##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K/A
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the fiscal year ended December 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from  to
 Commission file number: 001-33297
 VERICHIP CORPORATION
 (Exact name of registrant as specified in its charter)
 DELAWARE
    
    06-1637809(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1690 South Congress Avenue, Suite 200
Delray Beach, Florida 33445
(Address of principal executive offices) (Zip code)
 (561) 805-8008
(Registrants telephone number, including area code)
  Common Stock, par value $0.01 per share
    
    The NASDAQ Stock Market LLC(Title of each class)
    
    (Name of each exchange on which registered)
  o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if smaller reporting company)
 o þ
   Explanatory Note




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##### 



Item
    
    
    Description
    
    PagePart III10
    
    
    Directors, Executive Officers and Corporate Governance
    
    
    111
    
    
    Executive Compensation
    
    
    512
    
    
    Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    3313
    
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    3514
    
    
    Principal Accounting Fees and Services
    
    
    40Part IV15
    
    
    Exhibits, Financial Statement Schedules
    
    
    41SignaturesExhibit 31.1Exhibit 31.2




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PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name
    
    Positions with the CompanyScott R. Silverman
    
    Chairman of the Board and Chief Executive OfficerWilliam J. Caragol
    
    President, Chief Financial Officer, Treasurer and SecretaryDaniel A. Gunther
    
    Chief Executive Officer and President of our subsidiary,
Xmark CorporationJeffrey S. Cobb
    
    DirectorBarry M. Edelstein
    
    DirectorSteven R. Foland
    
    DirectorPaul C. Green
    
    Director
      1




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Board Composition
  Committees and Meetings of the Board
    2




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Audit Committee
 www.verichipcorp.com
  
    
    our accounting, financial reporting processes, audits and the
integrity of our financial statements;
    
    our independent auditors qualifications, independence and performance;
    
    our compliance with legal and regulatory requirements;
    
    our internal accounting and financial controls; and
    
    our audited financial statements and reports, and the discussion of
the statements and reports with management, including any significant
adjustments, management judgments and estimates, new accounting
polices and disagreements with management.
  Compensation Committee
 www.verichipcorp.com
  
    
    reviewing and recommending to our board approval of the compensation,
benefits, corporate goals and objectives of our chief executive
officer and our other executive officers;
    
    evaluating the performance of our executive officers; and
    
    administering our employee benefit plans and making recommendations to
our board of directors regarding these matters.
  3




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Nominating and Governance Committee
 www.verichipcorp.com
  
    
    identifying, evaluating and recommending nominees to our board of
directors and its committees;
    
    evaluating the performance of our board of directors and of individual directors;
    
    ensuring that we and our employees maintain the highest standards of
compliance with both external and internal rules, regulations and good
practices; and
    
    reviewing developments in corporate governance practices, evaluating
the adequacy of our corporate governance practices and reporting and
making recommendations to our board of directors concerning corporate
governance matters.
 Code of Business Conduct and Ethics
  Section 16(a) Beneficial Ownership Reporting Compliance
   4




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
   The Compensation CommitteeJeffrey S. Cobb (Chair)Steven R. FolandBarry M. EdelsteinApril 29, 2008
 The compensation committee report above shall not be deemed soliciting material or to be
filed with the SEC, nor shall such information be incorporated by reference into any future
filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except
to the extent that we specifically incorporate it by reference into such filing.
 COMPENSATION DISCUSSION AND ANALYSIS
 General
   
    
    establishing, reviewing and approving our overall executive compensation
philosophy and policies;
    
    reviewing and approving those corporate goals and objectives that bear on the
compensation of our chief executive officer;
    
    determining the appropriate compensation for all other executive officers,
with input from other members of senior management;
    
    evaluating performance target goals for senior executive officers;
    
    reviewing and approving any annual or long-term cash bonus or incentive plans;
    
    reviewing and approving executive employment agreements, severance
arrangements, and change-in-control agreements or provisions; and
    
    administering our equity-based compensation plans, including the grant of
stock options and other equity awards under such plans.
  5




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Principal Components of Compensation of Our Executive Officers
  
    
    base salary;
    
    signing or retention bonuses, paid in cash;
    
    cash incentive compensation under the terms of individual senior
management incentive compensation plans established for our executive
officers; and
    
    equity compensation, generally in the form of grants of stock options or restricted shares.
  6




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Allocation of Compensation Among Principal Components
  Base Salary
  Our Chief Executive Officer
    7




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Our Chief Financial Officer
  Chief Executive Officer and President of Xmark Corporation (and Our Former President)
   Bonus Compensation
  Compensation under Individual Senior Management Incentive Compensation Plans
    8




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Equity Compensation
   9




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Accounting for Certain Transactions Involving Stock
Compensation  an Interpretation of APB Opinion No. 25
    Severance and Change in Control Payments
   10




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Other Benefits
  Perquisites
  
    
    an automobile allowance for two automobiles and other automobile
expenses, including insurance, gasoline and maintenance costs;
    
    tickets to sporting events used primarily for business entertainment purposes; and
    
    a membership in a private club.
  Section 162(m) of the Internal Revenue Code
   11




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EXECUTIVE COMPENSATION
 Summary Compensation Table
  
    
    each person who served as our chief executive officer in 2007;
    
    each person who served as our chief financial officer in 2007; and
    
    our most highly compensated executive officer, other than our chief
executive officer and our chief financial officer, who was serving as
an executive officer at the end of 2007 and, at that time, was our
only other executive officer.
  Summary Compensation Table
 Non-EquityStock
    
    
    Option
    
    
    Incentive Plan
    
    
    All OtherName and Principal
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    TotalPosition
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)(1)
    
    
    ($)
    
    
    ($)Scott R. Silverman(2)Chairman of the Board of Directors and Chief Executive Officer
    
    
    2007
    
    
    
    420,000
    
    
    
    
    
    
    
    2,097,899
    (3)
    
    
    
    
    
    
    800,000
    
    
    
    104,980
    (4)
    
    
    3,422,8792006
    
    
    
    400,323
    (5)
    
    
    900,000
    (6)
    
    
    154,762
    (3)
    
    
    
    
    
    
    
    
    
    
    3,403,016
    (7)
    
    
    4,858,101William J. Caragol(8)President and Chief Financial
Officer
    
    
    2007
    
    
    
    174,808
    (9)
    
    
    25,000
    (10)
    
    
    119,562
    (11)
    
    
    92,692
    (12)
    
    
    450,000
    
    
    
    15,251
    (13)
    
    
    942,0622006
    
    
    
    51,923
    (9)
    
    
    
    
    
    
    
    
    
    
    62,034
    (12)
    
    
    75,000
    
    
    
    66,029
    
    
    
    254,986Daniel A. Gunther(14)Chief Executive Officer and
President of Xmark Corporation
    
    
    2007
    
    
    
    225,309
    (15)
    
    
    
    
    
    
    119,562
    (11)
    
    
    
    
    
    
    370,370
    (16)
    
    
    1,940
    (17)
    
    
    716,7812006
    
    
    
    188,354
    (15)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200,490
    (16)
    
    
    588
    
    
    
    389,432
 
 (1)
    
    The amounts shown in this column were paid under the terms of our
executive management incentive plan for fiscal year 2007, which were
entered into with each of our named executive officers other than
Daniel A. Gunther, for the achievement of specified performance
objectives. Mr. Gunthers senior management incentive compensation plan
for fiscal year 2007, which sets forth performance objectives and
related dollar amounts, contain the terms that govern his receipt of
incentive compensation for fiscal year 2007. For a description of the
material terms of each of these plans, see the discussion under Our
2007 Senior Management Incentive Compensation Plans and Comparable
Arrangements.(2)
    
    Mr. Silverman became our chief executive officer as of December 5, 2006.  12




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(3)
    
    Mr. Silverman received an award of 500,000 restricted shares of our
common stock in December 2006 in connection with his appointment as our
chief executive officer. The shares are subject to forfeiture in the
event Mr. Silverman resigns or is terminated for cause on or before
December 31, 2008. The dollar amount of this award reflected in the
table represents the amount recognized in 2006 and 2007 for financial
statement reporting purposes in accordance with FAS 123R without
reduction for assumed forfeitures. The grant date fair value of the
award was $4,500,000, which amount has been determined in accordance
with FAS 123R based on an estimated fair value of our common stock of
$9.00 per share on December 31, 2006, as determined by our board of
directors and management. The grant date fair value of each award was
determined using the Black Scholes pricing model. The value realized
from this grant will ultimately be determined by the price of our
common stock when the restricted period ends, which may be less than
the value assigned at the time of the grant. For more information
regarding assumptions made in determining the amount under the Black
Scholes pricing model, see Note 9 of our consolidated financial
statements for the year ended December 31, 2007, included in our Annual
Report on Form 10-K for the year ended December 31, 2007.(4)
    
    The amount shown includes (i) $300 in respect of group term life
insurance provided to Mr. Silverman and (ii) amounts in respect of
perquisites and other personal benefits aggregating $104,680. The
perquisites and other personal benefits were as follows: AmountofNature of Expense
    
    ExpenseExpense allowance
    
    $
    45,000Automobile allowance for two automobiles, maintenance and gasoline expenses
    
    
    33,266*Other
    
    
    26,414Total
    
    $
    104,680
 *
    
    Tickets to sporting events primarily provided for business
entertainment purposes and related food and beverages, a club
membership, home security monitoring service, and medical examinations.(5)
    
    Mr. Silvermans salary for 2006 includes $377,799 paid by Digital Angel
to Mr. Silverman from January 1, 2006 through December 4, 2006, during
which time he served as the chief executive officer of Digital Angel,
which owns a majority position in our common stock. All such amounts
were paid or accrued by Digital Angel and do not affect our financial
statements.(6)
    
    In December 2006, Digital Angels board of directors determined to fix
the amount payable to Mr. Silverman under the Digital Angel 2006
incentive and recognition policy in order to resolve and clarify
outstanding compensation issues under the policy, given the wide range
of potential payments under the policy and the timing of our initial
public offering and how that would affect such range. Accordingly,
Digital Angel fixed Mr. Silvermans bonus for 2006 at $900,000. The
amount is shown in the Bonus column instead of the Non-Equity
Incentive Compensation Plan column as the amount paid was not
determined solely by reference to the performance objectives set forth
in the policy. All such amounts were paid or accrued by Digital Angel
and do not affect our financial statements.(7)
    
    The amount shown includes (i) $3.3 million owed to Mr. Silverman under
an agreement Digital Angel entered into with Mr. Silverman dated
December 5, 2006 in connection with his agreeing to waive all of his
rights under his employment agreement with Digital Angel (the majority
of this amount was settled in the stock of Digital Angel, the value of
which may be less when realized), (ii) amounts in respect of
perquisites and other personal benefits aggregating $102,716 provided
by Digital Angel, and (iii) $300 in respect of group term life
insurance provided to Mr. Silverman. See Compensation of Scott R.
Silverman below for more information regarding the $3.3 million
payment. All such amounts were paid or accrued by Digital Angel and do
not affect our financial statements.(8)
    
    Mr. Caragol became our chief financial officer as of August 21, 2006
and our president as of May 4, 2007.(9)
    
    Mr. Caragols annual base salary in 2006, as specified in his offer
letter with us, was $150,000. On March 2, 2007, our compensation
committee approved an increase to Mr. Caragols base salary to
$165,000. Then, on May 4, 2007, in connection with our boards decision
to appoint Mr. Caragol to serve as our president, our compensation
committee approved an increase in Mr. Caragols base salary to
$185,000. In 2008, our compensation committee approved a further
increase in Mr. Caragols base salary to $203,500.  13




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(10)
    
    On March 2, 2007, our compensation committee approved a discretionary bonus to Mr. Caragol in the amount of $25,000.(11)
    
    On March 2, 2007, Mr. Caragol and Mr. Gunther each received a
restricted stock award of 50,000 restricted shares of our common
stock. Mr. Caragols award vests on March 2, 2009. On April 28, 2008,
Mr. Gunther voluntarily entered into a termination agreement with us
to terminate his restricted stock award of 50,000 restricted shares
of our common stock. The dollar amount of each award reflected in
the table represents the amount recognized in 2007 for financial
statement reporting purposes in accordance with FAS 123R without
reduction for assumed forfeitures. The grant date fair value of each
award, determined using the Black Scholes pricing model, is reflected
in the Grants of Plan-Based Awards table below. For information
regarding assumptions made in determining the amount under the Black
Scholes pricing model, see Note 9 of our consolidated financial
statements for the year ended December 31, 2007, included in our
Annual Report on Form 10-K for the year ended December 31, 2007.(12)
    
    In connection with Mr. Caragols appointment as our chief financial
officer, on August 14, 2006, the compensation committee of our board
of directors authorized the grant to Mr. Caragol of options
exercisable for 50,000 shares of our common stock. The options vest
equally over a three-year period. The dollar amount of this award
reflected in the table represents the amount recognized in 2006 and
2007 for financial statement reporting purposes in accordance with
FAS 123R, without reduction for assumed forfeitures, determined by
reference to that portion of the vesting period that occurred in 2006
and 2007 based on the grant date fair value of the award. The grant
date fair value of the award was $278,581, which was determined using
the Black Scholes pricing model. For information regarding
assumptions made in determining the amount under the Black Scholes
pricing model, see Note 9 of our consolidated financial statements
for the year ended December 31, 2007, included in our Annual Report
on Form 10-K for the year ended December 31, 2007.(13)
    
    The amount represents an expense allowance received by Mr. Caragol
for 2007 in the amount of $5,000 and tickets to sporting events
primarily provided for business entertainment purposes and related
food and beverages.(14)
    
    Mr. Gunther served as our president from June 10, 2005 through March
2, 2007. On March 2, 2007, Mr. Gunther resigned his duties as our
president and assumed the title and responsibilities of chief
executive officer and president of VeriChip Canada and VHI, which companies
were amalgamated and are now known as Xmark Corporation.(15)
    
    Mr. Gunthers annual base salary is paid in Canadian dollars. The
2006 base salary reported has been converted to U.S. dollars using
the average exchange rate for 2006 of 1.136 Canadian dollars for each
U.S. dollar. The 2007 base salary reported has been converted to
U.S. dollars using the average exchange rate for 2007 of 1.08
Canadian dollars for each U.S. dollar.(16)
    
    The amount reported in the table has been converted to U.S. dollars
using the average exchange rate for 2006 and 2007 of 1.136 and 1.08,
respectively, Canadian dollars for each U.S. dollar.(17)
    
    This amount represents the cost of group term life insurance we
maintain on behalf of Mr. Gunther and home internet service. Compensation of Scott R. Silverman
    14




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15




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2007 Grants of Plan-Based Awards
  
    
    cash amounts that could be earned in 2007 by our named executive
officers under the terms of our management incentive compensation
plans;
 
    
    stock awards granted by the compensation committee of our board of
directors to our named executive officers in 2007, reflected on an
individual grant basis; and
 
    
    stock awards granted by Digital Angel to Mr. Silverman under the
December 5, 2006 Agreement and letter agreement dated March 14, 2007,
each further discussed in Compensation of Scott R. Silverman above.
  2007 Grants of Plan-Based Awards
 AllOtherStock
    
    
    All OtherAwards:
    
    
    Option
    
    
    
    
    
    
    GrantNumber
    
    
    Awards:
    
    
    Exercise
    
    
    Date FairDate of Board
    
    
    Estimated Future Payouts
    
    
    of
    
    
    Number of
    
    
    or Base
    
    
    Value ofor
    
    
    Under Non-Equity Incentive
    
    
    Shares
    
    
    Securities
    
    
    Price of
    
    
    Stock andCompensation
    
    
    Plan Awards
    
    
    of Stock
    
    
    Underlying
    
    
    Option
    
    
    OptionGrant
    
    
    Committee
    
    
    Threshold
    
    
    Target
    
    
    Maximum
    
    
    or Units
    
    
    Options
    
    
    Awards
    
    
    AwardsName
    
    Date
    
    
    Action
    
    
    ($)(1)
    
    
    ($)(1)
    
    
    ($)(1)
    
    
    (#)
    
    
    (#)
    
    
    ($/Sh)
    
    
    ($)Scott R.
SilvermanVeriChip
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,550,000
    
    
    
    1,550,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Digital Angel
    
    
    03/14/2007
    
    
    
    11/29/2006
    (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    503,768
    (3)
    
    
    
    
    
    
    
    
    
    
    735,500
    (4)07/05/2007
    
    
    
    11/29/2006
    (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,458,465
    (3)
    
    
    
    
    
    
    
    
    
    
    1,779,327
    (4)07/27/2007
    
    
    
    11/29/2006
    (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    426,781
    (3)
    
    
    
    
    
    
    
    
    
    
    520,673
    (4)William J. Caragol
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    875,000
    
    
    
    875,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    03/02/2007
    
    
    
    03/02/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    (5)
    
    
    
    
    
    
    
    
    
    
    287,500
    (4)Daniel A. Gunther
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    462,963
    (6)
    
    
    462,963
    (6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    03/02/2007
    
    
    
    03/02/2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    (5)
    
    
    
    
    
    
    
    
    
    
    287,500
    (4)
 
 (1)
    
    Our non-equity incentive plans, under which our named executive
officers have been paid incentive compensation, in cash, with respect
to 2007, consist of: 
    
    the executive management incentive compensation plan for
fiscal year 2007 to which Messrs. Silverman and Caragol are a party;
and
 
    
    the senior management incentive compensation plan for fiscal
year 2007 to which Mr. Gunther is a party.
  16




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The terms of the management incentive compensation plans with respect
to 2007 to which each of Messrs. Silverman, Caragol and Gunther are
parties provide for target/maximum amounts of incentive compensation
based upon the achievement of specified performance objectives. For
more information, see Our 2007 Senior Management Incentive
Compensation Plans and Comparable Arrangements.(2)
    
    Reflects the date the board of directors of Digital Angel approved the
December 5, 2006 Agreement and the authorization to issue shares of
Digital Angel common stock in connection therewith. For more
information on the December 5, 2006 Agreement, see Compensation of
Scott R. Silverman, above for more information.(3)
    
    Reflects payments made in connection with Digital Angels obligations
to Mr. Silverman under the December 5, 2006 Agreement. The shares were
issued under a letter agreement between Digital Angel and Mr.
Silverman dated March 14, 2007. See Compensation of Scott R.
Silverman, above for more information.(4)
    
    The grant date fair value of the equity award was determined under the
Black Scholes pricing model in accordance with FAS 123R. For
information regarding assumptions made in determining the amount under
the Black Scholes pricing model, see Note 9 of our consolidated
financial statements for the year ended December 31, 2007, included in
our Annual Report on Form 10-K for the year ended December 31, 2007.(5)
    
    On March 2, 2007, Mr. Caragol and Mr. Gunther each received a
restricted stock award of 50,000 restricted shares of our common
stock. Mr. Caragols award vests on March 2, 2009. On April 28, 2008,
Mr. Gunther voluntarily entered into a termination agreement with us
to terminate his restricted stock award of 50,000 restricted shares of
our common stock.(6)
    
    The target incentive compensation amounts specified in the senior
management incentive compensation plans of Mr. Gunther are stated in
Canadian dollars. That amount for Mr. Gunther is CDN$500,000. The
amounts reported in the table have been converted to U.S. dollars
using the average exchange rate for 2007 of 1.08 Canadian dollars for
each U.S. dollar.  17




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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
 Executive Employment Arrangements
 Scott R. Silverman
      William J. Caragol
   18




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Daniel A. Gunther
    19




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Our 2007 Senior Management Incentive Compensation Plans and Comparable Arrangements
  
    
    the performance objectives applicable to his incentive compensation for 2007; and
 
    
    the weighting of such performance objectives, stated as a dollar amount.
 Scott R. Silverman
 Performance
Objective(1)
    
    WeightingConsolidated revenue of $32.0 million for 2007(2)
    
    $
    150,000Consolidated revenue of $33.6 million for 2007(3)
    
    $
    50,000Consolidated revenue of $35.2 million for 2007(3)
    
    $
    50,000Implantable revenue of $250 thousand for 2007(3)
    
    $
    50,000Implantable revenue of $500 thousand for 2007(3)
    
    $
    50,000Implantable revenue of $750 thousand for 2007(3)
    
    $
    50,000Implantable revenue of $1.0 million for 2007(3)
    
    $
    50,000December 31, 2007 common stock price in excess of IPO price(3)
    
    $
    100,000December 31, 2007 common stock price 25% in excess of IPO price(3)
    
    $
    50,000Total cash at December 31, 2007 of $8.5 million(2)
    
    $
    50,000Strategic partnership and distribution agreements (other than Henry
Schein)(2)
    
    $
    50,000Strategic acquisition(3)
    
    $
    50,000EBITDA of Canadian operations of $4.8 million(2)
    
    $
    100,000SOX 404 and audit opinion without material deficiencies(2)
    
    $
    50,000VeriMed hospitals in network of 800 at December 31, 2007 and protocol
adopted hospitals of 200 at December 31, 2007(2)
    
    $
    50,000Analyst coverage by three equity research analysts(2)
    
    $
    100,000Discretionary by the Compensation Committee(4)
    
    $
    500,000MAXIMUM POTENTIAL
    
    $
    1,550,000
 (1)
    
    The attainment of these performance objectives was determined by our compensation committee on
December 14, 2007.(2)
    
    Mr. Silverman achieved these objectives.(3)
    
    Mr. Silverman did not achieve these objectives.(4)
    
    The discretionary amount granted by the compensation committee was $250,000.   20




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##### Table of Contents



William J. Caragol
 Performance Objective(1)
    
    WeightingConsolidated revenue of $32.0 million for 2007(2)
    
    $
    100,000Consolidated revenue of $33.6 million for 2007(3)
    
    $
    50,000Consolidated revenue of $35.2 million for 2007(3)
    
    $
    50,000Implantable revenue of $250 thousand for 2007(3)
    
    $
    25,000Implantable revenue of $500 thousand for 2007(3)
    
    $
    25,000Implantable revenue of $750 thousand for 2007(3)
    
    $
    25,000Implantable revenue of $1.0 million for 2007(3)
    
    $
    25,000December 31, 2007 common stock price in excess of IPO price(3)
    
    $
    33,500December 31, 2007 common stock price 25% in excess of IPO price(3)
    
    $
    16,500Total cash at December 31, 2007 of $8.5 million(2)
    
    $
    50,000Strategic partnership and distribution agreements (other than Henry
Schein)(2)
    
    $
    25,000Strategic acquisition(3)
    
    $
    25,000EBITDA of Canadian operations of $4.8 million(2)
    
    $
    50,000SOX 404 and audit opinion without material deficiencies(2)
    
    $
    50,000VeriMed hospitals in network of 800 at December 31, 2007 and protocol
adopted hospitals of 200 at December 31, 2007(2)
    
    $
    25,000Analyst coverage by three equity research analysts(2)
    
    $
    50,000Discretionary by the Compensation Committee(4)
    
    $
    250,000MAXIMUM POTENTIAL
    
    $
    875,000
 (1)
    
    The attainment of these performance objectives was determined by our compensation committee on
December 14, 2007.(2)
    
    Mr. Caragol achieved these objectives.(3)
    
    Mr. Caragol did not achieve these objectives.(4)
    
    The discretionary amount granted by the compensation committee was $100,000.  Daniel A. Gunther
 Weighting(CDNPerformance Objective
    
    $500,000)Quarterly for achieving revenue objectives for Canadian-based businesses(1)
    
    $
    200,000Annual for achieving revenues and EBITDA objectives for Canadian-based
businesses(2)
    
    $
    200,000Annual for exceeding revenues and EBITDA objectives(3)
    
    $
    100,000
 (1)
    
    The quarterly component was based on the amount of 2007 quarterly year-to-date revenue from our
Canadian-based businesses relative to the budgeted annual revenue amount for these businesses in
2007 of US$32,004,000. The quarterly incentive compensation was earned in the applicable quarter
and was calculated at the end of each fiscal quarter. If year-to-date revenue to the end of any
fiscal quarter did not exceed the following minimum year-to-date revenue thresholds at the end of
each quarter, no additional incentive compensation was paid with respect to such quarter: as of
March 31, 2007  US$7,019,000; as of June 30, 2007  US$14,202,500; as of September 30, 2007 -
US$21,761,650; and as of December 31, 2007  US$30,403,800.  21




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##### Table of Contents



(2)
    
    This annual component was based upon the amount of budged revenues for Canadian operations of
US$32,004,000 and a minimum EDITDA from Canadian operations of US$4,800,000. If both of these
objectives were not achieved, no annual incentive compensation would be paid with respect to this
component.(3)
    
    This component was based upon exceeding both the annual budgeted revenues and budged EBITDA
from Canadian operations by 5%. Thus, this component was based upon the amount of budged revenues
for Canadian operations of US$33,604,200 and a minimum EDITDA from Canadian operations of
US$5,040,000. If both of these objectives were not achieved, no annual incentive compensation would
be paid with respect to this component.   22




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##### Table of Contents



Outstanding Equity Awards as Of December 31, 2007
  Outstanding Equity Awards as Of December 31, 2007
 Option Awards
    
    
    Stock AwardsEquityEquity
    
    
    IncentiveIncentive
    
    
    PlanPlan
    
    
    Awards:Awards:
    
    
    MarketEquity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    or PayoutIncentive
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    of
    
    
    Value ofPlan
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Unearned
    
    
    UnearnedAwards:
    
    
    
    
    
    
    
    
    
    
    of Shares
    
    
    Market
    
    
    Shares,
    
    
    Shares,Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    
    
    
    
    or Units
    
    
    Value of
    
    
    Units or
    
    
    Units orSecurities
    
    
    Number of
    
    
    Securities
    
    
    
    
    
    
    
    
    
    
    of Stock
    
    
    Shares or
    
    
    Other
    
    
    OtherUnderlying
    
    
    Securities
    
    
    Underlying
    
    
    
    
    
    
    
    
    
    
    That
    
    
    Units of
    
    
    Rights
    
    
    RightsUnexercised
    
    
    Underlying
    
    
    Unexercised
    
    
    Option
    
    
    
    
    
    
    Have
    
    
    Stock That
    
    
    That
    
    
    ThatOptions
    
    
    Unexercised
    
    
    Unearned
    
    
    Exercise
    
    
    Option
    
    
    Not
    
    
    Have Not
    
    
    Have Not
    
    
    Have Not(#)
    
    
    Options (#)
    
    
    Options
    
    
    Price
    
    
    Expiration
    
    
    Vested
    
    
    Vested
    
    
    Vested
    
    
    VestedName
    
    Exercisable(1)
    
    
    Unexercisable
    
    
    (#)
    
    
    ($)(2)
    
    
    Date
    
    
    (#)
    
    
    ($)
    
    
    (#)
    
    
    ($)Scott R.
Silverman(3)VeriChip
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500,000
    (4)
    
    $
    1,125,000
    (5)
    
    
    
    
    
    
    Corporation
    
    
    111,111
    
    
    
    
    
    
    
    
    
    
    $
    0.225
    
    
    
    2/7/2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    $
    0.225
    
    
    
    4/1/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    $
    1.125
    
    
    
    5/26/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Digital
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    $
    3.900
    
    
    
    11/3/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Angel
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    $
    3.200
    
    
    
    2/4/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,000
    
    
    
    
    
    
    
    
    
    
    $
    2.800
    
    
    
    7/25/2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    750,000
    
    
    
    
    
    
    
    
    
    
    $
    3.230
    
    
    
    7/6/2013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    759,951
    
    
    
    
    
    
    
    
    
    
    $
    2.570
    
    
    
    4/8/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,500
    
    
    
    
    
    
    
    
    
    
    $
    2.240
    
    
    
    4/8/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,049
    
    
    
    
    
    
    
    
    
    
    $
    5.850
    
    
    
    4/8/2012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    175,000
    
    
    
    
    
    
    
    
    
    
    $
    4.050
    
    
    
    1/25/2014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70,000
    (6)
    
    
    
    
    
    
    
    
    
    $
    2.970
    
    
    
    2/7/2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350,000
    (6)
    
    
    
    
    
    
    
    
    
    $
    1.370
    
    
    
    9/5/2013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350,000
    (6)
    
    
    
    
    
    
    
    
    
    $
    2.780
    
    
    
    12/31/2013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    700,000
    (6)
    
    
    
    
    
    
    
    
    
    $
    2.450
    
    
    
    2/18/2014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    280,000
    (6)
    
    
    
    
    
    
    
    
    
    $
    3.630
    
    
    
    2/25/2015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    196,000
    (6)
    
    
    
    
    
    
    
    
    
    $
    4.010
    
    
    
    3/7/2015
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    560,000
    (6)
    
    
    
    
    
    
    
    
    
    $
    2.330
    
    
    
    6/14/2016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Daniel A.
    
    
    55,556
    
    
    
    
    
    
    
    
    
    
    $
    7.425
    
    
    
    8/11/2013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gunther
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    (7)
    
    
    112,500
    (8)
    
    
    
    
    
    
    William J.
    
    
    
    
    
    
    33,333
    (9)
    
    
    
    
    
    $
    9.990
    
    
    
    8/21/2016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Caragol
    
    
    16,667
    
    
    
    
    
    
    
    
    
    
    $
    9.990
    
    
    
    8/12/2016
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,000
    (7)
    
    
    112,500
    (8)
    
    
    
    
    
    
    
  23




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##### Table of Contents



(1)
    
    On December 12, 2005, our board of directors approved a proposal which
provided for vesting on December 30, 2005 of all of our then
outstanding and unvested stock options previously awarded to our
directors, employees and consultants and one employee of Digital
Angel. In connection with the acceleration of these options, our board
stipulated that a grantee that acquires any shares through exercise of
any of such options shall not be permitted to sell such shares until
the earlier of (i) the original vesting date applicable to such option
or (ii) the date on which such grantees employment terminates for any
reason. The board of directors of Digital Angel took similar action
with respect to their then outstanding and unvested stock options. Due
to this acceleration, the only VeriChip stock options that were not
exercisable as of December 31, 2007 are the VeriChip stock options
granted to Mr. Caragol on August 21, 2006, 16,667 of which vested on
August 21, 2007, 16,667 of which vest on August 21, 2008 and 16,666 of
which vest on August 21, 2009.(2)
    
    The exercise price of VeriChip stock options reflected in the table
represents the estimated fair market value of our common stock on the
date of grant, as determined by our management and board of directors.
Based on information provided to us by Digital Angel, the exercise
price of Digital Angel stock options reflected in the table is based
on the closing price of Digital Angels common stock, as reported on
the applicable Nasdaq market on the day prior to the date of grant.(3)
    
    Includes: (i) options we granted to Mr. Silverman in his capacity as
our director; and (ii) options granted by Digital Angel to Mr.
Silverman while he was a special advisor to the board of Digital
Angel, and later a director and executive officer of Digital Angel.(4)
    
    This restricted stock award vests on December 31, 2008.(5)
    
    The market value of the restricted stock was computed by multiplying
the closing market price of a share of our common stock as reported on
the applicable Nasdaq market on December 31, 2007, or $2.25, by the
number of restricted shares, or 500,000.(6)
    
    In connection with the merger of Digital Angel and DAC on December 28,
2007, these options were original issued by DAC and were cancelled and
converted into an option to purchase 1.4 shares of Digital Angel
common stock for every share of DAC common stock at a price per share
equal to the exercise price per share of the DAC option divided by
1.4.(7)
    
    Mr. Caragols restricted stock award vests on March 2, 2009. On April
28, 2008, Mr. Gunther voluntarily entered into a termination agreement
with us to terminate his restricted stock award of 50,000 restricted
shares of our common stock.(8)
    
    The market value of the restricted stock was computed by multiplying
the closing market price of a share of our common stock as reported on
the applicable Nasdaq market on December 31, 2007, or $2.25, by the
number of restricted shares, or 50,000.(9)
    
    Options exercisable for 16,667 shares of our common stock vest on
August 21, 2008, and options exercisable for 16,666 shares of our
common stock vest on August 21, 2009. 2007 Option Exercises and Stock Vested
  Pension Benefits
  Nonqualified Deferred Compensation
   24




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##### Table of Contents



Potential Payments Upon Termination or Change in Control
  Scott R. Silverman
  Resignation and Termination for Cause.
 
    
    any and all earned but unpaid base salary and any and all earned but
unpaid incentive compensation as of the date of termination, to be
paid within 30 days of Mr. Silvermans last day of service; and
    
    50% of his then base salary for a period of two years from the date of termination.
    Disability, Death, Constructive Termination or Termination Without Cause.
 
    
    any and all earned but unpaid base salary and any and all earned but
unpaid incentive compensation as of the date of termination;
    
    the greater of (A) his then base salary from the date of termination
through December 31, 2011, or (B) two times his then base salary; and
    
    the average bonus paid by us to Mr. Silverman for the three full
calendar years immediately prior to the date of termination, or 50% of
the bonus paid by Digital Angel to Mr. Silverman in 2006, if the
termination occurred in 2007, or 75% of the bonus paid by us to
Mr. Silverman in 2007, if the termination occurs in 2008, which amount
shall be interpolated from the date of termination through
December 31, 2011.
   26




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##### Table of Contents



Change in Control
 
    
    any and all earned but unpaid base salary and earned but unpaid
incentive compensation as of the date of the change in control;
    
    five times his then base salary; and
    
    five times the average incentive compensation paid by us to
Mr. Silverman for the three full calendar years immediately prior to
the change in control, or the number of calendar years completed prior
to the change in control, if less than three calendar years.
   
    
    the acquisition of our stock by our parent company, Digital Angel or its affiliates;
    
    a public offering or sale to the public of our stock; or
 
    
    a merger with another company, unless such merger also results in the
members of our board of directors prior to such transaction not
constituting a majority of our board of directors following such
transaction.
  27




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##### Table of Contents



Daniel A. Gunther
  Resignation and Termination for Cause.
 Termination for Any Reason Other Than For Cause.
 Executive Management Change in Control Plan
  
    
    any and all earned but unpaid base salary and earned but unpaid
incentive compensation as of the date of the Change in Control;
    
    the Multiplier (as defined below) times his then base salary; and
    
    the Multiplier times the average bonus paid by us to him (either
Messrs. Caragol or Gunther, as the case may be) for the
three full calendar years immediately prior to the Change in Control
(provided, however, that if the Change in Control occurred in 2007,
then the average bonus shall mean the average of the bonus earned in
2006 and the pro rata portion of the total target bonus for 2007, and
if the Change in Control occurs in 2008, then the average bonus shall
mean the average of bonuses earned in 2006 and 2007).
  28




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##### Table of Contents




    
    the consummation of any transaction (including, without limitation,
any merger or consolidation) the result of which is that any person
as such term is used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934, (the Exchange Act) (other than a Controlling
Stockholder (as defined below), any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company), is or becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing more than 50% of the
combined voting power of the Companys then outstanding securities
entitled generally to vote in the election of the Board of Directors
of the Company (other than the occurrence of any contingency);
    
    the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation or entity, which is
consummated, other than a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more
than 50% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation; or
    
    the effective date of a complete liquidation of the Company or the
consummation of an agreement for the sale or disposition by the
Company of all or substantially all of the Companys assets, which in
both cases are approved by the stockholders of the Company as may be
required by law.
      29




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##### Table of Contents



30




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##### Table of Contents



Director Compensation
  2007 Director Compensation
 Change inPension ValueFees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    andEarned
    
    
    
    
    
    
    
    
    
    
    Non-Equity
    
    
    Nonqualifiedor Paid
    
    
    Stock
    
    
    Option
    
    
    Incentive Plan
    
    
    Deferred
    
    
    All Otherin Cash
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    Compensation
    
    
    TotalName
    
    ($)
    
    
    ($)
    
    
    ($)(1)
    
    
    ($)
    
    
    Earnings
    
    
    ($)
    
    
    ($)Tommy G. Thompson(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Daniel E. Penni(3)
    
    
    20,000
    
    
    
    
    
    
    
    76,413
    (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,195Paul C. Green(5)
    
    
    24,000
    
    
    
    
    
    
    
    212,258
    (6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,874Constance K. Weaver(7)
    
    
    20,000
    
    
    
    
    
    
    
    76,413
    (8)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,195Jeffrey S. Cobb(9)
    
    
    20,000
    
    
    
    
    
    
    
    70,167
    (10)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,014
 
 (1)
    
    The dollar amount of this award reflected in the table represents the amount recognized in
2007 for financial statement reporting purposes in accordance with FAS 123R. For information
regarding assumptions made in determining the amount under the Black
Scholes pricing model,
see Note 9 of our consolidated financial statements for the year ended December 31, 2007,
included in our Annual Report on Form 10-K for the year ended December 31, 2007.(2)
    
    As of December 31, 2007, Mr. Thompson held options to purchase 55,556 shares of our common
stock. On March 8, 2007, Mr. Thompson resigned from our board of directors.(3)
    
    As of December 31, 2007, Mr. Penni held options to purchase 91,666 shares of our common
stock. On January 11, 2008, Mr. Penni resigned from our board of directors.(4)
    
    On March 2, 2007, Mr. Penni was granted a stock option to purchase 25,000 shares of our
common stock at an exercise price of $5.75 per share. The grant date fair value of the award
was $21,195, which amount has been determined in accordance with FAS 123R.(5)
    
    As of December 31, 2007, Mr. Green held options to purchase 69,444 shares of our common stock.(6)
    
    On March 2, 2007, Mr. Green was granted a stock option to purchase 25,000 shares of our
common stock with an exercise price of $5.75 and a stock option to purchase 44,444 shares of
our common stock with an exercise price of $5.75. The grant date fair value of these
issuances was $58,874, which amount has been determined in accordance with FAS 123R.(7)
    
    As of December 31, 2007, Ms. Weaver held options to purchase 102,777 shares of our common
stock. On January 11, 2008, Ms. Weaver resigned from our board of directors.(8)
    
    On March 2, 2007, Ms. Weaver was granted a stock option to purchase 25,000 shares of our
common stock at an exercise price of $5.75 per share. The grant date fair value of the award
was $21,195, which amount has been determined in accordance with FAS 123R.(9)
    
    As of December 31, 2007, Mr. Cobb held options to purchase 25,000 shares of our common stock.(10)
    
    On March 9, 2007, Mr. Cobb was granted a stock option to purchase 25,000 shares of our common
stock at an exercise price of $5.28 per share. The grant date fair value of the award was
$19,014, which amount has been determined in accordance with FAS 123R.  31




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##### Table of Contents




    
    a quarterly fee of $5,000; and
    
    an additional quarterly fee of $1,000 to the chairperson of our audit committee.
   
    
    411,430 shares of Digital Angel common stock; and
    
    200,000 shares of Thermo Life common stock.
  
    
    330,300 shares of Digital Angel common stock; and
    
    200,000 shares of Thermo Life common stock.
  Compensation Committee Interlocks and Insider Participation
   32




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##### Table of Contents



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
    
    each of our directors;
    
    each of our named executive officers;
    
    all of our executive officers and directors as a group; and
    
    each person, or group of affiliated persons, known to us to be the
beneficial owner of more than 5% of our outstanding shares of common
stock.
  Number ofShares
    
    
    Percent ofBeneficially
    
    
    OutstandingName and Address of Beneficial Owner
    
    Owned(#)
    
    
    Shares(%)Five percent stockholders:Applied Digital Solutions, Inc.(1)
1690 South Congress Avenue, Suite 200
Delray Beach, Florida 33445
    
    
    5,355,556
    
    
    
    49.1
    %Austin W. Marxe (2)
527 Madison Avenue, Suite 2600
New York, New York 10022
    
    
    986,099
    
    
    
    9.0
    %David M. Greenhouse(2)
527 Madison Avenue, Suite 2600
New York, New York 10022
    
    
    986,099
    
    
    
    9.0
    %Named Executive Officers and Directors:Scott R. Silverman(3)
    
    
    866,111
    
    
    
    7.7
    %William J. Caragol(4)
    
    
    119,667
    
    
    
    1.1
    %Daniel A. Gunther(5)
    
    
    55,556
    
    
    
    *Jeffrey S. Cobb(6)
    
    
    108,334
    
    
    
    1.0
    %Barry M. Edelstein(7)
    
    
    100,000
    
    
    
    *Steven R. Foland(8)
    
    
    55,600
    
    
    
    *Paul C. Green(9)
    
    
    123,149
    
    
    
    1.1
    %Executive Officers and Directors as a Group (7 persons) (10)
    
    
    1,528,416
    
    
    
    12.6
    %
  33




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*
    
    Less than 1%(1)
    
    Digital Angel has pledged 3,611,111 shares and 4,284,445 shares to Laurus Master Fund,
Ltd. and Kallina Corporation, respectively, to secure, in part, loans from each of the
lenders to Digital Angel. The 3,611,111 shares that were pledged to Laurus Master Fund,
Ltd. were also pledged to Kallina Corporation.(2)
    
    Austin W. Marxe and David M. Greenhouse share voting and investment control over all
securities owned by Special Situations Fund III QP (QP), Special Situations Technology
Fund, L.P. (Tech) and Special Situations Technology Fund II, L.P. (Tech II). 544,522
shares of our common stock are owned by QP, 62,179 shares of our common stock are owned by
Tech and 379,398 shares of our common stock are owned by Tech II. The interest of Messrs.
Marxe and Greenhouse in the shares of our common stock owned by QP, Tech and Tech II is
limited to the extent of their pecuniary interest. The information included in the table
is based solely on the Form 4 filed jointly with the SEC on
February 1, 2008 by Messrs. Marxe
and Greenhouse.(3)
    
    Includes 550,000 restricted shares of our common stock, 311,111 shares of our common stock
issuable upon the exercise of stock options that are currently exercisable or exercisable
within 60 days of April 28, 2008, and 5,000 shares of our common stock.(4)
    
    Includes 100,000 restricted shares of our common stock, 16,667 shares of our common stock
issuable upon the exercise of stock options that are currently exercisable or exercisable
within 60 days of April 28, 2008, and 3,000 shares of our common stock.(5)
    
    Includes 55,556 shares of our common stock issuable upon the exercise of stock options
that are currently exercisable or exercisable within 60 days of
April 28, 2008.(6)
    
    Includes 100,000 restricted shares of our common stock and 8,334 shares of our common
stock issuable upon the exercise of stock options that are currently exercisable or
exercisable within 60 days of April 28, 2008.(7)
    
    Includes 100,000 restricted shares of our common stock.(8)
    
    Includes 50,000 restricted shares of our common stock and 5,600 shares of our common stock.(9)
    
    Includes 100,00 restricted shares of our common stock and 23,149 shares of our common
stock issuable upon the exercise of stock options that are currently exercisable or
exercisable within 60 days of April 28, 2008.(10)
    
    Includes shares of our common stock beneficially owned by current executive officers and
directors and shares issuable upon the exercise of stock options that are currently
exercisable or exercisable within 60 days of April 28, 2008, in each case as set forth in
the footnotes to this table.  34




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Number ofShares
    
    
    Percent ofBeneficially
    
    
    OutstandingName and Address of Beneficial Owner
    
    Owned(#)(1)
    
    
    Shares(%)Named Executive Officers and Directors:Scott R. Silverman
    
    
    6,059,726
    
    
    
    4.9
    %William J. Caragol
    
    
    25
    
    
    
    *Daniel A. Gunther
    
    
    
    
    
    
    Jeffrey S. Cobb
    
    
    
    
    
    
    Barry M. Edelstein
    
    
    560,000
    
    
    
    *Steven R. Foland
    
    
    
    
    
    
    Paul C. Green
    
    
    
    
    
    
    Executive Officers and Directors as a
Group (7 persons) (2)
    
    
    6,619,751
    
    
    
    5.4
    %
 
 *
    
    Less than 1%(1)
    
    This table includes presently exercisable stock options and options
that are exercisable within sixty days of April 28, 2008, in
accordance with Rule 13d-3(d) under the Exchange Act. The following
directors and executive officers hold the number of exercisable
options set forth following their respective names: Scott R. Silverman
- 4,548,500; William J. Caragol  0; Daniel A. Gunther  0; Jeffrey S.
Cobb  0; Barry M. Edelstein  560,000; Steven R. Foland  0; Paul C.
Green  0; and all current directors and officers as a group -
5,108,500.(2)
    
    Includes shares of Digital Angels common stock beneficially owned by
our current executive officers and directors and shares issuable upon
the exercise of stock options that are currently exercisable or
exercisable within 60 days of April 28, 2008. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  Director and Officer Roles and Relationships with Digital Angel and Its Other Affiliates
   
    
    Our chairman, Scott R. Silverman, served on the board of directors of
Digital Angel from March 2002 until July 2007, and, from March 2003
until the end of his term of service, in the capacity of chairman.
  35




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##### Table of Contents




    
    Mr. Silverman served on the board of directors of DAC from July 2003
until December 2007 and, from February 2004 until the end of his term
of service, in the capacity of chairman.
    
    Mr. Silverman currently serves as chairman of the board of directors of InfoTech.
    
    Barry M. Edelstein served as interim chief executive officer and
president of DAC from August 2007 through December 2007, as well as a
member of the board of directors of DAC from June 2005 until January
2008.
    
    Jeffrey S. Cobb serves as a member of our compensation, audit, and
nominating and governance committees and as a member of the
compensation, audit, and nominating committees of InfoTech.
   
    
    Our chief executive officer, Mr. Silverman, served as president of
Digital Angel from March 2002 to March 2003, acting president of
Digital Angel from April 2005 to December 2006, and as the chief
executive officer of Digital Angel from March 2003 to December 2006,
until he assumed the position of our chief executive officer on
December 5, 2006.
    
    Mr. Silverman also served as the chief executive officer of Thermo Life.
  Transactions with Digital Angel
 Transition Services Agreement
   36




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Intercompany Loan Agreement with Digital Angel
      37




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Valens Financing
  Digital Angel Letter Agreement
    Tax Allocation Agreement with Digital Angel
      38




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Supply and Development Agreement
     Review, Approval or Ratification of Transactions with Related Parties
   39




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Director Independence
  
 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
 AUDIT AND NON-AUDIT FEES
  2007
    
    
    2006A. Audit Fees
    
    $
    391,414
    
    
    $
    290,000B. Audit Related Fees (review of registration
statements and other SEC filings)
    
    $
    35,881
    
    
    $
    377,514C. Tax Fees (tax-related services, including income
tax advice regarding income taxes within the United
States)
    
    
    
    
    
    
    D. All other fees (acquisition due diligence
services)
    
    
    
    
    
    
    Total Fees
    
    $
    427,295
    
    
    $
    667,514
 Pre-Approval Policies and Procedures
    40




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PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
     41




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SIGNATURES
  VERICHIP CORPORATIONDate: April 29, 2008
    By:
    /s/ Scott R. SilvermanScott R. SilvermanChairman of the Board and Chief
Executive Officer  Signature
    
    Title
    
    Date/s/ SCOTT R. SILVERMAN
    
    Chairman of the Board and ChiefScott R. Silverman
    
    Executive
Officer (Principal
Executive Officer)
    
    April 29, 2008/s/ WILLIAM J. CARAGOL
    
    President and Chief Financial
OfficerWilliam J. Caragol
    
    (Principal
Financial Officer and
Principal Accounting Officer)
    
    April 29, 2008/s/ JEFFREY S. COBBJeffrey Cobb*
    
    Director
    
    April 29, 2008/s/ BARRY M. EDELSTEINBarry Edelstein*
    
    Director
    
    April 29, 2008/s/ PAUL C. GREENPaul C. Green*
    
    Director
    
    April 29, 2008/s/ STEVEN R. FOLANDSteven R. Foland*
    
    Director
    
    April 29, 2008
 By:
    *William J. CaragolWilliam J. CaragolAttorney-in-Fact  42




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Exhibit Index
 ExhibitNumber
    
    Description31.1
    
    
    Certification by Scott R. Silverman, Chief Executive Officer,
pursuant to Exchange Act Rules 13A-14(a) and 15d-14(a)31.2
    
    
    Certification by William J. Caragol, Chief Financial Officer,
pursuant to Exchange Act Rules 13A-14(a) and 15d-14(a)
  43