10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2014
☐	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: 000-26020

VERITEQ CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware	43-1641533
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
220 Congress Park Drive, Suite 200, Delray Beach, Florida	33445
(Address of Principal Executive Offices)	(Zip Code)

(561) 846-7000

Registrant’s Telephone Number, Including Area Code

N/A

(Former Name, Former Address and Formal Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.      Yes ☑          No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑          No ☐

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

Large accelerated filer ☐   Accelerated filer ☐                Non-accelerated filer☐ (Do not check if smaller reporting company)     Smaller reporting company ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class	Outstanding at August 15, 2014
Common Stock, $0.01 par value per share	34,186,131 shares

1

VERITEQ CORPORATION

TABLE OF CONTENTS

		Page
	PART I – Financial Information
Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets – As of June 30, 2014 and December 31, 2013	3
	Condensed Consolidated Statements of Operations – Three-Months ended June 30, 2014 and 2013	4
	Condensed Consolidated Statements of Operations – Six-Months ended June 30, 2014 and 2013 and for the period from December 14, 2011 (Inception) to June 30, 2014	5
	Condensed Consolidated Statements of Comprehensive Loss – Three-Months ended June 30, 2014 and 2013	6
	Condensed Consolidated Statements of Comprehensive Loss – Six-Months ended June 30, 2014 and 2013 and for the period from (December 14, 2011 (Inception) to June 30, 2014	6
	Condensed Consolidated Statement of Changes in Stockholders’ Deficit – For the period from December 14, 2011 (Inception) to June 30, 2014	7
	Condensed Consolidated Statements of Cash Flows – Six-Months ended June 30, 2014 and 2013 and for the period from December 14, 2011 (Inception) to June 30, 2014	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36
	PART II – Other Information
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	38
	Signatures	39
	Certifications

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VERITEQ CORPORATION

(formerly known as Digital Angel Corporation)

 (A Development Stage Company)

Condensed Consolidated Balance Sheets

(in thousands, except par value)

	June 30,			December 31,
	2014			2013
	(unaudited)
ASSETS
Current assets:
Cash	$	110		$	13
Restricted cash		47			882
Accounts receivable		20			—
Inventory		26			21
Other receivable		—			171
Other current assets		48			96
Total current assets		251			1,183
Property and equipment, net		5			4
Other assets		69			14
Intangible assets, net		6,721			7,018
Total assets	$	7,046		$	8,219
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Notes payable, net of discounts (including $216 and $60 to related parties, respectively)	$	1,250		$	467
Subordinated convertible debt with an embedded convertible option, at fair value		2,137			—
Liabilities for conversion option of the convertible notes		125			3,124
Accounts payable		1,057			854
Accrued expenses (including $2,386 and $1,764 to related parties, respectively)		3,580			2,718
Due to former related party under shared services agreement		217			211
Total current liabilities		8,366			7,374
Commitments and contingencies (Notes 11 and12)
Subordinated convertible debt with an embedded convertible option, at fair value		—			4,925
Warrant liabilities at fair value		1,962			6,114
Contingent consideration – estimated royalty obligations		3,840			3,940
Total liabilities		14,168			22,353
Stockholders’ deficit:
Preferred Stock ($10 par value; shares authorized 5,000; 0 shares issued and outstanding)		—			—
Common shares ($0.01 par value; shares authorized 50,000; shares issued and outstanding, 41,480 and 9,459, respectively, including 29,097 shares issuable at June 30, 2014)		415			95
Additional paid-in-capital		13,220			5,595
Accumulated deficit during the development stage		(20,757	)		(19,824	)
Total stockholders’ deficit		(7,122	)		(14,134	)
Total liabilities and stockholders’ deficit	$	7,046		$	8,219

See the accompanying notes to condensed consolidated financial statements.

3

VERITEQ CORPORATION AND SUBSIDIARIES

(formerly known as Digital Angel Corporation)

(A Development Stage Company)

Condensed Consolidated Statements of Operations (Unaudited)

 (in thousands, except per share data)

	For the Three- Months Ended June 30, 2014			For the Three- Months Ended June 30, 2013
Sales	$	21		$	—
Cost of goods sold		8			—
Gross margin		13			—
Operating Expenses:
Selling, general and administrative expenses		1,163			1,138
Development expenses		75			3
Depreciation and amortization expense		149			148
Total operating expenses		1,387			1,289
Operating Loss		(1,374	)		(1,289	)
Other Income (Expense):
Change in value of convertible debt with embedded option feature		356			—
Change in fair value of conversion option of the convertible notes		2,558			—
Change in value of warrant liabilities		(5,961	)		—
Other expense		(6	)		—
Interest expense		(1,131	)		(253	)
Total other income (expense)		(4,184	)		(253	)
Loss before income taxes		(5,558	)		(1,542	)
Benefit for income taxes		—			—
Net Loss	$	(5,558	)	$	(1,542	)
Net loss per common share — basic and diluted	$	(0.28	)	$	(0.17	)
Weighted average number of common shares outstanding — basic and diluted		19,913			9,042

See the accompanying notes to condensed consolidated financial statements. 

4

 VERITEQ CORPORATION AND SUBSIDIARIES

(formerly known as Digital Angel Corporation)

(A Development Stage Company)

Condensed Consolidated Statements of Operations (Unaudited)

 (in thousands, except per share data)

	For the Six- Months Ended June 30, 2014			For the Six- Months Ended June 30, 2013			From December 14, 2011 (Inception) to June 30, 2014
Sales	$	95		$	—		$	113
Cost of goods sold		46			—			53
Gross margin		49			—			60
Operating Expenses:
Selling, general and administrative expenses		2,469			2,100			10,408
Development expenses		139			9			276
Depreciation and amortization expense		298			297			1,101
Total operating expenses		2,906			2,406			11,785
Operating Loss		(2,857	)		(2,406	)		(11,725	)
Other Income (Expense):
Change in value of convertible debt with embedded option feature		2,788			—			—
Change in fair value of conversion option of the convertible notes		3,628			—			3,265
Change in value of warrant liabilities		(2,838	)		—			(4,107	)
Other expense		(62	)		—			(169	)
Interest expense		(1,592	)		(446	)		(8,821	)
Total other income (expense)		1,924			(446	)		(9,832	)
Loss before income taxes		(933	)		(2,852	)		(21,557	)
Benefit for income taxes		—			—			800
Net Loss	$	(933	)	$	(2,852	)	$	(20,757	)
Net loss per common share — basic and diluted	$	(0.06	)	$	(0.32	)		—
Weighted average number of common shares outstanding — basic and diluted		14,758			8,941			—

See the accompanying notes to condensed consolidated financial statements. 

5

VERRITEQ CORPORATION AND SUBSIDIARIES

(formerly known as Digital Angel Corporation)

(A Development Stage Company)

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

 (in thousands)

	Three-Months Ended June 30,
	2014			2013
Net loss	$	(5,558	)	$	(1,542	)
Comprehensive loss	$	(5,558	)	$	(1,542	)

See the accompanying notes to condensed consolidated financial statements.

VERRITEQ CORPORATION AND SUBSIDIARIES

(formerly known as Digital Angel Corporation)

(A Development Stage Company)

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

 (in thousands)

	Six-Months Ended June 30,						From December 14, 2011 (Inception) to June 30, 2014
	2014			2013
Net loss	$	(933	)	$	(2,852	)	$	(20,757	)
Comprehensive loss	$	(933	)	$	(2,852	)	$	(20,757	)

See the accompanying notes to condensed consolidated financial statements.

6

VERITEQ CORPORATION AND SUBSIDIARIES

(formerly known as Digital Angel Corporation)

(A Development Stage Company)

Condensed Consolidated Statement of Changes in Stockholders’ Deficit (Unaudited)

For the Period from December 14, 2011 (Inception) to June 30, 2014

(in thousands)

	Preferred Stock				Common Stock				Additional Paid-In			Accumulated Deficit			Total Stockholders’
	Number		Amount		Number		Amount		Capital						Deficit
December 14, 2011 (Inception)
Net Loss		—		—		—		—		—		$	(18	)	$	(18	)
Balance, December 31, 2011													(18	)		(18	)
Net loss		—		—		—		—		—			(1,605	)		(1,605	)
Issuances of common stock for founders shares, January 2012		—		—		5,563		56		(56	)		—			—
Issuance of common stock and assumption of stock options for acquisition, January 2012		—		—		763		8		752			—			760
Issuance of common stock to investors, April 2012		—		—		218		2		78			—			80
Issuance of common stock and warrants to investor, June 2012		—		—		41		—		15			—			15
Issuance of common stock for shared services, June 2012		—		—		436		4		156			—			160
Issuance of common stock warrants in connection with convertible note payable, September 2012		—		—		—		—		33			—			33
Beneficial conversion feature of convertible note payable, September 2012		—		—		—		—		33			—			33
Issuance of common stock warrants in connection with convertible notes payable, October 2012		—		—		—		—		34			—			34
Beneficial conversion feature of convertible notes payable, October 2012		—		—		—		—		34			—			34
Issuance of common stock warrants in connection with convertible notes payable, December 2012		—		—		—		—		41			—			41
Beneficial conversion feature of convertible notes payable, December 2012		—		—		—		—		41			—			41
Share-based compensation		—		—		—		—		354			—			354
Balance, December 31, 2012		—	$	—		7,021	$	70	$	1,515		$	(1,623	)	$	(38	)

See the accompanying notes to condensed consolidated financial statements.

7

VERITEQ CORPORATION AND SUBSIDIARIES

(formerly known as Digital Angel Corporation)

(A Development Stage Company)

Condensed Consolidated Statement of Changes in Stockholders’ Deficit (Unaudited)

For the Period from December 14, 2011 (Inception) to June 30, 2014, continued

(in thousands)

	Preferred Stock						Common Stock						Additional Paid-in-			Accumulated			Total Stockholders’
	Number			Amount			Number			Amount			Capital			Deficit			Deficit
Balance, December 31, 2012, brought forward		—		$	—			7,021		$	70		$	1,515		$	(1,623	)	$	(38	)
Net loss		—			—			—			—			—			(18,201	)		(18,201	)
Issuance of restricted stock for compensation, January 2013								859			9			(9	)		—			—
Issuance of common stock and warrants for note conversion, March 2013		—			—			95			1			194			—			195
Issuance of warrants in connection with note payable, April 2013		—			—			—			—			35			—			35
Issuance of common stock and warrants for note conversion, June 2013		—			—			221			2			439			—			441
Issuance of common stock to investor, June 2013		—			—			19			—			25			—			25
Acquisition of VeriTeQ Corporation (f/k/a Digital Angel Corporation) common stock, July 2013		—			—			1,029			10			925			—			935
Issuance of Series C Preferred Stock to VeriTeQ shareholders in exchange for their common stock, July 2013		411			4,108			(8,215	)		(82	)		(4,026	)		—			—
Issuance of common stock for investment advisory services, July 2013		—			—			42			1			62			—			63
Issuance of common stock from conversion of preferred stock, October 2013		(411	)		(4,108	)		8,215			82			4,026			—			—
Adjust for cash paid in lieu of fractional shares, October 2013		—			—			(7	)		—			(16	)		—			(16	)
Issuance of common stock for partial note conversion, October 2013		—			—			17			—			25			—			25
Issuance of common stock for investor relations services, October 2013		—			—			33			1			90			—			91
Issuance of common stock for investor relations services, November 2013		—			—			130			1			262			—			263
Share-based compensation		—			—			—			—			2,048			—			2,048
Balance, December 31, 2013		—		$	—			9,459		$	95		$	5,595		$	(19,824	)	$	(14,134	)

See the accompanying notes to condensed consolidated financial statements.

8

VERITEQ CORPORATION AND SUBSIDIARIES

(formerly known as Digital Angel Corporation)

(A Development Stage Company)

Condensed Consolidated Statement of Changes in Stockholders’ Deficit (Unaudited0

For the Period from December 14, 2011 (Inception) to June 30, 2014

(in thousands)

	Preferred Stock				Common Stock				Additional Paid-in-			Accumulated			Total Stockholders’
	Number		Amount		Number		Amount		Capital			Deficit			Deficit
Balance, December 31, 2013, brought forward		—	$	—		9,459	$	95	$	5,595		$	(19,824	)	$	(14,134	)
Net loss		—		—		—		—		—			(933	)		(933	)
Issuance of common stock for partial conversion of note, February 2014		—		—		47		—		70			—			70
Issuance of common stock for cashless exercise of warrant, February 2014		—		—		67		1		(1	)		—			—
Issuance of common stock for cashless exercise of stock options, March 2014		—		—		363		3		(3	)		—			—
Beneficial conversion feature of convertible notes payable, May 2014		—		—		—		—		139			—			139
Issuance of warrants under terms of promissory notes, May 2014		—		—		—		—		66			—			66
Issuances of common stock for conversions of notes payable, June 2014		—		—		677		7		128			—			135
Cashless exercise of warrants under right to shares agreements, June 2014		—		—		28,136		281		6,709			—			6,990
Issuances of common stock under right to shares agreements, June 2014		—		—		1,120		11		(11	)		—			—
Issuance of restricted stock to a director, June 2014		—		—		650		7		(7	)		—			—
Conversion of promissory note under right to shares agreement, June 2014		—		—		961		10		181			—			191
Share-based compensation		—		—		—		—		354			—			354
Balance, June 30, 2014		—	$	—		41,480	$	415	$	13,220		$	(20,757	)	$	(7,122	)

See the accompanying notes to consolidated financial statements.

9

VERITEQ CORPORATION AND SUBSIDIARIES

(formerly known as Digital Angel Corporation)

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	For the Six- Months Ended June 30, 2014			For the Six- Months Ended June 30, 2013			From December 14, 2011 (Inception) to June 30, 2014
Cash flows from operating activities:
Net loss	$	(933	)	$	(2,852	)	$	(20,757	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share based compensation		354			916			2,756
Depreciation and amortization		298			297			1,101
Non-cash interest expense		1,568			413			8,320
Change in fair value of subordinated convertible debt		(2,788	)		—			—
Change in fair value of warrants		2,838			—			3,558
Change in fair value of conversion option of the convertible notes		(3,628	)		—			(3,265	)
Loss on settlement of other receivable		56			—			56
Deferred income tax benefit		—		__				(800	)
Issuance of warrants for contract amendment		—			—			550
Realized loss on sale of marketable securities, available-for-sale		—			—			107
Issuance of common stock for investment advisory and investor relation services		—			—			416
Change in other receivable		115			—			169
Change in other current assets		23		__				(49	)
Change in accounts payable, accrued expenses and liability under shared services agreement		978			979			4,463
Change in other assets		(55	)		(10	)		(65	)
Net cash used in operating activities		(1,174	)		(257	)		(3,440	)
Cash flows from investing activities:
Purchases of fixed assets		(1	)		—			(5	)
Sale of marketable securities, available-for-sale		—			—			133
Cash acquired from acquisition of VeriTeQ Corporation (f/k/a Digital Angel Corporation)		—			—			818
Net cash (used in) provided by investing activities		(1	)		—			946
Cash flows from financing activities:
Proceeds from the issuances of notes payable, net of repayments of $33 in 2014		537			50			997
Proceeds from the issuance of common stock to investors		—			25			105
Proceeds from the issuance of senior convertible debt, net of repayments of $400 in 2014		(100	)		—			1,550
Change in restricted cash		835			—			(47	)
Cash paid in lieu of fractional shares		—			—			(16	)
Proceeds from the issuance of common stock and warrants to investor		—			—			15
Net cash provided by financing activities		1,272			75			2,604
Net increase (decrease) in cash		97			(182	)		110
Cash --- Beginning of period		13			183			—
Cash — End of period	$	110		$	1		$	110
Supplemental disclosure of cash flow information:
Interest paid		—			—			—
Income taxes paid		—			—			—

See the accompanying notes to consolidated financial statements.

10

 VERITEQ CORPORATION AND SUBSIDIARIES

(formerly known as Digital Angel Corporation)

 (A Development Stage Company)

Notes to Condensed Consolidated Financial Statements (Unaudited) 

1. Organization and Summary of Significant Accounting Policies 

These unaudited condensed consolidated financial statements and notes thereto, include the financial statements of VeriTeQ Corporation (“VC” or the "Company"), formerly known as Digital Angel Corporation, and its wholly-owned subsidiary, VeriTeQ Acquisition Corporation (“VAC”), a Florida corporation formed on December 14, 2011. VC became the legal acquirer of VAC and VAC became the accounting acquirer of VC pursuant to the terms of a share exchange agreement (the “Exchange Agreement”), as more fully discussed below. In January 2012, VAC acquired all of the outstanding stock of PositiveID Animal Health Corporation, a Florida corporation, from PositiveID Corporation (“PSID”), which at the time was a related party. In December 2012, VAC formed a subsidiary, VTQ IP Holding Corporation, a Delaware corporation. VC, VAC and VAC’s subsidiaries are referred to together as, “VeriTeQ,” “the Company,” “we,” “our,” and “us”. Our business consists of ongoing efforts to provide implantable medical device identification and radiation dose measurement technologies to the healthcare industry.

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and with the instructions to Form 10-Q and Article 8 of Regulation S-X under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The interim financial information in this report has not been audited. In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair financial statement presentation have been made. Results of operations reported for interim periods may not be indicative of the results for the entire year. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2013 included in our Annual Report for Form 10-K as amended, filed with the Securities and Exchange Commission (“SEC”) on August 19, 2014.

During the preparation of the Company’s Form 10Q for the period ended June 30, 2014, an error was identified for the accounting of the Company's financing transaction in November 2013 which is described below. The Company has restated and amended its consolidated financial statements for the year ended December 31, 2013 and as of and for three months ended March 31, 2014 to correct for impact of this error.

On November 13, 2013, the Company entered into a financing transaction, as more fully discussed in Note 5 to the accompanying financial statements, which included notes in the principal amount of $1,816,667. The notes are convertible into shares of the Company’s common stock at an initial exercise price of $0.75 per share. The notes provided for the initial conversion price to be reset to lower amounts in the event the Company issues its common stock or is deemed to have issued its common stock at a price below the conversion price in effect at that time. This provision results in what is referred to as an embedded derivative and should have been bifurcated and a liability recorded at fair value upon the issuance of the notes and on December 31, 2013 and on March 31, 2014. This oversight resulted in an understatement of the derivative liability of $2.1 million and $3.1 million at March 31, 2014 and December 31, 2013, respectively. Accordingly, we restated our previously filed financial statements by filing an amendment to the 2013 Form 10-K and Form 10-Q for the fiscal quarter ended March 31, 2014.

Going Concern

The accompanying financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We are in the development stage, have incurred operating losses since our inception and have a working capital deficit. Our cash position is critically low, and payments critical to our survival are not being made in the ordinary course. Failure to raise capital in the coming days to fund our operations and generate positive cash flow to fund such operations will have a material adverse effect on our financial condition. These factors raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty. Further, the report of the independent registered public accounting firm on the Company’s December 31, 2013 financial statements included a paragraph about the existence of substantial doubt concerning the Company’s ability to continue as a going concern.

We need to raise additional funds immediately and continuing until we begin to ship sufficient quantities of our products to fund our operations and we may not be able to obtain debt or equity funding at all, or if available, they may not be on favorable terms.

Although we had negative working capital at June 30, 2014, we are attempting to generate enough cash from: (i) capital raises; (ii) the additional issuances of promissory notes, including to related parties; (iv) business operations as we have begun to ship our products; (v) through other investing and financing sources; (vi) from our ability to continue to delay certain salary and bonus payments to senior management until funds are available; and (vii) to undertake other cash management initiatives, including working with our vendors to continue to allow us to extend payment terms in order to operate our business for the twelve months ending June 30, 2015.

Our goal is to achieve profitability and to generate positive cash flows from operations. Our capital requirements depend on a variety of factors, including but not limited to, the cash that will be required to grow our business operations and to service our debt. Failure to raise additional capital to fund our operations and to generate positive cash flow from such operations will have a material adverse effect on our financial condition, results of operations and cash flows.

11

Development Stage

The Company is in the development stage as defined by Accounting Standards Codification subtopic 915-10 Development Stage Entities ("ASC 915-10") and its success depends on its ability to obtain financing and realize its marketing efforts. To date, the Company has generated only a small amount of revenue, has incurred expenses and has sustained operating losses. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from December 14, 2011 (Inception) through June 30, 2014, the Company has accumulated losses of approximately $20.8 million.

Share Exchange Agreement and Reverse Stock Split

On June 24, 2013, VAC and its stockholders entered in the Exchange Agreement with VC and the closing of the transaction (the “VeriTeQ Transaction”) took place on July 8, 2013 (the “Closing Date”). Pursuant to the terms of the Exchange Agreement, VAC exchanged all of its issued and outstanding shares of common stock for 4,107,592 shares of VC’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”). On July 10, 2013, VC realized that it incorrectly issued the Series B Preferred Stock and as a result, on July 12, 2013, it exchanged the Series B Preferred Stock for 410,759 shares of its newly created Series C convertible preferred stock, par value $10.00 (the “Series C Preferred Stock”). The terms of the Series C Preferred Stock are substantially similar to the Series B Preferred Stock, including the aggregate number of shares of common stock into which the Series C Preferred Stock was convertible. Each share of Series C Preferred Stock was convertible into twenty shares of VC’s common stock, par value $0.01 per share (the “Conversion Shares”), automatically upon the effectiveness of the Reverse Stock Split (defined below) on October 18, 2013 (such transaction is sometimes referred to herein as the “Share Exchange”).

Under the terms of the Exchange Agreement, all outstanding stock options to purchase shares of VAC’s common stock, whether or not exercisable or vested, converted into options to acquire shares of VC’s common stock (the “Substitute Options”), and all outstanding warrants to purchase shares of VAC’s common stock converted into warrants to purchase shares of VC’s common stock (the “Converted Warrants”). As a result of the Share Exchange and the issuance of the Substitute Options and the Converted Warrants, VAC became a wholly-owned subsidiary of VC, and VAC’s shareholders owned on July 12, 2013 approximately 91% of VC’s common stock, on an as converted, fully diluted basis (including outstanding stock options and warrants).

Based on the terms of the transaction, VAC was the accounting acquirer and as a result VAC’s operating results became the historical operating results of the Company. In addition, VAC’s common stock has been presented as if it was converted into shares of VC’s common stock at the beginning of the periods presented herein and based on the exchange ratio under the terms of the Exchange Agreement, which was 0.19083. The exchange ratio took into consideration the Reverse Stock Split, which is more fully discussed below.

The Series C Preferred Stock consisted of 500,000 authorized shares, 410,759 of which were issued and outstanding through October 17, 2013. The shares of Series C Preferred Stock issued to VAC’s shareholders in connection with the Share Exchange, by their principal terms:

(a)	converted into a total of 8,215,184 Conversion Shares, constituting approximately 88% of the issued and outstanding shares of common stock of VC, following the Reverse Stock Split on October 18, 2013 (as more fully discussed below);
(b)	had the same voting rights as holders of VC’s common stock on an as-converted basis for any matters that are subject to stockholder vote;
(c)	were not entitled to any dividends; and
(d)	were to be treated pari passu with the common stock on liquidation, dissolution or winding up of VC.

On July 12, 2013, VC obtained approval from a majority of its shareholders for and to effect a one for thirty (1:30) reverse stock split (the “Reverse Stock Split”). On October 18, 2013, VC filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Reverse Stock Split. The Reverse Stock Split became effective on October 18, 2013. The Reverse Stock Split caused the total number of shares of common stock outstanding, including the shares underlying the Series C Preferred Stock, to equal 9,302,674 shares of VC common stock based on the shares outstanding on October 18, 2013. The Reverse Stock Split did not affect the number of shares of VC’s authorized common stock, which remain at 50 million shares.

As a result of the Reverse Stock Split, all share information in this Quarterly Report has been restated to reflect the Reverse Stock Split as if it had occurred at the beginning of the periods presented, where appropriate.

In connection with the Share Exchange, Digital Angel Corporation changed its name to VeriTeQ Corporation effective October 18, 2013.

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On July 12, 2013, pursuant to the Exchange Agreement, a majority of VC’s voting stockholders adopted resolutions by written consent approving the Digital Angel Corporation 2013 Stock Incentive Plan (the “DAC 2013 Stock Plan”), under which employees, including officers and directors, and consultants may receive awards. The Plan became effective on October 18, 2013.

Amended and Restated Certification of Incorporation and Adoption of 2014 Stock Incentive Plan

On June 18, 2014, the Company obtained approval from a majority of its stockholders to:

● increase the number of authorized shares of the Company’s common stock from 50 million to 500 million;

● reduce the par value of the Company’s preferred stock from $10.00 per share to $0.01 per share; and

● adopt the Company’s 2014 Stock Incentive Plan under which 50 million shares are reserved for issuance.

The Company expects to file an Amended and Restated Certificate of Incorporation with the State of Delaware to effect the changes to its authorized shares of common stock and the par value of its preferred stock and to complete the adoption of the 2014 Stock Incentive Plan on or about August 26, 2014.

A portion of the increase in the authorized shares of the Company’s common stock became necessary as a result of a financing that occurred on May 30, 2014. As described in the following paragraph, that financing triggered resets in the pricing of convertible promissory notes issued by the Company on November 13, 2013, and triggered changes to the exercise price and number of shares covered by warrants issued in connection with such notes.

Under the terms of the May 30, 2014 financing, the Company issued promissory notes totaling $0.3 million to two investors. The promissory notes are convertible into shares of the Company’s common stock at an exercise price of $0.20 per share. As a result of the May 30, 2014 financing, certain reset provisions under the terms of existing promissory notes convertible into shares of the Company’s common stock and existing common stock warrants, which were issued on November 13, 2013, were triggered. Accordingly, the conversion price of the convertible promissory notes with an aggregate principal balance of $1,816,667 was reset to $0.20 per share from $0.75 per share of the Company’s common stock and the exercise price of the common stock warrants was changed to $0.20 per share from $2.84 per share of the Company’s common stock. In addition, the number of common stock warrants was increased from common stock warrants to acquire 2,944,444 shares of the Company’s common stock to common stock warrants to acquire 41,811,114 shares of the Company’s common stock, subject to adjustment based on the cashless provisions of the warrants.

On June 10, 2014, a Right to Shares Agreement was entered into with one of the holders of a promissory note and common stock warrant issued on November 13, 2013 and reset on May 30, 2014 as discussed above. The warrant holder was entitled to receive 15,199,410 warrant shares under the cashless exercise provisions of its common stock warrant but agreed to accept the lesser amount of 11,500,000 warrant shares in full satisfaction of the complete exercise of its warrant of which 495,711 shares of common stock were issued on June 13, 2014 and 474,000 shares of common stock were issued on June 27, 2014, leaving a balance remaining to be issued of 10,530,289 shares of the Company’s common stock at June 30, 2014. Subsequent to June 30, 2014 and through August 15, 2014, we have issued an additional 10,035,289 shares of the Company’s common stock under the agreement and 495,000 shares remained to be issued. The balance will be issued from time to time at the election of the holder, subject to limitations regarding the holder’s percentage of beneficial ownership, for no additional consideration.

The June 24, 2014 Right to Shares Agreement was entered into with one of the holders of a promissory note and common stock warrant issued on November 13, 2013 and reset on May 30, 2014. Pursuant to the agreement, the Company and the shareholder acknowledged that the shareholder desired to (1) exchange the shareholder warrant, for a right to acquire 17,763,325 shares of common stock to be issued to the shareholder, with such right being determined based on the cashless exercise formula contained in the warrant; (2) redeem $400,000 underlying its promissory note for $400,000 in cash, and (3) convert $190,667 underlying its promissory note into 953,334 shares of common stock. Pursuant to the agreement, the shareholder has a right to receive 18,716,659 shares of common stock, and the balance of the shareholder’s remaining note that was issued on November 13, 2013 has been reduced to $190,667. The issuance of shares of the Company’s common stock will be made from time to time, subject to limitations regarding the holder’s percentage of beneficial ownership, for no additional consideration. As of June 30, 2014, we issued 150,000 shares under the June 24, 2014 Right to Shares Agreement and 18,566,659 shares of the Company common stock remained to be issued. From July 1, 2014 to August 15, 2014, we issued an additional 9,118,000 shares of the Company’s common stock under the agreement and 9,448,659 shares of the Company’s common stock remain to be issued.

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Letter Agreement with Digital Angel Radio Communications Limited. (DARC)

On January 30, 2014, we and the buyers of Digital Angel Radio Communications Limited, or DARC (a former wholly-owned subsidiary operating in the United Kingdom), entered into a letter agreement under which we agreed to accept a payment of £62,000 (approximately $0.1 million) in full and final settlement of a deferred purchase price related to VC’s sale of DARC in March 2013. As a result, we recorded a loss of approximately USD $56,000 in the six-months ended June 30, 2014. The loss is included in other expense in our condensed consolidated statement of operations. All other provisions (including, without limitation, the indemnities) agreed between VC, and/or the buyers under the stock purchase agreement and any related documents remain in full force and effect.

Summary of Significant Accounting Policies 

Principles of Consolidation 

The financial statements include our accounts and the accounts of our subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Classification of Expenses

For comparative purposes, we have reclassified certain expenses related to the development of our products from selling, general and administrative expenses to development expenses in the historical financial statement presented herein.

Use of Estimates 

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”) requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on the knowledge of current events and actions we may undertake in the future, they may ultimately differ from actual results. Included in these estimates are assumptions used in determining the lives of long-lived assets, in Black-Scholes-Merton (“BSM”) valuation models in estimating the fair value of stock-based compensation and warrants, promissory notes with an embedded convertible option and royalty obligations and in determining valuation allowances for intangible assets, deferred tax assets, among others.

Concentration of Credit Risk 

We maintained our domestic cash in two financial institutions during the period ended June 30, 2014. Balances were insured up to Federal Deposit Insurance Corporation limits of $250,000 per institution. At times, cash balances may exceed the federally insured limits.

Other Current Assets

Other current assets consist primarily of deferred financing costs of approximately $20,000 at June 30, 2014 and prepaid insurance of approximately $28,000 and $74,000 at June 30, 2014 and December 31, 2013, respectively. No other items included in other current assets at June 30, 2014 and December 31, 2013 exceeded 5% of total current assets, respectively.

Inventory

Inventory consisted of purchased finished goods at June 30, 2014 and December 31, 2013. Inventory is valued at the lower of the value using the first-in, first-out (“FIFO”) cost method, or market.

Property and Equipment

Property and equipment, consisting primarily of computer equipment, and are stated at cost less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful life of the related assets (generally three years for computer equipment and 10 years for other equipment). Depreciation expense for the three-months ended June 30, 2014 and 2013 was approximately $1 thousand and nil, respectively. Depreciation expense for the six-months ended June 30, 2014 and 2013 was approximately $1 thousand and nil, respectively.

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Intangible Assets 

We account for intangible assets in accordance with the Intangibles — Goodwill and Other Topic of the Codification. Intangible assets deemed to have an indefinite life, such as goodwill, are reviewed at least annually for impairment. Intangible assets with finite lives are amortized over their estimated useful lives. We do not have any intangible assets with indefinite lives.

We have intangible assets consisting of technology, customer relationship and trademarks, which are more fully discussed in Note 3. These intangible assets are amortized over their expected economic lives ranging from 7 to 14 years. The lives were determined based upon the expected use of the asset, the ability to extend or renew patents, trademarks and other contractual provisions associated with the asset, the stability of the industry, expected changes in and replacement value of distribution networks and other factors deemed appropriate. We continually evaluate whether events or circumstances have occurred that indicate the remaining estimated useful lives of our definite-lived intangible assets warrant revision or that the remaining balance of such assets may not be recoverable. We use an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable. We believe that no impairment of our intangible assets existed as of June 30, 2014.

Revenue Recognition

Product revenue is recognized at the time product is shipped and title has transferred, provided that a purchase order has been received or a contract has been executed, there are no uncertainties regarding customer acceptance, the sales price is fixed and determinable and collectability is deemed probable. If uncertainties regarding customer acceptance exist, we intend to recognize the revenue when such uncertainties are resolved. There are no significant post-contract support obligations at the time of revenue recognition. Our accounting policy regarding vendor and post contract support obligations is based on the terms of the customers’ contracts and is billable upon occurrence of the post-sale support. Currently, there are no multiple element arrangements in connection with our product sales. Cost of products sold is recorded as the related revenue is recognized. We offer a warranty on our products and record a liability for product warranties at the time it is probable that a warranty liability has been incurred and the amount of loss can reasonably be estimated. To date, we have not incurred a warranty liability on products we have sold. It is our policy to approve all customer returns before issuing credit to the customer.

Stock-Based Compensation 

At June 30, 2014, we had five stock-based employee compensation plans which are more fully described in Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on April 15, 2014. In accordance with the Compensation – Stock Compensation Topic of the Codification, awards granted are valued at fair value and compensation cost is recognized on a straight line basis over the service period of each award. On June 18, 2014, our majority stockholders approved the 2014 Stock Incentive Plan, which is more fully discussed in Note 7.

Income Taxes 

We recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes consist primarily of timing differences such as amortization of intangible assets, deferred officers' compensation and stock-based compensation. A valuation allowance is provided against net deferred tax assets where we determine realization is not currently judged to be more likely than not. We recognize and measure uncertain tax positions through a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating and estimating tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. Accordingly, we report a liability for unrecognized tax benefits resulting from the uncertain tax positions taken or expected to be taken in a tax return and recognize interest and penalties, if any, related to uncertain tax positions in income tax expense.     

Loss Per Common Share and Common Share Equivalent 

Basic and diluted loss per common share has been computed by dividing the loss by the weighted average number of common shares outstanding. Since we have incurred losses attributable to common stockholders, diluted loss per common share has not been computed by giving effect to all potentially dilutive common shares that were outstanding during the period., since to do so would have been anti-dilutive. See Note 9 for the computation of basic and diluted loss per share.

15

Impact of Recently Issued Accounting Standards 

From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies will issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification (“ASC” or “Codification”) are communicated through issuance of an Accounting Standards Update (“ASU”).

In June 2014, the FASB issued ASU Codification Development Stage Entities (Topic 915), Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments related to the elimination of inception-to date information and other remaining disclosure requirements of Topic 915, which should be applied retrospectively and are effective for annual reporting periods beginning after December 15, 2014 and interim periods therein.The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations. The amendments regarding Topic 275 and the sufficiency-of-equity-at-risk criterion for development stage entities of Topic 810 shall be applied prospectively. The adoption of these amendments will eliminate the inception--to–date information that is currently presented in the Company’s financial statements and may result in enhanced disclosures regarding risks and uncertainties applicable to the Company’s business.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09,”Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. ASU 2014-09 is effective for public entities for annual reporting periods beginning after December 15, 2016 and interim periods within those periods. Early adoption is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements and footnote disclosures.

2. Acquisition

Acquisition	Dates Acquired	Acquisition Price		Intangible Assets Acquired		Description of Assets
(in thousands)
VeriTeQ Corporation	7/08/13	$	935	$	—	Cash, marketable securities and receivables, among others

Acquisition of VeriTeQ Corporation under Share Exchange Agreement

Given VAC’s former shareholders’ ownership in VC, as a result of the Exchange Agreement, VAC was considered to be the acquirer for accounting purposes and the transaction was accounted for as a reverse acquisition of VC by VAC under the accounting rules for business combinations. Accordingly, VC’s assets and liabilities were recorded at their estimated fair values to the extent they were deemed to have been acquired for accounting purposes and VC has established a new basis for its assets and liabilities based upon the fair values thereof and the value of VC’s shares outstanding on July 8, 2013, the Closing Date.

The results of VC have been included in the consolidated statements of operations since July 8, 2013, the date of acquisition. Unaudited pro forma results of operations for the six-months ended June 30, 2013 are included below. Such pro forma information assumes that the VC acquisition had occurred as of January 1, 2013. This summary is not necessarily indicative of what our result of operations would have been had VC been a combined entity during such period, nor does it purport to represent results of operations for any future periods.

(In thousands, except per share amounts)	Six-Months Ended June 30, 2013
Net operating revenue	$	—
Loss from continuing operations	$	(3,208	)
Loss per common share from continuing operations– basic and diluted	$	(0.35	)

3. Intangible Assets

Intangibles and other assets consist of the following:

	June 30, 2014		December 31, 2013		Lives (in years)
	(in thousands)		(in thousands)
Technology, net of accumulated amortization of $873 and $627	$	5,998	$	6,244		14
Customer relationship, net of accumulated amortization of $176 and $141		324		359		7
Trademarks, net of accumulated amortization of $51 and $35		399		415		14
	$	6,721	$	7,018

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Amortization of intangibles charged against income amounted to $0.1 million and $0.1 million for the three-months ended June 30, 2014 and 2013, respectively, and $0.3 million and $0.3 million for the six-months ended June 30, 2014 and 2013, respectively.

4. Accrued Expenses

The following table summarizes the significant components of accrued expenses:

	June 30, 2014		December 31, 2013
	(in thousands)
Accrued payroll and payroll related	$	2,315	$	1,734
Accrued legal		454		445
Accrued other expenses		811		539
Total accrued expenses	$	3,580	$	2,718

5. Notes Payable and Restricted Cash

November 2013 Financing Transaction

On November 13, 2013, we entered into the securities purchase agreement (the “Purchase Agreement”) with a group of institutional investors (the “Investors”), relating to the private placement of approximately $1,816,667 in principal amount of senior secured convertible promissory notes. The notes were issued with an original issue discount of $166,667 and the aggregate purchase price of the notes was $1,650,000. Notwithstanding the purchase price of $1,650,000, $150,000 of the purchase price was be deemed paid at the closing by the cancellation of $150,000 of obligations owed by the Company to the placement agent as more fully discussed below. Therefore, the Notes were issued for a cash purchase price of $1,500,000, and with warrants to purchase up to 2,422,222 shares of our common stock, on the terms set forth below.     

In connection with the financing, we agreed to allow our placement agent to participate in the offering for $150,000 in lieu of our obligation to pay the placement agent a cash fee of $150,000. In addition, the placement agent will receive 5% of the aggregate cash exercise price received by us upon exercise of any warrants in the offering, and they received 222,222 warrants entitling them to purchase 222,222 shares of common stock as part of their placement agent fee. Thus, the aggregate number of warrants, issued in the financing was 2,644,444. We also issued 300,000 warrants under the terms of a letter agreement dated November 13, 2013 in connection with the financing. Thus, the warrants issued on November 13, 2014 aggregated 2,944,444.

In connection with the sale of the notes and the warrants issued to the Investors, (i) we entered into a registration rights agreement with the Investors (the "Registration Rights Agreement"), (ii) we and certain of our subsidiaries entered into a security and pledge agreement in favor of the collateral agent for the Investors (the "Security Agreement"), (iii) certain of our subsidiaries entered into a guaranty in favor of the collateral agent for the Buyers (the “Guaranty”), and (iv) we and each depository bank in which such bank account is maintained entered into certain account control agreements with respect to certain accounts described in the Note and the Security Agreement. The transaction closed on November 13, 2013 (the “Closing”).

At Closing, we received proceeds, net of $115,000 of the Investor’s expenses that were paid for by the Company, of $635,000 and approximately $750,000 of the proceeds were placed in restricted bank accounts in amounts proportionate to each Investors note balance. The restricted funds were to be applied to pay any redemption or other payment due under the applicable note to the applicable holder from time to time. Per the term of the securities purchase agreement, we were required upon the sale of 50,000 shares of MGT Capital Investments Inc.’s common stock that we owned to place the proceeds from the sale into the restricted bank accounts on a pro rata basis. Accordingly, on November 21, 2013, upon the sale of the 50,000 shares of MGT’s common stock under the terms of a stock purchase agreement, we placed approximately $132,500 into the restricted accounts. The balance in the restricted bank accounts totaled approximately $0.9 million at March 31, 2014. On April 3, 2014 and on June 16, 2014, to provide the Company with additional liquidity, several of the Investors transferred approximately $145 thousand and $0.3 million, respectively, of the restricted funds to our operating account. In connection with the Right to Shares Agreement dated June 24, 2014, $0.4 million of the restricted funds were used to pre-pay a portion of one of the outstanding notes. Therefore, the balance in the restricted accounts aggregates approximately $47 thousand as of June 30, 2014.

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Under the terms of a May 30, 2014 financing, the Company issued promissory notes totaling $0.3 million to two of the Investors. The promissory notes are convertible into shares of the Company’s common stock at an exercise price of $0.20 per share. As a result of the May 30, 2014 financing, certain reset provisions under the terms of the November 13, 2013 promissory notes were triggered. Accordingly, the conversion price of the notes with an aggregate principal balance of $1,816,667 was reset to $0.20 per share from $0.75 per share of the Company’s common stock and the exercise price of certain warrants issued on November 13, 2014, was changed to $0.20 per share from $2.84 per share of the Company’s common stock. In addition, the number of warrants was increased from common stock warrants to acquire 2,944,444 shares of the Company’s common stock to warrants to acquire 41,811,114 shares of the Company’s common stock, subject to adjustment based on the cashless provisions of the warrants. On June 10, 2014 and June 24, 2014, the Company entered into Right to Shares Agreements with two of the Investors related to the notes and warrants. The Right to Shares Agreements are more fully discussed in Note 1.

Notes payable consists of the following (in thousands): 

	June 30, 2014			December 31, 2013
	(in thousands)
Note originally with PSID for $200 dated January 11, 2012, bore interest at 5% per annum, was originally payable in monthly instalments beginning January 11, 2013 through December 11, 2014. Note was amended in July 2013 to allow for conversion into common stock and extend payment terms. After the note was partially converted into common stock in October 2013, PSID assigned the note to a group of lenders in November 2013. One of the lenders converted $60 of the note and $10 of accrued interest into 47 shares of common stock in February 2014. The Company issued warrants to acquire 300 shares of its common stock to PSID in connection with a letter agreement entered into in November 2013, that were reset on May 30, 2014 to warrants to acquire 4,260 shares at an exercise price of $0.20 per share. (2)(3)	$	115		$	175
Demand note for $80 issued October 11, 2013 to our CEO, bears interest at 5% per annum repaid in November 2013, February and April 2014(1)		—			30
Demand note for $30 issued October 29, 2013 to our CEO, bears interest at 5% per annum, partially repaid in April 2014(1)		26			30
Senior Secured Convertible Notes issued November 13, 2013 for $1,817, of which $726 was repaid and converted in June 2014, net of discount of $400 and $1,585, to group of institutional investors, are convertible into shares of common stock at $0.20 per share and mature November 13, 2014. Notes were issued with Warrants to acquire 2,644 shares of common stock with an exercise price of $2.84 per share that were reset on May 30, 2014 to warrants to acquire 37,551 shares of common stock with an exercise price of $0.20 per share of which 11,254 were outstanding on June 30, 2014. (2)(4)		691			232
Demand note for $60 issued January 8, 2014 to Michael Krawitz, our CFO, bears interest at 5% per annum (1)		60			—
Demand note for $60 issued January 16, 2014 to our CEO, bears interest at 5% per annum (1)		60			—
Demand note for $40 issued January 16, 2014 to our President, bears interest at 5% per annum (1)		40			—
Note for $175 issued on February 4, 2014 to Corbin Properties LLC, bears interest at 10% per annum, due February 4, 2015		175			—
Demand note for $25 issued March 4, 2014 to a Director, bears interest at 5% per annum (1)		25			—
Note for $25 issued March 5, 2014 to Deephaven Enterprises, Inc., net of discount of $22, bears interest at 9% per annum, due March 5, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share.		3			—
Note for $25 issued on March 6, 2014, to James Rybicki Trust, net of discount of $22, bears interest at 9% per annum, due March 6, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share.		3			—
Note for $25 issued on March 10, 2014, to William Caragol, net of discount of $25, bears interest at the rate of 9% per annum, due March 10, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price equal to 60% of the lowest closing bid price over the 10-trading days immediately preceding a conversion notice.		—			—
Note for $61 issued on March 20, 2014 to Deephaven Enterprises, Inc., net of discount of $43, bears interest at the rate of 9% per annum, due March 20, 2015. Effective May 30, 2014, existing outstanding common stock warrants held by the holder became exercisable at $0.35 per share and an additional 300 warrants to acquire shares of the Company’s common stock with an exercise price of $0.35 per share were granted. (2)		18			—
Note for $25 issued April 16, 2014 to William Caragol, net of discount of $23, bears interest at 9% per annum, due April 16, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share if conversion is elected by the holder or 60% of the lowest closing bid price over the 10-trading days immediately preceding a conversion notice if elected by the Company.		2			—
Note for $30 issued on April 16, 2014, to Ned Siegel, net of discount of $27, bears interest at 9% per annum, due April 16, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share. (1)		3			—
Note for $20 issued on May 1, 2014, to Ned Siegel, net of discount of $18, bears interest at the rate of 9% per annum, due March 10, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share. The note was issued with 100 warrants to acquire shares of the Company’s common stock with an exercise price of $0.35 per share. (1) (2).		2			—
Senior Convertible Note for $222 issued May 30, 2014 to an Investor, net of discount of $203, convertible into shares of common stock at $0.20 per share and matures May 30, 2015. Note was issued with an original issue discount of $22 in lieu of interest. (4)		19			—
Senior Convertible Note for $100 issued on May 30, 2014 to an Investor, net of discount of $92, convertible into shares of common stock at $0.20 per share, bears no interest, due May 30, 2015. (4)		8			—
Total notes payable		1,250			467
Less: Current maturities		(1,250	)		(467	)
Note payable long-term	$	—		$	—
Subordinated Convertible Note Payable elected at fair value:
Non-interest bearing subordinated convertible note payable with a principal amount of $3,300 dated December 3, 2012. Note is convertible into common stock equal to 1/3 of the shares beneficially held by the CEO on the date of conversion. Note was amended in July 2013 to extend the maturity date to June 2015. The note was recorded at its fair value and will be revalued at each reporting period with changes in the fair value recorded as other expense/income.	$	2,137		$	4,925

(1) These notes have been issued to related parties. See Note 10.

(2) The warrants are more fully described in Note 7.

(3) This note when originally issued was issued to a related party. See Note 10.

(4) If and whenever we issue or sell, or are deemed to have issued or sold, any shares of common stock for a consideration per share less than a price equal to the conversion price in effect immediately prior to such issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the conversion price then in effect shall be reduced to an amount equal to the new issuance price. The convertible option of these notes was bifurcated from the notes and recorded as its fair value on the date of issuance and at each reporting date, with the change in the fair value being charged/credited to other income/expense. Subsequent to June 30, 2014, the conversion price of the notes was reset as more fully discussed in Note 14.

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Interest expense was approximately $1.1 million and $0.3 million for the three-months ended June 30, 2014 and June 30, 2013, respectively, and $1.6 million and $0.4 million for the six-months ended June 30, 2014 and 2013, respectively. The majority of the interest expense is due to the accretion of debt discounts and, therefore, the weighted average interest rates for each of the periods are not meaningful numbers.

See Note 14 for promissory notes issued subsequent to June 30, 2014.

6. Financial Instruments 

Fair Value Measurements

We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.

We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

During the three and six-months ended June 30, 2014, the subordinated convertible note, which has a convertible option embedded in the note, the conversion option of the convertible notes warrant liabilities and the contingent royalty obligations, which relate to assets acquisitions during 2012, were valued using Level 3 inputs, and for the three and six-months ended June 30, 2013, the subordinated convertible note and the contingent royalty obligations were valued using Level 3 inputs. The changes in fair value of the subordinated convertible note, the conversion option of the convertible notes and the warrant liabilities during the three and six-months ended June 30, 2014 and 2013 are reflected in other income (expense) for each period. There was no change in the estimated fair value of the contingent royalty obligations during the three and six-months ended June 30, 2014 and 2013.

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Notes Payable and Long-Term Debt 

At June 30, 2014 and December 31, 2013, we valued the subordinated convertible note based on the greater of the initial fair value as determined by a discounted cash flow methodology and the market value of the shares of our common stock into which it is convertible. We valued the conversion option of the convertible notes at fair value.

Warrant Liabilities

The carrying amounts approximate management’s estimate of the fair value of the warrant liabilities at June 30, 2014 based on the BSM valuation model and using the following assumptions: expected term of 4.37 years, expected volatility of 166%, risk-free interest rates of 1.25%, and expected dividend yield of 0%.

Conversion option of the notes

The carrying amounts approximates management's estimate of the embedded conversion option at June 30, 2014 and December 31, 2013 based on using a Monte Carlo method with the following assumptions: Market price of $0.14 and $2.29; terms of 0.42, 0.92 and 0.92 years; Standard deviation of 0.09, 0.11 and 0.18; and conversion price of $0.20 and $0.75, respectively.

Estimated Royalty Obligations

The carrying amount approximates management’s estimate of the fair value of royalty obligations that will be paid (discounted at rates ranging from 25% to 60%) for a period from 3 to 14 years.

The following table summarizes our financial assets and liabilities measured at fair value as presented in the consolidated balance sheets as of June 30, 2014 and December 31, 2013 (in thousands):

	June 30, 2014						December 31, 2013
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Liabilities:
Subordinated convertible note with an embedded conversion option	$	—	$	—	$	2,137	$	—	$	—	$	4,925
Embedded conversion option of the convertible notes	$	—	$	—	$	125	$	—	$	—	$	3,124
Warrant liabilities	$	—	$	—	$	1,962	$	—	$	—	$	6,114
Royalty obligations	$	—	$	—	$	4,000	$	—	$	—	$	4,000

The following is a summary of activity of Level 3 liabilities for the six-months ended June 30, 2014 (in thousands):

	Subordinated Note with Convertible Option			Embedded Conversion Option of Convertible Notes			Warrant Liabilities			Estimated Royalty Obligations
Balance at December 31, 2013	$	4,925		$	3,124		$	6,114		$	4,000
Increase due to embedded conversion option for May 30, 2014 convertible notes payable		—			629			—			—
Change in fair value		(2,788	)		(3,628	)		2,838			—
Exercise of warrants under Right to Shares Agreements		—						(6,990	)		—
Balance at June 30, 2014	$	2,137	(1)	$	125		$	1,962		$	4,000	(2)

(1) The principal balance at December 31, 2013 and June 30, 2014 is $3.3 million. See Note 5 for additional information regarding the note.

(2) Includes $160 thousand of current royalty obligations in account payable and accrued expenses at June 30, 2014.

The Company’s management considers the carrying values of other current assets and other current liabilities to approximate fair values primarily due to their short-term nature.

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7. Stockholders’ Deficit

Preferred Stock

As of June 30, 2014, the Company has authorized 5,000,000 shares of preferred stock, par value $10.00 per share of which 500,000 shares were authorized as Series C Preferred Stock. The Series C Preferred Stock is more fully described in Note 1. No shares of preferred stock were outstanding as of June 30, 2014.

Common Stock

At June 30, 2014, VC had authorized 50 million shares of common stock of which approximately 12.4 million were issued and outstanding. Of the 12.4 million issued and outstanding shares of common stock at June 30, 2014, 5.7 million were beneficially owned by our Chief Executive Officer.

On or about August 26, 2014, the Company intends to file an Amended and Restated Certification of Incorporation with the State of Delaware to increase the number of authorized shares of its common stock to 500 million and to reduce the par value of its preferred stock to $0.01 per share as more fully discussed in Notes 1 and 14.

Warrants

We have issued warrants exercisable for shares of common stock for consideration, as follows (in thousands, except exercise price):

Series/ Issue Date	Warrants Issued/As Reset		Additional Warrants under Cashless Exercise Provisions		Exercised			Balance June 30, 2014		Exercise Price		Exercisable Period (years)
Series A /June 2012		95		—		(95	)		—	$	0.37		3
Series B / September 2012		40		—		—			40	$	1.57		3
Series C / October 2012		20		—		—			20	$	1.57		3
Series C / October 2012, reset May 2014		20		—		—			20	$	0.35		3
Series D / December 2012		14		—		—			14	$	1.57		5
Series E /December 2012		29		—		—			29	$	1.57		5
Series F / March 2013		40		—		—			40	$	1.57		3
Series G / April 2013		47	−−			—			47	$	1.31		3
Series G / April 2013, reset May 2014		48	−−			—			48	$	0.35		3
Series H / June 2013		63	−−			—			63	$	1.57		3
Series H/ June 2013, reset May 2014		20	−−			—			20	$	0.35		3
Series VT a/ November 2013, as reset May 2014		37,551		2,966		(29,263	)		11,254	$	0.20		5
Series VT b/ November 2013, as reset May 2014		4,260		—		—			4,260	$	0.20		5
Series I/ May 2014		300		—		—			300	$	0.35		3
Series J/ May 2014		100		—		—			100	$	0.35		2
		42,647		2,966		(29,358	)		16,255

The Series A warrant was issued in connection with a stock subscription agreement to an investor. The Series A warrant was exercised in February 2014 under the cashless exercise provisions of the warrants.

The Series B, C, D, E, F, G and H warrants were issued in connection with promissory notes. These warrants are exercisable at any time during the exercisable periods. The warrant agreements provide for the number of shares to be adjusted in the event of a stock split, a reverse stock split, a share exchange or other conversion or exchange event in which case the number of warrants and the exercise price of the warrants shall be adjusted on a proportional basis. The total value of these warrants of approximately $0.3 million was amortized to interest expense over the life of the promissory notes. The promissory notes were converted into common stock during 2013. As a result of the issuances of two promissory notes on May 30, 2014, and under the terms of a promissory note issued on March 20, 2014, the exercises prices of one-half of the Series C, G and H warrants were reduced to $0.35 per share of common stock from exercise prices ranging from $1.31 to $1.57 per share. We recorded non-cash interest expense of approximately $7 thousand during the three-months ended June 30, 2014 as a result of the reductions in the exercise prices of the warrants.

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The Series VTa warrants were issued on November 13, 2013 in connection with senior secured convertible notes, which are more fully described in Note 5. These warrants are exercisable at any time during the exercise periods. The warrant agreements provide for the number of shares to be adjusted in the event of a stock split, a reverse stock split, a share exchange or other conversion or exchange event in which case the number of warrants and the exercise price of the warrants shall be adjusted on a proportional basis. In addition, if we issue or sell any shares of our common stock, except certain specified issuances pursuant to the Company’s stock plans or the issuance of common stock pursuant to agreements existing on November 13, 2013, at a price per share, or the New Exercise Price, less than the Exercise Price in effect immediately before the issuance or sale, then immediately after such dilutive issuance, the Exercise Price will be reduced to the New Exercise Price. If there is an adjustment to the Exercise Price as a result of any of the dilution events specified in the Warrant agreements, the number of shares of common stock that may be purchased upon exercise of the warrant will be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable for the adjusted number of shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on exercise). As a result of the issuances of two promissory notes on May 30, 2014, the reset provisions under the terms of the Series VTa warrants were triggered. Accordingly, the number of warrants to acquire shares of the Company’s common stock increased from 2,644,444 warrants to 37,551,144 warrants and the exercise price was reduced to $0.20 per share from $2.84 per share of common stock. In addition, during the three-months ended June 30, 2014, certain of the Series VTa warrants were exercised under the cashless provisions of the warrants, which resulted in an increase in the shares issued upon exercise as noted in the table above. Subsequent to June 30, 2014, the number of warrants and the exercise price have been reset as more fully discussed in Note 14.

The Series VTb warrants were issued November 13, 2013 to PSID in connection with a letter agreement between the Company and PSID as more fully discussed in Note 10 to our consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on April 15, 2014. The terms of the Series VTb warrants are identical to the Series VTa warrants. As a result of the issuances of two promissory notes on May 30, 2014, the reset provisions under the terms of the Series VTb warrants were triggered. Accordingly, the number of warrants to acquire shares of the Company’s common stock increased from 300,000 warrants to 4,260,000 warrants and the exercise price was reduced to $0.20 per share from $2.84 per share of common stock. Subsequent to June 30, 2014, the number of warrants and the exercise price have been reset as more fully discussed in Note 14.

The VTa and VTb warrants are classified as liabilities at June 30, 2014 and December 31, 2013.

The Series I and J warrants were issued in connection with promissory notes issued on March 20, 2014 and May 1, 2014, respectively. As a result of the issuances of two promissory notes on May 30, 2014, provisions under the notes issued on March 20, 2014, and May 1, 2014 requiring the issuances of these warrants were triggered. These warrants are exercisable at any time during the exercise periods. The warrant agreements provide for the number of shares to be adjusted in the event of a stock split, a reverse stock split, a share exchange or other conversion or exchange event in which case the number of warrants and the exercise price of the warrants shall be adjusted on a proportional basis. The relative fair value of these warrants of approximately $0.1 million is being amortized to interest expense over the life of the promissory notes.

We determined the value of the warrants issued in 2012, 2013 and 2014 on the issuance/reset dates utilizing the following assumptions in the BSM valuation model:

Dates Warrants Issued/Reset	Dividend Yield			Volatility			Expected Lives (Yrs.)		Risk-Free Rate			Date of the Assumptions
June 2012		0.00	%		126.00	%		3		.34	%	June 1, 2012
September 2012		0.00	%		126.00	%		3		.35	%	September 25, 2012
October 2012		0.00	%		126.00	%		3		.35	%	October 12, 2012
October 2012, reset May 2014		0.00	%		223.00	%		1.37		.10	%	May 30, 2014
December 2012		0.00	%		126.00	%		5		.72	%	December 31, 2012
March 2013		0.00	%		126.00	%		3		.38	%	March 18, 2013
April 2013		0.00	%		126.00	%		3		.34	%	April 10, 2013
April 2013, reset May 2014		0.00	%		210.00	%		1.87		.37	%	May 30, 2014
June 2013		0.00	%		126.00	%		3		.52	%	June 1, 2013
June 2013, reset May 2014		0.00	%		215.00	%		2.01		.37	%	May 30, 2014
November 2013, reset May 2014		0.00	%		163.00	%		4.46		1.54	%	May 30, 2014
May 2014 (Series I)		0.00	%		192.26	%		2.80		.79	%	May 30, 2014
May 2014 (Series J)		0.00	%		214.78	%		2		.39	%	May 30, 2014

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Stock Option Activity

We had stock-based employee plans outstanding as of June 30, 2014, which are more fully described in Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K/A filed with the SEC on August 19, 2014.

We account for our stock-based compensation plans in accordance with ASC 718-10, Compensation – Stock Compensation. Under the provisions of ASC 718-10, the fair value of each stock option is estimated on the date of grant using a BSM option-pricing formula, and amortized to expense over the expected performance or service periods using the straight-line attribution method. During the three and six-months ended June 30, 2014 and for the three-months ended June 30, 2013, we did not grant any stock options. During the six-months ended June 30, 2013, we granted 1.0 million options The weighted average fair value of the options granted during the six-months ended June 30, 2013 was $1.33 per share.

The weighted average values of the assumptions used to value the options granted in the six-months ended June 30, 2013 were as follows: expected term of 5 years, expected volatility of 126%, risk-free interest rates of 0.83%, and expected dividend yield of 0%. The expected life represents an estimate of the weighted average period of time that options are expected to remain outstanding given consideration to vesting schedules and the Company’s historical exercise patterns. Expected volatility was estimated based on the historical volatility of similar companies’ common stock. The risk free interest rate was estimated based on the U.S. Federal Reserve’s historical data for the maturity of nominal treasury instruments that corresponds to the expected term of the option. The expected dividend yield was 0% based on the fact that we have never paid dividends and we have no present intention to pay dividends.

During the three and six-months ended June 30, 2014, we did not record any compensation expense associated with stock options as they were all fully vested on or before January 1, 2014. During the three and six-months ended June 30, 2013, we recorded approximately $0.4 million and $0.6 million in compensation expense related to stock options granted to our directors, employees and consultants (who provide corporate support services).

A summary of the stock option activity for our stock options plans for the six-months ended June 30, 2014 is as follows (shares in thousands):

	Stock Options			Weighted Average Exercise Price		Weighted Average Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2014		2,628		$	9.01
Granted		—			—
Exercised		(382	)		0.05
Forfeited or expired		(8	)		659.87
Outstanding at June 30, 2014		2,238			8.02		4.65	$	77,000	*
Vested or expected to vest at June 30, 2014		2,238			8.02		4.65	$	77,000	*
Shares available on June 30, 2014 for options that may be granted		2,508

^*The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The market value of our common stock was $0.14 per share at June 30, 2014.

There were 0.4 million stock options exercised during the six-months ended June 30, 2014, with a total intrinsic value of $0.4 million. No stock options were exercised during the three-months ended June 30, 2014 nor for the three and six-months ended June 30, 2013. No options vested during the three-months ended June 30, 2014 and 2013. The total fair value of options vested during the six-months ended June 30, 2013, was approximately $0.4 million. As of June 30, 2014, there was no unrecognized compensation cost related to stock options granted under our plans.

Restricted Stock Grants 

In June 2014, we issued approximately 0.6 million shares of our restricted stock to a director as an inducement to joining our board. One-hundred and fifty-thousand shares of the restricted stock vest on January 2, 2015 and the remainder vest on January 3, 2016. Also, in January 2013, we issued approximately 0.9 million shares of our restricted common stock to a member of our senior management. This restricted stock vests in full in January 2015. The total value of the restricted stock of approximately $1.5 million is being expensed over the vesting period. During the three-months ended June 30, 2014 and 2013 and the six-months ended June 30, 2014 and 2013, we recorded $0.2 million, $0.2 million, $0.4 million and $0.3 million, respectively, in compensation expense related to the restricted stock.

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8. Income Taxes

We did not have an income tax provision or benefit for the three and six-months ended June 30, 2014 and 2013. The income tax benefit of $0.8 million for the period from December 31, 2011 (Inception) to June 30, 2014 resulted from the utilization of deferred tax assets to offset a deferred tax liability associated with an acquisition we made in January 2012. We have incurred accumulated losses and have provided a valuation allowance against our net operating loss carryforwards and other net deferred tax assets.

At June 30, 2014, we had estimated U.S. net operating loss carryforwards of approximately $11 million for income tax purposes, which expire in varying amounts through 2034. The amount of any benefit from our U.S. tax net operating losses is dependent on: (1) our ability to generate future taxable income, and (2) the unexpired amount of net operating loss carryforwards available to offset amounts payable on such taxable income. Any greater than a fifty percent change in ownership under IRC section 382 places significant annual limitations on the use of our U.S. net operating losses to offset any future taxable U.S. income we may generate. The change in the number of warrants outstanding on May 30, 2014 as a result of the reset provisions of warrants that we issued on November 13, 2013, as more fully discussed in Notes 1 and 5, resulted in a greater than fifty percent change in ownership under IRC section 382. Accordingly, our current net operating losses are limited in use to approximately $7.5 million, based on our preliminary estimates. Certain future transactions could again cause a more than fifty percent ownership change, including (a) additional issuances of shares of common stock by us or (b) acquisitions or sales of shares by certain holders of our shares, including persons who have held, currently hold, or accumulate in the future five percent or more of our outstanding stock.

9. Loss Per Share

A reconciliation of the numerator and denominator of basic and diluted loss per share is provided as follows, in thousands, except per share amounts:

	Three-Months Ended June 30,						Six-Months Ended June 30,
	2014			2013			2014			2013
Numerator for basic and diluted loss per share:
Loss from continuing operations	$	(5,558	)	$	(1,542	)	$	(933	)	$	(2,852	)
Denominator for basic and diluted loss per share:
Basic and diluted weighted-average shares outstanding (1)		19,913			9,042			14,758			8,941
Loss per share— basic and diluted:
Total — basic and diluted	$	(0.28	)	$	(0.17	)	$	(0.06	)	$	(0.32	)

(1) The following stock options, warrants and shares issuable under right to shares agreements, investor relations consulting agreement and upon conversion of convertible notes payable outstanding at June 30, 2014 and 2013 were not included in the computation of dilutive loss per share because the net effect would have been anti-dilutive:

	June 30, 2014		June 30, 2013
	(in thousands)
Stock options		2,238		2,712
Warrants		16,255		436
Shares issuable under investor relations consulting agreement		200	__
Shares issuable upon conversion of convertible notes payable		10,039		2,185
		28,732		5,333

Subsequent to June 30, 2014, the number of warrants outstanding has been increased and the shares issuable upon conversion of convertible notes payable has been increased as more fully discussed in Note 14

10. Related Party Transactions

As of June 30, 2014, we have entered into notes payable with related parties and a shared services agreement and letter agreements with a former related party. In addition, in June 2013, we sold common stock to a member of our board of directors. Each of these transactions is more fully described in Notes 10 and 14 to our consolidated financial statements included in our Annual Report on Form 10-K/A filed with the SEC on August 19, 2014. Certain of the related-party notes payable are also discussed in Note 5.

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Accrued Expenses

Included in accrued expenses at June 30, 2014 and December 31, 2013 are approximately $2.0 million and $1.6 million, respectively, owed to the Company's corporate officers and directors.

11. Commitments and Contingencies

We have entered into employment agreements with Mr. Scott Silverman, our Chief Executive Officer, Mr. Randolph Geissler, our President and Mr. Michael Krawitz our Chief Legal and Financial Officer. Messrs. Silverman and Geissler’s employment agreements are discussed in Note 11 and Mr. Krawitz’ employment agreement is discussed in Note 14 to our consolidated financial statements included in our Annual Report on Form10-K/A filed with the SEC on August 19, 2014.  No changes were made to these agreements during the six-months ended June 30, 2014.

Liquidation of Signature Industries, Limited

In March 2013, VC appointed a liquidator and initiated the formal liquidation of a U.K. subsidiary, Signature Industries Limited (“Signature”), primarily related to its outstanding liabilities. VC used £40,000 ($61,000) of the purchase price from the sale of Signature’s former division, Digital Angel Radio Communications Limited (“DARC”) to satisfy its estimated portion of Signature’s outstanding liabilities. However, one party has submitted a claim to the liquidator for approximately £244,000 (U.S. $0.4 million). This claim is associated with an outsourced manufacturing agreement related to a terminated manufacturing contract. As a result of the termination of the contract, Signature did not purchase any product under the manufacturing agreement and, accordingly, VC, in consultation with outside legal counsel, does not believe that any amount is owed per the terms of the agreement. However, this claim could result in VC having to pay an additional estimated portion of Signature’s outstanding liabilities. We expect the liquidation to be completed by the end of 2014, although it could extend beyond the expected timeframe.

12. Legal Proceedings

We have been informed by the New Jersey Department of Environmental Protection that a predecessor business sold a building in 2006 for which an environmental action has been claimed. The claim is being reviewed by the Company’s outside legal counsel. We have not yet determined the impact on our financial condition or cash flows, if any.

13. Supplemental Cash Flow Information

We had the following non-cash operating, investing and financing activities (in thousands):

	For the Six- Months Ended June 30, 2014		For the Six- Months Ended June 30, 2013
Non-cash operating activities:
Royalty obligations now included in accrued expenses	$	100		—
Non-cash investing and financing activities:
Issuance of common stock in full payment of note payable and accrued interest		—		420
Issuance of common stock in partial payment of note payable and accrued interest		70		—
Issuances of common stock in payment of notes payable		135		—
Conversion of promissory note under Right to Shares Agreement		191		—
Issuance of a warrant in connection with a promissory note		66
Cashless expense of warrants		6,990

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14. Subsequent Events 

Consulting and Advisory Relationships and Impact on Promissory Notes and Warrants

On July 1, 2014, July 14, 2014, and July 15, 2014, the Company entered into consulting and advisory agreements with Hanover Financial Services (“HFS”), SmallCapVoice.com, Inc. (“SCV”) and RedChip Companies Inc., respectively, relating to investor relations services.  Under the terms of the agreements, the Company issued 550,000 shares of common stock to HFS, 500,000 shares of common stock to SCV and 500,000 shares of common stock to Redchip.  The Company had previously accrued for the issuance of 200,000 shares to Redchip. Accordingly, as a result of the issuances, the Company will record, for the quarter ending September 30, 2014, charges of $77,000, $45,000, and $24,000, respectively, for the issuances of 550,000 shares to HFS 500,000 shares to SCV and 300,000 additional shares to Redchip.  Under the terms of financing transactions entered into on November 13, 2013 and on May 30, 2014, the conversion price of notes and the exercise price of warrants issued in connection with such transactions automatically adjusts following the issuance of common stock at a price per share less than the previously-applicable exercise price or conversion price.  The previously applicable price was $0.20 per share.  Because the issuance to Redchip resulted in a charge of $24,000, it is deemed to be an issuance of shares of common stock at a price per share of $0.08 per share.  Based on that, as of July 15, 2014, the exercise price and conversion price in connection with the notes issued in the November 13, 2013 financing transaction and the conversion price in connection with the notes issued in the May 30, 2014 financing transaction, reset to $0.08 per share.  Under the terms of the warrants, the aggregate exercise price must remain the same, so the number of shares of common stock subject to warrant are increased.  Accordingly, following July 15, 2014, the number of shares issuable upon conversion of the notes was 17,661,115 shares of common stock and the number subject to warrant was 38,787,016 shares at an exercise price of $0.08.

Promissory Notes

We have entered into the following promissory notes subsequent to June 30, 2014: 

Securities Purchase Agreement and Convertible Promissory Note Effective July 15, 2014

Effective July 15, 2014, the funding date, the Company entered into a securities purchase agreement with an accredited investor. Pursuant to the terms of the purchase agreement, the Company issued and sold to the purchaser a convertible promissory note in the aggregate principal amount of $83,500. The note, which accrues interest at a rate of 8% per annum, will mature on April 14, 2015. The note provides the Company with several pre-payment options with varying amount due depending upon the timing of the prepayment. The note may be converted in whole or in part into the Company's common stock, at the option of the holder, at any time following 180 days after issuance and until the maturity date, unless the conversion or share issuance under the conversion would cause the holder to beneficially own in excess of 4.99% of the Company’s common stock. The conversion price shall be 61% multiplied by the market price. Market price means the average of the lowest three (3) trading prices for the Company’s common stock during the ten (10) trading day period ending on the latest complete trading day prior to the date of conversion. If and whenever the Company issues or sells, or is deemed to have issued or sold, any shares of common stock for a consideration per share less than a price equal to the conversion price in effect immediately prior to such issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the conversion price then in effect shall be reduced to an amount equal to the new issuance price. 

The note contains certain covenants and restrictions, including, among others, that, for so long as the note is outstanding the Company will not dispose of certain assets and will maintain its listing on the over-the-counter market. Events of default under the note include, among others, failure to pay principal or interest on the note or comply with certain covenants under the note.

Convertible Note Effective July 16, 2014

Effective July 16, 2014, the funding date, the Company entered into a convertible note with an accredited investor in an amount up to $500,000. On July 16, 2014, the Company received $125,000 as the initial consideration under the terms of the note. The investor may pay additional consideration to the Company in such amounts and at such dates as the Investor may choose in its sole discretion. The note bears an original issue discount of 10% of the amounts funded by the investor and bears no interest for the first 90 days after each payment of consideration. If any amount funded is not paid within the 90 day period, a one-time interest payment of 12% of the amount funded becomes due. The maturity date is two years from the effective date of each payment of consideration made to the Company by the investor. The note may be converted in whole or in part into the Company's common stock, at the option of the investor. The conversion price is the lesser of $0.14 or 60% of the lowest trade price in the 25 trading days previous to the conversion. Unless otherwise agreed in writing by both parties, at no time will the investor convert any amount of the note into common stock that would result in the investor owning more than 4.99% of the Company’s common stock outstanding.

The note provides for the Company to include the shares underlying the note in any subsequently filed registration statement to the extent that the Company files a registration statement with the SEC. Failure to do so will result in liquidated damages of 25% of the outstanding principal balance of the note, but not less than $25,000, being immediately due and payable to the Investor at its election in the form of cash payment or addition to the balance of this note.

So long as the note is outstanding, upon any issuance by the Company or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Investor in the note, then the Company shall notify the Investor of such additional or more favorable term and such term, at the investor’s option, shall become a part of the transaction documents with the investor.

 The note contains certain covenants and restrictions, including, among others, that, for so long as the note is outstanding, the Company shall not become delinquent in its filing requirements as a fully-reporting issuer registered with the SEC or become ineligible to use the DTC system when issuing the Company’s common stock. Events of default under the note include, among others, failure to pay principal or interest on the note or comply with certain covenants under the note.

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Securities Purchase Agreement effective August 6, 2014, 8% Convertible Redeemable Notes due July 31, 2015 and Collateralized Secured Promissory Note due July 31, 2015

VeriTeQ Corporation (the “Company”) entered into a securities purchase agreement, (the “SPA’), dated July 31, 2014 and effective August 6, 2014, with an accredited investor (the “Buyer”). Pursuant to the terms of the SPA, the Company issued and sold to the Buyer two 8% convertible promissory notes in the amount of $75,000 each. The first note for $75,000 (the “8% Note”) was paid for by the Buyer on August 6, 2014 in cash, less transaction expenses. The second note (“8% Second Note”) was paid for by the issuance of an offsetting $75,000 secured note issued to the Company by the Buyer, (the “8% Buyer Note”) which is to be paid in cash to the Company within 8 months.

The 8% Note matures on July 31, 2015. It may be converted in whole or in part into the Company's common stock, at the option of the holder, at any time following 180 days after issuance and until the maturity date. The conversion price shall be 61% of the average of the three lowest closing bid prices of the Company’s common stock for the fifteen prior trading days, including the day upon which the conversion notice is received by the Company. During the first 180 days that 8% Note is in effect, the Company may redeem the note by paying to the holder an amount equal to 150% of the face amount plus any accrued interest. The 8% Note may not be prepaid after the 180th day. Interest on any unpaid principal balance of 8% Note shall be paid at the rate of 8% per annum. Interest on the 8% Note shall be paid by the Company in shares of its common stock, referred to as Interest Shares. The holder may, at any time, send in a notice of conversion to the Company for Interest Shares based on the formula provided above for principal conversions.

The 8% Second Note matures on July 31, 2015. The holder of the 8% Second Note is entitled, at its option, after the expiration of the requisite Rule 144 holding period and after full cash payment of the 8% Buyer Note, to convert all or any amount of the principal face amount of the 8% Second Note then outstanding into shares of the Company's common stock without restrictive legend of any nature, at a conversion price for each share of the Company’s common stock equal to 61% of the average of the three lowest closing bid prices of the Company’s common stock for the fifteen prior trading days, including the day upon which the conversion notice is received by the Company. The 8% Second Note may not be prepaid, except in certain circumstances described therein. Interest on any unpaid principal balance of the 8% Second Note shall be paid by the Company in Interest Shares. The holder may, at any time, send in a notice of conversion to the Company for Interest Shares based on the formula provided above for principal conversions.

The 8% Note and the 8% Second Note contain certain covenants and restrictions, including, among others, that, for so long as the notes are outstanding the Company will not dispose of certain assets and will maintain its listing on the over-the-counter market. Events of default under the note include, among others, failure to pay principal or interest on the note or comply with certain covenants under the note.

As discussed above, the Buyer issued to the Company, the 8% Buyer Note, also referred to as the Collateralized Secured Promissory Back End Note, in the amount of $75,000, which matures no later than March 31, 2015, unless the Company does not meet the “current information requirements” required under Rule 144 of the Securities Act of 1933, as amended, in which case the Buyer may declare the 8% Second Note to be in default (as defined in that note) and cross cancel its payment obligations under the 8% Buyer Note against the Company’s payment obligations under the 8% Second Note. The 8% Buyer Note shall bear simple interest at the rate of 8%. The Buyer may, at its option, prepay the 8% Buyer Note at any time. The 8% Buyer Note may not be assigned by the Company, except by operation of law..

Securities Purchase Agreement effective August 4, 2014, 12% Convertible Redeemable Notes due August 4, 2015 and Collateralized Secured Promissory Note due August 4, 2015

The Company entered into a securities purchase agreement, (the “Purchase Agreement’), effective August 4, 2014, with an accredited investor (the “Lender”). Pursuant to the terms of the Purchase Agreement, the Company issued and sold to the Lender two 12% convertible promissory notes in the amount of $50,000 each. The first note for $50,000 (the “12% Note”) was paid for by the Lender on August 4, 2014 in cash, less transaction expenses. The second note (the “12% Second Note”) was initially paid for by the issuance of an offsetting $50,000 secured note issued to the Company by the Lender, (the “12% Lender Note”), which is to be paid in cash to the Company within 8 months.

The 8% Note matures on August 4, 2015. It may be converted in whole or in part into the Company's common stock, at the option of the holder, at any time following 180 days after issuance and until the maturity date. The conversion price shall be 61% of the average of the three lowest closing bid prices of the Company’s common stock for the twenty prior trading days, including the day upon which the conversion notice is received by the Company. During the first 180 days the 12% Note is in effect, the Company may redeem the note by paying to the holder an amount equal to 150% of the face amount plus any accrued interest. The 12% Note may not be prepaid after the 180th day. Interest on any unpaid principal balance of 12% Note shall be paid at the rate of 12% per annum. Interest on the 12% Note shall be paid by the Company in shares of its common stock, referred to as Interest Shares. The holder may, at any time, send in a notice of conversion to the Company for Interest Shares based on the formula provided above for principal conversions.

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The 12% Second Note matures on August 4, 2015. The holder of the 12% Second Note is entitled, at its option, after the expiration of the requisite Rule 144 holding period and after full cash payment of the 12% Lender Note, to convert all or any amount of the principal face amount of the 12% Second Note then outstanding into shares of the Company's common stock without restrictive legend of any nature, at a conversion price for each share of the Company’s common stock equal to 61% of the average of the three lowest closing bid prices of the Company’s common stock for the twenty prior trading days, including the day upon which the conversion notice is received by the Company. The 12% Second Note may not be prepaid, except in certain circumstances described therein. Interest on any unpaid principal balance of the 12% Second Note shall be paid by the Company in Interest Shares. The holder may, at any time, send in a notice of conversion to the Company for Interest Shares based on the formula provided above for principal conversions.

The 12% Note and the 12% Second Note contain certain covenants and restrictions, including, among others, that, for so long as the notes are outstanding the Company will not dispose of certain assets and will maintain its listing on the over-the-counter market. Events of default under the note include, among others, failure to pay principal or interest on the note or comply with certain covenants under the note.

As discussed above, the Lender issued to the Company, the 12% Lender Note, also referred to as the Collateralized Secured Promissory Back End Note, in the amount of $50,000, which matures no later than April 4, 2015, unless the Company does not meet the “current information requirements” required under Rule 144 of the Securities Act of 1933, as amended, in which case the Lender may declare the 12% Second Note to be in default (as defined in that note) and cross cancel its payment obligations under the 12% Lender Note against the Company’s payment obligations under the 12% Second Note. The 12% Lender Note shall bear simple interest at the rate of 12%. The Lender may, at its option, prepay the 12% Lender Note at any time. The 12% Lender Note may not be assigned by the Company, except by operation of law.

Impact of Promissory Notes and Warrants of Variable Priced Promissory Notes

Under the terms of a financing from November 13, 2013 and on May 30, 2014, the holders of the notes and warrants issued in connection with such transactions, following the issuance of any security with a variable price conversion feature, may substitute the variable price formula for their exercise or conversion prices.  The promissory notes described above contain a variable price conversion feature. As a result, the holder of a warrant issued on November 13, 2013 may substitute a formula resulting in a lower price.  Moreover, the warrants provide that the holder of the warrant has the right to invest the same aggregate amount.  Accordingly, whenever a lower price applies, a larger number of shares may be purchased.   The exact number of shares that may be issued varies depending on the stock price at the time of exercise or conversion.  On August 12, 2014, if all of the outstanding warrants issued in connection with the Novermber 13, 2013 financing had been exercised, the alternative price formulation could have resulted in an increase in the number of warrants from 38,787,016 at an exercise price of $0.08 per share to warrants to acquire 144,851,212 shares of the Company's common stock at an exercise price of $0.021 per share.  The warrant holders have the right to effect a cashless exercise by accepting fewer shares and not tendering cash.  On August 12, 2014, $1,413,000 principal amount of notes issued in connection with the November 13, 2013 and May 30, 2014 financings was outstanding.  If all such outstanding notes had been converted on such date, it would have resulted in an issuance of approximately 66,900,000 shares and the elimination of the liability for the Company.  Because the variable price formula changes with the value of the common stock, the number of shares subject to warrant and the number of shares into which the notes are convertible varies. 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

This quarterly report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements concern expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this quarterly report contains forward-looking statements including, but not limited to:

● that our ability to continue as a going concern is dependent upon our ability to obtain financing in the coming days to fund our operations, the continued development of our products and our working capital requirements;

● our expectation that operating losses will continue for the foreseeable future, and that until we are able to achieve profits, we intend to continue to seek to access the capital markets to fund the development of our products;

● that our cash position is critically low and that we need to raise additional funds in the coming days to fund our operations and that we may not be able to obtain additional debt or equity financing on favorable terms, if at all;

● that our revenue from our Q Inside Safety Technology will continue to increase and that we will realize revenue from sales of our dosimeter products beginning in 2015;

● our expectations and expected trends with respect to the potential microtransponder revenue and scanner revenue for the breast implant, vascular port and artificial joint markets;

● that if our products fail to gain market acceptance, we will be unable to achieve the necessary revenues which will allow us to remain in business;

● that our results may differ materially from those reflected in our forward looking statements;

● that our products have certain technological advantages, but maintaining these advantages will require continual investment for development and in sales and marketing;

● that we intend to continue to explore strategic acquisition opportunities of businesses that are complementary to ours;

● our ability to preserve our intellectual property and trade secrets and operate without infringing on the proprietary rights of third parties; 

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● that we will have the funds necessary to fund our business for the twelve months ended June 30, 2015;

● our ability to maintain compliance with the provisions of the notes and warrants and related agreements from the our various financings; 

● that we believe that we will have the financial ability to make all payments with respect to the November 2013 and our other outstanding financings;

● that any amount is owed under the terms of the manufacturing agreement with our subsidiary, Signature Industries Limited and that we will have the funds necessary to pay amounts that may become due as a result of the liquidation of Signature Industries Limited, which is in process;

● that our results of operations are not materially impacted by moderate changes in the inflation rate;

● the potential of further dilution to our common stock based on transactions effected involving issuance of shares;

● volatility in our stock price;

● our ability to continue to execute all required filings, tax returns, maintain insurance and perform other required activities to maintain our standing as a publicly-trading company;

● our ability to add employees during the latter half 2014 and beyond as we begin to ship our products and to grow our business;

● our ability to establish and maintain proper and effective internal accounting and financial controls;

● our ability to comply with current and future regulations related to our business; and

● our actual results may differ materially from those reflected in forward-looking statements as a result of: (i) the risk factors described under the heading “Risk Factors” beginning on page 11 of our Annual Report on Form 10-K for the year ending December 31, 2013 as amended and in our other public filings, (ii) general economic, market, regulatory or business conditions, (iii) the opportunities (or lack thereof) that may be presented to and pursued by us, (iv) competitive actions by other companies, (v) changes in laws, and (vi) other factors, many of which are beyond our control.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “could,” “would,” “anticipates,” “expects,” “attempt,” “intends,” “plans,” “hopes,” “believes,” “seeks,” “estimates” and similar expressions intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from estimates or forecasts contained in the forward-looking statements. Some of these risks and uncertainties are beyond our control. Also, these forward-looking statements represent our estimates and assumptions only as of the date the statement was made.

The information in this quarterly report is as of June 30, 2014, or, where clearly indicated, as of the date of this filing. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. We also may make additional disclosures in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that we may file from time to time with the Securities Exchange Commission, or SEC. Please also note that we provided a cautionary discussion of risks and uncertainties in our Annual Report on Form 10-K for the year ended December 31, 2013 as amended. These are factors that could cause our actual results to differ materially from expected results and they should be reviewed carefully.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes included in Item 1 of this report as well as our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on April 15, 2014 as amended on August 19, 2014.

Overview 

On June 24, 2013, VeriTeQ Corporation ("VC" or the "Company") acquired its wholly-owned subsidiary, VeriTeQ Acquisition Corporation ("VAC"), pursuant to the terms of a share exchange agreement (the “Exchange Agreement”) pursuant to which VC became the legal acquirer of VAC and VAC became the accounting acquirer of VC pursuant to the terms of the Exchange Agreement, which closed on July 8, 2013 (the “VeriTeQ Transaction”). In January 2012, VAC acquired all of the outstanding stock of PositiveID Animal Health Corporation (“PAH”) a Florida corporation from PositiveID Corporation, which was then a related party. In December 2012, VAC formed a subsidiary, VTQ IP Holding Corporation, a Delaware corporation. VAC was founded in December 2011 and is engaged in the business of radio frequency identification technologies (“RFID”) for the Unique Device Identification (“UDI”) of implantable medical devices, and radiation dose measurement technologies for use in radiation therapy treatment. The Exchange Agreement and the VeriTeQ Transaction are more fully described in Note 1 to the accompanying unaudited condensed consolidated financial statements.

As a result of the VeriTeQ Transaction, our operations now consist primarily of 13 U.S.-based corporate employees, and five board members, four of whom are non-employee board members. We added four employees during the fourth quarter of 2013 as we began to ship our products and two employees during the first quarter of 2014: our new chief legal and financial officer and a former consultant. Our plan is to outsource our manufacturing operations and to maintain a lean organizational structure.     

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VeriTeQ is in the development stage as defined by Accounting Standards Codification subtopic 915-10 Development Stage Entities, or ASC 915-10, and its success depends on its ability to obtain financing and realize its marketing efforts. To date, VeriTeQ has generated minimal sales revenue, has incurred expenses and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise.

Our headquarters is located in Delray Beach, Florida. We expect to continue to execute all required filings, tax returns and perform other required activities to maintain our standing as a publicly-traded company. Also see the discussion below under the heading Liquidity and Capital Resources, which discusses our expectations regarding liquidity and our ability to continue as a going concern.

Critical Accounting Policies

Our critical accounting policies are presented in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K/A for the year-ended December 31, 2013 filed with the SEC on August 19, 2014.

Impact of Recently Issued Accounting Standards 

For information regarding recent accounting pronouncements and their expected impact on our future consolidated results of operations or financial condition, see Note 1 to our accompanying unaudited condensed consolidated financial statements.

Results of Operations

Our consolidated operating activities used cash of $1.2 million and $0.3 million during the six-months ended June 30, 2014 and 2013, respectively. As of June 30, 2014, our cash on hand totaled $0.1 million compared to $13 thousand as of December 31, 2013. As of June 30, 2014, our stockholders’ deficit was $7.1 million, and as of June 30, 2014, we had an accumulated deficit of $20.8 million. Our consolidated net loss was $5.6 million and $1.5 million for the three-months ending June 30, 2014 and 2013, respectively and $0.9 million and $2.9 million for the six-months ended June 30, 2014 and 2013, respectively.

We are a development stage company through June 30, 2014. We recorded approximately $0.1 million of revenue from sales of our Q Inside Safety Technology products since our inception on December 14, 2011, with sales beginning in the fourth quarter of 2013. Our profitability and liquidity depend on many factors, including our ability to successfully develop and bring to market our products and technologies the maintenance and reduction of expenses, and our ability to protect the intellectual property rights of VeriTeQ and others that we may acquire.

We need to raise additional funds immediately and continuing until we begin to ship our products – see “Liquidity and Capital Resources” below.

Financing Transactions During the Three-Months Ended June 30, 2014

During the three-months ended June 30, 2014, we issued several promissory notes, including two convertible promissory notes issued on May 30, 2014. As a result of our issuing the May 30, 2014 promissory notes certain reset provisions under convertible promissory notes and warrants that we had issued in connection with a November 13, 2013 financing were triggered. The reset provisions resulted in significant changes in the number of outstanding warrants and in the value of warrants liabilities. These charges are more fully discussed below. We also entered into two Right to Shares Agreements during June 2014. These transactions are more fully discussed in Notes 1 and 5 to the accompanying unaudited condensed consolidated financial statements.

Three-Months Ended June 30, 2014 Compared to June 30, 2013

Revenue and Gross Profit

We generated $21 thousand of revenue and $13 thousand of gross profit during the three-months ended June 30, 2014 related to the sale of our Q Inside Safety Technology products – microtransponders and readers/scanners. We did not generate any revenue and gross profit during the three-months ended June 30, 2013.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were relatively constant at $1.2 million and $1.1 million for the three-months ended June 30, 2014 and 2013, respectively.

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Development Expenses

Development expense was $0.1 million for the three-months ended June 30, 2014 and nil for the three-months ended June 30, 2013. Development expenses consist primarily of salaries and benefits and consulting expenses related to ongoing efforts to develop client and end user application programming interfaces, or APIs. Development expenses also relate to product testing costs.

Depreciation and Amortization Expense

We incurred $0.1 million and $0.1 million of amortization expense for the three-months ended June 30, 2014 and 2013, respectively. The expense related primarily to amortization of technology, customer relationship and trademarks resulting from two acquisitions during 2012.

Operating Loss

Operating loss remained relatively constant at approximately $1.4 million and $1.3 million for the three-months ended June 30, 2014 and 2013, respectively.

Change in Value of Convertible Debt with Embedded Option Feature

Change in value of convertible debt with embedded option feature resulted in other income of approximately $0.4 million for the three-months ended June 30, 2014. We did not incur a change in value of convertible debt with embedded option feature during the three-months ended June 30, 2013. The note was entered into in December 2012 in connection with the acquisition of our dosimeter technology assets. The debt is convertible into one-third of the shares of our common stock held beneficially by our CEO. As a result of the significant decrease in the value of our common stock at June 30, 2014 compared to March 31, 2014, we valued the debt at June 30, 2014 at its initial fair value, which was approximately $2.1 million. In the future, increases in our stock price will result in other expense and reductions in our stock price may result in additional income to the extent that the fair value of the debt does not fall below the initial fair value.

Change in Value of Conversion Option of Convertible Notes

Change in value of the conversion option of convertible notes was approximately $2.6 million for the three-months ended June 30, 2014. We did not incur a change in value of conversion option of convertible notes during the three-months ended June 30, 2013. These notes with an embedded derivative (conversion option) were issued November 13, 2013 and May 30, 2014. During the three-months ended June 30, 2014, the conversion price of the notes issued on November 13, 2013 was reset to $0.20 per share from $0.75 per share of the Company’s common stock. The notes issued on May 30, 2014 were issued with a conversion price of $0.20 per share of the Company’s common stock. As long as the notes remain outstanding, changes in the fair value of the conversion options will result in other expense/income.

Change in Value of Warrant Liabilities

Change in value of warrant liabilities resulted in other expense of approximately $6.0 million for the three-months ended June 30, 2014. We did not incur a change in value of warrant liabilities during the three-months ended June 30, 2013. The warrants were issued in connection with a financing entered into on November 13, 2013 and are being revalued each reporting period with changes in the value being reported as other income or expense. On May 30, 2014, we entered into a financing that triggered the reset provisions under the warrants and as a result, the exercise price of the common stock warrants was changed to $0.20 per share from $2.84 per share of our common stock and the number of common stock warrants was increased from common stock warrants to acquire 2,966,444 shares of our common stock to common stock warrants to acquire 41,811,114 shares of our common stock, subject to adjustment based on the cashless provisions of the warrants. The reset resulted in a significant amount of other expense being recorded on May 30, 2014. However, primarily as a result of a significant decrease in the price of our common stock subsequent to May 30, 2014, the value of the warrants decreased, which partially offset the expense.

Other Expense

Other expense was $6 thousand for the three-months ended June 30, 2014. We did not incur other expense during the three-months ended June 30, 2013.

Interest Expense

Interest expense was $1.1 million and $0.3 million for the three-months ended June 30, 2014 and 2013, respectively. A significant portion of our interest expense in both periods is non-cash interest expense due to the accretion of debt discounts. Also, we recorded approximately $0.6 million of interest expense during the three-months ended June 30, 2014 for the initial fair value of the conversion option of convertible notes issued on May 30, 2014. We have entered into and expect to continue to enter into convertible debt financings, which may include beneficial conversion features and embedded conversion options, under which we may be required to record significant interest expense in future periods.

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Six-Months Ended June 30, 2014 Compared to June 30, 2013

Revenue and Gross Profit

We generated approximately $0.1 million of revenue and $49 thousand of gross profit during the six-months ended June 30, 2014 related to the sale of our Q Inside Safety Technology products – microtransponders and readers/scanners. We did not generate any revenue and gross profit during the six-months ended June 30, 2013. We expect our revenue to continue to increase during 2014 and beyond as we fulfill orders under our existing development and supply contract with our customer, Establishment Labs, and as we obtain new customers. During 2014, we expect the majority of revenue generated to be related to sales our Q Inside Safety Technology products for the breast implant market. We hope to begin realizing revenue from sales of our dosimeter products beginning in 2015.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were approximately $2.5 million for the six-months ended June 30, 2014 compared to selling, general and administrative expenses of $2.1 million for the six-months ended June 30, 2013. The $0.4 million increase in selling, general and administrative expense was due primarily to an increase in investor relations services expenses, higher personnel related costs and higher insurance and accounting expenses. These additional costs were incurred to support our growth and to handle the additional demands created by our becoming a public company as a result of the VeriTeQ Transaction, which closed on July 8, 2013. Partially offsetting the increase was a reduction in non-cash compensation expense of approximately $0.6 million in the six-months ended June 30, 2014 as compared to the 2013 period as we had fewer stock options vesting in the current period. We expect our selling, general and administrative expenses to remain at the current level during 2014 and to increase in future years as we grow our business.

Development Expenses

Development expense was $0.1 million for the six-months ended June 30, 2014 and $9 thousand for the six-months ended June 30, 2013. Development expenses for the six-months ended June 30, 2014 consist primarily of salaries and benefits and consulting expenses related to ongoing efforts to develop client and end user application programming interfaces, or APIs. Development expenses also relate to product testing costs. We expect development expenses to continue to increase during 2014 and beyond as we focus more efforts on expanding our technology products’ features, database development and creating new applications for our products.

Depreciation and Amortization Expense

We incurred $0.3 million and $0.3 million of amortization expense for the six-months ended June 30, 2014 and 2013, respectively. The expense related primarily to amortization of technology, customer relationship and trademarks resulting from two acquisitions during 2012. We expect depreciation and amortization expense to remain at the current levels during most of 2014 and for the expense to increase in future years as we expand our business operations.

Operating Loss

Operating loss was approximately $2.9 million and $2.4 million for the six-months ended June 30, 2014 and 2013, respectively. The increase in the loss was primarily due to the increase in selling, general and administrative expenses, which are more fully discussed above. An increase in development expenses also contributed to the increase in the loss during the 2014 period.

Change in Value of Convertible Debt with Embedded Option Feature

Change in value of convertible debt with embedded option feature resulted in other income of approximately $2.8 million for the six-months ended June 30, 2014. We did not incur a change in value of convertible debt with embedded option feature during the six-months ended June 30, 2013. The note was entered into in December 2012 in connection with the acquisition of our dosimeter technology assets. The debt is convertible into one-third of the shares of our common stock held beneficially by our CEO. As a result of the significant decrease in the value of our common stock at June 30, 2014 compared to December 31, 2013, we valued the debt at June 30, 2014 at its initial fair value, which was approximately $2.1 million, In the future, increases in our stock price will result in other expense and reductions in our stock price may result in additional income to the extent that the fair value of the debt does not fall below the initial fair value.

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Change in Value of Conversion Option of Convertible Notes

Change in value of the conversion option of convertible notes was approximately $3.6 million for the six-months ended June 30, 2014. We did not incur a change in value of conversion option of convertible notes during the six-months ended June 30, 2013. The notes with an embedded derivative (conversion option) were issued on November 13, 2013 and May 30, 2014. During the six-months ended June 30, 2014, the conversion price of the notes issued on November 13, 2013 was reset to $0.20 per share from $0.75 per share of the Company’s common stock. The notes issued on May 30, 2014 were issued with a conversion price of $0.20 per share of the Company’s common stock. As long as the notes remain outstanding, changes in the fair value of the conversion options will result in other expense/income.

Change in Value of Warrant Liabilities

Change in value of warrant liabilities resulted in other expense of approximately $2.8 million for the six-months ended June 30, 2014. We did not incur a change in value of warrant liabilities during the six-months ended June 30, 2013. The warrants were issued in connection with a financing enter into on November 13, 2013 and are being revalued each reporting period with changes in the value being reported as other income or expense. On May 30, 2014, we enter into a financing that triggered the reset provisions under the warrants and as a result, the exercise price of the common stock warrants was changed to $0.20 per share from $2.84 per share of our common stock and the number of common stock warrants was increased from common stock warrants to acquire 2,944,444 shares of our common stock to common stock warrants to acquire 41,811,114 shares of our common stock, subject to adjustment based on the cashless provisions of the warrants. The reset resulted in a significant amount of other expense being recorded on May 30, 2014. However, primarily as a result of a significant decrease in the price of our common stock subsequent to May 30, 2014, the value of the warrants decreased, which partially offset the expense.

Other Expense

Other expense was approximately $0.1 million for the six-months ended June 30, 2014. We did not incur other expense during the six-months ended June 30, 2013. Other expense resulted primarily from a loss recognized on the settlement of the receivable from the sale of DARC during the six-months ended June 30, 2014.

Interest Expense

Interest expense was $1.6 million and $0.4 million for the six-months ended June 30, 2014 and 2013, respectively. A significant portion of our interest expense in both periods is non-cash interest expense due to the accretion of debt discounts. Included in interest expense during the six-months ended June 30, 2014 was approximately $0.6 million for the initial fair value of the conversion option of convertible notes issued on May 30, 2014. 

We will continue to record interest expense in connection with the accretion of debt discount for certain outstanding notes payable. At June 30, 2014, the current un-accreted balance of the debt discounts associated with outstanding notes payable was approximately $1.4 million. We have entered into additional convertible debt financings, which include beneficial conversion features and embedded conversion options, which may require us to record significant interest expense in future periods.

Benefit for Income Taxes

We did not have an income tax provision or benefit for the three and six-months ended June 30, 2014 and 2013. The income tax benefit of $0.8 million for the period from December 31, 2011 (Inception) to June 30, 2014 resulted from the utilization of deferred tax assets to offset a deferred tax liability associated with an acquisition we made in January 2012. We have incurred accumulated losses and therefore have provided a valuation allowance against our net operating loss carryforwards and other net deferred tax assets. Also, the change in the number of warrants outstanding on May 30, 2014 as more fully discussed in Notes 1 and 5 resulted in a greater than fifty percent change in ownership under IRC section 382. According, certain portions of our net operating loss carryforwards are limited in use.

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Net Loss

The net loss was approximately $5.6 million and $1.5 million for the three-months ended June 30, 2014 and 2013, respectively, and approximately $0.9 million and $2.9 million for the six-months ended June 30, 2014 and 2013, respectively. The increase in the net losses in for the three and six-months ended June 30, 2014 as compared to the three and six-months ended June 30, 2013 resulted primarily from an increase in interest expense and an increase in the value of the warrant liabilities, partially offset by income from the change in value of convertible debt with embedded option feature. Each of these items is more fully discussed in the narrative above under each respective category.

Environmental Action

We have been informed by the New Jersey Department of Environmental Protection that a predecessor business sold a building in 2006 for which an environmental action has been claimed. The claim in being reviewed by the Company’s outside legal counsel. We have not yet determined the impact on our financial condition or cash flows, if any.

Changing Prices for Inflation

We believe that our results of operations are not materially impacted by moderate changes in the inflation rate. Inflation and changing prices did not have a material impact on our operations in the three and six-months ended June 30, 2014 and 2013.

Liquidity and Capital Resources

As of June 30, 2014, cash was $0.1 million compared to $13 thousand at December 31, 2013.

Net cash used in operating activities was $1.2 million and $0.3 million in the six-months ended June 30, 2014 and 2013, respectively. In both periods, cash was used primarily for selling, general and administrative expenses.

We used cash of $1 thousand to purchase fixed assets during the six-months June 30, 2014 and no cash was used or provided by investing activities during the six-months ended June 30, 2013. 

Net cash provided by financing activities totaled approximately $1.3 million and approximately $0.1 million in the six-months ended June 30, 2014 and 2013, respectively. The cash provided in the 2014 period was from the issuances of promissory notes and release of funds held in restricted bank accounts, partially offset by the partial repayment of senior convertible debt. The cash provided in the 2013 period was from the issuance of a promissory note and the sale of common stock to a member of our board of directors.

Adjustments to reconcile net loss to net cash used in operating activities included the following:

Accounts payable increased to $1.1 million at June 30, 2014 from $0.9 million at December 31, 2013. The increase is due primarily to accounting and legal fees, patent maintenance fees, minimum royalties of $25 thousand that were billed in 2014 and other amounts incurred for selling, general and administrative expenses. We continue to expect accounts payable to increase going forward until such time as we raise enough capital to pay the outstanding invoices, as well as due to the expanded efforts to commercialize our products.

Accrued expenses increased to $3.6 million at June 30, 2014 from $2.7 million at December 31, 2013. The increase is due primarily to higher accrued payroll costs as all bonuses certain salaries are being deferred, accrued investor relations services fees and accrued royalty obligations, among other items. We expect our accrued expenses to continue to increase until such time as we are able to raise enough capital to pay the deferred payroll and other accrued costs.

The liability to a former related party under the shared services agreement remained relatively constant at $0.2 million and $0.2 million at June 30, 2014 and December 31, 2013, respectively. We terminated the shared services agreement effective July 8, 2013.

As we intend to outsource the manufacture of our Q Inside Safety Technology and other products, and to maintain “just-in-time” inventory levels, we do not currently anticipate having to make significant investments in fixed assets or inventory.

Liquidity

We are in the development stage, have incurred operating losses since our inception and we had a working capital deficit of approximately $8.1 million as of June 30, 2014. This compares to a working capital deficiency of approximately $6.2 million at December 31, 2013. These factors raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty.      

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Financing is required immediately and continuing to meet our liquidity needs. Our cash position is critically low, and payments critical to our survival are not being made in the ordinary course. 

On November 13, 2013, we entered into a financing, which is more fully discussed in Note 5 to the accompanying condensed consolidated financial statements. However, the financing was inadequate to meet our liquidity needs. Moreover, the funds generated from the financing to date have been limited due to the requirement that a significant portion of the proceeds be held in restricted bank accounts. At June 30, 2014, only $47 thousand of the proceeds from the November 13, 2013 financing, is still held in the restricted bank accounts, however, in June 2014 $0.4 million of the restricted proceeds was required to be used to repay a portion of one of the notes issued on November 13, 2013. In addition to the November 13, 2013 financing, since December 31, 2013 to August 15, 2014, we have received approximately $1.2 million, from the issuances of other promissory notes of which approximately $0.2 million was from related parties. In order to have the funds necessary to pay: (i) existing accounts payable and accrued expenses; (ii) our notes payable that are due on demand or due within the next twelve months and, in particular, the promissory notes issued on November 13, 2013, which if not converted into common stock mature on November 13, 2014; (iii) the liability under the shared services agreement; and (iv) commitments for capital expenditures, as well as to develop and market our technology products, we need to raise additional capital immediately. We do not know whether such additional capital will be available to us or, if it is available, we do not know if the terms of any financing will be favorable or even acceptable.

Our goal is to achieve profitability and to generate positive cash flows from operations. Our capital requirements depend on a variety of factors, including: (i) whether the notes issued in the November 13, 2013 financing will be converted to stock or be required to be repaid in cash on the maturity date; (ii) the cash required to service our other outstanding debt and in particular those promissory notes that are due on demand; (iii) the cash that will be required to fund our business operations, including the purchasing of capital expenditures related to molds and testing equipment for our Q Inside Safety Technology products; and (iv) the cash required to pay our existing accounts payable and accrued expenses, most of which are past due and/or on extended payment terms, among other items. Failure to raise additional capital in the coming days to fund our operations and to generate positive cash flow from such operations will have a material adverse effect on our financial condition, results of operations and cash flows.

Our historical sources of liquidity have included proceeds from the sale of businesses and assets, the sale of common stock, proceeds from the issuance of debt, including promissory notes issued to related parties, a shared services agreement with a former related party, the deferral of certain salary and bonuses payments to our senior executives and other employees and extended payment terms with certain of our vendors. In addition to these sources, other sources of liquidity may include the raising of capital through additional private placements or public offerings of debt or equity securities, the exercise of stock options, as well as joint ventures. However, going forward some of these sources may not be available, or if available, they may not be on favorable terms. If we were unable to obtain the funds necessary to fund our operations in the coming days, it will have a material adverse effect on our financial condition, results of operations and cash flows and result in our inability to continue operations as a going concern. These conditions indicate that there is substantial doubt about our ability to continue operations as a going concern, as we may be unable to generate the funds necessary to pay our obligations in the ordinary course of business. The accompanying financial statements do not include any adjustments related to the recoverability and classification of asset carrying amounts and classification of liabilities that may result from the outcome of this uncertainty.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “Smaller Reporting Company,” we are not required to provide the information required by this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 240.13a - 15(e) and 240.15d — 15(e)) as of the end of the quarter ended June 30, 2014. Based on that evaluation, they have concluded that our disclosure controls and procedures as of the end of the period covered by this report are not effective in timely providing them with material information relating to us required to be disclosed in the reports we file or submit under the Exchange Act. Our disclosure controls and procedures are designed to provide reasonable assurances of achieving our objectives. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2014 the Company’s disclosure controls and procedures were not effective because of the material weaknesses described below.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The material weaknesses described below resulted in a restatement of the Company’s financial statements for the year ended December 31, 2013 and for the three-months March 31, 2014. As a result, on August 19, 2014, the Company filed amendments to its Annual Report on Form 10-K/A for the year ended December 31, 2013 and Quarterly Report on Form 10-Q/A for the three-months ended March 31, 2014. Management became aware of the material weaknesses described below during the preparation of this Quarterly Report on Form 10-Q for the period ended June 30, 2014 and, therefore, management has concluded that as of June 30, 2014, the material weaknesses in internal control over financial reporting described below were present.

The material weaknesses included deficiencies in the period-end financial reporting process including insufficient complement of personnel with a level of accounting knowledge commensurate with the Company’s financial reporting requirements and ineffective monitoring and review activities.

As a result of the material weaknesses in internal control over financial reporting described above, management has concluded that, as of June 30, 2014, the Company’s internal control over financial reporting was not effective based on the criteria established in Internal Control — Integrated Framework (1992) issued by COSO. To address the material weaknesses described above, the Company performed additional analyses and other procedures, including reviewing each of the balance sheet accounts and the methods used to determining the fair value of its liabilities to ensure that the Company’s consolidated financial statements were prepared in accordance with U.S. GAAP. Accordingly, the Company’s management believes that the consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows for the periods presented and that this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periods covered by this report.

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Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s system of internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with U.S. GAAP. Internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and to provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect every misstatement. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may decrease over time.

Change in Internal Control Over Financial Reporting

Management became aware of the material weaknesses described above during the preparation of this Quarterly Report on Form 10-Q for the period ended June 30, 2014. To address the material weaknesses, the Company performed additional analyses and other procedures, including reviewing each of the balance sheet accounts and the methods used to determining the fair value of its liabilities as presented in its unaudited condensed consolidated financial statements at and as of June 30, 2014. However, the material weaknesses have not been fully remediated as of the filing date of this report.

PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

See Item 1 of Part I, “Financial Statements — Note 12 – Legal Proceedings.”

ITEM 1A.   RISK FACTORS

As a “Smaller Reporting Company,” we are not required to provide the information required by this item.

ITEM 2 . UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As reported in Note 1 and Note 5 to the Company’s financial statements included in Item 1 of this report, the Company entered into a financing transaction on May 30, 2014 (the “May 30 Financing”). That transaction triggered certain convertible features in, and/or warrant issuances required by, the following notes, all of which have been more fully described in the annual report on Form 10-K for the period ended December 31, 2013 as amended or the quarterly report on Form 10-Q for the quarter ended March 31, 2014, as amended and in Note 5 to the financial statements included in Item 1 of this report:

1. The $25,000 March 5, 2014 promissory note with Deephaven Enterprises, Inc. Following the May 30 Financing, the note allowed the holder to convert the note, or any part thereof, into shares of common stock of the Company. The number of shares of common stock issuable upon conversion of any conversion amount shall be determined by dividing (x) such conversion amount by (y) the conversion price. Conversion amount means the sum of (x) portion of the principal to be converted, redeemed or otherwise with respect to which this determination is being made and (y) all accrued and unpaid interest with respect to such portion of the principal amount. Conversion price means $0.35, adjusted for any stock splits, reverse stock splits or similar transactions.

 2. The $25,000 March 6, 2014 promissory note with James Rybicki Trust. Following the May 30 Financing, the note allowed the holder to convert the note, or any part thereof, into common stock of the Company. The number of shares of common stock issuable upon conversion of any conversion amount shall be determined by dividing (x) such conversion amount by (y) the conversion price. Conversion amount means the sum of (x) portion of the principal to be converted, redeemed or otherwise with respect to which this determination is being made and (y) all accrued and unpaid interest with respect to such portion of the principal amount. Conversion price means $0.35, adjusted for any stock splits, reverse stock splits or similar transactions.

3. The $25,000 March 10, 2014 promissory note with William Caragol. Following the May 30 Financing, the note allowed the holder to convert the note, or any part thereof, into shares of common stock of the Company. The number of shares of common stock issuable upon conversion of any Conversion Amount shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price. “Conversion Amount”means the sum of (x) portion of the principal to be converted, redeemed or otherwise with respect to which this determination is being made and (y) all accrued and unpaid interest with respect to such portion of the principal amount. “Conversion Price”means $0.35, adjusted for any stock splits, reverse stock splits or similar transactions.

4. The $61,225 March 20, 2014 promissory note with Deephaven Enterprises, Inc. Following the May 30 Financing, the note provided that certain warrants held by the Deephaven Enterprises, Inc. or its owner: (i) would be amended to change the exercise price thereof to $.35 per shares; and (ii) would allow the holder to tender the note at any time in lieu of payment of the exercise price on any warrants held by the holder or owner. It also triggered a provision that requires the Company to issue a new warrant to acquire 300,000 shares of the Company’s common stock at a price of $.35 per share.

5. The $30,000 April 16, 2014 promissory note with Ned Siegel. Following the May 30 Financing, the note allowed the holder to convert the note, or any part thereof, into common stock of the Company. The number of shares of common stock issuable upon conversion of any conversion amount shall be determined by dividing (x) such conversion amount by (y) the conversion price. Conversion amount means the sum of (x) portion of the principal to be converted, redeemed or otherwise with respect to which this determination is being made and (y) all accrued and unpaid interest with respect to such portion of the principal amount. Conversion price means $0.35, adjusted for any stock splits, reverse stock splits or similar transactions.

6. The $20,000 May 1, 2014 promissory note with Ned Siegel. Following the May 30 Financing, the note allowed the holder to convert the note, or any part thereof, into common stock of the Company. The number of shares of common stock issuable upon conversion of any conversion amount shall be determined by dividing (x) such conversion amount by (y) the conversion price. Conversion amount means the sum of (x) portion of the principal to be converted, redeemed or otherwise with respect to which this determination is being made and (y) all accrued and unpaid interest with respect to such portion of the principal amount. Conversion price means, as of any conversion date or other date of determination, $0.35, adjusted for any stock splits, reverse stock splits or similar transactions. In addition, the May 30 Financing triggered a provision that requires the Company to issue a new warrant to acquire 100,000 shares of the Company’s common stock at a price of $.35 per share.

Each of the Notes issued by the Company were offered and sold to accredited investors pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act of 1933, as amended.

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ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.  OTHER INFORMATION

Consulting and Advisory Relationships and Impact on Promissory Notes and Warrants

On July 1, 2014, July 14, 2014, and July 15, 2014, the Company entered into consulting and advisory agreements with Hanover Financial Services (“HFS”), SmallCapVoice.com, Inc. (“SCV”) and RedChip Companies Inc., respectively, relating to investor relations services.  Under the terms of the agreements, the Company issued 550,000 shares of common stock to HFS, 500,000 shares of common stock to SCV and 500,000 shares of common stock to Redchip.  The Company had previously accrued for the issuance of 200,000 shares to Redchip. Accordingly, as a result of the issuances, the Company will record, for the quarter ending September 30, 2014, charges of $77,000, $45,000, and $24,000, respectively, for the issuance of 550,000 shares to HFS, 500,000 shares to SCV, and 300,000 additional shares to Redchip.  Under the terms of financing transactions entered into on November 13, 2013 and on May 30, 2014, the conversion price of notes and the exercise price of warrants issued in connection with such transactions automatically adjusts following the issuance of common stock at a price per share less than the previously-applicable exercise price or conversion price.  The previously applicable price was $0.20 per share.  Because the issuance to Redchip resulted in a charge of $24,000, it is deemed to be an issuance of shares of common stock at a price per share of $0.08 per share.  Based on that, as of July 15, 2014, the exercise price and conversion price in connection with the notes issued in the November 13, 2013 financing transaction and the conversion price in connection with the notes issued in the May 30, 2014 financing transaction, reset to $0.08 per share.  Under the terms of the warrants, the aggregate exercise price must remain the same, so the number of shares of common stock subject to warrant are increased.  Accordingly, following July 15, 2014, the number of shares issuable upon conversion of the notes was 17,661,115 shares of common stock and the number subject to warrant was 38,787,016 shares at an exercise price of $0.08.

Impact of Promissory Notes and Warrants of Variable Priced Promissory Notes

Under the terms of a financing from November 13, 2013 and on May 30, 2014, the holders of the notes and warrants issued in connection with such transactions, following the issuance of any security with a variable price conversion feature, may substitute the variable price formula for their exercise or conversion prices.  The promissory notes described above contain a variable price conversion feature. As a result, the holder of a warrant issued on November 13, 2013 may substitute a formula resulting in a lower price.  Moreover, the warrants provide that the holder of the warrant has the right to invest the same aggregate amount.  Accordingly, whenever a lower price applies, a larger number of shares may be purchased.   The exact number of shares that may be issued varies depending on the stock price at the time of exercise or conversion.  On August 12, 2014, if all of the outstanding warrants issued in connection with the November 13, 2013 financing had been exercised, the alternative price formulation could have resulted in an increase in the number of warrants from 38,787,016 at an exercise price of $0.08 per share to warrants to acquire 144,851,212 shares of the Company's common stock at an exercise price of $0.021 per share.  The warrant holders have the right to effect a cashless exercise by accepting fewer shares and not tendering cash.  On August 12, 2014, $1,413,000 principal amount of notes issued in connection with the November 13, 2013 and May 30, 2014 financings was outstanding.  If all such outstanding notes had been converted on such date, it would have resulted in an issuance of approximately 66,900,000 shares and the elimination of the liability for the Company.  Because the variable price formula changes with the value of the common stock, the number of shares subject to warrant and the number of shares into which the notes are convertible varies. 

ITEM 6. EXHIBITS 

We have listed the exhibits by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K on the Exhibit list attached to this report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		VERITEQ CORPORATION
		(Registrant)
Date:	August 19, 2014	By:		/s/ Michael E. Krawitz
			Name:		Michael E. Krawitz
			Title:		Chief Legal and Financial Officer  (Duly Authorized Officer)

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INDEX TO EXHIBITS

Exhibit No.	Description of Exhibit
10.1	Code of Ethics for Senior Financial Officers (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on April 8, 2014)
10.2	Form of Amendment Agreement (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on June 3, 2014)
10.3	Form of Purchase Agreement (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on June 3, 2014)
10.4	Form of New Note (filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the Commission on June 3, 2014)
10.5	Right to Shares Agreement dated June 10, 2014 (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on June 13, 2014)
10.6	Right to Shares Agreement dated June 24, 2014 (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on June 25, 2014)
10.7	Securities Purchase Agreement dated July 15, 2014 (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on July 25, 2014)
10.8	Convertible Promissory Note dated July 15, 2014 (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on July 25, 2014)
10.9	Convertible Note dated July 16, 2014 (filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the Commission on July 25, 2014)
10.10	Securities Purchase Agreement dated July 31, 2014 (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on August 8, 2014)
10.11	8% Convertible Redeemable Note due July 31, 2015 (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on August 8, 2014)
10.12	8% Convertible Redeemable Back End Note due July 31, 2015 (filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the Commission on August 8, 2014)
10.13	Collateralized Secured Promissory Note Back End Note due July 31, 2015 (filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the Commission on August 8, 2014)
10.14	Securities Purchase Agreement dated August 4, 2014 (filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed with the Commission on August 8, 2014)
10.15	12% Convertible Redeemable Note due August 4, 2015 (filed as Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed with the Commission on August 8, 2014)
10.16	12% Convertible Redeemable Back End Note due August 4, 2015 (filed as Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed with the Commission on August 8, 2014)
10.17	Collateralized Secured Promissory Note Back End Note due August 4, 2015 (filed as Exhibit 10.8 to the Registrant’s Current Report on Form 8-K filed with the Commission on August 8, 2014)
10.18*	Restricted Stock Award Agreement dated June 17, 2014 between VeriTeq Corporation and Ned L. Siegel
31.1	Certification by Scott R. Silverman Chief Executive Officer, pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a)*
31.2	Certification by Michael E. Krawitz, Chief Legal and Financial Officer, pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a)*
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS	XBRL Taxonomy Extension Instance Document
101.SCH	XBRL Taxonomy Extension Schema Linkbase Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

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EX-10

Exhibit 10.18

VERITEQ CORPORATION

RESTRICTED STOCK AWARD AGREEMENT

This RESTRICTED STOCK AWARD AGREEMENT (the “Agreement”) is made as of June 17, 2014 (the “Grant Date”), between VeriTeQ Corporation, a Delaware corporation (the “Company”) and Ned L. Siegel (the “Grantee”).

Background Information

A. The Compensation Committee has granted to the Grantee an award of 650,000 restricted shares of common stock, par value $0.01 per share (the “Common Stock”), of the Company (the “Award”).

B. The Company and the Grantee are entering into this Agreement in order to evidence the Award, which shall be governed in all respects by the terms and provisions hereof.

C. The Grantee desires to accept the Award grant and agrees to be bound by the terms and conditions of this Agreement.

Agreement

1. Restricted Stock. Subject to the terms and conditions provided in this Agreement, the Company hereby grants to the Grantee 650,000 shares of Common Stock (the “Restricted Stock”) as of the Grant Date. The extent to which the Grantee’s rights and interest in the Restricted Stock becomes vested and non-forfeitable shall be determined in accordance with the provisions of Sections 2 and 3 of this Agreement.

2. Vesting. Except as may be otherwise provided in Section 3 of this Agreement, the vesting of the Grantee’s rights and interest in the Restricted Stock shall be determined in accordance with this Section 2.

The Grantee’s rights and interest in 150,000 shares of the Restricted Stock shall become fully vested and non-forfeitable and shall cease being restricted on January 2, 2015, and the Grantee’s rights and interest in 500,000 shares of the Restricted Stock shall become fully vested and non-forfeitable and shall cease being restricted on January 3, 2016 (collectively the “Vesting Dates”), provided that (1) the Grantee does not resign prior to the Vesting Dates and (2) the Company does not terminate the engagement of the Grantee for cause prior to the Vesting Dates, with said cause being defined as a conviction of a felony or Grantee’s being prevented from providing services hereunder as a result of Grantee’s violation of any law, regulation and/or rule.

3. Change of Control. In the event of a Change in Control (as defined below), Restricted Stock that is not yet vested on the date such Change in Control is determined to have occurred shall become fully vested on the date such Change in Control is determined to have occurred. A “Change in Control” means the happening of any of the following: (i) 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 Exchange Act of 1934, as amended (the “Exchange Act”) (other than 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 (other than the occurrence of any contingency); (ii) 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 (iii) 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.

4. Restrictions on Transfer; Legending of Shares. Until such time as any share of Restricted Stock becomes vested pursuant to Section 2 or Section 3 of this Agreement, the Grantee shall not have the right to make or permit to occur any transfer, pledge or hypothecation of all or any portion of the Restricted Stock, whether outright or as security, with or without consideration, voluntary or involuntary. Any transfer, pledge or hypothecation not made in accordance with this Agreement shall be deemed null and void. The certificate evidencing the Restricted Stock shall contain a legend in substantially the following form:

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“The shares evidenced by this certificate are subject to restrictions on transfer set forth in the Restricted Stock Award Agreement, dated June 17, 2014, between VeriTeQ Corporation (the “Company”) and Ned L. Siegel, a copy of which may be obtained from the Company at its principal executive offices.”

“The shares of common stock of the Company represented hereby have not been registered under the Securities Act of 1933, as amended, or applicable state securities laws and may not be transferred, pledged, hypothecated or otherwise disposed of in the absence of an effective registration statement covering such shares under that Act and any applicable state securities laws, unless, in the opinion of counsel satisfactory to the Company, an exemption from registration thereunder is available.”

5. Forfeiture. The Grantee shall forfeit all of his rights and interest in the Restricted Stock if the Grantee resigns or the Company terminates the engagement of the Grantee for cause (as defined in Section 2 above) before the Restricted Stock becomes fully vested in accordance with Section 2 or Section 3 of this Agreement.

6. Shares Held by Custodian; Rights to Dividends and Voting Rights. The Grantee hereby authorizes and directs the Company to deliver any share certificate issued by the Company to evidence the award of Restricted Stock to the Secretary of the Company or such other officer of the Company (other than the Grantee) as may be designated by the Company’s Board of Directors or the Compensation Committee of such Board (the “Share Custodian”) to be held by the Share Custodian until the Restricted Stock becomes fully vested in accordance with Section 2 or Section 3 of this Agreement. When the Restricted Stock becomes vested, the Share Custodian shall deliver to the Grantee (or his beneficiary in the event of death) a certificate representing the vested Restricted Stock (which then will be unrestricted) and may delete the first paragraph of the legend set forth in Section 4 above. The Grantee hereby irrevocably appoints the Share Custodian, and any successor thereto, as the true and lawful attorney-in-fact of the Grantee with full power and authority to execute any stock transfer power or other instrument necessary to transfer the Restricted Stock to the Company, or to transfer the Restricted Stock to the Grantee on an unrestricted basis upon vesting, pursuant to this Agreement, in the name, place, and stead of the Grantee. The term of such appointment shall commence on the Grant Date and shall continue until the Restricted Stock becomes vested or is forfeited. During the period that the Share Custodian holds the shares of Restricted Stock subject to this Section 6, the Grantee shall be entitled to all rights applicable to shares of Common Stock of the Company not so held, including the right to vote and receive dividends, but provided, however, in the event of (i) any change in the Common Stock of the Company by reason of any stock dividend, spin-off, split-up, spin-out, recapitalization, merger, consolidation, reorganization, combination or exchange of shares or (ii) any distribution of Common Stock or other securities of the Company in respect of such shares of Common Stock, the Grantee agrees that any certificate representing shares of such additional Common Stock or other securities of the Company issued as a result of any of the foregoing shall be delivered to the Share Custodian and shall be subject to all of the provisions of this Agreement as if initially received hereunder.

7. Tax Consequences. Upon the occurrence of a vesting event specified in Section 2 or Section 3 above, the Grantee must satisfy the federal, state, local or foreign income and social insurance withholding taxes imposed by reason of the vesting of the Restricted Stock.

The Grantee understands that the Grantee may elect to be taxed at the Grant Date rather than when the Restricted Stock becomes vested by filing with the Internal Revenue Service an election under section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), within thirty (30) days from the Grant Date. The Grantee acknowledges that it is the Grantee’s sole responsibility, and not the Company’s responsibility, to timely file the Code section 83(b) election with the Internal Revenue Service if the Grantee intends to make such an election. Grantee agrees to provide written notification to the Company if the Grantee files a Code section 83(b) election.

8. No Effect on Engagement. Nothing in this Agreement shall confer upon the Grantee the right to continue in the engagement of the Company or affect any right which the Company may have to terminate the engagement of the Grantee regardless of the effect of such termination of engagement on the rights of the Grantee or this Agreement.

9. Governing Laws. This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law. By accepting this Award, the Grantee irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of Florida or of the United States of America, in each case located in Palm Beach County, Florida, for any litigation arising out of or relating to this Agreement (and agrees not to commence any litigation relating thereto except in such courts). The Grantee also irrevocably and unconditionally waives any objection to the laying of venue of any litigation arising out of or related to this Award in the courts of the State of Florida or of the United States of America, in each case located in Palm Beach County, Florida, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such litigation brought in any such court has been brought in an inconvenient forum.

10. Successors. This Agreement shall inure to the benefit of, and be binding upon, the Company and the Grantee and their heirs, legal representatives, successors and permitted assigns.

11. Severability. In the event that any one or more of the provisions or portion thereof contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Agreement, and this Agreement shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.

2 

12. Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified; (b) when sent by confirmed facsimile if sent during normal business hours of the recipient, if not, then on the next business day; (c) three (3) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent as follows:

If to the Company:

VeriTeQ Corporation

220 Congress Park Drive, Suite 201

Delray Beach, Florida 33445

If to Grantee:

Ned L. Siegel

3656 NW 52 Street

Boca Raton, FL 33496

13. Entire Agreement. Subject to paragraph D in the section of this Agreement under the heading “Background Information,” this Agreement expresses the entire understanding and agreement of the parties hereto with respect to the terms and conditions of this Award.

14. Headings. Section headings used herein are for convenience of reference only and shall not be considered in construing this Agreement.

15. Additional Acknowledgements. By their signatures below (including electronic signatures), the Grantee and the Company agree that the Restricted Stock is granted under and governed by the terms and conditions of this Agreement. Grantee has reviewed the terms of this Agreement, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. Grantee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Compensation Committee of the Company’s Board of Directors upon any questions relating to this Agreement.

IN WITNESS WHEREOF, the Company and the Grantee have executed this Agreement as of the Grant Date set forth above.

VERITEQ CORPORATION
By:	/s/ Allison Tomek
Allison Tomek, Secretary
GRANTEE:
/s/ Ned L. Siegel
Ned L. Siegel

3

EX-31

EXHIBIT 31.1

CERTIFICATION

I, Scott R. Silverman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of VeriTeQ Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The material weaknesses in internal controls which existed as of December 31, 2013 continue to exist as of June 30, 2014.
6.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Scott R. Silverman

Scott R. Silverman

Chief Executive Officer

Dated: August 19, 2014

EX-31

EXHIBIT 31.2

CERTIFICATION

I, Michael E. Krawitz, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of VeriTeQ Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The material weaknesses in internal controls which existed as of December 31, 2013, continue to exist as of June 30, 2014.
6.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Michael E. Krawitz

Michael E. Krawitz

Chief Legal and Financial Officer

Dated: August 19, 2014

EX-32

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of VeriTeQ Corporation (the “Company”) for the quarter ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott R Silverman, Chief Executive Officer of the Company, and I, Michael E. Krawitz, Chief Legal and Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Scott R. Silverman

Scott R. Silverman

Chief Executive Officer

Dated: August 19, 2014

/s/ Michael E. Krawitz

Michael E. Krawitz

Chief Legal and Financial Officer

Dated: August 19, 2014

A signed original of this written statement required by Section 906 has been provided to VeriTeQ Corporation and will be retained by VeriTeQ Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Note 5 - Notes Payable and Restricted Cash (Details) (USD $)	0 Months Ended		3 Months Ended		6 Months Ended		31 Months Ended		0 Months Ended								0 Months Ended		1 Months Ended	0 Months Ended						0 Months Ended	1 Months Ended	0 Months Ended
	Jun. 16, 2014	Nov. 13, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Mar. 31, 2014	Apr. 03, 2014 Subsequent Event [Member] Investors [Member]	Jul. 16, 2014 Subsequent Event [Member] Investors [Member]	Jul. 15, 2014 Subsequent Event [Member] Investors [Member]	Aug. 12, 2014 Subsequent Event [Member]	Jul. 15, 2014 Subsequent Event [Member]	Jun. 30, 2014 Subsequent Event [Member]	May 30, 2014 Reset Provision [Member] Investors [Member]	May 30, 2014 Prior To Reset Provision [Member] Investors [Member]	Nov. 13, 2013 Net of Investor Expenses and Restricted Proceeds [Member] Investors [Member]	Nov. 13, 2013 Placement Agent [Member] Investors [Member]	Nov. 21, 2013 MGT Capital Investments Inc. [Member] Investors [Member]	Nov. 13, 2013 Investors [Member]	May 30, 2014 Investors [Member]	Nov. 13, 2013 Placement Agent [Member]	Nov. 13, 2013 Investors and Placement Agent [Member]	Nov. 13, 2013 Letter Agreement [Member]	Nov. 13, 2013 Investors, Placement Agent, And Letter Agreement [Member]	Nov. 13, 2013 Proceeds from Financing [Member] Investors [Member]	Nov. 21, 2013 Proceeds from Sale of Marketable Securities [Member] Investors [Member]	Jun. 16, 2014 Pre-Pay Portion Of Outstanding Note [Member]
Note 5 - Notes Payable and Restricted Cash (Details) [Line Items]
Convertible Notes Payable		$ 1,816,667								$ 500,000	$ 83,500	$ 1,413,000			$ 1,816,667					$ 1,816,667	$ 300,000
Debt Instrument, Unamortized Discount																				166,667
Debt Instrument, Face Amount			3,300,000		3,300,000		3,300,000													1,650,000
Debt Instrument, Increase (Decrease), Other, Net																				150,000
Proceeds from Issuance of Debt																	635,000			1,500,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)												38,787,016	38,787,016		41,811,114	2,944,444				2,422,222		222,222	2,644,444		2,944,444
Debt Issuance Cost																		150,000		115,000
Percent of Warrant Proceeds Placement Agent		5.00%
Class of Warrant or Right, Outstanding (in Shares)																						222,222		300,000
Increase in Restricted Cash																										750,000	132,500
Sale of Stock, Number of Shares Issued in Transaction (in Shares)																			50,000
Restricted Cash and Cash Equivalents								900,000						47,000
Increase (Decrease) in Restricted Cash	300,000				(835,000)		47,000		145,000																			400,000
Debt Instrument, Convertible, Conversion Price (in Dollars per share)		$ 0.75	$ 0.20		$ 0.20		$ 0.20			$ 0.14			$ 0.08		$ 0.20	$ 0.75				$ 0.75	$ 0.20
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)												$ 0.08	$ 0.08		$ 0.20	$ 2.84				$ 2.84	$ 0.20
Interest Expense, Debt			$ 1,100,000	$ 300,000	$ 1,600,000	$ 400,000

XML

Note 13 - Supplemental Cash Flow Information (Details) - Supplemental Cash Flow Information (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014 Royalty Expense [Member]	Jun. 30, 2013 Full Payment of Note Payable [Member]	Jun. 30, 2014 Partial Payment of Note Payable [Member]	Jun. 30, 2014 Payment Of Notes Payable [Member]
Note 13 - Supplemental Cash Flow Information (Details) - Supplemental Cash Flow Information [Line Items]
Royalty obligations now included in accrued expenses		$ 100
Non-cash investing and financing activities:
Issuance of common stock			420	70	135
Conversion of promissory note under Right to Shares Agreement	191
Issuance of a warrant in connection with a promissory note	66
Cashless expense of warrants	$ 6,990

XML

Note 7 - Stockholders' Deficit (Details) - Stock Option Activity (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014		Jun. 30, 2014
Stock Option Activity [Abstract]
Outstanding at January 1, 2014			2,628,000
Outstanding at January 1, 2014 (in Dollars per share)			$ 9.01
Exercised	0		(382,000)
Exercised (in Dollars per share)			$ 0.05
Forfeited or expired			(8,000)
Forfeited or expired (in Dollars per share)			$ 659.87
Outstanding at June 30, 2014	2,238,000		2,238,000
Outstanding at June 30, 2014 (in Dollars per share)	$ 8.02		$ 8.02
Outstanding at June 30, 2014			4 years 237 days
Outstanding at June 30, 2014 (in Dollars)	$ 77,000	[1]	$ 77,000	[1]
Vested or expected to vest at June 30, 2014	2,238,000		2,238,000
Vested or expected to vest at June 30, 2014 (in Dollars per share)	$ 8.02		$ 8.02
Vested or expected to vest at June 30, 2014			4 years 237 days
Vested or expected to vest at June 30, 2014 (in Dollars)	$ 77,000	[1]	$ 77,000	[1]
Shares available on June 30, 2014 for options that may be granted	2,508,000		2,508,000

[1] The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The market value of our common stock was $0.14 per share at June 30, 2014.

XML

Note 14 - Subsequent Events (Details) (USD $)	6 Months Ended	12 Months Ended	31 Months Ended						0 Months Ended		0 Months Ended		0 Months Ended		0 Months Ended		0 Months Ended				0 Months Ended	3 Months Ended	0 Months Ended	3 Months Ended	0 Months Ended	3 Months Ended	0 Months Ended
	Jun. 30, 2014	Dec. 31, 2012	Jun. 30, 2014	Nov. 13, 2013	Jul. 31, 2014 8% Buyer Note [Member] Subsequent Event [Member] Investors [Member]	Aug. 04, 2014 12% Buyer Note [Member] Subsequent Event [Member] Investors [Member]	Jul. 15, 2014 Convertible Notes Payable [Member] Subsequent Event [Member] Investors [Member]	Aug. 12, 2014 Subsequent Event [Member] If All Warrants Exercised [Member]	Jul. 31, 2014 Subsequent Event [Member] 8% Note [Member] Investors [Member]	Jul. 31, 2014 Subsequent Event [Member] 8% Note [Member] Investors [Member]	Jul. 31, 2014 Subsequent Event [Member] 8% Second Note [Member] Investors [Member]	Jul. 31, 2014 Subsequent Event [Member] 8% Second Note [Member] Investors [Member]	Aug. 04, 2014 Subsequent Event [Member] 12% Note [Member] Investors [Member]	Aug. 04, 2014 Subsequent Event [Member] 12% Note [Member] Investors [Member]	Aug. 04, 2014 Subsequent Event [Member] 12% Second Note [Member] Investors [Member]	Aug. 04, 2014 Subsequent Event [Member] 12% Second Note [Member] Investors [Member]	Jul. 16, 2014 Subsequent Event [Member] Investors [Member]	Jul. 15, 2014 Subsequent Event [Member] Investors [Member]	Jul. 16, 2014 Subsequent Event [Member] Investors [Member]	Jul. 15, 2014 Subsequent Event [Member] Investors [Member]	Jul. 01, 2014 Subsequent Event [Member] Hanover Financial Services [Member]	Sep. 30, 2014 Subsequent Event [Member] Hanover Financial Services [Member]	Jul. 14, 2014 Subsequent Event [Member] SmallCapVoice.com, Inc [Member]	Sep. 30, 2014 Subsequent Event [Member] SmallCapVoice.com, Inc [Member]	Jul. 15, 2014 Subsequent Event [Member] RedChip Companies Inc [Member]	Sep. 30, 2014 Subsequent Event [Member] RedChip Companies Inc [Member]	Jul. 15, 2014 Subsequent Event [Member]	Aug. 12, 2014 Subsequent Event [Member]	Jul. 15, 2014 Subsequent Event [Member]	May 30, 2014 Investors [Member]	Nov. 13, 2013 Investors [Member]	Jun. 30, 2014 RedChip Companies Inc [Member]
Note 14 - Subsequent Events (Details) [Line Items]
Stock Issued During Period, Shares, Issued for Services (in Shares)																					550,000		500,000		500,000	300,000
Common Stock, Shares Subscribed but Unissued (in Shares)	29,097,000		29,097,000																													200,000
Stock Issued During Period, Value, Issued for Services (in Dollars)		$ 160,000																				$ 77,000		$ 45,000		$ 24,000
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 0.20		$ 0.20	$ 0.75															$ 0.14										$ 0.08	$ 0.20	$ 0.75
Debt Conversion, Converted Instrument, Shares Issued (in Shares)																											17,661,115
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)								144,851,212																				38,787,016	38,787,016		2,422,222
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)								$ 0.021																				$ 0.08	$ 0.08	$ 0.20	$ 2.84
Convertible Notes Payable (in Dollars)				1,816,667						75,000		75,000		50,000		50,000			500,000	83,500								1,413,000		300,000	1,816,667
Debt Instrument, Interest Rate, Stated Percentage							8.00%			8.00%		8.00%		12.00%		12.00%
Convertible Note, Maximum Ownership Percent																			4.99%	4.99%
Debt Instrument, Convertible, Threshold Consecutive Trading Days																		10 days
Proceeds from Convertible Debt (in Dollars)	(100,000)		1,550,000														125,000
Debt Instrument, Unamortized Discount, Percent Of Principal																	10.00%
Convertible Note, Contingent Interest Payment, Percent Of Principal																	12.00%
Debt Instrument, Convertible, Conversion Price, Percent Of Lowest Trade Price										61.00%		61.00%		61.00%		61.00%			60.00%
DebtInstrumentConversion PriceTradingDays									15 years		15 days		20 days		20 days		25 days
Convertible Note, Note Terms, Minimum Penalty For Inproper Registration Of Underlying Stock (in Dollars)																			25,000
Debt Instrument, Redemption Price, Percentage									150.00%				150.00%
Financing Receivable, Gross (in Dollars)					$ 75,000	$ 50,000
Notes Receivable Interest Rate					8.00%	12.00%

XML

Note 7 - Stockholders' Deficit (Details) - Warrants Exercisable (USD $) In Thousands, except Per Share data, unless otherwise specified	5 Months Ended	6 Months Ended
	Jun. 03, 2014	Jun. 30, 2014
Class of Warrant or Right [Line Items]
Warrants Authorized		42,647
Warrants Issued		2,966
Balance (in Dollars)		$ 16,255
Exercised/Forfeited	(29,358)
Series A Warrant [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		95
Exercise Price (in Dollars per share)		$ 0.37
Exercisable Period		3 years
Exercised/Forfeited	(95)
Series B Warrant [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		40
Balance (in Dollars)		40
Exercise Price (in Dollars per share)		$ 1.57
Exercisable Period		3 years
Series C Warrant [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		20
Balance (in Dollars)		20
Exercise Price (in Dollars per share)		$ 1.57
Exercisable Period		3 years
Series C Warrant Reset [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		20
Balance (in Dollars)		20
Exercise Price (in Dollars per share)		$ 0.35
Exercisable Period		3 years
Series D Warrant [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		14
Balance (in Dollars)		14
Exercise Price (in Dollars per share)		$ 1.57
Exercisable Period		5 years
Series E Warrant [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		29
Balance (in Dollars)		29
Exercise Price (in Dollars per share)		$ 1.57
Exercisable Period		5 years
Series F Warrant [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		40
Balance (in Dollars)		40
Exercise Price (in Dollars per share)		$ 1.57
Exercisable Period		3 years
Series G Warrant [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		47
Balance (in Dollars)		47
Exercise Price (in Dollars per share)		$ 1.31
Exercisable Period		3 years
Series G Warrant Reset [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		48
Balance (in Dollars)		48
Exercise Price (in Dollars per share)		$ 0.35
Exercisable Period		3 years
Series H Warrant [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		63
Balance (in Dollars)		63
Exercise Price (in Dollars per share)		$ 1.57
Exercisable Period		3 years
Series H Warrant Reset [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		20
Balance (in Dollars)		20
Exercise Price (in Dollars per share)		$ 0.35
Exercisable Period		3 years
Series VT a Warrant [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		37,551
Warrants Issued		2,966
Balance (in Dollars)		11,254
Exercise Price (in Dollars per share)		$ 0.20
Exercisable Period		5 years
Exercised/Forfeited	(29,263)
Series VT b Warrant [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		4,260
Balance (in Dollars)		4,260
Exercise Price (in Dollars per share)		$ 0.20
Exercisable Period		5 years
Series I Warrant [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		300
Balance (in Dollars)		300
Exercise Price (in Dollars per share)		$ 0.35
Exercisable Period		3 years
Series J Warrant [Member]
Class of Warrant or Right [Line Items]
Warrants Authorized		100
Balance (in Dollars)		$ 100
Exercise Price (in Dollars per share)		$ 0.35
Exercisable Period		2 years

XML

Note 2 - Acquisition (Details) - Acquisitions (VeriTeQ Corporation [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
VeriTeQ Corporation [Member]
Business Acquisition [Line Items]
VeriTeQ Corporation	Jul. 08, 2013
VeriTeQ Corporation	$ 935

XML

Note 3 - Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

Schedule of Intangible Assets and Goodwill [Table Text Block]

	June 30, 2014		December 31, 2013		Lives (in years)
	(in thousands)		(in thousands)
Technology, net of accumulated amortization of $873 and $627	$	5,998	$	6,244		14
Customer relationship, net of accumulated amortization of $176 and $141		324		359		7
Trademarks, net of accumulated amortization of $51 and $35		399		415		14
	$	6,721	$	7,018

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Note 9 - Loss Per Share (Details) - Basic and Diluted (Loss) Income Per Share (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Numerator for basic and diluted loss per share:
Loss from continuing operations	$ (5,558)		$ (1,542)		$ (933)		$ (2,852)
Denominator for basic and diluted loss per share:
Basic and diluted weighted-average shares outstanding (1)	19,913	[1]	9,042	[1]	14,758	[1]	8,941	[1]
Loss per share— basic and diluted:
Total — basic and diluted	$ (0.28)		$ (0.17)		$ (0.06)		$ (0.32)

[1] The following stock options, warrants and shares issuable under right to shares agreements, investor relations consulting agreement and upon conversion of convertible notes payable outstanding at June 30, 2014 and 2013 were not included in the computation of dilutive loss per share because the net effect would have been anti-dilutive:

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Note 6 - Financial Instruments (Details) (USD $)			6 Months Ended		6 Months Ended	12 Months Ended			6 Months Ended
	Jun. 30, 2014	Nov. 13, 2013	Jun. 30, 2014 Warrant [Member]	Dec. 31, 2013 Warrant [Member]	Jun. 30, 2014 Notes [Member]	Dec. 31, 2013 Notes [Member]	Jun. 30, 2014 Estimated Royalty Obligations [Member]	Dec. 31, 2013 Estimated Royalty Obligations [Member]	Jun. 30, 2014 Estimated Royalty Obligations [Member] Minimum [Member]	Jun. 30, 2014 Estimated Royalty Obligations [Member] Maximum [Member]	Dec. 31, 2013 Convertible Subordinated Debt [Member]
Note 6 - Financial Instruments (Details) [Line Items]
Fair Value Assumptions, Expected Term			4 years 135 days		153 days	335 days			3 years	14 years
Fair Value Assumptions, Expected Volatility Rate			166.00%		0.09%	0.18%
Fair Value Assumptions, Risk Free Interest Rate			1.25%
Fair Value Assumptions, Expected Dividend Rate			0.00%
Fair Value Assumptions, Exercise Price (in Dollars per share)				$ 2.29	$ 0.14
Debt Instrument, Convertible, Conversion Price (in Dollars per share)	$ 0.20	$ 0.75			$ 0.20	$ 0.75
Fair Value Inputs, Discount Rate									25.00%	60.00%
Debt Instrument, Face Amount (in Dollars)	$ 3,300,000										$ 3,300,000
Accrued Royalties (in Dollars)	$ 160,000						$ 4,000,000	$ 4,000,000

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Note 3 - Intangible Assets (Details) - Intangibles and Other Assets (Parentheticals) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Technology-Based Intangible Assets [Member]
Note 3 - Intangible Assets (Details) - Intangibles and Other Assets (Parentheticals) [Line Items]
Intangible asset, accumulated amortization	$ 873	$ 627
Customer Relationships [Member]
Note 3 - Intangible Assets (Details) - Intangibles and Other Assets (Parentheticals) [Line Items]
Intangible asset, accumulated amortization	176	141
Trademarks [Member]
Note 3 - Intangible Assets (Details) - Intangibles and Other Assets (Parentheticals) [Line Items]
Intangible asset, accumulated amortization	$ 51	$ 35

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Note 10 - Related Party Transactions (Details) (Accrued Expenses [Member], USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Accrued Expenses [Member]
Note 10 - Related Party Transactions (Details) [Line Items]
Due to Related Parties, Current	$ 2.0	$ 1.6

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Note 7 - Stockholders' Deficit (Details) - Fair Value of Warrants Assumptions (Warrant [Member])	0 Months Ended					1 Months Ended			12 Months Ended	14 Months Ended	20 Months Ended
	Jun. 02, 2013	May 30, 2013	Apr. 10, 2013	Oct. 12, 2012	Jun. 02, 2012	Mar. 18, 2013	Dec. 31, 2012	Sep. 25, 2012	May 30, 2014	May 30, 2014	May 30, 2014
Note 7 - Stockholders' Deficit (Details) - Fair Value of Warrants Assumptions [Line Items]
Dividend yield	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Volatility	126.00%	163.00%	126.00%	126.00%	126.00%	126.00%	126.00%	126.00%	215.00%	210.00%	223.00%
Expected lives	3 years	4 years 167 days	3 years	3 years	3 years	3 years	5 years	3 years	2 years 3 days	1 year 317 days	1 year 135 days
Risk-free rate	0.52%	1.54%	0.34%	0.35%	0.34%	0.38%	0.72%	0.35%	0.37%	0.37%	0.10%
Series I Warrant [Member]
Note 7 - Stockholders' Deficit (Details) - Fair Value of Warrants Assumptions [Line Items]
Dividend yield		0.00%
Volatility		192.26%
Expected lives		2 years 292 days
Risk-free rate		0.79%
Series J Warrant [Member]
Note 7 - Stockholders' Deficit (Details) - Fair Value of Warrants Assumptions [Line Items]
Dividend yield		0.00%
Volatility		214.78%
Expected lives		2 years
Risk-free rate		0.39%

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Note 1 - Organization and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

1. Organization and Summary of Significant Accounting Policies 

These unaudited condensed consolidated financial statements and notes thereto, include the financial statements of VeriTeQ Corporation (“VC” or the "Company"), formerly known as Digital Angel Corporation, and its wholly-owned subsidiary, VeriTeQ Acquisition Corporation (“VAC”), a Florida corporation formed on December 14, 2011. VC became the legal acquirer of VAC and VAC became the accounting acquirer of VC pursuant to the terms of a share exchange agreement (the “Exchange Agreement”), as more fully discussed below. In January 2012, VAC acquired all of the outstanding stock of PositiveID Animal Health Corporation, a Florida corporation, from PositiveID Corporation (“PSID”), which at the time was a related party. In December 2012, VAC formed a subsidiary, VTQ IP Holding Corporation, a Delaware corporation. VC, VAC and VAC’s subsidiaries are referred to together as, “VeriTeQ,” “the Company,” “we,” “our,” and “us”. Our business consists of ongoing efforts to provide implantable medical device identification and radiation dose measurement technologies to the healthcare industry.

The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and with the instructions to Form 10-Q and Article 8 of Regulation S-X under the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The interim financial information in this report has not been audited. In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments) considered necessary for fair financial statement presentation have been made. Results of operations reported for interim periods may not be indicative of the results for the entire year. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2013 included in our Annual Report for Form 10-K as amended, filed with the Securities and Exchange Commission (“SEC”) on August 19, 2014.

During the preparation of the Company’s Form 10Q for the period ended June 30, 2014, an error was identified for the accounting of the Company's financing transaction in November 2013 which is described below. The Company has restated and amended its consolidated financial statements for the year ended December 31, 2013 and as of and for three months ended March 31, 2014 to correct for impact of this error.

On November 13, 2013, the Company entered into a financing transaction, as more fully discussed in Note 5 to the accompanying financial statements, which included notes in the principal amount of $1,816,667. The notes are convertible into shares of the Company’s common stock at an initial exercise price of $0.75 per share. The notes provided for the initial conversion price to be reset to lower amounts in the event the Company issues its common stock or is deemed to have issued its common stock at a price below the conversion price in effect at that time. This provision results in what is referred to as an embedded derivative and should have been bifurcated and a liability recorded at fair value upon the issuance of the notes and on December 31, 2013 and on March 31, 2014. This oversight resulted in an understatement of the derivative liability of $2.1 million and $3.1 million at March 31, 2014 and December 31, 2013, respectively. Accordingly, we restated our previously filed financial statements by filing an amendment to the 2013 Form 10-K and Form 10-Q for the fiscal quarter ended March 31, 2014.

Going Concern

The accompanying financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. We are in the development stage, have incurred operating losses since our inception and have a working capital deficit. Our cash position is critically low, and payments critical to our survival are not being made in the ordinary course. Failure to raise capital in the coming days to fund our operations and generate positive cash flow to fund such operations will have a material adverse effect on our financial condition. These factors raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty. Further, the report of the independent registered public accounting firm on the Company’s December 31, 2013 financial statements included a paragraph about the existence of substantial doubt concerning the Company’s ability to continue as a going concern.

We need to raise additional funds immediately and continuing until we begin to ship sufficient quantities of our products to fund our operations and we may not be able to obtain debt or equity funding at all, or if available, they may not be on favorable terms.

Although we had negative working capital at June 30, 2014, we are attempting to generate enough cash from: (i) capital raises; (ii) the additional issuances of promissory notes, including to related parties; (iv) business operations as we have begun to ship our products; (v) through other investing and financing sources; (vi) from our ability to continue to delay certain salary and bonus payments to senior management until funds are available; and (vii) to undertake other cash management initiatives, including working with our vendors to continue to allow us to extend payment terms in order to operate our business for the twelve months ending June 30, 2015.

Our goal is to achieve profitability and to generate positive cash flows from operations. Our capital requirements depend on a variety of factors, including but not limited to, the cash that will be required to grow our business operations and to service our debt. Failure to raise additional capital to fund our operations and to generate positive cash flow from such operations will have a material adverse effect on our financial condition, results of operations and cash flows.

Development Stage

The Company is in the development stage as defined by Accounting Standards Codification subtopic 915-10 Development Stage Entities ("ASC 915-10") and its success depends on its ability to obtain financing and realize its marketing efforts. To date, the Company has generated only a small amount of revenue, has incurred expenses and has sustained operating losses. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from December 14, 2011 (Inception) through June 30, 2014, the Company has accumulated losses of approximately $20.8 million.

Share Exchange Agreement and Reverse Stock Split

On June 24, 2013, VAC and its stockholders entered in the Exchange Agreement with VC and the closing of the transaction (the “VeriTeQ Transaction”) took place on July 8, 2013 (the “Closing Date”). Pursuant to the terms of the Exchange Agreement, VAC exchanged all of its issued and outstanding shares of common stock for 4,107,592 shares of VC’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”). On July 10, 2013, VC realized that it incorrectly issued the Series B Preferred Stock and as a result, on July 12, 2013, it exchanged the Series B Preferred Stock for 410,759 shares of its newly created Series C convertible preferred stock, par value $10.00 (the “Series C Preferred Stock”). The terms of the Series C Preferred Stock are substantially similar to the Series B Preferred Stock, including the aggregate number of shares of common stock into which the Series C Preferred Stock was convertible. Each share of Series C Preferred Stock was convertible into twenty shares of VC’s common stock, par value $0.01 per share (the “Conversion Shares”), automatically upon the effectiveness of the Reverse Stock Split (defined below) on October 18, 2013 (such transaction is sometimes referred to herein as the “Share Exchange”).

Under the terms of the Exchange Agreement, all outstanding stock options to purchase shares of VAC’s common stock, whether or not exercisable or vested, converted into options to acquire shares of VC’s common stock (the “Substitute Options”), and all outstanding warrants to purchase shares of VAC’s common stock converted into warrants to purchase shares of VC’s common stock (the “Converted Warrants”). As a result of the Share Exchange and the issuance of the Substitute Options and the Converted Warrants, VAC became a wholly-owned subsidiary of VC, and VAC’s shareholders owned on July 12, 2013 approximately 91% of VC’s common stock, on an as converted, fully diluted basis (including outstanding stock options and warrants).

Based on the terms of the transaction, VAC was the accounting acquirer and as a result VAC’s operating results became the historical operating results of the Company. In addition, VAC’s common stock has been presented as if it was converted into shares of VC’s common stock at the beginning of the periods presented herein and based on the exchange ratio under the terms of the Exchange Agreement, which was 0.19083. The exchange ratio took into consideration the Reverse Stock Split, which is more fully discussed below.

The Series C Preferred Stock consisted of 500,000 authorized shares, 410,759 of which were issued and outstanding through October 17, 2013. The shares of Series C Preferred Stock issued to VAC’s shareholders in connection with the Share Exchange, by their principal terms:

(a)	converted into a total of 8,215,184 Conversion Shares, constituting approximately 88% of the issued and outstanding shares of common stock of VC, following the Reverse Stock Split on October 18, 2013 (as more fully discussed below);
(b)	had the same voting rights as holders of VC’s common stock on an as-converted basis for any matters that are subject to stockholder vote;
(c)	were not entitled to any dividends; and
(d)	were to be treated pari passu with the common stock on liquidation, dissolution or winding up of VC.

On July 12, 2013, VC obtained approval from a majority of its shareholders for and to effect a one for thirty (1:30) reverse stock split (the “Reverse Stock Split”). On October 18, 2013, VC filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Reverse Stock Split. The Reverse Stock Split became effective on October 18, 2013. The Reverse Stock Split caused the total number of shares of common stock outstanding, including the shares underlying the Series C Preferred Stock, to equal 9,302,674 shares of VC common stock based on the shares outstanding on October 18, 2013. The Reverse Stock Split did not affect the number of shares of VC’s authorized common stock, which remain at 50 million shares.

As a result of the Reverse Stock Split, all share information in this Quarterly Report has been restated to reflect the Reverse Stock Split as if it had occurred at the beginning of the periods presented, where appropriate.

In connection with the Share Exchange, Digital Angel Corporation changed its name to VeriTeQ Corporation effective October 18, 2013.

On July 12, 2013, pursuant to the Exchange Agreement, a majority of VC’s voting stockholders adopted resolutions by written consent approving the Digital Angel Corporation 2013 Stock Incentive Plan (the “DAC 2013 Stock Plan”), under which employees, including officers and directors, and consultants may receive awards. The Plan became effective on October 18, 2013.

Amended and Restated Certification of Incorporation and Adoption of 2014 Stock Incentive Plan

On June 18, 2014, the Company obtained approval from a majority of its stockholders to:

● increase the number of authorized shares of the Company’s common stock from 50 million to 500 million;

● reduce the par value of the Company’s preferred stock from $10.00 per share to $0.01 per share; and

● adopt the Company’s 2014 Stock Incentive Plan under which 50 million shares are reserved for issuance.

The Company expects to file an Amended and Restated Certificate of Incorporation with the State of Delaware to effect the changes to its authorized shares of common stock and the par value of its preferred stock and to complete the adoption of the 2014 Stock Incentive Plan on or about August 26, 2014.

A portion of the increase in the authorized shares of the Company’s common stock became necessary as a result of a financing that occurred on May 30, 2014. As described in the following paragraph, that financing triggered resets in the pricing of convertible promissory notes issued by the Company on November 13, 2013, and triggered changes to the exercise price and number of shares covered by warrants issued in connection with such notes.

Under the terms of the May 30, 2014 financing, the Company issued promissory notes totaling $0.3 million to two investors. The promissory notes are convertible into shares of the Company’s common stock at an exercise price of $0.20 per share. As a result of the May 30, 2014 financing, certain reset provisions under the terms of existing promissory notes convertible into shares of the Company’s common stock and existing common stock warrants, which were issued on November 13, 2013, were triggered. Accordingly, the conversion price of the convertible promissory notes with an aggregate principal balance of $1,816,667 was reset to $0.20 per share from $0.75 per share of the Company’s common stock and the exercise price of the common stock warrants was changed to $0.20 per share from $2.84 per share of the Company’s common stock. In addition, the number of common stock warrants was increased from common stock warrants to acquire 2,944,444 shares of the Company’s common stock to common stock warrants to acquire 41,811,114 shares of the Company’s common stock, subject to adjustment based on the cashless provisions of the warrants.

On June 10, 2014, a Right to Shares Agreement was entered into with one of the holders of a promissory note and common stock warrant issued on November 13, 2013 and reset on May 30, 2014 as discussed above. The warrant holder was entitled to receive 15,199,410 warrant shares under the cashless exercise provisions of its common stock warrant but agreed to accept the lesser amount of 11,500,000 warrant shares in full satisfaction of the complete exercise of its warrant of which 495,711 shares of common stock were issued on June 13, 2014 and 474,000 shares of common stock were issued on June 27, 2014, leaving a balance remaining to be issued of 10,530,289 shares of the Company’s common stock at June 30, 2014. Subsequent to June 30, 2014 and through August 15, 2014, we have issued an additional 10,035,289 shares of the Company’s common stock under the agreement and 495,000 shares remained to be issued. The balance will be issued from time to time at the election of the holder, subject to limitations regarding the holder’s percentage of beneficial ownership, for no additional consideration.

The June 24, 2014 Right to Shares Agreement was entered into with one of the holders of a promissory note and common stock warrant issued on November 13, 2013 and reset on May 30, 2014. Pursuant to the agreement, the Company and the shareholder acknowledged that the shareholder desired to (1) exchange the shareholder warrant, for a right to acquire 17,763,325 shares of common stock to be issued to the shareholder, with such right being determined based on the cashless exercise formula contained in the warrant; (2) redeem $400,000 underlying its promissory note for $400,000 in cash, and (3) convert $190,667 underlying its promissory note into 953,334 shares of common stock. Pursuant to the agreement, the shareholder has a right to receive 18,716,659 shares of common stock, and the balance of the shareholder’s remaining note that was issued on November 13, 2013 has been reduced to $190,667. The issuance of shares of the Company’s common stock will be made from time to time, subject to limitations regarding the holder’s percentage of beneficial ownership, for no additional consideration. As of June 30, 2014, we issued 150,000 shares under the June 24, 2014 Right to Shares Agreement and 18,566,659 shares of the Company common stock remained to be issued. From July 1, 2014 to August 15, 2014, we issued an additional 9,118,000 shares of the Company’s common stock under the agreement and 9,448,659 shares of the Company’s common stock remain to be issued.

Letter Agreement with Digital Angel Radio Communications Limited. (DARC)

On January 30, 2014, we and the buyers of Digital Angel Radio Communications Limited, or DARC (a former wholly-owned subsidiary operating in the United Kingdom), entered into a letter agreement under which we agreed to accept a payment of £62,000 (approximately $0.1 million) in full and final settlement of a deferred purchase price related to VC’s sale of DARC in March 2013. As a result, we recorded a loss of approximately USD $56,000 in the six-months ended June 30, 2014. The loss is included in other expense in our condensed consolidated statement of operations. All other provisions (including, without limitation, the indemnities) agreed between VC, and/or the buyers under the stock purchase agreement and any related documents remain in full force and effect.

Summary of Significant Accounting Policies 

Principles of Consolidation 

The financial statements include our accounts and the accounts of our subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Classification of Expenses

For comparative purposes, we have reclassified certain expenses related to the development of our products from selling, general and administrative expenses to development expenses in the historical financial statement presented herein.

Use of Estimates 

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”) requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on the knowledge of current events and actions we may undertake in the future, they may ultimately differ from actual results. Included in these estimates are assumptions used in determining the lives of long-lived assets, in Black-Scholes-Merton (“BSM”) valuation models in estimating the fair value of stock-based compensation and warrants, promissory notes with an embedded convertible option and royalty obligations and in determining valuation allowances for intangible assets, deferred tax assets, among others.

Concentration of Credit Risk 

We maintained our domestic cash in two financial institutions during the period ended June 30, 2014. Balances were insured up to Federal Deposit Insurance Corporation limits of $250,000 per institution. At times, cash balances may exceed the federally insured limits.

Other Current Assets

Other current assets consist primarily of deferred financing costs of approximately $20,000 at June 30, 2014 and prepaid insurance of approximately $28,000 and $74,000 at June 30, 2014 and December 31, 2013, respectively. No other items included in other current assets at June 30, 2014 and December 31, 2013 exceeded 5% of total current assets, respectively.

Inventory

Inventory consisted of purchased finished goods at June 30, 2014 and December 31, 2013. Inventory is valued at the lower of the value using the first-in, first-out (“FIFO”) cost method, or market.

Property and Equipment

Property and equipment, consisting primarily of computer equipment, and are stated at cost less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful life of the related assets (generally three years for computer equipment and 10 years for other equipment). Depreciation expense for the three-months ended June 30, 2014 and 2013 was approximately $1 thousand and nil, respectively. Depreciation expense for the six-months ended June 30, 2014 and 2013 was approximately $1 thousand and nil, respectively.

Intangible Assets 

We account for intangible assets in accordance with the Intangibles — Goodwill and Other Topic of the Codification. Intangible assets deemed to have an indefinite life, such as goodwill, are reviewed at least annually for impairment. Intangible assets with finite lives are amortized over their estimated useful lives. We do not have any intangible assets with indefinite lives.

We have intangible assets consisting of technology, customer relationship and trademarks, which are more fully discussed in Note 3. These intangible assets are amortized over their expected economic lives ranging from 7 to 14 years. The lives were determined based upon the expected use of the asset, the ability to extend or renew patents, trademarks and other contractual provisions associated with the asset, the stability of the industry, expected changes in and replacement value of distribution networks and other factors deemed appropriate. We continually evaluate whether events or circumstances have occurred that indicate the remaining estimated useful lives of our definite-lived intangible assets warrant revision or that the remaining balance of such assets may not be recoverable. We use an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable. We believe that no impairment of our intangible assets existed as of June 30, 2014.

Revenue Recognition

Product revenue is recognized at the time product is shipped and title has transferred, provided that a purchase order has been received or a contract has been executed, there are no uncertainties regarding customer acceptance, the sales price is fixed and determinable and collectability is deemed probable. If uncertainties regarding customer acceptance exist, we intend to recognize the revenue when such uncertainties are resolved. There are no significant post-contract support obligations at the time of revenue recognition. Our accounting policy regarding vendor and post contract support obligations is based on the terms of the customers’ contracts and is billable upon occurrence of the post-sale support. Currently, there are no multiple element arrangements in connection with our product sales. Cost of products sold is recorded as the related revenue is recognized. We offer a warranty on our products and record a liability for product warranties at the time it is probable that a warranty liability has been incurred and the amount of loss can reasonably be estimated. To date, we have not incurred a warranty liability on products we have sold. It is our policy to approve all customer returns before issuing credit to the customer.

Stock-Based Compensation 

At June 30, 2014, we had five stock-based employee compensation plans which are more fully described in Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on April 15, 2014. In accordance with the Compensation – Stock Compensation Topic of the Codification, awards granted are valued at fair value and compensation cost is recognized on a straight line basis over the service period of each award. On June 18, 2014, our majority stockholders approved the 2014 Stock Incentive Plan, which is more fully discussed in Note 7.

Income Taxes 

We recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes consist primarily of timing differences such as amortization of intangible assets, deferred officers' compensation and stock-based compensation. A valuation allowance is provided against net deferred tax assets where we determine realization is not currently judged to be more likely than not. We recognize and measure uncertain tax positions through a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating and estimating tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. Accordingly, we report a liability for unrecognized tax benefits resulting from the uncertain tax positions taken or expected to be taken in a tax return and recognize interest and penalties, if any, related to uncertain tax positions in income tax expense.     

Loss Per Common Share and Common Share Equivalent 

Basic and diluted loss per common share has been computed by dividing the loss by the weighted average number of common shares outstanding. Since we have incurred losses attributable to common stockholders, diluted loss per common share has not been computed by giving effect to all potentially dilutive common shares that were outstanding during the period., since to do so would have been anti-dilutive. See Note 9 for the computation of basic and diluted loss per share.

Impact of Recently Issued Accounting Standards 

From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies will issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification (“ASC” or “Codification”) are communicated through issuance of an Accounting Standards Update (“ASU”).

In June 2014, the FASB issued ASU Codification Development Stage Entities (Topic 915), Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments related to the elimination of inception-to date information and other remaining disclosure requirements of Topic 915, which should be applied retrospectively and are effective for annual reporting periods beginning after December 15, 2014 and interim periods therein. The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations. The amendments regarding Topic 275 and the sufficiency-of-equity-at-risk criterion for development stage entities of Topic 810 shall be applied prospectively. The adoption of these amendments will eliminate the inception--to–date information that is currently presented in the Company’s financial statements and may result in enhanced disclosures regarding risks and uncertainties applicable to the Company’s business.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09,”Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. ASU 2014-09 is effective for public entities for annual reporting periods beginning after December 15, 2016 and interim periods within those periods. Early adoption is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements and footnote disclosures.

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Note 6 - Financial Instruments (Details) - Assets and Liabilities Measured at Fair Value (USD $)	Jun. 30, 2014		Dec. 31, 2013	Nov. 13, 2013
Liabilities:
Subordinated convertible note with an embedded conversion option	$ 2,137,000		$ 4,925,000
Embedded conversion option of the convertible notes				1,816,667
Royalty obligations	3,840,000		3,940,000
Warrant [Member] | Fair Value, Inputs, Level 3 [Member]
Liabilities:
Warrant liabilities	1,962,000		6,114,000
Warrant [Member]
Liabilities:
Warrant liabilities	1,962,000	[1]	6,114,000
Fair Value, Inputs, Level 3 [Member]
Liabilities:
Subordinated convertible note with an embedded conversion option	2,137,000		4,925,000
Embedded conversion option of the convertible notes	125,000		3,124,000
Royalty obligations	$ 4,000,000		$ 4,000,000

[1] Includes $160 thousand of current royalty obligations in account payable and accrued expenses at June 30, 2014.

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Note 7 - Stockholders' Deficit (Tables)

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

Series/ Issue Date	Warrants Issued/As Reset		Additional Warrants under Cashless Exercise Provisions		Exercised			Balance June 30, 2014		Exercise Price		Exercisable Period (years)
Series A /June 2012		95		—		(95	)		—	$	0.37		3
Series B / September 2012		40		—		—			40	$	1.57		3
Series C / October 2012		20		—		—			20	$	1.57		3
Series C / October 2012, reset May 2014		20		—		—			20	$	0.35		3
Series D / December 2012		14		—		—			14	$	1.57		5
Series E /December 2012		29		—		—			29	$	1.57		5
Series F / March 2013		40		—		—			40	$	1.57		3
Series G / April 2013		47	−−			—			47	$	1.31		3
Series G / April 2013, reset May 2014		48	−−			—			48	$	0.35		3
Series H / June 2013		63	−−			—			63	$	1.57		3
Series H/ June 2013, reset May 2014		20	−−			—			20	$	0.35		3
Series VT a/ November 2013, as reset May 2014		37,551		2,966		(29,263	)		11,254	$	0.20		5
Series VT b/ November 2013, as reset May 2014		4,260		—		—			4,260	$	0.20		5
Series I/ May 2014		300		—		—			300	$	0.35		3
Series J/ May 2014		100		—		—			100	$	0.35		2
		42,647		2,966		(29,358	)		16,255

Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value [Table Text Block]

Dates Warrants Issued/Reset	Dividend Yield			Volatility			Expected Lives (Yrs.)		Risk-Free Rate			Date of the Assumptions
June 2012		0.00	%		126.00	%		3		.34	%	June 1, 2012
September 2012		0.00	%		126.00	%		3		.35	%	September 25, 2012
October 2012		0.00	%		126.00	%		3		.35	%	October 12, 2012
October 2012, reset May 2014		0.00	%		223.00	%		1.37		.10	%	May 30, 2014
December 2012		0.00	%		126.00	%		5		.72	%	December 31, 2012
March 2013		0.00	%		126.00	%		3		.38	%	March 18, 2013
April 2013		0.00	%		126.00	%		3		.34	%	April 10, 2013
April 2013, reset May 2014		0.00	%		210.00	%		1.87		.37	%	May 30, 2014
June 2013		0.00	%		126.00	%		3		.52	%	June 1, 2013
June 2013, reset May 2014		0.00	%		215.00	%		2.01		.37	%	May 30, 2014
November 2013, reset May 2014		0.00	%		163.00	%		4.46		1.54	%	May 30, 2014
May 2014 (Series I)		0.00	%		192.26	%		2.80		.79	%	May 30, 2014
May 2014 (Series J)		0.00	%		214.78	%		2		.39	%	May 30, 2014

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Stock Options			Weighted Average Exercise Price		Weighted Average Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2014		2,628		$	9.01
Granted		—			—
Exercised		(382	)		0.05
Forfeited or expired		(8	)		659.87
Outstanding at June 30, 2014		2,238			8.02		4.65	$	77,000	*
Vested or expected to vest at June 30, 2014		2,238			8.02		4.65	$	77,000	*
Shares available on June 30, 2014 for options that may be granted		2,508

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Note 6 - Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure Text Block Supplement [Abstract]

Fair Value, by Balance Sheet Grouping [Table Text Block]

	June 30, 2014						December 31, 2013
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Liabilities:
Subordinated convertible note with an embedded conversion option	$	—	$	—	$	2,137	$	—	$	—	$	4,925
Embedded conversion option of the convertible notes	$	—	$	—	$	125	$	—	$	—	$	3,124
Warrant liabilities	$	—	$	—	$	1,962	$	—	$	—	$	6,114
Royalty obligations	$	—	$	—	$	4,000	$	—	$	—	$	4,000

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

	Subordinated Note with Convertible Option			Embedded Conversion Option of Convertible Notes			Warrant Liabilities			Estimated Royalty Obligations
Balance at December 31, 2013	$	4,925		$	3,124		$	6,114		$	4,000
Increase due to embedded conversion option for May 30, 2014 convertible notes payable		—			629			—			—
Change in fair value		(2,788	)		(3,628	)		2,838			—
Exercise of warrants under Right to Shares Agreements		—						(6,990	)		—
Balance at June 30, 2014	$	2,137	(1)	$	125		$	1,962		$	4,000	(2)

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Note 6 - Financial Instruments (Details) - Level 3 Liabilities Activity (USD $)	3 Months Ended	6 Months Ended	31 Months Ended		6 Months Ended				6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2014	Nov. 13, 2013	Jun. 30, 2014 Warrant [Member]		Jun. 30, 2014 Estimated Royalty Obligations [Member]	Dec. 31, 2013 Estimated Royalty Obligations [Member]	Jun. 30, 2014 Convertible Subordinated Debt [Member]		Jun. 30, 2014 Embedded Derivative Financial Instruments [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance at December 31, 2013		$ 4,925,000							$ 4,925,000
Balance at December 31, 2013				1,816,667							3,124,000
Balance at December 31, 2013					6,114,000
Balance at December 31, 2013							4,000,000	4,000,000
Increase due to embedded conversion option for May 30, 2014 convertible notes payable											629,000
Change in fair value					2,838,000				(2,788,000)
Change in fair value	5,961,000	2,838,000	4,107,000								(3,628,000)
Change in fair value					2,838,000				(2,788,000)
Exercise of warrants under Right to Shares Agreements					(6,990,000)
Balance at June 30, 2014	2,137,000	2,137,000	2,137,000						2,137,000	[1]
Balance at June 30, 2014				1,816,667							125,000
Balance at June 30, 2014					1,962,000	[2]
Balance at June 30, 2014	$ 160,000	$ 160,000	$ 160,000				$ 4,000,000	$ 4,000,000

[1] The principal balance at December 31, 2013 and June 30, 2014 is $3.3 million. See Note 5 for additional information regarding the note.

[2] Includes $160 thousand of current royalty obligations in account payable and accrued expenses at June 30, 2014.

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Note 9 - Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three-Months Ended June 30,						Six-Months Ended June 30,
	2014			2013			2014			2013
Numerator for basic and diluted loss per share:
Loss from continuing operations	$	(5,558	)	$	(1,542	)	$	(933	)	$	(2,852	)
Denominator for basic and diluted loss per share:
Basic and diluted weighted-average shares outstanding (1)		19,913			9,042			14,758			8,941
Loss per share— basic and diluted:
Total — basic and diluted	$	(0.28	)	$	(0.17	)	$	(0.06	)	$	(0.32	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	June 30, 2014		June 30, 2013
	(in thousands)
Stock options		2,238		2,712
Warrants		16,255		436
Shares issuable under investor relations consulting agreement		200	__
Shares issuable upon conversion of convertible notes payable		10,039		2,185
		28,732		5,333

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Note 13 - Supplemental Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2014

Supplemental Cash Flow Elements [Abstract]

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	For the Six- Months Ended June 30, 2014		For the Six- Months Ended June 30, 2013
Non-cash operating activities:
Royalty obligations now included in accrued expenses	$	100		—
Non-cash investing and financing activities:
Issuance of common stock in full payment of note payable and accrued interest		—		420
Issuance of common stock in partial payment of note payable and accrued interest		70		—
Issuances of common stock in payment of notes payable		135		—
Conversion of promissory note under Right to Shares Agreement		191		—
Issuance of a warrant in connection with a promissory note		66
Cashless expense of warrants		6,990

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Condensed Consolidated Statements of Cash Flows (Unaudited) (Parentheticals) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Notes payable, repayments	$ 33

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Note 1 - Organization and Summary of Significant Accounting Policies (Details)	0 Months Ended	1 Months Ended		3 Months Ended	6 Months Ended							0 Months Ended	1 Months Ended				6 Months Ended						1 Months Ended				1 Months Ended	0 Months Ended	1 Months Ended		0 Months Ended				0 Months Ended			0 Months Ended				6 Months Ended
	Jul. 12, 2013 USD ($)	Jan. 30, 2014 USD ($)	Jan. 30, 2014 GBP (£)	Jun. 30, 2014 USD ($)	Jun. 30, 2014 USD ($)	Jun. 18, 2014 USD ($)	Jun. 17, 2014 USD ($)	Mar. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Nov. 13, 2013 USD ($)	Oct. 18, 2013	Jul. 08, 2013 Series B Preferred Stock [Member] Issued and Outstanding Common Stock Exchanged for Series B Convertible Preferred Stock [Member]	Oct. 18, 2013 Series C Preferred Stock [Member] Subsequent Event [Member]	Jun. 30, 2014 Series C Preferred Stock [Member]	Oct. 17, 2013 Series C Preferred Stock [Member]	Jul. 12, 2013 Series C Preferred Stock [Member] USD ($)	Jun. 30, 2014 Computer Equipment [Member]	Jun. 30, 2014 Non Computer Equipment [Member]	May 30, 2014 Financing Arrangement, May 30, 2014 [Member] Investors [Member]	Nov. 13, 2013 Financing Arrangement, May 30, 2014 [Member] Investors [Member]	Jun. 18, 2014 Right To Shares Agreement - June 18, 2014 [Member] Warrant Holder Original Entitlement Amount [Member]	Jun. 18, 2014 Right To Shares Agreement - June 18, 2014 [Member] Warrant Satisfaction Settlement [Member]	Aug. 15, 2014 Right To Shares Agreement - June 18, 2014 [Member] Subsequent Event [Member]	Jun. 17, 2014 Right To Shares Agreement - June 18, 2014 [Member]	Jun. 27, 2014 Right To Shares Agreement - June 18, 2014 [Member]	Jun. 30, 2014 Right To Shares Agreement - June 18, 2014 [Member]	Aug. 15, 2014 Rights To Shares Agreement - June 24, 2014 [Member] Subsequent Event [Member]	Jun. 25, 2014 Rights To Shares Agreement - June 24, 2014 [Member] USD ($)	Jun. 30, 2014 Rights To Shares Agreement - June 24, 2014 [Member]	Jun. 26, 2014 Rights To Shares Agreement - June 24, 2014 [Member] USD ($)	Jul. 12, 2013 Series B Preferred Stock Converted to Series C Convertible Preferred Stock [Member]	Jul. 12, 2013 Series C Preferred Stock Convertible Into Twenty Shares of VC's Common Stock [Member]	Jul. 16, 2014 Subsequent Event [Member] Investors [Member] USD ($)	Jul. 15, 2014 Subsequent Event [Member] Investors [Member] USD ($)	Jul. 15, 2014 Subsequent Event [Member]	Aug. 12, 2014 Subsequent Event [Member] USD ($)	Jul. 15, 2014 Subsequent Event [Member] USD ($)	Jul. 12, 2013 VC Acquisition [Member]	Jun. 18, 2014 2014 Stock Incentive Plan [Member]	May 30, 2014 Investors [Member] USD ($)	Nov. 13, 2013 Investors [Member] USD ($)	Jun. 30, 2014 Minimum [Member]	Jun. 30, 2014 Maximum [Member]
Note 1 - Organization and Summary of Significant Accounting Policies (Details) [Line Items]
Convertible Notes Payable (in Dollars)										$ 1,816,667																		$ 400,000		$ 190,667			$ 500,000	$ 83,500		$ 1,413,000				$ 300,000	$ 1,816,667
Debt Instrument, Convertible, Conversion Price (in Dollars per share)				$ 0.20	$ 0.20					$ 0.75																							$ 0.14				$ 0.08			$ 0.20	$ 0.75
Understatement of Derivative Liability (in Dollars)								2,100,000	3,100,000
Development Stage Enterprise, Deficit Accumulated During Development Stage (in Dollars)				20,757,000	20,757,000				19,824,000
Conversion of Stock, Shares Converted												4,107,592	8,215,184
Preferred Stock, Conversion Basis																															410,759
Preferred Stock, Par or Stated Value Per Share (in Dollars per share)				$ 10.00	$ 10.00	$ 0.01	$ 10.00		$ 10							$ 10.00
Convertible Preferred Stock, Shares Issued upon Conversion																																20
Common Stock, Par or Stated Value Per Share (in Dollars per share)	$ 0.01			$ 0.01	$ 0.01				$ 0.01
Sale of Stock, Percentage of Ownership after Transaction																																						91.00%
Exchange Ratio	0.19083
Preferred Stock, Shares Authorized				5,000,000	5,000,000				5,000,000					500,000	500,000
Preferred Stock, Shares Issued				0	0				0						410,759
Issued Outstanding Shares Following Reverse Merger Percentage											88.00%
Stockholders' Equity Note, Stock Split, Conversion Ratio	30
Common Stock, Shares, Outstanding				41,480,000	41,480,000				9,459,000		9,302,674
Common Stock, Shares Authorized				50,000,000	50,000,000	500,000,000	50,000,000		50,000,000		50,000,000
Common Stock, Capital Shares Reserved for Future Issuance																							495,000			10,530,289	9,448,659		18,566,659										50,000,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)																																				$ 0.08	$ 0.08			$ 0.20	$ 2.84
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																			41,811,114	2,944,444	15,199,410	11,500,000						17,763,325		18,716,659						38,787,016	38,787,016				2,422,222
Stock Issued During Period, Shares, Conversion of Units																								495,711	474,000
Stock Issued During Period, Shares, New Issues																							10,035,289				9,118,000
Class Of Warrant Or Right, Cash The Holder Is Entitled To, Upon Redemption (in Dollars)																												400,000
Debt Conversion, Original Debt, Amount (in Dollars)																												190,667
Debt Conversion, Converted Instrument, Shares Issued																												953,334	150,000						17,661,115
Proceeds from Divestiture of Businesses		100,000	62,000
Gain (Loss) on Disposition of Business (in Dollars)					(56,000)
Number of Financial Institutions				2
Cash, FDIC Insured Amount (in Dollars)				250,000	250,000
Deferred Finance Costs, Gross (in Dollars)				20,000	20,000
Prepaid Insurance (in Dollars)				28,000	28,000				74,000
Property, Plant and Equipment, Useful Life																	3 years	10 years
Depreciation (in Dollars)				1,000	1,000
Indefinite-Lived Intangible Assets (Excluding Goodwill) (in Dollars)				0	0
Finite-Lived Intangible Asset, Useful Life																																										7 years	14 years
Impairment of Intangible Assets (Excluding Goodwill) (in Dollars)					$ 0

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Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014		Dec. 31, 2013
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable	$ 1,250		$ 467
Less: Current maturities	(1,250)		(467)
Non-interest bearing subordinated convertible note payable with a principal amount of $3,300 dated December 3, 2012. Note is convertible into common stock equal to 1/3 of the shares beneficially held by the CEO on the date of conversion. Note was amended in July 2013 to extend the maturity date to June 2015. The note was recorded at its fair value and will be revalued at each reporting period with changes in the fair value recorded as other expense/income.	2,137		4,925
Chief Executive Officer [Member] | Demand Note October 11, 2013 [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable Related Party		[1]	30	[1]
Chief Executive Officer [Member] | Demand Note October 29, 2013 [Member] | Secured Debt [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable Related Party	691	[2]	232	[2]
Chief Executive Officer [Member] | Demand Note October 29, 2013 [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable Related Party	26	[1]	30	[1]
Chief Executive Officer [Member] | Demand Note [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable Related Party	60	[1]		[1]
Chief Financial Officer [Member] | Demand Note [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable Related Party	60	[1]		[1]
President [Member] | Demand Note [Member] | Corbin Properties LLC [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable	175
President [Member] | Demand Note [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable Related Party	40	[1]		[1]
Director [Member] | Demand Note [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable Related Party	25	[1]		[1]
Director [Member] | Note Issued March 5, 2014 [Member] | Deephaven Enterprises, Inc. [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable	3
Director [Member] | Note Issued March 5, 2014 [Member] | James Rybicki Trust [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable	3
Director [Member] | Note Issued March 5, 2014 [Member] | Investors [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable	19
Director [Member] | Note Issued March 20, 2014 [Member] | Deephaven Enterprises, Inc. [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable	18	[2]		[2]
Director [Member] | Note Issued April 16, 2014 [Member] | William Caragol [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable	2
Director [Member] | Note Issued April 16, 2014 [Member] | Ned Siegel [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable Related Party	3	[1]		[1]
Director [Member] | Note Issued May 1, 2014 [Member] | Ned Siegel [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable Related Party	2	[1],[2]		[1],[2]
Director [Member] | Note Payable, No Interest [Member] | Investors [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable	8
PositiveID [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt [Line Items]
Note payable Related Party	$ 115	[2],[3]	$ 175	[2],[3]

[1] These notes have been issued to related parties. See Note 10.

[2] The warrants are more fully described in Note 7.

[3] This note when originally issued was issued to a related party. See Note 10.

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Note 11 - Commitments and Contingencies (Details)	1 Months Ended
	Mar. 31, 2013 USD ($)	Mar. 31, 2013 GBP (£)
Commitments and Contingencies Disclosure [Abstract]
Portion of Purchase Price From Sale of Division to Satisfy Outstanding Liabilities	$ 61,000	£ 40,000
Third Party Claim to Liquidator	$ 400,000	£ 244,000

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
ASSETS
Cash	$ 110	$ 13
Restricted cash	47	882
Accounts receivable	20
Inventory	26	21
Other receivable		171
Other current assets	48	96
Total current assets	251	1,183
Property and equipment, net	5	4
Other assets	69	14
Intangible assets, net	6,721	7,018
Total assets	7,046	8,219
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Notes payable, net of discounts (including $216 and $60 to related parties, respectively)	1,250	467
Subordinated convertible debt with an embedded convertible option, at fair value	2,137
Liabilities for conversion option of the convertible notes	125	3,124
Accounts payable	1,057	854
Accrued expenses (including $2,386 and $1,764 to related parties, respectively)	3,580	2,718
Due to former related party under shared services agreement	217	211
Total current liabilities	8,366	7,374
Commitments and contingencies (Notes 11 and12)
Subordinated convertible debt with an embedded convertible option, at fair value		4,925
Warrant liabilities at fair value	1,962	6,114
Contingent consideration – estimated royalty obligations	3,840	3,940
Total liabilities	14,168	22,353
Stockholders’ deficit:
Preferred Stock ($10 par value; shares authorized 5,000; 0 shares issued and outstanding)
Common shares ($0.01 par value; shares authorized 50,000; shares issued and outstanding, 41,480 and 9,459, respectively, including 29,097 shares issuable at June 30, 2014)	415	95
Additional paid-in-capital	13,220	5,595
Accumulated deficit during the development stage	(20,757)	(19,824)
Total stockholders’ deficit	(7,122)	(14,134)
Total liabilities and stockholders’ deficit	$ 7,046	$ 8,219

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Note 7 - Stockholders' Deficit (Details) (USD $)	1 Months Ended		3 Months Ended		6 Months Ended		31 Months Ended						3 Months Ended	6 Months Ended					3 Months Ended									1 Months Ended	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jan. 31, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 18, 2014	Jun. 17, 2014	Dec. 31, 2013	Oct. 18, 2013	Jun. 30, 2014 Beneficial Owner [Member] Chief Executive Officer [Member]	Jun. 30, 2013 Directors, Employees, And Consultants [Member]	Jun. 30, 2013 Directors, Employees, And Consultants [Member]	Jun. 30, 2014 Series C Preferred Stock [Member]	Oct. 17, 2013 Series C Preferred Stock [Member]	Jul. 12, 2013 Series C Preferred Stock [Member]	Jun. 30, 2014 Series B, C, D, E, F, G and H Warrants [Member]	Jun. 30, 2014 Series C, G, and H Warrants [Member]	May 30, 2014 Series C, G, and H Warrants [Member]	May 30, 2014 Series C, G, and H Warrants [Member] Minimum [Member]	May 30, 2014 Series C, G, and H Warrants [Member] Maximum [Member]	May 30, 2014 Series VTa Warrant [Member]	Nov. 13, 2013 Series VTa Warrant [Member]	May 30, 2014 Series VTb Warrants [Member]	Nov. 13, 2013 Series VTb Warrants [Member]	Jun. 30, 2014 Series I And J Warrants [Member]	Jun. 30, 2014 Restricted Stock [Member] Share-based Compensation Award, Tranche One [Member]	Jun. 30, 2014 Restricted Stock [Member]	Jun. 30, 2013 Restricted Stock [Member]	Jun. 30, 2014 Restricted Stock [Member]	Jun. 30, 2013 Restricted Stock [Member]	Jun. 30, 2014 Future Event 08/26/14 [Member]
Note 7 - Stockholders' Deficit (Details) [Line Items]
Preferred Stock, Shares Authorized	5,000,000		5,000,000		5,000,000		5,000,000			5,000,000					500,000	500,000
Preferred Stock, Par or Stated Value Per Share (in Dollars per share)	$ 10.00		$ 10.00		$ 10.00		$ 10.00	$ 0.01	$ 10.00	$ 10							$ 10.00																$ 0.01
Preferred Stock, Shares Outstanding	0		0		0		0			0
Common Stock, Shares Authorized	50,000,000		50,000,000		50,000,000		50,000,000	500,000,000	50,000,000	50,000,000	50,000,000																						500,000,000
Common Stock, Shares, Issued	41,480,000		41,480,000		41,480,000		41,480,000			9,459,000
Common Stock, Shares, Outstanding	41,480,000		41,480,000		41,480,000		41,480,000			9,459,000	9,302,674	5,700,000
Warrants and Rights Outstanding (in Dollars)	$ 1,962,000		$ 1,962,000		$ 1,962,000		$ 1,962,000			$ 6,114,000								$ 300,000									$ 100,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)																				$ 0.35	$ 1.31	$ 1.57	$ 0.20	$ 2.84	$ 0.20	$ 2.84
Interest Expense (in Dollars)			1,131,000	253,000	1,592,000	446,000	8,821,000												7,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																							37,551,144	2,644,444	4,260,000	300,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			0	0	0	1,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value (in Dollars per share)						$ 1.33
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term						5 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate						126.00%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate						0.83%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate						0.00%
Allocated Share-based Compensation Expense (in Dollars)			0		0								400,000	600,000															200,000	200,000	400,000	300,000
Share Price (in Dollars per share)	$ 0.14		$ 0.14		$ 0.14		$ 0.14
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period			0		382,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value (in Dollars)					400,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value (in Dollars)			0			400,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares				3
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options (in Dollars)	0		0		0		0
Stock Issued During Period, Value, Restricted Stock Award, Gross (in Dollars)	$ 600,000				$ 1,500,000
Share Based Compensation Arrangement By Share Based Payment Award, Equity Instruments Other Than Options, Number of Shares Expected To Vest																												150,000
Stock Issued During Period, Shares, Restricted Stock Award, Gross		900,000

XML

Condensed Consolidated Statement of Changes in Stockholders’ Deficit (Unaudited) (USD $)	Series C Preferred Stock [Member] Preferred Stock [Member] USD ($)	Series C Preferred Stock [Member] Common Stock [Member] USD ($)	Series C Preferred Stock [Member] Additional Paid-in Capital [Member] USD ($)	Issuance Of Common Stock To Investors, April 2012 [Member] Common Stock [Member] Investors [Member] USD ($)	Issuance Of Common Stock To Investors, April 2012 [Member] Additional Paid-in Capital [Member] Investors [Member] USD ($)	Issuance Of Common Stock To Investors, April 2012 [Member] Investors [Member] USD ($)	Issuance Of Common Stock And Warrants To Investor, June 2012 [Member] Common Stock [Member] Investors [Member]	Issuance Of Common Stock And Warrants To Investor, June 2012 [Member] Additional Paid-in Capital [Member] Investors [Member] USD ($)	Issuance Of Common Stock And Warrants To Investor, June 2012 [Member] Investors [Member] USD ($)	Issuance Of Common Stock Warrants, Convertible Notes Payable September 2012 [Member] Additional Paid-in Capital [Member] USD ($)	Issuance Of Common Stock Warrants, Convertible Notes Payable September 2012 [Member] USD ($)	Beneficial Conversion Feature Of Convertible Note Payable September 2012 [Member] Additional Paid-in Capital [Member] USD ($)	Beneficial Conversion Feature Of Convertible Note Payable September 2012 [Member] USD ($)	Issuance Of Common Stock Warrants, Convertible Notes Payable October 2012 [Member] Additional Paid-in Capital [Member] USD ($)	Issuance Of Common Stock Warrants, Convertible Notes Payable October 2012 [Member] USD ($)	Beneficial Conversion Feature Of Convertible Note Payable, October 2012 [Member] Additional Paid-in Capital [Member] USD ($)	Beneficial Conversion Feature Of Convertible Note Payable, October 2012 [Member] USD ($)	Issuance Of Common Stock Warrants, Convertible Notes Payable, December 2012 [Member] Additional Paid-in Capital [Member] USD ($)	Issuance Of Common Stock Warrants, Convertible Notes Payable, December 2012 [Member] USD ($)	Beneficial Conversion Feature Of Convertible Note Payable, December 2012 [Member] Additional Paid-in Capital [Member] USD ($)	Beneficial Conversion Feature Of Convertible Note Payable, December 2012 [Member] USD ($)	Issuance Of Common Stock And Warrants For Note Conversion March 2013 [Member] Common Stock [Member] USD ($)	Issuance Of Common Stock And Warrants For Note Conversion March 2013 [Member] Additional Paid-in Capital [Member] USD ($)	Issuance Of Common Stock And Warrants For Note Conversion March 2013 [Member] USD ($)	Issuance Of Common Stock And Warrants For Note Conversion June 2013 [Member] Common Stock [Member] USD ($)	Issuance Of Common Stock And Warrants For Note Conversion June 2013 [Member] Additional Paid-in Capital [Member] USD ($)	Issuance Of Common Stock And Warrants For Note Conversion June 2013 [Member] USD ($)	Issuance of common stock for investment advisory services, July 2013 [Member] Common Stock [Member] USD ($)	Issuance of common stock for investment advisory services, July 2013 [Member] Additional Paid-in Capital [Member] USD ($)	Issuance of common stock for investment advisory services, July 2013 [Member] USD ($)	Issuance Of Common Stock For Partial Note Conversion October 2013 [Member] Common Stock [Member]	Issuance Of Common Stock For Partial Note Conversion October 2013 [Member] Additional Paid-in Capital [Member] USD ($)	Issuance Of Common Stock For Partial Note Conversion October 2013 [Member] USD ($)	Issuance Of Common Stock For Investor Relations Octover 2013 [Member] Common Stock [Member] USD ($)	Issuance Of Common Stock For Investor Relations Octover 2013 [Member] Additional Paid-in Capital [Member] USD ($)	Issuance Of Common Stock For Investor Relations Octover 2013 [Member] USD ($)	Issuance Of Common Stock For Investor Relations, November 2013 [Member] Common Stock [Member] USD ($)	Issuance Of Common Stock For Investor Relations, November 2013 [Member] Additional Paid-in Capital [Member] USD ($)	Issuance Of Common Stock For Investor Relations, November 2013 [Member] USD ($)	Issuance Of Common Stock For Partial Note Conversion, February 2014 [Member] Common Stock [Member]	Issuance Of Common Stock For Partial Note Conversion, February 2014 [Member] Additional Paid-in Capital [Member] USD ($)	Issuance Of Common Stock For Partial Note Conversion, February 2014 [Member] USD ($)	Issuance Of Common Stock For Cashless Exercise Of Warrant, February 2014 [Member] Common Stock [Member] USD ($)	Issuance Of Common Stock For Cashless Exercise Of Warrant, February 2014 [Member] Additional Paid-in Capital [Member] USD ($)	Issuance Of Common Stock For Cashless Exercise Of Stock Options March 2014 [Member] Common Stock [Member] USD ($)	Issuance Of Common Stock For Cashless Exercise Of Stock Options March 2014 [Member] Additional Paid-in Capital [Member] USD ($)	Rights To Shares Agreement [Member] Common Stock [Member] USD ($)	Rights To Shares Agreement [Member] Additional Paid-in Capital [Member] USD ($)	Rights To Shares Agreement [Member] USD ($)	Preferred Stock [Member] USD ($)	Common Stock [Member] Restricted Stock [Member] USD ($)	Common Stock [Member] Convertible Notes Payable [Member] USD ($)	Common Stock [Member] VeriTeQ Corporation [Member] USD ($)	Common Stock [Member] USD ($)	Additional Paid-in Capital [Member] Restricted Stock [Member] USD ($)	Additional Paid-in Capital [Member] Convertible Notes Payable [Member] USD ($)	Additional Paid-in Capital [Member] VeriTeQ Corporation [Member] USD ($)	Additional Paid-in Capital [Member] USD ($)	Accumulated Deficit during Development Stage [Member] USD ($)	Convertible Notes Payable [Member] USD ($)	VeriTeQ Corporation [Member] USD ($)	Total USD ($)
Balance at Dec. 31, 2011
Net loss																																																											$ (1,605,000)			$ (1,605,000)
Issuances of common stock for founders shares, January 2012																																																						56,000				(56,000)
Issuances of common stock for founders shares, January 2012 (in Shares)																																																						5,563,000
Issuance of common stock and assumption of stock options for acquisition																																																						8,000				752,000				760,000
Issuance of common stock and assumption of stock options for acquisition (in Shares)																																																						763,000
Issuance of common stock				2,000	78,000	80,000		15,000	15,000
Issuance of common stock (in Shares)				218,000			41,000
Issuance of common stock for services																																																						4,000				156,000				160,000
Issuance of common stock for services (in Shares)																																																						436,000
Issuance of common stock and warrants for note conversion										33,000	33,000			34,000	34,000			41,000	41,000
Beneficial conversion feature of convertible note payable												33,000	33,000			34,000	34,000			41,000	41,000
Share-based compensation																																																										354,000				354,000
Balance at Dec. 31, 2012																																																						70,000				1,515,000	(1,623,000)			(38,000)
Balance (in Shares) at Dec. 31, 2012																																																						7,021,000
Net loss																																																											(18,201,000)			(18,201,000)
Issuance of Restricted Stock																																																			9,000				(9,000)
Issuance of Restricted Stock (in Shares)																																																			859,000
Issuance of common stock and assumption of stock options for acquisition																																																					10,000				925,000				935,000
Issuance of common stock and assumption of stock options for acquisition (in Shares)																																																					1,029,000
Issuance of common stock	4,108,000	(82,000)	(4,026,000)																																																							25,000				25,000
Issuance of common stock (in Shares)	411,000	(8,215,000)																																																				19,000
Issuance of common stock for services																												1,000	62,000	63,000				1,000	90,000	91,000	1,000	262,000	263,000
Issuance of common stock for services (in Shares)																												42,000						33,000			130,000
Issuance of common stock and warrants for note conversion																						1,000	194,000	195,000	2,000	439,000	441,000					25,000	25,000																	(4,108,000)				82,000				4,026,000
Issuance of common stock and warrants for note conversion (in Shares)																						95,000			221,000						17,000																			(411,000)				8,215,000
Adjustments to APIC																																																										(16,000)				(16,000)
Adjustments to APIC (in Shares)																																																						(7,000)
Issuance of warrants in connection with payable																																																										35,000				35,000
Share-based compensation																																																										2,048,000				2,048,000
Balance at Dec. 31, 2013																																																						95,000				5,595,000	(19,824,000)			(14,134,000)
Balance (in Shares) at Dec. 31, 2013																																																						9,459,000
Net loss																																																											(933,000)			(933,000)
Issuance of Restricted Stock																																																						7,000				(7,000)				1,500,000
Issuance of Restricted Stock (in Shares)																																																						650,000
Issuance of common stock																																											1,000	(1,000)			11,000	(11,000)
Issuance of common stock (in Shares)																																											67,000				1,120,000
Issuance of common stock for cashless exercise of stock options, March 2014																																													3,000	(3,000)
Issuance of common stock for cashless exercise of stock options, March 2014 (in Shares)																																													363,000																	382,000
Issuance of common stock and warrants for note conversion																																									70,000	70,000					10,000	181,000	191,000			7,000				128,000				135,000
Issuance of common stock and warrants for note conversion (in Shares)																																								47,000							961,000					677,000
Adjustments to APIC																																															281,000	6,709,000	6,990,000
Adjustments to APIC (in Shares)																																															28,136,000
Issuance of warrants in connection with payable																																																										66,000				66,000
Beneficial conversion feature of convertible note payable																																																										139,000				139,000
Share-based compensation																																																										354,000				354,000
Balance at Jun. 30, 2014																																																						$ 415,000				$ 13,220,000	$ (20,757,000)			$ (7,122,000)
Balance (in Shares) at Jun. 30, 2014																																																						41,480,000

XML

Note 3 - Intangible Assets (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Disclosure Text Block [Abstract]
Amortization of Intangible Assets	$ 0.1	$ 0.1	$ 0.3	$ 0.3

XML

Note 14 - Subsequent Events

6 Months Ended

Jun. 30, 2014

Subsequent Events [Abstract]

Subsequent Events [Text Block]

14. Subsequent Events 

Consulting and Advisory Relationships and Impact on Promissory Notes and Warrants

On July 1, 2014, July 14, 2014, and July 15, 2014, the Company entered into consulting and advisory agreements with Hanover Financial Services (“HFS”), SmallCapVoice.com, Inc. (“SCV”) and RedChip Companies Inc., respectively, relating to investor relations services.  Under the terms of the agreements, the Company issued 550,000 shares of common stock to HFS, 500,000 shares of common stock to SCV and 500,000 shares of common stock to Redchip.  The Company had previously accrued for the issuance of 200,000 shares to Redchip. Accordingly, as a result of the issuances, the Company will record, for the quarter ending September 30, 2014, charges of $77,000, $45,000, and $24,000, respectively, for the issuances of 550,000 shares to HFS 500,000 shares to SCV and 300,000 additional shares to Redchip.  Under the terms of financing transactions entered into on November 13, 2013 and on May 30, 2014, the conversion price of notes and the exercise price of warrants issued in connection with such transactions automatically adjusts following the issuance of common stock at a price per share less than the previously-applicable exercise price or conversion price.  The previously applicable price was $0.20 per share.  Because the issuance to Redchip resulted in a charge of $24,000, it is deemed to be an issuance of shares of common stock at a price per share of $0.08 per share.  Based on that, as of July 15, 2014, the exercise price and conversion price in connection with the notes issued in the November 13, 2013 financing transaction and the conversion price in connection with the notes issued in the May 30, 2014 financing transaction, reset to $0.08 per share.  Under the terms of the warrants, the aggregate exercise price must remain the same, so the number of shares of common stock subject to warrant are increased.  Accordingly, following July 15, 2014, the number of shares issuable upon conversion of the notes was 17,661,115 shares of common stock and the number subject to warrant was 38,787,016 shares at an exercise price of $0.08.

Promissory Notes

We have entered into the following promissory notes subsequent to June 30, 2014: 

Securities Purchase Agreement and Convertible Promissory Note Effective July 15, 2014

Effective July 15, 2014, the funding date, the Company entered into a securities purchase agreement with an accredited investor. Pursuant to the terms of the purchase agreement, the Company issued and sold to the purchaser a convertible promissory note in the aggregate principal amount of $83,500. The note, which accrues interest at a rate of 8% per annum, will mature on April 14, 2015. The note provides the Company with several pre-payment options with varying amount due depending upon the timing of the prepayment. The note may be converted in whole or in part into the Company's common stock, at the option of the holder, at any time following 180 days after issuance and until the maturity date, unless the conversion or share issuance under the conversion would cause the holder to beneficially own in excess of 4.99% of the Company’s common stock. The conversion price shall be 61% multiplied by the market price. Market price means the average of the lowest three (3) trading prices for the Company’s common stock during the ten (10) trading day period ending on the latest complete trading day prior to the date of conversion. If and whenever the Company issues or sells, or is deemed to have issued or sold, any shares of common stock for a consideration per share less than a price equal to the conversion price in effect immediately prior to such issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the conversion price then in effect shall be reduced to an amount equal to the new issuance price. 

The note contains certain covenants and restrictions, including, among others, that, for so long as the note is outstanding the Company will not dispose of certain assets and will maintain its listing on the over-the-counter market. Events of default under the note include, among others, failure to pay principal or interest on the note or comply with certain covenants under the note.

Convertible Note Effective July 16, 2014

Effective July 16, 2014, the funding date, the Company entered into a convertible note with an accredited investor in an amount up to $500,000. On July 16, 2014, the Company received $125,000 as the initial consideration under the terms of the note. The investor may pay additional consideration to the Company in such amounts and at such dates as the Investor may choose in its sole discretion. The note bears an original issue discount of 10% of the amounts funded by the investor and bears no interest for the first 90 days after each payment of consideration. If any amount funded is not paid within the 90 day period, a one-time interest payment of 12% of the amount funded becomes due. The maturity date is two years from the effective date of each payment of consideration made to the Company by the investor. The note may be converted in whole or in part into the Company's common stock, at the option of the investor. The conversion price is the lesser of $0.14 or 60% of the lowest trade price in the 25 trading days previous to the conversion. Unless otherwise agreed in writing by both parties, at no time will the investor convert any amount of the note into common stock that would result in the investor owning more than 4.99% of the Company’s common stock outstanding.

The note provides for the Company to include the shares underlying the note in any subsequently filed registration statement to the extent that the Company files a registration statement with the SEC. Failure to do so will result in liquidated damages of 25% of the outstanding principal balance of the note, but not less than $25,000, being immediately due and payable to the Investor at its election in the form of cash payment or addition to the balance of this note.

So long as the note is outstanding, upon any issuance by the Company or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Investor in the note, then the Company shall notify the Investor of such additional or more favorable term and such term, at the investor’s option, shall become a part of the transaction documents with the investor.

 The note contains certain covenants and restrictions, including, among others, that, for so long as the note is outstanding, the Company shall not become delinquent in its filing requirements as a fully-reporting issuer registered with the SEC or become ineligible to use the DTC system when issuing the Company’s common stock. Events of default under the note include, among others, failure to pay principal or interest on the note or comply with certain covenants under the note.

Securities Purchase Agreement effective August 6, 2014, 8% Convertible Redeemable Notes due July 31, 2015 and Collateralized Secured Promissory Note due July 31, 2015

VeriTeQ Corporation (the “Company”) entered into a securities purchase agreement, (the “SPA’), dated July 31, 2014 and effective August 6, 2014, with an accredited investor (the “Buyer”). Pursuant to the terms of the SPA, the Company issued and sold to the Buyer two 8% convertible promissory notes in the amount of $75,000 each. The first note for $75,000 (the “8% Note”) was paid for by the Buyer on August 6, 2014 in cash, less transaction expenses. The second note (“8% Second Note”) was paid for by the issuance of an offsetting $75,000 secured note issued to the Company by the Buyer, (the “8% Buyer Note”) which is to be paid in cash to the Company within 8 months.

The 8% Note matures on July 31, 2015. It may be converted in whole or in part into the Company's common stock, at the option of the holder, at any time following 180 days after issuance and until the maturity date. The conversion price shall be 61% of the average of the three lowest closing bid prices of the Company’s common stock for the fifteen prior trading days, including the day upon which the conversion notice is received by the Company. During the first 180 days that 8% Note is in effect, the Company may redeem the note by paying to the holder an amount equal to 150% of the face amount plus any accrued interest. The 8% Note may not be prepaid after the 180th day. Interest on any unpaid principal balance of 8% Note shall be paid at the rate of 8% per annum. Interest on the 8% Note shall be paid by the Company in shares of its common stock, referred to as Interest Shares. The holder may, at any time, send in a notice of conversion to the Company for Interest Shares based on the formula provided above for principal conversions.

The 8% Second Note matures on July 31, 2015. The holder of the 8% Second Note is entitled, at its option, after the expiration of the requisite Rule 144 holding period and after full cash payment of the 8% Buyer Note, to convert all or any amount of the principal face amount of the 8% Second Note then outstanding into shares of the Company's common stock without restrictive legend of any nature, at a conversion price for each share of the Company’s common stock equal to 61% of the average of the three lowest closing bid prices of the Company’s common stock for the fifteen prior trading days, including the day upon which the conversion notice is received by the Company. The 8% Second Note may not be prepaid, except in certain circumstances described therein. Interest on any unpaid principal balance of the 8% Second Note shall be paid by the Company in Interest Shares. The holder may, at any time, send in a notice of conversion to the Company for Interest Shares based on the formula provided above for principal conversions.

The 8% Note and the 8% Second Note contain certain covenants and restrictions, including, among others, that, for so long as the notes are outstanding the Company will not dispose of certain assets and will maintain its listing on the over-the-counter market. Events of default under the note include, among others, failure to pay principal or interest on the note or comply with certain covenants under the note.

As discussed above, the Buyer issued to the Company, the 8% Buyer Note, also referred to as the Collateralized Secured Promissory Back End Note, in the amount of $75,000, which matures no later than March 31, 2015, unless the Company does not meet the “current information requirements” required under Rule 144 of the Securities Act of 1933, as amended, in which case the Buyer may declare the 8% Second Note to be in default (as defined in that note) and cross cancel its payment obligations under the 8% Buyer Note against the Company’s payment obligations under the 8% Second Note. The 8% Buyer Note shall bear simple interest at the rate of 8%. The Buyer may, at its option, prepay the 8% Buyer Note at any time. The 8% Buyer Note may not be assigned by the Company, except by operation of law..

Securities Purchase Agreement effective August 4, 2014, 12% Convertible Redeemable Notes due August 4, 2015 and Collateralized Secured Promissory Note due August 4, 2015

The Company entered into a securities purchase agreement, (the “Purchase Agreement’), effective August 4, 2014, with an accredited investor (the “Lender”). Pursuant to the terms of the Purchase Agreement, the Company issued and sold to the Lender two 12% convertible promissory notes in the amount of $50,000 each. The first note for $50,000 (the “12% Note”) was paid for by the Lender on August 4, 2014 in cash, less transaction expenses. The second note (the “12% Second Note”) was initially paid for by the issuance of an offsetting $50,000 secured note issued to the Company by the Lender, (the “12% Lender Note”), which is to be paid in cash to the Company within 8 months.

The 8% Note matures on August 4, 2015. It may be converted in whole or in part into the Company's common stock, at the option of the holder, at any time following 180 days after issuance and until the maturity date. The conversion price shall be 61% of the average of the three lowest closing bid prices of the Company’s common stock for the twenty prior trading days, including the day upon which the conversion notice is received by the Company. During the first 180 days the 12% Note is in effect, the Company may redeem the note by paying to the holder an amount equal to 150% of the face amount plus any accrued interest. The 12% Note may not be prepaid after the 180th day. Interest on any unpaid principal balance of 12% Note shall be paid at the rate of 12% per annum. Interest on the 12% Note shall be paid by the Company in shares of its common stock, referred to as Interest Shares. The holder may, at any time, send in a notice of conversion to the Company for Interest Shares based on the formula provided above for principal conversions.

The 12% Second Note matures on August 4, 2015. The holder of the 12% Second Note is entitled, at its option, after the expiration of the requisite Rule 144 holding period and after full cash payment of the 12% Lender Note, to convert all or any amount of the principal face amount of the 12% Second Note then outstanding into shares of the Company's common stock without restrictive legend of any nature, at a conversion price for each share of the Company’s common stock equal to 61% of the average of the three lowest closing bid prices of the Company’s common stock for the twenty prior trading days, including the day upon which the conversion notice is received by the Company. The 12% Second Note may not be prepaid, except in certain circumstances described therein. Interest on any unpaid principal balance of the 12% Second Note shall be paid by the Company in Interest Shares. The holder may, at any time, send in a notice of conversion to the Company for Interest Shares based on the formula provided above for principal conversions.

The 12% Note and the 12% Second Note contain certain covenants and restrictions, including, among others, that, for so long as the notes are outstanding the Company will not dispose of certain assets and will maintain its listing on the over-the-counter market. Events of default under the note include, among others, failure to pay principal or interest on the note or comply with certain covenants under the note.

As discussed above, the Lender issued to the Company, the 12% Lender Note, also referred to as the Collateralized Secured Promissory Back End Note, in the amount of $50,000, which matures no later than April 4, 2015, unless the Company does not meet the “current information requirements” required under Rule 144 of the Securities Act of 1933, as amended, in which case the Lender may declare the 12% Second Note to be in default (as defined in that note) and cross cancel its payment obligations under the 12% Lender Note against the Company’s payment obligations under the 12% Second Note. The 12% Lender Note shall bear simple interest at the rate of 12%. The Lender may, at its option, prepay the 12% Lender Note at any time. The 12% Lender Note may not be assigned by the Company, except by operation of law.

Impact of Promissory Notes and Warrants of Variable Priced Promissory Notes

Under the terms of a financing from November 13, 2013 and on May 30, 2014, the holders of the notes and warrants issued in connection with such transactions, following the issuance of any security with a variable price conversion feature, may substitute the variable price formula for their exercise or conversion prices.  The promissory notes described above contain a variable price conversion feature. As a result, the holder of a warrant issued on November 13, 2013 may substitute a formula resulting in a lower price.  Moreover, the warrants provide that the holder of the warrant has the right to invest the same aggregate amount.  Accordingly, whenever a lower price applies, a larger number of shares may be purchased.   The exact number of shares that may be issued varies depending on the stock price at the time of exercise or conversion.  On August 12, 2014, if all of the outstanding warrants issued in connection with the Novermber 13, 2013 financing had been exercised, the alternative price formulation could have resulted in an increase in the number of warrants from 38,787,016 at an exercise price of $0.08 per share to warrants to acquire 144,851,212 shares of the Company's common stock at an exercise price of $0.021 per share.  The warrant holders have the right to effect a cashless exercise by accepting fewer shares and not tendering cash.  On August 12, 2014, $1,413,000 principal amount of notes issued in connection with the November 13, 2013 and May 30, 2014 financings was outstanding.  If all such outstanding notes had been converted on such date, it would have resulted in an issuance of approximately 66,900,000 shares and the elimination of the liability for the Company.  Because the variable price formula changes with the value of the common stock, the number of shares subject to warrant and the number of shares into which the notes are convertible varies. 

XML

Note 3 - Intangible Assets (Details) - Intangibles and Other Assets (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Note 3 - Intangible Assets (Details) - Intangibles and Other Assets [Line Items]
Intangible asset	$ 6,721	$ 7,018
Technology-Based Intangible Assets [Member]
Note 3 - Intangible Assets (Details) - Intangibles and Other Assets [Line Items]
Intangible asset	5,998	6,244
Intangible asset estimated useful life	14 years
Customer Relationships [Member]
Note 3 - Intangible Assets (Details) - Intangibles and Other Assets [Line Items]
Intangible asset	324	359
Intangible asset estimated useful life	7 years
Trademarks [Member]
Note 3 - Intangible Assets (Details) - Intangibles and Other Assets [Line Items]
Intangible asset	$ 399	$ 415
Intangible asset estimated useful life	14 years

XML

Note 2 - Acquisition (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure Text Block Supplement [Abstract]

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

Acquisition	Dates Acquired	Acquisition Price		Intangible Assets Acquired		Description of Assets
(in thousands)
VeriTeQ Corporation	7/08/13	$	935	$	—	Cash, marketable securities and receivables, among others

Business Acquisition, Pro Forma Information [Table Text Block]

(In thousands, except per share amounts)	Six-Months Ended June 30, 2013
Net operating revenue	$	—
Loss from continuing operations	$	(3,208	)
Loss per common share from continuing operations– basic and diluted	$	(0.35	)

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended		31 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014
Cash flows from operating activities:
Net loss	$ (933,000)	$ (2,852,000)	$ (20,757,000)
Share based compensation	354,000	916,000	2,756,000
Depreciation and amortization	298,000	297,000	1,101,000
Non-cash interest expense	1,568,000	413,000	8,320,000
Change in fair value of subordinated convertible debt	(2,788,000)
Change in fair value of warrants	2,838,000		3,558,000
Change in fair value of conversion option of the convertible notes	(3,628,000)		(3,265,000)
Loss on settlement of other receivable	56,000		56,000
Deferred income tax benefit			(800,000)
Issuance of warrants for contract amendment	66,000
Realized loss on sale of marketable securities, available-for-sale			107,000
Change in other receivable	115,000		169,000
Change in other current assets	23,000		(49,000)
Change in accounts payable, accrued expenses and liability under shared services agreement	978,000	979,000	4,463,000
Change in other assets	(55,000)	(10,000)	(65,000)
Net cash used in operating activities	(1,174,000)	(257,000)	(3,440,000)
Cash flows from investing activities:
Purchases of fixed assets	(1,000)		(5,000)
Sale of marketable securities, available-for-sale			133,000
Cash acquired from acquisition of VeriTeQ Corporation (f/k/a Digital Angel Corporation)			818,000
Net cash (used in) provided by investing activities	(1,000)		946,000
Cash flows from financing activities:
Proceeds from the issuances of notes payable, net of repayments of $33 in 2014	537,000	50,000	997,000
Proceeds from the issuance of common stock to investors		25,000	105,000
Proceeds from the issuance of senior convertible debt, net of repayments of $400 in 2014	(100,000)		1,550,000
Change in restricted cash	835,000		(47,000)
Cash paid in lieu of fractional shares			(16,000)
Proceeds from the issuance of common stock and warrants to investor			15,000
Net cash provided by financing activities	1,272,000	75,000	2,604,000
Net increase (decrease) in cash	97,000	(182,000)	110,000
Cash --- Beginning of period	13,000	183,000
Cash — End of period	110,000	1,000	110,000
Warrant [Member]
Cash flows from operating activities:
Issuance of warrants for contract amendment			550,000
Common Stock [Member]
Cash flows from operating activities:
Issuance of common stock for investment advisory and investor relation services			$ 416,000

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Notes payable, net of discounts to related parties (in Dollars)	$ 216	$ 60
Accrued expenses to related parties (in Dollars)	$ 2,386	$ 1,764
Preferred shares, par value (in Dollars per share)	$ 10.00	$ 10
Preferred shares, shares authorized	5,000,000	5,000,000
Preferred shares,shares outstanding	0	0
Preferred Shares, shares issued	0	0
Common shares, par value (in Dollars per share)	$ 0.01	$ 0.01
Common shares, shares authorized	50,000,000	50,000,000
Common shares, shares issued	41,480,000	9,459,000
Common shares, shares outstanding	41,480,000	9,459,000
Common shares, shares subscribed but unissued	29,097,000

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Note 9 - Loss Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

9. Loss Per Share

A reconciliation of the numerator and denominator of basic and diluted loss per share is provided as follows, in thousands, except per share amounts:

	Three-Months Ended June 30,						Six-Months Ended June 30,
	2014			2013			2014			2013
Numerator for basic and diluted loss per share:
Loss from continuing operations	$	(5,558	)	$	(1,542	)	$	(933	)	$	(2,852	)
Denominator for basic and diluted loss per share:
Basic and diluted weighted-average shares outstanding (1)		19,913			9,042			14,758			8,941
Loss per share— basic and diluted:
Total — basic and diluted	$	(0.28	)	$	(0.17	)	$	(0.06	)	$	(0.32	)

(1) The following stock options, warrants and shares issuable under right to shares agreements, investor relations consulting agreement and upon conversion of convertible notes payable outstanding at June 30, 2014 and 2013 were not included in the computation of dilutive loss per share because the net effect would have been anti-dilutive:

	June 30, 2014		June 30, 2013
	(in thousands)
Stock options		2,238		2,712
Warrants		16,255		436
Shares issuable under investor relations consulting agreement		200	__
Shares issuable upon conversion of convertible notes payable		10,039		2,185
		28,732		5,333

Subsequent to June 30, 2014, the number of warrants outstanding has been increased and the shares issuable upon conversion of convertible notes payable has been increased as more fully discussed in Note 14

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Document And Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 15, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	VERITEQ
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		34,186,131
Amendment Flag	false
Entity Central Index Key	0000924642
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Note 10 - Related Party Transactions

6 Months Ended

Jun. 30, 2014

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

10. Related Party Transactions

As of June 30, 2014, we have entered into notes payable with related parties and a shared services agreement and letter agreements with a former related party. In addition, in June 2013, we sold common stock to a member of our board of directors. Each of these transactions is more fully described in Notes 10 and 14 to our consolidated financial statements included in our Annual Report on Form 10-K/A filed with the SEC on August 19, 2014. Certain of the related-party notes payable are also discussed in Note 5.

Accrued Expenses

Included in accrued expenses at June 30, 2014 and December 31, 2013 are approximately $2.0 million and $1.6 million, respectively, owed to the Company's corporate officers and directors.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) Share data in Thousands, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended				31 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014
Sales	$ 21,000				$ 95,000				$ 113,000
Cost of goods sold	8,000				46,000				53,000
Gross margin	13,000				49,000				60,000
Operating Expenses:
Selling, general and administrative expenses	1,163,000		1,138,000		2,469,000		2,100,000		10,408,000
Development expenses	75,000		3,000		139,000		9,000		276,000
Depreciation and amortization expense	149,000		148,000		298,000		297,000		1,101,000
Total operating expenses	1,387,000		1,289,000		2,906,000		2,406,000		11,785,000
Operating Loss	(1,374,000)		(1,289,000)		(2,857,000)		(2,406,000)		(11,725,000)
Other Income (Expense):
Change in value of convertible debt with embedded option feature	356,000				2,788,000
Change in fair value of conversion option of the convertible notes	2,558,000				3,628,000				3,265,000
Change in value of warrant liabilities	(5,961,000)				(2,838,000)				(4,107,000)
Other expense	(6,000)				(62,000)				(169,000)
Interest expense	(1,131,000)		(253,000)		(1,592,000)		(446,000)		(8,821,000)
Total other income (expense)	(4,184,000)		(253,000)		1,924,000		(446,000)		(9,832,000)
Loss before income taxes	(5,558,000)		(1,542,000)		(933,000)		(2,852,000)		(21,557,000)
Benefit for income taxes	0		0		0		0		800,000
Net Loss	$ (5,558,000)		$ (1,542,000)		$ (933,000)		$ (2,852,000)		$ (20,757,000)
Net loss per common share — basic and diluted (in Dollars per share)	$ (0.28)		$ (0.17)		$ (0.06)		$ (0.32)
Weighted average number of common shares outstanding — basic and diluted (in Shares)	19,913	[1]	9,042	[1]	14,758	[1]	8,941	[1]

[1] The following stock options, warrants and shares issuable under right to shares agreements, investor relations consulting agreement and upon conversion of convertible notes payable outstanding at June 30, 2014 and 2013 were not included in the computation of dilutive loss per share because the net effect would have been anti-dilutive:

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Note 4 - Accrued Expenses

6 Months Ended

Jun. 30, 2014

Other Liabilities and Financial Instruments Subject to Mandatory Redemption [Abstract]

Other Liabilities Disclosure [Text Block]

4. Accrued Expenses

The following table summarizes the significant components of accrued expenses:

	June 30, 2014		December 31, 2013
	(in thousands)
Accrued payroll and payroll related	$	2,315	$	1,734
Accrued legal		454		445
Accrued other expenses		811		539
Total accrued expenses	$	3,580	$	2,718

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Note 3 - Intangible Assets

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

Intangible Assets Disclosure [Text Block]

3. Intangible Assets

Intangibles and other assets consist of the following:

	June 30, 2014		December 31, 2013		Lives (in years)
	(in thousands)		(in thousands)
Technology, net of accumulated amortization of $873 and $627	$	5,998	$	6,244		14
Customer relationship, net of accumulated amortization of $176 and $141		324		359		7
Trademarks, net of accumulated amortization of $51 and $35		399		415		14
	$	6,721	$	7,018

Amortization of intangibles charged against income amounted to $0.1 million and $0.1 million for the three-months ended June 30, 2014 and 2013, respectively, and $0.3 million and $0.3 million for the six-months ended June 30, 2014 and 2013, respectively.

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Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation 

The financial statements include our accounts and the accounts of our subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reclassification, Policy [Policy Text Block]

Classification of Expenses

For comparative purposes, we have reclassified certain expenses related to the development of our products from selling, general and administrative expenses to development expenses in the historical financial statement presented herein.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates 

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”) requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Although these estimates are based on the knowledge of current events and actions we may undertake in the future, they may ultimately differ from actual results. Included in these estimates are assumptions used in determining the lives of long-lived assets, in Black-Scholes-Merton (“BSM”) valuation models in estimating the fair value of stock-based compensation and warrants, promissory notes with an embedded convertible option and royalty obligations and in determining valuation allowances for intangible assets, deferred tax assets, among others.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risk 

We maintained our domestic cash in two financial institutions during the period ended June 30, 2014. Balances were insured up to Federal Deposit Insurance Corporation limits of $250,000 per institution. At times, cash balances may exceed the federally insured limits.

Other Current Assets [Policy Text Block]

Other Current Assets

Other current assets consist primarily of deferred financing costs of approximately $20,000 at June 30, 2014 and prepaid insurance of approximately $28,000 and $74,000 at June 30, 2014 and December 31, 2013, respectively. No other items included in other current assets at June 30, 2014 and December 31, 2013 exceeded 5% of total current assets, respectively.

Inventory, Policy [Policy Text Block]

Inventory

Inventory consisted of purchased finished goods at June 30, 2014 and December 31, 2013. Inventory is valued at the lower of the value using the first-in, first-out (“FIFO”) cost method, or market.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment, consisting primarily of computer equipment, and are stated at cost less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful life of the related assets (generally three years for computer equipment and 10 years for other equipment). Depreciation expense for the three-months ended June 30, 2014 and 2013 was approximately $1 thousand and nil, respectively. Depreciation expense for the six-months ended June 30, 2014 and 2013 was approximately $1 thousand and nil, respectively.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Intangible Assets 

We account for intangible assets in accordance with the Intangibles — Goodwill and Other Topic of the Codification. Intangible assets deemed to have an indefinite life, such as goodwill, are reviewed at least annually for impairment. Intangible assets with finite lives are amortized over their estimated useful lives. We do not have any intangible assets with indefinite lives.

We have intangible assets consisting of technology, customer relationship and trademarks, which are more fully discussed in Note 3. These intangible assets are amortized over their expected economic lives ranging from 7 to 14 years. The lives were determined based upon the expected use of the asset, the ability to extend or renew patents, trademarks and other contractual provisions associated with the asset, the stability of the industry, expected changes in and replacement value of distribution networks and other factors deemed appropriate. We continually evaluate whether events or circumstances have occurred that indicate the remaining estimated useful lives of our definite-lived intangible assets warrant revision or that the remaining balance of such assets may not be recoverable. We use an estimate of the related undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable. We believe that no impairment of our intangible assets existed as of June 30, 2014.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

Product revenue is recognized at the time product is shipped and title has transferred, provided that a purchase order has been received or a contract has been executed, there are no uncertainties regarding customer acceptance, the sales price is fixed and determinable and collectability is deemed probable. If uncertainties regarding customer acceptance exist, we intend to recognize the revenue when such uncertainties are resolved. There are no significant post-contract support obligations at the time of revenue recognition. Our accounting policy regarding vendor and post contract support obligations is based on the terms of the customers’ contracts and is billable upon occurrence of the post-sale support. Currently, there are no multiple element arrangements in connection with our product sales. Cost of products sold is recorded as the related revenue is recognized. We offer a warranty on our products and record a liability for product warranties at the time it is probable that a warranty liability has been incurred and the amount of loss can reasonably be estimated. To date, we have not incurred a warranty liability on products we have sold. It is our policy to approve all customer returns before issuing credit to the customer.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation 

At June 30, 2014, we had five stock-based employee compensation plans which are more fully described in Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on April 15, 2014. In accordance with the Compensation – Stock Compensation Topic of the Codification, awards granted are valued at fair value and compensation cost is recognized on a straight line basis over the service period of each award. On June 18, 2014, our majority stockholders approved the 2014 Stock Incentive Plan, which is more fully discussed in Note 7.

Income Tax, Policy [Policy Text Block]

Income Taxes 

We recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary differences between taxable income reported for financial reporting purposes and income tax purposes consist primarily of timing differences such as amortization of intangible assets, deferred officers' compensation and stock-based compensation. A valuation allowance is provided against net deferred tax assets where we determine realization is not currently judged to be more likely than not. We recognize and measure uncertain tax positions through a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating and estimating tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. Accordingly, we report a liability for unrecognized tax benefits resulting from the uncertain tax positions taken or expected to be taken in a tax return and recognize interest and penalties, if any, related to uncertain tax positions in income tax expense.

Earnings Per Share, Policy [Policy Text Block]

Loss Per Common Share and Common Share Equivalent 

Basic and diluted loss per common share has been computed by dividing the loss by the weighted average number of common shares outstanding. Since we have incurred losses attributable to common stockholders, diluted loss per common share has not been computed by giving effect to all potentially dilutive common shares that were outstanding during the period., since to do so would have been anti-dilutive. See Note 9 for the computation of basic and diluted loss per share.

New Accounting Pronouncements, Policy [Policy Text Block]

Impact of Recently Issued Accounting Standards 

From time to time, the Financial Accounting Standards Board (“FASB”) or other standards setting bodies will issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification (“ASC” or “Codification”) are communicated through issuance of an Accounting Standards Update (“ASU”).

In June 2014, the FASB issued ASU Codification Development Stage Entities (Topic 915), Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments related to the elimination of inception-to date information and other remaining disclosure requirements of Topic 915, which should be applied retrospectively and are effective for annual reporting periods beginning after December 15, 2014 and interim periods therein. The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations. The amendments regarding Topic 275 and the sufficiency-of-equity-at-risk criterion for development stage entities of Topic 810 shall be applied prospectively. The adoption of these amendments will eliminate the inception--to–date information that is currently presented in the Company’s financial statements and may result in enhanced disclosures regarding risks and uncertainties applicable to the Company’s business.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09,”Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”). ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-step analysis in determining when and how revenue is recognized. The new model will require revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services. ASU 2014-09 is effective for public entities for annual reporting periods beginning after December 15, 2016 and interim periods within those periods. Early adoption is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements and footnote disclosures.

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Note 11 - Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

11. Commitments and Contingencies

We have entered into employment agreements with Mr. Scott Silverman, our Chief Executive Officer, Mr. Randolph Geissler, our President and Mr. Michael Krawitz our Chief Legal and Financial Officer. Messrs. Silverman and Geissler’s employment agreements are discussed in Note 11 and Mr. Krawitz’ employment agreement is discussed in Note 14 to our consolidated financial statements included in our Annual Report on Form10-K/A filed with the SEC on August 19, 2014.  No changes were made to these agreements during the six-months ended June 30, 2014.

Liquidation of Signature Industries, Limited

In March 2013, VC appointed a liquidator and initiated the formal liquidation of a U.K. subsidiary, Signature Industries Limited (“Signature”), primarily related to its outstanding liabilities. VC used £40,000 ($61,000) of the purchase price from the sale of Signature’s former division, Digital Angel Radio Communications Limited (“DARC”) to satisfy its estimated portion of Signature’s outstanding liabilities. However, one party has submitted a claim to the liquidator for approximately £244,000 (U.S. $0.4 million). This claim is associated with an outsourced manufacturing agreement related to a terminated manufacturing contract. As a result of the termination of the contract, Signature did not purchase any product under the manufacturing agreement and, accordingly, VC, in consultation with outside legal counsel, does not believe that any amount is owed per the terms of the agreement. However, this claim could result in VC having to pay an additional estimated portion of Signature’s outstanding liabilities. We expect the liquidation to be completed by the end of 2014, although it could extend beyond the expected timeframe.

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Note 7 - Stockholders' Deficit

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

7. Stockholders’ Deficit

Preferred Stock

As of June 30, 2014, the Company has authorized 5,000,000 shares of preferred stock, par value $10.00 per share of which 500,000 shares were authorized as Series C Preferred Stock. The Series C Preferred Stock is more fully described in Note 1. No shares of preferred stock were outstanding as of June 30, 2014.

Common Stock

At June 30, 2014, VC had authorized 50 million shares of common stock of which approximately 12.4 million were issued and outstanding. Of the 12.4 million issued and outstanding shares of common stock at June 30, 2014, 5.7 million were beneficially owned by our Chief Executive Officer.

On or about August 26, 2014, the Company intends to file an Amended and Restated Certification of Incorporation with the State of Delaware to increase the number of authorized shares of its common stock to 500 million and to reduce the par value of its preferred stock to $0.01 per share as more fully discussed in Notes 1 and 14.

Warrants

We have issued warrants exercisable for shares of common stock for consideration, as follows (in thousands, except exercise price):

Series/ Issue Date	Warrants Issued/As Reset		Additional Warrants under Cashless Exercise Provisions		Exercised			Balance June 30, 2014		Exercise Price		Exercisable Period (years)
Series A /June 2012		95		—		(95	)		—	$	0.37		3
Series B / September 2012		40		—		—			40	$	1.57		3
Series C / October 2012		20		—		—			20	$	1.57		3
Series C / October 2012, reset May 2014		20		—		—			20	$	0.35		3
Series D / December 2012		14		—		—			14	$	1.57		5
Series E /December 2012		29		—		—			29	$	1.57		5
Series F / March 2013		40		—		—			40	$	1.57		3
Series G / April 2013		47	−−			—			47	$	1.31		3
Series G / April 2013, reset May 2014		48	−−			—			48	$	0.35		3
Series H / June 2013		63	−−			—			63	$	1.57		3
Series H/ June 2013, reset May 2014		20	−−			—			20	$	0.35		3
Series VT a/ November 2013, as reset May 2014		37,551		2,966		(29,263	)		11,254	$	0.20		5
Series VT b/ November 2013, as reset May 2014		4,260		—		—			4,260	$	0.20		5
Series I/ May 2014		300		—		—			300	$	0.35		3
Series J/ May 2014		100		—		—			100	$	0.35		2
		42,647		2,966		(29,358	)		16,255

The Series A warrant was issued in connection with a stock subscription agreement to an investor. The Series A warrant was exercised in February 2014 under the cashless exercise provisions of the warrants.

The Series B, C, D, E, F, G and H warrants were issued in connection with promissory notes. These warrants are exercisable at any time during the exercisable periods. The warrant agreements provide for the number of shares to be adjusted in the event of a stock split, a reverse stock split, a share exchange or other conversion or exchange event in which case the number of warrants and the exercise price of the warrants shall be adjusted on a proportional basis. The total value of these warrants of approximately $0.3 million was amortized to interest expense over the life of the promissory notes. The promissory notes were converted into common stock during 2013. As a result of the issuances of two promissory notes on May 30, 2014, and under the terms of a promissory note issued on March 20, 2014, the exercises prices of one-half of the Series C, G and H warrants were reduced to $0.35 per share of common stock from exercise prices ranging from $1.31 to $1.57 per share. We recorded non-cash interest expense of approximately $7 thousand during the three-months ended June 30, 2014 as a result of the reductions in the exercise prices of the warrants.

The Series VTa warrants were issued on November 13, 2013 in connection with senior secured convertible notes, which are more fully described in Note 5. These warrants are exercisable at any time during the exercise periods. The warrant agreements provide for the number of shares to be adjusted in the event of a stock split, a reverse stock split, a share exchange or other conversion or exchange event in which case the number of warrants and the exercise price of the warrants shall be adjusted on a proportional basis. In addition, if we issue or sell any shares of our common stock, except certain specified issuances pursuant to the Company’s stock plans or the issuance of common stock pursuant to agreements existing on November 13, 2013, at a price per share, or the New Exercise Price, less than the Exercise Price in effect immediately before the issuance or sale, then immediately after such dilutive issuance, the Exercise Price will be reduced to the New Exercise Price. If there is an adjustment to the Exercise Price as a result of any of the dilution events specified in the Warrant agreements, the number of shares of common stock that may be purchased upon exercise of the warrant will be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable for the adjusted number of shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on exercise). As a result of the issuances of two promissory notes on May 30, 2014, the reset provisions under the terms of the Series VTa warrants were triggered. Accordingly, the number of warrants to acquire shares of the Company’s common stock increased from 2,644,444 warrants to 37,551,144 warrants and the exercise price was reduced to $0.20 per share from $2.84 per share of common stock. In addition, during the three-months ended June 30, 2014, certain of the Series VTa warrants were exercised under the cashless provisions of the warrants, which resulted in an increase in the shares issued upon exercise as noted in the table above. Subsequent to June 30, 2014, the number of warrants and the exercise price have been reset as more fully discussed in Note 14.

The Series VTb warrants were issued November 13, 2013 to PSID in connection with a letter agreement between the Company and PSID as more fully discussed in Note 10 to our consolidated financial statements included in our Annual Report on Form 10-K filed with the SEC on April 15, 2014. The terms of the Series VTb warrants are identical to the Series VTa warrants. As a result of the issuances of two promissory notes on May 30, 2014, the reset provisions under the terms of the Series VTb warrants were triggered. Accordingly, the number of warrants to acquire shares of the Company’s common stock increased from 300,000 warrants to 4,260,000 warrants and the exercise price was reduced to $0.20 per share from $2.84 per share of common stock. Subsequent to June 30, 2014, the number of warrants and the exercise price have been reset as more fully discussed in Note 14.

The VTa and VTb warrants are classified as liabilities at June 30, 2014 and December 31, 2013.

The Series I and J warrants were issued in connection with promissory notes issued on March 20, 2014 and May 1, 2014, respectively. As a result of the issuances of two promissory notes on May 30, 2014, provisions under the notes issued on March 20, 2014, and May 1, 2014 requiring the issuances of these warrants were triggered. These warrants are exercisable at any time during the exercise periods. The warrant agreements provide for the number of shares to be adjusted in the event of a stock split, a reverse stock split, a share exchange or other conversion or exchange event in which case the number of warrants and the exercise price of the warrants shall be adjusted on a proportional basis. The relative fair value of these warrants of approximately $0.1 million is being amortized to interest expense over the life of the promissory notes.

We determined the value of the warrants issued in 2012, 2013 and 2014 on the issuance/reset dates utilizing the following assumptions in the BSM valuation model:

Dates Warrants Issued/Reset	Dividend Yield			Volatility			Expected Lives (Yrs.)		Risk-Free Rate			Date of the Assumptions
June 2012		0.00	%		126.00	%		3		.34	%	June 1, 2012
September 2012		0.00	%		126.00	%		3		.35	%	September 25, 2012
October 2012		0.00	%		126.00	%		3		.35	%	October 12, 2012
October 2012, reset May 2014		0.00	%		223.00	%		1.37		.10	%	May 30, 2014
December 2012		0.00	%		126.00	%		5		.72	%	December 31, 2012
March 2013		0.00	%		126.00	%		3		.38	%	March 18, 2013
April 2013		0.00	%		126.00	%		3		.34	%	April 10, 2013
April 2013, reset May 2014		0.00	%		210.00	%		1.87		.37	%	May 30, 2014
June 2013		0.00	%		126.00	%		3		.52	%	June 1, 2013
June 2013, reset May 2014		0.00	%		215.00	%		2.01		.37	%	May 30, 2014
November 2013, reset May 2014		0.00	%		163.00	%		4.46		1.54	%	May 30, 2014
May 2014 (Series I)		0.00	%		192.26	%		2.80		.79	%	May 30, 2014
May 2014 (Series J)		0.00	%		214.78	%		2		.39	%	May 30, 2014

Stock Option Activity

We had stock-based employee plans outstanding as of June 30, 2014, which are more fully described in Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K/A filed with the SEC on August 19, 2014.

We account for our stock-based compensation plans in accordance with ASC 718-10, Compensation – Stock Compensation. Under the provisions of ASC 718-10, the fair value of each stock option is estimated on the date of grant using a BSM option-pricing formula, and amortized to expense over the expected performance or service periods using the straight-line attribution method. During the three and six-months ended June 30, 2014 and for the three-months ended June 30, 2013, we did not grant any stock options. During the six-months ended June 30, 2013, we granted 1.0 million options The weighted average fair value of the options granted during the six-months ended June 30, 2013 was $1.33 per share.

The weighted average values of the assumptions used to value the options granted in the six-months ended June 30, 2013 were as follows: expected term of 5 years, expected volatility of 126%, risk-free interest rates of 0.83%, and expected dividend yield of 0%. The expected life represents an estimate of the weighted average period of time that options are expected to remain outstanding given consideration to vesting schedules and the Company’s historical exercise patterns. Expected volatility was estimated based on the historical volatility of similar companies’ common stock. The risk free interest rate was estimated based on the U.S. Federal Reserve’s historical data for the maturity of nominal treasury instruments that corresponds to the expected term of the option. The expected dividend yield was 0% based on the fact that we have never paid dividends and we have no present intention to pay dividends.

During the three and six-months ended June 30, 2014, we did not record any compensation expense associated with stock options as they were all fully vested on or before January 1, 2014. During the three and six-months ended June 30, 2013, we recorded approximately $0.4 million and $0.6 million in compensation expense related to stock options granted to our directors, employees and consultants (who provide corporate support services).

A summary of the stock option activity for our stock options plans for the six-months ended June 30, 2014 is as follows (shares in thousands):

	Stock Options			Weighted Average Exercise Price		Weighted Average Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at January 1, 2014		2,628		$	9.01
Granted		—			—
Exercised		(382	)		0.05
Forfeited or expired		(8	)		659.87
Outstanding at June 30, 2014		2,238			8.02		4.65	$	77,000	*
Vested or expected to vest at June 30, 2014		2,238			8.02		4.65	$	77,000	*
Shares available on June 30, 2014 for options that may be granted		2,508

^*The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The market value of our common stock was $0.14 per share at June 30, 2014.

There were 0.4 million stock options exercised during the six-months ended June 30, 2014, with a total intrinsic value of $0.4 million. No stock options were exercised during the three-months ended June 30, 2014 nor for the three and six-months ended June 30, 2013. No options vested during the three-months ended June 30, 2014 and 2013. The total fair value of options vested during the six-months ended June 30, 2013, was approximately $0.4 million. As of June 30, 2014, there was no unrecognized compensation cost related to stock options granted under our plans.

Restricted Stock Grants 

In June 2014, we issued approximately 0.6 million shares of our restricted stock to a director as an inducement to joining our board. One-hundred and fifty-thousand shares of the restricted stock vest on January 2, 2015 and the remainder vest on January 3, 2016. Also, in January 2013, we issued approximately 0.9 million shares of our restricted common stock to a member of our senior management. This restricted stock vests in full in January 2015. The total value of the restricted stock of approximately $1.5 million is being expensed over the vesting period. During the three-months ended June 30, 2014 and 2013 and the six-months ended June 30, 2014 and 2013, we recorded $0.2 million, $0.2 million, $0.4 million and $0.3 million, respectively, in compensation expense related to the restricted stock.

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Note 5 - Notes Payable and Restricted Cash

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

5. Notes Payable and Restricted Cash

November 2013 Financing Transaction

On November 13, 2013, we entered into the securities purchase agreement (the “Purchase Agreement”) with a group of institutional investors (the “Investors”), relating to the private placement of approximately $1,816,667 in principal amount of senior secured convertible promissory notes. The notes were issued with an original issue discount of $166,667 and the aggregate purchase price of the notes was $1,650,000. Notwithstanding the purchase price of $1,650,000, $150,000 of the purchase price was be deemed paid at the closing by the cancellation of $150,000 of obligations owed by the Company to the placement agent as more fully discussed below. Therefore, the Notes were issued for a cash purchase price of $1,500,000, and with warrants to purchase up to 2,422,222 shares of our common stock, on the terms set forth below.     

In connection with the financing, we agreed to allow our placement agent to participate in the offering for $150,000 in lieu of our obligation to pay the placement agent a cash fee of $150,000. In addition, the placement agent will receive 5% of the aggregate cash exercise price received by us upon exercise of any warrants in the offering, and they received 222,222 warrants entitling them to purchase 222,222 shares of common stock as part of their placement agent fee. Thus, the aggregate number of warrants, issued in the financing was 2,644,444. We also issued 300,000 warrants under the terms of a letter agreement dated November 13, 2013 in connection with the financing. Thus, the warrants issued on November 13, 2014 aggregated 2,944,444.

In connection with the sale of the notes and the warrants issued to the Investors, (i) we entered into a registration rights agreement with the Investors (the "Registration Rights Agreement"), (ii) we and certain of our subsidiaries entered into a security and pledge agreement in favor of the collateral agent for the Investors (the "Security Agreement"), (iii) certain of our subsidiaries entered into a guaranty in favor of the collateral agent for the Buyers (the “Guaranty”), and (iv) we and each depository bank in which such bank account is maintained entered into certain account control agreements with respect to certain accounts described in the Note and the Security Agreement. The transaction closed on November 13, 2013 (the “Closing”).

At Closing, we received proceeds, net of $115,000 of the Investor’s expenses that were paid for by the Company, of $635,000 and approximately $750,000 of the proceeds were placed in restricted bank accounts in amounts proportionate to each Investors note balance. The restricted funds were to be applied to pay any redemption or other payment due under the applicable note to the applicable holder from time to time. Per the term of the securities purchase agreement, we were required upon the sale of 50,000 shares of MGT Capital Investments Inc.’s common stock that we owned to place the proceeds from the sale into the restricted bank accounts on a pro rata basis. Accordingly, on November 21, 2013, upon the sale of the 50,000 shares of MGT’s common stock under the terms of a stock purchase agreement, we placed approximately $132,500 into the restricted accounts. The balance in the restricted bank accounts totaled approximately $0.9 million at March 31, 2014. On April 3, 2014 and on June 16, 2014, to provide the Company with additional liquidity, several of the Investors transferred approximately $145 thousand and $0.3 million, respectively, of the restricted funds to our operating account. In connection with the Right to Shares Agreement dated June 24, 2014, $0.4 million of the restricted funds were used to pre-pay a portion of one of the outstanding notes. Therefore, the balance in the restricted accounts aggregates approximately $47 thousand as of June 30, 2014.

Under the terms of a May 30, 2014 financing, the Company issued promissory notes totaling $0.3 million to two of the Investors. The promissory notes are convertible into shares of the Company’s common stock at an exercise price of $0.20 per share. As a result of the May 30, 2014 financing, certain reset provisions under the terms of the November 13, 2013 promissory notes were triggered. Accordingly, the conversion price of the notes with an aggregate principal balance of $1,816,667 was reset to $0.20 per share from $0.75 per share of the Company’s common stock and the exercise price of certain warrants issued on November 13, 2014, was changed to $0.20 per share from $2.84 per share of the Company’s common stock. In addition, the number of warrants was increased from common stock warrants to acquire 2,944,444 shares of the Company’s common stock to warrants to acquire 41,811,114 shares of the Company’s common stock, subject to adjustment based on the cashless provisions of the warrants. On June 10, 2014 and June 24, 2014, the Company entered into Right to Shares Agreements with two of the Investors related to the notes and warrants. The Right to Shares Agreements are more fully discussed in Note 1.

Notes payable consists of the following (in thousands): 

	June 30, 2014			December 31, 2013
	(in thousands)
Note originally with PSID for $200 dated January 11, 2012, bore interest at 5% per annum, was originally payable in monthly instalments beginning January 11, 2013 through December 11, 2014. Note was amended in July 2013 to allow for conversion into common stock and extend payment terms. After the note was partially converted into common stock in October 2013, PSID assigned the note to a group of lenders in November 2013. One of the lenders converted $60 of the note and $10 of accrued interest into 47 shares of common stock in February 2014. The Company issued warrants to acquire 300 shares of its common stock to PSID in connection with a letter agreement entered into in November 2013, that were reset on May 30, 2014 to warrants to acquire 4,260 shares at an exercise price of $0.20 per share. (2)(3)	$	115		$	175
Demand note for $80 issued October 11, 2013 to our CEO, bears interest at 5% per annum repaid in November 2013, February and April 2014(1)		—			30
Demand note for $30 issued October 29, 2013 to our CEO, bears interest at 5% per annum, partially repaid in April 2014(1)		26			30
Senior Secured Convertible Notes issued November 13, 2013 for $1,817, of which $726 was repaid and converted in June 2014, net of discount of $400 and $1,585, to group of institutional investors, are convertible into shares of common stock at $0.20 per share and mature November 13, 2014. Notes were issued with Warrants to acquire 2,644 shares of common stock with an exercise price of $2.84 per share that were reset on May 30, 2014 to warrants to acquire 37,551 shares of common stock with an exercise price of $0.20 per share of which 11,254 were outstanding on June 30, 2014. (2)(4)		691			232
Demand note for $60 issued January 8, 2014 to Michael Krawitz, our CFO, bears interest at 5% per annum (1)		60			—
Demand note for $60 issued January 16, 2014 to our CEO, bears interest at 5% per annum (1)		60			—
Demand note for $40 issued January 16, 2014 to our President, bears interest at 5% per annum (1)		40			—
Note for $175 issued on February 4, 2014 to Corbin Properties LLC, bears interest at 10% per annum, due February 4, 2015		175			—
Demand note for $25 issued March 4, 2014 to a Director, bears interest at 5% per annum (1)		25			—
Note for $25 issued March 5, 2014 to Deephaven Enterprises, Inc., net of discount of $22, bears interest at 9% per annum, due March 5, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share.		3			—
Note for $25 issued on March 6, 2014, to James Rybicki Trust, net of discount of $22, bears interest at 9% per annum, due March 6, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share.		3			—
Note for $25 issued on March 10, 2014, to William Caragol, net of discount of $25, bears interest at the rate of 9% per annum, due March 10, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price equal to 60% of the lowest closing bid price over the 10-trading days immediately preceding a conversion notice.		—			—
Note for $61 issued on March 20, 2014 to Deephaven Enterprises, Inc., net of discount of $43, bears interest at the rate of 9% per annum, due March 20, 2015. Effective May 30, 2014, existing outstanding common stock warrants held by the holder became exercisable at $0.35 per share and an additional 300 warrants to acquire shares of the Company’s common stock with an exercise price of $0.35 per share were granted. (2)		18			—
Note for $25 issued April 16, 2014 to William Caragol, net of discount of $23, bears interest at 9% per annum, due April 16, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share if conversion is elected by the holder or 60% of the lowest closing bid price over the 10-trading days immediately preceding a conversion notice if elected by the Company.		2			—
Note for $30 issued on April 16, 2014, to Ned Siegel, net of discount of $27, bears interest at 9% per annum, due April 16, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share. (1)		3			—
Note for $20 issued on May 1, 2014, to Ned Siegel, net of discount of $18, bears interest at the rate of 9% per annum, due March 10, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share. The note was issued with 100 warrants to acquire shares of the Company’s common stock with an exercise price of $0.35 per share. (1) (2).		2			—
Senior Convertible Note for $222 issued May 30, 2014 to an Investor, net of discount of $203, convertible into shares of common stock at $0.20 per share and matures May 30, 2015. Note was issued with an original issue discount of $22 in lieu of interest. (4)		19			—
Senior Convertible Note for $100 issued on May 30, 2014 to an Investor, net of discount of $92, convertible into shares of common stock at $0.20 per share, bears no interest, due May 30, 2015. (4)		8			—
Total notes payable		1,250			467
Less: Current maturities		(1,250	)		(467	)
Note payable long-term	$	—		$	—
Subordinated Convertible Note Payable elected at fair value:
Non-interest bearing subordinated convertible note payable with a principal amount of $3,300 dated December 3, 2012. Note is convertible into common stock equal to 1/3 of the shares beneficially held by the CEO on the date of conversion. Note was amended in July 2013 to extend the maturity date to June 2015. The note was recorded at its fair value and will be revalued at each reporting period with changes in the fair value recorded as other expense/income.	$	2,137		$	4,925

(1) These notes have been issued to related parties. See Note 10.

(2) The warrants are more fully described in Note 7.

(3) This note when originally issued was issued to a related party. See Note 10.

(4) If and whenever we issue or sell, or are deemed to have issued or sold, any shares of common stock for a consideration per share less than a price equal to the conversion price in effect immediately prior to such issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the conversion price then in effect shall be reduced to an amount equal to the new issuance price. The convertible option of these notes was bifurcated from the notes and recorded as its fair value on the date of issuance and at each reporting date, with the change in the fair value being charged/credited to other income/expense. Subsequent to June 30, 2014, the conversion price of the notes was reset as more fully discussed in Note 14.

Interest expense was approximately $1.1 million and $0.3 million for the three-months ended June 30, 2014 and June 30, 2013, respectively, and $1.6 million and $0.4 million for the six-months ended June 30, 2014 and 2013, respectively. The majority of the interest expense is due to the accretion of debt discounts and, therefore, the weighted average interest rates for each of the periods are not meaningful numbers.

See Note 14 for promissory notes issued subsequent to June 30, 2014.

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Note 6 - Financial Instruments

6 Months Ended

Jun. 30, 2014

Disclosure Text Block Supplement [Abstract]

Financial Instruments Disclosure [Text Block]

6. Financial Instruments 

Fair Value Measurements

We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk.

We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

During the three and six-months ended June 30, 2014, the subordinated convertible note, which has a convertible option embedded in the note, the conversion option of the convertible notes warrant liabilities and the contingent royalty obligations, which relate to assets acquisitions during 2012, were valued using Level 3 inputs, and for the three and six-months ended June 30, 2013, the subordinated convertible note and the contingent royalty obligations were valued using Level 3 inputs. The changes in fair value of the subordinated convertible note, the conversion option of the convertible notes and the warrant liabilities during the three and six-months ended June 30, 2014 and 2013 are reflected in other income (expense) for each period. There was no change in the estimated fair value of the contingent royalty obligations during the three and six-months ended June 30, 2014 and 2013.

Notes Payable and Long-Term Debt 

At June 30, 2014 and December 31, 2013, we valued the subordinated convertible note based on the greater of the initial fair value as determined by a discounted cash flow methodology and the market value of the shares of our common stock into which it is convertible. We valued the conversion option of the convertible notes at fair value.

Warrant Liabilities

The carrying amounts approximate management’s estimate of the fair value of the warrant liabilities at June 30, 2014 based on the BSM valuation model and using the following assumptions: expected term of 4.37 years, expected volatility of 166%, risk-free interest rates of 1.25%, and expected dividend yield of 0%.

Conversion option of the notes

The carrying amounts approximates management's estimate of the embedded conversion option at June 30, 2014 and December 31, 2013 based on using a Monte Carlo method with the following assumptions: Market price of $0.14 and $2.29; terms of 0.42, 0.92 and 0.92 years; Standard deviation of 0.09, 0.11 and 0.18; and conversion price of $0.20 and $0.75, respectively.

Estimated Royalty Obligations

The carrying amount approximates management’s estimate of the fair value of royalty obligations that will be paid (discounted at rates ranging from 25% to 60%) for a period from 3 to 14 years.

The following table summarizes our financial assets and liabilities measured at fair value as presented in the consolidated balance sheets as of June 30, 2014 and December 31, 2013 (in thousands):

	June 30, 2014						December 31, 2013
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Liabilities:
Subordinated convertible note with an embedded conversion option	$	—	$	—	$	2,137	$	—	$	—	$	4,925
Embedded conversion option of the convertible notes	$	—	$	—	$	125	$	—	$	—	$	3,124
Warrant liabilities	$	—	$	—	$	1,962	$	—	$	—	$	6,114
Royalty obligations	$	—	$	—	$	4,000	$	—	$	—	$	4,000

The following is a summary of activity of Level 3 liabilities for the six-months ended June 30, 2014 (in thousands):

	Subordinated Note with Convertible Option			Embedded Conversion Option of Convertible Notes			Warrant Liabilities			Estimated Royalty Obligations
Balance at December 31, 2013	$	4,925		$	3,124		$	6,114		$	4,000
Increase due to embedded conversion option for May 30, 2014 convertible notes payable		—			629			—			—
Change in fair value		(2,788	)		(3,628	)		2,838			—
Exercise of warrants under Right to Shares Agreements		—						(6,990	)		—
Balance at June 30, 2014	$	2,137	(1)	$	125		$	1,962		$	4,000	(2)

(1) The principal balance at December 31, 2013 and June 30, 2014 is $3.3 million. See Note 5 for additional information regarding the note.

(2) Includes $160 thousand of current royalty obligations in account payable and accrued expenses at June 30, 2014.

The Company’s management considers the carrying values of other current assets and other current liabilities to approximate fair values primarily due to their short-term nature.

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Note 8 - Income Taxes

6 Months Ended

Jun. 30, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

8. Income Taxes

We did not have an income tax provision or benefit for the three and six-months ended June 30, 2014 and 2013. The income tax benefit of $0.8 million for the period from December 31, 2011 (Inception) to June 30, 2014 resulted from the utilization of deferred tax assets to offset a deferred tax liability associated with an acquisition we made in January 2012. We have incurred accumulated losses and have provided a valuation allowance against our net operating loss carryforwards and other net deferred tax assets.

At June 30, 2014, we had estimated U.S. net operating loss carryforwards of approximately $11 million for income tax purposes, which expire in varying amounts through 2034. The amount of any benefit from our U.S. tax net operating losses is dependent on: (1) our ability to generate future taxable income, and (2) the unexpired amount of net operating loss carryforwards available to offset amounts payable on such taxable income. Any greater than a fifty percent change in ownership under IRC section 382 places significant annual limitations on the use of our U.S. net operating losses to offset any future taxable U.S. income we may generate. The change in the number of warrants outstanding on May 30, 2014 as a result of the reset provisions of warrants that we issued on November 13, 2013, as more fully discussed in Notes 1 and 5, resulted in a greater than fifty percent change in ownership under IRC section 382. Accordingly, our current net operating losses are limited in use to approximately $7.5 million, based on our preliminary estimates. Certain future transactions could again cause a more than fifty percent ownership change, including (a) additional issuances of shares of common stock by us or (b) acquisitions or sales of shares by certain holders of our shares, including persons who have held, currently hold, or accumulate in the future five percent or more of our outstanding stock.

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Note 2 - Acquisition (Details) - VC Pro Forma Information (USD $)	6 Months Ended
	Jun. 30, 2013
VC Pro Forma Information [Abstract]
Loss from continuing operations	$ (3,208)
Loss per common share from continuing operations– basic and diluted	$ (0.35)

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Note 9 - Loss Per Share (Details) - Antidilutive Securities In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	28,732	5,333
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	2,238	2,712
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	16,255	436
Consulting Agreement [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	200
Convertible Debt Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	10,039	2,185

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Note 13 - Supplemental Cash Flow Information

6 Months Ended

Jun. 30, 2014

Supplemental Cash Flow Elements [Abstract]

Cash Flow, Supplemental Disclosures [Text Block]

13. Supplemental Cash Flow Information

We had the following non-cash operating, investing and financing activities (in thousands):

	For the Six- Months Ended June 30, 2014		For the Six- Months Ended June 30, 2013
Non-cash operating activities:
Royalty obligations now included in accrued expenses	$	100		—
Non-cash investing and financing activities:
Issuance of common stock in full payment of note payable and accrued interest		—		420
Issuance of common stock in partial payment of note payable and accrued interest		70		—
Issuances of common stock in payment of notes payable		135		—
Conversion of promissory note under Right to Shares Agreement		191		—
Issuance of a warrant in connection with a promissory note		66
Cashless expense of warrants		6,990

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Note 4 - Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2014

Other Liabilities and Financial Instruments Subject to Mandatory Redemption [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

	June 30, 2014		December 31, 2013
	(in thousands)
Accrued payroll and payroll related	$	2,315	$	1,734
Accrued legal		454		445
Accrued other expenses		811		539
Total accrued expenses	$	3,580	$	2,718

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Note 8 - Income Taxes (Details) (USD $)	3 Months Ended		6 Months Ended		30 Months Ended	31 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2014
Note 8 - Income Taxes (Details) [Line Items]
Income Tax Expense (Benefit)	$ 0	$ 0	$ 0	$ 0	$ (800,000)	$ (800,000)
Limited Under IRC Section 382 [Member]
Note 8 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	7,500,000		7,500,000		7,500,000	7,500,000
Internal Revenue Service (IRS) [Member]
Note 8 - Income Taxes (Details) [Line Items]
Operating Loss Carryforwards	$ 11,000,000		$ 11,000,000		$ 11,000,000	$ 11,000,000

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Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt (Parentheticals) (USD $)							6 Months Ended														6 Months Ended			6 Months Ended				6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Nov. 13, 2013	Oct. 18, 2013	Jun. 30, 2014 Chief Executive Officer [Member] Convertible Note, Warrants Reset [Member] Demand Note October 29, 2013 [Member] Secured Debt [Member]	Jun. 30, 2014 Chief Executive Officer [Member] Demand Note October 11, 2013 [Member]	Jun. 30, 2014 Chief Executive Officer [Member] Demand Note October 29, 2013 [Member] Secured Debt [Member]	Dec. 31, 2013 Chief Executive Officer [Member] Demand Note October 29, 2013 [Member] Secured Debt [Member]	Jun. 30, 2014 Chief Executive Officer [Member] Demand Note October 29, 2013 [Member]	Dec. 31, 2013 Chief Executive Officer [Member] Demand Note October 29, 2013 [Member]	Jun. 30, 2014 Chief Executive Officer [Member] Demand Note [Member]	Jun. 30, 2014 Chief Executive Officer [Member] Subordinated Debt [Member]	Dec. 31, 2013 Chief Executive Officer [Member] Subordinated Debt [Member]	Jun. 30, 2014 Chief Financial Officer [Member] Demand Note [Member]	Jun. 30, 2014 President [Member] Demand Note [Member] Corbin Properties LLC [Member]	Jun. 30, 2014 President [Member] Demand Note [Member]	Jun. 30, 2014 Director [Member] Originally Issued [Member] Note Issued March 5, 2014 [Member] Investors [Member]	Jun. 30, 2014 Director [Member] Demand Note [Member]	Jun. 30, 2014 Director [Member] Note Issued March 5, 2014 [Member] Deephaven Enterprises, Inc. [Member]	Jun. 30, 2014 Director [Member] Note Issued March 5, 2014 [Member] James Rybicki Trust [Member]	Jun. 30, 2014 Director [Member] Note Issued March 5, 2014 [Member] William Caragol [Member]	Jun. 30, 2014 Director [Member] Note Issued March 5, 2014 [Member] Investors [Member]	Jun. 30, 2014 Director [Member] Note Issued March 20, 2014 [Member] Deephaven Enterprises, Inc. [Member]	Jun. 30, 2014 Director [Member] Note Issued April 16, 2014 [Member] William Caragol [Member]	Jun. 30, 2014 Director [Member] Note Issued April 16, 2014 [Member] Ned Siegel [Member]	Jun. 30, 2014 Director [Member] Note Issued May 1, 2014 [Member] Ned Siegel [Member]	Jun. 30, 2014 Director [Member] Note Payable, No Interest [Member] Investors [Member]	Jun. 30, 2014 PositiveID [Member]	Dec. 31, 2013 PositiveID [Member]	May 30, 2014 Investors [Member]	Nov. 13, 2013 Investors [Member]
Note 5 - Notes Payable and Restricted Cash (Details) - Notes Payable and Long-term Debt (Parentheticals) [Line Items]
Note face amount	$ 3,300,000					$ 80,000	$ 1,817,000	$ 1,817,000	$ 30,000		$ 60,000	$ 3,300,000	$ 3,300,000	$ 60,000	$ 175,000	$ 40,000		$ 25,000	$ 25,000	$ 25,000	$ 25,000	$ 222,000	$ 61,000	$ 25,000	$ 30,000	$ 30,000	$ 100,000	$ 200,000	$ 200,000		$ 1,650,000
Interest						5.00%			5.00%	5.00%	5.00%			5.00%	10.00%	5.00%		5.00%	9.00%	9.00%	9.00%		9.00%	9.00%	9.00%	9.00%		5.00%	5.00%
Converted amount																												60,000
Converted interest																												10,000
Converted shares (in Shares)																												47,000
Warrants (in Shares)					34,396,000		2,644,000																300,000			100,000		300,000			2,422,222
Discount							892,000	1,585,000									22,000		22,000	22,000	25,000	203,000	43,000	23,000	27,000	18,000	92,000				166,667
Conversion price (in Dollars per share)	$ 0.20		$ 0.75				$ 0.20												$ 0.35	$ 0.35		$ 0.20		$ 0.35	$ 0.35		$ 0.20			$ 0.20	$ 0.75
Warrants exercise price (in Dollars per share)							$ 2.84																$ 0.35			$ 0.35				$ 0.20	$ 2.84
Repaid, net of discount							$ 400,000
Outstanding on June 30, 2014 (in Shares)	41,480,000	9,459,000		9,302,674			8,099,000
Conversion Percentage																					60.00%			60.00%

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Condensed Consolidated Statements of Comprehensive (Loss) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		31 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014
Net loss	$ (5,558)	$ (1,542)	$ (933)	$ (2,852)	$ (20,757)
Comprehensive loss	$ (5,558)	$ (1,542)	$ (933)	$ (2,852)	$ (20,757)

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Note 2 - Acquisition

6 Months Ended

Jun. 30, 2014

Disclosure Text Block Supplement [Abstract]

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

2. Acquisition

Acquisition	Dates Acquired	Acquisition Price		Intangible Assets Acquired		Description of Assets
(in thousands)
VeriTeQ Corporation	7/08/13	$	935	$	—	Cash, marketable securities and receivables, among others

Acquisition of VeriTeQ Corporation under Share Exchange Agreement

Given VAC’s former shareholders’ ownership in VC, as a result of the Exchange Agreement, VAC was considered to be the acquirer for accounting purposes and the transaction was accounted for as a reverse acquisition of VC by VAC under the accounting rules for business combinations. Accordingly, VC’s assets and liabilities were recorded at their estimated fair values to the extent they were deemed to have been acquired for accounting purposes and VC has established a new basis for its assets and liabilities based upon the fair values thereof and the value of VC’s shares outstanding on July 8, 2013, the Closing Date.

The results of VC have been included in the consolidated statements of operations since July 8, 2013, the date of acquisition. Unaudited pro forma results of operations for the six-months ended June 30, 2013 are included below. Such pro forma information assumes that the VC acquisition had occurred as of January 1, 2013. This summary is not necessarily indicative of what our result of operations would have been had VC been a combined entity during such period, nor does it purport to represent results of operations for any future periods.

(In thousands, except per share amounts)	Six-Months Ended June 30, 2013
Net operating revenue	$	—
Loss from continuing operations	$	(3,208	)
Loss per common share from continuing operations– basic and diluted	$	(0.35	)

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Note 5 - Notes Payable and Restricted Cash (Tables)

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Schedule of Debt [Table Text Block]

	June 30, 2014			December 31, 2013
	(in thousands)
Note originally with PSID for $200 dated January 11, 2012, bore interest at 5% per annum, was originally payable in monthly instalments beginning January 11, 2013 through December 11, 2014. Note was amended in July 2013 to allow for conversion into common stock and extend payment terms. After the note was partially converted into common stock in October 2013, PSID assigned the note to a group of lenders in November 2013. One of the lenders converted $60 of the note and $10 of accrued interest into 47 shares of common stock in February 2014. The Company issued warrants to acquire 300 shares of its common stock to PSID in connection with a letter agreement entered into in November 2013, that were reset on May 30, 2014 to warrants to acquire 4,260 shares at an exercise price of $0.20 per share. (2)(3)	$	115		$	175
Demand note for $80 issued October 11, 2013 to our CEO, bears interest at 5% per annum repaid in November 2013, February and April 2014(1)		—			30
Demand note for $30 issued October 29, 2013 to our CEO, bears interest at 5% per annum, partially repaid in April 2014(1)		26			30
Senior Secured Convertible Notes issued November 13, 2013 for $1,817, of which $726 was repaid and converted in June 2014, net of discount of $400 and $1,585, to group of institutional investors, are convertible into shares of common stock at $0.20 per share and mature November 13, 2014. Notes were issued with Warrants to acquire 2,644 shares of common stock with an exercise price of $2.84 per share that were reset on May 30, 2014 to warrants to acquire 37,551 shares of common stock with an exercise price of $0.20 per share of which 11,254 were outstanding on June 30, 2014. (2)(4)		691			232
Demand note for $60 issued January 8, 2014 to Michael Krawitz, our CFO, bears interest at 5% per annum (1)		60			—
Demand note for $60 issued January 16, 2014 to our CEO, bears interest at 5% per annum (1)		60			—
Demand note for $40 issued January 16, 2014 to our President, bears interest at 5% per annum (1)		40			—
Note for $175 issued on February 4, 2014 to Corbin Properties LLC, bears interest at 10% per annum, due February 4, 2015		175			—
Demand note for $25 issued March 4, 2014 to a Director, bears interest at 5% per annum (1)		25			—
Note for $25 issued March 5, 2014 to Deephaven Enterprises, Inc., net of discount of $22, bears interest at 9% per annum, due March 5, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share.		3			—
Note for $25 issued on March 6, 2014, to James Rybicki Trust, net of discount of $22, bears interest at 9% per annum, due March 6, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share.		3			—
Note for $25 issued on March 10, 2014, to William Caragol, net of discount of $25, bears interest at the rate of 9% per annum, due March 10, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price equal to 60% of the lowest closing bid price over the 10-trading days immediately preceding a conversion notice.		—			—
Note for $61 issued on March 20, 2014 to Deephaven Enterprises, Inc., net of discount of $43, bears interest at the rate of 9% per annum, due March 20, 2015. Effective May 30, 2014, existing outstanding common stock warrants held by the holder became exercisable at $0.35 per share and an additional 300 warrants to acquire shares of the Company’s common stock with an exercise price of $0.35 per share were granted. (2)		18			—
Note for $25 issued April 16, 2014 to William Caragol, net of discount of $23, bears interest at 9% per annum, due April 16, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share if conversion is elected by the holder or 60% of the lowest closing bid price over the 10-trading days immediately preceding a conversion notice if elected by the Company.		2			—
Note for $30 issued on April 16, 2014, to Ned Siegel, net of discount of $27, bears interest at 9% per annum, due April 16, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share. (1)		3			—
Note for $20 issued on May 1, 2014, to Ned Siegel, net of discount of $18, bears interest at the rate of 9% per annum, due March 10, 2015. Effective May 30, 2014, the note became convertible into shares of common stock at a price of $0.35 per share. The note was issued with 100 warrants to acquire shares of the Company’s common stock with an exercise price of $0.35 per share. (1) (2).		2			—
Senior Convertible Note for $222 issued May 30, 2014 to an Investor, net of discount of $203, convertible into shares of common stock at $0.20 per share and matures May 30, 2015. Note was issued with an original issue discount of $22 in lieu of interest. (4)		19			—
Senior Convertible Note for $100 issued on May 30, 2014 to an Investor, net of discount of $92, convertible into shares of common stock at $0.20 per share, bears no interest, due May 30, 2015. (4)		8			—
Total notes payable		1,250			467
Less: Current maturities		(1,250	)		(467	)
Note payable long-term	$	—		$	—
Subordinated Convertible Note Payable elected at fair value:
Non-interest bearing subordinated convertible note payable with a principal amount of $3,300 dated December 3, 2012. Note is convertible into common stock equal to 1/3 of the shares beneficially held by the CEO on the date of conversion. Note was amended in July 2013 to extend the maturity date to June 2015. The note was recorded at its fair value and will be revalued at each reporting period with changes in the fair value recorded as other expense/income.	$	2,137		$	4,925

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Note 4 - Accrued Expenses (Details) - Significant Components of Accrued Expenses (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Significant Components of Accrued Expenses [Abstract]
Accrued payroll and payroll related	$ 2,315	$ 1,734
Accrued legal	454	445
Accrued other expenses	811	539
Total accrued expenses	$ 3,580	$ 2,718

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Note 12 - Legal Proceedings

6 Months Ended

Jun. 30, 2014

Disclosure Text Block Supplement [Abstract]

Legal Matters and Contingencies [Text Block]

12. Legal Proceedings

We have been informed by the New Jersey Department of Environmental Protection that a predecessor business sold a building in 2006 for which an environmental action has been claimed. The claim is being reviewed by the Company’s outside legal counsel. We have not yet determined the impact on our financial condition or cash flows, if any.