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VeriChip Corp. (CHIP) Sheds Subsidiary, Will use Proceeds to Retire Outstanding Debt

VeriChip Corp. (Nasdaq: CHIP) develops and markets radio frequency identification devices (RFID) to identify, locate and protect people and assets. The company’s implantable microchips have gained popularity as a revolutionary way to track and protect children, elderly persons in need of supervision, and more. Its VeriMed Health Link system was cleared by the U.S. Food and Drug Administration to rapidly and accurately identify people who arrive in an emergency room and are unable to communicate who they are, as well as patients with special needs and more.

The company today announced the completion of the sale of its wholly-owned Canadian subsidiary, Xmark Corp., to a subsidiary of The Stanley Works. The $47.9 million sale consists of the $45 million purchase price in addition to a $2.9 million balance sheet adjustment. According to Scott R. Silverman, departing chairman and CEO of VeriChip, the transaction benefits shareholders as well as both companies involved.

“We are pleased to have completed the sale of Xmark to The Stanley Works. We believe the transaction, which provided an excellent valuation for Xmark, was in the best interest of our stockholders. It will enable us to pay off all of our outstanding debt and issue a special cash dividend to our stockholders,” Silverman stated. “Furthermore, the search for potential buyers of our VeriMed Health Link business continues.”

Per the agreement, VeriChip will use the proceeds to eliminate all outstanding debt. After retiring the debt and related commitments, VeriChip anticipates achieving net proceeds of approximately $24.8 million, $4.5 million of which will be held in escrow for 12 months. The company intends to fund a special dividend to stockholders currently estimated to be at least $15 million.

Joseph J. Grillo, CEO of Digital Angel Corp. is replacing Silverman as chairman of VeriChip. “I share Scott’s views about the completion of the sale of the Xmark business. Not only does it benefit VeriChip’s stockholders but it also significantly strengthens Digital Angel’s balance sheet. I look forward to working with the current VeriChip Board,” Grillo stated.

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