INFORMATION
STATEMENT
[●],
2018
Action
by Written Consent of Majority Stockholders
WE
ARE NOT ASKING YOU FOR A
PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY
GENERAL
INFORMATION
In
this Information Statement we refer to PositiveID Corporation, a Delaware corporation, as the “Company,” “we,”
“us,” or “our.”
This
Information Statement is being furnished by the Board of Directors of the Company (the “Board”), to inform the holders
(“Stockholders”) of common stock, par value $0.0001 per share (the “Common Stock”), as of December 27,
2017, of action already approved by written consent (the “Written Consent”) of holders of shares of voting securities
representing approximately 78% of the total issued and outstanding shares of voting stock of the Company on December 27, 2017.
Action
by Written Consent
The
following actions were approved by holders of shares of voting securities representing approximately 78% of the total issued and
outstanding shares of voting stock of the Company pursuant to the Written Consent, in lieu of a special meeting:
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the
granting of discretionary authority to the Board, at any time for a period of 12 months after the date of the Written Consent,
to authorize the adoption of an amendment to the Company’s Third Amended and Restated Certificate of Incorporation,
as amended (the “Certificate of Incorporation”), to effect a reverse stock split of the Company’s common
stock at a ratio between 1 for 100 to 1 for 1,000, such ratio to be determined by the Board, or to determine not to proceed
with the reverse stock split (the “Reverse Stock Split”);
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the
granting of discretionary authority to the Board for a period of 12 months after the date of the Written Consent, to authorize
the adoption of an amendment to the Certificate of Incorporation to decrease the Company’s authorized capital stock,
from 20,000,000,000 shares down to an amount not less than 50,000,000 shares, such decrease to be determined by the Board,
or to determine not to proceed with the decrease in authorized capital stock (the “Decrease in Authorized Shares”).
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This
Information Statement is being furnished to all of our Stockholders in accordance with Section 14C of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and the rules promulgated by the U.S. Securities and Exchange Commission
(the “SEC”) thereunder, solely for the purpose of informing our Stockholders of the Actions taken by the Written Consent
before they become effective.
The
Board has fixed the close of business on December 27, 2017, as the record date (the “Record Date”) for the determination
of Stockholders who are entitled to receive this Information Statement. This Information Statement will be mailed on or about
[●]
, 2018 to Stockholders of Record as of the Record Date.
Pursuant
to the Written Consent, holders of shares of voting securities representing approximately 78% of the total issued and outstanding
shares of voting stock of the Company approved the Reverse Stock Split and the Decrease in Authorized Shares.
The
Actions were unanimously approved by our Board on December 27, 2017.
This
Information Statement contains a brief summary of the material aspects of the Actions approved by the Board and the holders of
shares of voting securities representing approximately 78% of the total issued and outstanding shares of voting stock of the Company.
WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND A PROXY
ABOUT
THE INFORMATION STATEMENT
What
is the Purpose of the Information Statement?
Section
228 of the DGCL provides that the written consent of the holders of outstanding shares of voting capital stock having not less
than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled
to vote thereon were present and voted can approve an action in lieu of conducting a special stockholders’ meeting convened
for the specific purpose of such action. The DGCL, however, requires that in the event an action is approved by written consent,
a company must provide prompt notice of the taking of any corporate action without a meeting to the stockholders of record who
have not consented in writing to such action and who, if the action had been taken at a meeting, would have been entitled to notice
of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders
to take the action were delivered to a company.
This
Information Statement is being furnished to you pursuant to Section 14C of the Securities Exchange Act of 1934, as amended, to
notify our Stockholders of certain corporate actions taken by the holders of shares of voting securities representing approximately
78% of the total issued and outstanding shares of voting stock of the Company pursuant to the Written Consent. In order to eliminate
the costs and management time involved in obtaining proxies and in order to effect the Actions as early as possible to accomplish
the purposes hereafter described, the Board elected to seek the written consent of the holders of shares of voting securities
representing approximately 78% of the total issued and outstanding shares of voting stock of the Company to reduce the costs and
implement the Actions in a timely manner.
Who
is Entitled to Notice?
Each
outstanding share of Common Stock as of record on the Record Date is entitled to notice of the Actions to be taken pursuant to
the Written Consent.
What
Vote is Required to Approve the Actions?
As
of the Record Date, there were 359,073,598 shares of our Common Stock issued and outstanding, 3,097 shares of Series II Preferred
Stock, which are convertible into 542,353,999 shares of Common Stock, issued and outstanding (the “Series II Conversion
Shares”), and 71 shares of Series J Preferred Stock issued and outstanding. The Series J Preferred Stock does not have voting
rights. As each Series II Conversion Share has the equivalent of 25 votes on each matter submitted to stockholders, the holders
of the Series II Preferred Stock have control of 13,558,849,982 voting shares. Accordingly, the total aggregate amount of shares
entitled to vote regarding the approval of the Actions is 13,917,923,580. Pursuant to Section 228 of the DGCL, at least a majority
of the voting equity of the Company, or at least 6,958,961,790 votes, are required to approve the Actions by written consent.
Our
majority stockholders consist of our CEO and Chairman, William J. Caragol, our President, Lyle L. Probst, and our three non-employee
directors, Jeffrey Cobb, Michael Krawitz, and Ned L. Siegel (collectively, the “Majority Stockholders”). As of the
Record Date, the Majority Stockholders held 31 shares of Common Stock, and 2,632 shares of our Series II Preferred Stock, par
value $0.001 per share (the “Series II Preferred Stock”), which are convertible into 436,444,618 shares of Common
Stock and equals 10,911,115,445 voting shares. The Majority Stockholders, which hold in the aggregate 10,911,115,476 shares entitled
to vote (and therefore having 78% of the total voting power of all outstanding voting capital), have voted in favor of the Actions
thereby satisfying the requirement that at least a majority of the voting equity vote in favor of a corporate action by written
consent. Therefore, no other stockholder consents will be obtained in connection with this Information Statement.
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Number
of shares of Common Stock/Series II Preferred Stock held by such Stockholder
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Name
of Majority Stockholders
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Common
Stock
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Series
II Preferred Stock
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Series
II on an as-Converted Basis
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Votes
of Series II on an as-Converted Basis
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Number
of Votes that Voted in Favor of the Actions
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Percentage
of Voting Equity that Voted in Favor of the Actions
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William
J. Caragol
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15
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1,327
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188,143,828
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4,703,595,690
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4,703,595,705
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33.8
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%
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Lyle
L. Probst
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4
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706
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148,123,152
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3,703,078,812
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3,703,078,816
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26.6
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%
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Jeffrey
Cobb
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4
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204
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33,671,810
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841,795,247
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841,795,251
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6.1
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%
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Michael
Krawitz
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4
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219
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34,638,493
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865,962,321
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865,962,325
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6.2
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%
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Ned
L. Siegel
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4
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176
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31,867,335
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796,683,375
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796,683,379
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5.7
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%
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Total
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31
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2,632
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436,444,618
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10,911,115,445
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10,911,115,476
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78.4
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%
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Do
I have appraisal rights?
Neither
the DGCL nor our Certificate of Incorporation or bylaws provide our Stockholders with appraisal rights in connection with any
of the Actions discussed in this Information Statement.
ACTIONS
TO BE TAKEN
This
Information Statement contains a brief summary of the material aspects of the Actions approved by the Board and the Majority Stockholders.
ACTION
I
THE
GRANTING OF DISCRETIONARY AUTHORITY TO THE BOARD, AT ANY TIME FOR A PERIOD OF 12 MONTHS AFTER THE DATE OF THE WRITTEN CONSENT,
TO AUTHORIZE THE ADOPTION OF AN AMENDMENT TO THE COMPANY’S THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED
(THE “CERTIFICATE OF INCORPORATION”), TO EFFECT A REVERSE STOCK SPLIT OF THE COMPANY’S COMMON STOCK AT A RATIO
BETWEEN 1 FOR 100 TO 1 FOR 1,000, SUCH RATIO TO BE DETERMINED BY THE BOARD, OR TO DETERMINE NOT TO PROCEED WITH THE REVERSE STOCK
SPLIT
The
Board approved a resolution to authorize the adoption of an amendment to the Certificate of Incorporation to effect a reverse
stock split of the Common Stock at any time during the next 12 months at a ratio between 1:100 to 1:1,000, such ratio to be determined
by the Board, or to determine not to proceed with the Reverse Stock Split (the “Reverse Stock Split”).
PLEASE
NOTE THAT THE REVERSE STOCK SPLIT WILL NOT CHANGE YOUR PROPORTIONATE EQUITY INTERESTS IN THE COMPANY, EXCEPT AS MAY RESULT FROM
THE TREATMENT OF FRACTIONAL SHARES, AS EXPLAINED BELOW UNDER THE CAPTION “FRACTIONAL SHARES.”
PLEASE
NOTE THAT THE REVERSE STOCK SPLIT WILL HAVE THE EFFECT OF SUBSTANTIALLY INCREASING THE NUMBER OF SHARES THE COMPANY WILL BE ABLE
TO ISSUE TO NEW OR EXISTING STOCKHOLDERS BECAUSE THE NUMBER OF AUTHORIZED SHARES MAY REMAIN THE SAME WHILE THE NUMBER OF SHARES
ISSUED AND OUTSTANDING WILL BE REDUCED.
Reasons
for Reverse Stock Split
The
Board believes it is in the best interests of the Company and its Stockholders to have the authority, in their discretion, to
effect a reverse stock split to reduce the number of issued and outstanding shares, or to determine not to proceed with the Reverse
Stock Split. Immediately following the completion of the Reverse Stock Split, the number of shares of Common Stock issued and
outstanding or held in treasury would be reduced proportionately based on the reverse stock split ratio between 1-for-100 to 1-for-1,000,
as determined by the Board. A reverse stock split by a publicly traded company reduces the number of shares outstanding, but leaves
the market capitalization of the company the same, which results in an increase in the price per share of the company’s
stock. Put another way, after a reverse stock split, the enterprise value of the company is spread over fewer shares and so the
per share price of the stock will be higher.
The
Board believes implementing a reverse stock split is likely to increase the market price for the Common Stock as fewer shares
will be outstanding. The Board further believes that the increased market price of the Common Stock expected as a result of implementing
the reverse stock split may improve marketability and liquidity of the Common Stock and encourage interest and trading in the
Common Stock. While the Company generated revenues of $5.6 million for 2016 and $3.9 million for the first nine months of 2017,
it does not currently generate sufficient cash flow to fund its operations and has therefore relied on third-party financing.
Since the beginning of the year, the trading price of the Common Stock has declined significantly, due in the large part to the
Company’s use of convertible note financing. As the trading price of the Common Stock decreases, the likelihood increases
that the Board will choose to implement the Reverse Stock Split approximately twenty (20) calendar days after this Information
Statement is first sent to Stockholders and, when the Board does so, it will effect the Reverse Stock Split at the higher
end of the ratio. The Reverse Stock Split would decrease the number of outstanding shares but not the number of authorized shares.
This Action is not being made in connection with any going-private transaction, nor does management currently have any intention
to effectuate the privatization of the Company. There can be no assurance that the reverse stock split will result in the benefits
described above. The Company cannot assure you that the reverse stock split will not further adversely impact the market price
of the Common Stock.
Implementation
and Effects of the Reverse Stock Split
If
the Board elects to implement a Reverse Stock Split, which the Board may choose not to do at its discretion, the Reverse Stock
Split would have the following effects:
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the
number of shares of the Common Stock owned by each Stockholder will automatically be reduced proportionately based on the
reverse stock split ratio determined by the Board;
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a
proportionate adjustment will be made to the par value of the Common Stock, such that the stated value of the Company’s
capital will be reduced;
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the
number of shares of the Common Stock issued and outstanding will be reduced proportionately;
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proportionate
adjustments will be made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding
options and warrants entitling the holders thereof to purchase shares of the Common Stock, which will result in approximately
the same aggregate price being required to be paid for such options or warrants upon exercise of such options or warrants
immediately preceding the reverse stock split;
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a
proportionate adjustment will be made to the per share conversion price under the terms of the Company’s outstanding
convertible promissory notes, Series II Preferred Stock, and Series J Preferred Stock.
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The
table set forth below illustrates the Company’s hypothetical capitalization subsequent to a reverse stock split in varying
ratios with the ratio of 1-for-1,000 being the maximum ratio which may be effectuated by the Board pursuant to the Written Consent.
This hypothetical model is based on the total number of shares issued and outstanding as of the Record Date and gives effect to
the Reverse Stock Split, as well as shares of Common Stock issued and outstanding and issuable upon the conversion/exercise of
notes payable, options and warrants.
Hypothetical
Reverse Stock Split Ratio
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Shares
of common stock issued and outstanding following Reverse Stock Split
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Shares
of common stock issued and outstanding and issuable upon the conversion/exercise of notes payable, options and warrants
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Shares
of common stock available for future issuance following Reverse Stock Split
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1:
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100
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3,590,736
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50,287,375
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19,941,121,889
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1:
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500
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718,147
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10,057,475
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19,984,224,378
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1:
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1,000
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359,074
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5,028,738
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19,989,612,189
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The
Reverse Stock Split will be effected simultaneously for all of the Common Stock and the reverse split ratio will be the same for
all of the Common Stock. The Reverse Stock Split will affect all of the Stockholders uniformly and will not affect any stockholder’s
percentage ownership interests in the Company, except to the extent that the Reverse Stock Split results in any of the Company’s
stockholders owning a fractional share. As described below, Stockholders holding fractional shares will be entitled to cash payments
in lieu of such fractional shares. Such cash payments will reduce the number of post-split stockholders to the extent there are
stockholders presently holding fewer shares than the to-be-determined reverse split ratio, however that is not the purpose for
which the Company is effecting the Reverse Stock Split. The Company will continue to be subject to the periodic reporting requirements
of the Securities and Exchange Act of 1934, as amended.
The
Board may decide not to proceed with the Reverse Stock Split for various reasons including general stock market/business conditions,
or if it were to enter into a strategic transaction or financing that eliminates all or the majority of the Company’s convertible
debt. However, in all likelihood, the Board will implement the Reverse Stock Split by filing an amendment to its Certificate of
Incorporation approximately twenty (20) calendar days after this Information Statement is first sent to Stockholders, and effectuate
the Reverse Stock Split in the marketplace as soon as practicable thereafter.
Potential
for Significant Dilution of Equity Interest
The
Reverse Stock Split will not affect the rights of Stockholders or any Stockholder’s proportionate equity interest in the
Company, subject to the treatment of fractional shares. At this time the Company has no plans to issue such additional shares,
other than (i) as required for existing and additional financings, (ii) for conversion of the Series II Preferred Stock, (iii)
for conversion of the Series J Preferred Stock, and (iv) as compensation and incentives to employees and directors
under the Company’s existing stock incentive plans and other arrangements that may be undertaken.
The
future issuance of such authorized shares may have the effect of diluting the Company’s earnings per share and book value
per share, as well as the stock ownership and voting rights of the current holders of outstanding shares of the Common Stock.
The effective increase in the number of authorized but unissued shares of the Common Stock may be construed as having an anti-takeover
effect by permitting the issuance of shares to purchasers who might oppose a hostile takeover bid or oppose any efforts to amend
or repeal certain provisions of the Certificate of Incorporation or the Company’s By-laws.
Fractional
Shares
No
scrip or fractional share certificates will be issued in connection with the reverse stock split. Stockholders who otherwise would
be entitled to receive fractional shares because they hold a number of shares of the Common Stock not evenly divisible by the
reverse split ratio will be entitled, upon surrender of certificate(s) representing such shares, to a cash payment in lieu thereof.
The cash payment will equal the product obtained by multiplying (a) the fraction to which the stockholder would otherwise be entitled
by (b) the per share closing sales price of the Common Stock on the effective date of the reverse stock split. The ownership of
a fractional interest will not give the holder thereof any voting, dividend or other rights except to receive payment therefor
as described herein.
Stockholders
should be aware that, under the escheat laws of the various jurisdictions where stockholders reside, where the Company is domiciled
and where the funds will be deposited, sums due for fractional interests that are not timely claimed after the effective time
may be required to be paid to the designated agent for each such jurisdiction. Thereafter, stockholders otherwise entitled to
receive such funds may have to seek to obtain them directly from the state to which they were paid.
Authorized
Shares
As
of the Record Date, we had 19,995,000,000 shares of Common Stock authorized, 359,073,598 shares of our Common Stock issued and
outstanding, 9,315 shares of our Common Stock reserved for issuance pursuant to stock option agreements and warrants, and 18,904,706,728
shares reserved for the conversion of notes payable and preferred stock. As a result of the reverse stock split, the number of
shares remaining available for future issuance under the Company’s authorized pool of Common Stock would increase.
These
authorized but unissued shares of common and preferred stock would be available for issuance from time to time for corporate purposes
such as raising additional capital, acquisitions of businesses or assets and sales of stock or securities convertible into Common
Stock. The Company believes that the availability of the authorized but unissued shares will provide it with the flexibility to
meet business needs as they arise, to take advantage of favorable opportunities and to respond to a changing corporate environment.
If the Company issues additional shares, the ownership interests of holders of the Common Stock may be diluted. Also, if the Company
issues shares of its preferred stock, the issued shares may have rights, preferences and privileges senior to those of its Common
Stock.
Other
Effects on Issued and Outstanding Shares
If
the Reverse Stock Split is implemented, the rights and preferences of the issued and outstanding shares of the Common Stock would
remain the same after the reverse stock split. Each share of Common Stock issued pursuant to the Reverse Stock Split would be
fully paid and non-assessable.
In
addition, the Reverse Stock Split would result in some stockholders owing “odd-lots” of fewer than 100 shares of the
Common Stock. Brokerage commissions and other costs of transactions in odd-lots are generally higher than the costs of transactions
in “round-lots” of even multiples of 100 shares.
Procedure
for Effecting Reverse Stock Split and Exchange of Stock Certificates
If
the Board chooses to effect the Reverse Stock Split, it would be implemented by filing a Certificate of Amendment to the Certificate
of Incorporation with the Secretary of State of the State of Delaware. The Reverse Stock Split will become effective at the time
specified in the Certificate of Amendment, which will most likely be immediately after the filing of the Certificate of Amendment
and which the Company refers to as the “effective time.” Beginning at the effective time, each certificate representing
shares of the Common Stock before the reverse stock split will automatically be deemed for all corporate purposes to evidence
ownership based on the reverse stock split ratio, between 1-for-100 to 1-for-1,000 shares of the Common Stock after the Reverse
Stock Split. All shares issuable upon exercise or conversion of outstanding convertible promissory notes, stock options, warrants,
Series II Preferred Stock, Series J Preferred Stock, or other securities will automatically be adjusted.
As
soon as practicable after the effective time, stockholders will be notified that the Reverse Stock Split has been effected. The
Company expects that its transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates.
Stockholders of record will receive a letter of transmittal requesting that they surrender the stock certificates they currently
hold for stock certificates reflecting the adjusted number of shares as a result of the Reverse Stock Split. Persons who hold
their shares in brokerage accounts or “street name” will not be required to take any further actions to effect the
exchange of their certificates. No new certificates will be issued to a stockholder until the stockholder has surrendered the
stockholder’s outstanding certificate(s) together with the properly completed and executed letter of transmittal to the
exchange agent. Until surrender, each certificate representing shares before the Reverse Stock Split will continue to be valid
and will represent the adjusted number of shares rounded down to the nearest whole share.
Stockholders should not destroy any
stock certificate and should not submit any certificates until they receive a letter of transmittal.
Federal
Income Tax Consequences of the Reverse Stock Split
The
following is a summary of certain material United States federal income tax consequences of the Reverse Stock Split. It does not
purport to be a complete discussion of all the possible United States federal income tax consequences of the Reverse Stock Split
and is included for general information only. Further, it does not address any state, local or foreign income or other tax consequences.
This discussion does not address the tax consequences to holders that are subject to special tax rules, such as banks, insurance
companies, regulated investment companies, personal holding companies, foreign entities, nonresident alien individuals, broker-dealers
and tax-exempt entities. The discussion is based on the provisions of the United States federal income tax law as of the date
hereof, which is subject to change retroactively as well as prospectively. This summary also assumes that the shares of our Common
Stock held by our Stockholders before the Reverse Stock Split were, and the shares of our Common Stock held after the Reverse
Stock Split will be, held as “capital assets,” as defined in the Internal Revenue Code of 1986, as amended (i.e.,
generally, property held for investment). The tax treatment of a Stockholder may vary depending upon the particular facts and
circumstances of such Stockholder. Each stockholder is urged to consult with such Stockholder’s own tax advisor with respect
to the tax consequences of the Reverse Stock Split.
Other
than the cash payments for fractional shares discussed below, no gain or loss will be recognized by a Stockholder upon such Stockholder’s
exchange of shares held before the Reverse Stock Split for shares after the Reverse Stock Split. The aggregate tax basis of the
shares of the Common Stock received in the Reverse Stock Split (including any fraction of a share deemed to have been received)
will be the same as the Stockholder’s aggregate tax basis in the shares of our Common Stock exchanged therefor. In general,
Stockholders who receive cash instead of their fractional share interests in the shares of our Common Stock as a result of the
Reverse Stock split will recognize a gain or loss based on their adjusted basis in the fractional share interests redeemed. The
Stockholder’s holding period for the shares of our Common Stock after the Reverse Stock Split will include the period during
which the Stockholder held the shares of our Common Stock surrendered in the Reverse Stock Split.
This
summary of certain material United States federal income tax consequence of the Reverse Stock Split is not binding on the Internal
Revenue Service, the Company or the courts. Accordingly, each Stockholder should consult with his or her own tax advisor with
respect to all of the potential tax consequences to him or her of the Reverse Stock Split.
ACTION
II
THE
GRANTING OF DISCRETIONARY AUTHORITY TO THE BOARD, FOR A PERIOD OF 12 MONTHS AFTER THE DATE OF THE WRITTEN CONSENT, TO AUTHORIZE
THE ADOPTION OF AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO DECREASE THE COMPANY’S AUTHORIZED CAPITAL STOCK, FROM
20,000,000,000 SHARES DOWN TO AN AMOUNT NOT LESS THAN 50,000,000 SHARES, SUCH DECREASE TO BE DETERMINED BY THE BOARD, OR TO DETERMINE
NOT TO PROCEED WITH THE DECREASE IN AUTHORIZED CAPITAL STOCK
The
Certificate of Incorporation authorizes the issuance of 19,995,000,000 shares of Common Stock, par value of $0.0001 per share,
and 5,000,000 shares of preferred stock, par value of $0.001 per share. On December 27, 2017, the Board approved the Decrease
in Authorized Shares to authorize the decrease the Company’s authorized capital stock from 20,000,000,000 shares to an amount
not less than 50,000,000 shares, such that the capital stock of the Company will consist of not less than 45,000,000 shares of
Common Stock and 5,000,000 shares of preferred stock, par value $0.001 per share.
The
Company’s leadership, at the Board’s discretion, plans to file the Decrease in Authorized Shares with the Secretary
of State of Delaware. The decrease in our authorized capital stock will become effective on the date of filing.
As
of the Record Date, we had 19,995,000,000 authorized shares of Common Stock, of which 359,073,598 shares were issued and outstanding,
and 5,000,000 authorized shares of preferred stock, of which 3,168 shares were issued and outstanding. There are 18,904,706,728
shares of Common Stock reserved for issuance pursuant to convertible notes and preferred stock.
Purposes
of the Decrease in Authorized Shares
The
principal purpose of the Decrease in Authorized Shares is to more closely align our capital structure. While the Reverse Stock
Split’s ratio has yet to be determined, any such action will create a sharp reduction in the number of outstanding shares
of Common Stock and would, with no further action by us, result in a significant disparity in the ratio of our outstanding to
authorized shares of Common Stock. By implementing the Decrease in Authorized Shares following the Reverse Stock Split, we will
still have a sufficient number of authorized shares of both Common Stock and preferred stock that will afford us maximum flexibility
to issue shares of either class in the future while allowing us to have a proportionate capital structure.
Further,
each year, we are required to make franchise tax payments to the State of Delaware in an amount determined, in part, by the total
number of shares of stock we are authorized to issue. Therefore, the amount of this tax will be decreased if we reduce the number
of authorized shares of our Common Stock (unless before and after such reduction, we are subject to the maximum tax amount). While
the exact amount of such cost savings will depend on a number of factors, and could change year to year, we estimate the amount
of tax savings could be in excess of $100,000 in 2018 based on the current Delaware law.
Effect
of the Decrease in Authorized Shares
If
the Board elects to file an amendment for the Decrease in Authorized Shares, it will have the immediate effect of reducing the
total amount of authorized Common Stock and preferred stock as specified above. Unlike the Reverse Stock Split, it will have no
impact on the number of shares you own.
No
Dissenters’ Rights
Under
the DGCL, the Company’s Stockholders are not entitled to dissenters’ rights with respect to the Reverse Stock Split
or the Decrease in Authorized Shares, and the Company will not independently provide Stockholders with any such right.
INTEREST
OF CERTAIN PERSONS IN OR OPPOSITION TO MATTERS TO BE ACTED UPON
As
disclosed under the section entitled “Action by Written Consent,” the Board and Majority Stockholders of the Company
further approved the Actions. The Company’s officers hold preferred shares that give them voting control of the Company.
As
of the Record Date our officers, directors and management (in addition to the five people who make up the Majority Stockholders,
this includes Allison Tomek, our Senior Vice President of Corporate Development, Kimothy Smith, our Chief Technology Advisor,
Kent Murray, our Senior Vice President of Finance, and Gary O’Hara, our Chief Technology Officer) have voting control
over our voting shares via an aggregate of 13,558,850,015 votes on any matter brought to a vote of the holders of our
Common Stock, or up to 97% of the total 13,917,923,580 outstanding voting shares of the Company, including an aggregate
13,558,849,982 votes, or up to 97% of the total vote, through the ownership of Series II Preferred Stock.
Except
the foregoing and disclosed elsewhere in this Information Statement, since January 1, 2017, being the commencement of our last
financial year, none of the following persons has any substantial interest, direct or indirect, by security holdings or otherwise
in any matter to be acted upon:
1.
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Any
director or officer of our corporation;
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2.
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Any
proposed nominee for election as a director of our corporation; and
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3.
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Any
associate or affiliate of any of the foregoing persons.
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The
shareholdings of our directors and officers are listed below in the section entitled “Security Ownership of Certain Beneficial
Owners and Management.”
OUTSTANDING
VOTING SECURITIES
As
of the Record Date related to the Written Consent, the Company had 359,073,598 shares of Common Stock issued and outstanding,
and there were 3,097 shares of Series II Preferred Stock issued and outstanding. Each share of outstanding Common Stock is entitled
to one vote on matters submitted for Stockholder approval. Each share of Series II Preferred stock is entitled to 25 votes for
each share of Common Stock that the Series II Preferred stock is convertible into, which is the equivalent of 13,558,849,982 votes
as of the Record Date.
On
December 27, 2017, the holders of 78% of the voting rights, equivalent to 10,911,115,476 voting shares (including shares of our
Series II Preferred Stock on an as-converted basis), executed and delivered to the Company the Written Consent approving the Actions
set forth herein. Since the Actions have been approved by the Majority Stockholders, no proxies are being solicited with this
Information Statement.
The
DGCL provides in substance that unless the Company’s certificate of incorporation provides otherwise, stockholders may take
action without a meeting of stockholders and without prior notice if a consent or consents in writing, setting forth the action
so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary
to take such action at a meeting at which all shares entitled to vote thereon were present.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information known to us regarding beneficial ownership of shares of our Common Stock as of
the Record Date by:
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each
of our directors;
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●
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each
of our named executive officers;
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●
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all
of our executive officers and directors as a group; and
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●
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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.
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Beneficial
ownership is determined in accordance with the rules and regulations of the SEC and includes voting and investment power with
respect to the securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options or warrants held by that person that are currently exercisable or exercisable
within 60 days of the Record Date are deemed outstanding. Such shares, however, are not deemed outstanding for purposes of computing
the percentage ownership of any other person. To our knowledge, except as indicated in the footnotes to this table and subject
to community property laws where applicable, the persons named in the table have sole voting and investment power with respect
to all shares of our Common Stock shown opposite such person’s name. The percentage of beneficial ownership is based on
359,073,598 shares of our Common Stock outstanding as of the Record Date. Unless otherwise noted below, the address of the persons
and entities listed in the table is c/o PositiveID Corporation, 1690 South Congress Avenue, Suite 201, Delray Beach, Florida 33445.
Including the voting rights associated with the 2,632 shares of Series II Preferred Stock they own (out of a total of
3,097), the named executive officers and directors have the right to 10,911,115,476 votes. The percentage of voting rights
in the table below assumes that all Series II shares held by directors and named officers are voted in any instance requiring
stockholder vote.
The
beneficial owners of all issued shares have voting rights over such shares, whether or not such owners have dispositive powers
with respect to the shares, and such shares are included in each person’s beneficial ownership amount. For the avoidance
of doubt, if a beneficial owner does not have dispositive powers with respect to certain shares, each such person maintains voting
control over these shares, and such shares are included in the determination the person’s beneficial ownership amount.
Name
and Address of Beneficial Owner
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Number
of Shares
Beneficially
Owned (#)
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Percent
of
Outstanding
Shares (%)
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Percent
of Voting
Rights (%)
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Five
Percent Stockholders:
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William
J. Caragol (1)
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188,143,955
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20.9
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%
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33.8
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%
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Lyle
L. Probst (2)
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148,123,224
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16.4
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%
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26.6
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%
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Dominion
Capital LLC (3)
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35,871,452
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9.9
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%
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*
%
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Union
Capital, LLC (4)
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35,871,452
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9.9
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%
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*
%
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Named
Executive Officers and Directors:
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William
J. Caragol (1)
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188,143,955
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20.9
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%
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33.8
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%
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Lyle
L. Probst (2)
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148,123,224
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16.4
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%
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26.6
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%
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Michael
E. Krawitz (5)
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34,638,517
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3.8
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%
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6.2
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%
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Jeffrey
S. Cobb (6)
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33,671,834
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3.7
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%
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6.1
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%
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Ned
L. Siegel (7)
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31,867,359
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3.6
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%
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5.7
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%
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Executive
Officers and Directors as a group (5 persons) (8)
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436,444,889
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48.4
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%
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78.4
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%
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*Less
than 1%
(1)
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Mr.
Caragol beneficially owns 188,143,955 shares which include 15 shares of common stock and 112 shares of our common stock issuable
upon the exercise of stock options that are currently exercisable or exerciasable within 60 days of the Record Date. Mr. Caragol
owns 1,077 shares of Series II Preferred, which may convert to 188,143,828 shares of common stock. The Series II Preferred
vests on January 1, 2019. On January 7, 2016, Mr. Caragol was granted 167 stock options, which vest: (i) 57 on January 1,
2017; (ii) 55 on January 1, 2018; (iii) 55 on January 1, 2019. Only the vested options are included in the table above.
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(2)
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Includes
4 shares of our common stock and 67 shares of our common stock issuable upon the exercise of stock options that are currently
exercisable or exercisable within 60 days of the Record Date. Mr. Probst owns 456 shares of Series II Preferred, which may
convert to 148,123,152 shares of common stock. The Series II Preferred vests on January 1, 2019. On January 7, 2016, Mr. Probst
was granted 100 stock options, which vest: (i) 34 on January 1, 2017; (ii) 33 on January 1, 2018; (iii) 33 on January 1, 2019.
Only the vested options are included in the table above.
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(3)
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Dominion
Capital LLC (“Dominion”), and Dominion’s managing members Mikhail Gurevich and Daniel Kordash, may be deemed
to beneficially own shares of common stock beneficially owned by Dominion, including shares issuable to Dominion upon conversion
of a series of convertible notes. The address of the principal business office of Dominion is 3 Fraser Lane, Westport, Connecticut
06880. Voting and dispositive power with respect to the shares owned by Dominion is exercised by Messrs. Gurevich and Kordash.
Each of Dominion and Messrs. Gurevich and Kordash disclaims beneficial ownership or control of any of the securities listed
above as control may be deemed to be held by the other members of Dominion. However, by reason of the provisions of Rule 13d-3
of the Exchange Act, as amended, Dominion or Messrs. Gurevich and Kordash may be deemed to beneficially own or control the
shares owned by Dominion.
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(4)
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Union
Capital, LLC (“Union”), and Union’s managing member Yakov Borenstein, may be deemed to beneficially own
shares of common stock beneficially owned by Union, including shares issuable to Union upon conversion of a series of convertible
notes. The address of the principal business office of Union is 525 Norton Parkway, New Haven, CT 06511. Voting and dispositive
power with respect to the shares owned by Union is exercised by Mr. Borenstein. Each of Union and Mr. Borenstein disclaims
beneficial ownership or control of any of the securities listed above as control may be deemed to be held by the other members
of Union. However, by reason of the provisions of Rule 13d-3 of the Exchange Act, as amended, Union and Mr. Borenstein may
be deemed to beneficially own or control the shares owned by Union.
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(5)
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Includes
4 shares of our common stock and 20 shares of our common stock issuable upon the exercise of stock options that are currently
exercisable or exercisable within 60 days of the Record Date. Mr. Krawitz owns 169 shares of Series II Preferred, which may
convert to 34,638,493 shares of common stock. The Series II Preferred vests on January 1, 2019.
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(6)
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Includes
4 shares of our common stock and 20 shares of our common stock issuable upon the exercise of stock options that are currently
exercisable or exercisable within 60 days of the Record Date. Mr. Cobb owns 154 shares of Series II Preferred, which may convert
to 33,671,810 shares of common stock. The Series II Preferred vests on January 1, 2019.
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(7)
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Includes
4 shares of our common stock and 20 shares of our common stock issuable upon the exercise of stock options that are currently
exercisable or exercisable within 60 days of the Record Date. Mr. Siegel owns 126 shares of Series II Preferred, which may
convert to 31,867,335 shares of common stock. The Series II Preferred vests on January 1, 2019.
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(8)
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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 the Record Date, in each case as set forth
in the footnotes to this table.
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INFORMATION
STATEMENT COSTS
The
cost of delivering this Information Statement, including the preparation, assembly and mailing of the Information Statement, as
well as the cost of forwarding this material to the beneficial owners of our Common Stock will be borne by us. We may reimburse
brokerage firms and others for expenses in forwarding Information Statement materials to the beneficial owners of our Common Stock.
HOUSEHOLDING
OF INFORMATION STATEMENT
Some
banks, brokers and other nominee record holders may be participating in the practice of “householding” information
statements. This means that only one copy of our information statement may have been sent to multiple stockholders in each household.
We will promptly deliver a separate copy of either document to any stockholder upon written or oral request to c/o PositiveID
Corporation, 1690 South Congress Avenue, Suite 201, Delray Beach, Florida 33445. Any stockholder who wants to receive separate
copies of our Information Statement in the future, or any stockholder who is receiving multiple copies and would like to receive
only one copy per household, should contact the stockholder’s bank, broker, or other nominee record holder, or the stockholder
may contact us at the above address or calling Allison Tomek at (561) 805-8044.
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By
Order of the Board of Directors
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[●]
,
2018
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William
J. Caragol
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Chairman
of the Board of Directors
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Chief
Executive Officer
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Annex
A
FORM
OF THIRD CERTIFICATE OF AMENDMENT
TO
THIRD
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED,
OF
POSITIVEID
CORPORATION
PositiveID
Corporation, a corporation organized and existing under and by virtue of the Delaware General Corporation Law, through its duly
authorized officer and by authority of its Board of Directors, does hereby certify that:
1.
The name of the corporation (hereinafter called the “Corporation”) is PositiveID Corporation, formerly known as VeriChip
Corporation. The date of filing of the Corporation’s original Certificate of Incorporation with the Secretary of State of
the State of Delaware was November 29, 2001.
2.
The Board of Directors of the Corporation duly adopted resolutions setting forth proposed amendments (the “Certificate of
Amendment”) to the Third Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”),
declaring said amendments to be advisable and directing that said amendments be submitted to the stockholders of the Corporation
for consideration thereof. The resolutions setting forth the proposed amendments are as follows:
RESOLVED,
that the Certificate of Incorporation be amended by changing Section 4.1 of Article “IV” so that, as amended, Section
4.1 shall be and read as follows:
“Section
4.1
Authorized Capital Stock
The
total number of shares of all classes of capital stock which the Corporation is authorized to issue is [ ] shares, consisting
of [ ] shares of common stock, par value $0.0001 per share (the “Common Stock”) and 5,000,000 shares of preferred
stock, par value $0.001 per share (the “Preferred Stock”).
No
holder of stock of any class or series of the Corporation, whether now or hereafter authorized or issued, shall be entitled, as
a matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class or series whatsoever,
or of any securities convertible into stock of any class or series, or to which are attached or with which are issued warrants
or rights to purchase any such stock, whether now or hereafter authorized, issued or sold, whether issued for moneys, property
or services, or by way of dividend or otherwise, or any right or subscription to any thereof, other than such, if any, as the
Board of Directors in its discretion may from time to time fix, pursuant to authority hereby conferred upon it; and any shares
of stock or convertible obligations with warrants or rights to purchase any such stock, which the Board of Directors may determine
to offer for subscription, may be sold without being first offered to any of the holders of the stock of the Corporation of any
class or classes or series or may, as the Board of Directors may determine, be offered to holders of any class or classes or series
of stock exclusively or to the holders of all classes or series of stock, and if offered to more than one class or series of stock,
in such proportions as between such classes or series of stock as the Board of Directors, in its discretion, may determine.
Effective
at 12:01 a.m. on [ ], 2018 (the “Effective Time”), every [ ] shares of Common Stock issued and outstanding immediately
prior to the Effective Time (“Old Common Stock”) shall automatically be combined, without any action on the part of
the holder thereof, into one (1) validly issued, fully paid and non-assessable share of Common Stock (“New Common Stock”),
subject to the treatment of fractional share interests as described below (the “Reverse Stock Split”). No fractional
shares of Common Stock shall be issued in connection with the Reverse Stock Split. No stockholder of the Corporation shall transfer
any fractional shares of Common Stock. The Corporation shall not recognize on its stock record books any purported transfer of
any fractional share of Common Stock. A holder of Old Common Stock who otherwise would be entitled to receive fractional shares
of New Common Stock because they hold a number of shares of Old Common Stock not evenly divisible by the Reverse Stock Split ratio
will be entitled to receive a cash payment equal to the product obtained by multiplying (a) the number of shares of Old Common
Stock held by such holder that would otherwise have been exchanged for such fractional share interest, by (b) the volume weighted
average price of the Old Common Stock as reported on The Over the Counter Bulletin Board, or other principal market of the Old
Common Stock, as applicable, on the date of the Effective Time of the Reverse Stock Split. Each certificate that immediately prior
to the Effective Time represented shares of Old Common Stock (“Old Certificates”), shall thereafter represent that
number of shares of New Common Stock into which the shares of Old Common Stock represented by the Old Certificate shall have been
combined.”
3.
The Certificate of Amendment has been duly adopted by the corporation’s Board of Directors and by the stockholders in accordance
with Sections 242 and 245 of the Delaware General Corporation Law, with the approval of the corporation’s stockholders having
been given by written consent without a meeting in accordance with Section 228 of the Delaware General Corporation Law.
NOW,
THEREFORE, the Corporation has caused this Certificate of Amendment to be signed this ____ day of ____, 2018.
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POSITIVEID CORPORATION
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By:
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Name:
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Title:
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