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VeriChip Corp. (CHIP): Locating and Tracking Potential for Investors

VeriChip (CHIP) is a maker of radio frequency identification systems (RFID) used to identify, locate and track people across the United States and abroad. The company markets its products through direct sales force and distributors. Its customers include hospitals and long-term care facilities, and healthcare professionals such as physicians and individual patients. VeriChip’s main competitors are Axcess International Inc. and closely-held Precision Dynamics Corporation. The company is a former unit of Applied Digital Solutions Inc. and was founded in 2002.

Last month, VeriChip, based in Florida, sold its Canadian operations, known as Xmark Corporation, to engineering giant Stanley Works for $48 million. The sale led to a special dividend payout of $1.35 for VeriChip shareholders. The special dividend was paid earlier this month. Recent news reports have said VeriChip is also exploring options, including a possible sale of its VeriMed Health Link business, which carries the implantable chips used in the RFID devices.

About twice the length of a grain of rice, VeriChips RFID device is typically implanted above the triceps area of an individual’s right arm. Once inserted, the device cannot be seen from the outside. Earlier this year, VeriChip completed $8 million in debt financing, of which $5.3 million will be used to pay down a debt to Digital Angel Corporation. The remainder will be used for working capital, the company said.

Investors should be aware that the company is also attempting to find a buyer for itself and that its business is viewed as controversial and a potential invasion of privacy by many critics. In addition, former Chief Executive Officer Scott Silverman recently left the company and was replaced by an executive from Digital Angel.

For the year ended Dec. 31, 2007, VeriChip had almost $50 million in assets and about $25 million in liabilities. Shares of VeriChip, with a market value of $9.5 million, closed today at 85 cents on volume of more than 812,000 shares, more than 11 times the daily average for the last three months.

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