowest
daily trading prices (as set forth in Note II) calculated at the time of conversion. Note II also contains certain representations,
warranties, covenants and events of default, and increases in the amount of the principal and interest rates under Note II in
the event of such defaults. Pursuant to the GlucoChip Agreement, the Company agreed to provide VeriTeQ with continuing financial
support through issuance of additional convertible promissory notes with similar terms and conditions as Note II. The continuing
financial support is not required to be more frequent than every 100 days and may not be in excess of $50,000 in any individual
note.



As
VeriTeQ is an early stage company, not yet fully capitalized, the Company plans to continue to fully reserve all note receivable
and warrant balances. If and when proceeds are realized in the future, gains may be recognized.



License
of iglucose



In
February 15, 2013, the Company entered into an agreement the (“SGMC Agreement”) with SGMC, Easy Check, Easy-Check
Medical Diagnostic Technologies Ltd., an Israeli company, and Benjamin Atkin, an individual (“Atkin”), pursuant to
which the Company licensed its iglucose TM technology to SGMC for up to $2 million based on potential future revenues
of glucose test strips sold by SGMC.  These revenues will range between $0.0025 and $0.005 per strip. A person with
diabetes who tests three times per day will use over 1,000 strips per year.



Pursuant
to the SGMC Agreement, the Company granted SGMC an exclusive right and license to the intellectual property rights in the iglucosepatent applications; a non-exclusive right and license to use and make a “white label” version of the iglucosewebsites; a non-exclusive right and license to use all documents relating to the iglucose 510(k) application to the
Food and Drug Administration of the United States Government; and an exclusive right and license to the iglucose trademark.
The Company has also agreed to transfer to SGMC all right, title, and interest in the www.iglucose.com and www.iglucose.net domain
names.



In
consideration for the rights and licenses discussed above, and the transfer of the domain names, SGMC shall pay to the Company
the amount set forth below for each glucose test strip sold by SGMC and any sublicenses of SGMC for which results are posted by
SGMC via its communications servers (the “Consideration”):



| | (i)  | $0.0025 per strip sold until SGMC
    has paid aggregate Consideration of $1,000,000; and                                                                                                                                                  
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii) | $0.005 per strip sold
    thereafter until SGMC has paid aggregate Consideration of $2,000,000; provided, however, that the aggregate Consideration
    payable by SGMC pursuant to the SGMC Agreement shall in no event exceed $2,000,000.



To date, no
royalties have been realized from this agreement.





F-15







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



4. Intangible Assets



Intangible assets consist of the
following as of December 31, 2014 and 2013 (in thousands):





|                                     |  |                       |       |  | December 31,             |  
|------------------------------------ |  | --------------------- | ----- |  | ------------------------ | -
|                                     |  |                       |       |  | 2014                     |  
|                                     |  | Gross Carrying Amount |       |  | Accumulated Amortization |  
|                                     |  |                       |       |  |                          |  
|Customer contracts and relationships |  | $                     | 230   |  |                          | $
|Patents                              |  |                       | 1,223 |  |                          |  
|Non-compete agreements               |  |                       | 169   |  |                          |  
|                                     |  | $                     | 1,622 |  |                          | $



Amortization
of intangible assets amounted to approximately $277,000 and $357,000 for the year ended December 31, 2014 and 2013 respectively.
Estimated future amortization expense is as follows (in thousands):



|2015 |  |   | 245 | 
|---- |  | - | --- | 
|2016 |  |   | 102 | 
|     |  | $ | 347 | 



5. Accrued
Expenses



Accrued
expenses and other current liabilities consisted of the following as of December 31, 2014 and 2013 (in thousands):



|                     |  | December 31, 2014 |     |  | December 31, 2013 |  
|-------------------- |  | ----------------- | --- |  | ----------------- | -
|Accrued compensation |  | $                 | 359 |  |                   | $
|Other                |  |                   | 334 |  |                   |  
|                     |  | $                 | 693 |  |                   | $



6.   Equity
and Debt Financing Agreements



Ironridge
Series F Preferred Stock Financings



Beginning
in July 2011, the Company entered into a series of financings with Ironridge involving the Company’s Series F convertible
preferred stock. Between July 2011 and December 31, 2014, a total of 3,150 Series F shares have been issued and fully converted
into a total of 60,017,961 common shares, as of the year ended December 31, 2014. No Series F shares have been redeemed. As of
December 31, 2014 there are no shares of Series F outstanding.



On
August 26, 2013, the Company entered into a Stock Purchase Agreement (the “Ironridge Stock Purchase Agreement”) and
a Registration Rights Agreement (the “Ironridge Registration Rights Agreement” and, collectively, the “Ironridge
Agreements”) with Ironridge Global IV, Ltd., a British Virgin Islands business company (“Ironridge”). Pursuant
to the Ironridge Agreements, the Company agreed to issue 450 shares of Series F Preferred Stock (“Series F”) to Ironridge
in exchange for $300,000. Additionally, the Company issued 100 shares and 50 shares of Series F as commitment and documentation
fees, respectively. During the year ended December 31, 2014, these 600 shares of Series F were converted into 22,992,056 shares
of common stock.



The
Company had the option to buy back any shares of Series F at the liquidation value plus accrued dividends, without any premium.
The Company also agreed to file a Registration Statement covering the common shares underlying the Series F within 30 days of
closing and to use its best efforts to get the Registration Statement effective. As the Registration Statement was not effective
within 90 days of closing on January 10, 2014 the Company issued 150 shares of Series F to Ironridge as liquidated damages, for
which an expense in the amount of $150,000 has been recorded during the year ended December 31, 2014. On February 25, 2014, these
150 shares of Series F were converted into 3,398,389 shares of common stock.





F-16







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



On
February 27, 2014, the Company entered into a Stock Purchase Agreement with Ironridge. Pursuant to the agreement, the Company
agreed to issue 150 shares of Series F to Ironridge in exchange for $100,000. Additionally, the Company issued 50 shares of Series
F as commitment and documentation fees which were recorded at face value of $50,000, and in March 2014 issued an additional 100
shares of Series F as liquidated damages, for which an expense in the amount of $100,000 was recorded, in fulfillment of its obligations
under the agreement. During the year ended December 31, 2014, all of the 300 Series F shares were converted into 17,607,041 shares
of common stock.



The table below
provides a detail of the 3,150 Series F shares issued:



|Series F 
Shares Issued |       |  | Date |                    | Type of Consideration |                                   | Amount of    Consideration |  
|----------------------- | ----- |  | ---- | ------------------ | --------------------- | --------------------------------- | -------------------------- | -
|                        | 500   |  |      | August 15, 2011    |                       | Cash                              |                            | $
|                        | 130   |  |      | September 20, 2011 |                       | Cash                              |                            |  
|                        | 290   |  |      | November 14, 2011  |                       | Cash                              |                            |  
|                        | 290   |  |      | November 14, 2011  |                       | Cash                              |                            |  
|                        | 290   |  |      | December 5, 2011   |                       | Cash                              |                            |  
|                        | 500   |  |      | July 12, 2012      |                       | Termination Fee                   |                            |  
|                        | 100   |  |      | September 12, 2012 |                       | Waiver Fee                        |                            |  
|                        | 450   |  |      | August 26, 2013    |                       | Cash                              |                            |  
|                        | 150   |  |      | August 26, 2013    |                       | Commitment and documentation fees |                            |  
|                        | 150   |  |      | January 10, 2014   |                       | Penalty Fee                       |                            |  
|                        | 50    |  |      | February 28, 2014  |                       | Documentation fees                |                            |  
|                        | 150   |  |      | February 28, 2014  |                       | Cash                              |                            |  
|                        | 100   |  |      | March 28, 2014     |                       | Penalty Fee                       |                            |  
|                        | 3,150 |  |      |                    |                       |                                   |                            | $



| | (1) | These
fees were paid to Ironridge through the issuance of Series F Preferred Stock as more fully described below.
| | --- | -----------------------------------------------------------------------------------------------------------------



The table below
provides a detail of the 3,150 Series F which have been converted by the Company:



|Series F Shares Converted |       |  | Date of Conversion Notice |                                                      | Number of Shares of Common Issued on 
Conversion (1) | 
|------------------------- | ----- |  | ------------------------- | ---------------------------------------------------- | ---------------------------------------------------- | 
|                          | 300   |  |                           | February 15, 2012                                    |                                                      | 
|                          | 200   |  |                           | March 21, 2012                                       |                                                      | 
|                          | 130   |  |                           | April 2, 2012                                        |                                                      | 
|                          | 210   |  |                           | June 14, 2012                                        |                                                      | 
|                          | 134   |  |                           | July 10, 2012                                        |                                                      | 
|                          | 250   |  |                           | September 12, 2012                                   |                                                      | 
|                          | 100   |  |                           | November 27, 2012                                    |                                                      | 
|                          | 1,324 |  |                           | Total shares issued for year ended December 31, 2012 |                                                      | 
|                          |       |  |                           |                                                      |                                                      | 
|                          | 176   |  |                           | January 7, 2013                                      |                                                      | 
|                          | 100   |  |                           | January 30, 2013                                     |                                                      | 
|                          | 100   |  |                           | March 4, 2013                                        |                                                      | 
|                          | 100   |  |                           | April 19, 2013                                       |                                                      | 
|                          | 50    |  |                           | May 16, 2013                                         |                                                      | 
|                          | 50    |  |                           | May 17, 2013                                         |                                                      | 
|                          | 50    |  |                           | June 21, 2013                                        |                                                      | 
|                          | 50    |  |                           | July 11, 2013                                        |                                                      | 
|                          | 50    |  |                           | September 24, 2013                                   |                                                      | 
|                          | 50    |  |                           | November 12, 2013                                    |                                                      | 
|                          | 776   |  |                           | Total shares issued for year ended December 31, 2013 |                                                      | 
|                          |       |  |                           |                                                      |                                                      | 
|                          | 100   |  |                           | February 6, 2014                                     |                                                      | 
|                          | 150   |  |                           | February 25, 2014                                    |                                                      | 
|                          | 30    |  |                           | March 24, 2014                                       |                                                      | 
|                          | 170   |  |                           | March 25, 2014                                       |                                                      | 
|                          | 100   |  |                           | May 27, 2014                                         |                                                      | 
|                          | 100   |  |                           | July 16, 2014                                        |                                                      | 
|                          | 100   |  |                           | August 8, 2014                                       |                                                      | 
|                          | 100   |  |                           | September 8, 2014                                    |                                                      | 
|                          | 100   |  |                           | October 2, 2014                                      |                                                      | 
|                          | 100   |  |                           | October 16, 2014                                     |                                                      | 
|                          | 1,050 |  |                           | Total shares issued for year ended December 31, 2014 |                                                      | 
|                          |       |  |                           |                                                      |                                                      | 
|                          | 3,150 |  |                           | Total shares issued                                  |                                                      | 





|(1) | The
    shares of the Company’s common stock issued at the time a notice of conversion is subject to reconciliation based on
    the average of the daily VWAPs of the Common Stock, as reported by Bloomberg, for the 20 trading days following the notice
    of conversion. In addition, Ironridge is restricted from holding more than 9.99% of our total outstanding shares at any one
    time. In the event that the number of shares issuable pursuant to a notice of conversion would result in Ironridge holding
    more than 9.99% of the total outstanding shares of our common stock, such shares are held in escrow to be issued at a later
    date. The “Number of Shares Issued on Conversion” in the table represents the aggregate number of shares issued
    pursuant to the corresponding notice of conversion once all reconciliations have been taken into account.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







F-17







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



In
connection with the Series F conversions, the Company recorded beneficial conversion dividends totaling $0.9 and $9.0 million
during years ended December 31, 2014 and 2013 which represents the excess of fair value of the Company’s common stock at
the date of issuance of the converted Series F Preferred Stock over the effective conversion rate, multiplied by the common shares
issued upon conversion. These charges are non-cash charges.



Certificate
of Designations for Series F Preferred Stock



On
July 27, 2011, the Company filed a Certificate of Designations of Preferences, Rights and Limitations of Series F Preferred
Stock with the Secretary of State of the State of Delaware. On December 19, 2013 the Certificate of Designations was amended.
A summary of the Certificate of Designations, as amended, is set forth below:



Dividends
and Other Distributions. Commencing on the date of issuance of any such shares of Series F Preferred Stock, holders of Series
F Preferred Stock are entitled to receive dividends on each outstanding share of Series F Preferred Stock, which accrue in shares
of Series F Preferred Stock at a rate equal to 7.65% per annum from the date of issuance.  Accrued dividends are payable
upon redemption of the Series F Preferred Stock.



Redemption.
The Company may redeem the Series F Preferred Stock, for cash or by an offset against any outstanding note payable from Ironridge
Global to the Company that Ironridge Global issued, as follows.  The Company may redeem any or all of the Series F Preferred
Stock at any time after the seventh anniversary of the issuance date at the redemption price per share equal to $1,000 per share
of Series F Preferred Stock, plus any accrued but unpaid dividends with respect to such shares of Series F Preferred Stock (the
“Series F Liquidation Value”).  Prior to the seventh anniversary of the issuance of the Series F Preferred Stock,
the Company may redeem the shares at any time after six months from the issuance date at a make-whole price per share equal to
the following with respect to such redeemed Series F Preferred Stock: (i) 149.99% of the Series F Liquidation Value if redeemed
prior to the first anniversary of the issuance date, (ii) 141.6% of the Series F Liquidation Value if redeemed on or after the
first anniversary but prior to the second anniversary of the issuance date, (iii) 133.6% of the Series F Liquidation Value if
redeemed on or after the second anniversary but prior to the third anniversary of the issuance date,  (iv) 126.1% of the
Series F Liquidation Value if redeemed on or after the third anniversary but prior to the fourth anniversary of the issuance date,
(v) 119.0% of the Series F Liquidation Value if redeemed on or after the fourth anniversary but prior to the fifth anniversary
of the issuance date, (vi) 112.3% of the Series F Liquidation Value if redeemed on or after the fifth anniversary but prior to
the sixth anniversary of the issuance date, and  (vii) 106.0% of the Series F Liquidation Value if redeemed on or after the
sixth anniversary but prior to the seventh anniversary of the issuance date.



In
addition, if the Company determines to liquidate, dissolve or wind-up its business, or engage in any deemed liquidation event,
it must redeem the Series F Preferred Stock at the applicable early redemption price set forth above.



Conversion. The Series F Preferred Stock is convertible into shares of the Company’s common stock at the applicable Ironridge
Entities option or at the Company’s option at any time after six months from the date of issuance of the Series F Preferred
Stock.  The fixed conversion price is equal to $0.50 per share which represented a premium of 32% over the closing bid price
of the Company’s common stock on the trading day immediately before the date the Company announced the entry into the Series
F Agreement (the “Series F Conversion Price”).



If
the Company or Ironridge elects to convert the Series F Preferred Stock into common stock and the closing bid price of the Company’s
common stock exceeds 150% of the Series F Conversion Price for any 20 consecutive trading days, the Company will issue that number
of shares of its common stock equal to the early redemption price set forth above multiplied by the number of shares subject to
conversion, divided by the Series F Conversion Price.  If the Company elects to convert the Series F Preferred Stock into
common stock and the closing bid price of the Company’s common stock is less than 150% of the Series F Conversion Price,
the Company will issue an initial number of shares of its common stock equal to 130% of the early redemption price set forth above
multiplied by the number of shares subject to conversion, divided by the lower of (i) the Series F Conversion Price and (ii) 100%
of the closing bid price of a share of the Company’s common stock on the trading day immediately before the date of the
conversion notice.



F-18











POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



After 20 trading days, the
Ironridge Entity shall return, or the Company shall issue, a number of conversion shares (the “Series F Reconciling Conversion
Shares”), so that the total number of conversion shares under the conversion notice equals the early redemption price set
forth above multiplied by the number of shares of subject to conversion, divided by the lower of (i) the Series F Conversion Price
and (ii) 85% of the average of the daily volume-weighted average prices of the Company’s common stock for the lowest three
is the twenty trading days following the Ironridge Entity’s receipt of the conversion notice.  However, if the trading
price of the Company’s common stock during any one or more of the 20 trading days following the Ironridge Entity’s
receipt of the conversion notice falls below 70% of the closing bid price on the day prior to the date the Company gives notice
of its intent to convert, the Ironridge Entity will return the Series F Reconciling Conversion Shares to the Company and the pro
rata amount of the conversion notice will be deemed canceled.



The Company cannot issue
any shares of common stock upon conversion of the Series F Preferred Stock if it would result in an Ironridge Entity being deemed
to beneficially own, within the meaning of Section 13(d) of the Securities Exchange Act, more than 9.99% of the total shares of
common stock then outstanding.  Furthermore, until stockholder approval is obtained or the holder obtains an opinion of counsel
reasonably satisfactory to the Company and its counsel that such approval is not required, both the holder and the Company are
prohibited from delivering a conversion notice if, as a result of such exercise, the aggregate number of shares of common stock
to be issued, when aggregated with any common stock issued to holder or any affiliate of holder under any other agreements or arrangements
between the Company and the holder or any applicable affiliate of the holder, such aggregate number would, under NASDAQ Marketplace
rules (or the rules of any other exchange where the common stock is listed), exceed the Cap Amount (meaning 19.99% of the common
stock outstanding on the date of the Series F Agreement). If delivery of a conversion notice is prohibited by the preceding sentence
because the Cap Amount would be exceeded, the Company must, upon the written request of the holder, hold a meeting of its stockholders
within sixty (60) days following such request, and use its best efforts to obtain the approval of its stockholders for the transactions
described herein.



Due to the above variations
in the conversion price, the beneficial conversion feature is considered contingent and not measurable or recorded until the actual
conversion dates. The beneficial conversion feature is recorded as a constructive dividend and was $1.4 million for the year ended
December 31, 2014.



Convertible Note Financings



Short-term convertible debt for the year ended
December 31, 2014 as follows (In thousands):



|                                                                            |  | Notes |        |   | Accrued Interest |   |     | Total | 
|--------------------------------------------------------------------------- |  | ----- | ------ | - | ---------------- | - | --- | ----- | 
|                                                                            |  |       |        |   |                  |   |     |       | 
|Convertible notes with accrued interest accounted for as stock settled debt |  | $     | 534    |   |                  | $ | 47  |       | 
|Conversion premiums                                                         |  |       | 237    |   |                  |   | —   |       | 
|                                                                            |  |       | 771    |   |                  |   | 47  |       | 
|                                                                            |  |       |        |   |                  |   |     |       | 
|Convertible notes with embedded derivatives                                 |  |       | 1,900  |   |                  |   | 68  |       | 
|Derivative discounts                                                        |  |       | (1,038 | ) |                  |   | —   |       | 
|                                                                            |  |       | 862    |   |                  |   | 68  |       | 
|                                                                            |  |       |        |   |                  |   |     |       | 
|Original issue discounts and loan fee discounts                             |  |       | (221   | ) |                  |   | —   |       | 
|                                                                            |  | $     | 1,412  |   |                  | $ | 115 |       | 



On August 15, 2012,
the Company borrowed $100,000 pursuant to a convertible note, in connection with which it issued to the lender immediately exercisable
warrants to purchase 111,111 shares of common stock at an initial exercise price of $0.45 per share.  The debt was recorded
at a discount in the amount of $32,888, representing the relative fair value of the warrants. Additionally, a liability of $49,000
was recorded as the fair value of the warrant as a result of a down round adjustment to the exercise price of the warrants. In
connection with the issuance of the $100,000 note there is a beneficial conversion feature of approximately $25,000, which was
amortized over the one year term of the note. During 2013, the note principal and interest was fully converted into an aggregate
of 421,656 shares of common stock. All related debt discount and beneficial conversion feature were fully amortized in conjunction
with the conversion of the note. On January 15, 2014 the warrants were converted, on a cashless basis, into 1,666,399 shares of
common stock.



On November 8, 2012, the
Company borrowed $100,000 pursuant to a convertible note, in connection with which it issued the lender immediately exercisable
warrants to purchase 100,000 shares of common stock at an initial exercise price of $0.50 per share.  As an inducement
to enter into the loan the Company issued the lender 74,000 shares of common stock with a fair value of $37,925 at the time of
issuance, which was amortized over the one year life of the note.  The debt was recorded at a discount in the amount
of $32,683, representing the relative fair value of the warrants. Additionally, a liability of $49,000 was recorded as the fair
value of the warrant as a result of a down round adjustment to the exercise price of the warrants. In connection with the issuance
of the $100,000 note there was a beneficial conversion feature of approximately $25,000, which will be amortized over the one year
term of the note. During 2013, the note principal and interest was fully converted into an aggregate of 1,758,299 shares of common
stock. All related debt discount and beneficial conversion feature were fully amortized in conjunction with the conversion of the
note. On February 28, 2014 the warrants were converted, on a cashless basis, into 3,051,564 shares of common stock.



F-19







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



On February 27, 2013, the
Company borrowed $75,000 pursuant to a convertible note, in connection with which it issued the lender immediately exercisable
warrants to purchase 68,182 shares of common stock at an initial exercise price of $0.55 per share.  The debt was recorded
at a discount in the amount of $28,125, representing the relative fair value of the warrants. Additionally, a liability of $35,687
was recorded as the fair value of the warrant as a result of a down round adjustment to the exercise price of the warrants. In
connection with the issuance of the $75,000 note there is a beneficial conversion feature of approximately $18,750, which will
be amortized over the one year term of the note. During 2013, the note principal and interest was fully converted into an aggregate
of 4,155,937 shares of common stock. All related debt discount and beneficial conversion feature were fully amortized in conjunction
with the conversion of the note. During the year ended December 31, 2014, the warrants were converted, on a cashless basis, into
2,304,215 shares of common stock.



On June 4, 2013, the Company
borrowed $50,000 pursuant to a convertible note, in connection with which it issued the lender immediately exercisable warrants
to purchase 104,167 shares of common stock at an initial exercise price of $0.24 per share.  The debt was recorded at
a discount in the amount of $23,684, representing the relative fair value of the warrants.  The debt shall accrete in
value over its one year term to its face value of approximately $50,000. Additionally, a liability of $23,223 was recorded as the
fair value of the warrant as a result of a down round adjustment to the exercise price of the warrants. In connection with the
issuance of the $50,000 note there is a beneficial conversion feature of approximately $12,500, which will be amortized over the
one year term of the note. In 2013, $47,850 principal balance of the convertible note was converted into 2,600,000 shares of common
stock. During the three months ended September 30, 2014, remaining balance of the note principal and interest was fully converted
into 725,734 shares of common stock. All related debt discount and beneficial conversion feature were fully amortized in conjunction
with the conversion of the note. During the year ended December 31, 2014, the warrants were converted, on a cashless basis, into
1,508,848 shares of common stock.

On July 3, 2013, the Company
entered into a Securities Purchase Agreement for a new convertible promissory note (the "Purchase Agreement"). Pursuant
to the terms of the Purchase Agreement the investor committed to purchase an 8% Convertible Promissory Note (the "Convertible
Promissory Note") in the principal amount of $78,500, with a maturity date of April 8, 2014, convertible into shares of common
stock, $0.01 par value per share, of the Company, upon the terms and subject to the limitations and conditions set forth in such
Convertible Promissory Note. Interest shall commence accruing on the date that the Note is issued and shall be computed on the
basis of a 365-day year and the actual number of days elapsed. The holder may convert the Convertible Promissory Note into common
shares of stock at a 42% discount to the price of common shares in the ten days prior to conversion. In connection with the issuance
of the Convertible Promissory Note, the Company recorded a premium of $56,845 which was amortized over the life of the Note. During
the year ended December 31, 2014, the outstanding principal and interest on the Convertible Promissory Note was converted, into
5,790,072 shares of common stock.



On December 13, 2013, the
Company entered into a Securities Purchase Agreement for a new convertible promissory note (the “December Purchase Agreement”).
Pursuant to the terms of the December Purchase Agreement the investor committed to purchase an 8% Convertible Promissory Note (the
“December Convertible Promissory Note”) in the principal amount of $103,500, with a maturity date of September 17,
2014, convertible into shares of common stock, $0.01 par value per share, of the Company (the “Common Stock”), upon
the terms and subject to the limitations and conditions set forth in such December Convertible Promissory Note. Interest shall
commence accruing on the date that such note is issued and shall be computed on the basis of a 365-day year and the actual number
of days elapsed. The holder may convert the December Convertible Promissory Note into common shares of stock at a 39% discount
to the price of common shares in the ten days prior to conversion. In connection with the issuance of the December Convertible
Promissory Note, the Company computed a premium of $66,172 all of which was amortized as of June 30, 2014. During the year ended
December 31, 2014, the outstanding principal and interest on the December Convertible Promissory Note was converted, into 3,294,466
shares of common stock.



On January 24, 2014, the
Company entered into a Securities Purchase Agreement for a convertible promissory note (the “January Purchase Agreement”).
Pursuant to the terms of the January Purchase Agreement the investor committed to purchase an 8% Convertible Promissory Note (the
“January Convertible Promissory Note”) in the principal amount of $78,500 with a maturity date of October 28, 2014,
convertible into shares Common Stock, upon the terms and subject to the limitations and conditions set forth in such Convertible
Promissory Note. Interest shall commence accruing on the date that such note is issued and shall be computed on the basis of a
365-day year and the actual number of days elapsed. The holder may convert the January Convertible Promissory Note into common
shares of stock at a 39% discount to the price of common shares in the ten days prior to conversion. In connection with the issuance
of the January Convertible Promissory Note, the Company recorded a computed of $50,189 as the note is considered stock settled
debt under ASC 480, all of which was amortized as of the year ended December 31, 2014. During the year ended December 31, 2014,
the outstanding principal and interest on the January Convertible Promissory Note was converted, into 3,132,485 shares of common
stock.



F-20







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



On February 20, 2014, the
Company borrowed $82,500 pursuant to a convertible note with an OID of $7,500 resulting in cash received of $75,000. The debt matures
twenty four months from the date funded, has a one-time 10% interest charge if not paid within 90 days, and is convertible at the
option of the lender into shares of the Company’s common stock at the lesser of $0.042 per share or 60% of the average of
the two lowest closing bid prices in the 25 trading days prior to conversion.  The note might be accelerated if
an event of default occurs under the terms of the note, including the Company’s failure to pay principal and interest when
due, certain bankruptcy events or if the Company is delinquent in its SEC filings. In connection with the issuance of the notes,
the Company recorded a debt discount of $75,000 which has been fully amortized as of the year ended December 31, 2014. As of December
31, 2014, the outstanding principal and interest of the Note was converted, into 4,756,739 shares of common stock. As the note
conversion includes a “lesser of” pricing provision, a derivative liability of $91,061 was recorded when the note was
entered into. The derivative liability was remeasured at each balance sheet date and was reclassified to equity on a pro-rata basis
upon conversion of the note.



On February 21, 2014, the
Company entered into a financing arrangement pursuant to which it borrowed $100,000 in unsecured debt, convertible at the discretion
of the lender. The debt was issued at a 10% discount, matures on August 21, 2014, has an interest rate of 10%, and is convertible
at the option of the lender into shares of the Company’s common stock at a 40% discount to the lowest closing bid price in
the 20 trading days prior to conversion.  In connection with the issuance of the note, the Company computed a premium of $66,667
as the note is considered stock settled debt under ASC 480, all of which was accreted and charged to interest expense in the year
ended December 31, 2014. During the year ended December 31, 2014, the outstanding principal and interest on the Convertible Promissory
Note was converted, into 4,149,378 shares of common stock.



On March 13, 2014,
the Company borrowed two notes of $75,000, each from a separate lender with maturity dates of March 4, 2015. Under each agreement
the Company received $65,750, which was net of legal and due diligence fees. The notes bear interest at 8% per annum and are convertible
at the option of the lender into shares of the Company’s common stock at a 40% discount to the lowest closing bid price in
the 20 trading days prior to conversion.  The notes might be accelerated if an event of default occurs under the
terms of the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy events or if
the Company is delinquent in its SEC filings. In conjunction with each note the Company also issued an additional note, of identical
terms, each for $75,000. The additional note was paid for by the issuance of a note payable from the lenders to the Company. In
the event that the original note is not repaid prior to six months from its issuance, the lender has the option of converting the
additional note into shares of the Company’s common stock at a 40% discount to lowest closing bid price in the 20 trading
days prior to conversion, subject to the notes payable to the Company having been paid in full.  The additional note
payable has been netted with the related note receivable. In connection with the issuance of the notes, the Company computed a
premium of $100,000 as the debt is considered a stock settled debt under ASC 480, all of which was amortized during the year ended
December 31, 2014. As of December 31, 2014 the outstanding principal and interest was converted, into 16,386,485 shares of common
stock. On May 5, 2014 one of the $75,000 notes receivable due to the company was paid, for which the Company received $65,750,
net of fees. The Company computed a premium of $50,000 as the debt is considered a stock settled debt under ASC 480, all of which
was amortized during the year ended December 31, 2014. As of December 31, 2014 the outstanding principal and interest was converted,
into 4,117,795 shares of common stock. Concurrent with the repayment the Company and the lender entered into two new convertible
notes, for $75,000 each, on identical terms to the March 4, 2014 convertible notes. Each of these two notes was paid for by the
issuance of notes payable from the lenders to the Company, each for $75,000, on identical terms to the March 4, 2014 notes. These
two new notes have been netted for presentation purposes. In connection with the payment of the note receivable to the Company,
the Company recorded a premium of $50,000 related to one of the additional notes that had been entered into on March 4, 2014, all
of which was amortized as of the year ended December 31, 2014. As of December 31, 2014 the outstanding principal and interest was
converted, into 4,166,386 shares of common stock.



On March 24, 2014,
the Company borrowed $52,500 with a maturity date of March 19, 2015, pursuant to a financing agreement. Under the agreement the
Company received $46,000, which was net of legal and due diligence fees. The note bears interest at 8% per annum and is convertible
at the option of the lender into shares of the Company’s common stock at a 40% discount to the lowest closing bid price in
the 20 trading days prior to conversion.  The note might be accelerated if an event of default occurs under the
terms of the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy events or if
the Company is delinquent in its SEC filings. In connection with the issuance of the notes, the Company recorded a premium of $35,000
as the note is considered stock settled debt under ASC 480, all of which was accreted and charged to interest expense in the year
ended December 31, 2014. As of December 31, 2014, the outstanding principal and interest on the note was converted, into 3,043,515
shares of common stock.



On April 7, 2014, the Company
borrowed $50,000 with a maturity date of April 4, 2015, pursuant to a financing agreement. Under the agreement the Company received
$44,000, which was net of legal and due diligence fees. The note bears interest at 8% per annum and is convertible at the option
of the lender into shares of the Company’s common stock at a 40% discount to the price of common shares in the twenty days
prior to conversion. The note might be accelerated if an event of default occurs under the terms of the note, including the
Company’s failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in its
SEC filings. In connection with the issuance of the note, the Company computed a premium of $33,333 as the note is considered stock
settled debt under ASC 480, all of which was accreted and charged to interest expense in the year ended December 31, 2014. As of
December 31, 2014, the outstanding principal and interest on the note was converted, into 2,888,888 shares of common stock.



On April 14, 2014, the Company
borrowed $63,000 with a maturity date of January 2, 2015, pursuant to a financing agreement. Under the agreement the Company received
$60,000, which was net of legal fees. The note bears interest at 8% per annum and is convertible at the option of the lender into
shares of the Company’s common stock at a 39% discount to the price of common shares in the ten days prior to conversion.
The note might be accelerated if an event of default occurs under the terms of the note, including the Company’s failure
to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in its SEC filings. In connection
with the issuance of the note, the Company computed a premium of $40,279 as the note is considered stock settled debt under ASC
480, all of which was accreted and charged to interest expense in the year ended December 31, 2014. As of December 31, 2014, the
outstanding principal and interest on the note was converted, into 3,102,713 shares of common stock.



F-21







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



On April 16, 2014, the Company
borrowed $110,000 pursuant to a convertible note with an OID of $10,000 resulting in cash received of $100,000. The debt matures
twenty four months from the date funded, has a one-time 10% interest charge if not paid within 90 days, and is convertible at the
option of the lender into shares of the Company’s common stock at the lesser of $0.042 per share or 60% of the average of
the two lowest closing bid prices in the 25 trading days prior to conversion.  The note might be accelerated if
an event of default occurs under the terms of the note, including the Company’s failure to pay principal and interest when
due, certain bankruptcy events or if the Company is delinquent in its SEC filings. In connection with the issuance of the notes,
the Company recorded a debt discount of $139,997, which has been fully amortized during the year ended December 31, 2014. As of
December 31, 2014, the outstanding principal and interest of the Note was converted, into 6,910,704 shares of common stock. As
the note conversion includes a “lesser of” pricing provision, a derivative liability of $139,997 was recorded when
the note was entered into. The derivative liability was remeasured at each balance sheet date and was reclassified to equity on
a pro-rata basis upon conversion of the note.



On April 25, 2014, the Company
borrowed $50,000 with a maturity date of January 25, 2015, pursuant to a financing agreement. Under the agreement the Company received
$45,000, which was net of legal and due diligence fees. The note bears interest at 8% per annum and is convertible at the option
of the lender into shares of the Company’s common stock at a 40% discount to the price of common shares in the ten days prior
to conversion. The note might be accelerated if an event of default occurs under the terms of the note, including the Company’s
failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in its SEC filings. In
connection with the issuance of the note, the Company computed a premium of $33,333 as the note is considered stock settled debt
under ASC 480, all of which was accreted and charged to interest expense in the year ended December 31, 2014. As of December 31,
2014, the outstanding principal and interest on the note was converted, into 2,890,411 shares of common stock.



On May 30, 2014, the
Company borrowed $63,000 with a maturity date of February 27, 2015, pursuant to a financing agreement. Under the agreement the
Company received $60,000, which was net of legal fees. The note bears interest at 8% per annum and is convertible at the option
of the lender into shares of the Company’s common stock at a 39% discount to the price of common shares in the ten days prior
to conversion. The note might be accelerated if an event of default occurs under the terms of the note, including the Company’s
failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in its SEC filings. In
connection with the issuance of the note, the Company computed a premium of $40,279 as the note is considered stock settled debt
under ASC 480, all of which was accreted and charged to interest expense in the year ended December 31, 2014. As of December 31,
2014, the Company exercised its right to prepay the outstanding principal and interest for a total redemption amount of $87,536.



On June 18, 2014, the Company
borrowed $55,000 with a maturity date of June 17, 2016, pursuant to a convertible note. The debt was issued at a 10% original
issue discount resulting in proceeds of $50,000, has an interest rate of 10%, and is convertible at the option of the lender into
shares of the Company’s common stock at the lesser of (i) a 40% discount to the lowest closing bid price in the 20 trading
days prior to conversion or (ii) $0.075. The note might be accelerated if an event of default occurs under the terms
of the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy events or if the
Company is delinquent in its SEC filings. In connection with the issuance of the notes, the Company recorded a debt discount of
$50,000 related to the derivative liability. The amortization expense related to that debt discount recorded for the year ended
December 31, 2014 was $38,291. As of December 31, 2014, the outstanding principal and interest on the notes was $58,240. As the
note conversion includes a “lesser of” pricing provision, a derivative liability of $59,623 was recorded when the note
was entered into. The derivative liability is remeasured at each balance sheet date and was $53,436 at December 31, 2014.



On June 19, 2014, the Company
borrowed of $25,000, with a maturity date of June 17, 2015, pursuant to a financing agreement. Under the agreement the Company
received $22,000, which was net of legal and due diligence fees. The notes bear interest at 8% per annum and are convertible at
the option of the lender into shares of the Company’s common stock at a 40% discount to the lowest closing bid price in the
20 trading days prior to conversion.  The note might be accelerated if an event of default occurs under the terms
of the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy events or if the
Company is delinquent in its SEC filings. In connection with the issuance of the note, the Company computed a premium of $16,667
as the note is considered stock settled debt under ASC 480, all of which was accreted and charged to interest expense in the year
ended December 31, 2014. As of December 31, 2014, the Company exercised its right to prepay the outstanding principal and interest
for a total redemption amount of $35,956.



On June 20, 2014,
the Company borrowed $40,000 with a maturity date of June 17, 2015, pursuant to a financing agreement. Under the agreement the
Company received $36,000, which was net of legal and due diligence fees. The note bears interest at 8% per annum and is convertible
at the option of the lender into shares of the Company’s common stock at a 40% discount to the lowest closing bid price in
the 20 trading days prior to conversion.  The note might be accelerated if an event of default occurs under the
terms of the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy events or if
the Company is delinquent in its SEC filings. In connection with the issuance of the notes, the Company computed a premium of $26,667
as the note is considered stock settled debt under ASC 480, all of which was accreted and charged to interest expense in the year
ended December 31, 2014. As of December 31, 2014, the Company exercised its right to prepay the outstanding principal and interest
for a total redemption amount of $57,517.



F-22







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



On July 3, 2014, the Company
borrowed $115,000 with a maturity date of July 3, 2015, pursuant to a convertible note. Under the agreement the Company received
$100,000, which was net of legal and due diligence fees. The Note has an interest rate of 8%, and is convertible at the option
of the lender into shares of the Company’s common stock at the lesser of $0.06 per share or a 40% discount of the lowest
closing bid prices in the 15 trading days prior to conversion. The note might be accelerated if an event of default occurs
under the terms of the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy events
or if the Company is delinquent in its SEC filings. In connection with the issuance of the notes, the Company recorded a debt discount
of $58,571 relating to derivative liability. The amortization expense related to that debt discount recorded for the year ended
December 31, 2014 was $100,351. As of December 31, 2014, the outstanding principal and interest on the notes was $119,613. In conjunction
with the Note, the Company granted the lender a warrant for 1,000,000 common shares at a strike price of $0.08. The warrant has
a life of three years and its relative fair value of $41,429 has been recorded as a debt discount and additional paid in capital
as of December 31, 2014. As the note conversion includes a “lesser of” pricing provision, a derivative liability of
$59,623 was recorded when the note was entered into. The derivative liability is remeasured at each balance sheet date and was
$111,729 at December 31, 2014.



On July 7, 2014, the Company
borrowed $53,000 with a maturity date of March 25, 2015, pursuant to a financing agreement. Under the agreement the Company received
$50,000, which was net of legal fees. The note bears interest at 8% per annum and is convertible at the option of the lender into
shares of the Company’s common stock at a 39% discount to the price of common shares in the ten days prior to conversion.
The note might be accelerated if an event of default occurs under the terms of the note, including the Company’s failure
to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in its SEC filings. In connection
with the issuance of the note, the Company computed a premium of $33,885 as the note is considered stock settled debt under ASC
480, all of which was accreted and charged to interest expense in the year ended December 31, 2014.As of December 31, 2014, the
outstanding principal and interest on the notes was $55,137.



On July 9, 2014, the Company
borrowed $110,000 with a maturity date of July 9, 2015, pursuant to a convertible note. The debt was issued at a 10% original
issue discount resulting in proceeds of $90,000, net of legal fees. The note bears an interest rate of 10%, and is convertible
at the option of the lender into shares of the Company’s common stock at a 40% discount to the lowest closing bid price during
the 15 days prior to the election to conversion. The note might be accelerated if an event of default occurs under the
terms of the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy events or if
the Company is delinquent in its SEC filings. In connection with the issuance of the note, the Company computed a premium of $73,333
as the note is considered stock settled debt under ASC 480. On December 30, 2014, the outstanding principal and interest of the
convertible note was purchase by Dominion Capital LLC and no outstanding balance remains as of December 31, 2014. In addition,
the total recorded premium was accreted and charged to interest expense upon purchase of the convertible note.



On July 17, 2014, the Company
borrowed $115,000 with a maturity date of July 17, 2016, pursuant to a convertible note. The debt was issued at a 10% original
issue discount resulting in proceeds of $100,000, has an interest rate of 10%, and is convertible at the option of the lender into
shares of the Company’s common stock at the lesser of $0.06 per share or a 40% discount of the lowest closing bid prices
in the 20 trading days prior to conversion. The note might be accelerated if an event of default occurs under the terms
of the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy events or if the
Company is delinquent in its SEC filings. In connection with the issuance of the notes, the Company recorded a debt discount of
$100,000 related to the derivative liability. The amortization expense related to that debt discount recorded during the year ended
December 31, 2014 was $84,412. As of December 31, 2014, the outstanding principal and interest on the notes was $118,886. As the
note conversion includes a “lesser of” pricing provision, a derivative liability of $124,666 was recorded when the
note was entered into. The derivative liability is remeasured at each balance sheet date and was $111,729 at December 31, 2014.



On August 19, 2014, the
Company borrowed $66,000 with a maturity date of August 15, 2015, pursuant to a convertible note. The debt was issued at a
10% original issue discount resulting in proceeds of $54,500, net of legal fees. The Note has an interest rate of 8%, and is convertible
at the option of the lender into shares of the Company’s common stock at the lesser of $0.06 per share or a 60% of the average
of the three lowest closing bid prices 15 trading days prior to conversion. The note might be accelerated if an event
of default occurs under the terms of the note, including the Company’s failure to pay principal and interest when due, certain
bankruptcy events or if the Company is delinquent in its SEC filings. In connection with the issuance of the notes, the Company
recorded a debt discount of $54,500 related to the derivative liability. The amortization expense related to that premium recorded
in the year ended December 31, 2014 was $42,461. As of December 31, 2014, the outstanding principal and interest on the notes was
$68,213. As the note conversion includes a “lesser of” pricing provision, a derivative liability of $71,548 was recorded
when the note was entered into. The derivative liability is remeasured at each balance sheet date and was $64,123 at December 31,
2014.



On August 21, 2014, the
Company borrowed $110,000 with a maturity date of August 21, 2015, pursuant to a convertible note. The debt was issued at
a 10% original issue discount resulting in proceeds of $90,000, net of legal fees. The note bears an interest rate of 10%, and
is convertible at the option of the lender into shares of the Company’s common stock at a 40% discount to the lowest closing
bid price during the 15 days prior to the election to conversion. The note might be accelerated if an event of default
occurs under the terms of the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy
events or if the Company is delinquent in its SEC filings. In connection with the issuance of the note, the Company computed a
premium of $73,333 as the note is considered stock settled debt under ASC 480. On December 30, 2014, the outstanding principal
and interest of the convertible note was purchase by Dominion Capital LLC and no outstanding balance remains as of December 31,
2014. In addition, the total recorded premium was accreted and charged to interest expense upon purchase of the convertible note.



F-23







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



On September 4, 2014, the
Company borrowed $110,000 pursuant to a convertible note with an OID of $10,000 resulting in cash received of $100,000.The debt
matures twenty four months from the date funded, has a one-time 10% interest charge if not paid within 90 days, and is convertible
at the option of the lender into shares of the Company’s common stock at the lesser of $0.042 per share or 60% of the average
of the two lowest closing bid prices in the 25 trading days prior to conversion.  The note might be accelerated
if an event of default occurs under the terms of the note, including the Company’s failure to pay principal and interest
when due, certain bankruptcy events or if the Company is delinquent in its SEC filings. In connection with the issuance of the
notes, the Company recorded a debt discount of $100,000. As of December 31, 2014, the outstanding principal and interest on the
notes was $114,412. As the note conversion includes a “lesser of” pricing provision, a derivative liability of $119,246
was recorded when the note was entered into. The derivative liability is remeasured at each balance sheet date and was $106,971
at December 31, 2014.



On September 11, 2014, the
Company borrowed $75,000 pursuant to the back-end note in conjunction with the March 13, 2014 financing agreement. The debt has
an interest rate of 8% and the Company received proceeds of $67,750, net of fees, In the event that the original note is not repaid
prior to six months from its issuance, the lender has the option of converting the additional note into shares of the Company’s
common stock at a 40% discount to lowest closing bid price in the 20 trading days prior to conversion, subject to the notes payable
to the Company having been paid in full. In connection with the issuance of the note, the Company computed a premium of $50,000
as the note is considered stock settled debt under ASC 480, all of which was accreted and charged to interest expense in the year
ended December 31, 2014. As of December 31, 2014, the outstanding principal and interest on the note was converted, into 1,006,575
shares of common stock.



On September 19, 2014,
the Company borrowed $55,000 with a maturity date of September 19, 2015, pursuant to a convertible note. The debt was issued
at a 10% original issue discount resulting in proceeds of $50,000, has an interest rate of 10%, and is convertible at the option
of the lender into shares of the Company’s common stock at a 40% discount to the lowest closing bid price in the 20 trading
days prior to conversion. The note might be accelerated if an event of default occurs under the terms of the note, including
the Company’s failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in
its SEC filings. In connection with the issuance of the notes, the Company recorded a debt discount of $50,000 related to the derivative
liability. The amortization expense related to that discount recorded in the year ended December 31, 2014 was $21,463. As of December
31, 2014, the outstanding principal and interest on the notes was $56,838. As the note conversion includes a “lesser of”
pricing provision, a derivative liability of $59,623 was recorded when the note was entered into. The derivative liability is remeasured
at each balance sheet date and was $53,436 at December 31, 2014.



On September 22, 2014, Company
closed a Securities Purchase Agreement providing for the purchase of two Convertible Redeemable Notes in the aggregate principal
amount of $100,000, with the first note being in the amount of $50,000 and the second note being in the amount of $50,000. The
first note was funded on September 22, 2014, with the Company receiving $45,000 of net proceeds, which was net of legal and due
diligence fees. In connection with the issuance of the first note, the Company computed a premium of $33,333 as the note is considered
stock settled debt under ASC 480. The amortization expense related to that premium recorded during the year ended December 31,
2014 was $18,514. As of December 31, 2014, the outstanding principal and interest on the first note was $51,337.The second note
was initially paid for by the issuance of an offsetting $50,000 secured note issued by the lender to the Company. The funding of
the second note is subject to certain conditions as described in the second note. The two notes bear interest at the rate of 8%
per annum; are due and payable on September 15, 2015; and may be converted at the option of the lender into shares of Company common
stock at a conversion price equal to a 40% discount of the lowest closing bid price calculated at the time of conversion. The two
notes also contain certain representations, warranties, covenants and events of default, and increases in the amount of the principal
and interest rates under the two Notes in the event of such defaults.



On September 22, 2014, the
Company borrowed $54,750 with a maturity date of June 19, 2015, pursuant to a financing agreement. Under the agreement the Company
received $50,000, which was net of legal and due diligence fees. The note bears interest at 8% per annum and is convertible at
the option of the lender into shares of the Company’s common stock at a 40% discount to the price of common shares in the
ten days prior to conversion. The note might be accelerated if an event of default occurs under the terms of the note, including
the Company’s failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in
its SEC filings. In connection with the issuance of the note, the Company computed a premium of $36,500 as the note is considered
stock settled debt under ASC 480. The amortization expense related to that premium recorded during the year ended December 31,
2014 was $25,593. As of December 31, 2014, the outstanding principal and interest on the notes was $56,214.



On October 6, 2014, the
Company borrowed $53,000 with a maturity date of June 1, 2015, pursuant to a financing agreement. Under the agreement the Company
received $50,000, which was net of legal fees. The note bears interest at 8% per annum and is convertible at the option of the
lender into shares of the Company’s common stock at a 39% discount to the price of common shares in the ten days prior to
conversion. The note might be accelerated if an event of default occurs under the terms of the note, including the Company’s
failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in its SEC filings. In
connection with the issuance of the note, the Company computed a premium of $33,885 as the note is considered stock settled debt
under ASC 480. The amortization expense related to that premium recorded in the year ended December 31, 2014 was $17,738. As of
December 31, 2014, the outstanding principal and interest on the notes was $54,067.

F-24







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



On October 8, 2014, the
Company borrowed $100,000 with a maturity date of March 30, 2015, pursuant to a financing agreement. Under the agreement the Company
received $85,500, which was net of legal fees of $7,000 and original issue discount of $7,500. The note bears interest at 10% per
annum and is convertible at the option of the lender into shares of the Company’s common stock at a 40% discount to the price
of common shares in the ten days prior to conversion. The note might be accelerated if an event of default occurs under the
terms of the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy events or if
the Company is delinquent in its SEC filings. In connection with the issuance of the note, the Company computed a premium of $66,667
as the note is considered stock settled debt under ASC 480. The amortization expense related to that premium recorded in the year
ended December 31, 2014 was $35,453. As of December 31, 2014, the outstanding principal and interest on the notes was $102,521.

On October 22, 2014, the
Company borrowed $75,000 pursuant to the additional note in conjunction with the March 13, 2014 financing agreement. The debt has
an interest rate of 8% and the Company received proceeds of $65,750, net of fees. In the event that the original note is not repaid
prior to six months from its issuance, the lender has the option of converting the additional note into shares of the Company’s
common stock at a 40% discount to lowest closing bid price in the 20 trading days prior to conversion, subject to the notes payable
to the Company having been paid in full. In connection with the issuance of the note, the Company computed a premium of $50,000
as the note is considered stock settled debt under ASC 480, all of which was accreted and charged to interest expense in the year
ended December 31, 2014. As of December 31, 2014, the outstanding principal and interest on the note was converted, into 3,617,965
shares of common stock.



On October 27,
2014, the Company borrowed $36,750 with a maturity date of October 21, 2015, pursuant to a financing agreement. Under the agreement
the Company received $33,250, which was net of legal and due diligence fees. The note bears interest at 8% per annum and is convertible
at the option of the lender into shares of the Company’s common stock at a 40% discount to the lowest closing bid price in
the 20 trading days prior to conversion.  The note might be accelerated if an event of default occurs under the
terms of the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy events or if
the Company is delinquent in its SEC filings. In connection with the issuance of the notes, the Company recorded a premium of $24,500
as the note is considered stock settled debt under ASC 480.The amortization expense related to that premium recorded in the year
ended December 31, 2014 was $12,274. As of December 31, 2014, the outstanding principal and interest on the notes was $37,491.



On October 27, 2014, the
Company borrowed $161,000 with a maturity date of October 27, 2015, pursuant to a financing agreement. Under the agreement the
Company received $150,000, which was net of an original issue discount of $11,000. The note bears interest at 8% per annum and
is convertible at the option of the lender into shares of the Company’s common stock at a 40% discount to the price of common
shares in the ten days prior to conversion. The note might be accelerated if an event of default occurs under the terms of
the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy events or if the Company
is delinquent in its SEC filings. In conjunction with the Note, the Company granted the lender a warrant for 1,000,000 common shares
at a strike price of $0.08. The warrant has a life of three years and its relative fair value of $33,404 has been recorded as a
debt discount and additional paid in capital as of December 31, 2014. In connection with the issuance of the note, the Company
computed a premium of $107,333 as the note is considered stock settled debt under ASC 480. The amortization expense related to
that premium recorded in the year ended December 31, 2014 was $53,773. As of December 31, 2014, the outstanding principal and interest
on the notes was $164,246.

On December 22, 2014,
the Company borrowed $55,000 with a maturity date of December 22, 2015, pursuant to a convertible note. The debt was issued
at a 10% original issue discount resulting in proceeds of $50,000, has an interest rate of 10%, and is convertible at the option
of the lender into shares of the Company’s common stock at lesser of $0.075 or a 40% discount to the lowest closing bid price
in the 20 trading days prior to conversion. The note might be accelerated if an event of default occurs under the terms
of the note, including the Company’s failure to pay principal and interest when due, certain bankruptcy events or if the
Company is delinquent in its SEC filings. In connection with the issuance of the notes, the Company recorded a debt discount of
$50,000 related to the derivative liability. The amortization expense related to that discount recorded in the year ended December
31, 2014 was $16,364. As of December 31, 2014, the outstanding principal and interest on the notes was $55,136. As the note conversion
includes a “lesser of” pricing provision, a derivative liability of $62,858 was recorded when the note was entered
into. The derivative liability is remeasured at each balance sheet date and was $66,390 at December 31, 2014.



$4 Million Convertible Debt Financing



On November 25, 2014 the
Company closed a financing transaction by entering into a Securities Purchase Agreement dated November 25, 2014 (the “SPA”)
with Dominion Capital LLC (the “Purchaser”) for an aggregate subscription amount of $4,000,000 (the “Purchase
Price”). Pursuant to the Securities Purchase Agreement, the Company shall issue a series of 4% Original Issue Discount Senior
Secured Convertible Promissory Notes (collectively, the “Notes”) to the Purchaser. The Purchase Price will be paid
in eight equal monthly payments of $500,000. Each individual Note will be issued upon payment and will be amortized beginning
six months after issuance, with amortization payments being 1/24th of the principal and accrued interest, made in cash
or common stock at the option of the Company, subject to certain conditions contained in the Securities Purchase Agreement. The
Company also reimbursed the Purchaser $25,000 for expenses from the proceeds of the first tranche and the Purchaser’s counsel
$25,000 from the first tranche. The use of proceeds from this financing are intended for the completion of the breadboard prototype
of the Company’s FireflyDx cartridge, restructuring of the Company’s existing convertible debt, and general working
capital.



F-25







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



The total principal amount
of the Notes are issued with a 4% original issue discount whereby the principal amount of the Note is $4,000,000 but the actual
purchase price of the note is $3,840,000. Each Note accrues interest at a rate equal to 12% per annum and has a maturity date of
May 25, 2016. The Notes are convertible any time after the issuance date of the Notes. The Purchasers has the right to convert
the Notes into shares of the Company’s common stock at a conversion price equal to 95% of the daily VWAP on the trading day
immediately prior to the closing of each tranche. Additionally, under certain conditions defined in the Note, the Note would be
convertible into common stock at a price equal to 62.5% of the lowest VWAP during the fifteen Trading Days immediately prior to
the applicable amortization date. In the event that there is an Event of Default or certain conditions are not met, the conversion
price will be adjusted to equal to 55% of the lowest VWAP during the thirty (30) Trading Days immediately prior to the applicable
Conversion Date. The Note can be prepaid at any time upon 5 days’ notice to the Holder by paying an amount in cash equal
to the outstanding principal and interest and a 120% premium.



In connection with the
Company’s obligations under the Note, the Company entered into a Security Agreement with the Purchaser, pursuant to which
the Company granted a lien on all assets of the Company, subject to existing security interests, (the “Collateral”)
for the benefit of the Purchaser, to secure the Company’s obligations under the Note. In the event of a default as defined
in the Note, the Purchaser may, among other things, collect or take possession of the Collateral, proceed with the foreclosure
of the security interest in the Collateral or sell, lease or dispose of the Collateral.



On November 26, 2014, the
Company received the first tranche of this financing, with a maturity date of May 25, 2016, pursuant to a convertible note. Under
the agreement the Company received $387,000, which was net of Purchaser’s expenses and legal fees and a 4% original issue
discount. The note might be accelerated if an event of default occurs under the terms of the note, including the Company’s
failure to pay principal and interest when due, certain bankruptcy events or if the Company is delinquent in its SEC filings. In
connection with the issuance of the note, the Company recorded a debt discount of $387,000 related to the embedded conversion option
derivative liability. The amortization expense related to that discount recorded in the year ended December 31, 2014 was $27,000.
As of December 31, 2014, the outstanding principal and interest on the notes was $505,753. As the note conversion includes a “lesser
of” pricing provision, a derivative liability of $786,301was recorded when the note was entered into. The derivative liability
is remeasured at each balance sheet date and was $696,825 at December 31, 2014. The December 2014 tranche of this financing was
received on January 2, 2015.



Additionally, on
December 30, 2014 the Purchaser entered into an agreement to purchase the existing $110,000 convertible note dated July 9,
2014 and $110,000 convertible note dated August 21, 2014 discussed above from the holders. This agreement closed early in
January 2015. Subsequent to the purchase and assignment, these notes were amended by the Company and the Purchaser, using the
form of note identical to the notes used in the $4 Million Financing Agreement. The Company issued a new note for $222,222
convertible at the lesser of a 37.5% discount to the common stock price on the date of the note (which was $0.0163) or  a
37.5% discount to the price of our common stock price at the time of conversion. In conjunction with the purchase and
assignment, the Company and Purchaser entered into a new note with a principal value of $49,444 as compensation for
Purchaser’s costs related to the purchase and assignment. This $49,444 was expensed as a loss on debt extinguishment.
As the note conversions includes a “lesser of” pricing provision, a derivative liability of $289,701 was recorded
when these note were entered into.



Debenture Financing



Effective as of January
16, 2013, the Company entered into a Securities Purchase Agreement (the “TCA Purchase Agreement”) with TCA Global Credit
Master Fund, LP, a Cayman Islands limited partnership (“TCA”), pursuant to which TCA may purchase from the Company
up to $5,000,000 senior secured, convertible only upon default, redeemable debentures (the “Debentures”). A $550,000
Debenture was purchased by TCA on January 16, 2013 (the “First Debenture”).



The maturity date of the
First Debenture was January 16, 2014, subject to adjustment (the “Maturity Date”). The First Debenture bears interest
at a rate of twelve percent (12%) per annum. The Company additionally pays a 7% premium on all scheduled principal payments. The
Company, at its option, may repay the principal, interest, fees and expenses due under the Debenture, including a 7% redemption
premium on the outstanding principal balance, and in full and for cash, at any time prior to the Maturity Date, with three (3)
business days advance written notice to the holder. At any time while the Debenture is outstanding, but only upon the occurrence
of an event of default under the TCA Purchase Agreement or any other transaction documents, the holder may convert all or any portion
of the outstanding principal, accrued and unpaid interest, redemption premium and any other sums due and payable under the First
Debenture or any other transaction document (such total amount, the “Conversion Amount”) into shares of the Company’s
common stock at a price equal to (i) the Conversion Amount divided by (ii) eighty-five (85%) of the average daily volume weighted
average price of the Company’s common stock during the five (5) trading days immediately prior to the date of conversion.
The Debenture also contains a provision whereby TCA may not own more than 4.99% of the Company’s common stock at any one
time.



As consideration for entering
into the TCA Purchase Agreement, the Company paid to TCA (i) a transaction advisory fee in the amount of $22,000, (ii) a due diligence
fee equal to $10,000, and (iii) document review and legal fees in the amount of $12,500.



F-26







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



As further consideration,
the Company agreed to issue to TCA that number of shares of the Company’s common stock that equals $100,000 (the “Incentive
Shares”). For purposes of determining the number of Incentive Shares issuable to TCA, the Company’s common stock was
valued at the volume weighted average price for the five (5) trading days immediately prior to the date of the TCA Purchase Agreement,
as reported by Bloomberg, and 191,388 shares were issued. It is the intention of the Company and TCA that the value of the Incentive
Shares shall equal $100,000. In the event the value of the Incentive Shares issued to TCA does not equal $100,000 after a twelve
month evaluation date, the TCA Purchase Agreement provides for an adjustment provision allowing for necessary action (either the
issuance of additional shares to TCA or the return of shares previously issued to TCA to the Company’s treasury). At the
end of the twelve month evaluation date on January 16, 2014, the value of the incentive shares was $12,000 and consequently, the
Company was obligated to issue to TCA, see further discussion below. Additionally, the Company paid a broker fee consisting of
$22,000 and 52,632 shares of its common stock for arranging this financing. Such fee was recorded as a cost of capital, or reduction
to stockholder’s equity.



In connection with the TCA
Purchase Agreement, the Company entered into a Security Agreement (the “TCA Security Agreement”) with TCA. As security
for the Company’s obligations to TCA under the Debentures, the TCA Purchase Agreement and any other transaction document,
the TCA Security Agreement grants to TCA a continuing, second priority security interest in all of the Company’s assets and
property, wheresoever located and whether now existing or hereafter arising or acquired. This security interest is subordinate
to the security interest of The Boeing Company (“Boeing”), who has a secured interest supporting that certain Boeing
License Agreement (defined below).



On March 18, 2013, the Company
entered into an Intercreditor and Non-Disturbance Agreement (the “Intercreditor Agreement”) among PositiveID and MFS;
VeriGreen Energy Corporation, Steel Vault Corporation, IFTH NY Sub, Inc., and IFTH NJ Sub, Inc. Boeing, and TCA. The Intercreditor
Agreement sets forth the agreement of Boeing and TCA as to their respective rights and obligations with respect to the Boeing Collateral
(as described below) and the TCA Collateral (as described below) and their understanding relative to their respective positions
in the Boeing Collateral and the TCA Collateral.



The “Boeing Collateral”
includes, among other things, all Intellectual Property Rights (as defined in the Intercreditor Agreement) in the M-BAND Technology
(as defined in the Intercreditor Agreement), including without limitation certain patents and patent applications set forth in
the Intercreditor Agreement. The TCA Collateral includes any and all property and assets of PositiveID. The liens of Boeing on
the Boeing Collateral are senior and prior in right to the liens of TCA on the Boeing Collateral and such liens of TCA on the Boeing
Collateral are junior and subordinate to the liens of Boeing on the Boeing Collateral.



On August 21, 2013, the
Company entered into a First Amendment to Securities Purchase Agreement (the “Amendment”) with TCA. Pursuant to the
Amendment, principal payments for July through October were deferred and the maturity date for the entire first Debenture was extended
to May 16, 2014 and in exchange for this principal holiday, the Company and TCA agreed to increase the outstanding principal balance
by $80,000. In connection with this Amendment, the Company accounted for this modification as an extinguishment and recorded a
charge to interest expense in the amount of $139,000 during the year ended December 31, 2013, comprised of $59,000 relating to
the write-off of unamortized debt discount and the $80,000.



Beginning in January 2014,
the Company was not current in its payments under the Debenture. On April 3, 2014 TCA sold its rights under the TCA SPA, Debenture,
Security Agreement and all related transaction documents to Ironridge, releasing the Company of all of its obligations to TCA,
including the obligation to issue the additional $88,000 incentive shares as discussed above.  The sale price paid from Ironridge
to TCA was $425,000.  Also on April 3, 2014 the Company and Ironridge amended the Debenture, setting the amount owed as of
April 3, 2014 at $425,000, extending the maturity date to April 2, 2015, lowering the interest rate to 3.4% and to amend the formula
for conversion of Debenture principal and interest into common shares of the Company.  Pursuant to the amended Debenture,
Ironridge has the right, at any time, to request the conversion of principal and accrued interest  into free trading shares
of common Stock of the Company at a price equal to: (i) the conversion amount; divided by (ii) an amount, equal to 85% of the closing
bid price of the Company's common stock on April 3, 2014, not to exceed 85% of the average of the daily volume weighted average
prices of the Company's common Stock for any five of the trading days from April 3, 2014 until the date that the Debenture is paid
or converted in full. There was no material gain or loss on this modification.



On December 24, 2014, the
Ironridge and Dominion Capital LLC entered into a purchase and assignment of the debenture, and the Company and Dominion amended
the Debenture, with the total amount owed as of December 24, 2014 at $434,592, making the note a demand note with terms and conditions
identical to Purchaser’s notes pursuant to the $4 Million Financing Agreement. Pursuant to the amendment the maturity date
was extended to May 31, 2015. Additionally, on December 24, 2014 the Company and Purchaser entered into a $158,400 Senior Convertible,
Redeemable Debenture of PositiveID Corporation, which was issued without proceeds as consideration for the Purchaser’s expenses
in conjunction with the purchase and assignment with Ironridge, including legal and transaction fees. This amount was recorded
as a loss on debt extinguishment. As of December 31, 2014, the Company no longer has any outstanding debt owed to Ironridge.



In connection with the issuance
of the Debenture and the Note, the Company recorded a debt discount of $522,061 related to the embedded conversion option derivative
liability. The amortization expense related to that discount recorded in the year ended December 31, 2014 was $440,116. As of December
31, 2014, the outstanding principal and interest on Debenture and the Note was $598,841. As the note conversion includes a “lesser
of” pricing provision, a derivative liability of $571,387 was recorded when the note was entered into. The derivative liability
is remeasured at each balance sheet date and was $597,275 at December 31, 2014.



F-27







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



Equity Line Financing



On May 10, 2013, the Company
entered into an investment agreement (the “Investment Agreement”) and a registration rights agreement (the “RRA”)
with IBC Funds LLC (“IBC”), a Nevada limited liability company. Pursuant to the terms of the Investment Agreement,
IBC committed to purchase up to $5,000,000 of the Company’s common stock over a period of up to thirty-six (36) months. From
time to time during the thirty-six (36) month period commencing on the day immediately following the effectiveness of the IBC Registration
Statement (defined below), the Company may deliver a drawdown notice to IBC which states the dollar amount that the Company intends
to sell to IBC on a date specified in the drawdown notice. The maximum investment amount per notice shall be equal to two hundred
percent (200%) of the average daily volume of the common stock for the ten consecutive trading days immediately prior to date of
the applicable drawdown notice so long as such amount does not exceed 4.99% of the outstanding shares of the Company’s common
stock. The purchase price per share to be paid by IBC shall be calculated at a twenty percent (20%) discount to the average of
the three lowest prices of the Company’s common stock during the ten (10) consecutive trading days immediately prior to the
receipt by IBC of the drawdown notice.  Additionally, the Investment Agreement provides for a commitment fee to IBC of
104,000 shares of the Company's common stock (the “IBC Commitment Shares”). The IBC Commitment Shares were issued May
10, 2013. Such commitment shares were recorded as a cost of capital, or reduction of shareholder’s equity when issued.



Pursuant to the RRA, the
Company is obligated to file a registration statement (the “IBC Registration Statement”) with the Securities and Exchange
Commission covering the shares of its common stock underlying the Investment Agreement, including the IBC Commitment Shares, within
21 days after the closing of the transaction.  Such IBC Registration Statement was filed on May 10, 2013.



On May 10, 2013, the Company
entered into a Securities Purchase Agreement with IBC whereby IBC agreed to purchase 40,064, shares of common stock for $12,500.  The
proceeds of the sale of the shares will be used to fund the Company’s legal expenses associated with the Investment Agreement.  These
shares were included in the IBC Registration Statement filed May 10, 2013. During 2013, the Company issued 4,500,000 shares
to IBC under the equity line (inclusive of the commitment shares), for which it received $333,802, net of fees, in proceeds. The
Company has no intention of registering any further shares under this equity line, or accessing this equity line in the future.



Other Financings



On July 9, 2012, the Company
issued a Secured Promissory Note (the “H&K Note”) in the principal amount of $849,510 to Holland & Knight LLP
(“Holland & Knight”), its external legal counsel, in support of amounts due and owing to Holland & Knight as
of June 30, 2012. The H&K Note is non-interest bearing, and principal on the H&K Note is due and payable as soon as practicably
possible by the Company. The Company has agreed to remit payment against the H&K Note immediately upon each occurrence of any
of the following events: (a) completion of an acquisition or disposition of any of the Company’s assets or stock or any of
the Company’s subsidiaries’ assets or stock with gross proceeds in excess of $750,000, (b) completion of any financing
with gross proceeds in excess of $1,500,000, (c) receipt of any revenue in excess of $750,000 from the licensing or development
of any of the Company’s or the Company’s subsidiaries’ products, or (d) any liquidation or reorganization of
the Company’s assets or liabilities. The amount of payment to be remitted by the Company shall equal one-third of the gross
proceeds received by the Company upon each occurrence of any of the above events, until the principal is repaid in full. If the
Company receives $3,000,000 in gross proceeds in any one financing or licensing arrangement, the entire principal balance shall
be paid in full.  The H&K Note was secured by substantially all of the Company’s assets pursuant to a security
agreement between the Company and Holland & Knight dated July 9, 2012.  In conjunction with the TCA Purchase Agreement
and the Boeing License Agreement (defined below), Holland & Knight agreed to terminate its security interest.  As
of December 31, 2014, the Company had repaid $284,051 of the H&K Note  and
the outstanding balance was $565,459.



On September 7, 2012, the
Company issued a Secured Promissory Note (the “Caragol Note”) in the principal amount of $200,000 to William J. Caragol
(“Caragol”), the Company’s chairman and chief executive officer, in connection with a $200,000 loan to the Company
by Caragol. The Caragol Note accrues interest at a rate of 5% per annum, and principal and interest on the Caragol Note are due
and payable on September 6, 2013. The Company agreed to accelerate the repayment of principal and interest in the event that the
Company raises at least $1,500,000 from any combination of equity sales, strategic agreements, or other loans, with no prepayment
penalty for any paydown prior to maturity. The Caragol Note was secured by a subordinated security interest in substantially all
of the assets of the Company pursuant to a Security Agreement between the Company and Caragol dated September 7, 2012 (the “Caragol
Security Agreement”). The Caragol Note may be accelerated if an event of default occurs under the terms of the Caragol Note
or the Caragol Security Agreement, or upon the insolvency, bankruptcy, or dissolution of the Company. In December, 2012, the Company
paid $100,000 of the principal amount of the Caragol Note and all accrued interest owed on the date of payment.  In conjunction
with the TCA Purchase Agreement and the Boeing License Agreement (defined below), Caragol agreed to terminate his security interest,
effective January 16, 2013. As of December 31, 2014, the outstanding principal and interest on the Caragol Note was $110,319.



Embedded Conversion Option Derivatives



Due to the conversion terms
of certain promissory notes, the embedded conversion options met the criteria to be bifurcated and presented as derivative liabilities.  The
Company calculated the estimated fair values of the liabilities for embedded conversion option derivative instruments at the original
note inception dates and as of December 31, 2014 using the Black-Scholes option pricing model using the share prices of the Company’s
stock on the dates of valuation and using the following ranges for volatility, expected term and the risk free interest rate at
each respective valuation date, no dividend has been assumed for any of the periods:



F-28







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



|                        |  | Note Inception Date |                 |   | December 31, 2014 | 
|----------------------- |  | ------------------- | --------------- | - | ----------------- | 
|Volatility              |  |                     | 195 - 374       | % |                   | 
|Expected Term           |  |                     | 0.4 - 1.5 years |   |                   | 
|Risk Free Interest Rate |  |                     | 2               | % |                   | 



The following reflects the initial fair value on the note inception
dates and changes in fair value through December 31, 2014:



|Note inception date fair value allocated to debt discount               |  | $ | 2,160,700 |  
|----------------------------------------------------------------------- |  | - | --------- | -
|Note inception date fair value allocated to other expense               |  |   | 681,137   |  
|Reclassification of derivative liability to equity upon debt conversion |  |   | (207,608  | )
|Change in fair value in 2014                                            |  |   | (482,727  | )
|Embedded conversion option liability fair value as of December 31, 2014 |  | $ | 2,151,502 |  



Fair Value Measurements



We currently measure and
report at fair value the liability for embedded conversion option derivatives.  The fair value liabilities for price
adjustable convertible debt instruments have been recorded as determined utilizing the BSM option pricing model as previously discussed.
The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis as of December
31, 2014:



|                                                                              |  | Balance at December 31,
 2014 |           |  | Quoted Prices in Active Markets for Identical Assets |   |   | Significant Other Observable Inputs |  |   | Significant Unobservable Inputs | 
|----------------------------------------------------------------------------- |  | ----------------------------- | --------- |  | ---------------------------------------------------- | - | - | ----------------------------------- |  | - | ------------------------------- | 
|                                                                              |  |                               |           |  | (Level 1)                                            |   |   | (Level 2)                           |  |   | (Level 3)                       | 
|Liabilities:                                                                  |  |                               |           |  |                                                      |   |   |                                     |  |   |                                 | 
|Fair value of liability for embedded conversion option derivative instruments |  | $                             | 2,151,516 |  |                                                      | $ | - |                                     |  | $ | -                               | 



7.   Stockholders’
Deficit



Authorized Common Stock



As of December 31, 2014,
the Company was authorized to issue 970 million shares of common stock, par value $0.01 per share.



On April 18, 2013, our
stockholders approved a reverse stock split within a range of between 1-for-10 to 1-for-25. On that same date our Board of Directors
approved a reverse stock split in the ratio of 1-for-25 and we filed a Certificate of Amendment to our Second Amended and Restated
Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware to affect the reverse stock split.
 On April 23, 2013, the reverse stock split became effective.  All share amounts in this Annual Report have been adjusted
to reflect the 1-for 25 reverse stock split.



Stock Option Plans



On August 26, 2011, the
Company’s stockholders approved and adopted the PositiveID Corporation 2011 Stock Incentive Plan (the “2011 Plan”).
The 2011 Plan provides for awards of incentive stock options, nonqualified stock options, restricted stock awards, performance
units, performance shares, SARs and other stock-based awards to employees and consultants. Under the 2011 Plan, up to 1 million
shares of common stock may be granted pursuant to awards. As of December 31, 2014, approximately 0.3 million options and shares
have been granted under the 2011 Plan, and approximately 1.0 million remaining shares may be granted under the 2011 Plan. Awards
to employees under the Company’s stock option plans generally vest over a two-year period, with pro-rata vesting upon the
anniversary of the grant. Awards of options have a maximum term of ten years and the Company generally issues new shares upon exercise.



In addition, as of December
31, 2014, 4.9 million warrants to purchase the Company’s common stock have been granted outside of the Company’s plans,
4.5 million warrants which remain outstanding as of December 31, 2014. These warrants were granted at exercise prices ranging from
$0.06 to $22.0 per share, are fully vested and are exercisable for a period from five to seven years.



On November 10, 2009, the
Company assumed all of Steel Vault Corporation’s (“Steel Vault”) obligations under the SysComm International
Corporation 2001 Flexible Stock Plan, as amended and restated, and each option outstanding thereunder, provided that the obligation
to issue shares of the Company’s common stock, as adjusted to reflect the exchange ratio set forth in the merger with Steel
Vault, was substituted for the obligation to issue shares of Steel Vault common stock.  On November 10, 2009, pursuant
to the merger with Steel Vault, approximately 268,000 outstanding Steel Vault options were converted into 132,000 Company options.
These options were granted at exercise prices ranging from $9.0 to $50.0 per share, are fully vested and are exercisable for a
period up to ten years from the vesting date.



F-29







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



A summary of option activity
under the Company’s option plans and outside of the Company’s option plan for the years ended December 31, 2014 and
2013 is as follows (in thousands, except per share amounts):



|                                                                     |  | 2014              |       |   | 2013                             |  
|-------------------------------------------------------------------- |  | ----------------- | ----- | - | -------------------------------- | -
|                                                                     |  | Number of Options |       |   | Weighted- Average Exercise Price |  
|Outstanding on January 1                                             |  |                   | 1,409 |   |                                  | $
|Granted                                                              |  |                   | 1,450 |   |                                  | $
|Exercised                                                            |  |                   | —     |   |                                  | $
|Forfeited                                                            |  |                   | (3    | ) |                                  | $
|Outstanding at year end                                              |  |                   | 2,856 |   |                                  | $
|Exercisable at year end                                              |  |                   | 2,756 |   |                                  | $
|Shares available for grant within Company’s option plans at year end |  |                   | 1,180 |   |                                  |  





|                         |                |  | Outstanding Stock Options |  |       | Exercisable Stock Options                            | 
|------------------------ | -------------- |  | ------------------------- |  | ----- | ---------------------------------------------------- | 
|Range of Exercise Prices |                |  | Shares                    |  |       | Weighted- Average Remaining Contractual Life (years) | 
|$                        | 0.00           |  |                           |  | to    |                                                      | 
|$                        | 9.25           |  |                           |  | to    |                                                      | 
|$                        | 17.00          |  |                           |  | to    |                                                      | 
|$                        | 73.13          |  |                           |  | to    |                                                      | 
|                         | Above $143.75  |  |                           |  | 3     |                                                      | 
|                         |                |  |                           |  |       |                                                      | 
|                         | Vested options |  |                           |  | 2,756 |                                                      | 



The weighted average per
share fair value of grants made in 2014 and 2013 under the Company’s incentive plans was $0.04 and $0.03, respectively.



There are inherent uncertainties
in making estimates about forecasts of future operating results and identifying comparable companies and transactions that may
be indicative of the fair value of the Company’s securities. The Company believes that the estimates of the fair value of
its common stock options at each option grant date were reasonable under the circumstances.



The Black-Scholes model, which the Company
uses to determine compensation expense, requires the Company to make several key judgments including:



| | ● | the 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.         



The Company’s
computation of the expected life of issued stock options was determined based on historical experience of similar awards giving
consideration to the contractual terms of the stock-based awards, vesting schedules and expectations about employees’ future
length of service. The interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. The computation
of volatility was based on the historical volatility of the Company’s common stock.



The fair values of the options
granted were estimated on the grant date using the Black-Scholes valuation model based on the following weighted-average assumptions:



F-30







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



|                                |  | 2014 |             |   | 2013 | 
|------------------------------- |  | ---- | ----------- | - | ---- | 
|Expected dividend yield         |  |      | —           |   |      | 
|Expected stock price volatility |  |      | 184 -188    | % |      | 
|Risk-free interest rate         |  |      | 1.65 - 1.74 | % |      | 
|Expected term (in years)        |  |      | 5.0         |   |      | 



A summary of restricted
stock outstanding under the stockholder approved plans outstanding as of December 31, 2014 and 2013 and changes during the
years then ended is presented below (in thousands):



|                              |  | 2014 |      |   | 2013 | 
|----------------------------- |  | ---- | ---- | - | ---- | 
|Unvested at beginning of year |  |      | 300  |   |      | 
|Issued                        |  |      | —    |   |      | 
|Vested                        |  |      | (100 | ) |      | 
|Forfeited                     |  |      | —    |   |      | 
|Unvested at end of year       |  |      | 200  |   |      | 



Warrants





From time to
time the Company issues warrants both for compensatory purposes to consultants and advisors, and to financial institutions in conjunction
with financing activities.



Activity related
to warrants issued in conjunction with financing transactions for the year ended December 31, 2014 is as follows:



|                                       |  | Number of 
Warrants |           |   | Weighted Average Exercise Price |  
|-------------------------------------- |  | ------------------- | --------- | - | ------------------------------- | -
|Outstanding at December 31, 2013       |  |                     | 385,620   |   |                                 | $
|Granted                                |  |                     | 2,000,000 |   |                                 |  
|Exercised                              |  |                     | (383,460  | ) |                                 |  
|Expired                                |  |                     | (2,160    | ) |                                 |  
|Outstanding at December 31, 2014       |  |                     | 2,000,000 |   |                                 | $
|Exercisable at December 31, 2014       |  |                     | 2,000,000 |   |                                 | $
|Weighted average grant date fair value |  |                     |           |   |                                 | $





Activity related
to the warrants issued for compensatory purposes for the year ended December 31, 2014 is as follows:



|                                       |  | Number of  Warrants |           |   | Weighted Average Exercise Price |  
|-------------------------------------- |  | ------------------- | --------- | - | ------------------------------- | -
|Outstanding at December 31, 2013       |  |                     | 2,500,000 |   |                                 | $
|Granted                                |  |                     | -         |   |                                 |  
|Exercised                              |  |                     | -         |   |                                 |  
|Expired                                |  |                     | (10,000   | ) |                                 |  
|Outstanding at December 31, 2014       |  |                     | 2,490,000 |   |                                 | $
|Exercisable at December 31, 2014       |  |                     | 2,490,000 |   |                                 | $
|Weighted average grant date fair value |  |                     |           |   |                                 | $





On December 19, 2012, pursuant to an advisory agreement, the
Company issued immediately exercisable warrants to purchase 240,000 shares of common stock at an initial exercise price of $0.75
per share and were exercisable for a period of five years from the vest date. The warrants will expire in 2017. Additionally, on
December 18, 2013 the Company issued immediately exercisable warrants to purchase 2,000,000 shares of common stock to the same

advisor at an initial exercise price of $0.06 per share and
were exercisable for a period of five years from the vest date.



On February 27, 2013, pursuant to a financing agreement, the
Company issued immediately exercisable warrants to purchase 68,182 shares of common stock at an initial exercise price of $0.55
per share and are exercisable for a period of five years from the vest date. The warrants were exercised in full as of year ended
December 31, 2014.



On June 4, 2013, pursuant to a financing agreement, the Company
issued immediately exercisable warrants to purchase 104,167 shares of common stock at an initial exercise price of $0.24 per share
and are exercisable for a period of five years from the vest date. The warrants were exercised in full as of year ended December
31, 2014.



On June 4, 2013, pursuant to a consulting agreement with an
advisor, the Company issued immediately exercisable warrants to purchase 250,000 shares of common stock at an initial exercise
price of $0.23 per share and are exercisable for a period of five years from the vest date. The warrants expire in 2019.



On January 1, 2014, pursuant to a financing agreement, the Company
issued immediately exercisable warrants to purchase 1,000,000 shares of common stock at an initial exercise price of $0.08 per
share and are exercisable for a period of four years from the vest date. The warrants expire in 2017.





On October 24, 2014, pursuant to a financing agreement, the
Company issued immediately exercisable warrants to purchase 1,000,000 shares of common stock at an initial exercise price of $0.08
per share and are exercisable for a period of four years from the vest date. The warrants expire in 2017.







F-31







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



Stock-Based Compensation



Stock-based compensation
expense for awards granted is recognized on a straight-line basis over the requisite service period based on the grant-date fair
value. Forfeitures are estimated at the time of grant and require the estimates to be revised, if necessary, in subsequent periods
if actual forfeitures differ from those estimates. The Company recorded compensation expense related to stock options and restricted
stock of approximately $1,701,000 and $1,180,000 for the years ended December 31, 2014 and 2013, respectively. The intrinsic value
for all options outstanding was approximately nil as of December 31, 2014 and 2013.



During the year ended
December 31, 2014, the Company issued an aggregate of 1,100,000 shares of restricted stock, outside of the approved employee
stock incentive plans, to employees valued between $0.026 and $0.075 per share, or  an aggregate $77,600 based on quoted
common stock prices on the grant dates, and recorded related stock-based compensation of approximately $34,000 with the remainder to be recognized over the respective vesting periods. During the
year ended December 31, 2013, the Company issued an aggregate of 100,000 shares of restricted stock, under the 2011 Plan and
an aggregate of 3,655,330 shares of restricted stock, outside of the approved employee stock incentive plans, to
employees valued between $0.28 and $1.00 per share, and recorded related stock-based compensation of approximately
$241,000.



During the year
ended December 31, 2014, the Company issued, outside of the approved employee stock incentive plans, an aggregate of
8,230,000 shares of restricted stock to consultants and advisors valued between $0.02 and $0.10 per share and recorded
related stock-based compensation of approximately $423,000 for 2013 and 2014 vested amounts. During the year ended December 31,
2013, the Company issued, outside of the approved employee stock incentive plans, an aggregate of 1,890,019 shares of
restricted stock and, under the 2011 Plan, an aggregate of 80,000 shares of restricted stock to consultants and advisors
valued between $0.25 and $3.75 per share and recorded related stock-based compensation of approximately $124,000.



During the year ended December
31, 2014, the Company issued, outside of the approved employee stock incentive plans, an aggregate of 1,200,000 options to employees,
an aggregate of 250,000 options to consultants and recorded related stock-based compensation of approximately $49,000 for the year
ended December 31, 2014. During the year ended December 31, 2013, the Company issued, outside of the approved employee stock incentive
plans, an aggregate of 1,000,000 options to advisors and recorded related stock-based compensation of approximately $27,000 for
the year ended December 31, 2013.



Series I Preferred Stock



On September 30, 2013 the
Board of Directors authorized and in November 2013 the Company filed with the State of Delaware, a Certificate of Designations
of Preferences, Rights and Limitations of Series I Preferred Stock (the “Certificate”). The Series I Preferred Stock
ranks junior to the Company’s Series F Preferred Stock and to all liabilities of the Company and is senior to the Common
Stock and any other preferred stock. The Series I Preferred Stock has a stated value per share of $1,000, a dividend rate of 6%
per annum, voting rights on an as-converted basis and a conversion price equal to the closing bid price of the Company’s
Common Stock on the date of issuance. The Series I Preferred Stock is required to be redeemed (at stated value, plus any accrued
dividends) by the Company after three years or any time after one year, the Company may at its option, redeem the shares subject
to a ten-day notice (to allow holder conversion). The Series I Preferred Stock is convertible into the Company’s Common Stock,
at stated value plus accrued dividends, at the closing bid price on September 30, 2013, any time at the option of the holder and
by the Company in the event that the Company’s closing stock price exceeds 400% of the conversion price for twenty consecutive
trading days. The Company has classified the Series I Preferred Stock as a liability in the consolidated balance sheet due to the
mandatory redemption feature. The Series I Preferred Stock has voting rights equal to the number of shares of Common Stock that
Series I Preferred Stock is convertible into, times twenty-five. The holders of Series I Preferred Stock will have voting control
in situations requiring shareholder vote.



On September 30, 2013,
the Company issued 413 shares of Series I Preferred Stock to settle $413,000 of accrued and unpaid compensation to its Board of
Directors and management (see Note 8), at a conversion price of $0.036, which was the closing bid price on September 30, 2013. 
The Series I Preferred Stock will vest on January 1, 2017, subject to acceleration in the event of conversion or redemption. The
Series I Preferred may also be converted into common shares in advance of their vesting, at the option of the holder, which in
turn accelerates the vesting.



On November 5, 2013, the
Company filed an Amended and Restated Certificate of Designation of Series I Preferred Stock (the “Amended Certificate of
Designation”). The Amended Certificate of Designation was filed to clarify and revise the mechanics of conversion and certain
conversion rights of the holders of Series I Preferred Stock. No other rights were modified or amended in the Amended Certificate
of Designation. On January 8, 2015, the Company filed an amendment to the Amended Certificate of Designation to increase the authorized
shares of Series I Convertible Preferred Stock from 1,000 shares to 2,500 shares. No other terms were modified or amended in the
Amended Certificate of Designation.



On December 31, 2013, the
three independent directors were each granted 25 shares of Series I, as a component of their 2014 board compensation. On January
14, 2014 an additional 512 shares of Series I were issued to the Company’s CEO, President and Senior Vice President. Of these
shares 381 were issued to the Company’s chief executive officer as follows: (i) 138 shares issued for 2013 incentive compensation,
(ii) 143 shares were issued for his agreement to amend his employment contract and reduce his annual salary from the remainder
of the term of the contract to $200,000, per annum, and (iii) 100 shares of Series I as a tax equalization payment to compensate
Mr. Caragol for taxes paid on unrealized stock compensation during prior years. All Series I shares granted vest on January 1,
2017. The Series I Preferred may also be converted into common shares in advance of their vesting, at the option of the holder,
which in turn accelerates vesting. As such the Company recorded an expense since vesting is at the holder’s option in the
amount of $688,000 in 2014 and $75,000 in 2013, representing the fair value of the shares during the year ended December 31, 2014.



On January 12, 2015,
shares of Series I were issued as follows: (i) 50 shares of Series I were issued to each independent board members as a component
of their 2015 compensation, and (ii) 425 shares of Series I were issued to the Company’s CEO, President and Senior Vice President
as a component of their 2014 incentive compensation. All Series I shares granted vest on January 1, 2017. The Series I Preferred
may also be converted into common shares in advance of their vesting, at the option of the holder, which in turn accelerates vesting.



Additional share issuances:



See Note 6 for additional
disclosure of common stock issuances.



F-32







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



8.   Income Taxes



The Company accounts for
income taxes under the asset and liability approach. Deferred taxes are recorded based upon the tax impact of items affecting financial
reporting and tax filings in different periods. A valuation allowance is provided against net deferred tax assets where the Company
determines realization is not currently judged to be more likely than not.



The tax effects of temporary
differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following
(in thousands):



|                                   |  | December 31, |        
|---------------------------------- |  | ------------ | -------
|                                   |  | 2014         |        
|Deferred tax assets (liabilities): |  |              |        
|Accrued expenses and reserves      |  | $            | 273    
|Stock-based compensation           |  |              | 990    
|Intangibles                        |  |              | (14    
|Property and equipment             |  |              | 4      
|Net operating loss carryforwards   |  |              | 29,967 
|Gross deferred tax assets          |  |              | 31,220 
|Valuation allowance                |  |              | (31,220
|Net deferred taxes                 |  | $            | —      



The valuation allowance
for U.S. deferred tax assets increased by $0.3 million in 2014 due mainly to the generation of U.S. net operating losses and timing
differences resulting from stock-based compensation. As a result of the Company’s history of incurring operating losses a
full valuation allowance against the net deferred tax asset has been recorded at December 31, 2014 and 2013.



The difference between the
effective rate reflected in the provision for income taxes on loss before taxes and the amounts determined by applying the applicable
statutory U.S. tax rate are analyzed below:



|                                                 |  | 2014 |     |   | 2013 |  
|------------------------------------------------ |  | ---- | --- | - | ---- | -
|                                                 |  |      |     |   |      |  
|Statutory tax benefit                            |  | %    | (34 | ) |      | %
|State income taxes, net of federal effects       |  |      | (4  | ) |      |  
|Permanent items                                  |  |      | (3  | ) |      |  
|Provision for Xmark Canadian taxes               |  |      | —   |   |      |  
|Change in deferred tax asset valuation allowance |  |      | 41  |   |      |  
|                                                 |  |      |     |   |      |  
|Provision for income taxes                       |  | %    | —   |   |      | %



As of December 31,
2014, the Company had U.S. federal net operating loss carry forwards of approximately $81.6 million for income tax purposes that
expire in various amounts through 2034. The Company also has approximately $55.8 million of state net operating loss carryforwards
that expire in various amounts through 2034.



Based upon the change of
ownership rules under IRC Section 382, the Company experienced a change of ownership in December 2007 exceeding the 50% limitation
threshold imposed by IRC Section 382. The Company experienced subsequent changes in ownership during 2008 through 2014 as a result
of the Company issuing common shares which could potentially result in additional changes of ownership under IRC Section 382. As
a result the Company’s future utilization of its net operating loss carryforwards will be significantly limited as to the
amount of use in any particular year, and consequently may be subject to expiration.



The Company files consolidated
tax returns in the United States federal jurisdiction and in the various states in which it does business. In general, the Company
is no longer subject to U.S. federal or state income tax examinations for years before December 31, 2011.



In July 2008, the Company
completed the sale of all of the outstanding capital stock of Xmark to Stanley. In January 2010, Stanley received a notice
from the Canadian Revenue Agency (“CRA”) that the CRA would be performing a review of Xmark’s Canadian tax returns
for the periods 2005 through 2008.  This review covers all periods that the Company owned Xmark.



In February 2011, and as
revised on November 9, 2011, Stanley received a notice from the CRA that the CRA completed its review of the Xmark returns and
was questioning certain deductions attributable to allocations from related companies on the tax returns under review. In November
and December 2011, the CRA and the Ministry of Revenue of the Province of Ontario issued notices of reassessment confirming the
proposed adjustments. The total amount of the income tax reassessments for the 2006-2008 tax years, including both provincial and
federal reassessments, plus interest, was approximately $1.4 million.



F-33







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



On January 20, 2012, the
Company received an indemnification claim notice from Stanley related to the matter. The Company did not agree with the position
taken by the CRA, and filed a formal appeal related to the matter on March 8, 2012. In addition, on March 28, 2012, Stanley received
assessments for withholding taxes on deemed dividend payments in respect of the disallowed management fee totaling approximately
$0.2 million, for which we filed a formal appeal on June 7, 2012. In October 2012, the Company submitted a Competent Authority
filing to the U.S. IRS seeking relief in the matter. In connection with the filing of the appeals, Stanley was required to remit
an upfront payment of a portion of the tax reassessment totaling approximately $950,000. The Company has also filed a formal appeal
related to the withholding tax assessments, pursuant to which Stanley was required to remit an additional upfront payment of approximately
$220,000. Pursuant to a letter agreement dated March 7, 2012, the Company has agreed to repay Stanley for the upfront payments,
plus interest at the rate of five percent per annum, in 24 equal monthly payments beginning on June 1, 2012. To the extent that
the Company and Stanley reach a successful resolution of the matter through the appeals process, the upfront payment (or a portion
thereof) will be returned to Stanley or the Company as applicable. As of December 31, 2014 the Company had made payments to Stanley
of $405,777.



On February 28, 2014 the
Company received final notice from the CRA. The Company has determined that it will not further appeal the decision in the final
notice. The Company and Stanley are in the process of submitting the amended tax returns necessary to effect the final adjustments.
Based on management’s estimate the Company’s liability to Stanley is between $350,000 and $500,000. The Company recorded
a tax expense of $371,000 for the year ended December 31, 2013 to reflect this adjusted tax obligation to Stanley and has recorded
as a tax contingency liability of $480,000 in the accompanying audited condensed consolidated financial statements as of December
31, 2014.



9.   Commitments and Contingencies



Lease Commitments



The Company leases certain office space under
noncancelable operating leases, including the Company’s corporate offices in Delray Beach, Florida under a lease scheduled
to expire in August 2015 and lab and office space in Pleasanton, California under a lease scheduled to expire in April 2015. Rent
expense under operating leases totaled approximately $101,000 and $142,000 for the years ended December 31, 2014 and 2013, respectively.



Other Commitments





Pursuant to the GlucoChip
Agreement (see Note 3), the Company also agreed to provide financial support to VeriTeQ, for a period of up to two years, in the
form of convertible promissory notes. On October 20, 2014, the Company funded VeriTeQ $60,000 and VeriTeQ issued the Company a
convertible promissory note in the same amount. The quarterly support commitments for 2015 and 2016 are up to an additional $340,000.



Legal Proceedings



The Company is a party
to certain legal actions, as either plaintiff or defendant, arising in the ordinary course of business, none of which is expected
to have a material adverse effect on the Company’s business, financial condition or results of operations. However, litigation
is inherently unpredictable, and the costs and other effects of pending or future litigation, governmental investigations, legal
and administrative cases and proceedings, whether civil or criminal, settlements, judgments and investigations, claims or charges
in any such matters, and developments or assertions by or against the Company relating to the Company or to the Company’s
intellectual property rights and intellectual property licenses could have a material adverse effect on the Company’s business,
financial condition and operating results.



On June 5, 2013, the Company
entered into a Settlement and Agreement and Release (the “Settlement Agreement”) with IBC pursuant to which the Company
agreed to issue common stock to in exchange for the settlement of $214,536 (the “Settlement Amount”) of past-due accounts
payable of the Company.  IBC purchased the accounts payable from certain vendors of the Company, pursuant to the terms of
separate receivable purchase agreements between IBC and each of such vendors (the “Assigned Accounts”). The Assigned
Accounts relate to certain legal, accounting, and financial services provided to the Company. The Settlement Agreement became effective
and binding upon the Company and IBC upon execution of the Order by the Court on June 7, 2013.



Pursuant to the terms of
the Settlement Agreement approved by an order from the Circuit Court of the Twelfth Judicial Circuit for Sarasota County, Florida
(the “Order”), on June 7, 2013, the Company agreed to issue to IBC shares (the “Settlement Shares”) of
the Company’s Common Stock. The Settlement Agreement provides that the Settlement Shares will be issued in one or more tranches,
as necessary, sufficient to satisfy the Settlement Amount through the issuance of freely trading securities issued pursuant to
Section 3(a) (10) of the Securities Act. Pursuant to the Settlement Agreement, IBC may deliver a request to the Company which states
the dollar amount (designated in U.S. Dollars) of Common Stock to be issued to IBC (the “Share Request”). The parties
agree that the total amount of Common Stock to be delivered by the Company to satisfy the Share Request shall be issued at a thirty
percent (30%) discount to market based upon the average of the volume weighted average price of the Common Stock over the three
(3) trading day period preceding the Share Request. Additional tranche requests shall be made as requested by IBC until the Settlement
Amount is paid in full so long as the number of shares requested does not make IBC the owner of more than 4.99% of the outstanding
shares of Common Stock at any given time. The Company has recorded a charge of $91,944 during 2013 representing the total cost
to the company for settling the $214,535 claim by issuing shares of common stock at a 30% discount. During 2013, the entire amount
of the settlement was converted into 3,637,681 common shares.



F-34







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



10.   Employment Contracts
and Stock Compensation to Related Parties



On December 6, 2011, the
Compensation Committee approved a First Amendment to Employment and Non-Compete Agreement (the “First Caragol Amendment”)
between the Company and Mr. Caragol in connection with Mr. Caragol’s assumption of the position of Chairman of the Board
of the Company effective December 6, 2011. The First Caragol Amendment amends the Employment and Non-Compete Agreement dated November
11, 2010, between the Company and Mr. Caragol and provides for, among other things, the elimination of any future guaranteed raises
and bonuses, other than a 2011 bonus of $375,000 to be paid beginning January 1, 2012 in twelve (12) equal monthly payments. This
bonus was not paid during 2012 and on January 8, 2013, $300,000 of such bonus was converted into 738,916 shares of our restricted
common stock, which vest on January 1, 2016.  The remaining $75,000 was paid through the issuance of Series I Preferred
Stock (see below).  The First Caragol Amendment obligates the Company to grant to Mr. Caragol an aggregate of 0.5 million
shares of restricted stock over a four-year period as follows: (i) 100,000 shares upon execution of the First Caragol Amendment,
which shall vest on January 1, 2014, (ii) 100,000 shares on January 1, 2012, which shall vest on January 1, 2015, (iii) 100,000  shares
on January 1, 2013, which shall vest on January 1, 2015, (iv) 100,000 shares on January 1, 2014, which shall vest on January 1,
2016, and (v) 100,000  shares on January 1, 2015, which shall vest on January 1, 2016. Stock compensation expense related
to the restricted share grants totaled approximately $136,000 and $363,000 for the year December 31, 2014 and 2013, respectively.
On January 14, 2014, Mr. Caragol’s agreement was further amended, lowering his salary to $200,000 per annum through the remaining
term of the agreement in exchange for the issuance of 143 shares of Series I Preferred Stock.



On February 21, 2013, the
Board approved a Tax Equalization Plan to compensate board members for permanent out-of-pocket tax payments incurred by accepting
equity compensation in lieu of cash consideration between 2010-2012. The total plan compensation is $510,000 in aggregate and was
expensed during 2013.



On September 30, 2013, the
Board of Directors of the Company agreed to satisfy $1,003,000 of accrued compensation owed to its directors, officers and management
(collectively, the “Management”) through a liability reduction plan (the “Plan”). Under this Plan the Company’s
Management agreed to accept a combination of PositiveID Corporation Series I Convertible Preferred Stock (the “Series I Preferred
Stock”) and to accept the transfer of Company owned shares of common stock in VeriTeQ Corporation (f/k/a Digital Angel Corporation)
(“VeriTeQ”), a Delaware corporation, in settlement of accrued compensation.



In connection with the Plan
$590,000 of accrued compensation was settled through the commitment to transfer 327,778 shares of VeriTeQ common stock (out of
the 1,199,532 total shares of VeriTeQ common stock that were issuable to the Company upon the conversion of VeriTeQ’s Series
C convertible preferred stock owned by the Company). The Series C conversion was completed on October 22, 2013. The VeriTeQ shares
were valued at $1.80 (adjusted to reflect the 1 for 30 reverse split by VeriTeQ on October 22, 2013), which was a 21% discount
to the closing bid price on September 30, 2013, to reflect liquidity discount and holding period restrictions.



On October 22, 2013, gain
of $590,000 was recognized upon the issuance of the 327,778 shares of VeriTeQ Common Stock in relation to the conversion of the
VeriTeQ Series C convertible preferred stock.



In connection with the Plan,
$413,000 of accrued and unpaid compensation was settled through the issuance of 413 shares of the Company’s Series I Preferred
Stock. The Series I Preferred Stock is convertible into shares of the Company’s Common Stock, at a conversion price of $0.036
per share, which was the closing bid price on September 30, 2013, and will vest on January 1, 2017, subject to acceleration in
the event of conversion or redemption (see Note 7).



On
September 28, 2012, the employment of Bryan D. Happ, our chief financial officer terminated. In connection with the termination
of Happ’s Employment and Non-Compete Agreement dated September 30, 2011, we and Mr. Happ entered into a Separation Agreement
and General Release, or the Separation Agreement, on September 28, 2012. Pursuant to the Separation Agreement, Mr. Happ was due
to receive payments totaling $404,423, or the Compensation, consisting of past-due accrued and unpaid salary and bonus amounts
plus termination compensation. Of the Compensation, $100,000 was paid with 200,000 shares of our restricted common stock (such
shares not issued under a stockholder approved plan) and $304,423 was to be paid in cash. As of December 31, 2014, we have
paid $166,880 of the cash balance to Mr. Happ.



11.   Agreements with The
Boeing Company



On December 20, 2012, the
Company entered into a Sole and Exclusive License Agreement (the “Boeing License Agreement”), a Teaming Agreement (“Teaming
Agreement”), and a Security Agreement (“Boeing Security Agreement”) with The Boeing Company (“Boeing”).



The Boeing License Agreement
provides Boeing the exclusive license to manufacture and sell PositiveID’s M-BAND airborne bio-threat detector for the U.S.
Department of Homeland Security’s BioWatch next generation opportunity, as well as other opportunities (government or commercial)
that may arise in the North American market.  As consideration for entering into the Boeing License Agreement, Boeing
agreed to pay a license fee of $2.5 million (the “Boeing License Fee”) to the Company in three installments, which
were paid in full during 2012 and 2013. The $2.5 million license fee received as of December 31, 2014 has been recorded as deferred
revenue.



At the time of entering
into the Boeing Teaming and License Agreements we evaluated the Boeing license revenue recognition and concluded that all elements
necessary to complete the earnings process were complete as of the date of receipt of the $2.5 million of license fees, with the
exception of the completion of the terms of the Teaming Agreement, which is a delivery requirement.



F-35







POSITIVEID CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financials

December 31, 2014 and 2013



Under the Teaming Agreement,
the Company retained exclusive rights to serve as the reagent and assay supplier of the M-BAND systems to Boeing. The Company also
retained all rights to sell M-BAND units, reagents and assays in international markets. Upon the Teaming Agreement expiring, terminating
or being replaced by a contract or subcontract, the Company expects to recognize the deferred revenue related to the Boeing License
Agreement.



Pursuant to the Boeing Security
Agreement, the Company granted Boeing a security interest in all of its assets, including the licensed products and intellectual
property rights (as defined in the Boeing License Agreement), to secure the Company’s performance under the Boeing License
Agreement.



12. Subsequent events



On January 7, 2015, PositiveID
Corporation filed an Amended and Restated Certificate of Designations of Preferences, Rights and Limitations of Series I Convertible
Preferred Stock. The Amended Certificate of Designation was filed to increase the authorized shares of Series I Convertible Preferred
Stock from 1,000 shares to 2,500 shares. No other terms were modified or amended in the Amended Certificate of Designation.



On January 12,
2015, 625 shares of Series I was granted for 2014 management incentive compensation and 2015 director compensation. The
shares were valued at $812,500, with the expense being recorded in the first quarter of 2015.





Subsequent to year
end, the Company has entered into additional convertible notes pursuant to its $4 Million Convertible Debt Financing (see Note
4). The principal amount of notes entered into since December 31, 2014 is approximately $2.2
million.



Subsequent to year end
convertible notes with an approximate principal value
of $683,000 have been converted into  47,308,000 shares of common stock.







In addition, 100,000
shares of common stock with grant date value of $3,000 was issued to an employee pursuant to the employment agreement and 4,500,000
shares of common stock with total grant date values of $90,000 were issued to consultants pursuant to consulting agreements.



Subsequent to year
end, the Company issued 300,000 stock options to each of the 4 members on its advisory board with an exercise price of $0.027 and
a total grant date fair value of approximately $35,000 which will be expensed over the one-year service period.





F-36









EXHIBIT INDEX



|Exhibit
        No. |  | Description
|------------------- |  | -----------





|31.1**  |  | Certification by William J. Caragol, Chief Executive Officer and Acting 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                                
|101.INS |  | XBRL
    Instance Document (1)                                                                                                                         
|101.SCH |  | XBRL
    Taxonomy Extension Schema Document (1)                                                                                                        
|101.CAL |  | XBRL
    Taxonomy Extension Calculation Linkbase Document (1)                                                                                          
|101.DEF |  | XBRL
    Taxonomy Extension Definition Linkbase Document (1)                                                                                           
|101.LAB |  | XBRL
    Taxonomy Extension Label Linkbase Document (1)                                                                                                
|101.PRE |  | XBRL
    Taxonomy Extension Presentation Linkbase Document (1)                                                                                         



| | ** | Filed herewith
| | -- | --------------
| |    |               







| | (1) | Incorporated by reference to the Form 10-K previously filed by PositiveID
    Corporation on March 30, 2015.
| | --- | ------------------------------------------------------------------------------------------------------------