UNITED STATES SECURITIES ~~STATESSECURITIES~~ AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2014~~2015

☐ 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		(I.R.S. Employer
incorporation or organization)		Identification No.)

~~3333 S~~6560 W. ~~Congress~~Rogers ~~Avenue~~Circle, Suite ~~401,Delray~~19 Boca ~~Beach~~Raton, Florida ~~33445~~33487 (Address of principal executive offices, including zip code)

(~~561~~954) ~~846~~ 574-~~7000Registrant~~9720 Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

(Title of each class)		(Name of each exchange on which registered)
Common Stock, $0.00001 par value		OTC Markets

Securities registered pursuant to Section 12(g) of the Act: Not applicable

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

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 Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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.

Large accelerated filer ☐		Accelerated filer ☐		Non-accelerated filer ☐		Smaller reporting company ☑
				(Do not check if a 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~~ ☑ No ☐

At June 30, ~~2014~~2015, the aggregate market value of the voting and non-voting common stock held by non-affiliates was approximately $40.8 4 million, computed by reference to the price at which the stock was last sold on that date of $~~140~~1.00 per share as reported on the OTC Market.

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

Class		Outstanding at ~~March~~December 316, ~~2015~~2016
Common Stock, $0.00001 par value per share		30965,~~802,114~~635 shares

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

VERITEQ CORPORATION

TABLE OF CONTENTS

Item	Description	Page
	PART I
1.	Business	3
1A.	Risk Factors	106
1B.	Unresolved Staff Comments	16
2.	Properties	10
2.	Properties	16
3.	Legal Proceedings	10
3.	Legal Proceedings	17
4.	Mine Safety Disclosures	10
4.	Mine Safety Disclosures	17
	PART II
5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1811
6.	Selected Financial Data	1811
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1912
7A	Quantitative and Qualitative Disclosures about Market Risk	23
7A.	Quantitative and Qualitative Disclosures about Market Risk	17
8.	Financial Statements	2317
9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	2317
9A	Controls and Procedures	23
9A.	Controls and Procedures	17
9B	Other Information	24
9B.	Other Information	18
	PART III
10	Directors, Executive Officers and Corporate Governance	25
10.	Directors, Executive Officers and Corporate Governance	19
11	Executive Compensation	28
11.	Executive Compensation	21
12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	35
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	25
13	Certain Relationships and Related Transactions, and Director Independence	37
13.	Certain Relationships and Related Transactions, and Director Independence	26
14	Principal Accountant Fees and Services	40
14.	Principal Accountant Fees and Services	26
	PART IV
15.	Exhibits and Financial Statements	4127
	Signatures	4128

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

PART 1

ITEM 1. BUSINESS

Unless the context otherwise provides, when we refer to the “Company,” “we,” “VeriTeQ,” "VC," or “us,” we are referring to VeriTeQ Corporation and its wholly-owned subsidiaries.

Overview

~~VeriTeQ~~We were ~~Corporation,~~originally ~~("VC"),~~incorporated ~~formerly~~under ~~known as Digital Angel Corporation, acquired its wholly-owned subsidiary, VeriTeQ Acquisition Corporation, ("VAC"), on July 8, 2013 pursuant to~~ the ~~terms~~laws of ~~a share exchange agreement, as more fully discussed below, whereby VC became~~ the ~~legal~~State ~~acquirer~~ of ~~VAC~~Missouri ~~and~~on ~~VAC~~May ~~became~~11, ~~the~~1993 ~~accounting~~under ~~acquirer of VC. VAC was founded in December 2011 and is engaged in~~ the ~~business~~name ofDigital ~~radio~~Angel ~~frequency identification technologies~~Corporation, and oreffective ~~RFID,~~April ~~for the Unique Device Identification~~20, ~~or UDI~~2007, ofwe ~~implantable~~reincorporated ~~medical~~in ~~devices. Subject to funds becoming available,~~ the ~~Company~~state ~~also~~of ~~intends to offer radiation dose measurement technologies for use in radiation therapy treatment~~Delaware. InOn ~~January~~October ~~2012~~18, ~~VAC~~2013 ~~acquired~~we ~~all~~changed ofour ~~the~~name ~~outstanding stock of PositiveID Animal Health Corporation ("PAH"),~~ from ~~PositiveID~~Digital Angel Corporation, ~~then~~to aVeriTeQ ~~related party~~Corporation.

~~VeriTeQ~~We were ispreviously engaged in the ~~early~~business ~~stages~~of radio frequency identification technologies (“RFID”) for the Unique Device Identification (“UDI”) of ~~development~~implantable medical devices and, ~~its~~subject ~~success~~to ~~depends~~funds onbecoming ~~its~~available, ~~ability~~radiation todose ~~obtain~~measurement technologies ~~financing~~for ~~and~~use ~~realize~~in ~~its~~radiation ~~marketing~~therapy ~~efforts~~treatment. ToFrom ~~date~~inception through November 3, ~~VeriTeQ~~2015, ~~has~~we generated minimal sales revenue and ~~its~~our operations ~~are~~were subject to all the risks inherent in the establishment of a new business enterprise. Our failure to timely file our Quarterly Report on Form 10-Q with the SEC in August of 2015, as well as our failure to pay certain indebtedness that became due, constituted events of default on our outstanding convertible promissory notes, including approximately $1.0 million of senior secured promissory notes secured by substantially all of our assets, and $1.3 million of convertible promissory of notes that were pari passu in rank and priority to the senior secured promissory notes (collectively, the "Senior Notes”).

~~VeriTeQ~~On October ~~has~~19, ~~proprietary technology~~2015, ~~including~~we ~~patents,~~received ~~patents~~a ~~pending,~~default ~~patent~~notice ~~licenses~~from the collateral agent under the security agreement pertaining to the Senior Notes. The default notice demanded repayment of the entire amount due under the Senior Notes, and Uwe did not have the financial resources to repay this indebtedness.S. ~~Food~~We ~~and~~also ~~Drug~~received ~~Administration~~a Notification of Disposition of Collateral (~~"FDA"~~the “NDC”). ~~cleared~~The NDC ~~and~~advised CEthe ~~marked~~Company ~~products~~that the collateral agent intended to sell, lease or license the assets securing the Senior Notes at a public auction to take place in early November 2015. ~~VeriTeQ’s~~These ~~principal~~assets ~~line~~comprised substantially all of ~~business~~the isassets ~~UDI~~of the Company and its subsidiaries, except for ~~medical~~the ~~devices~~assets described below. IfOn November 4, 2015, the public auction took place, and ~~when~~the ~~funds~~holder ~~become~~of a ~~available~~substantial portion of the ~~Company~~Senior ~~also~~Notes ~~expects~~purchased ~~that~~the ~~radiation~~assets, ~~dosimeters~~including the capital stock of our VeriTeQ Acquisition Corp. (“VAC”) and ~~other~~PositiveID ~~medical~~Animal ~~sensor~~Health ~~applications~~(“PSID”) ~~will~~subsidiaries, ~~develop~~for ~~into~~$1 amillion, ~~second~~which ~~line~~was credited against the Company’s outstanding indebtedness to the holder of ~~business~~the Senior Notes.

OnIn October ~~September~~of 202015, ~~2013,~~we ~~the~~contacted ~~FDA published in~~ the ~~Federal~~holder ~~Register~~of ~~its~~a ~~Final~~subordinated ~~Rule~~convertible ~~for~~promissory ~~UDI~~note (the ~~"FDA~~“SNC ~~Rule"~~Note”), ~~which~~regarding the ~~requires~~possibility ~~all~~of ~~medical~~returning ~~devices~~the ~~distributed~~assets insecuring the ~~U.S.~~SNC ~~that~~Note, ~~are~~consisting ~~intended~~primarily toof beintellectual ~~used~~property ~~more~~and ~~than~~certain ~~once~~tangible property and ~~intended~~equipment related to ~~undergo~~radiation ~~any~~dose ~~form~~measurement oftechnologies ~~reprocessing~~(the ~~before~~“SNC ~~each use~~Collateral”), to ~~carry~~the aholder ~~UDI~~in satisfaction ~~directly~~of on the ~~device~~SNC ~~itself,~~Note. ~~known~~By asletter ~~direct~~agreement ~~part~~dated ~~marking.~~February ~~The~~18, ~~FDA~~2016, ~~Rule~~we ~~was~~agreed ~~issued~~to inreturn ~~response~~the SNC Collateral to the ~~passage~~ holder of the ~~FDA~~SNC ~~Safety~~Note, and ~~Innovation Act, which directed~~ the ~~FDA~~holder agreed to ~~develop~~discharge ~~regulations~~the ~~that~~Company ~~would~~of ~~create~~all aof ~~UDI~~its ~~system~~obligations ~~for~~and ~~medical~~liabilities ~~devices.~~under ~~Medical~~the ~~devices~~SNC ~~that~~Note ~~are~~upon receipt ~~reprocessed~~of ~~and~~the ~~reused~~SNC ~~will~~Collateral. ~~inevitably~~In beNovember ~~separated~~2016 ~~from~~the ~~their~~Company ~~original~~returned ~~label~~the ~~and~~SNC ~~device~~Collateral ~~package,~~to ~~and therefore~~ the ~~FDA~~holder ~~states~~of ~~direct~~the ~~part~~SNC ~~marking~~Note, isbut the holder ~~only~~has ~~way~~not toyet ~~ensure~~accepted ~~the~~such ~~accurate~~collateral ~~identification~~and ofthe ~~such~~debt ~~devices~~remains outstanding.

InBetween November ~~October 2004~~4, ~~VeriTeQ’s~~2015 ~~human-implantable~~and ~~RFID~~May ~~microtransponder~~5, ~~which~~2016, iswe ~~the~~were ~~basis~~not ~~for~~engaged ~~VeriTeQ’s~~in Qany ~~Inside~~operations ~~Safety~~and ~~Technology,~~our business was ~~cleared for use by the FDA~~dormant. ~~VeriTeQ~~As ~~believes~~such, ~~that~~we ~~its~~were Qa ~~Inside Safety Technology meets the automatic identification and data capture~~“shell” company, oras ~~AIDC,~~defined ~~technology~~in ~~requirement~~Rule of12b-2 ~~the~~under ~~direct part marking mandate of~~ the ~~FDA~~Securities ~~Rule~~Exchange ~~for~~Act ~~reprocessed medical devices. The VeriTeQ UDI system consists~~ of a1934, ~~passive~~as ~~implantable~~amended ~~RFID~~(the ~~microtransponder called~~ “QExchange ~~Inside Safety Technology,~~Act” ~~a proprietary hand-held reader, and a corresponding database~~).

~~VeriTeQ~~As previously ~~also~~reported, ~~has~~on ~~proprietary~~November ~~technologies~~25, ~~and~~2015, ~~patents~~we ~~for~~executed ~~implantable~~a ~~and~~Stock ~~wearable~~Purchase ~~radiation~~Agreement ~~dosimeters~~(the “Stock Purchase Agreement”) of the same date among us, Mrs. Lynne Shapiro, and ~~bio~~Brace Shop, LLC, a Florida limited liability company (“Brace Shop”), pursuant to which Brace Shop became a wholly-~~sensing~~owned ~~technologies~~subsidiary of ours on May 6, 2016 (the “Reverse Merger”). ~~Its~~In ~~radiation~~the Reverse ~~dosimeter~~Merger, ~~portfolio~~we ~~includes~~purchased ~~previously~~all ~~commercialized~~of the outstanding membership interests of Brace Shop from Mrs. Lynne Shapiro, ~~FDA~~and ~~cleared~~in exchange, we paid (i) $250,000 in cash to Mrs. Lynne Shapiro, (ii) 849 shares of our newly designated Series E Convertible Preferred Stock (“Series E Preferred Stock”), which is convertible into 84.9% of the issued and CEoutstanding ~~marked~~shares ~~radiation~~of ~~dosimeter~~our ~~technologies~~common stock, ~~that~~par ~~were~~value ~~formerly~~$0.00001 ~~used~~(the “Common Stock”), on a fully diluted basis, and has voting rights on an as converted basis and (iii) a goldenshare in ~~numerous~~the Uform of a 5-year warrant (the “Goldenshare”), exercisable at $0.S.00001 ~~hospitals~~per share with a cashless exercise provision for that number of shares of Common Stock required to ~~measure~~insure ~~radiation~~that ~~doses~~the inSeries ~~vivo~~E Preferred Stock issued as part of the purchase price to Mrs. Lynne Shapiro is convertible into 84.9% of the issued and outstanding shares of Common Stock, on ~~the~~a ~~skin~~fully ~~surface~~diluted basis. At the closing of the Reverse Merger, VeriTeQ Corporation’s ~~OneDose®~~former ~~and~~Chief ~~DVS~~Executive ~~SmartMarker®~~Officer received ~~technologies~~39 ~~provide~~shares ~~radiation~~of ~~oncologists,~~the ~~radiologists,~~Series ~~therapists~~E Preferred Stock convertible into 3.9% of the issued and ~~physicists~~outstanding Common Stock on a ~~tool~~fully-diluted basis. toThe ~~know~~shares of Series E Preferred Stock and the ~~exact~~Goldenshare ~~dosage~~shall not be convertible until the six (6) month anniversary of ~~radiation~~the ~~delivered~~Closing toof the Reverse Merger. Further, once a ~~patient~~majority atof the ~~skin~~outstanding ~~level~~Series ~~and~~E atPreferred Stock has been converted into Common Stock, then any other Series E Preferred Stock then outstanding shall automatically be deemed converted into Common Stock on the ~~site~~fifth ofbusiness day following the date that a ~~tumor~~majority orof ~~tumor~~the ~~area.~~outstanding Series E Preferred Stock is converted into Common Stock.

Recent Events

Reverse Split of Common Stock

On February 11, 2015, an amendment to our Amended and Restated Certificate of Incorporation became effective to implement a 1-for-1,000 reverse split (the “Reverse Stock Split”) of our outstanding common stock, whereby each 1,000 shares of the Company’s issued and outstanding common stock was automatically, and without any action on the part of the respective holders, combined and converted into one issued and outstanding share of common stock. The Reverse Stock Split resulted in a reduction in the number of issued and outstanding shares of the Company’s common stock from approximately 1.2 billion to approximately 1.2 million. The Reverse Stock Split affected all issued and outstanding shares of the Company's common stock, as well as all common stock underlying stock options, warrants, convertible notes and convertible preferred stock outstanding immediately prior to the Reverse Stock Split. The Reverse Stock Split was authorized by our Board of Directors, and by our Stockholders at the 2014 Annual Meeting of Stockholders held on December 18, 2014.

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

No fractional shares were issued as a result of the Reverse Stock Split and stockholders who otherwise would be entitled to a fractional share received, in lieu thereof, a cash payment equal to the value of the fractional share to which the stockholder would otherwise be entitled based on the per share closing sales price of the Company’s common stock on the effective date of the Reverse Stock Split. Recent Events

On November 25, 2015, our company, Brace Shop and Mrs. Lynne Shapiro entered into a Stock Purchase Agreement dated as of the same date (the “Stock Purchase Agreement”), which closed on May 6, 2016 (the “Closing Date”). Pursuant to the terms of the Stock Purchase Agreement, Brace Shop became a wholly-owned subsidiary of ours on May 6, 2016 (the “Reverse Merger”). In the Reverse Merger, we purchased all of the outstanding membership interests of Brace Shop from Mrs. Lynne Shapiro, and in exchange, we paid (i) $250,000 in cash to Mrs. Lynne Shapiro, (ii) 849 shares of Series E Preferred Stock, which is convertible into 84.9% of the issued and outstanding shares of Common Stock on a fully diluted basis, and has voting rights on an as converted basis and (iii) the Goldenshare, exercisable at $0.00001 per share with a cashless exercise provision for that number of shares of Common Stock required to insure that the Series E Preferred Stock issued as part of the purchase price to Mrs. Lynne Shapiro is convertible into 84.9% of the issued and outstanding shares of Common Stock, on a fully diluted basis. At the closing of the Reverse Merger, VeriTeQ Corporation’s former Chief Executive Officer received 39 shares of the Series E Preferred Stock convertible into 3.9% of the issued and outstanding Common Stock on a fully-diluted basis. The shares of Series E Preferred Stock and the Goldenshare shall not be convertible until the six (6) month anniversary of the Closing of the Reverse Merger. Further, once a majority of the outstanding Series E Preferred Stock has been converted into Common Stock, then any other Series E Preferred Stock then outstanding shall automatically be deemed converted into Common Stock on the fifth business day following the date that a majority of the outstanding Series E Preferred Stock is converted into Common Stock.

Pursuant to the Reverse Merger, we acquired the business of Brace Shop to establish our company as a provider of physical therapy and rehabilitation equipment and products, including orthopedic braces. Brace Shop operates as an expanding online retailer of orthopedic braces and supports for the various extremity categories such as knee, ankle, back, wrist, shoulder, elbow, foot and neck; physical therapy and rehabilitation equipment such as hot and cold therapy, electric simulation, medical tables and ambulatory devices. Operating for over 15 years, Brace Shop distributes their products worldwide to a variety of industries including healthcare professionals, hospitals and clinics, government institutions, school sport teams and to the general public.

The Reverse Merger was treated as a recapitalization of Brace Shop for financial accounting purposes. Brace Shop will be considered the acquirer for accounting purposes, and our historical financial statements before the Reverse Merger will be the consolidated historical financial statements of Brace Shop in all future filings with the SEC. In addition, due to the November 4, 2015 foreclosure on all of our operating assets, the consolidated financial statements included in this Form 10-K have been retrospectively restated to reflect our RFID business as a discontinued operation.

On the Closing Date, Scott Silverman, our former Chairman of the Board, and Shawn Wooden, each resigned their position as a director, and Lynne Shapiro was appointed to our board of directors. Also on the Closing Date, Marc Gelberg, our Interim Chief Financial Officer before the Reverse Merger, resigned from his position with the Company, and Kenneth Shapiro was appointed as our Chief Financial Officer.

History and Development of the Company

We were initially incorporated in the state of Missouri on May 11, 1993. Effective April 20, 2007, we became a Delaware corporation.

Share Exchange Agreement and 2013 Reverse Stock Split

On June 24, 2013, VAC and its stockholders entered into a share exchange agreement (the "Exchange Agreement") with VC and the closing of the transaction (the "VeriTeQ Transaction") took place on July 8, 2013, also referred to as the Closing Date. Pursuant to the terms of the Exchange Agreement, VAC exchanged all of its issued and outstanding shares of common stock for 410,759 shares of VC’s Series C Convertible Preferred Stock, par value $10.00 (the "Series C Preferred Stock"). Each share of Series C Preferred Stock was converted into twenty shares of VC’s common stock upon the effectiveness of the 1:30 reverse split of VC's common stock on October 18, 2013 (the "2013 Reverse Stock Split"). Also on October 18, 2013, the Company changed its name from Digital Angel Corporation to VeriTeQ Corporation.

In connection with the VeriTeQ Transaction, 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, or 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, or the Converted Warrants. As a result of the Exchange Agreement and the issuance of the Substitute Options and the Converted Warrants, VAC became a wholly-owned subsidiary of VC, and VAC’s former 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), resulting in a change in control.

As a result of the VeriTeQ Transaction, VAC became a wholly-owned subsidiary of VC. The VeriTeQ Transaction was accounted for as a reverse acquisition of VC by VAC under the accounting rules for business combinations, therefore 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 herein as if it was converted into shares of VC’s common stock at the beginning of the periods presented herein based on an exchange ratio of 0.19083 under the terms of the Exchange Agreement. The exchange ratio took into consideration the 2013 Reverse Stock Split.

VERITEQ CORPORATION

2015 ANNUAL REPORT ON FORM 10-K

VC’s Business Prior to the VeriTeQ Transaction

Through May 3, 2013, VC’s business operations consisted primarily of its mobile game division, doing business as HammerCat Studio. On May 3, 2013, VC sold its mobile game division to MGT Capital Investments, Inc.

PositiveID Animal Health Corporation acquired by VeriTeQ Acquisition Corporation

On January 11, 2012, VAC entered into a stock purchase agreement with PositiveID Corporation ("PSID") to acquire the outstanding stock of PSID’s then wholly-owned subsidiary PAH. Our chairman and chief executive officer is the former chairman and chief executive officer of PSID. In addition, the current chairman and chief executive officer of PSID was a member of our board of directors until July 8, 2013.

Under the terms of the stock purchase agreement, VAC issued approximately 0.8 million shares of its common stock, valued at approximately $0.3 million, for the 5.0 million shares of outstanding stock of PAH and issued a promissory note payable to PSID in the principal amount of $0.2 million with a stated interest rate of 5% per annum (the "PSID Note"). In addition, the then outstanding stock options to acquire shares of PAH were converted into stock options, valued at $0.5 million, to acquire an equal number of shares of VAC’s common stock and VAC assumed obligations under an existing development and supply agreement and agreed to make royalty payments to PSID initially valued at approximately $0.2 million, as more fully discussed below.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

In connection with the acquisition of PAH, VAC entered into a license agreement with PSID (the "Original License Agreement"), under which VAC was granted a non-exclusive, perpetual, non-transferable, license to utilize PSID’s bio sensor implantable RFID device that is protected under United States Patent No. 7,125,382, “Embedded Bio Sensor System,” (the "Patent") for the purpose of designing and constructing, using, selling and offering to sell products or services related to its business, but excluding the GlucoChip or any product or application involving blood glucose detection or diabetes management. Pursuant to the Original License Agreement, PSID was to receive royalties in the amount of 10% on all gross revenues arising out of or relating to VAC’s sale of products, whether by license or otherwise, specifically relating to the Patent, and a royalty of 20% on gross revenues that are generated under a development and supply agreement between PSID and Medical Components, Inc., or Medcomp, dated April 2, 2009. The total cumulative royalty payments under the agreement with Medcomp will not exceed $0.6 million.

On June 26, 2012, the Original License Agreement was amended pursuant to which the license was converted from a non-exclusive license to an exclusive license, subject to VAC meeting certain minimum royalty requirements, which were amended during 2013. The total purchase price of the PAH assets acquired, net of a deferred tax liability of $0.8 million, was $1.2 million.

Bio Sensor Patents acquired by VeriTeQ Acquisition Corporation

On August 28, 2012, VAC entered into an Asset Purchase Agreement (the "APA") with PSID, whereby VAC purchased all of the intellectual property, including patents and patents pending, related to PSID’s embedded bio sensor portfolio of intellectual property. Under the APA, PSID is to receive royalties in the amount of ten percent (10%) on all gross revenues arising out of or relating to VAC’s sale of products, whether by license or otherwise, specifically related to the embedded bio sensor intellectual property, to be calculated quarterly with royalty payments due within 30 days of each quarter end. Minimum royalty requirements, which were to begin in 2013 and thereafter through the remaining life of any of the patents and patents pending, were identical to the minimum royalties due under the Original License Agreement, as amended.

Simultaneously with the APA, VAC entered into a license agreement with PSID granting PSID an exclusive, perpetual, transferable, worldwide and royalty-free license to the patent and patents pending that are a component of the GlucoChip in the fields of blood glucose monitoring and diabetes management. In connection with the APA, the Original License Agreement, as amended June 26, 2012, was terminated. Also on August 28, 2012, the PSID Security Agreement was amended, pursuant to which the assets sold by PSID to VAC under the APA and the related royalty payments were added as collateral under the PSID Security Agreement. We had no plans to develop or commercialize the Bio Sensor patents, and therefore, no value was ascribed to these patents. Further, we are not aware of a buyer or licensor for these patents.

VeriTeQ Acquisition Corporation Asset Purchase Agreement with SNC Holding Corp.

In December 2012, VAC entered into an asset purchase agreement and a royalty agreement with SNC Holding Corp. wherein VAC acquired various technology and trademarks related to its radiation dose measurement technology. Under the terms of the agreements, VAC issued a non-interest bearing secured subordinated convertible promissory note, in the principal amount of $3.3 million and agreed to make royalty payments based on a percentage of revenue earned from the technology acquired. In addition, under the terms of sublicense agreement related to the technology, VAC made a $20 thousand sublicense payment in February 2013 and agreed to make minimum sublicense payments aggregating $0.2 million over the period from June 2014 to March 2017. The promissory note is convertible into one-third of the beneficial common stock ownership of VC held by our CEO, or 2,148 shares at December 31, 2014. The total purchase price, including estimated royalty obligations of $3.7 million, was approximately $5.8 million. In connection with the asset purchase agreement with SNC Holding Corp., VAC entered into a security agreement whereby certain intellectual property purchased thereunder, including intellectual property related to its dosimeter products, would revert to SNC Holding Corp. in the event of: (i) a default under the promissory note; (ii) failure to pay the minimum royalty obligations; (iii) failure to perform its obligations with respect to commercializing the intellectual property acquired; or (iv) the occurrence of an unauthorized issuance as defined in the agreement. At December 31, 2014, the Company recorded an impairment charge of approximately $5.0 million related to the technology and trademark assets acquired in this transaction, and a corresponding reduction in the fair value of the royalty obligation in the amount of $3.4 million.

Industry Overview and Principal Products and Services

Industry data indicates that there were 1.2 million breast augmentations performed worldwide in 2011 and 33,000 plastic surgeons worldwide according to the International Society of Aesthetic Plastic Surgeons. According to an iData Research published in May of 2011, “U.S. Market, Vascular Access Devices and Accessories,” data showed that there were 422,000 vascular port procedures performed that year in the US. It also stated that there are 8,000 surgery centers and six major manufacturers in the U.S. Additionally, there were 230,000 artificial hip procedures and 543,000 artificial knee procedures in the U.S. in 2011 according to 24/7 Wall St. research.

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

~~Q-Inside~~VeriTeQ Acquisition ~~Safety~~Corporation ~~Technology~~Asset Purchase Agreement with SNC Holding Corp.

OnIn December ~~September 20~~2012, ~~2013,~~VAC ~~the~~entered ~~FDA~~into ~~published~~an asset purchase agreement and a royalty agreement with SNC Holding Corp. wherein VAC acquired various technology and trademarks related to its radiation dose measurement technology. Under the ~~FDA~~terms ~~Rule~~of the agreements, ~~which~~VAC issued ~~requires~~a ~~all~~non-interest ~~medical~~bearing ~~devices~~secured ~~distributed~~subordinated convertible promissory note, in the Uprincipal amount of $3.S3 million and agreed to make royalty payments based on a percentage of revenue earned from the technology acquired. ~~that~~In ~~are~~addition, ~~intended~~under the terms of sublicense agreement related to bethe ~~used~~technology, ~~more~~VAC ~~than~~made ~~once~~a $20 thousand sublicense payment in February 2013 and ~~intended~~agreed to ~~undergo~~make minimum ~~any~~sublicense ~~form~~payments ofaggregating ~~reprocessing~~$0.2 ~~before~~million ~~each~~over ~~use~~the period from June 2014 to ~~carry~~March a2017. ~~UDI~~The ~~directly~~promissory onnote is convertible into one-third of the ~~device~~beneficial ~~itself~~common stock ownership of VC held by our CEO, ~~called~~or ~~direct~~2,148 ~~part~~shares ~~marking~~at December 31, 2014. The ~~FDA~~total purchase ~~Rule~~price, ~~was~~including ~~issued~~estimated inroyalty ~~response~~obligations toof ~~the~~$3.7 ~~passage~~million, ofwas approximately $5.8 million. In connection with the asset ~~FDA~~purchase ~~Safety~~agreement ~~and~~with ~~Innovation~~SNC ~~Act~~Holding Corp., ~~which~~VAC ~~directed~~entered ~~the~~into ~~federal~~a ~~agency~~security agreement whereby certain intellectual property purchased thereunder, including intellectual property related to ~~develop~~its ~~regulations~~dosimeter ~~that~~products, would ~~create~~revert to SNC Holding Corp. in the event of: (i) a ~~UDI~~default ~~system~~under ~~for~~the ~~medical~~promissory ~~devices.~~note; ~~Medical~~(ii) ~~devices~~failure ~~that~~to ~~are~~pay ~~reprocessed~~the ~~and~~minimum ~~reused~~royalty ~~will~~obligations; ~~inevitably~~(iii) befailure ~~separated~~to ~~from~~perform ~~their~~its obligations ~~original~~with ~~label~~respect ~~and~~to ~~device~~commercializing ~~package,~~the ~~and~~intellectual ~~therefore~~property acquired; or (iv) the ~~FDA~~occurrence ~~states~~of ~~direct~~an ~~part~~unauthorized ~~marking~~issuance as isdefined in the ~~only~~agreement. ~~way~~At December 31, 2014, the Company recorded an impairment charge of approximately $5.0 million related to ~~ensure~~the technology and trademark assets acquired in this transaction, and a corresponding reduction in the ~~accurate~~fair ~~identification~~value of ~~such~~the ~~devices~~royalty obligation in the amount of $3.4 million.

InChange in ~~October~~Shell ~~2004,~~Company VeriTeQ’s human-implantable RFID microtransponder, which is the basis for VeriTeQ’s Q Inside Safety Technology, was cleared for use by the FDA. VeriTeQ believes that its UDI technology meets the automatic identification and data capture, or AIDC, technology recommendation of the direct part marking mandate of the FDA Rule for reprocessed medical devices. The VeriTeQ UDI system consists of a passive implantable RFID microtransponder called “Q Inside Safety Technology,” a proprietary hand-held reader/scanner, and corresponding database. Status

WeManagement has ~~believe~~determined that, subsequent to the ~~benefits~~Reverse ofMerger in May 2016, our ~~UDI~~company Qis ~~Inside~~no ~~Safety~~longer ~~Technology~~a ~~are~~shell company as ~~follows:~~defined in Rule 12b-2 of the United States Securities Exchange Act of 1934, as amended. Please refer to our Current Report on Form 8-K filed May 11, 2016 for a detailed description of the Stock Purchase Agreement and the business of our company following the Reverse Merger.

● Allows more accurate reporting and analysis of adverse events to quickly identify problem devices;

● Reduces medical errors by quickly and accurately identifying a device and its characteristics; ● Provides a standardized identifier that allows manufacturers, distributors and healthcare facilities to more effectively manage medical device recalls;

● Provides a consistent way to enter information about devices in electronic health records and clinical information systems; and

● Provides a foundation for a global, secure distribution chain, helping to address counterfeiting and diversion and prepare for medical emergencies.

The challenges we faced in incorporating the UDI chip into the silicone breast implants are the extreme high-heat temperatures that the breast implant goes through during the manufacturing process as well as the additional high-heat levels required for sterilization or “autoclave” process for the breast implant sizers, which must be sterilized after each use. It is imperative that the inter-core of the transponder work past certain heat levels. We have worked with our development partner, Establishment Labs, S.A., to ensure that the chip maintains its integrity and effectiveness at temperatures of 400 degrees Fahrenheit.

Other challenges we face as they relate to our UDI products include customer specific performance and testing requirements, ISO compliance issues and the length of time for a customer to file with and have our device cleared by the FDA for use in their products. We are also working through issues surrounding the use of our Q Inside Safety Technology products on implantable devices that are made of metal. RFID devices will not “read” when placed directly on metal so our UDI products for these types of devices will need to be encased in plastic or other material to function properly.

Dosimeter Technology

VeriTeQ also has proprietary technologies and patents for implantable and wearable radiation dosimeters and bio-sensing technologies. Its radiation dosimeter portfolio includes previously commercialized, FDA cleared and CE marked radiation dosimeter technologies that were formerly used in numerous U.S. hospitals to measure radiation doses in vivo and on the skin surface. VeriTeQ’s OneDose® and DVS SmartMarker® technologies provide radiation oncologists, radiologists, therapists and physicists a tool to know the exact dosage of radiation delivered to a patient at the skin level and at the site of a tumor or tumor area.

VeriTeQ’s external (wearable) radiation dosimeter technology, OneDose, has FDA clearance and CE marks for use in patients being treated with external beam radiation therapy, while its implantable radiation dosimeter technology, DVS SmartMarker, has FDA clearance and CE marks for use in breast and prostate cancer patients undergoing radiation therapy.

OneDose is a proprietary, wearable radiation dosimetry technology, single-use system that is used to verify the radiation dose delivered to a patient. The OneDose system is comprised of disposable sensors that attach to the patient’s skin using a basic adhesive and hand-held scanner that reads the sensor. OneDose is the only wireless, pre-calibrated, disposable, skin surface sensor that provides instant dose delivery data, which could be fed into patient radiology reports and electronic health records.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

DVS (dose verification system) SmartMarker is a proprietary, wireless, implantable radiation dosimetry technology that enables radiation oncologists to both locate tumors and verify that the accurate radiation doses have been delivered to a tumor or tumor site. The VeriTeQ DVS SmartMarker technology is comprised of an implantable dosimeter and a hand-held scanner that reads the data gathered by the implanted microtransponders. Like OneDose, the DVS SmartMarker could be used to populate patient radiology reports and electronic health records.

VeriTeQ has patents, patent applications and patent licenses that protect its intellectual property in the United States and internationally. In addition to the UDI and dosimeter related patents, VeriTeQ also has patents which protect its RFID reader/scanner and microtransponder technologies. VeriTeQ’s RFID reader/scanner and microtransponder technologies could protect differentiated technical characteristics in UDI, radiation dosimetry and biosensor enabled products.

VeriTeQ’s OneDose and DVS SmartMarker systems are protected by a portfolio of patents including broad foundational patents. In addition to its foundational patents, VeriTeQ has a number of patents that protect more specific applications of its technology such as those that cover VeriTeQ’s OneDose and DVS SmartMarker products. As additional applications for VeriTeQ’s technologies are developed, VeriTeQ will pursue further patent protection.

Though FDA cleared and CE marked, VeriTeQ’s dosimetry technologies are not currently on the commercial market. To date we have been unable to commercialize these technologies due to a lack of available funds. We do not expect to generate any sales revenue from our dosimeter technology until such time as we are able to complete a significant capital raise. There are currently no commitments for any such financing and no assurances can be given that funds will ever become available on terms that are acceptable to us, or at all.

As a result of the foregoing circumstances with respect to our radiation dosimeter technologies, during the year ended December 31, 2014 we recorded an impairment charge on the assets purchased from SNC Holding Corp. in the amount of $1.6 million.

Data Services

In addition to our UDI and radiation dosimetry businesses, we intend to offer data services including database connectivity to our microtransponders and application software through our Office of Medicine and Data Science. Data extracted from VeriTeQ's UDI and dosimeter technologies could wirelessly populate third-party databases maintained by VeriTeQ, hospitals, health insurers, or regulators, and support electronic health record and evidence-based healthcare initiatives. We currently have one customer that has just begun to use our data services.

Growth Strategy

We intend to grow our business and product lines organically and through strategic acquisitions.

Sales, Marketing and Distribution

Our sales, marketing and distribution plan for our products is to align with medical device manufacturers and their distributors, and manufacture the products to their specifications.

Our current customer for our UDI breast implant microtransponders and readers, Establishment Labs, S.A. (“EL”), sells its breast implants under the name Motiva Implant Matrix®. We have a 5-year development and supply agreement with EL which sets for the pricing for our microtransponders and RFID readers/scanners, and provides for revenue share payments to EL where the sale of microtransponders to third parties exceeds certain thresholds. The RFID readers/scanners we sell are used to identify the direct mark contained on the microtransponders, which is a unique identification number. We buy our readers from a manufacturer and resell them at a mark-up. We do not yet have an agreement in place with the manufacturer of the RFID readers/scanners.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

Other targeted customers are:

UDI Products

Breast Implant Manufacturers-Allergan, Mentor, Sientra, among others;

Vascular Port Manufacturers – CR Bard, Smiths;

Artificial Joint Manufacturers- Stryker, Zimmer, Synthes, Wright, Boston Scientific, among others;

Heart Valve Sizers, Endo/ Surgical Equipment – Medtronic, St. Jude Medical, Welch Allyn and Cook Medical; and

Scope Manufacturers – Pentax, Olympus and Fujinon.

Dosimeter Products

Our potential customers are radiation oncologists. Potential distribution partners are: Varian Medical Systems, BSD Medical, Calypso, Siemens, Henry Schein, MedComp, Elekta, McKesson, Standard Imaging, among others.

We also are party to a development and supply agreement with Medcomp, dated April 2, 2009, which we acquired under the terms of the stock purchase agreement for PAH in January 2012. We have not yet generated any revenue under this agreement, which relates to the development and sale of our vascular port products.

Competitive Conditions

As it relates to UDI applications for reprocessed medical devices that adhere to the FDA Rule for a UDI System, VeriTeQ believes that the Q Inside Safety Technology is the only FDA cleared technology that serves as a direct part marking with AIDC features and, therefore, meets the AIDC recommendation for reprocessed medical devices under the FDA Rule. There are 2D and 3D barcodes and etching that could technically be AIDC for the direct part marking recommendation on a reprocessed device. The direct part marking can be in the form of plain text and/or AIDC.

Several competing technologies to VeriTeQ’s OneDose exist that support radiation dose monitoring via the surface of a patient’s skin. However, OneDose is unique in terms of the combination of its ease-of-use and ability to automatically archive patient dosage data. OneDose is a disposable, pre-calibrated technology that can wirelessly report radiation dose delivery on demand in real time.

VeriTeQ’s DVS SmartMarker is the only FDA cleared and CE marked implantable radiation dosimeter technology able to measure radiation dose at the tumor site. We recently announced that we would rebrand our DVS Smart Market as Q Inside SmartMarker. VeriTeQ is unaware of any alternate technology that can be used to both locate the patient’s tumor and confirm delivery of the prescribed radiation dosage at the site of the tumor.

Intellectual Property

VeriTeQ has proprietary technology, including patents, patents pending, patent licenses, and FDA cleared and CE marked products. Certain of our patents are subject to security and/or license agreements that require us to make certain payments, including the payment due under a promissory note, in order for us to retain exclusivity and/or usage.Our patent that relates to the use of our Q Inside Safety Technology in a breast implant is jointly owned with EL. Pursuant to our agreement with EL, we have agreed to pay them a 10% royalty in any year in which sales of the Q Inside Safety Technology for breast implants to third parties exceeds 100,000 microtransponders. Q Inside Safety Technology is a trade name being used in connection with the Company’s UDI products and, as discussed above, we are branding our dosimeter products as Q Inside SmartMarker. Other registered trade names are VeriTeQ’s OneDose® and DVS SmartMarker®. Destron Fearing Corporation and its parent, Allflex U.S.A. Inc., have covenanted not to sue the Company for its use of any intellectual property in human applications. Accordingly, we have the ability to deploy any of their technology and/or patents created before November 2008 free of charge for use in the medical field.

Manufacturing; Supply Arrangements

VeriTeQ’s products are manufactured by third parties. Its Q Inside product is manufactured by RFID Solutions in Malaga, Spain under a verbal agreement. We source our readers/scanners from a third party manufacturer. Currently, we purchase readers from Destron Fearing Corporation, the manufacturer, under a simple purchase order process rather than under a written agreement. VeriTeQ’s radiation dosimeter products were previously manufactured by Bourns, Inc., a Riverside, California-based company. To date, we have not had material difficulties obtaining any of the materials for our products; however, we have not purchased significant qualities to date. We believe that if any of our manufacturers or suppliers were to cease supplying us with products, we would be able to procure alternative sources without material disruption to our business. We plan to continue to outsource any manufacturing requirements of our current and under development products.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

Environmental Regulation

We must comply with local, state, federal, and international environmental laws and regulations in the countries in which we do business, including laws and regulations governing the management and disposal of hazardous substances and wastes. We expect our operations and products will be affected by future environmental laws and regulations, but we cannot predict the effects of any such future laws and regulations at this time. Customers who place our products on the market in the European Union are required to comply with EU Directive 2002/96/EC on waste electrical and electronic equipment, known as the WEEE Directive. Noncompliance by our distributors with EU Directive 2002/96/EC would adversely affect the success of our business in that market. Additionally, we are investigating the applicability of EU Directive 2002/95/EC on the restriction of the use of certain hazardous substances in electrical and electronic equipment, known as the RoHS Directive which took effect on July 1, 2006. We do not expect the RoHS Directive will have a significant impact on our business.

Government Regulation

VeriTeQ’s business is subject to regulation by governmental agencies in the U.S., including the FDA, and in the European Union, including the European Commission.

U.S. Federal Communications Commission Regulations

Under FCC regulations and Section 302 of the Communications Act, RFID devices must be authorized and comply with all applicable technical standards and labeling requirements prior to being marketed in the United States. The FCC’s rules prescribe technical, operational and design requirements for devices that operate on the electromagnetic spectrum at very low powers. The rules ensure that such devices do not cause interference to licensed spectrum services, mislead consumers regarding their operational capabilities or produce emissions that are harmful to human health. Our RFID devices are intentional radiators, as defined in the FCC’s rules. As such, our devices may not cause harmful interference to licensed services and must accept any interference received. We must construct all equipment in accordance with good engineering design as well as manufacturers’ practices.

Manufacturers of RFID devices must submit testing results and/or other technical information demonstrating compliance with the FCC’s rules in the form of an application for equipment authorization. The FCC processes each application when it is in a form acceptable for filing and, upon grant, issues an equipment identification number. Each of our RFID devices must bear a label which displays the equipment authorization number, as well as specific language set forth in the FCC’s rules. In addition, each device must include a user manual cautioning users that changes or modifications not expressly approved by the manufacturer could void the equipment authorization. As a condition of each FCC equipment authorization, we warrant that each of our devices marked under the grant and bearing the grant identifier will conform to all the technical and operational measurements submitted with the application. RFID devices used and/or sold in interstate commerce must meet these requirements or the equipment authorization may be revoked, the devices may be seized and a forfeiture may be assessed against the equipment authorization grantee. The FCC requires all holders of equipment authorizations to maintain a copy of each authorization together with all supporting documentation and make these records available for FCC inspection upon request. The FCC may also conduct periodic sampling tests of equipment to ensure compliance. We believe we are in substantial compliance with all FCC requirements applicable to our products and systems which are offered for sale or lease in the United States.

Internet Website

Our internet website address is www.veriteqcorp.com. The information on this website is not incorporated by reference into this Annual Report on Form 10-K. We make available free of charge through our website annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4 and 5 filings, and all amendments to those reports and filings as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (the “SEC”).

~~Seasonality~~Investors may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. Investors may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information that we file or furnish to the SEC at http://www.sec.gov.

We do not believe that our business in significantly impacted by seasonality.

Employees

At December ~~March~~ 31, 2015, we ~~employed~~did 11not ~~full-time employees and two part-time employees. We believe we~~ have aany ~~positive relationship with our~~ employees.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

Geographic Areas

Our operations are located in the U.S. However, our sole customer during the years ended December 31, 2014 and 2013, EL, is based in Costa Rica.

Dependence on One or a Few Major Customers

All of our revenues for the years ended December 31, 2014 and 2013 were sourced from a single customer, EL.

ITEM 1A. RISK FACTORS

Risks Related to Our Operations and Business

We have a history of losses, working capital deficit and stockholders’ deficit, and we expect to incur additional losses in the future. There can be no assurance that we will ever achieve profitability or have sufficient funds to execute our business strategy.

For the years ended December 31, ~~2014~~2015 and ~~2013~~2014, we experienced net losses of $311.91 million and $186.24 million, respectively. Our working capital deficit and accumulated deficit at December 31, ~~2014~~2015 was $714.25 million and $2337.73 million, respectively. We reported ~~$151,000~~no revenues ~~and~~from ~~$18,000~~continuing ofoperations ~~revenue~~ for the years ended December 31, ~~2014~~2015 and ~~2013, respectively~~2014. ~~Until one or more of the products under development is successfully brought to market, we do not anticipate generating significant revenue or gross profit.~~ As a result, we did not generate positive cash flow from operations for the years ended December 31, ~~2014~~2015 and ~~2013~~2014. We expect to continue to incur operating losses for the near future, and may not be able to support our operations or otherwise establish a return on invested capital. In addition, we may not have sufficient funds to execute our business strategy, requiring us to raise funds from the capital markets or other sources, resulting in dilution of our common stock.

These losses, among other things, have had and will continue to have an adverse effect on our working capital, total assets and stockholders’ deficit. In light of our recurring losses, accumulated deficit and cash flow difficulties, the report of our independent registered public accounting firm on our financial statements for the fiscal year ended December 31, ~~2014~~2015 contains an explanatory paragraph raising substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that may be necessary in the event we are unable to continue as a going concern.

~~We are introducing new products without a record of sales in the marketplace, and if we are not successful in launching some of our products, we may need to cease ongoing business operations.~~6

Our success depends upon our ability to obtain financing and generate revenues from the sale of our products. To date, we have generated minimal sales revenue, incurred expenses and sustained significant operating and net losses. Consequently, our operations are subject to all the risks inherent in the establishment of a new business enterprise. 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. Notwithstanding the need for our products in the marketplace, products like ours do not yet exist, and may not be accepted.

There can be no assurance that the products we intend to offer will be accepted by the marketplace and we may never operate profitably, even in the long term. Operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. Potential investors should be aware of the difficulties normally encountered in commercializing new products and services. If our business plan is not successful and we are not able to operate profitably, investors may lose some or all of their investment in us.

Our failure to raise additional capital to fund our operations and complete our work in introducing our products and launch an effective marketing campaign could reduce our ability to compete successfully and adversely affect our results of operations.

We need to raise additional funds to finance our operations and to achieve our strategic objectives, and we may not be able to obtain additional debt or equity financing on terms that are acceptable to us, if at all. If we raise additional equity financing, our security holders may experience significant dilution of their ownership interests and the value of shares of our common stock could decline. If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions.

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

If we cannot raise the additional capital we need on acceptable terms, we may not be able to, among other things:

● fund our operations and pay our existing and past due operating expenses; ● continue to expand our technology development, sales and/or marketing efforts; ● hire, train and retain employees; or ● develop and enhance our existing products and services.

Our inability to do any of the foregoing could reduce our ability to compete successfully and adversely affect our results of operations and our ability to continue as a going concern.

We have limited resources compared to some of our potential competitors and we may not be able to compete effectively and increase market share.

The success of a technology/medical device business like ours is dependent not only upon its intellectual property, but also upon reaching the market quickly, safely and effectively. Notwithstanding patent protections, it is possible that another technology/medical device company could develop a non-infringing product that meets the same needs that are addressed by our products. A larger, better capitalized or better connected technology/medical device company could be able to innovate more quickly and reach the market using far more resources. As a result, a competitor could reach the market first, blocking us from some or all of the market for our products.

We may have challenges in selling our products that a well-known brand would not have and our ability to negotiate financing sources and customer contracts may be more difficult for us than for competitors with greater resources.

As a new company, we do not have a reputation that larger, well established companies have. Particularly in the technology/medical device market, in which trust in product quality is important, the absence of a proven reputation could make selling our products more difficult. Conversely, if our products are well received in the market, we may have challenges associated with rapid growth, such as needing capital for inventory, IT infrastructure and personnel.

Our lack of significant resources and operating history could result in difficulties in negotiating favorable or market-rate terms for our required debt or equity financings, as the risk of engaging in a financing transaction with us is higher than it would be with a more established entity. Similarly, we will need to sell our products almost exclusively to organizations that are much larger than we are. These organizations will usually have enhanced strength in any negotiations because they are not as dependent on their relationship with us we are on our relationship with them.

Our commercial success depends significantly on our ability to develop and commercialize our products without infringing upon the intellectual property rights of third parties.

Our commercial success will depend, in part, on operating our business without infringing on the proprietary rights of third parties. Third parties that believe we are infringing on their rights could bring actions against us claiming damages and seeking to enjoin the development, marketing and use of our website and services. If we become involved in any litigation, it could consume a substantial portion of our resources, regardless of the outcome of the litigation. If any of these actions are successful, we could be required to pay damages and/or to obtain a license to continue to develop or market our services, in which case we may be required to pay substantial royalties. However, any such license may not be available on terms acceptable to us or at all. Ultimately, we could be prevented from commercializing our products or be forced to cease some aspect of our business operations as a result of patent infringement claims, which would harm our business.

Our results of operations may be adversely affected if our intangible assets were deemed to be impaired.

As of December 31, 2014, our intangible assets, net of accumulated amortization, totaled $1.5 million. We assess the fair value of our intangible assets whenever events occur or circumstances change that would more likely than not reduce the fair value of these assets below their carrying value. If we determine that an impairment has occurred, then we are required to write off the impaired portion of the intangible assets. An impairment charge could have a material adverse effect on our operating results and financial condition, and for the year ended December 31, 2014 we recorded a charge of $5.0 million for the impairment of some of our dosimeter-related intangible assets and a corresponding reduction in the fair value of the royalty obligation of $3.4 million.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

Our industry changes rapidly as a result of technological and product developments, which may quickly render our product candidates less desirable or even obsolete. If we are unable or unsuccessful in supplementing our product offerings, our revenue and operating results may be materially adversely affected.

The industry in which we operate is subject to rapid technological change. The introduction of new technologies in the market, as well as new alternatives for the delivery of products and services, will continue to have a profound effect on competitive conditions in this market. We may not be able to develop and introduce new products, services and enhancements that respond to technological changes on a timely basis. If our product candidates are not accepted by the market as anticipated, if at all, our business, operating results, and financial condition may be materially and adversely affected.

We have pledged our intellectual property, and may pledge more in the future, in connection with financing transactions. If we default on our obligations under the terms of those agreements, the secured parties can take our intellectual property, which would hurt our ability to sell our products and maintain a competitive advantage and could have a material adverse effect on our business.

Under the terms of a financing we entered into in November 2013 and an asset purchase agreement with SNC Holdings Corp. that we entered into in December 2012, certain intellectual property, including intellectual property related to our UDI and dosimeter products is pledged as security. If we default on our obligations under the terms of those agreements, the secured parties can take our intellectual property. As of March 31, 2015, we are in payment default of two promissory notes with an aggregate principal amount of approximately $0.2 million related to the November 2013 financing and the remaining notes related to that financing become due in July of 2015. The loss of our intellectual property or the rights to the exclusive use of certain intellectual property will hurt our ability to sell our products and/or maintain a competitive advantage.

Our success depends on continuing to hire and retain qualified personnel, including our directors and officers and our technical personnel. If we are not successful in attracting and retaining these personnel, our business will be adversely impacted.

Our success depends substantially on the performance of our management team and key personnel. We believe our Chairman and Chief Executive Officer, or CEO, is extremely important in connection with our ability to communicate with bankers, development partners and potential investors. Our President is extremely important in connection with the further development of our products and will be extremely important in generating revenue from those products. Our future success will depend on our ability to attract, integrate, motivate and retain qualified technical, sales, operations, and managerial personnel, as well as our ability to successfully implement a plan for management succession. We believe that retaining qualified personnel is particularly difficult for companies that do not yet have revenue, and we may not be able to continue to attract and retain key personnel. In addition, if we lose the services of any of our management team or key personnel and are not able to find suitable replacements in a timely manner, our business could be disrupted and we may incur increased operating expenses.

If we are unable to manage our growth effectively, our business, financial condition and results of operations may be adversely affected.

We intend to develop a customer base, expand our product offerings and pursue market opportunities. The expansion of our operations and customer base is expected to place a significant strain on our management, operational and financial resources. There can be no assurance that our current management or sales, marketing and support or technical personnel will be able to support our future operations or to identify, manage and exploit potential market and technological opportunities. If we are unable to manage growth effectively, such inability could have a material adverse effect on our business, financial condition and results of operations.

Our products are subject to regulatory approval, and failure to obtain such approval may adversely affect us.

Our products are regulated by the FDA in the United States, or U.S., and analogous agencies in other countries. Failure to obtain, or timely obtain, approvals from the regulating agencies would delay or prevent our entry into the market with our products. Application to, and compliance with, these agencies can be costly, and may require resources that would detract from our other efforts, such as sales or marketing.

Liquidation of Signature Industries Limited may result in additional cash obligations.

In March 2013, VC appointed a liquidator and initiated the formal liquidation of its U.K. subsidiary, Signature Industries Limited (“Signature”), primarily related to its outstanding liabilities. VC used £40,000 (approximately $61,000) of the proceeds 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, additional claims submitted to the liquidator could result in the Company being required to pay additional amounts to cover its share of Signature’s outstanding liabilities. The Company has estimated a potential additional liability of approximately $159,000. The Company ~~expects~~has ~~the~~not ~~liquidation~~had ~~process~~the financial resources to beretain ~~completed~~counsel byor ~~the~~other ~~middle~~advisors ofin ~~2015,~~order ~~although~~to itbe ~~could~~able ~~extend~~to ~~beyond~~keep abreast of the ~~expected~~liquidation ~~timeframe~~process.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

We may be involved in legal claims which could materially adversely affect us.

Claims or disputes against the Company may arise in the future. Results of legal proceedings are subject to significant uncertainty and, regardless of the merit of the claims, litigation may be expensive, time-consuming and disruptive to our operations.

Medical devices are subject to products liability claims, and such claims, regardless of merit, could be disruptive and costly, and may exceed any insurance we have in connection with product liability. Although our management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against us for amounts in excess of management’s expectations, our results of operations could be materially adversely affected. Further, such outcome could result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief against us, all of which could have a material impact on our business, liquidity, results of operations or financial condition.

Failure to maintain proper and effective internal controls could adversely affect our operating results, our ability to produce financial statements that comply with accounting principles generally accepted in the United States of America (“U.S. GAAP”), our ability to operate our business and our stock price.

During the course of our testing of our internal controls, we may identify material weaknesses or significant deficiencies in our internal controls that will have to be remediated. Implementing any appropriate changes to our internal controls may require specific compliance training of our directors, officers and employees, and entail substantial costs in order to modify our existing accounting systems, which take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or our subsequent inability to produce financial statements that comply with U.S. GAAP on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. In addition, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements may negatively affect our stock price.

In connection with the errors discussed in our Annual Report on Form 10-K/A filed with the SEC on August 19, 2014, management identified material weaknesses in our internal control over financial reporting. As a result, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2013. Although the Company believes that these material weaknesses have been fully remediated as of the filing date of this report, and that the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2014, any failure to continue to maintain internal control over financial reporting in the future could have a material adverse effect on our business, financial condition and our stock price. 7

Risks Related to Our Common Stock

Because our Chairman and CEO owns a substantial percentage of our voting stock, he may be able to exercise greater control over the decisions and direction of the Company than other stockholders.

Mr. Scott Silverman, our Chairman and CEO, holds 1,400 shares of our Series D Convertible Preferred Stock, and beneficially owns 443,044,416 shares of our outstanding common stock, representing approximately 72% of the voting rights of the Company. As such, Mr. Silverman will have greater influence in determining the outcome of all matters submitted to a vote of our stockholders, including but not limited to mergers, acquisitions, the sale of substantially all of our assets, the power to prevent or cause a change of control of the Company and the election of directors. Even if Mr. Silverman’s voting rights were to be reduced below 50% of the voting rights outstanding, he will continue to maintain significant influence over the outcome of such matters. The interests of Mr. Silverman may differ from those of other stockholders.

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

Risks Related to Our Common Stock

Our stock price has reflected a great deal of volatility, including a significant decrease over the past few years. The volatility may mean that, at times, our stockholders may be unable to resell their shares at or above the price at which they acquired them.

From January 1, ~~2013~~2015 to ~~March~~November 3127, ~~2015~~2016 , the price per share of our common stock has ranged from a high of $~~3.30~~20,000 to a low of $0.~~0018~~02. The price of our common stock has been, and may continue to be, highly volatile and subject to wide fluctuations. The market value of our common stock has declined in the past, in part, due to our operating performance. In addition, we effected to reverse splits of our common stock during 2015, including a 1:10,000 reverse split on July 29, 2015. In the future, broad market and industry factors may decrease the market price of our common stock, regardless of our actual operating performance. Recent declines in the market price of our common stock have and could continue to affect our access to capital, and may, if they continue, impact our ability to continue operations at the current level. In addition, any continuation of the recent declines in the price of our common stock may curtail investment opportunities presented to us, and negatively impact other aspects of our business, including our ability to raise the funds necessary to fund our operations. As a result of any such declines, many stockholders have been or may become unable to resell their shares at or above the price at which they acquired them.

In addition, the market price of our common stock may fluctuate significantly in response to a number of other factors, many of which are beyond our control, including but not limited to the following:

● Our ability to obtain securities analyst coverage ● Changes in securities analysts’ recommendations or estimates of our financial performance ● Changes in the market valuations of companies similar to us ● Announcements by us or our competitors of significant contracts, new offerings, acquisitions, commercial relationships, joint ventures, or capital commitments ● Failure to meet analysts’ expectations regarding financial performance

● Changes in securities analysts’ recommendations or estimates of our financial performance

● Changes in the market valuations of companies similar to us

● Announcements by us or our competitors of significant contracts, new offerings, acquisitions, commercial relationships, joint ventures, or capital commitments

● Failure to meet analysts’ expectations regarding financial performance

Furthermore, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. A securities class action lawsuit against us, regardless of its merit, could result in substantial costs and divert the attention of our management from other business concerns, which in turn could harm our business.

VERITEQ CORPORATION

2015 ANNUAL REPORT ON FORM 10-K

Because we will be subject to the “Penny Stock” rules, the level of trading activity in our stock may be reduced.

The SEC has adopted regulations which generally define "penny stock" to be any listed, trading equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements severely limit the liquidity of securities in the secondary market because few brokers or dealers are likely to undertake these compliance activities, which may increase the difficulty Investors experience in attempting to liquidate such securities. In addition to the applicability of the penny stock rules, other risks associated with trading in penny stocks could also be price fluctuations and lack of a liquid market.

An active trading market for our common stock or warrants may not develop and the market price for our common stock or warrants may decline below the offering price of our common stock or warrants.

Our common stock is quoted on the OTCQB Marketplace (“OTCQB”), under the symbol “VTEQ”. The OTCQB is an electronic quotation system that displays real-time quotes, last sale prices, and volume information for many over the counter securities that are not listed on a national securities exchange. Trading volume for our common stock has been limited and OTCQB quotations for our common stock price may not represent the true market value of our common stock.

Current stockholders may experience dilution of their ownership interests because of the future issuance of additional shares of our common stock issued pursuant to our debt instruments and outstanding warrants

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We are currently authorized to issue an aggregate of 10100,005,000,000 shares of capital stock, consisting of 10100,000,000,000 shares of common stock and 5,000,000 shares of preferred stock with preferences and rights to be determined by our Board of Directors. As of ~~March~~December 31, 2015, there are 30723,~~802,114~~718 shares of our common stock outstanding, and there are 2123,~~197~~500,000 stock options outstanding ~~and we have 255,069,924 shares of our common stock reserved for issuance under our stock option plans~~. We also have as of ~~March~~December 31, 2015 outstanding warrants for the issuance of 233,~~657~~895,~~452,539~~130 shares of our common stock, and convertible notes outstanding convertible into an aggregate of 282,~~557~~388,~~606,165~~120 shares of our common stock. Any future issuance of our equity or equity-backed securities may dilute then-current stockholders’ ownership percentages. In addition, the terms of the convertible promissory notes issued by us insince November 2013 ~~and 2014~~ provide for reductions in the conversion price per share of the notes and in the exercise price of associated warrants, if applicable, in the event that we issue common stock at an issuance price or issue convertible debt or equity securities with an exercise price that is less than the conversion or exercise price of the outstanding notes or warrants. These provisions have resulted in significant dilution of our common stock ~~during~~and has given rise to the ~~latter~~two ~~half~~reverse splits of ~~2014~~our common stock that were effected during 2015.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

To fund our business, we will need to raise additional capital through public or private offerings of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock. We may also issue such securities in connection with hiring or retaining employees and consultants (including stock options issued under our equity incentive plans), as payment to providers of goods and services, in connection with acquisitions or for other business purposes. Our Board of Directors may at any time authorize the issuance of additional common or preferred stock without common stockholder approval, subject only to the total number of authorized common and preferred shares set forth in our amended and restated certificate of incorporation. The terms of equity securities issued by us in future transactions may be more favorable to new investors, and may include dividend and/or liquidation preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect. Also, the future issuance of any such additional shares of common or preferred stock or other securities may create downward pressure on the trading price of the common stock. There can be no assurance that any such future issuances will not be at a price (or exercise prices) below the price at which shares of the common stock are then traded.

In the aftermath of the reverse split of our common stock, the market price for our common stock may not maintain its post-split market price.

On December 18, 2014, our stockholders empowered our Board of Directors to, subject to certain parameters, effectuate a reverse split of the Company’s outstanding common stock. On February 11, 2015, the Reverse Stock Split became effective whereby each 1,000 shares of our common stock were combined and converted into one issued and outstanding share of common stock. We cannot be certain that the Reverse Stock Split will have a long-term positive effect on the market price of our common stock, or increase our ability to consummate acquisitions or financing arrangements in the future. The market price of our common stock is based on factors that may be unrelated to the number of shares outstanding. These factors include our performance, general economic and market conditions and other factors, many of which are beyond our control. The market price for our post-split shares may not rise or remain constant in proportion to the reduction in the number of pre-split shares outstanding before the Reverse Stock Split. Accordingly, the total market capitalization of our common stock after the Reverse Stock Split may be lower than the total market capitalization before the Reverse Stock Split. In addition, the post-split market price of our common stock may not equal or exceed the market price prior to the Reverse Stock Split.

We are unlikely to pay cash dividends on our common stock in the foreseeable future.

We have never declared or paid any cash dividends on our common stock. We intend to retain any future earnings to finance our operations and expand our business and therefore do not expect to pay any cash dividends in the foreseeable future. The payment of dividends is also subject to provisions of Delaware law prohibiting the payment of dividends except out of surplus and certain other limitations, as well as the provisions contained in our senior notes payable.

Pursuant to the terms of our outstanding convertible promissory notes, the occurrence of certain events may require us to pay cash to holders of certain notes and warrants, and we may not have sufficient working capital to make such cash payments. 9

Upon the occurrence of certain events, including but not limited to the following, we may be required to make a payment in cash to the holders of certain notes:

● upon maturity of the notes, if not otherwise redeemed or converted;

● upon a change in control (as defined in the notes);

● upon an event of default (as defined in the notes), including our failure to pay any amount of principal, default interest, late charges or other amounts when due, after applicable cure periods;

● if shares issuable upon conversion of the notes or exercise of certain warrants are not registered for resale on an effective registration statement or are otherwise not freely tradable under any state or federal securities laws; and

● our failure to issue shares of common stock upon conversion of the notes or upon exercise of the warrants on a timely basis.

We may not have sufficient working capital to make such cash payments, or to the extent we are able to make such cash payments, it will reduce the amount of working capital we have to operate our business. Promissory notes with an aggregate principal amount of approximately $0.2 million matured on November 13, 2014. To date, we have not repaid these notes and no action has been taken against us by the holders with respect to these notes.

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

A substantial portion of our outstanding convertible promissory notes are currently in default, and we do not have sufficient working capital to make such cash payments.

We currently have $4.4 million of outstanding indebtedness, substantially all of which are in default, and we do not have sufficient working capital to repay these notes. We are subject to default interest and penalties if these note are not repaid.

Anti-dilution and other provisions in outstanding notes and warrants may also adversely affect our stock price or our ability to obtain additional financing.

The notes and warrants that we issued insince ~~the~~ November 2013 ~~financing and the notes we issued in 2014~~ contain anti-dilution provisions that provide for adjustment of the conversion price of the notes and the exercise price of the associated warrants under certain circumstances. If we issue or sell shares of our common stock, or securities convertible into our common stock, at prices below the conversion price or exercise price, as applicable, the conversion price of the notes will be reduced and the exercise price of the warrants will be reduced and the number of shares issuable under the warrants will be increased. The amount of such adjustment if any, will be determined pursuant to a formula specified in the notes and the warrants and will depend on the number of shares issued and the offering price of the subsequent issuance of securities. Adjustments to the notes and warrants pursuant to these anti-dilution provisions have resulted in significant dilution to our existing stockholders and adversely affected the market price of our common stock, and may continue to do so in the future. The anti-dilution provisions may also limit our ability to obtain additional financing on terms acceptable to us.

Moreover, we may not realize any cash proceeds from the exercise of the warrants. A holder of warrants may opt for a cashless exercise of all or part of the warrants under certain circumstances. In a cashless exercise, the holder of a warrant would make no cash payment to us, and would receive a number of shares of our common stock having an aggregate value equal to the excess of the then-current market price of the shares of our common stock issuable upon exercise of the warrant over the exercise price of the warrant. Such an issuance of common stock would be immediately dilutive to other stockholders.

We could use preferred stock to fund operations or resist takeovers, and the issuance of preferred stock may cause additional dilution.

Our amended and restated certificate of incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock~~, of which 1,841 shares of Series D Preferred Stock are currently issued and outstanding~~. Our amended and restated certificate of incorporation gives our board of directors the authority to issue preferred stock without the approval of our stockholders. We may issue additional shares of preferred stock to raise money to finance our operations. We may authorize the issuance of the preferred stock in one or more series. In addition, we may set the terms of preferred stock, including:

● Dividend and liquidation preferences ● Voting rights ● Conversion privileges ● Redemption terms ● Other privileges and rights of the shares of each authorized series

● Voting rights

● Conversion privileges

● Redemption terms

● Other privileges and rights of the shares of each authorized series

The issuance of large blocks of preferred stock could possibly have a dilutive effect to our existing stockholders. It can also negatively impact our existing stockholders’ liquidation preferences. In addition, while we include preferred stock in our capitalization to improve our financial flexibility, we could possibly issue our preferred stock to friendly third parties to preserve control by present management. This could occur if we become subject to a hostile takeover that could ultimately benefit our stockholders and us.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable to a smaller reporting company.

ITEM 2. PROPERTIES

~~Our~~At ~~corporate~~December ~~headquarters~~31, is2015 ~~located~~we inoccupied ~~Delray~~no ~~Beach, Florida~~facilities. As of December 31, ~~2014~~2015, weour ~~occupied~~principle ~~approximately~~executive ~~3,185~~offices ~~square~~were ~~feet~~located ofat ~~office~~333 ~~space~~S. ~~under~~Congress aStreet, ~~lease~~Suite ~~that~~401, weDelray ~~terminated on January 14~~Beach, ~~2015~~Florida 33443. ~~Effective~~Following the ~~January~~Reverse 15Merger, ~~2015,~~our wecurrent ~~entered~~principal ~~into~~executive aoffices ~~new~~are ~~lease~~located ~~for~~in ~~approximately~~the ~~1,862~~United ~~square~~States ~~feet~~at ~~that~~6560 ~~expires~~West inRogers ~~April~~Circle, ~~2018. In~~Suite 19, ~~addition~~Boca Raton, weFlorida ~~occupy~~33487, an approximately 212,~~401~~000 square ~~feet~~foot ofproperty. ~~office~~The ~~space~~property ~~and~~is ~~515~~owned ~~square~~by ~~feet~~Braceshop ofReal ~~warehouse~~Estate ~~space in Plymouth~~Holdings, LLC, ~~Minnesota under the terms of~~ a ~~verbal,~~Florida ~~month-to-month~~limited ~~lease. Total~~liability ~~monthly~~company ~~rent~~(“Braceshop ~~payments~~Real ~~for~~Estate ~~these properties~~Holdings”), ~~including~~an ~~common~~affiliate ~~area~~of ~~maintenance~~Brace ~~and~~Shop, ~~real~~subject ~~estate~~to two ~~taxes,~~mortgage isloans ~~approximately~~with ~~$6,500~~two ~~per~~different ~~month~~financial institutions.

ITEM 3. LEGAL PROCEEDINGS

The Company is from time to time involved in claims and legal actions arising in the ordinary course of business. Management does not expect that the outcome of any such claims or actions will have a material effect on the Company’s liquidity, results of operations or financial condition.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

1710

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

~~During~~From January ~~the fiscal year ended December 31~~1, ~~2013~~2014 ~~and~~ through October 13, 2014, our common stock was traded on the OTCQB Marketplace. Since October 14, 2014, our common stock has been trading on the OTC Pink Marketplace under the symbol “VTEQ.” The following table lists the high and low price for our common stock as quoted, in U.S. dollars, on the internet tracking services during each quarter within the last two fiscal years:

Fiscal Year Ended December 31, 2014	High		Low
Fiscal Year Ended December 31, 2015	High		Low
Quarter ended December 31, 2014	$	7.90	$	1.50
Quarter ended December 31, 2015	$	0.35	$	0.10
Quarter ended September 30, 2014	$	160.00	$	4.50
Quarter ended September 30, 2015	$	1.00	$	0.02
Quarter ended June 30, 2014	$	1,210.00	$	110.00
Quarter ended June 30, 2015	$	90	$	0.01
Quarter ended March 31, 2014	$	2,400.00	$	650.00
Quarter ended March 31, 2015	$	20,000	$	18.00

Fiscal Year Ended December 31, 2013	High		Low
Fiscal Year Ended December 31, 2014	High		Low
Quarter ended December 31, 2013	$	4,300.00	$	1,510.00
Quarter ended December 31, 2014	$	79,000	$	15,000
Quarter ended September 30, 2013	$	3,000.00	$	900.00
Quarter ended September 30, 2014	$	1,600,000	$	45,000
Quarter ended June 30, 2013	$	1,800.00	$	600.00
Quarter ended June 30, 2014	$	12,100,000	$	1,100,000
Quarter ended March 31, 2013	$	3,300.00	$	1,200.00
Quarter ended March 31, 2014	$	24,000,000	$	6,500,000

The quotations set forth above give effect to the 1:1,000 reverse split of our common stock effective as of February 11, 2015, and a 1:10,000 reverse split effective as of July 29, 2015, and reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. On ~~March~~December 31, 2015, the closing sale price of our common stock on the OTC Pink Marketplace was $0.~~0023~~13 per share.

Holders

As of ~~March~~June 3130, ~~2015~~2016, there were ~~155~~4 holders of record of our common stock, which number does not reflect beneficial stockholders who hold their stock in nominee or “street” name through various brokerage firms.

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain future earnings, if any, to finance our operations, and to expand our business. Subject to the rights of holders of preferred stock, any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent upon our financial condition, operating results, capital requirements, limitations under Delaware law and the terms of our senior debt and other factors that our board of directors considers appropriate. Our senior debt, which matures in May 2018, restricts us from paying dividends while such debt remains outstanding.

Recent Sales of Unregistered Securities/Recent Purchases of Securities

None.

Securities authorized for issuance under equity compensation plans.

A description of our equity compensation plans and shares of our common stock that were authorized for issuance under such is presented in Item 11, “Executive Compensation”, appearing elsewhere in this Annual Report on Form 10-K.

The following table presents information regarding options and rights outstanding under our compensation plans as of December 31, 2015:

	Equity Compensation Plan Information
Plan Category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights		(b) Weighted- average exercise price per share of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		123,500,000	$	.036		376,500,000
Equity compensation plans not approved by security holders		--		--		--
Total		123,500,000	$	.036		376,500,000

VERITEQ CORPORATION

2015 ANNUAL REPORT ON FORM 10-K

ITEM 6. SELECTED FINANCIAL DATA

Not applicable for a smaller reporting company.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the Company’s financial condition and results of operations should be read together with the Company’s consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. This discussion contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1996, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements consist of any statement other than a recitation of historical fact and can be identified by the use of forward-looking terminology such as “may”, “expect”, “anticipate”, “intend”, “estimate” or “continue” or the negative thereof or other variations thereof or comparable terminology. The reader is cautioned that all forward-looking statements are speculative, and there are certain risks and uncertainties that could cause actual events or results to differ from those referred to in such forward-looking statements (see Item 1A, “Risk Factors”).

OVERVIEW

Our Business

~~Prior~~We were topreviously ~~July~~engaged 8,in ~~2013,~~the ~~our~~ business ~~operations~~of ~~consisted~~radio ~~primarily~~frequency identification technologies (“RFID”) for the Unique Device Identification (“UDI”) of ~~our~~implantable ~~mobile~~medical ~~game~~devices ~~division~~and, ~~doing~~subject ~~business~~to asfunds ~~HammerCat~~becoming ~~Studio~~available, radiation dose measurement technologies for use in radiation therapy treatment. OnFrom ~~May~~inception 3through December 31, ~~2013~~2015, we ~~sold~~generated ~~our~~minimal ~~mobile~~sales ~~game~~revenue and ~~division.~~our ~~Since~~operations ~~the~~were ~~consummation~~subject ofto all the ~~Exchange~~risks ~~Agreement~~inherent ~~and~~in the ~~closing~~establishment of ~~the~~a ~~VeriTeQ~~new ~~Transaction~~business onenterprise. ~~July~~Our 8,failure ~~2013~~to ~~(see~~timely file ~~Item~~our 1,Quarterly ~~“History~~Report ~~and~~on ~~Development~~Form of10-Q with the ~~Company”),~~SEC wein ~~have~~August ~~been~~of ~~engaged~~2015, inas ~~the~~well ~~business~~as ofour ~~RFID~~failure ~~technologies~~to ~~for~~pay ~~the~~certain ~~UDI~~indebtedness ofthat became ~~implantable~~due, ~~medical~~constituted ~~devices,~~events ~~and~~of ~~radiation~~default ~~dose~~on ~~measurement~~our ~~technologies~~outstanding ~~for~~convertible ~~use~~promissory innotes, ~~radiation~~including ~~therapy~~approximately ~~treatment~~$1.0 ~~Our~~million of ~~success~~senior ~~depends~~secured onpromissory ~~our~~notes ~~ability~~secured toby ~~obtain~~substantially ~~financing~~all ~~and~~of ~~execute~~ our ~~comprehensive~~assets, ~~business~~comprised ~~plan.~~primarily Toof ~~date,~~intellectual weproperty ~~have~~related to ~~generated~~UDI ~~minimal~~of ~~sales~~implantable ~~revenue~~medical devices, and ~~our~~$1.3 ~~operations~~of ~~are~~million ~~subject~~convertible topromissory ~~all~~of ~~the~~notes ~~risks~~that ~~inherent~~were pari passu in rank and priority to the ~~establishment~~senior ofsecured apromissory ~~new~~notes ~~business~~(collectively, ~~enterprise~~the "Senior Notes”).

On October 19, 2015, we received a default notice from the collateral agent under the security agreement pertaining to the Senior Notes. The ~~near~~default ~~term~~notice ~~focus~~demanded repayment of ~~our~~the ~~business~~entire ~~plan~~amount isdue under the Senior Notes, and we did not have the financial resources to ~~align~~repay ~~with~~this ~~medical~~indebtedness. ~~device~~We ~~manufacturers~~also ~~and~~received ~~their~~a ~~distributors~~Notification of Disposition of Collateral (the “NDC”). The NDC advised the Company that the collateral agent intended to sell, ~~and~~lease ~~manufacture~~or ~~our~~license ~~products~~the assets securing the Senior Notes at a public auction to ~~their~~take ~~specifications~~place in early November of 2015. ~~Our~~These ~~current~~assets ~~customer~~comprised ~~for~~substantially ~~UDI~~all ~~breast~~of ~~implant~~the ~~microtransponders~~assets of the Company and ~~readers~~its subsidiaries, ~~Establishment~~except ~~Labs,~~for Sthe assets described below.A. ~~(“EL”)~~On November 4, ~~sells~~2015, ~~its~~the ~~breast~~public ~~implants~~auction ~~under~~took place, and the ~~name~~holder of ~~Motiva~~a ~~Implant~~substantial ~~Matrix®~~portion of the Senior Notes purchased the assets, including the capital stock of our VeriTeQ Acquisition Corp. and PositiveID Animal Health subsidiaries, for $1 million, which was credited against the Company’s outstanding indebtedness to the holder of the Senior Notes.

~~The~~In October ~~RFID~~of ~~readers/scanners~~2015, we ~~sell~~contacted ~~are~~the ~~used~~holder toof ~~identify~~a subordinated convertible promissory note (the ~~direct~~“SNC ~~mark~~Note”) ~~contained~~regarding the onpossibility of returning the ~~microtransponders~~assets securing the SNC Note, ~~which~~consisting isprimarily aof ~~unique~~intellectual ~~identification~~property ~~number.~~and Wecertain ~~buy~~tangible property ~~our~~and ~~readers~~equipment ~~from~~related ato ~~manufacturer~~radiation ~~and~~dose ~~resell~~measurement ~~them~~technologies at(the a“SNC ~~mark-up~~Collateral”), to the holder in satisfaction of the SNC Note. ~~Our~~By ~~current~~letter ~~plan~~agreement isdated February 18, 2016, we agreed to ~~continue~~return the SNC Collateral to ~~outsource~~the ~~our~~holder of ~~manufacturing~~the ~~operations~~SNC Note, and the holder agreed to ~~third~~discharge ~~parties~~the Company of all of its obligations and liabilities under the SNC Note upon receipt of the SNC Collateral. In November 2016 the Company returned the SNC Collateral to the holder of the SNC Note, but the holder has not yet accepted such collateral and the debt remains outstanding.

As a result of the foreclosure of all of our operating assets on November 4, 2015, all of the activity related to the RFID business has been accounted for as a discontinued operation, and our financial statements for the year ended December 31, 2014 and the nine months ended September 30, 2015 have been restated to reflect the RFID business as a discontinued operation.

On November 25, 2015, our company, Brace Shop LLC (“Brace Shop”) and Mrs. Lynne Shapiro entered into a Stock Purchase Agreement dated as of the same date (the “Stock Purchase Agreement”), which closed on May 6, 2016 (the “Closing Date”). Pursuant to the terms of the Stock Purchase Agreement, Brace Shop became a wholly-owned subsidiary of ours on May 6, 2016 (the “Reverse Merger”). In the Reverse Merger, we purchased all of the outstanding membership interests of Brace Shop from Mrs. Lynne Shapiro, and in exchange, we paid (i) $250,000 in cash to Mrs. Lynne Shapiro, (ii) 849 shares of Series E Preferred Stock, which is convertible into 84.9% of the issued and outstanding shares of Common Stock on a fully diluted basis, and has voting rights on an as converted basis and (iii) the Goldenshare, exercisable at $0.00001 per share with a cashless exercise provision for that number of shares of Common Stock required to insure that the Series E Preferred Stock issued as part of the purchase price to Mrs. Lynne Shapiro is convertible into 84.9% of the issued and outstanding shares of Common Stock, on a fully diluted basis. In addition, Scott Silverman, our former Chief Executive Officer, received 39 shares of the Series E Preferred Stock convertible into 3.9% of the issued and outstanding Common Stock on a fully-diluted basis.

VERITEQ CORPORATION

2015 ANNUAL REPORT ON FORM 10-K

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent liabilities. We base these estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted.

We have identified the policies and significant estimation processes discussed below as critical to our business operations and to the understanding of our results of operations. For a detailed discussion on the application of these and other accounting policies, see Note 2 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make ~~certain~~ estimates and assumptions that affect the ~~amounts~~ reported inamounts ~~the~~of ~~financial~~assets ~~statements~~ and ~~accompanying~~liabilities ~~notes.~~and ~~Although~~disclosure ~~these~~of ~~estimates~~contingent ~~are~~assets ~~based~~and onliabilities at the ~~knowledge~~date of the ~~current~~consolidated ~~events~~financial statements and ~~actions~~the wereported ~~may~~amounts ~~undertake~~of inrevenues and expenses during the ~~future,~~year. ~~they~~Actual ~~may~~results ~~ultimately~~could be ~~differ~~affected ~~from~~by ~~actual~~those ~~results~~estimates. Included in these estimates are assumptions used in: ~~(i)~~ determining the lives and valuation of long-lived assets;, ~~(ii)~~in valuation models used in ~~determining~~estimating the ~~beneficial conversion feature or embedded conversion options associated with convertible debt; (iii) determining the~~ fair value of acertain promissory ~~note~~notes, ~~with~~warrants, an embedded ~~convertible~~conversion ~~option; (iv) determining valuation allowances for deferred tax assets; (v) Black-Scholes or other valuation models used to estimate the fair value of~~ options, stock-based compensation and ~~warrants;~~in ~~and~~determining ~~(vi)~~valuation ~~the~~allowances ~~liability~~ for ~~royalty~~deferred ~~obligations~~tax assets.

19Derivative Financial Instruments

~~VERITEQ~~The Company ~~CORPORATION~~accounts for notes payable that are convertible into shares of the Company’s common stock and warrants issued in conjunction with the issuance of such notes in accordance with the guidance contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”) and ASC Topic 480, Distinguishing Liabilities From Equity (“ASC 480”). For warrant instruments and conversion options embedded in promissory notes that are not deemed to be indexed to the Company’s own stock, the Company classifies such instruments as liabilities at their fair values at the time of issuance and adjusts the instruments to fair value at each reporting period. These liabilities are subject to re-measurement at each balance sheet date until extinguished either through conversion or exercise, and any change in fair value is recognized in the Company’s statements of operations. Upon conversion of debt the fair value of the derivative is reclassified into equity and the common stock is recorded at the book value of the debt. The fair values of these derivative instruments have been estimated using a Monte Carlo simulation model.

2014 ANNUAL REPORT ON FORM 10-K

Convertible Debt

Since November of 2013, we have funded our operations primarily through the issuance of promissory notes that are convertible, at the option of the holder, into shares of our common stock at variable conversion prices based on the market value of our common stock at the time of the conversion. The terms of these convertible promissory notes generally provide that if the Company were to issue or sell any shares of its common stock in connection with a subsequent placement for a consideration per share based on a variable price formula that is less than the conversion price in effect on the date of such issuance of shares of common stock, then the conversion price is reduced to the amount of the consideration per share received for such issuance. As a result, we recognize a liability for the fair value of these embedded conversion options at the time of issuance and record gains or losses in our consolidated statement of operations for changes in the fair value of these conversion options at each accounting period.

Revenue Recognition

We recognize revenue when persuasive evidence of a sale arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed and determinable, and collectability is reasonably assured. Our revenue results are difficult to predict, and any shortfall in revenue or delay in recognizing revenue could cause our operating results to vary significantly from quarter to quarter and year to year.

VERITEQ CORPORATION

2015 ANNUAL REPORT ON FORM 10-K

Income Taxes

We have adopted Accounting Standards Codification subtopic 740-10, Income Taxes, (“ASC 740-10”), which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in our financial statement. Under this method, deferred tax liabilities and assets are determined for temporary differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates in effect for the year in which the differences are expected to affect taxable income. 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 when we determine that it is more likely than not that we will fail to generate sufficient taxable income to be able to utilize the deferred tax assets.

As of December 31, ~~2014~~2015, we had an aggregate valuation allowance against all of our U. S. net deferred tax assets of approximately $5.93 million and we had U.S. net operating loss carryforwards of $105.82 million.

Loss per Common Share and Common Share Equivalent

Basic and diluted loss per common share has been computed by dividing the net loss by the weighted average number of common shares outstanding for the period. Since we have incurred losses attributable to common stockholders, diluted loss per common share does not give effect to all potentially dilutive common shares that were outstanding during the period. Dilutive common shares consist of incremental shares issuable upon exercise or conversion of stock options, warrants and convertible notes payable.

Impact of Recently Issued Accounting Standards

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915), Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation (“ASU 2014-10”). ASU 2014-10 removes the concept of development stage companies from the FASB Codification, including the previous requirement that certain companies include inception-to date information and other disclosure requirements of Topic 915. The guidance is to be applied retrospectively and is effective for annual reporting periods beginning after December 15, 2014 and interim periods therein, with early adoption permitted. ASU 2014-10 also clarifies 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 are to be applied prospectively. Beginning with the quarter ended September 30, 2014, we chose the early adoption of ASU 2014-10 and, accordingly, eliminated the inception–to-date information that had been previously presented in the Company’s consolidated financial statements.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

RESULTS OF OPERATIONS

Year Ended December 31, ~~2014~~2015 Compared to Year Ended December 31, ~~2013~~2014

~~Revenue~~We generated ~~and~~no ~~Gross~~revenues ~~Profit~~from continuing operations for the years ended December 31, 2015 and 2014.

WeSelling, general ~~generated~~and ~~$151,000~~administrative ofexpenses ~~revenue~~from ~~and~~continuing ~~$89,000~~operations ofwere ~~gross~~$6.4 ~~profit~~million ~~during~~for the year ended December 31, ~~2014~~2015, as compared to ~~revenue and gross profit of~~ $~~18,000~~3.5 ~~and~~million ~~$11,000,~~for ~~respectively, during~~ the year ended December 31, ~~2013, all of which was related to the sale of our Q Inside Safety Technology product~~2014. WeThe ~~expect~~increase ~~our~~is ~~revenue~~largely todue ~~continue~~ to ~~increase during 2015 and beyond as we fulfill orders under our exiting development and supply contract with EL and as we obtain new customers~~$4.4 Wemillion ~~expect that substantially all~~ of ~~our~~stock-based ~~revenue~~compensation recognized ~~for~~in 2015 ~~will~~in beconnection ~~related~~with tostock ~~sales~~options ~~our~~issued Qduring ~~Inside Safety Technology products for~~ the ~~breast~~year, ~~implant~~with ~~market.~~no Wecomparable ~~anticipate~~amount ~~that~~in ~~opportunities~~2014, ~~for~~partially ~~application~~offset by oflower ~~our~~legal, Qprofessional ~~Inside Safety Technology to other implantable medical devices~~ and ~~sales~~consulting ~~of our dosimeter products will materialize beginning in 2016~~fees.

~~Selling~~Interest expense for the years ended December 31, ~~General~~2015 and ~~Administrative~~2014 ~~Expenses~~were $2.4 million and $2.5 million, respectively, and consists primarily of amortization of debt discount and, in 2015, additional interest and penalties related to defaults on our outstanding convertible notes.

~~Selling,~~During the ~~general~~year ~~and~~ended ~~administrative~~December ~~expenses~~31, ~~including~~2015, ~~development~~we ~~expenses~~recorded ~~were~~a ~~$5.6~~loss ~~million~~on ~~for~~ the ~~year~~change ~~ended~~in ~~December~~fair ~~31,~~value ~~2014,~~of asderivative ~~compared~~and toother financial instruments in the amount of $63.03 million, ~~for~~which ~~the~~included ~~year~~a ~~ended~~loss ~~December~~on ~~31,~~the ~~2013.~~change ~~The~~in ~~decrease~~fair isvalue ~~largely~~of ~~due~~conversion tooptions aembedded ~~decrease~~in notes payable in ~~stock-based~~the ~~compensation~~amount of $13.0 million, a $0.3 million inloss ~~2014~~on asthe ~~all~~change in fair value of ~~our~~warrants ~~outstanding~~that ~~stock~~do ~~options~~not ~~became~~qualify ~~vested~~for inequity ~~early~~treatment and ~~January~~a loss of ~~2014~~$54,000 on the ~~absence~~change ofin ~~$0.4~~fair ~~million~~value of ~~transaction~~a ~~expenses~~convertible ~~related~~note that we had elected to ~~the~~record ~~VeriTeQ~~at ~~Transaction~~fair ~~which~~value. ~~took~~The ~~place~~year ended inDecember ~~2013~~31, ~~partially~~2014 ~~offset~~includes bya ~~increases~~gain on the change in fair value of derivative and other ~~employee~~fair ~~compensation~~valued ~~expense~~instruments in the amount of $13.18 million, ~~and~~including ~~professional~~a ~~fees~~gain on the change in fair value of conversion options embedded in notes payable in the amount of $0.2.0 million, ina ~~2014.~~gain Weon ~~expect~~the ~~our~~change ~~selling,~~in ~~general~~fair ~~and~~value ~~administrative~~of ~~expenses~~convertible todebt ~~approximate~~in ~~their~~the ~~2014~~amount ~~levels~~of ~~during~~$4.6 ~~2015~~million and toa ~~increase~~loss on the change in the ~~future~~fair ~~years~~value asof wewarrants ~~grow~~that ~~our~~do ~~business~~not qualify for equity treatment in the amount of $2.7 million.

~~Asset~~We recorded ~~Impairment~~losses ~~Charge~~from continuing operations in the amount of $12.1 million and $2.2 million for the years ended December 31, 2015 and 2014, respectively.

AtWe recorded ~~December~~income ~~31,~~from ~~2014,~~discontinued weoperations ~~determined~~in ~~that~~ the ~~intangible~~amount ~~assets~~of ~~related~~$1.0 tomillion ~~our~~for ~~radiation~~the ~~dosimeter~~year ~~technologies,~~ended ~~which~~December ~~have~~31, ~~yet~~2015, toconsisting ~~generate~~of a ~~any~~loss ~~revenue~~from ~~for~~discontinued ~~us,~~operations ~~were~~of ~~fully impaired~~$1.6 Asmillion and a ~~result,~~gain weon ~~recorded~~the andisposal ~~impairment~~of ~~charge~~the indiscontinued ~~2014~~RFID business of $52.06 million as ~~for~~a ~~the~~result ~~unamortized portion~~ of ~~these~~the ~~assets~~foreclosure transaction, ~~and~~which aincluded ~~corresponding~~foreclosure ~~reduction~~on in the ~~fair~~capital ~~value~~stock of ~~the~~our ~~associated~~operating ~~royalty~~subsidiaries. ~~obligations~~Our loss infrom discontinued operations for the ~~amount~~year ofended December 31, 2014 was $3.4.2 million.

~~Depreciation~~The net loss for the year ended December 31, 2015 was $11.1 million, as compared to $6.4 million for the year ended December 31, 2014. The increase in net loss for 2015 was primarily due to the loss on changes in fair value of derivative and ~~Amortization~~other ~~Expense~~fair valued instruments of $3.3 million, as compared to a net gain of $3.8 million in 2014, and an increase in selling, general and administrative expenses of $2.9 million, partially offset by the gain on disposal of the discontinued operations of $2.6 million and a reduced loss from discontinued operations of $2.5 million.

We incurred $0.6 million of depreciation and amortization expense for the years ended December 31, 2014 and 2013, primarily related to technology, customer relationship and trademark intangible assets resulting from two acquisitions during 2012. We expect depreciation and amortization expense to decrease significantly in 2015 due to the write-off of the radiation dosimeter intangibles in 2014, and to gradually increase thereafter as we incur capital expenditures to support the anticipated expansion of our business operations. 14

Interest Expense

Interest expense was $2.5 million and $7.1 million for the years ended December 31, 2014 and 2013, respectively. The interest expense for the year ended December 31, 2013 relates primarily to a financing with several investors that we entered into in November 2013. Non-cash interest expense in 2014 amounted to $2.4 million, comprised primarily of amortization of debt discount. Approximately $6.7 million of 2013 interest expense was non-cash interest expense related to with a financing transaction that closed in November 2013, including: (i) the accretion of debt discount of approximately $0.2 million; (ii) $3.2 million of discount associated with the fair value of the warrants issued in connection with the financing; (iii) $2.8 million related to the initial fair value of the conversion options of the convertible notes and (iv) the amortization of financing costs of $0.4 million. If we enter into additional convertible debt financings, which include the issuances of warrants and beneficial conversion features, or if we modify the terms of our existing convertible debt and warrants we may be required to record significant interest expense in future periods.

Other (Income) Expense

Other income/expense for the year ended December 31, 2014 includes a gain on the change in fair value of conversion options embedded in notes payable in the amount of $3.2 million, a gain on the change in fair value of convertible debt in the amount of $4.6 million and a loss on the change in the fair value of warrants that do not qualify for equity treatment in the amount of $1.5 million. For the year ended December 31, 2013, we recorded losses on the change in fair value of conversion options embedded in notes payable, the fair value of convertible debt and warrant liabilities in the amount of $0.4 million, $2.8 million and $1.3 million, respectively. We expect that the embedded conversion options within outstanding notes payable, the outstanding $3.3 million convertible note related to our acquisition of SNC and the outstanding warrant liabilities will continue to result in significant fluctuations to our results of operations, as these instruments, or securities with similar terms that we may issue in the future, require a determination of fair value in each reporting period, and changes in these fair values are required to be recognized through our statement of operations.

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

Net Loss

The net loss was for the year ended December 31, 2014 was $3.9 million, as compared to $18.2 million for the year ended December 31, 2013. The decrease in net loss for 2014 was primarily due to the net gain from changes in fair value of the foregoing derivative instruments of $6.3 million, as compared to net losses from the change in fair value from these instruments of $4.4 million in 2013, and a $4.6 million decrease in interest expense, partially offset by the $1.6 million asset impairment change in 2014.

LIQUIDITY AND CAPITAL RESOURCES

We have incurred significant operating losses and ~~generated~~have ~~only~~not ~~nominal~~generated significant revenues since our inception. ~~Our~~At ~~working capital deficit at~~ December 31, 2015 and 2014 ~~was~~we had a working capital deficit of $714.25 million and ~~our~~$9.1 ~~cash~~million, ~~balance~~respectively atand ~~December~~nominal ~~31,~~cash ~~2014 was $77,000~~balances. Our cash position is critically deficient, and certain payments ~~critical~~essential to our ability to operate are not being made in the ordinary course of business, or at all. Failure to raise capital in the ~~coming~~near ~~days~~term to fund our operations will have a material adverse effect on our financial condition, raising substantial doubt about our ability to continue as a going concern. We currently do not have sufficient cash or other financial resources to fund our operations and meet our obligations, including approximately $7.8 million of total indebtedness that is or will become due, for the next twelve months. While we anticipate that a substantial portion of this indebtedness will be converted into shares of our common stock or satisfied through the return of certain assets, there can be no assurances that we will not receive demands for cash payments on this indebtedness.

~~The~~Since November ~~Company’s~~of ~~fixed~~2013, ~~monthly~~we ~~operating~~have ~~expenses~~financed ~~amount~~our tooperations ~~approximately~~primarily ~~$175,000~~through the issuance of convertible promissory notes (“Convertible Notes”). InThe ~~addition,~~outstanding principal amount of Convertible Notes as of ~~March~~December 31, 2015, wewas ~~are~~approximately in$4.5 ~~payment~~million. ~~default~~We issued onadditional ~~existing~~Convertible ~~indebtedness~~Notes in the ~~approximate~~aggregate principal amount of approximately $0.39 million between January 1, 2016 and June ~~substantially~~30, ~~all~~2016. The Convertible Notes generally mature within 9 to 12 months from the date of ~~our~~issuance $6and bear interest at rates ranging from 8% to 12% per annum with all interest payable at maturity.5 ~~million~~Outstanding principal and accrued interest is convertible into shares of ~~existing~~Common ~~indebtedness~~Stock at ~~December~~discounts 31to the market price of the Company’s Common Stock ranging from 39% to 43%, ~~2014~~with the ~~will~~market ~~become~~price ~~due~~being inbased on the ~~next~~low ~~twelve~~end ~~months~~of the trading range of the Common Stock during the 10 to 30 days prior to conversion, depending on the specific note being converted. WeIn ~~currently~~addition, dosubstantially ~~not~~all ~~have~~of ~~sufficient~~the ~~cash~~Convertible Notes contain provisions whereby in the event the Company were to issue or ~~other~~sell, ~~financial~~or ~~resources~~is deemed to ~~fund~~have ~~our~~issued ~~operations~~or ~~and~~sold, ~~meet~~any ~~our~~shares ~~obligations~~of Common Stock for a consideration per share (the ~~next~~“New ~~twelve~~Issuance ~~months~~Price”) that is less than the conversion price in effect immediately prior to such issue or sale or deemed issuance or sale (a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the conversion price then in effect is reduced to an amount equal to the New Issuance Price.

WeOn October ~~are~~19, ~~seeking~~2015, towe ~~consummate~~received a ~~significant~~default ~~sale~~notice offrom ~~our~~Magna, ~~equity~~acting ~~securities~~in orits ~~refinancing~~capacity as collateral agent under the security agreement pertaining to the Senior Notes. At the time of ~~our~~the ~~existing~~notice, ~~indebtedness~~Magna ~~which~~was ~~would~~the ~~provide~~holder usof ~~with~~outstanding convertible promissory notes of the ~~necessary~~Company ~~working~~in ~~capital~~the toaggregate ~~continue~~principal toamount ~~execute~~of ~~our~~approximately ~~business~~$1.6 ~~plan~~million (excluding all accrued but unpaid interest) of Senior Notes, and had entered into agreements with holders of an additional $0.5 ~~There~~million ~~are~~aggregate ~~currently~~principal noof ~~commitments~~Senior ~~for~~Notes ~~any~~to acquire such ~~financings~~Senior ~~and~~Notes. noThe ~~assurances~~default ~~can~~notice bedemanded ~~given~~repayment ~~that~~of ~~funds~~the ~~will~~entire beamount ~~available~~due onunder ~~terms~~the ~~that~~Senior ~~are~~Notes ~~acceptable~~(including the $0.5 million of Senior Notes Magna had the right to usacquire, orcollectively, atthe ~~all~~"Magna Notes"). InWe did not have the ~~event~~financial ~~that~~resources to werepay ~~are~~this ~~unable~~indebtedness. toThe ~~secure~~default notice also advised the ~~necessary~~Company ~~funding~~and toits ~~meet~~subsidiaries ~~our~~that ~~working~~Magna ~~capital~~was ~~requirements~~exercising all of its rights and ~~payment~~remedies ~~obligations,~~under ~~either~~the ~~through~~Magna Notes and the ~~sale~~related ofdebt ~~our~~documents. ~~securities~~In orconjunction ~~through~~with ~~other~~this ~~financing~~default ~~arrangements~~notice, we ~~may~~received from beMagna ~~required~~a Notification of Disposition of Collateral (the “NDC”). The NDC advised us that Magna intended to ~~downsize~~sell, lease ~~reduce~~or license the assets securing the Senior Notes at a public auction to take place in early November of 2015. These assets constitute substantially all of our ~~workforce~~assets, ~~sell~~except for those assets orsecuring ~~possibly~~the ~~curtail~~SNC orNote. ~~even~~On ~~cease~~November ~~operations~~4, 2015, the public auction took place, and Magna purchased the assets, including the capital stock of our VAC and PositiveID Animal Health subsidiaries, for $1 million, which was credited against our outstanding indebtedness to Magna.

AWe may ~~summary~~continue to receive limited funding in the form of ~~our~~additional ~~cash~~Convertible ~~flows~~Notes ~~for~~as we look to improve the ~~periods~~operating ~~indicated~~and iscash flow performance of Brace Shop, which we acquired on May 6, 2016. Brace Shop currently does not generate positive cash flow from operations. No assurances can be given that we will be able to raise any additional funds on terms acceptable to us, or at all, or that we will be able to continue as ~~follows:~~a going concern.

(in thousands)	Year Ended December 31,
	2014			2013
Cash used in operating activities	$	(2,593	)	$	(1,954	)
Cash (used) provided by in investing activities		(35	)		947
Cash provided by financing activities		2,692			837
Increase in cash and cash equivalents		64			(170	)
Cash and cash equivalents, beginning of year		13			183
Cash and cash equivalents, end of year of year	$	77		$	13

In December 2012, we entered into an asset purchase agreement and royalty agreement with SNC Holding Corp. wherein VAC acquired various technology and trademarks related to its radiation dose measurement technology. Under the terms of the agreements, we issued the SNC Note in the principal amount of $3.3 million (the “SNC Note”). The SNC Note was amended in July 2013 to extend the maturity date to June 30, 2015. The SNC Note has not been repaid. By letter agreement dated February 18, 2016, we agreed to return the SNC Collateral to the holder of the SNC Note, and the holder agreed to discharge the Company of all of its obligations and liabilities under the SNC Note upon receipt of the SNC Collateral. In November 2016 the Company returned the SNC Collateral to the holder of the SNC Note, but the holder has not yet accepted such collateral and the debt remains outstanding.

Cash used in operating activities was $2.6 million for the year ended December 31, 2014, as compared to $2.0 million for the year ended December 31, 2013. The following table illustrates the primary components of our cash flows from operations:15

(in thousands)	Year Ended December 31,
	2014			2013
Net loss	$	(3,910	)	$	(18,201	)
Non-cash expenses, gains and losses		(591	)		14,222
Accounts payable and accrued expenses		1,826			2,053
Other		82			(28	)
Cash used in operating activities	$	(2,593	)	$	(1,954	)

Cash used in investing activities for the year ended December 31, 2014 was $35,000, comprised of purchases of property and equipment. Cash provided by investing activities for the year ended December 31, 2013 was $0.9 million, consisting of cash acquired from the acquisition of VeriTeQ Corporation of $0.8 million and proceeds from the sale of marketable securities of $0.1 million.

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

~~Cash~~As of ~~provided by financing activities for~~ the ~~year~~date ~~ended~~of ~~December~~this 31report, ~~2014~~we ~~was~~are ~~$2.7~~in ~~million,~~payment ~~consisting~~default of ~~proceeds~~a ~~from~~substantial ~~the~~portion ~~sale~~ of ~~notes~~our ~~payable~~existing ~~of $2~~indebtedness.3 ~~million,~~Our ~~the~~failure ~~release of restricted cash in 2014 $0.9 million related~~ to ~~our~~timely file ~~November~~periodic ~~2013~~reports ~~financing~~with ~~and~~ the ~~repayment~~SEC, ofincluding ~~notes~~the ~~payable~~Quarterly ofReports ~~$0.5~~on ~~million.~~Form ~~Cash~~10-Q ~~provided by financing activities~~ for the ~~year~~periods ~~ended~~ending ~~December~~March 31, ~~2013~~2016, ~~was~~June ~~$0.8 million~~30, 2016 ~~consisting~~and ofSeptember ~~proceeds~~30, ~~from the sale of convertible notes of $1.7 million~~2016, ~~partially~~constitute ~~offset~~events ~~by the placement~~ of ~~$0.9~~default ~~million~~on ~~into~~all ~~restricted cash accounts in accordance with the terms~~ of ~~the~~our ~~November~~Convertible ~~2013 financing~~Notes.

A summary of our cash flows for the periods indicated is as follows:

(in thousands)	Year Ended December 31,
	2015			2014
Cash used in operating activities	$	(1,211	)	$	(2,593	)
Cash (used) provided by in investing activities		-			(35	)
Cash provided by financing activities		1,134			2,692
Increase in cash and cash equivalents		(77	)		64
Cash and cash equivalents, beginning of year		77			13
Cash and cash equivalents, end of year of year	$	-		$	77

Cash used in operating activities was $1.1 million for the year ended December 31, 2015, as compared to $1.2 million for the year ended December 31, 2014. The following table illustrates the primary components of our cash flows from operations:

(in thousands)	Year Ended December 31,
	2015			2014
Net loss	$	(11,145	)	$	(6,376	)
Non-cash expenses, gains and losses		7,026			1,855
Accounts payable and accrued expenses		2,865			1,845
Other		43			83
Cash used in operating activities	$	(1,211	)	$	(2,593	)

Cash used in investing activities for the year ended December 31, 2014 was $35,000, comprised of purchases of property and equipment, with no comparable amount in 2015.

Cash provided by financing for the year ended December 31, 2015 was $1.1 million, consisting primarily of the issuance of convertible notes. Cash provided by financing activities for the year ended December 31, 2014 was $2.7 million, consisting of proceeds from the sale of notes payable of $2.3 million, the release of restricted cash in 2014 $0.9 million related to our November 2013 financing and the repayment of notes payable of $0.5 million.

Inflation

We did do not believe that inflation has had a material effect on our Company's results of operations in 2014 and 2015.

Off-Balance Sheet Arrangements

Under SEC regulations, we are required to disclose the Company’s off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, results of operations, liquidity, capital expenditures or capital resources that are material to investors. Off-balance sheet arrangements consist of transactions, agreements or contractual arrangements to which any entity that is not consolidated with us is a party, under which we have:

● Any obligation under certain guarantee contracts. ● Any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets. ● Any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to the Company’s stock and classified in stockholder’s equity in the Company’s statement of financial position. ● Any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

●As of ~~Any~~December ~~retained~~31, or2015, ~~contingent~~the ~~interest~~Company inhas ~~assets~~no ~~transferred~~off-balance tosheet anarrangements ~~unconsolidated~~that ~~entity~~have, or ~~similar~~are ~~arrangement~~reasonably ~~that~~likely ~~serves~~to ~~as credit~~have, ~~liquidity~~a current or ~~market~~future ~~risk~~effect ~~support~~on tothe Company’s financial condition, results of operations, liquidity, capital expenditures or capital resources that ~~entity~~is ~~for~~material ~~such~~to ~~assets~~investors.

● Any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to the Company’s stock and classified in stockholder’s equity in the Company’s statement of financial position.16

● Any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.VERITEQ CORPORATION

As2015 ANNUAL ofREPORT ~~December~~ON ~~31,~~FORM ~~2014, the Company has no off~~10-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, results of operations, liquidity, capital expenditures or capital resources that is material to investors.K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for smaller reporting companies.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company’s consolidated financial statements required by this item are included after Item 15 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to the Company’s management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

23 Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2015. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2015, the Company’s disclosure controls and procedures were not effective due to the material weakness described below.

~~VERITEQ~~Management’s Report ~~CORPORATION~~on Internal Control over Financial Reporting

2014 ANNUAL REPORT ON FORM 10-K

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2014. Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2014, the Company’s disclosure controls and procedures were not effective due to the material weakness described below.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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 deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2014~~2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Based on the assessment using those criteria, management concluded that the internal control over financial reporting was not effective as of December 31, ~~2014~~2015.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented, or detected and corrected on a timely basis. The material ~~weakness~~weaknesses at December 31, ~~2014~~2015 pertains to a lack of ~~expertise~~in-house expertise in the valuation of complex debt and equity instruments that are required to be reported at fair value. ~~Partly due to this deficiency, the Company was required to restate its financial statements for the year ended December 31, 2013, for the three-months March 31, 2014~~ and ~~for~~lack ~~the~~of ~~three and six-months ended June 30, 2014. As a result, the Company filed~~ an ~~amendment to its Annual Report on Form 10~~in-~~K/A~~house accounting ~~for~~staff ~~the~~due ~~year ended December 31, 2013 on August 19, 2014, an amendment~~ to ~~its Quarterly Report on Form 10-Q/A for~~ the ~~three-months~~discontinuance ~~ended~~of ~~March 31, 2014 on August 20, 2014 and an amendment to its Quarterly Report on Form 10-Q/A for the three and six-months ended June 30, 2014 on September 17, 2014~~operations.

In order to remediate this material weakness, the Company intends to ~~identify~~continue ~~and~~to engage additional third party expertise with the appropriate financial background and skill level to perform the proper valuation analysis on the Company’s derivative financial instruments, so that changes in their fair values can be properly recorded on a timely basis, and has engaged an outside consultant to maintain the Company’s books and records.

VERITEQ CORPORATION

2015 ANNUAL REPORT ON FORM 10-K

Inherent Limitations of Disclosure Controls and Procedures and Internal Control over Financial Reporting

Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or our internal controls will prevent all error and all fraud. The design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be considered relative to their cost. Because of the inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable assurance that its objectives are met. No evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based partly on certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving the Company’s stated goals under all potential future conditions. Therefore, 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 because the degree of compliance with the policies and procedures may deteriorate.

Changes in Internal Control over Financial Reporting

Although management ~~appointed~~has ~~a chief accounting officer and~~ implemented additional procedures related to the review and analysis of its balance sheet accounts, the terms of new issuances of debt and equity securities and the methods used in determining the fair value of its liabilities as presented in its consolidated financial statements during the quarter ended December 31, ~~2014~~2015, the Company has not fully remediated its material weakness as of December 31, ~~2014~~2015, and remediation efforts will continue into fiscal ~~2015~~2016. There were no other changes to the Company’s procedures related to internal control over financial reporting during the quarter ended December 31, ~~2014~~2015.

ITEM 9B. OTHER INFORMATION

None.

2418

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our directors, ~~their~~and ~~ages~~officers and ~~business experience~~their ages, as of ~~March~~December 31, 2015, are set forth below:

Name	~~Age~~	~~Position~~Age	Position
Scott R. Silverman	51	~~Chairman of the Board of Directors/Chief Executive Officer~~53	Chairman and Chief Executive Officer
Barry M. Edelstein	51	Director
Marc S. Gelberg		50	Chief Accounting Officer and Interim Chief Financial Officer
Daniel E. Penni	67	Director
Shawn Wooden		42	Director
Shawn A. Wooden	41	Director

Scott R. Silverman	Mr. Silverman has served as the Company’s chief executive officer and chairman of its Board of Directors since July 2013. Previously, Mr. Silverman served as the chairman of the Board of Directors of PositiveID Corporation from November 2008 until December 2011, and as chief executive officer from August 2009 until August 2011. He previously served as chief executive officer of PositiveID Corporation, then known as VeriChip Corporation, from December 2006 through July 2008, as chairman of its Board of Directors from March 2003 through July 2008, and as a member of its Board of Directors from February 2002 through July 2008. Mr. Silverman served as the chairman of Steel Vault Corporation from January 2006 until November 2009. He also served as a member of the Board of Directors of Gulfstream International Group, Inc. from September to October, 2010. Mr. Silverman served as chief executive officer and chairman of the Board of Directors of the Company from March 2003 to December 2006, and chairman of Destron Fearing Corporation (then known as Digital Angel Corporation) a then majority-owned subsidiary of the Company from March 2003 to July 2007. Mr. Silverman is an attorney licensed to practice in New Jersey and Pennsylvania. Mr. Silverman was selected to serve as a director on our Board of Directors because of his specific experience and proven expertise in our industry, his past and continuing contributions to the Company, his general business expertise and his experience in leading publicly-held companies.
Barry M. Edelstein	Mr. Edelstein has served as a director of the Company since July 2013. Mr. Edelstein has served as managing partner of Structured Growth Capital, Inc., a boutique investment banking firm, since January 2009. Mr. Edelstein served as acting president and chief executive officer of Destron Fearing Corporation, a majority-owned subsidiary of ours (then known as Digital Angel Corporation) from August 2007 until December 2007, and he served on Destron Fearing Corporation’s Board of Directors from June 2005 to December 2007. Mr. Edelstein has served as the chairman of ScentSational Technologies, LLC since 2002. Mr. Edelstein served as President of GlobalCom Telecommunications, LLC which he co-founded in 1992 and which was acquired in 1997 by Comcast Corporation, where he then served as a divisional vice president until 2002. Mr. Edelstein has a bachelor’s degree in business administration from Drexel University and received his law degree from Widener University School of Law. Mr. Edelstein served as a member of the Board of Directors of PositiveID Corporation from January 2008 to June 2013. Mr. Edelstein was nominated to the Board of Directors due to his past business experience, including as a director and officer of one of our former subsidiaries, and his knowledge of our industry.
Daniel E. Penni	Mr. Penni has served as a director since March 1995 and as chairman of our Board of Directors from July 3, 2007 to July 7, 2013. From May 3, 2013 to July 7, 2013, he served as our interim chief executive officer and president. Mr. Penni also served as our interim chief executive officer and president from January 31, 2012 to August 23, 2012. From September 1988 until December 2005, Mr. Penni was employed by Arthur J. Gallagher & Co., an insurance brokerage and risk management services firm, where he served in several positions, including his final position as area executive vice president. He has worked in various sales and administrative roles in the insurance business since 1969. He also served on the board of trustees of the Massachusetts College of Pharmacy and Health Sciences in Boston from 1989 through June 2006 and served as the chair of finance, the corporate treasurer and the chair of the audit committee at various times during his service period. Mr. Penni graduated with a bachelor of science degree in 1969 from the School of Management at Boston College. Mr. Penni was a member of the Board of Directors of VeriChip Corporation, n/k/a PositiveID Corporation (a former subsidiary of ours) from June 2004 until January 2008. Mr. Penni was selected to serve as a director on our Board of Directors because of his specific experience and proven expertise in our industry, his past and continuing contributions to the Company, and his general expertise and perspective on our business.

Scott R. Silverman resigned as Chief Executive Officer and Chairman on March 16, 2016 and May 6, 2016, respectively.

25· Marc S. Gelberg resigned as Chief Accounting Officer and Interim Chief Financial Officer on May 6, 2016.

Shawn Wooden resigned as Director on May 6, 2016.

Our directors and officers, their ages and business experience, as of June 30, 2016, are set forth below:

Name	Age	Position
Kenneth Shapiro	60	Chief Executive Officer, Chief Financial Officer and Director
Lynne Shapiro	63	Director
Michael James	57	Director

Directors are elected to serve until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.

A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action.

Executive officers are appointed by the Board of Directors and serve at its pleasure.

The principal occupation and business experience during at least the past five years for our executive officers and directors is as follows:

Lynne Shapiro –Director

Lynne Shapiro is Chief Executive Officer of Brace Shop, LLC. Lynne has brought years of professional experience, in and out of the medical equipment field to our on-line business. Following a Bachelor’s degree from Fairleigh Dickinson University Lynne held various positions before coming to Brace Shop, LLC. In the past, Lynne has, worked as a high school history teacher, a Senior Inspector for the NJ Casino Control Commission, a Paralegal Attorney, an Instructor for US Satellite Broadcasting, an Instructor for Computer Literacy and Job Preparedness and a Medical Biller. Immediately before joining Brace Shop, Lynne worked for MEDIQ, PRN. MEDIQ which eventually was acquired by Hill-Rom was a company which was one of the largest DME rental companies in the nation. It was here that Lynne learned the most about medical equipment and understood it to be a thriving industry. At MEDIQ, Lynne worked her way up to Vice President of Human Resources.

Lynne primarily works closely with Brace Shop vendors on pricing and product selection. This has led to a competitive on-line product assortment with an aggressive consumer friendly pricing structure.

Kenneth Shapiro –Chief Executive Officer and Director

Dr. Shapiro, age 60, is Chief Executive Officer and Medical Director of Brace Shop, LLC, which he founded nearly twenty years ago. Prior to founding Brace Shop, Dr. Shapiro was a licensed podiatrist for more than 20 years. He holds a Bachelor of Science Degree from the University of Western Ontario in London Ontario Canada, and a D.P.M. Degree from the Temple School of Podiatric Medicine in Philadelphia. Following a surgical residency at Kensington Hospital in Philadelphia, Dr. Shapiro went into private practice for over 20 years with offices in Philadelphia, Pennsylvania and Marlton New Jersey. During that time, he achieved board certification from the American Board of Podiatric Surgery and became a Fellow of the American College of Foot and Ankle Surgeons. Dr. Shapiro was on staff at numerous hospitals and surgical centers throughout Philadelphia and Southern New Jersey, specializing in Foot and Ankle Surgery.

Dr. Shapiro brings a wealth of medical and orthopedic knowledge to the company in assisting and training Brace Shop staff in ensuring customer satisfaction and medical compliance.

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

~~Shawn~~Michael A.James Wooden Mr. Wooden runs Wooden Wealth Strategies, a full-service financial services and investment boutique firm. He earned his bachelor of science from the University of Notre Dame in Computer Science. After graduation, he began a nine year career in the National Football League, where he played for the Miami Dolphins and the Chicago Bears. After retiring in 2005, Mr. Wooden transitioned into the financial services industry where he has earned the Financial Industry Regulation Authority (FINRA) Series 6, 7, 63, and 65 licenses, as well as the Life Underwriter Training Council Fellow (LUTCF) professional designation. Mr. Wooden also earned a Certificate for Retirement Planning from the Wharton School of Business in Pennsylvania.–Director

Mr. James, age 57, has been Chief Financial Officer Terra Tech Corp. since April 2011. Previously, Mr. James served as Chief Executive Officer ~~Officers~~of Nestor, Inc. (“Nestor”) where he successfully completed a financial restructuring of Nestor prior to its sale in September 2009 from the Receiver's Estate in Superior Court of the State of Rhode Island. He also served on Nestor's Board of Directors from 2006 to 2009. Mr. James has been the Managing Partner of Kuekenhof Capital Management, LLC, a private investment management company, for the past ten years where he continues to serve as Managing Director of Kuekenhof Equity Fund, L.P. and Kuekenhof Partners. Mr. James is also a director of Guided Therapeutics, Inc. where he serves as Chairman of the Compensation Committee and as a member of the Audit Committee. Mr. James holds a Bachelor of Science Degree in Accounting from Fairleigh Dickinson University.

~~Our~~Director ~~executive officers, their ages and business experience, as of March 31, 2015 are set forth below:~~ Independence

Name	Age	Position
Scott R. Silverman	51	Chief Executive Officer
Randolph K. Geissler	54	President
Michael E. Krawitz	45	Chief Legal and Financial Officer
Marc S. Gelberg	49	Chief Accounting Officer and Vice President of Financial Reporting

We are not currently subject to the listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the board of directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.” None of our five directors is an independent director under the applicable standards of the SEC and the Nasdaq stock market.

Scott R. Silverman	A summary of Mr. Silverman’s experience is set forth above.
Randolph K. Geissler	Mr. Geissler is currently the Company’s president. He also is currently the chief executive officer of Geissler Corporation. Mr. Geissler previously served as the chief executive officer of Geissler Technologies from 2004 to 2008 and as chief executive officer of Destron Fearing Corporation (then known as Digital Angel Corporation) from 1993 to 2003. Mr. Geissler specializes in managing companies and technologies focused on RFID, and he is the developer of the implantable microtransponder for animal identification.
Michael E. Krawitz	Mr. Krawitz was appointed our chief legal and financial officer effective January 31, 2014. He served as a member of our Board of Directors from July 2013 to June 2014. Mr. Krawitz served as chief executive officer of PEAR, LLC, a provider of renewable energy and financing for renewable energy projects, from February 2011 to January 31, 2014. From July 2010 until February 2011, he served as chief executive officer of Florida Sunshine Investments I, Inc. He previously served as the chief executive officer and president of the Company from December 2006 to December 2007, executive vice president from March 2003 until December 2006, and as a member of the Company’s Board of Directors from July 2007 until December 2007. Mr. Krawitz served as a member on the Board of Directors of Steel Vault Corporation from July 23, 2008 until November 11, 2009 and has served on the Board of Directors of PositiveID Corporation since November 2008. He practiced law at Fried, Frank, Harris, Shriver & Jacobson in New York from 1994 to 1999. Mr. Krawitz earned a bachelor of arts degree from Cornell University in 1991 and a juris doctorate from Harvard Law School in 1994.
Marc S. Gelberg	Mr. Gelberg was appointed our chief accounting officer and vice president of financial reporting effective October 30, 2014. Mr. Gelberg was previously corporate controller of Fusion Telecommunications International, Inc., a provider of unified communications and cloud services, since April of 2011, assuming the additional responsibilities of vice president of finance and senior vice president of finance in November of 2012 and March of 2014, respectively. From November of 2010 through March of 2011, Mr. Gelberg served as an SEC Reporting consultant for China Direct Industries, Inc., primarily serving its client companies. From February of 2008 through September 2010, Mr. Gelberg was vice president, corporate controller for Cross Match Technologies, Inc. and from July of 2006 through February of 2008 he was vice president of accounting and financial reporting for ION Media Networks, Inc. Mr. Gelberg holds a Bachelor’s Degree in Economics from the State University of New York at Albany, and received his certified public accounting certification from the State of New York in 1994.

There are no family relationships among our executive officers or directors.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

Currently, our Board of Directors consists of four directors. On January 28, 2015, Ambassador Ned L. Siegel resigned as a member of our Board of Directors. Ambassador Siegel’s resignation did not involve any disagreement on any matter related to the Company’s operations, policies or practices. Our Board of Directors was structured to be divided into three classes, and a class is generally elected to serve for a three-year term or until the directors' successors are duly elected and qualified. Thus, it has been our historical practice (since 1998) to elect approximately one-third of the members of the Board of Directors annually. Directors may be removed only for cause. Any director appointed by our Board of Directors to fill a vacancy on the board serves the balance of the unexpired term of the class of directors in which the vacancy occurred. The roles and responsibilities of the Board of Directors are as set forth by Delaware corporate law, which includes providing general oversight of management and setting strategic direction for the Company.

CORPORATE GOVERNANCE

We have a standing Audit and Governance Committee, Compensation Committee and Nominating Committee of our board of directors. Each has a written charter approved by our Board.

Audit Committee

Our Board of Directors established an Audit and Governance Committee (the “Audit Committee”) in accordance with Section 3(a)(58)(A) of the Securities and Exchange Act. Our Audit Committee iswas previously comprised of two members of the Board of Directors~~: Mr.~~, however ~~Edelstein and~~one ~~Mr.~~member ~~Wooden.~~resigned ~~All~~from of the ~~committee~~Board ~~members~~of ~~are~~Directors ~~independent~~on asMarch ~~defined~~7, in2016 ~~Rule 5605(a)(2)~~and of the ~~Nasdaq~~other ~~Marketplace~~resigned ~~Rules~~on ~~and~~May as6, ~~defined~~2016. byAs ~~the Sarbanes-Oxley Act~~ of ~~2002.~~the ~~Our Board~~ date of ~~Directors~~this ~~has~~report, ~~determined~~these ~~that~~vacancies ~~our~~have ~~Audit~~not ~~Committee~~been ~~members~~filled. ~~are~~We ~~financially~~do ~~literate~~not ~~and~~yet ~~that we~~ have ~~one~~an audit committee financial expert asdue ~~defined~~to inour ~~the~~ability to ~~applicable~~locate ~~SEC~~and ~~rules:~~compensate ~~Mr. Edelstein,~~such ~~who~~a ~~serves as the chairman of the committee~~person.

The Audit Committee assists our Board of Directors in its oversight of:

	●	our accounting, financial reporting processes, audits and the integrity of our financial statements;
	●	our independent auditor’s qualifications, independence and performance;
	●	our compliance with legal and regulatory requirements;
	●	our internal accounting and financial controls; and
	●	our audited financial statements and reports, and the discussion of the statements and reports with management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management.

The Audit Committee has the sole and direct responsibility for appointing, evaluating and retaining our independent registered public accounting firm and for overseeing their work. All audit and non-audit services to be provided to us by our independent auditors must be approved in advance by our Audit Committee, other than de minimis non-audit services that may instead be approved in accordance with applicable rules of the SEC. The Audit Committee met ~~four~~three times ~~and took one action~~ through unanimous written consent during fiscal ~~2014~~2015.

Compensation Committee

Our Compensation Committee ~~consists~~Our Audit Committee was previously comprised of ~~Messrs.~~two ~~Edelstein~~members of the Board of Directors, however one member resigned from the Board of Directors on March 7, 2016 and ~~Wooden.~~the ~~Mr.~~other ~~Wooden~~resigned ison ~~chairman~~May 6, 2016. As of the ~~committee~~date of this report, these vacancies have not been filled. The committee administers the Company’s stock incentive plans, including the review and grant of awards to officers and other employees under such plans, and recommends the adoption of new plans. The committee also reviews and approves various other compensation policies and matters and reviews and approves salaries, bonuses and other matters relating to our officers. The committee reviews all senior corporate employees after the end of each fiscal year to determine compensation for the subsequent year. Particular attention is paid to each employee’s contributions to our current and future success, as well as their salary level in comparison to the market value of personnel with similar skills and responsibilities. The committee also looks at accomplishments which are above and beyond management’s normal expectations for their positions. The Compensation Committee ~~did~~held ~~not~~one ~~hold~~meeting ~~any meetings~~ and took one action through unanimous written consent during fiscal ~~2014~~2015.

VERITEQ CORPORATION

2015 ANNUAL REPORT ON FORM 10-K

Our Compensation Committee assists our Board of Directors in the discharge of its responsibilities related to compensation of our executive officers. Specific responsibilities of our Compensation Committee include:

●

reviewing and recommending to our board approval of the compensation, benefits, corporate goals and objectives of our chief executive officer and our other executive officers;

●

evaluating the performance of our executive officers; and

●

administering our employee benefit plans and making recommendations to our Board of Directors regarding these matters.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

Our Compensation Committee has the authority to delegate any of its responsibilities to one or more subcommittees as the committee may from time to time deem appropriate and may ask members of management, employees, outside counsel, or others whose advice and counsel are relevant to the issues then being considered by the Compensation Committee to attend any meetings and to provide such pertinent information as the Compensation Committee may request. We expect that the Compensation Committee will continue to solicit input from our chief executive officer with respect to compensation decisions affecting other members of our senior management. Our Compensation Committee has not engaged compensation consultants to determine or recommend the amount or form of executive and director compensation.

Nominating Committee

Our Nominating Committee considers and nominates candidates for election to our Board of Directors. The committee ~~consists~~was previously comprised of ~~Mr.~~two ~~Wooden~~members of the Board of Directors, ~~who~~however ~~serves~~one asmember ~~its~~resigned ~~chairman~~from the Board of Directors on March 7, 2016 and Mrthe other resigned on May 6, 2016. ~~Edelstein~~As of the date of this report, these vacancies have not been filled.

Code of Conduct and Corporate Ethics General Policy Statement

Our Board of Directors has approved and we have adopted a Code of Business Conduct and Ethics, or the Code of Conduct, which applies to all of our directors, officers and employees. Our Board of Directors has also approved and we have adopted a Code of Ethics for Senior Financial Officers, or the Code for SFO, which applies to our chief executive officer, president, chief legal and financial officer and other officers. ~~The~~As of December 31, 2015 the Code of Conduct and the Code for SFO ~~are~~were available upon written request to VeriTeQ Corporation, Attention: ~~Secretary~~Chief Executive Officer, ~~3333~~333 ~~South~~S. Congress ~~Park Avenue~~Street, Suite 401, Delray Beach, Florida ~~33445~~33443, but as of the date of this report, they are available upon request to VeriTeQ Corporation, Attention: Chief Executive Officer, 6560 W. Rogers Circle Suite 19, Boca Raton, Florida 33487. The Audit Committee is responsible for overseeing the Code of Conduct and the Code for SFO. Our audit committee must approve any waivers of the Code of Conduct for directors and executive officers and any waivers of the Code for SFO.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires that our officers and directors and persons who own 10% or more of our common stock to file reports of ownership and changes in ownership with the SEC and furnish us with copies of all such reports. Based solely on a review of copies of such forms and written representations from our directors and executive officers, we believe that for the fiscal year ~~2014~~2015, all of our directors and executive officers were in compliance with the disclosure requirements of Section 16(a)~~, except that Mr~~. ~~Penni filed one late Form 4 in 2014.~~

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information regarding compensation earned in or with respect to our fiscal year ~~2013~~2015 and 2014 by:

● our Principal Executive Officer; ● our Principal Financial Officer; ● our two most highly compensated Executive Officers (other than our Principal Executive Officer), who were serving as such on December 31, ~~2014~~2015 and whose compensation exceeded $100,000; and ● up to two additional individuals for whom disclosure would have been provided but for the fact that the individual was not serving as an Executive Officer on December 31, ~~2014~~2015.

VERITEQ CORPORATION

2015 ANNUAL REPORT ON FORM 10-K

We refer to these officers collectively as our “Named Executive Officers.”

Name & Principal Position	Fiscal Year ended Dec. 31,		Salary ($)		Bonus ($)			Stock Awards (4) ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation (1) ($)		Total ($)
Scott R. Silverman,		2015		3,086		363,825	(3)		0		0		0		0		24,181		391,092	(8)
Chief Executive Officer (2)		2014		346,500		446,500			0		0		0		0		76,057		869,057
Randolph K. Geissler,		2015		6,361		202,125	(5)		0		0		0		0		0		208,486	(9)
President (4)		2014		210,000		285,000			0		0		0		0		31,248		526,248
Marc S. Gelberg, Interim		2015		124,038		30,000	(7)		0		0		0		0		0		154,038	(10)
Chief Financial Officer (6)		2014		0		0			0		0		0		0		0		0

(1)	Amount represents payments made for Mr. Silverman and Mr. Geissler in 2015 and 2014 in connection with their employment agreements, including life and disability insurance and car allowance.
(2)	On March 16, 2016, Mr. Silverman resigned as our Chief Executive Officer and on May 6, 2016, he resigned as a member of the Board of Directors.
(3)	This amount was accrued pursuant to the minimum bonus payment required under Mr. Silverman’s employment agreement with VeriTeQ Corporation, however, no amount has been paid in respect of such bonus and, effective upon the closing of the Reverse Merger, this entire amount has been forgiven.
(4)	Mr. Geissler’s employment contract with VeriTeQ Corporation expired in November of 2015 and was not renewed.
(5)	This amount was accrued pursuant to the minimum bonus requirement under Mr. Geissler’s employment agreement with VeriTeQ Corporation, however, no amount has been paid in respect of such bonus and, effective upon the closing of the Reverse Merger, this entire amount has been forgiven.
(6)	Mr. Gelberg was appointed Interim Chief Financial Officer of VeriTeQ Corporation on May 21, 2015, and resigned his position on May 6, 2016.
(7)	This amount was accrued pursuant to the anticipated bonus payment contemplated under Mr. Gelberg’s employment arrangement with VeriTeQ Corporation, however, no amount has been paid or authorized in respect of such bonus.
(8)	See note 1.
(9)	See note 3.
(10)	See note 7.

We currently have no contracts, agreements, plans or arrangements, whether written or unwritten, that provide for payments to the named executive officers listed above.

Outstanding Equity Awards as of December 31, 2015

On June 18, 2014, the Company’s stockholders adopted the VeriTeQ Corporation 2014 Stock Incentive Plan (the “2014 Plan”). The 2014 Plan provided for 50,000,000 shares of common stock to be reserved for awards under the 2014 Plan. On December 18, 2014, the Company’s shareholders approved an increase in the number of authorized shares of common stock issuable under the 2014 Plan to 500,000,000 shares. On February 24, 2015, in accordance with the terms of the 2014 Plan, our Board of Directors approved a decrease in the number of shares reserved for issuance under the 2014 Plan from 500,000,000 to 250,000,000.

On August 13, 2015, the Compensation Committee of VeriTeQ Corporation’s then Board of Directors (the “Compensation Committee”) granted 100,000,000 shares of restricted common stock to executive officers of the Company and options to purchase 123,500,000 shares of the Company’s common stock to employees and directors of the Company. These grants were under the 2014 Plan. Also on August 13, 2015, the Compensation Committee granted an additional 150,000,000 shares of restricted common stock to certain executive officers and a director. The restricted common stock vested on the Closing Date and the stock options vested on the date of grant. On April 29, 2016, the Compensation Committee and the Board of Directors, with the consent of the grantees, rescinded the grants of restricted common stock

Brace Shop has never had any equity compensation plans, and we will discontinue the 2014 Plan going forward. However, we may wish to issue stock options pursuant to a Stock Option Plan in the future. Such stock options may be awarded to management, employees, members of the Company’s Board of Directors and consultants of the Company.

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

~~Summary~~The following ~~Compensation~~table ~~Table~~provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding at December 31, 2015:

Name and Principal Position	Year		Salary			Bonus			Stock Awards(5)			Option Awards(6)			Non-Equity Incentive Plan Compensation		All Other Compensation			Total
								Equity Incentive Plan Awards:
Scott R. Silverman (1)	2014		$	346,500		$	446,500		$	—		$	—		$	—	$	76,057	(7)	$	869,057
		Number of Securities			Number of Securities			Number of Securities
Chief Executive Officer	2013		$	330,000		$	430,000		$	—		$	537,007		$	—	$	54,731	(7)	$	1,351,738
		Underlying Unexercised			Underlying Unexercised			Underlying Unexercised			Option			Option
Randolph K. Geissler(2)	2014		$	210,000		$	285,000		$	—		$			$	—	$	31,248	(8)	$	526,248
Name		Options - exercisable			Options - unexercisable			Unearned Options			Exercise Price ($)			Expiration Date
President	2013		$	200,000		$	275,000		$	1,350,000		$	537,007		$	—	$	—		$	2,362,007
Marc Gelberg			0			0			0			0
Michael E. Krawitz (3)	2014		$	192,500		$	267,500		$	—		$	—		$	—	$	28,803	(9)	$	488,803
Scott Silverman			0			0			0			0
Chief Legal and Financial Officer	2013			—			—			—			—			—		—			—
Randy Geissler			0			0			0			0
Lorraine M. Breece (4)	2014		$	11,667			—		$	—		$	—		$	—	$	—		$	11,667
Shawn Wooden			15,000,000			0			0			0.036			August 13, 2025
Former Chief Financial Officer	2013		$	142,700		$	50,000		$	—		$	—		$	—	$	2,629	(10)	$	195,329
Barry Edelstein			15,000,000			0			0			0.036			August 13, 2025

~~(1)~~Under the ~~Mr.~~2014 ~~Silverman~~Plan ~~became our chief executive officer on July 8~~250,000,000 ~~2013~~shares inare ~~connection~~reserved ~~with~~for ~~the~~issuance ~~Exchange Agreement~~ and ~~the~~as ~~closing~~ of ~~the VeriTeQ Transaction. The VeriTeQ Transaction was treated as a reverse acquisition, therefore we have included Mr. Silverman’s compensation in the table above for the full year ended~~ December 31, ~~2013.~~2016 ~~The portion of Mr. Silverman’s salary~~126, ~~bonus and option award earned by him from January 1~~500,000 ~~2013~~shares toare ~~July~~available 7,for ~~2013 was $171,875, $171,875 and $537,007, respectively~~future issuances. ~~A portion of the 2013 Other Compensation was also earned by Mr. Silverman prior to the VeriTeQ Transaction as noted in footnote 8 below.~~

~~(2)~~2015 Option ~~Mr.~~Exercises ~~Geissler became our president on July 8, 2013 in connection with the VeriTeQ Transaction,~~ and weStock have included Mr. Geissler’s compensation in the table above for the full year ended December 31, 2013. The portion of Mr. Geissler’s salary, bonus and option award earned by him from January 1, 2013 to July 7, 2013 was $104,167, $104,167 and $537,007, respectively.Vested

~~(3)~~None of ~~Mr.~~our ~~Krawitz~~Named ~~was~~Executive ~~appointed~~Officers ~~our~~exercised ~~chief~~options ~~legal~~during ~~and~~the ~~financial~~year ~~officer~~ended ~~effective~~December ~~January~~ 31, ~~2014~~2015.

(4) Ms. Breece served as our chief financial officer from August 1, 2011 to January 30, 2014. Ms. Breece was also paid $117,502 in salary and consulting fees during 2014, subsequent to her resignation as chief financial officer

(5) Mr. Geissler was granted 858,747 shares of restricted stock on January 1, 2013 under the terms of his employment agreement. The amount of compensation reflects the aggregate grant date fair value of the award computed in accordance with FASB ASC Topic 718. Also see the Outstanding Equity Awards Table as of December 31, 2014 presented elsewhere in this report.

(6) Messrs. Silverman and Geissler were each granted 381,655 stock options during 2013. The amount of compensation reflects the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718. For additional information on the valuation assumptions regarding the option awards, refer to Note 7 to our accompanying consolidated financial statements, which are included elsewhere in this report. Also see the Outstanding Equity Awards Table as of December 31, 2013 presented on page 35 of this report.

(7) Amount represents payments made for Mr. Silverman in 2014 and 2013 in connection with Mr. Silverman’s employment agreement, including: reimbursement of unallocable expenses, medical expense reimbursement, life and disability insurance, car allowance, and reimbursements for telephone and internet service.

(8) Amount represents reimbursements to Mr. Geissler in 2014 for health insurance in connection with Mr. Geissler’s employment agreement.

(9) Amount represents payments made for Mr. Krawitz in 2014 in connection with Mr. Krawitz’s employment agreement, including: reimbursements for health insurance and disability insurance, car allowance and clothing allowance.

(10) Amount represents $2,629 for Ms. Breece’s cellular telephone and internet services paid for during 2013.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND ADDITIONAL NARRATIVE DISCLOSURE

Executive Employment Arrangements

We did not establish an incentive and recognition plan for our Named Executive Officers for 2014 and 2013. We have entered into employment agreements with Messrs. Silverman, Geissler and Krawitz. Previously, Messrs. Silverman and Geissler had employment agreements with VAC.

Scott R. Silverman Employment Agreements

Effective January 1, 2012, Mr. Silverman entered into an Employment and Non-Compete Agreement with VAC, (the “Silverman 2012 Employment Agreement”). Mr. Silverman’s 2012 Employment Agreement was terminated effective July 8, 2013 at which time Mr. Silverman entered into a new employment agreement, which was amended and restated on November 14, 2013 (the “Silverman Employment Agreement”), appointing Mr. Silverman as our chairman and chief executive officer, effective as of July 8, 2013 until December 31, 2016. Under the Silverman Employment Agreement, Mr. Silverman’s initial base salary was $330,000, which is reviewed annually and is subject to a minimum increase of 5% per calendar year during each year of the term. Accordingly, Mr. Silverman’s base salary was increased to $346,500 beginning January 1, 2014. During the term, Mr. Silverman is eligible to receive an annual bonus, based on performance metrics and goals as determined annually by the Board of Directors, with the amount of such bonus to be determined based upon the annual objectives determined by the Compensation Committee, but in no event to be less than 100% of earned base salary for the applicable year. The bonus shall be paid in cash or, if Mr. Silverman and the Company agree at the time, using shares of the Company’s common stock, at a valuation equal to fair market value. On January 30, 2014, the Compensation Committee authorized a discretionary bonus in the amount of $100,000 to be paid to Mr. Silverman. This discretionary bonus was in addition to Mr. Silverman’s minimum bonus for 2013 under the terms of the Silverman Employment Agreement. Due to the Company’s financial condition, a substantial portion of the compensation that Mr. Silverman was entitled to receive under the terms of the Silverman 2012 Employment Agreement and the Silverman Employment Agreement had gone unpaid as of October 31, 2014. On October 31, 2014, Mr. Silverman entered into an agreement with the Company to exchange an aggregate of $1,400,000 owed to him by the Company, including all accrued but unpaid obligations related to the Silverman 2012 Employment Agreement, for 1,400 shares of the Company’s Series D Convertible Preferred Stock (the “Series D Preferred Stock”). Included in this amount are, among other items: (i) Mr. Silverman’s 2012 salary in the amount of $300,000; (ii) Mr. Silverman’s annual bonus for 2012 in the amount of $300,000; (iii) Mr. Silverman’s 2013 annual and discretionary bonus aggregating to $430,000; and (iv) a pro rata portion of his 2014 annual bonus. The Series D Preferred Stock issued under this exchange will vest upon the earlier of January 1, 2017 or a change of control event. If Mr. Silverman separates from the Company prior to the vesting date of the Series D Preferred Stock because of a termination for cause or by resigning without good reason, as defined under the terms of the Silverman Employment Agreement, then he shall forfeit the shares of Series D Preferred Stock.

On February 20, 2015, the Compensation Committee authorized a discretionary bonus in the amount of $100,000 to be paid to Mr. Silverman. This discretionary bonus was in addition to Mr. Silverman’s minimum bonus for 2014 under the terms of his employment agreement. On March 3, 2015, Mr. Silverman executed a letter agreement with the Company whereby this $100,000 discretionary bonus, along with the portion of his 2014 annual bonus that was not converted into Series D Preferred Stock, amounting to $94,010, would be paid in the form of a convertible promissory note issued by the Company due March 1, 2016. The convertible promissory note bears interest at a rate of 5% per annum, and is convertible at any time after September 1, 2015 into unregistered shares of the Company’s common stock, at a conversion price that is equal to the average daily closing price of the Company’s common stock for the 10 trading days prior to conversion.

If Mr. Silverman’s employment is terminated prior to the expiration of the term, certain payments become due. In the event Mr. Silverman is terminated with cause or he terminates for any reason other than good reason, Mr. Silverman is entitled to receive (i) earned or accrued but unpaid, base salary, through the date of termination, (ii) any bonus earned or accrued and vested, but unpaid, (iii) the economic value of the employee’s accrued, but unused, vacation time, and (iv) any unreimbursed business expenses incurred by the employee (collectively, the “Accrued Obligations”). In the event Mr. Silverman is terminated without cause or he terminates for good reason, or upon his death, Mr. Silverman is entitled to receive the Accrued Obligations and a termination payment equal to his base salary from the date of termination through December 31, 2016, (or two years whichever is longer) plus bonus for such period, with such bonus being determined based upon the time remaining between the date of termination and December 31, 2016 (or two years, whichever is longer) and with the rate of bonus to be based upon the average annual bonus paid by the Company to Mr. Silverman over the last three (3) full calendar years (or if the Agreement is terminated before Mr. Silverman has been employed by the Company for three (3) full calendar years, for purposes of calculating the average Annual Bonus, the Company will use 100% of Mr. Silverman’s base salary as the annual bonus) plus certain benefits as set forth in the Silverman Employment Agreement.

In addition, the Silverman Employment Agreement contains a change of control provision that provides for the payment of 299% of Mr. Silverman’s base salary plus 299% of the average annual bonus paid over the last three full calendar years (or 60% of base salary if the Silverman Employment Agreement is terminated before Mr. Silverman has been employed for three full years). Any outstanding stock options and unvested restricted stock held by Mr. Silverman as of the date of termination (other than for cause or by Mr. Silverman without good reason) or a change of control shall become vested and exercisable as of such date, and remain exercisable during the life of the option. In the event Mr. Silverman is terminated for cause or terminates without good reason, any unvested options and restricted stock awards shall terminate and all vested options shall remain exercisable for a period of ninety (90) days. The Silverman Employment Agreement also contains non-compete and confidentiality provisions which are effective from the date of employment through eighteen months from the date the Silverman Employment Agreement is terminated.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

Randolph Geissler Employment Agreements

On January 2, 2013, VAC entered into an employment agreement with Mr. Geissler with an effective date of September 1, 2012 (the “Geissler 2012 Agreement”). The Geissler 2012 Agreement called for an annual base salary of $200,000 and discretionary annual and incentive bonuses. The Geissler 2012 Agreement was terminated effective July 8, 2013 at which time Mr. Geissler entered into a new employment agreement, which was amended and restated on November 14, 2013 (the Geissler Employment Agreement”), appointing Mr. Geissler as president of VC, effective as of July 8, 2013. The Geissler Employment Agreement is for a term of two (2) years and is renewable for additional one (1) year periods upon mutual agreement. Under the Geissler Employment Agreement, Mr. Geissler received an initial base salary of $200,000, which base salary will be reviewed annually and is subject to a minimum increase of 5% per annum each calendar year. Accordingly, Mr. Geissler’s salary was increased to $210,000 beginning January 1, 2014. Mr. Geissler is eligible to receive an annual bonus, based on performance metrics and goals as determined annually by the Board of Directors, with the amount of such bonus to be determined based upon the annual objectives determined by the Compensation Committee of the Board of Directors, but in no event to be less than 100% of earned base salary for the applicable year. The bonus shall be paid in cash or, if Mr. Geissler and the Company agree at the time, using shares of the Company’s common stock, at a valuation equal to fair market value. On January 30, 2014, the compensation committee of the board of directors authorized a discretionary bonus in the amount of $75,000 to be paid to Mr. Geissler. This discretionary bonus was in addition to Mr. Geissler’s minimum bonus for 2013 under the terms of the Geissler Employment Agreement. Due to the Company’s financial condition, a substantial portion of the compensation that Mr. Geissler was to receive under the terms of the Geissler 2012 Agreement and the Geissler Employment Agreement had gone unpaid as of October 31, 2014. On October 31, 2014, Mr. Geissler entered into an agreement with the Company to exchange an aggregate of $441,000 owed to him by the Company, including all accrued but unpaid obligations related to the Geissler 2012 Agreement, for 441 shares of Series D Preferred Stock. This amount is comprised of: (i) A portion of Mr. Geissler’s 2012 and 2013 salary in the amount of $166,000; and; (ii) Mr. Geissler’s 2013 annual and discretionary bonus aggregating to $275,000. The Series D Preferred Stock issued under this exchange will vest upon the earlier of January 1, 2017 or a change of control event. If Mr. Geissler separates from the Company prior to the vesting date of the Series D Preferred Stock because of a termination for cause or by resigning without good reason, as defined under the terms of the Geissler Employment Agreement, then he shall forfeit the shares of Series D Preferred Stock.

On February 20, 2015, the Compensation Committee authorized a discretionary bonus in the amount of $75,000 to be paid to Mr. Geissler. This discretionary bonus was in addition to Mr. Geissler’s minimum bonus for 2014 under the terms of his employment agreement. On March 3, 2015, Mr. Geissler executed a letter agreement with the Company whereby this $75,000 discretionary bonus, along with his 2014 annual bonus of $210,000, would be paid in the form of a convertible promissory note issued by the Company due March 1, 2016. The convertible promissory note bears interest at a rate of 5% per annum, and is convertible at any time after September 1, 2015 into unregistered shares of the Company’s common stock, at a conversion price that is equal to the average daily closing price of the Company’s common stock for the 10 trading days prior to conversion.

Mr. Geissler is also entitled to the following: (i) the Company shall, at its option, either lease for Mr. Geissler an automobile, or reimburse Mr. Geissler for the lease or financing payments incurred by Mr. Geissler’s on his automobile, the amount of such reimbursement to be reasonably comparable to 75% of the current cost on the automobile then being provided to the Company’s CEO. The Company shall reimburse car-related expenses; (ii) the Company shall, at its option, either provide to Mr. Geissler disability insurance that provides standard disability coverage and terms, in an amount of at least equal to $15,000 per month until age 65, or reimburse Mr. Geissler for the premium payments incurred by him for disability insurance coverage for himself, the amount of such reimbursement to be reasonably comparable to the current cost of his disability insurance; (iii) the Company shall provide comprehensive health insurance as it provides to other executives and employees; (iv) reimbursement for expenses related to business attire in an amount not to exceed $950 per month; and (v) if the Company elects to secure a key man life insurance policy on the life of Mr. Geissler, it will provide a split-dollar policy.

If Mr. Geissler’s employment is terminated for cause or he terminates for any reason other than good reason, Mr. Geissler is entitled to receive the Accrued Obligations. In the event Mr. Geissler is terminated without cause or he terminates for good reason, or termination upon his death, Mr. Geissler is entitled to receive the Accrued Obligations and a termination payment equal to one times his base salary plus the previous year’s bonus, but no less than one times his base salary. In the event that Mr. Geissler is terminated as a result of a change in control, Mr. Geissler is entitled to receive the Accrued Obligations and a termination payment equal to two times his base salary, plus the previous year’s bonus, but no less than two times his base salary. Any termination payment shall be payable to Mr. Geissler in cash, or if Mr. Geissler agrees, in shares of the Company’s common stock valued at market value. Any outstanding stock options and unvested restricted stock held by Mr. Geissler as of the date of termination (other than for cause or by Mr. Geissler without good reason) or a change of control shall become vested and exercisable as of such date, and remain exercisable during the life of the option. In the event Mr. Geissler is terminated for cause or terminates without good reason, any unvested options and restricted stock awards shall terminate and all vested options shall remain exercisable for a period of 90 days. The Geissler Employment Agreement also contains non-compete and confidentiality provisions which are effective from the date of employment through one year from the date the Geissler Employment Agreement is terminated.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

Michael E. Krawitz Employment Agreement

Effective January 31, 2014, we entered into an employment agreement with Michael Krawitz (the “Krawitz Employment Agreement”) to serve as our Chief Legal and Financial Officer. The Krawitz Employment Agreement is for an initial term of two (2) years and is renewable for additional one (1) year terms upon mutual agreement of the parties. Under the Krawitz Employment Agreement, Mr. Krawitz received an initial base salary of $210,000, which base salary will be reviewed annually by the compensation committee and is subject to a minimum increase of 5% per annum, with the first increase to be effective on January 1, 2015. Mr. Krawitz is also entitled to (i) disability insurance or reimbursement of disability insurance in an amount at least equal to $15,000 per month until age 65; (ii) health insurance; (iii) an automobile or reimbursement of lease or financing payments incurred, the amount of such reimbursement to be reasonably comparable to 75% of the current cost of the automobile being provided to our Chief Executive Officer; and (iv) life insurance. During the term of the Krawitz Employment Agreement, Mr. Krawitz is eligible to receive an annual bonus based on performance metrics and goals as determined annually by the Company’s Board of Directors, with the amount of such bonus to be determined based upon annual objectives determined by the Compensation Committee of the Board of Directors, but in no event will be less than 100% of Mr. Krawitz’s earned base salary for the applicable year.

On February 20, 2015, the Compensation Committee authorized a discretionary bonus in the amount of $75,000 to be paid to Mr. Krawitz. This discretionary bonus was in addition to Mr. Geissler’s minimum bonus for 2014 under the terms of his employment agreement. On March 3, 2015, Mr. Krawitz executed a letter agreement with the Company whereby this $75,000 discretionary bonus, along with his 2014 pro-rated bonus of $192,500, would be paid in the form of a convertible promissory note issued by the Company due March 1, 2016. The convertible promissory note bears interest at a rate of 5% per annum, and is convertible at any time after September 1, 2015 into unregistered shares of the Company’s common stock, at a conversion price that is equal to the average daily closing price of the Company’s common stock for the 10 trading days prior to conversion.

If Mr. Krawitz’s employment is terminated prior to the expiration of the term, certain payments become due. In the event Mr. Krawitz is terminated with cause or he terminates for any reason other than good reason, Mr. Krawitz is entitled to receive (i) earned or accrued but unpaid, base salary, through the date of termination, (ii) any bonus earned or accrued and vested, but unpaid, (iii) the economic value of the employee’s accrued, but unused, vacation time, and (iv) any unreimbursed business expenses incurred by the employee, collectively, the Krawitz Accrued Obligations. In the event Mr. Krawitz is terminated without cause or he terminates for good reason, Mr. Krawitz is entitled to receive the Krawitz Accrued Obligations and a termination payment equal to his base salary plus the previous year’s bonus (but no less than one times his base salary). In the event that Mr. Krawitz is terminated as a result of a change in control, Mr. Krawitz is entitled to receive any Krawitz Accrued Obligations and a termination payment equal to two times his base salary, plus the previous year’s bonus, but no less than two times his base salary. Any outstanding stock options and unvested restricted stock held by Mr. Krawitz as of the date of termination (other than for cause or by Mr. Krawitz without good reason) or a change of control shall become vested and exercisable as of such date, and remain exercisable during the life of the option. In the event Mr. Krawitz is terminated for cause or terminates without good reason, any unvested options and restricted stock awards shall terminate and all vested options shall remain exercisable for a period of 90 days. The Krawitz Employment Agreement also contains non-compete provisions which are effective from the date of employment through one year from the date the Krawitz Employment Agreement is terminated.

Executive Employment Arrangements with Former Named Executive Officers

On January 30, 2014, the compensation committee of the board of directors authorized a 2013 discretionary bonus in the amount of $50,000 to be paid to Ms. Breece. The discretionary bonus has been accrued but has not been paid due to the Company’s financial condition. It will be paid in cash after the Compensation Committee determines we have adequate working capital to make such payments, or, if we are permitted to do so without triggering a reset provision on any outstanding warrants and the applicable employee so elects, in shares of our common stock, in which case the amount of the bonus would be increased by 25%.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

Outstanding Equity Awards as of December 31, 2014

The following table provides information as of December 31, 2014 regarding unexercised stock options and restricted stock awards granted to each of our Named Executive Officers by us.

	Option Awards							Stock Awards
Name	Number of Securities Underlying Unexercised Options Exercisable (1)		Number of Securities Underlying Unexercised Options Unexercisable	Equity Incentive Plan Awards: Number of Securities Underlying Unearned Options	Option Exercise Price		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested			Market Value of Shares of Units of Stock That Have Not Vested		Equity Incentive Plan Awards: Number of Unearned Units or Other Rights That Have Not Vested	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
Scott R. Silverman
		1			$	871,200	02/25/2015
		2			$	559,200	06/14/2016
		190			$	52.40	03/16/2020
		190			$	52.40	12/09/2021
		381			$	1,572.06	02/07/2018
Randolph Geissler
		127			$	52.40	03/16/2020
		381			$	1,572.06	02/07/2018
									858	(2)	$	1,716
Michael Krawitz
		38			$	52.40	03/16/2020
		38			$	52.40	12/09/2021

	(1)	All share amounts give effect to the Reverse Stock Split that was implemented on February 11, 2015
	(2)	Restricted stock vests on January 1, 2015

2014 Option Exercises and Stock Vested

None of our Named Executive Officers exercised options during the year ended December 31, 2014.

Pension Benefits

None of our Named Executive Officers are covered by a pension plan or other similar benefit plan that provides for payments or other benefits at, following, or in connection with retirement.

Nonqualified Deferred Compensation

None of our Named Executive Officers are covered by a defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.

3323

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

~~2014~~ 2015 DIRECTOR COMPENSATION

Name	Fees Earned or Paid in Cash		Stock Awards		Option Awards		Non-Equity Incentive Plan Compensation		Nonqualified Deferred Compensation Earnings		All Other Compensation		Total
Scott R. Silverman(1)	$	—	$	—	$	—	$	—	S		$	—	$	—
Barry Edelstein		26,000		—		—		—		—		—		26,000
Michael Krawitz(2)		5,500		—		—		—		—		—		5,500
Shawn Wooden		25,500		—		—		—		—		—		25,500
Daniel E. Penni		20,000		—		—		—		—		—		20,000
Ned L. Siegel		10,769		—		—		—		—		—		10,769

In 2015 we paid the following to our directors:

	(1)	Mr. Silverman did not receive any compensation as a director. See section “Executive Compensation” for details regarding his compensation as an executive officer for 2014.
Name & Principal Position		Salary ($)		Bonus ($)		Stock Awards (1) ($)		Option Awards (2) ($)		Non-Equity Incentive Plan Compensation ($)		Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
	(2)	Mr. Krawitz was appointed our chief legal and financial officer effective January 31, 2014, and resigned from the Board of Directors on June 17, 2014. See section “Executive Compensation” for details regarding his compensation as an executive officer for 2014.
Scott R. Silverman (3)			0		0		0		0		0		0		0		0
Michael James			0		0		0		0		0		0		0		0
Barry Edelstein			0		0		0		540,000		0		0		0		540,000
Shawn Wooden (4)			0		0		0		540,000		0		0		0		540,000
Daniel E. Penni (5)			0		0		0		540,000		0		0		0		540,000
Kenneth Shapiro			0		0		0		0		0		0		0		0
Lynne Shapiro			0		0		0		0		0		0		0		0

For the year ended December 31, 2014, fees earned by members of the Board of Directors are as follows: (i) $5,000 per quarter for board service; and (ii) an additional $1,500 per quarter for service as chairman of a board committee. Reasonable out of pocket travel expenses are reimbursed when incurred. Directors who are not also executive officers are not eligible to participate in any of our other benefit plans.

(1)	Reflects grant date fair value of equity awards computed in accordance with FASB ASC Topic 718.
(2)	Reflects grant date fair value of equity awards computed in accordance with FASB ASC Topic 718.
(3)	Mr. Silverman resigned from the Company’s Board of Directors on May 6, 2016.
(4)	Mr. Wooden resigned from the Company’s Board of Directors on May 6, 2016.
(5)	Mr. Penni resigned from the Company’s Board of Directors on August 19, 2015.

None of our directors exercised options during the year ended December 31, ~~2014~~2015.

~~STOCK OPTION AND OTHER COMPENSATION PLANS~~ 24

During 1999, the Company adopted the 1999 Flexible Stock Plan and the 1999 Employees’ Stock Purchase Plan. During 2002 the Company adopted the Digital Angel Corporation Transition Stock Option Plan. During 2003, the Company adopted the 2003 Flexible Stock Plan. The options granted under these plans have contractual terms ranging from three to ten years. At December 31, 2014, 31 options are outstanding under these plans, with 72,447 shares available for future issuance.

On July 12, 2013, pursuant to the Exchange Agreement, a majority of the Company’s voting stockholders adopted resolutions by written consent approving the DAC 2013 Stock Incentive Plan (the “2013 Plan”), under which employees, including officers and directors, and consultants may receive awards. Awards under the 2013 Plan include incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock performance units, performance shares, cash awards and other stock based awards. The purposes of the 2013 Plan are to attract and retain highly qualified personnel for positions of substantial responsibility, to provide additional incentive to employees and consultants, to promote the success of the Company’s business and to link participants’ interests directly with those of stockholders through increased stock ownership. The 2013 Plan became effective on October 18, 2013. On October 18, 2013, the outstanding stock options under the three VAC stock incentive plans were converted into options to acquire VC’s common stock under the 2013 Plan and VAC’s three former stock incentive plans were terminated.

The aggregate number of shares of the Company’s common stock that may be subject to awards under the 2013 Plan, subject to adjustment upon a change in capitalization, is 5,000,000 shares. Such shares of common stock may be authorized but unissued, or reacquired shares of common stock. Shares of common stock that were subject to plan awards that expire or become unexercisable without having been exercised in full shall become available for future awards under the 2013 Plan. At December 31, 2014, approximately 2,172 options are outstanding, and approximately 4,997,447 options remain available for issuance under the 2013 Plan.

On June 18, 2014, the Company’s stockholders adopted the VeriTeQ Corporation 2014 Stock Incentive Plan (the “2014 Plan”). The 2014 Plan has terms and provisions that are substantially similar to the 2013 Plan, and provided for 50,000,000 shares of common stock to be reserved for awards under the 2014 Plan. On December 18, 2014, the Company’s shareholders approved an increase in the number of authorized shares of common stock issuable under the 2014 Plan to 500,000,000 shares. No grants have been awarded under the 2014 Plan. On February 24, 2015, in accordance with the terms of the 2014 Plan, our Board of Directors approved a decrease in the number of shares reserved for issuance under the 2014 Plan from 500,000,000 to 250,000,000.

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information known to us regarding beneficial ownership of shares of our common stock as of June ~~March 31~~30, ~~2015~~2016 by:

(i) each person known to us to beneficially own more than 5% of our common stock, (ii) each of our directors, and (iii) all of the current executive officers and directors as a group.

~~(ii)~~Beneficial ownership ~~each~~is determined in accordance with the rules and regulations of the ~~named~~SEC ~~executive~~and ~~officers~~includes (voting and investment power with respect to the securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of June 30, 2016 are deemed outstanding. Such shares, however, are not deemed outstanding for purposes of computing the percentage ownership of any other person. To our knowledge, except as ~~disclosed~~indicated in the ~~summary~~footnotes ~~compensation~~to this table and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of our common stock shown opposite such person’s name. The Company has two classes of voting stock that vote together on all matters requiring a shareholder vote: (i) Series D Convertible Preferred Stock, which is voted on an as converted basis, and (ii) Common Stock. At June 30, 2016, the outstanding Series D Preferred Stock was convertible into 35,714,285 shares of common stock, and there were 723,718 shares of our common stock outstanding as of June 30, 2016. Unless otherwise noted below, the address of the persons and entities listed in the table is c/o VeriTeQ Corporation, 6560 W. Rogers Circle, Suite 19, Boca Raton, Florida 33487.

(iii) each of our directors, and

Name and Address of Beneficial Owner

Series D Preferred Stock

Series E Preferred Stock

Common Stock

Shares Beneficially Owned (1)

% of Class

Shares Beneficially Owned (1)

% of Class

Shares Beneficially Owned (2)

% of Class

Lynne Shapiro

849

95.61

Kenneth Shapiro

Michael James

All directors and executive officers as a group (3 persons)

849

95.61

5% Shareholders

Magna Equities I, LLC

1,400

76.05

Iliad Research & Trading, L.P

79,514

9.99

Ned Siegel

61,366

8.48

Vis Vires Group, Inc.

79,514

9.99

PositiveID Corporation

79,514

9.99

Union Capital, LLC

79,514

9.99

KBM Worldwide, Inc.

79,514

9.99

(iv) all of the current executive officers and directors as a group.

(1)

Applicable percentage ownership is based on 1,841 shares of Series D Preferred Stock, and 888 shares of Series E Preferred Stock outstanding as of the date of this Current Report.

(2)

The list of 5% beneficial shareholders of Common Stock is derived from filings of Schedule 13G with respect to the Company’s Common Stock since January 1, 2015, which we have assumed represent all current 5% beneficial shareholders. For each 5% beneficial shareholder of Common Stock that has disclosed that its beneficial interest is predicated upon the exercise of such beneficial shareholder’s rights under a convertible promissory note to convert its interest into 9.99% of the Company’s issued and outstanding Common Stock, we have disclosed the number of shares that each such 5% beneficial shareholder would own if it were to convert such interest as of the date of this Current Report. Applicable percentage ownership is based on 723,651 shares of Common Stock issued and outstanding as of the date of this Current Report.

Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting and investment power with respect to the securities. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of March 31, 2015 are deemed outstanding. Such shares, however, are not deemed outstanding for purposes of computing the percentage ownership of any other person. To our knowledge, except as indicated in the footnotes to this table and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of our common stock shown opposite such person’s name. The Company has two classes of voting stock that vote together on all matters requiring a shareholder vote: (i) Series D Convertible Preferred Stock held by Scott Silverman and Randolph Geissler (see “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE”), which is voted on an as converted basis, and (ii) Common Stock. At March 31, 2015, the outstanding Series D Preferred Stock was convertible into 582,594,937 shares of common stock, and there were 30,802,114 shares of our common stock outstanding as of March 31, 2015. Unless otherwise noted below, the address of the persons and entities listed in the table is c/o VeriTeQ Corporation, 3333 South Congress Ave., Suite 401, Delray Beach, Florida 33445. 25

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

Name and Address of Beneficial Owner	Seried D Preferred Stock					Common Stock					% of Voting Stock
	Shares Beneficially Owned		% of Class			Shares Beneficially Owned		% of Class
Scott R. Silverman (1)		443,037,975		76.0	%		6,441		*			72.2	%
Randolph K. Geissler (2)		139,556,962		24.0	%		1,597		*			22.8	%
Barry M. Edelstein (3)							167		*			*
Michael E. Krawitz (4)							234		*			*
Daniel E. Penni (5)							37		*			*
Shawn A. Wooden							-		*			*
Executive Officers and Directors as a group (6 persons)		582,594,937		100.0	%		8,476		*			95.0	%
Corbin Properties LLC (6)							66,640,538		68.40	%		9.8	%
Iliad Research and Trading, L.P. (7,11)							3,419,000		9.99	%		0.6	%
HS Contrarian Investments, LLC (7,12)							3,419,000		9.99	%		0.6	%
KBM Worldwide, Inc. (7,13)							3,419,000		9.99	%		0.6	%
Magna Equities II, LLC (8)							3,199,745		9.99	%		0.5	%
PositiveID Corporation (9)							3,232,287		9.99	%		0.5	%
Union Capital, LLC (10)							3,338,324		9.99	%		0.5	%

* Represents less than 1%

	(1)	Includes 443,037,975 shares issuable upon the conversion of 1,441 shares of Series D Preferred Stock, which are entitled to vote, along with common stockholders, on all matters requiring a stockholder vote.
	(2)	Includes 139,556,962 shares issuable upon the conversion of 400 shares of Series D Preferred Stock, which are entitled to vote, along with common stockholders, on all matters requiring a stockholder vote.
	(3)	Includes warrants to purchase 28 shares of common stock and options to purchase 39 shares of common stock.
	(4)	Includes options to purchase 76 shares of common stock.
	(5)	Includes options to purchase 3 shares of common stock.
	(6)	Pertains to shares issuable upon conversion of a promissory note. The address of Corbin Properties LLC is 70 E. 10th Street, Suite 12T New York, NY 10003
	(7)	Pertains to shares issuable upon conversion of a promissory note or notes, with such notes containing “blocker” provisions limiting conversion to a number shares that would be equal to 9.99% of the Company’s outstanding common stock after giving effect to such conversion.
	(8)	Includes 1,223,000 shares issuable upon conversion of promissory notes, with such notes (including notes held by the holder’s affiliate, Magna Equities I, LLC) containing “blocker” provisions limiting conversion to a number shares that would be equal to 9.99% of the Company’s outstanding common stock after giving effect to such conversion. The address of Magna Equities II, LLC is 5 Hanover Square New York, NY 10004.
	(9)	Includes 1,552,500 shares issuable upon conversion of promissory notes, with such notes containing “blocker” provisions limiting conversion to a number shares that would be equal to 9.99% of the Company’s outstanding common stock after giving effect to such conversion. The address of PositiveID Corporation is 1690 S. Congress Avenue, Suite 201, Delray Beach, FL 33445.
	(10)	Includes 2,610,000 shares issuable upon conversion of promissory notes, with such notes containing “blocker” provisions limiting conversion to a number shares that would be equal to 9.99% of the Company’s outstanding common stock after giving effect to such conversion. The address of Union Capital, LLC is 338 Crown Street Brooklyn, NY 11225.
	(11)	The address of Iliad Research and Trading is 303 E. Wacker Drive, Suite 1200, Chicago, IL 60601.
	(12)	The address of HS Contrarian is 347 N. New River Dr. East #804 Fort Lauderdale, FL 33301.
	(13)	The address of KBM Worldwide is 80 Cuttermill Road, Suite 410, Great Neck, NY 11021.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

Securities Authorized for Issuance Under Equity Compensation Plans

A description of our equity compensation plans and shares of our common stock that were authorized for issuance under such is presented in Item 11, “Executive Compensation”, appearing elsewhere in this Annual Report on Form 10-K.

The following table presents information regarding options and rights outstanding under our compensation plans as of December 31, 2014:

	Equity Compensation Plan Information
Plan Category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights		(b) Weighted- average exercise price per share of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		2,200	$	4,974.74		505,069,924
Equity compensation plans not approved by security holders		3		162,000.00		--
Total		2,203		5,188.03		505,069,924

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

~~Since~~SEC rules ~~January~~require 1,us ~~2013,~~to ~~there~~disclose ~~has~~any ~~not~~transaction ~~been,~~or ~~and there is not~~ currently proposed ~~any~~ transaction orin ~~series~~which ofthe ~~similar~~Company ~~transactions~~is a participant and in which any ~~the~~related ~~amount~~person ~~involved~~has ~~exceeded~~ or will ~~exceed~~have a direct or indirect material interest involving the lesser of $120,000 or one percent (1%) of the average of ~~our~~the Company’s total assets atas ~~year~~of the end ~~for~~of ~~the~~ last two completed fiscal years. ~~and~~A ~~in which any~~ related person, ~~including~~is any executive officer, director, ~~executive~~nominee ~~officer~~for director, or holder of ~~more than~~ 5% ofor ~~our~~more ~~capital~~of ~~stock~~the ~~during~~Company’s ~~such~~Common ~~period~~Stock, or ~~entities~~an ~~affiliated~~immediate ~~with~~family ~~them,~~member of ~~had~~any aof ~~material interest, other than~~ those ~~described in Item 11, “Executive Compensation” and the transactions set forth below~~persons.

~~Related~~None of ~~Party~~our ~~Transactions~~officers, directors, proposed director nominees, beneficial owners of more than 10% of our shares of common stock, or any relative or spouse of any of the foregoing persons, or any relative of such spouse who has the same house as such person or who is a director or officer of any parent or subsidiary of our Company, has any direct or indirect material interest in any transaction to which we are a party since our incorporation or in any proposed transaction to which we are proposed to be a party. In the event a related party transaction is proposed, such transaction will be presented to our board of directors for consideration and approval. Any such transaction will require approval by a majority of the disinterested directors and such transactions will be on terms no less favorable than those available to disinterested third parties.

Shared Services Agreement with PSID

The Company entered into a shared services agreement (the “SSA”) with PSID on January 11, 2012, pursuant to which PSID agreed to provide certain services, including administrative, rent, accounting, business development and marketing, to the Company in exchange for $30,000 per month. The SSA has also included working capital advances from time to time. The term of the SSA commenced on January 23, 2012. The SSA was amended from time to time during the year ended 2012 to, among other things, reduce the monthly charge for services to $5,000. On April 22, 2013, the Company and PSID entered into a non-binding letter agreement in which PSID agreed to provide up to an additional $60,000 of support during April and May 2013.

On July 8, 2013, the Company entered into a letter Agreement with PSID (the “July Letter Agreement”) to amend certain terms of several agreements between PSID and the Company. The July Letter Agreement amended certain terms of the SSA, as amended, the asset purchase agreement entered into on August 28, 2012, as amended (the “APA”), and the note payable to PSID.

On November 8, 2013, the Company entered into a Letter Agreement (the “November Letter Agreement”) with PSID which further amended the terms of the several agreements between PSID and the Company.

The July Letter Agreement, as modified by the November Letter Agreement, provides for:

(i) The elimination of minimum royalties payable to PSID under the APA in their entirety. In the event that royalty payments under the APA based on the Company’s attainment of certain sales levels are not at least $800,000 for the calendar year 2014, then the Company will grant PSID Corporation a non-exclusive, perpetual, non-transferrable, world-wide, fully paid license to said patents.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

(ii) VC’s granting to PSID a warrant to purchase 300,000 shares of common stock with an initial exercise price of $2.84. The warrant is exercisable for a period of five years, and the terms and form of the warrant are the same as the warrants issued in the Company’s November 2013 financing transaction (see notes 6 and 9 to the Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K).

As of December 31, 2013, the Company owed PSID $0.2 million under the SSA. On October 20, 2014, the Company entered into a GlucoChip and Settlement Agreement (the “PSID Settlement Agreement”) with PSID to transfer the final element of PSID implantable microchip business to the Company, to provide for a period of financial support to the Company, and to provide for settlement of the $0.2 million owed by the Company to PSID under the SSA. The PSID Settlement Agreement provides for the termination of the License Agreement entered into between the PSID and the Company on August 28, 2012, whereby, PSID had retained an exclusive license to the GlucoChip technology. Pursuant to the PSID Settlement Agreement, PSID retains its right to any future royalties from the sale of GlucoChip or any other implantable bio sensor applications. The PSID Settlement Agreement also provided for the settlement of the amount outstanding under the SSA by the Company issuing a convertible promissory note to PSID with terms similar to those of other convertible promissory notes issued by the Company during the year ended December 31, 2014.

Pursuant to the PSID Settlement Agreement, PSID also agreed to provide financial support to the Company, for a period of up to two years, in the form of convertible promissory notes. On October 20, 2014, PSID funded the Company $60,000 and the Company issued to PSID a convertible promissory note, with similar terms to other convertible promissory notes issued by the Company during 2014. Pursuant to the PSID Settlement Agreement, PSID agreed to provide the Company with continuing financial support through issuance of additional convertible promissory notes with similar terms and conditions as those notes issued in October 2014. The additional promissory notes are at the option of the Company, which option it can exercise every 100 days and, unless the parties agree otherwise, on January 30, 2015 the Company issued a $40,000 convertible promissory note to PSID.

Investment from VeriTeQ Corporation’s Director

In June of 2013, VC’s then interim chief executive officer and president and then chairman of VC’s board, Daniel E. Penni, agreed to make a $25,000 equity investment in VAC. As a result of such investment, Mr. Penni owned shares of VAC’s common stock, which have been exchanged for 19 shares of VC’s common stock. Mr. Penni continues to serve as a member of VC’s board.

Notes Payable

During 2013, 2014 and through March 31, 2015, VC and VAC issued notes payable to certain directors and officers as follows:

On April 10, 2013, VAC entered into a promissory note with its president, Randolph Geissler and his business partner in the amount of $50,000. The note bore interest at 10% per annum was due on demand and was repaid on November 15, 2013. In connection with the note, Mr. Geissler and his partner received warrants to acquire shares of VAC’s common stock. The warrants were converted into warrants to acquire 95,416 shares of VC’s common stock at an exercise price of $1.31 per share.

On October 11, 2013, VAC entered into a promissory note with its CEO, Scott Silverman, in the principal amount of $80,000. The note bears interest at 5% per annum and is due on demand. On November 15, 2013, we made a partial repayment of $50,000 and the remainder was repaid during the year ended December 31, 2014.

On October 29, 2013, VC entered into a promissory note with its CEO, Scott Silverman, in the principal amount of $30,000. The note bears interest at 5% per annum and was due on demand. This note was repaid during the year ended December 31, 2014.

On January 8, 2014, VC entered into a promissory note with its director, Michael Krawitz, in the principal amount of $60,000. The note bears interest at 5% per annum and is due on demand.

On January 15, 2014, VC entered into a promissory note with its president, Randolph Geissler, in the principal amount of $40,000. The note bears interest at 5% per annum and is due on demand. The Company made a payment of $6,000 on this note during the year ended December 31, 2014, and the remaining balance on this note is $34,000.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

On January 15, 2014, VC entered into a promissory note with its CEO, Scott Silverman, in the principal amount of $60,000. The note bears interest at 5% per annum and was due on demand. The note was repaid during the year ended December 31, 2014.

On March 4, 2014, VC entered into a promissory note with its director, Daniel Penni, in the principal amount of $25,000. The note bears interest at 5% per annum and is due on demand.

On April 16, 2014 and May 1, 2014, the Company issued promissory notes to Ned L. Siegel in the principal amount of $30,000 and $20,000, respectively (collectively, the “Siegel Notes”). The Siegel Notes bear interest at a rate of 9% per annum, with principal and interest are due on these notes one year after their date of issuance. The Siegel Notes are convertible into shares of the Company’s common stock at the option of the holder at a conversion price of $350 per share. In connection with the issuance of the May 1, 2014 note, Mr. Siegel also received a warrant to purchase 100 shares of the Company’s common stock at an exercise price of $350 per share, subject to adjustment for stock splits, stock dividends or stock combinations. Mr. Siegel was appointed a director of the Company on June 17, 2014, and resigned from the Company’s board of directors on January 28, 2015.

On January 22, 2015 the Company entered into a promissory note with its CEO, Scott Silverman, in the principal amount of $45,000. The note bears interest at 5% per annum and is due on demand.

Officer Liabilities

On October 31, 2014, the Company entered into agreements with Mr. Silverman and Mr. Geissler whereby Messrs. Silverman and Geissler agreed to convert amounts owed to them by the Company of $1.4 million and $441,000, respectively, into a total of 1,841 shares of the Company’s Series D Convertible Preferred Stock (the “Series D Preferred Stock”). The Series D Preferred Stock issued under this agreement will vest on January 1, 2017. If Mr. Silverman or Mr. Geissler separate from the Company because of a termination for cause or by resigning without good reason, as defined under the terms of their respective employment agreements, then they shall forfeit the shares of Series D Preferred Stock acquired under this agreement. The Series D Preferred Stock will automatically vest upon a change of control event.

Absent a change of control or certain other transformational events, the Series D Preferred Stock will become convertible on January 2, 2017 (immediately after it vests) into shares of the Company’s common stock at a conversion price per share equal to the lesser of the average closing price of the common stock for the five trading days prior to the date of conversion or $3.10, which was the closing price of the Company’s common stock on October 31, 2014. The Series D Preferred Stock is entitled to vote along with shares of common stock. The number of votes that a holder of the Series D Preferred Stock is able to cast is equal to the number of common shares that the Series D Preferred Stock would convert into if it could be converted on the date of issuance. Based on the closing price of the Company’s common stock at December 31, 2014, the Series D Preferred Stock being issued under this agreement is convertible into an aggregate of 929,798 shares of common stock, subject to adjustment for stock splits or stock combinations.

On March 3, 2015, the Company entered into separate agreements with Mr. Silverman, Mr. Geissler and Michael E. Krawitz, the Company’s Chief Legal and Financial Officer, (collectively, the “Named Executive Officers”) whereby each Named Executive Officer agreed that certain amounts of accrued but unpaid compensation that each individual was entitled to receive would be paid in the form of a convertible promissory note (the “Officer Notes”). In connection with these agreements, the Company issued Officer Notes to Messrs. Silverman, Geissler and Krawitz in the principal amount of $194,010, $285,000 and $267,500, respectively. In addition, Mr. Geissler and Mr. Krawitz agreed to have their outstanding demand notes due from the Company, in the principal amounts of $34,000 and $60,000, respectively, converted into separate Officer Notes.

The Officer Notes bear interest at a rate of 5% per annum, with principal and interest due on March 1, 2016. The Company has the option to prepay the Officer Notes, in whole or in part, and without premium or penalty, at any time upon 5 business days’ written notice to the holder. At any time after September 1, 2015, the holder of an Officer Note can convert all or part of the note into shares of the Company’s common stock at a conversion price equal to the average daily closing price of the Company’s common stock for the 10 days prior to conversion.

Review, Approval or Ratification of Transactions with Related Parties

Our audit committee’s charter requires review of any proposed related party transaction, conflicts of interest and any other transaction for which independent review is necessary or desirable to achieve the highest standards of corporate governance. It is also our unwritten policy, which policy is not otherwise evidenced, for any related party transaction that involves more than a de minimis obligation, expense or payment, to obtain approval by our board of directors prior to our entering into any such transaction. In conformity with our various policies on related party transactions, the above transactions discussed in this “Certain Relationships and Related Transactions” section had been reviewed and approved by our board of directors.

VERITEQ CORPORATION

2014 ANNUAL REPORT ON FORM 10-K

Director Independence

Currently, two members on our Board of Directors, Messrs. Edelstein and Wooden, are considered “independent” within the meaning of the listing standards of The Nasdaq Stock Market. Our other directors, Mr. Silverman, and Mr. Penni, held or hold officer positions with us and accordingly they are not considered independent, even though Mr. Penni is not currently an employee or currently has any other relationship with us that would otherwise disqualify him as independent.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit and Non-Audit Fees

~~For~~Fees for services provided by our independent registered public accounting firms, EisnerAmper LLP for the fiscal ~~years~~year ended December 31, 2014, and ~~2013~~Salberg & Company, ~~fees~~P.A. for ~~services~~the ~~provided~~fiscal byyears ~~our~~ended ~~principal accountant~~December 31, ~~EisnerAmper~~2015 ~~LLP~~and 2014, were as follows:

	2014		2013
	2015		2014
Audit Fees	$	~~156~~30,~~209~~000	$	~~220~~188,~~450~~209
Audit-Related Fees (review of registration statements and other SEC filings)		-		-
Assistance with research related to a proposed transaction		-		-
Tax Fees		-		-
All Other Fees		-		-
Total Fees	$	~~156~~30,~~209~~000	$	~~220~~188,~~450~~409

Audit fees for the year ended December 31, 2014 include $32,000 for Salberg & Company, P.A.’s re-audit of the fiscal 2014 financial statements. None of the services described above were approved pursuant to the exception provided in Rule 2-01(c)(7)(i)(C) of Regulation S-X promulgated by the SEC.

Compatibility of Fees

The Audit Committee of the Board of Directors has considered whether the provision of the services listed above is compatible with maintaining the independent registered public accounting firm’s independence and has concluded that the services did not interfere with the independent registered public accounting firm’s independence.

Pre-Approval Policies and Procedures

The audit committee has a policy for the pre-approval of audit services, requiring its prior approval for all audit and non-audit services provided by our independent registered public accounting firm. Our independent registered public accounting firm may not provide certain prohibited services. The audit committee’s prior approval must be obtained before the scope or cost of pre-approved services is increased.

Consistent with these policies and procedures, the audit committee approved all of the services rendered by ~~EisnerAmper~~Salberg & Co. and EisnerAmper LLP during fiscal years ~~2014~~2015 and ~~2013~~2014, as described above.

4026

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS

(a)(1)		The financial statements listed below are included in this report
		Report of Independent Registered Public Accounting Firm
		Consolidated Balance Sheets
		Consolidated Statements of Operations
		Consolidated Statements of Stockholders’ Equity
		Consolidated Statements of Changes in Stockholders’ Deficit
		Consolidated Statements of Cash Flows
		Notes to Consolidated Financial Statements
(a)(3)		Exhibits
		See the Exhibit Index filed as part of this Annual Report on Form 10-K.

VERITEQ CORPORATION

2015 ANNUAL REPORT ON FORM 10-K

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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
	By:	/s/ ~~Scott~~Kenneth ~~R. Silverman~~Shapiro
Date: April 14, 2015		Scott R. Silverman
Date: February 17, 2017		Kenneth Shapiro
		Chief Executive Officer
		Chief Executive Officer and Principal Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Scott R. Silverman	Chief Executive Officer and Chairman of the Board	April 14, 2015
/s/ Kenneth Shapiro	Chief Executive Officer, Chairman of the Board and	February 17, 2017
Scott R. Silverman	Principal Financial Officer
/s/ Michael E. Krawitz	Chief Legal and Financial Officer	April 14, 2015
/s/ Lynne Shapiro	Director	February 17, 2017
Michael E. Krawitz	(Principal Financial Officer)
Lynne Shapiro
/s/ Marc S. Gelberg	Chief Accounting Officer and Vice President of	April 14, 2015
Marc S. Gelberg	of Financial Reporting
/s/ Barry M. Edelstein	Director	April 14, 2015
Barry M. Edelstein

/s/ Daniel E. Penni	Director	April 14, 2015
/s/ Michael James	Director	February 17, 2017
Daniel E. Penni
Michael James
/s/ Shawn A. Wooden	Director	April 14, 2015
Shawn A. Wooden

4128

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

EXHIBIT INDEX

2.1		Share Exchange Agreement dated as of June 24, 2013, among the Company, VeriTeQ and the VeriTeQ Shareholders (filed as Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed with the Commission on June 25, 2013)
3.1		Amended and Restated Certificate of Incorporation of the Registrant (filed as Exhibit 99.2 to Registrant’s Current Report on Form 8-K filed with the Commission on February 10, 2015)
3.1.1		Amendment to Certificate of Incorporation of the Registrant (filed as Exhibit 99.2 to Registrant’s Current Report on Form 8-K filed with the Commission on July 28, 2015)
3.2		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.3 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 9, 2007)
3.3		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed with the Commission on September 28, 2009)
3.4		Certificate of Designations of Series B Convertible Preferred Stock (filed as Exhibit 3.1 to Registrant’s Current Report on Form 8-K filed with the Commission on July 12, 2013)
3.5		Certificate of Designations of Series C Convertible Preferred Stock (filed as Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed with the Commission on July 12, 2013)
3.6		Certificate of Elimination of the Series B Convertible Preferred Stock (filed as Exhibit 3.3 to Registrant’s Current Report on Form 8-K filed with the Commission on July 12, 2013)
3.7		Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock, as amended (5filed as Exhibit 3.7 to Registrant’s Form 10-Q filed with the Commission May 20, 2015)
3.8		Certificate of Designation of Series E Convertible Preferred Stock (9)
4.1		Form of Warrant and Schedule of Holders (filed as Exhibit 4.1 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.1		Applied Digital Solutions, Inc. 1999 Flexible Stock Plan, as amended (incorporated herein by reference to Exhibit 4.2 to Registrant’s Registration Statement on Form S-8 (File No. 333-118776) filed with the Commission on September 3, 2004)
10.2		Amended and Restated Digital Angel Corporation Transition Stock Option Plan, as amended (incorporated herein by reference to Exhibit 4.1 to Registrant’s Registration Statement on Form S-8 (file No. 333-148958) filed with the Commission on January 31, 2008)
10.3		Applied Digital Solutions, Inc. 1999 Employees Stock Purchase Plan, as amended (incorporated by reference to Exhibit 4.2 to Registrant’s Registration Statement on Form S-8 (File No. 333-126229) filed with the Commission on June 29, 2005)
10.4		Digital Angel Corporation 2003 Flexible Stock Plan, as Amended (incorporated by reference to Exhibit 4.1 to Registrant’s Registration Statement Under The Securities Act of 1933 on Form S-8 filed with the Commission on October 16, 2009)
10.5		Digital Angel Corporation 2013 Stock Incentive Plan (filed as Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed with the Commission on July 12, 2013)
10.6		Indemnification Agreement between Digital Angel Corporation (“Parent”) and Patricia M. Petersen (“Indemnitee”) dated July 22, 2011 (incorporated by reference to Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 19, 2011.)
10.7		Indemnification Agreement between Digital Angel Corporation (“Parent”) and Joseph J. Grillo (“Indemnitee”) dated July 22, 2011 (incorporated by reference to Exhibit 10.5 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on August 19, 2011)
10.8		Letter Agreement between Lorraine M. Breece and Digital Angel Corporation dated July 14, 2011 (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Commission on August 4, 2011)
10.9		Indemnification Agreement between Digital Angel Corporation (“Parent”) and Daniel Penni (“Indemnitee”) dated February 1, 2012 (incorporated by reference to Exhibit 10.52 to Registrant’s Annual Report on Form 10-K filed with the Commission on March 29, 2012)

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10.9		Indemnification Agreement between Digital Angel Corporation (“Parent”) and Daniel Penni (“Indemnitee”) dated February 1, 2012 (incorporated by reference to Exhibit 10.52 to Registrant’s Annual Report on Form 10-K filed with the Commission on March 29, 2012)
10.10		Indemnification Agreement between Digital Angel Corporation (“Parent”) and Lorraine Breece (“Indemnitee”) dated March 6, 2012 (incorporated by reference to Exhibit 10.54 to Registrant’s Annual Report on Form 10-K filed with the Commission on March 29, 2012)
10.11		Employment Agreement effective as of August 23, 2012 between Digital Angel Corporation and L. Michael Haller (incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Commission on August 28, 2012)
10.12		Amendment to Employment Agreement between Digital Angel Corporation and L. Michael Haller executed April 10, 2013 and effective on May 3, 2013 (filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the Commission on May 7, 2013)
10.13		Transition Services Agreement between Digital Angel Corporation and MGT Capital Investments, Inc. dated as of May 3, 2013 (filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the Commission on May 7, 2013)
10.14		Asset Purchase Agreement by and between Digital Angel Corporation and MGT Capital Investments, Inc. dated April 10, 2013 (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Commission on April 16, 2013)
10.15		Employment Agreement dated as of July 8, 2013, between the Company and Scott R. Silverman (filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed with the Commission on July 12, 2013)
10.16		Employment Agreement dated as of July 8, 2013, between the Company and Randolph K. Geissler (filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed with the Commission on July 12, 2013)
10.17		Employment Agreement, effective as of January 1, 2012, between VeriTeQ Acquisition Corporation and Scott R. Silverman (filed as Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.18		Termination of Employment Agreement, effective July 7, 2013, between VeriTeQ Acquisition Corporation and Scott R. Silverman (filed as Exhibit 10.2 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.19		Employment Agreement, dated January 2, 2013, but made effective as of September 1, 2012, between VeriTeQ Acquisition Corporation and Randolph K. Geissler (filed as Exhibit 10.3 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.20		Termination of Employment Agreement, effective July 7, 2013, between VeriTeQ Acquisition Corporation and Randolph K. Geissler(filed as Exhibit 10.4 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.21		Restricted Stock Award Agreement, dated January 22, 2013, between VeriTeQ Acquisition Corporation and Randolph K. Geissler (filed as Exhibit 10.5 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.22		Amended and Restated Employment Agreement, dated as of November 14, 2013, between the Company and Scott R. Silverman (filed as Exhibit 10.6 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.23		Amended and Restated Employment Agreement, dated as of November 14, 2013, between the Company and Randolph K. Geissler (filed as Exhibit 10.7 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.24		Stock Purchase Agreement, dated January 11, 2012, by and between PositiveID Corporation and VeriTeQ Acquisition Corporation (filed as Exhibit 10.8 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.25		Asset Purchase Agreement, dated August 28, 2012, by and between PositiveID Corporation and VeriTeQ Acquisition Corporation (filed as Exhibit 10.9 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.26		Development and Supply Agreement, effective April 2, 2009 by and between Medical Components, Inc. and VeriChip Corporation assumed by the Registrant under the terms of the Stock Purchase Agreement, dated January 11, 2012 by and between PositiveID Corporation and VeriTeQ Acquisition Corporation (1)

4330

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

10.24		Stock Purchase Agreement, dated January 11, 2012, by and between PositiveID Corporation and VeriTeQ Acquisition Corporation (filed as Exhibit 10.8 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.25		Asset Purchase Agreement, dated August 28, 2012, by and between PositiveID Corporation and VeriTeQ Acquisition Corporation (filed as Exhibit 10.9 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.26		Development and Supply Agreement, effective April 2, 2009 by and between Medical Components, Inc. and VeriChip Corporation assumed by the Registrant under the terms of the Stock Purchase Agreement, dated January 11, 2012 by and between PositiveID Corporation and VeriTeQ Acquisition Corporation (1)
10.27		License Agreement, dated August 28, 2012, by and between PositiveID Corporation and VeriTeQ Acquisition Corporation (filed as Exhibit 10.10 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.28		Letter Agreement, dated August 28, 2012, between PositiveID Corporation and VeriTeQ Acquisition Corporation (filed as Exhibit 10.11 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.29		License Agreement, dated August 28, 2012, by and between PositiveID Corporation and VeriTeQ Acquisition Corporation (filed as Exhibit 10.10 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.30		Secured Promissory Note, dated January 11, 2012, between VeriTeQ Acquisition Corporation as Borrower and PositiveID Corporation as Lender (filed as Exhibit 10.12 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.31		Letter Agreement, dated April 22, 2013, between PositiveID Corporation and VeriTeQ Acquisition Corporation (filed as Exhibit 10.13 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.32		Letter Agreement dated July 8, 2013, between PositiveID Corporation and VeriTeQ Acquisition Corporation (filed as Exhibit 10.4 to Registrant’s Current Report on Form 8-K filed with the Commission on July 12, 2013)
10.33		Asset Purchase Agreement, dated December 3, 2012, between SNC Holdings Corp. and VeriTeQ Acquisition Corporation (filed as Exhibit 10.15 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.34		Bill of Sale, dated November 30, 2012 and effective December 3, 2012, by and between SNC Holdings Corp. and VTQ IP Holding Corporation (filed as Exhibit 10.16 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.35		Assignment and Assumption Agreement, dated November 30, 2012 and effective December 3, 2013, by and between SNC Holdings Corp. and VeriTeQ Acquisition Corporation (filed as Exhibit 10.17 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.36		Assignment and Assumption of Patents, dated November 30, 2012 and effective December 3, 2012, by and between SNC Holdings Corp. and VTQ IP Holding Corporation (filed as Exhibit 10.18 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.37		Assignment and Assumption of Trademarks, dated November 28, 2012 and effective December 3, 2012, by and between SNC Holdings Corp. and VTQ IP Holdings Corporation (filed as Exhibit 10.19 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.38		Royalty Agreement dated November 30, 2012 and effective December 3, 2012, by and between SNC Holdings Corp. and VeriTeQ Acquisition Corporation (filed as Exhibit 10.20 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.39		Sublicense Agreement, effective November 26, 2012 by and between VeriTeQ Acquisition Corporation and SNC Holdings Corp. (1)
10.40		Form of Security Agreement, dated November 28, 2012 and effective December 3, 2012, among SNC Holdings Corp., VeriTeQ Acquisition Corporation and VTQ IP Holdings Corporation (filed as Exhibit 10.21 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.41		Non-Negotiable Secured Convertible Promissory Note dated December 3, 2012, between VeriTeQ Acquisition Corporation as Borrower and SNC Holding Corp. as Lender (filed as Exhibit 10.22 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.42		First Amendment to Promissory Note, dated July 8, 2013, given by VeriTeQ Acquisition Corporation as Borrower in Favor of SNC Holding Corp.as Lender (filed as Exhibit 10.23 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)

4431

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

10.39		Sublicense Agreement, effective November 26, 2012 by and between VeriTeQ Acquisition Corporation and SNC Holdings Corp. (1)
10.40		Form of Security Agreement, dated November 28, 2012 and effective December 3, 2012, among SNC Holdings Corp., VeriTeQ Acquisition Corporation and VTQ IP Holdings Corporation (filed as Exhibit 10.21 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.41		Non-Negotiable Secured Convertible Promissory Note dated December 3, 2012, between VeriTeQ Acquisition Corporation as Borrower and SNC Holding Corp. as Lender (filed as Exhibit 10.22 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.42		First Amendment to Promissory Note, dated July 8, 2013, given by VeriTeQ Acquisition Corporation as Borrower in Favor of SNC Holding Corp.as Lender (filed as Exhibit 10.23 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.43		Promissory Note, dated April 10, 2013, among VeriTeQ Acquisition Corporation as Borrower and Randolph Geissler/Donald Brattain as Lenders (filed as Exhibit 10.25 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.44		Promissory Note, dated October 11, 2013, between VeriTeQ Acquisition Corporation as Borrower and Scott R. Silverman as Lender (filed as Exhibit 10.26 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.45		Promissory Note, dated October 29, 2013, between the Registrant as Borrower and Scott R. Silverman as Lender (filed as Exhibit 10.27 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.46		Letter Agreement dated November 8, 2013, between VeriTeQ Acquisition Corporation and PositiveID Corporation (filed as Exhibit 10.28 to Registrant’s Quarterly Report on Form 10-Q filed with the Commission on November 14, 2013)
10.47		Securities Purchase Agreement, dated November 13, 2013, by and among the Registrant and Certain Institutional Investors (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 14, 2013)
10.48		Form of Senior Convertible Note, dated November 13, 2013, by and among the Registrant and Certain Institutional Investors (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 14, 2013)
10.49		Form of Warrant, dated November 13, 2013, by and among the Registrant and Certain Institutional Investors (filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 14, 2013)
10.50		Form of Registration Rights Agreement, dated November 13, 2013, by and among the Registrant and Certain Institutional Investors (filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 14, 2013)
10.51		Form of Lock-Up Agreement, dated November 13, 2013, by and among the Registrant and Certain Institutional Investors (filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 14, 2013)
10.52		Security Agreement, dated November 13, 2013, by and among the Registrant and Certain Institutional Investors (filed as Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 14, 2013)
10.53		Guaranty, dated November 13, 2013, by and among the Registrant and Certain Institutional Investors (filed as Exhibit 10.7 to the Registrant’s Current Report on Form 8-K filed with the Commission on November 14, 2013)
10.54		Stock Purchase Agreement, dated November 21, 2013, by and among the Registrant and Hudson Bay Master Fund Ltd. (1)
10.55		Promissory Note, dated January 8, 2014, between the Registrant as Borrower and Michael E. Krawitz as Lender (filed as Exhibit 10.54 to the Registrant’s Registration Statement on Form S-1/A filed with the Commission January 17, 2014)
10.56		Promissory Note, dated January 16, 2014, between the Registrant as Borrower and Scott R. Silverman as Lender (filed as Exhibit 10.55 to the Registrant’s Registration Statement on Form S-1/A filed with the Commission January 17, 2014)
10.57		Promissory Note, dated January 16, 2014, between the Registrant as Borrower and Randolph K. Geissler as Lender (filed as Exhibit 10.56 to the Registrant’s Registration Statement on Form S-1/A filed with the Commission January 17, 2014)
10.58		Promissory Note, dated February 4, 2014, between the Registrant as Borrower and Corbin Properties LLC (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 5, 2014)
10.59		Employment Agreement between the Company and Michael E. Krawitz effective January 31, 2014 (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 5, 2014)
10.60		Development and Supply Agreement, dated September 21, 2012 by and between VeriTeQ Acquisition Corporation and Establishment Labs, S.A. (1)

4532

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

10.56		Promissory Note, dated January 16, 2014, between the Registrant as Borrower and Scott R. Silverman as Lender (filed as Exhibit 10.55 to the Registrant’s Registration Statement on Form S-1/A filed with the Commission January 17, 2014)
10.57		Promissory Note, dated January 16, 2014, between the Registrant as Borrower and Randolph K. Geissler as Lender (filed as Exhibit 10.56 to the Registrant’s Registration Statement on Form S-1/A filed with the Commission January 17, 2014)
10.58		Promissory Note, dated February 4, 2014, between the Registrant as Borrower and Corbin Properties LLC (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 5, 2014)
10.59		Employment Agreement between the Company and Michael E. Krawitz effective January 31, 2014 (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the Commission on February 5, 2014)
10.60		Development and Supply Agreement, dated September 21, 2012 by and between VeriTeQ Acquisition Corporation and Establishment Labs, S.A. (1)
10.61		Letter Agreement between the Registrant and the Buyers of Digital Angel Radio Communications Limited effective January 30, 2014 (1)
10.62		Promissory Note, dated March 4, 2014, between the Registrant as Borrower and Daniel Penni as Lender (1)
10.63		Springing Promissory Note, dated March 6, 2014, between the Registrant as Borrower and James Rybicki Trust as Lender (1)
10.64		Springing Promissory Note, dated March 5, 2014, between the Registrant as Borrower and Deephaven Enterprises, Inc. as Lender (1)
10.65		Springing Promissory Note, dated March 10, 2014 between the Registrant as Borrower and William Caragol as Lender (1)
10.66		Springing Promissory Note, dated March 20, 2014 between the Registrant as Borrower and Deephaven Enterprises, Inc. as Lender (1)
10.67		Promissory Note dated April 16, 2014, between the Registrant as Borrower and William J. Caragol as Lender (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 14, 2014)
10.68		Promissory Note dated April 16, 2014, between the Registrant as Borrower and Ned L. Siegel as Lender (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 14, 2014)
10.69		Promissory Note dated May 1, 2014, between the Registrant as Borrower and Ned L. Siegel as Lender (filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 14, 2014)
10.70		First Amendment Agreement dated May 30, 2014 between the Registrant and Positive ID Animal Health Corporation (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 3, 2014)
10.71		Securities Purchase Agreement dated May 30, 2014 between the Registrant, Hudson Bay Master Fund Ltd., Alpha Capital Anstalt and HS Contrarian Investments (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on June 3, 2014)
10.72		Form of Senior Convertible Note dated May 30, 2014 between the Registrant and Certain Institutional Investors (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on June 3, 2014)
10.73		Form of Restated Senior Secured Convertible Note dated November 13, 2013 between the Registrant and Certain Institutional Investors (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on June 3, 2014)
10.74		Form of Restated Warrant dated November 13, 2013 between the Registrant and Certain Institutional Investors (filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on June 3, 2014)
10.75		Right to Shares Agreement dated June 10, 2014 between the Registrant and Alpha Capital Anstalt (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 13, 2014)
10.76		Right to Shares Agreement dated June 10, 2014 between the Registrant and Hudson Bay Master Fund Ltd. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 25, 2014)
10.77		Securities Purchase Agreement dated July 15, 2014 between the Registrant and KBM Worldwide, Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 25, 2014)
10.78		Convertible Promissory Note dated July 15, 2014 between the Registrant and KBM Worldwide, Inc. (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on July 25, 2014)
10.79		Convertible Note dated July 16, 2014 between the Registrant and JMJ Financial (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on July 25, 2014)
10.80		Securities Purchase Agreement dated July 31, 2014 between the Registrant and LG Capital Funding, LLC (2)
10.81		Convertible Redeemable Note dated August 6, 2014 between the Registrant and LG Capital Funding, LLC (2)

4633

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

10.75		Right to Shares Agreement dated June 10, 2014 between the Registrant and Alpha Capital Anstalt (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 13, 2014)
10.76		Right to Shares Agreement dated June 10, 2014 between the Registrant and Hudson Bay Master Fund Ltd. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on June 25, 2014)
10.77		Securities Purchase Agreement dated July 15, 2014 between the Registrant and KBM Worldwide, Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 25, 2014)
10.78		Convertible Promissory Note dated July 15, 2014 between the Registrant and KBM Worldwide, Inc. (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on July 25, 2014)
10.79		Convertible Note dated July 16, 2014 between the Registrant and JMJ Financial (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on July 25, 2014)
10.80		Securities Purchase Agreement dated July 31, 2014 between the Registrant and LG Capital Funding, LLC (2)
10.81		Convertible Redeemable Note dated August 6, 2014 between the Registrant and LG Capital Funding, LLC (2)
10.82		Convertible Redeemable Note (Back End Note) dated August 6, 2014 between the Registrant and LG Capital Funding, LLC (2)
10.83		Collateralized Secured Promissory Note (Back End Note) dated July 31, 2014 between LC Capital Funding, LLC and the Registrant (2)
10.84		Securities Purchase Agreement dated August 4, 2014 between the Registrant and Union Capital, LLC (2)
10.85		Convertible Redeemable Note dated August 4, 2014 between the Registrant and Union Capital, LLC (2)
10.86		Convertible Redeemable Note (Back End Note) dated August 4, 2014 between the Registrant and Union Capital, LLC (2)
10.87		Collateralized Secured Promissory Note (Back End Note) dated August 4, 2014 between Union Capital, LLC and the Registrant (2)
10.88		Securities Purchase Agreement dated August 4, 2014 between the Registrant and Magna Equities II, LLC (3)
10.89		Convertible Promissory Note dated August 4, 2014 between the Registrant and Magna Equities II, LLC (3)
10.90		Assignment Agreement dated August 4, 2014 between the Registrant, Corbin Properties LLC and Magna Equities I, LLC (3)
10.91		Convertible Promissory Note dated August 4, 2014 between the Registrant and Magna Equities I, LLC (3)
10.92		Securities Purchase Agreement dated August 13, 2014 between the Registrant and KBM Worldwide, Inc. (3)
10.93		Convertible Promissory Note dated August 13, 2014 between the Registrant and KBM Worldwide, Inc. (3)
10.94		Master Convertible Promissory Note between the Registrant and Iliad Research and Trading, L.P. (3)
10.95		Convertible Promissory Note dated August 26, 2014 between the Registrant and Corbin Properties LLC (3)
10.96		Securities Purchase Agreement dated September 30, 2014 between the Registrant and Magna Equities II, LLC (4)
10.97		Convertible Promissory Note dated September 30, 2014 between the Registrant and Magna Equities II, LLC (4)
10.98		Securities Exchange Agreement dated September 30, 2014 between the Registrant and Magna Equities I, LLC (4)
10.99		Convertible Promissory Note dated September 30, 2014 between the Registrant and Magna Equities I, LLC (4)
10.100		Securities Purchase Agreement dated October 1, 2014 between the Registrant and KBM Worldwide, Inc. (4)
10.101		Convertible Promissory Note dated October 1, 2014 between the Registrant and KBM Worldwide, Inc. (4)
10.102		Securities Purchase Agreement dated October 10th, 2014 between the Registrant and WHC Capital, LLC (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 17, 2014)
10.103		Convertible Promissory Note dated October 10th, 2014 between the Registrant and WHC Capital, LLC (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on October 17, 2014)
10.104		Glucochip and Settlement Agreement dated October 20, 2014 between the Registrant and PositiveID Corporation (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 24, 2014)
10.105		Convertible Promissory Note dated October 20, 2014 between the Registrant and PositiveID Corporation (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on October 24, 2014)
10.106		Convertible Promissory Note dated October 20, 2014 between the Registrant and PositiveID Corporation (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on October 24, 2014)

4734

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

10.98		Securities Exchange Agreement dated September 30, 2014 between the Registrant and Magna Equities I, LLC (4)
10.99		Convertible Promissory Note dated September 30, 2014 between the Registrant and Magna Equities I, LLC (4)
10.100		Securities Purchase Agreement dated October 1, 2014 between the Registrant and KBM Worldwide, Inc. (4)
10.101		Convertible Promissory Note dated October 1, 2014 between the Registrant and KBM Worldwide, Inc. (4)
10.102		Securities Purchase Agreement dated October 10th, 2014 between the Registrant and WHC Capital, LLC (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 17, 2014)
10.103		Convertible Promissory Note dated October 10th, 2014 between the Registrant and WHC Capital, LLC (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on October 17, 2014)
10.104		Glucochip and Settlement Agreement dated October 20, 2014 between the Registrant and PositiveID Corporation (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on October 24, 2014)
10.105		Convertible Promissory Note dated October 20, 2014 between the Registrant and PositiveID Corporation (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on October 24, 2014)
10.106		Convertible Promissory Note dated October 20, 2014 between the Registrant and PositiveID Corporation (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on October 24, 2014)
10.107		Securities Purchase Agreement dated November 3, 2014 between the Registrant and Magna Equities II, LLC (5)
10.108		Convertible Promissory Note dated November 3, 2014 between the Registrant and Magna Equities II, LLC (5)
10.109		Agreement between the Registrant and certain Executives to Convert Director, Officer and Management Liabilities into Equity (5)
10.100		Second Amendment Agreement to the Securities Purchase Agreement between the Registrant, Magna Equities II, LLC, Alpha Capital Anstatlt, Magna Equities I, LLC and HS Contrarian Investments, LLC (5)
10.111		Securities Purchase Agreement effective as of December 26, 2014 between the Registrant and KBM Worldwide, Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 30, 2014)
10.112		Convertible Promissory Note dated effective as of December 26, 2014 between the Registrant and KBM Worldwide, Inc. (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on December 30, 2014)
10.113		Securities Purchase Agreement dated January 27, 2015 between the Registrant and Magna Equities II, LLC (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 28, 2015)
10.114		Convertible Promissory Note dated January 27, 2015 between the Registrant and Magna Equities II, LLC (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 28, 2015)
10.115		Promissory Note dated January 23, 2015 between the Registrant and Scott R. Silverman (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 28, 2015)
10.116		Convertible Promissory Note dated February 6, 2015 between the Registrant and Alpha Capital Anstalt (6)
10.117		Convertible Promissory Note dated February 6, 2015 between the Registrant and Magna Equities II, LLC (6)
10.118		Form of Agreement Regarding Liabilities to Officers dated March 3, 2015 (6)
10.119		Form of Officer Note dated March 3, 2015 (6)
10.120		Securities Purchase Agreement dated March 19, 2015 between the Registrant and Adar Bays, LLC (7)
10.121		Convertible Redeemable Note dated March 19, 2015 between the Registrant and Adar Bays, LLC (7)
10.122		Convertible Promissory Note dated March 17, 2015 between the Registrant and Magna Equities II, LLC (7)
10.123		Securities Purchase Agreement dated March 10, 2015 between the Registrant and Vis Vires Group, Inc. (7)
10.124		Convertible Promissory Note dated March 10, 2015 between the Registrant and Vis Vires Group, Inc. (7)
10.125		Common Stock Purchase Warrant dated March 10, 2015 issued by the Registrant to Vis Vires Group, Inc. (7)
10.126		Convertible Debenture dated April 10, 2015 issued by the Registrant to RDW Capital, LLC (8)
10.127		Securities Settlement Agreement between the Registrant and RDW Capital, LLC (8)
10.128		Stock Purchase Agreement, dated as of November 25, 2015, by and among the Registrant, Brace Shop and Mrs. Lynne Shapiro (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission December 2, 2015 and incorporated herein by reference)
10.129		Goldenshare Warrant, dated as of May 6, 2016 (9)
10.130		Mutual Release and Agreement dated April 28, 2016 between the Registrant and Barry Edelstein*

4835

VERITEQ CORPORATION

~~2014~~ 2015 ANNUAL REPORT ON FORM 10-K

10.121		Convertible Redeemable Note dated March 19, 2015 between the Registrant and Adar Bays, LLC (7)
10.131		Mutual Release and Agreement dated April 28, 2016 between the Registrant and Scott Silverman*
10.122		Convertible Promissory Note dated March 17, 2015 between the Registrant and Magna Equities II, LLC (7)
10.132		Mutual Release and Agreement dated April 28, 2016 between the Registrant and Randolph Geissler*
10.123		Securities Purchase Agreement dated March 10, 2015 between the Registrant and Vis Vires Group, Inc. (7)
31.1*		Certification by Kenneth Shapiro, Chief Executive Officer and Principal Financial Officer, pursuant to Exchange Act Rules 13A-14(a) and 15d-14(a)
10.124		Convertible Promissory Note dated March 10, 2015 between the Registrant and Vis Vires Group, Inc. (7)
32.1*		Certification by Kenneth Shapiro Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
10.125		Common Stock Purchase Warrant dated March 10, 2015 issued by the Registrant to Vis Vires Group, Inc. (7)
10.126		Convertible Debenture dated April 10, 2015 issued by the Registrant to RDW Capital, LLC*
10.127		Securities Settlement Agreement between the Registrant and RDW Capital, LLC*
21.1*		List of Subsidiaries
23.1*		Consent of EisnerAmper LLP
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 Financial Officer, pursuant to Exchange Act Rules 13A-14(a) and 15d-14(a)
32.1*		Certification by Scott R. Silverman Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification by Michael E. Krawitz Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*	XBRL Instance
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation
101.DEF*	XBRL Taxonomy Extension Definition
101.LAB*	XBRL Taxonomy Extension Labels
101.PRE*	XBRL Taxonomy Extension Presentation

*	Filed herewith.
(1)	Filed as an exhibit to the Company’s Annual Report on Form 10-K filed with the Commission on April 15, 2014 and incorporated herein by reference.
(2)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Commission on August 8, 2014 and incorporated herein by reference.
(3)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Commission on August 26, 2014 and incorporated herein by reference.
(4)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Commission on October 8, 2014 and incorporated herein by reference.
(5)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Commission on November 5, 2014 ~~and incorporated herein by reference.~~
(6)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Commission on March 6, 2015 and incorporated herein by reference.
(7)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Commission on March 25, 2015 and incorporated herein by reference.
(8)	Filed as an exhibit to the Company’s Annual Report on Form 10-K filed with the Commission on April 14, 2015 and incorporated herein by reference.
(9)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Commission on May 11, 2016 and incorporated herein by reference.

4936

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

CONTENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Reports of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2014 and 2013	F-3
Consolidated Balance Sheets as of December 31, 2015 and 2014	F-3
Consolidated Statements of Operations for the years ended December 31, 2014 and 2013	F-4
Consolidated Statements of Operations for the years ended December 31, 2015 and 2014	F-4
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2014 and 2013	F-5
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2015 and 2014	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013	F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014	F-6
Notes to Consolidated Financial Statements	F-7

F-1

~~REPORT~~Report of OFIndependent ~~INDEPENDENT~~Registered ~~REGISTERED~~Public ~~PUBLIC~~Accounting ~~ACCOUNTING FIRM~~Firm

To the Board of Directors and Stockholders of

~~VeriTeQ~~ Veriteq Corporation:

We have audited the accompanying consolidated balance sheets of ~~VeriTeQ~~Veriteq Corporation and ~~subsidiaries~~Subsidiaries ~~(the~~at ~~“Company”) as of~~ December 31, ~~2014~~2015 and ~~2013~~2014, and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for each of the two years in the ~~two-year~~ period ended December 31, ~~2014~~2015. ~~The~~These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the ~~audit~~audits to obtain reasonable assurance about whether the ~~financial~~consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ~~VeriTeQ~~Veriteq Corporation and ~~subsidiaries~~Subsidiaries as of December 31, ~~2014~~2015 and ~~2013~~2014, and the consolidated results of ~~their~~ its operations and ~~their~~its cash flows for each of the two years in the ~~two-year~~ period ended December 31, ~~2014,~~2015 in conformity with accounting principles generally accepted in the United States of America.

~~The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.~~ As discussed in Note 1 14 to the consolidated financial statements, the ~~Company has incurred recurring net losses, and at December 31,~~ 2014 had negative working capital and a stockholders’ deficit. These events and conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements, doas ~~not~~previously ~~include~~audited by ~~any~~a ~~adjustments~~predecessor toauditor, ~~reflect~~have ~~the~~been ~~outcome~~restated ofto ~~this~~correct ~~uncertainty~~misstatements.

/The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has continuing net losses and has negative cash flows from operations through December 31, 2015 and has a working capital deficit and accumulated deficit of approximately $14.5 million and $37.3 million, respectively, at December 31, 2015. In November 2015 a lender of the Company foreclosed on the Company’s/ assets ~~EisnerAmper~~resulting ~~LLP~~in the discontinuance of all operations. Furthermore, as of the date of this report, the Company is in default on most of their notes payable. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management’s plan in regards to these matters is also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~New~~/s/ Salberg ~~York~~& Company, ~~New York~~ P.A.

~~April~~SALBERG & 13COMPANY, ~~2015~~P.A.

Boca Raton, Florida

February 16, 2017

2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7328

Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920

www.salbergco.com • info@salbergco.com

Member National Association of Certified Valuation Analysts • Registered with the PCAOB

Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality

F-2

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	December 31,			December 31,
	2014			2013
	2015			2014
ASSETS
ASSETS:				Restated (Note 14)
Current assets:
Cash	$	77-		$	131
Restricted cash		12-			~~882~~12
Accounts receivable		11			-
Other current assets		12			81
Inventory		2			21
Total current assets		12			94
Other receivable		-			171
Property and equipment, net		-			5
Other current assets		84			96
Assets from discontinued operations		-			1,640
Total current assets		186			1,183
Other assets		-			6
Property and equipment, net		35			4
Total assets	$	12		$	1,745
Other assets		54			14
Intangible assets, net		1,470			7,018
Total assets	$	1,745		$	8,219
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	~~1,141~~713		$	~~854~~583
Accrued expenses (including $1,171 and $1,764 to related parties)		2,511			2,718
Accrued expenses (including $864 and $808 to related parties)		2,216			1,458
Notes payable, net of discounts (including $152 and $60 to related parties, and including $206 in default at December 31, 2014)		2,480			467
Notes payable, current portion, net of discounts (including $1,110 and $152 to related parties)		4,478			2,365
Liabilities for conversion options of convertible notes		~~930~~5,337			32,~~124~~128
Subordinated debt with an embedded conversion option, at fair value		316			-
Warrant liabilities at fair value		1,410			1,802
Other current liabilities		-			211
Liabilities of discontinued operations, (includes $369 due to officers)		-			2,166
Total current liabilities		7,378			7,374
Subordinated debt with an embedded conversion option, at fair value		370			316
Commitments and contingencies (note 12)
Total current liabilities		14,524			10,818
Notes payable, net of discount		~~286~~-			-286
Subordinated debt with an embedded conversion option, at fair value		-			4,925
Total liabilities		14,524			11,104
Warrant liabilities at fair value		534			6,114
Commitments and contingencies (note 11)
Estimated royalty obligations		440			3,940
Series D preferred stock ($0.01 par value; 1,841 shares outstanding)		1,841			1,841
Total liabilities		8,638			22,353
Series D preferred stock ($0.01 par value; 1,841 and 0 shares outstanding)		1,841			-
Stockholders' deficit:
Preferred stock ($0.01 par value; 4,998 shares authorized; 0 issued and outstanding		-			-
Preferred stock ($0.01 par value; 5 million shares authorized; 0 issued and outstanding		-			-
Common stock ($0.00001 par value; 10 billion shares authorized; 307 and 9 shares issued and outstanding)		-			-
Common stock ($0.00001 par value; 100 million shares authorized; 723,718 and 30 shares issued and outstanding)		-			-
Additional paid-in capital		1520,~~000~~992			515,~~690~~000
Accumulated deficit		(2337,~~734~~345	)		(1926,~~824~~200	)
Total stockholders' deficit		(816,~~734~~353	)		(1411,~~134~~200	)
Total liabilities and stockholders' deficit	$	~~1,745~~12		$	81,~~219~~745

*	At December 31, 2014 the Company had 30 shares (unrounded) outstanding after giving retroactive effect to the reverse splits of 1:1,000 on February 11, 2015 and 1:10,000 on July 29, 2015.

The accompanying notes are an integral part of these consolidated financial statements.

F-3

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

	For the Year Ended December 31,
	2014			2013
	2015			2014
Sales	$	151		$	18
				Restated (Note 14)
Cost of goods sold, exclusive of depreciation and amortization, separately below		62			7
Gross profit		89			11
Operating Expenses:
Selling, general and administrative expenses		56,~~311~~390			53,~~931~~484
Development expenses		292			83
Depreciation and amortization expense		1			1
Asset impairment charge		4,954			-
Total operating expenses		6,391			3,485
Change in fair value of royalty obligation		(3,400	)		-
Operating loss		(6,391	)		(3,485	)
Depreciation and amortization expense		598			595
Total operating expenses		7,755			6,609
Operating loss		(7,666	)		(6,598	)
Other (income) expenses
Interest expense		2,~~476~~400			72,~~096~~466
Change in fair value of derivative instruments, net		(6,293	)		4,421
Change in fair value of derivatives and other fair valued instruments, net		3,321			(3,827	)
Other expense		61			86
Loss on disposal of property and equipment		5
Total other (income) expenses		(3,756	)		11,603
Other (income) expense		(9	)		61
Loss before income taxes		(3,910	)		(18,201	)
Total other (income) expenses		5,717			(1,300	)
Loss before income taxes		(12,108	)		(2,185	)
Income tax benefit		-			-
Net loss	$	(3,910	)	$	(18,201	)
Net loss from continuing operations		(12,108	)		(2,185	)
Net loss per common share - basic and diluted	$	(52	)	$	(2,115	)
Discontinued operations:
Loss from discontinued operations		(1,603	)		(4,191	)
Gain on disposal from discontinued operations		2,566			-
Income (loss) from discontinued operations		963			(4,191	)
Net loss	$	(11,145	)	$	(6,376	)
Net loss per common share - basic and diluted
Continuing operations	$	(31.00	)	$	(293,189	)
Discontinued operations	$	2.46		$	(562,359	)
Net loss per common share - basic and diluted	$	(28.53	)	$	(855,548	)
Weighted average common shares outstanding:
Basic and diluted		75390,589			97

The accompanying notes are an integral part of these consolidated financial statements.

F-4

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

(in thousands except share amounts)

							Additional						~~Additional~~Total						~~Total~~
	Preferred Stock						Common Stock						Paid-in			Accumulated			Stockholders'
	Common Stock						Paid-in			Accumulated			Stockholders'
	Number			Amount			~~Number~~Capital			~~Amount~~Deficit			~~Capital~~Deficit			~~Deficit~~			~~Deficit~~
Balance at December 31, 2012		-		$	-			7		$	-		$	1,585		$	(1,623	)	$	(38	)
Balance at December 31, 2013		1		$	-		$	5,690		$	(19,824	)	$	(14,134	)
Net loss		-			-			-			-(6,376	)		-(6,376	)		~~(18,201~~	)		~~(18,201~~	)
Issuance of restricted stock as compensation		-			-			1			-			-			-			-
Issuance of common stock on conversions of notes payable		23			-			917			-			917
Issuance of warrants in connection with note payable		-			-			-			-			35			-			35
Issuance of common stock on cashless exercise of warrants		6			-			7,052			-			7,052
Issuance of common stock and warrants for note conversion		-			-			-			-			637			-			637
Issuance of warrants under terms of promissory notes		-			-			67			-			67
Issuance of common stock		-			-			-			-			25			-			25
Beneficial conversion feature of convertible notes payable		-			-			114			-			114
Acquisition of VeriTeQ Corporation common stock		-			-			1			-			935			-			935
Stock-based compensation		-			-			777			-			777
Issuance of Series C Preferred Stock to VeriTeQ shareholders in exchange for common stock		411			4,108			(8	)		-			(4,108	)		-			-
Reclassification of conversion option liabilities of notes payable		-			-			47						47
Issuance of common stock from conversion of preferred stock		(411	)		(4,108	)		8			-			4,108			-			-
Issuance of common stock for services		-			-			336			-			336
Issuance of common stock for services		-			-			-			-			416			-			416
Issuance of unvested stock to a director		-			-			-			-			-
Adjustment for cash paid in lieu of fractional shares in connection with reverse stock split		-			-			-			-			(16	)		-			(16	)
Balance at December 31, 2014 Restated (Note 14)		30			-			15,000			(26,200	)		(11,200	)
Issuance of common stock for partial conversion of note payable		-			-			-			-			25			-			25
Issuance of common stock on partial conversions of notes payable and accrued interest		487,978			-			658			-			658
Stock-based compensation		-			-			-			-			2,048			-			2,048
Issuance of common stock on cashless exercise of warrants		223,818			-			11			-			11
Balance at December 31, 2013		-			-			9			-			5,690			(19,824	)		(14,134	)
Cancellation of warrants accounted for as as liabilities		-			-			657			-			657
Issuance of common stock on cashless exercise of options		-			-			-			-			-			-			-
Reclassification of conversion option liabilities upon conversion of notes payable		-			-			168			-			168
Issuance of common stock on conversions of notes payable		-			-			229			-			917			-			917
Sale of common stock to related parties		1,192			-			20			-			20
Issuance of common stock on cashless exercise of warrants		-			-			66			-			7,052			-			7,052
Settlement of liabilities with related party		10,700			-			32			-			32
Issuance of warrants under terms of promissory notes		-			-			-			-			67			-			67
Stock options issued to employees		-			-			4,446			-			4,446
Beneficial conversion feature of convertible notes payable		-			-			-			-			114			-			114
Net loss		-			-			-			(11,145	)		(11,145	)
Stock-based compensation		-			-			-			-			777			-			777
Balance at December 31, 2015		723,718		$	-		$	20,992		$	(37,345	)	$	(16,353	)
Reclassification of conversion option liabilities of notes payable		-			-			-			-			47						47
Issuance of common stock for services		-			-			2			-			336			-			336
Issuance of unvested stock to a director		-			-			1			-			-			-			-
Adjustment for fractional shares in connection with reverse stock split		-			-			-			-			-			-			-
Net loss		-			-			-			-			-			(3,910	)		(3,910	)
Conversion of related party obligations into Series D Preferred Stock		-			-			-			-			-			-			-
Balance at December 31, 2014		-		$	-			307		$	-		$	15,000		$	(23,734	)	$	(8,734	)

~~The~~* ~~accompanying~~At ~~notes~~December an31, ~~integral~~2014 ~~part~~and 2013, the Company had 30 shares and 1 share (unrounded), respectively, outstanding after giving retroactive effect to the reverse splits of ~~these~~1:1,000 ~~consolidated~~on ~~financial~~February ~~statements.~~ 11, 2015 and 1:10,000 on July 29, 2015

The accompanying notes are an integral part of these consolidated financial statements.

F-5

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	For the Year Ended December 31,
	2014			2013
	2015			2014
				Restated (Note 14)
Cash flows from operating activities:
Net loss	$	(311,~~910~~145	)	$	(186,~~201~~376	)
Adjustments to reconcile net loss to net cash used in operating activites:
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		~~777~~4,446			~~2,048~~777
Deprecation and amortization		~~598~~1			~~595~~598
Non-cash interest expense		2,362			6,634
Non-cash interest charges		1,662			2,362
Asset impairment charge		4,954			-
Gain on discontinued operations		(2,565	)
Change in fair value of royalty obligation		(3,400	)
Loss on disposal of property and equipment		5
Change in fair value of subordinated convertible debt		(4,609	)		2,788
Asset impairment charge		-			4,954
Change in fair value of conversion options embedded in convertible notes		(3,156	)		363
Change in fair value of royalty obligation		-			(3,400	)
Change in fair value of warrants		1,472			720
Issuance of common stock for services		-			336
Loss on settlement of other receivable		55			-
Change in fair value of subordinated convertible debt		54			(4,609	)
Issuance of common stock for services		336			417
Change in fair value of conversion options embedded in convertible notes		2,991			(1,959	)
Issuance of warrants for contract amendment		-			550
Change in fair value of warrants		276			2,741
Loss on sale of marketable securities		-			107
Gain on extinguishment of debt		(9	)		-
Loss on settlement of other receivable		-			55
Issuance of notes payable for services		165			-
Increase (decrease) in cash attributable to changes in operating assets and liabilities:
Accounts payable, accrued expenses and other current liabilities		1,845			2,053
Accounts payable and accrued expenses		2,865			1,845
Other receivable		~~116~~-			54116
Other current assets		725			~~(72~~7	)
Other assets		(40	)		(10	)
Accounts receivable		11			-
Net cash used in operating activities		(2,593	)		(1,954	)
Other assets		7			(40	)
Net cash used in operating activities		(1,211	)		(2,593	)
Cash flows from investing activities:
Purchases of property and equipment		~~(35~~-	)		(435	)
Sale of marketable securities					133
Net cash used in investing activities		-			(35	)
Cash acquired from acquisition of VeriTeQ Corporation					818
Net cash (used in) provided by investing activities		(35	)		947
Cash flows from financing activities:
Proceeds from the issuance of notes payable and warrants		235			160
Proceeds from the issuance of convertible notes payable and warrants		1,209			2,113
Proceeds from the issuance of common stock		-			25
Proceeds from the issuance of related party notes and advances		137			235
Repayment of notes payable		(526	)		(100	)
Repayment of convertible notes		(95	)		(400	)
Proceeds from the issuance of convertible debt		2,113			1,650
Repayment of related party notes and advances		(137	)		(126	)
Decrease (increase) in restricted cash		870			(882	)
Proceeds from the issuance of common stock to related parties		20			-
Cash paid in lieu of fractional shares		-			(16	)
Decrease in restricted cash		-			870
Net cash provided by financing activities		21,~~692~~134			~~837~~2,692
Net increase (decrease) in cash		64			(170	)
Net (decrease) increase in cash		(77	)		64
Cash and cash equivalents - beginning of year		13			183
Cash and cash equivalents - beginning of period		77			13
Cash and cash equivalents - end of year	$	77		$	13
Cash and cash equivalents - end of period	$	-		$	77	(1)

~~The~~(1) ~~accompanying~~- ~~notes~~$76 anof ~~integral~~cash ~~part~~is ofincluded ~~these~~in ~~consolidated~~assets ~~financial~~from ~~statements.~~ discontinued operations at December 31, 2014

The accompanying notes are an integral part of these consolidated financial statements.

F-6

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND NATURE OF OPERATIONS

These consolidated financial statements and notes thereto include the financial statements of VeriTeQ Corporation (“VC”), a Delaware corporation, and, through November 4, 2015, 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 (“PAH”), from PositiveID Corporation (“PSID”), a then-related party. ~~In December 2012~~VC, VAC ~~formed~~and aVAC’s inactive ~~subsidiary,~~ VTQ IP Holding Corporation, ~~a Delaware corporation. VC, VAC~~ and ~~VAC’s~~PAH subsidiaries are referred to together as, “VeriTeQ,” or “the Company~~,” “we,” “our,” and “us~~.” The Company’s business ~~consists~~had ofbeen ~~ongoing~~comprised of efforts to provide implantable medical device identification and radiation dose measurement technologies to the healthcare industry. On November 4, 2015, substantially all of the Company’s assets, including the capital stock of VAC and PAH through which the Company conducted all of its business operations, were sold at auction for the sum of $1 million, which was credited against the Company’s outstanding senior debt (see notes 3 and 5).

~~Share~~As of ~~Exchange~~December ~~Agreement~~31, 2015, the Company had ceased its business operations. On May 6, 2016, the Company completed its acquisition of Brace Shop, LLC (“Brace Shop”) through a stock purchase agreement and reverse merger and recapitalization transaction (see note 15).

On June 24, 2013, VAC and its stockholders entered into 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 410,759 shares of its Series C convertible preferred stock, par value $10.00 (the “Series C Preferred Stock”). Each share of Series C Preferred Stock was converted into 0.02 shares of VC’s common stock on October 18, 2013. Also on October 18, 2013, the Company changed its name from Digital Angel Corporation to VeriTeQ Corporation.

In connection with the VeriTeQ Transaction, all outstanding 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 VeriTeQ Transaction 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), resulting in a change in control.

The VeriTeQ Transaction was accounted for as a reverse acquisition of VC by VAC under the accounting rules for business combinations, therefore VAC was the accounting acquirer and VAC’s operating results became the historical operating results of the Company.

Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has incurred significant operating losses since its inception on December 14, 2011 and had a ~~substantial~~ working capital deficit and accumulated deficit at December 31, ~~2014~~2015 of $14.5 million and $37.3 million, respectively. A lender foreclosed upon the assets of the Company in November 2015 resulting in the discontinuance of all operations at that date. The Company’s cash position is critically deficient, and payments ~~critical~~essential to the Company’s ability to operate are not being made in the ordinary course of business. Failure to raise capital in the ~~coming~~near ~~days~~term to fund the Company’s operations and failure to generate positive cash flow to fund such operations in the future will have a material adverse effect on the Company’s financial condition. In addition, as of the date of this report, the Company is in payment default of a substantial portion of its existing indebtedness. The Company’s failure to timely file periodic reports with the Securities and Exchange Commission (the “SEC”), including the Quarterly Reports on Form 10-Q for the periods ending March 31, 2016, June 30, 2016 and September 30, 2016, constitute events of default on all of the Company’s outstanding convertible notes. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to the classification of recorded asset amounts or the amounts and classification of liabilities that might result from this uncertainty.

The Company needs to raise additional funds immediately and continue to raise funds until it begins to generate sufficient cash ~~through the sale of its products to fund its~~ from operations, and it may not be able to obtain the necessary financing on acceptable terms, or at all. During the year ended December 31, ~~2014~~2015, the Company raised approximately $21.32 million, net of repayments, from the sale of convertible promissory notes ~~and~~(see note ~~received~~5). ~~approximately~~In ~~$0.5~~May ~~million~~2016 ofthe ~~previously~~Company ~~restricted~~acquired ~~funds~~an ~~from~~operating ~~its~~company ~~November~~which ~~2013~~transaction ~~financing~~was accounted for as a reverse recapitalization (see note 1015).

~~The~~2. SUMMARY ~~Company~~OF ~~had~~SIGNIFICANT ~~negative~~ACCOUNTING working capital at December 31, 2014 and in order to operate its business for the twelve months ending December 31, 2015 and beyond, the Company is attempting to generate sufficient cash from: (i) the sale of its equity securities; (ii) the issuance of additional promissory notes; (iii) its business operations; (iv) other investing and financing sources, including loans from related parties; and (v) other cash management initiatives, including working with the Company’s vendors to continue to allow for extended payment terms. POLICIES

Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of the Company, including its wholly owned subsidiaries prior to November 4, 2015. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Regulation S-X of the SEC. During the years ended December 31, 2015 and 2014, comprehensive loss was equal to the net loss amounts presented for the respective periods in the accompanying consolidated statements of operations. All inter-company accounts and transactions have been eliminated in consolidation, and certain prior year balances have been reclassified to conform to the current presentation. Specifically, the amount of repayment of notes payable in the consolidated statement of cash flows for the year ended December 31, 2014 has been segregated between payments on related party notes and payments on unrelated party notes. In addition, the balance sheet and statement of operations for the year ended December 31, 2014 have been retroactively restated to reflect the net assets and operations of VAC and PAH as a discontinued operation (see note 3). Separate disclosure of cash flows pertaining to discontinued operations is not presented in the accompanying consolidated statements of cash flows consistence with the guidance in ASC 230.

F-7

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of the Company, including its wholly owned subsidiaries. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Regulation S-X of the Securities and Exchange Commission (the “SEC”). During the years ended December 31, 2014 and 2013, comprehensive loss was equal to the net loss amounts presented for the respective periods in the accompanying consolidated statements of operations. All inter-company accounts and transactions have been eliminated in consolidation, and certain prior year balances have been reclassified to conform to the current presentation.

Reverse Stock Split and Change in Par Value of Common Stock

On December 18, 2014, an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect a reverse split of all of the outstanding shares of the Company’s common stock at a ratio of 1 for 1,000 ~~(the “Reverse Stock Split”)~~ was approved by the Company’s Stockholders. The Certificate of Amendment became effective on February 11, 2015, and at that time ~~the Reverse Stock Split took place and~~ each 1,000 shares of outstanding common stock of the Company was combined and automatically converted into one share of the Company’s common stock, with a par value of $0.00001 per share (the “February 2015 Reverse Stock Split”). In addition, the conversion and exercise prices of all of the Company’s outstanding preferred stock, common stock purchase warrants, stock options and convertible notes payable were proportionately adjusted at the 1:1,000 reverse split ratio consistent with the terms of such instruments. No fractional shares were issued as a result of the February 2015 Reverse Stock Split, and shareholders received a cash payment in lieu of such fractional shares that they would otherwise be entitled.

Also on December 18, 2014, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to (i) reduce the par value of the Company’s common stock from $0.01 per share to $0.00001 per share; and (ii) increase the number of shares of common stock that the Company is authorized to issue from 500 million to 10 billion. This amendment became effective on December 18, 2014.

~~All~~On July ~~share~~29, ~~per~~2015, ~~share~~another amendment to the Company’s Amended and ~~capital~~Restated Certificate of Incorporation became effective to implement a 1-for-10,000 reverse stock ~~amounts~~split as(the “July 2015 Reverse Stock Split”) of the Company’s common stock. As a result, each 10,000 shares of the Company’s issued and ~~for~~outstanding common stock automatically, and without any action on the ~~years~~part ~~ended~~of ~~December~~the 31respective holders, ~~2014~~were combined and ~~2013~~converted ~~have~~into ~~been~~one ~~restated~~issued toand ~~give~~outstanding ~~effect~~share toof common stock. The July 2015 Reverse Stock Split resulted in a reduction in the number of issued and outstanding shares of the Company’s common stock from approximately 4.4 billion to approximately 446,000. The July 2015 Reverse Stock Split affected all issued and outstanding shares of the Company's common stock, as well as all common stock underlying convertible notes, warrants, convertible preferred stock and stock options outstanding immediately prior to the ~~change~~July in2015 Reverse Stock Split. The amendment also increased the ~~par~~number of ~~value~~shares of common stock that the Company is authorized to issue from 10 billion to 100 billion. The Amendment was approved by the Company’s ~~common~~Board ~~stock~~of Directors and ratified by the Company’s stockholders on May 26, 2015.

All share, per share and capital stock amounts as of December 31, 2015 and December 31, 2014, and for the years ended December 31, 2015 and 2014 have been retroactively restated to give effect to the July 2015 Reverse Stock Split, the February 2015 Reverse Stock Split and the change in the par value of the Company’s common stock.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Actual results could be affected by those estimates. Included in these estimates are assumptions used in determining the lives and valuation of long-lived assets, in valuation models used in estimating the fair value of certain promissory notes, warrants, embedded conversion options ~~and convertible preferred stock~~, stock-based compensation, ~~royalty obligations~~ and in determining valuation allowances for deferred tax assets.

Restricted Cash

Restricted cash is comprised of cash held in bank accounts by parties to the Company’s private placement transaction of senior secured convertible notes on November 13, 2013~~, as more fully described in note 10~~.

~~Concentration~~Property and ~~of Credit Risk~~ Equipment

~~The~~Property and ~~Company~~equipment ~~maintains~~consists ~~its~~primarily ~~cash~~of incomputer ~~financial~~equipment ~~institutions~~and ~~for~~is ~~which~~stated ~~balances~~at ~~are~~cost ~~insured~~less upaccumulated todepreciation. ~~Federal~~Depreciation ~~Deposit~~expense is ~~Insurance~~computed ~~Corporation~~using ~~limits~~the straight-line method over the estimated useful life of ~~$250~~the related assets,~~000~~ ~~per~~ranging ~~account~~from 3 to 10 years. AtDepreciation expense ~~times,~~from ~~cash~~continuing ~~balances~~operations ~~may~~for ~~exceed~~each of the ~~federally~~years ~~insured~~ended ~~limits.~~December 31, 2015 and 2014 was approximately $1,000.

One customer comprises the entire balance of the Company’s outstanding accounts receivable.

F-8

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

Inventory

Inventory consisted of purchased finished goods at December 31, 2014 and 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 consists primarily of computer equipment and is stated at cost less accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful life of the related assets, ranging from 3 to 10 years. Depreciation expense for the years ended December 31, 2014 and 2013 was approximately $4,000 and $1,000, respectively.

Intangible Assets

The Company has intangible assets consisting of technology, customer relationship and trademarks, which are more fully discussed in Note 4. These intangible assets are amortized on a straight-line basis 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. The Company reviews its intangible assets and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the carrying value of the asset exceeds the projected undiscounted cash flows, the Company is required to estimate the fair value of the asset and recognize an impairment charge to the extent that the carrying value of the asset exceeds its estimated fair value. The Company recorded a net impairment charge of $1.6 million and $0 for the years ended December 31, 2014 and 2013, respectively.

Derivative Financial Instruments

The Company accounts for notes payable that are convertible into shares of the Company’s common stock and warrants issued in conjunction with the issuance of such notes in accordance with the guidance contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”) and ASC Topic 480, Distinguishing Liabilities From Equity (“ASC 480”). For warrant instruments and conversion options embedded in promissory notes that are not deemed to be indexed to the Company’s own stock, the Company classifies such instruments as liabilities at their fair values at the time of issuance and adjusts the instruments to fair value at each reporting period. These liabilities are subject to re-measurement at each balance sheet date until extinguished either through conversion or exercise, and any change in fair value is recognized in the Company’s statements of operations (see notes 6, 7 and 8). Upon conversion of debt the fair value of the derivative is reclassified into equity, and the common stock is recorded at the book value of the debt. The fair values of these derivative instruments have been estimated using a ~~binomial~~Monte ~~option~~Carlo ~~pricing~~simulation model. Unobservable inputs that, if changed, might produce a significantly higher or lower fair value measurement of the Company’s derivative liabilities include the discount rate used to estimate the fair value of the Company’s subordinated debt (see note 6) and ~~other~~the expected ~~valuation~~volatility ~~techniques~~used to estimate the fair value of warrants reflected as derivative liabilities. The discount rate used to estimate the fair value of the Company’s subordinated debt is based on rates of return achieved by market participants investing in similar instruments, and reflects the perceived risk of investing of such instruments. Should the credit risk of the Company improve or worsen, a lower or higher, respectively, discount rate may be appropriate, which could result in a significantly higher or lower, respectively, measurement of fair value. The expected volatility used to estimate the fair value of warrants reflected as derivative liabilities is based on the historical volatility of comparable publicly traded common stocks. Should the expected volatility of the Company increase or decrease, there could be a significantly higher or lower, respectively, measurement of fair value.

Stock-Based Compensation

~~At December 31, 2014, the Company had six stock~~Stock-based ~~employee~~ compensation ~~plans~~awards ~~which~~to ~~are~~employees ~~described more fully in Note 7. Awards granted~~ are ~~valued~~measured at fair value and compensation cost is recognized on a straight line basis over the requisite service period of each award. The Company awarded stock options to its directors and employees during the year ended December 31, 2015 (see note 8). No awards were granted during the year ended December 31, 2014.

Income Taxes

The Company recognizes deferred tax liabilities and assets based on the temporary differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates in effect for the year in which the differences are expected to affect taxable income. 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~~net ~~compensation~~operating loss carryforwards. A valuation allowance is provided against net deferred tax assets when the Company determines it is more likely than not that it will fail to generate sufficient taxable income to be able to realize the deferred tax assets.

In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of December 31, ~~2014~~2015 and ~~2013~~2014.

Loss per Common Share and Common Share Equivalent

Basic loss per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company.

The following stock options and warrants and shares issuable upon conversion of convertible notes payable outstanding at December 31, 2015 and 2014 were not included in the computation of dilutive loss per share because the net effect would have been anti-dilutive:

	December 31, 2015		December 31, 2014

Stock options		123,500,000		-
Warrants		33,895,130		323
Shares issuable upon conversion of preferred stock		46,964,286		93
Shares issuable upon conversion of convertible notes payable		82,388,120		319
		286,747,536		734

F-9

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

Loss per Common Share and Common Share Equivalent

The following stock options and warrants and shares issuable upon conversion of convertible notes payable outstanding at December 31, 2014 and 2013 were not included in the computation of dilutive loss per share because the net effect would have been anti-dilutive:

	December 31, 2014		December 31, 2013
Stock options		2,203		2,628
Warrants		3,232,600		3,380
Shares issuable upon conversion of preferred stock		929,798		-
Shares issuable upon conversion of convertible notes payable		3,196,575		4,709
		7,361,176		10,717

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 ASC are communicated through issuance of an Accounting Standards Update (“ASU”).

In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915), Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation (“ASU 2014-10”). The amendments related to the elimination from the FASB Codification of the concept of development stage companies, including the previous requirement that certain companies include inception-to date information and other disclosure requirements of Topic 915. The guidance is to be applied retrospectively and is effective for annual reporting periods beginning after December 15, 2014 and interim periods therein, with early adoption permitted. 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. Beginning with the quarter ended September 30, 2014, the Company chose the early adoption of these amendments and, accordingly, has eliminated the inception-to–date information that had been previously presented in the Company’s financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), which is effective for annual periods ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. Under ASU 2014-15, entities will be required to formally assess their ability to continue as a going concern and provide disclosures under certain circumstances. While current practice regarding such disclosures is often guided by U.S. auditing standards, the new standard explicitly requires the assessment at interim and annual periods, and provides management with its own disclosure guidance. The standard can be adopted early. The Company is currently assessing the impact that adopting these new assessment and disclosure requirements will have on its financial statements and footnote disclosures. See note 1 for the Company’s current disclosure about its ability to continue as a going concern.

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. The FASB has approved a one-year deferral of the effective date with the option to early adopt using the original effective date. Entities 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.

3. DISCONTINUED OPERATIONS

As more fully described in note 5, on October 19, 2015, the Company received a default notice from the collateral agent under the security agreement pertaining to the Company’s senior secured indebtedness. The default notice demanded repayment of the entire amount of senior debt that was due, and the Company did not have the financial resources to repay this indebtedness. The Company also received a Notification of Disposition of Collateral (the “NDC”). The NDC advised the Company that the collateral agent intended to sell, lease or license the assets securing the Company’s senior secured debt at a public auction to take place in early November of 2015. These assets comprised substantially all of the assets of the Company and its subsidiaries, except for certain intangible assets that the Company had deemed to be fully impaired as of December 31, 2014. On November 4, 2015, the public auction took place, and the holder of a substantial portion of the Company’s senior secured indebtedness purchased the assets, including the capital stock of the Company’s VAC and PositiveID Animal Health subsidiaries, for $1 million, which was credited against the Company’s outstanding indebtedness to the holder of the senior secured indebtedness.

F-10

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

3As a result of the foreclosure and auction transaction, the Company’s RFID business has been accounted for as a discontinued operation. ~~ACQUISITION~~The assets and liabilities of VAC and PAH at the date of the auction transaction were as follows (in thousands):

Acquisition of VeriTeQ Corporation

Restricted cash	$	12
Property and equipment		25
Intangible assets, net		973
Other assets		48
Accounts payable and accrued expenses		(1,934	)
Notes payable		(115	)
Accrued royalty obligations		(575	)
Net assets (liabilities) disposed		(1,566	)
Consideration received in the form of notes payable reduction		(1,000	)
Gain on disposal of RFID business	$	(2,566	)

~~The~~Accrued interest ~~VeriTeQ~~allocated ~~Transaction~~to ~~was~~discontinued ~~accounted~~operations ~~for~~is aslimited ato ~~reverse~~interest ~~acquisition~~on ~~of VC by~~ VAC, ~~whereby~~notes ~~VAC was considered to be the acquirer~~ for ~~accounting~~which ~~purposes. Accordingly,~~ the ~~accompanying~~parent ~~consolidated~~is ~~financial~~neither ~~statements reflect VC’s assets and liabilities at fair value to the extent they were deemed to have been acquired for accounting purposes and VC established~~ a ~~new~~guarantor nor basis for its assets and liabilities based upon the fair values thereof and the value of VC’s 1,029 shares outstanding on the Closing Date. The purchase price of $935,000 was determined based on the closing price of VC’s common stock on July 8, 2013 of $900 per share on a post reverse stock split basis, and VC’s outstanding stock options, which were valued at $9,000 based on the closing price of VC’s common stock on July 8, 2013 and using the BSM valuation model using the following assumptions: expected term of 2.6 years, expected volatility of 106.6 %, riskco-~~free interest rate of 0~~borrower.~~62%, and expected dividend yield of 0%.~~

In addition, the Exchange Agreement created a new measurement date for the valuation of the options to acquire shares of VAC’s common stock, which were converted into options to acquire shares of VC’s common stock4. ACCRUED The new measurement date was the Closing Date. This new measurement did not result in a non-cash compensation charge because the value of the modified options did not exceed the value of the options before the modification. EXPENSES

The following ~~total~~table ~~purchase~~summarizes ~~price of~~ the VCsignificant ~~assets~~components ~~acquired~~of ~~and~~accrued ~~liabilities assumed was allocated was follows (in thousands)~~expenses:

Assets purchased:
	December 31, 2015		December 31, 2014
Cash	$	818
	(in thousands)
Marketable securities		239
Accrued payroll and payroll related (including $729 and $492 to related parties)	$	778	$	531
Current portion of other receivable		168
Accrued legal		55		55
Prepaid and other assets		47
Accrued interest		842		84
Fixed assets		1
Accrued other expenses (including $135 and $316 to related parties)		541		788
Other assets		60
Total accrued expenses	$	2,216	$	1,458
Total	$	1,333
Liabilities assumed:
Accounts payable	$	72
Accrued expenses		326
Total	$	398
Net Assets Acquired	$	935

~~Included~~During the inyear ended December 31, 2015, the ~~selling~~Company entered into separate agreements with Scott Silverman, ~~general~~the ~~and~~Company’s ~~administrative~~then Chief ~~expenses~~Executive ~~for~~Officer, Randolph Geissler, the ~~year~~Company’s ~~ended~~then ~~December~~President, 31Michael Krawitz, ~~2013~~the isCompany’s then Chief Legal and Financial Officer and two other employees, (collectively, the “Officers”) whereby each Officer agreed that certain amounts of accrued but unpaid compensation that each individual was entitled to receive (aggregating approximately $~~0.4~~1,010,000) would ~~million~~be paid in the form of ~~expenses~~a ~~related~~convertible promissory note (the “Officer Notes”). In connection with these agreements, the Company issued Officer Notes to Messrs. Silverman, Geissler, Krawitz and the ~~VeriTeQ~~other ~~transaction~~two employees in the principal amounts of $194,010, $285,000, $384,509 and $146,955, respectively.

~~The results of VC have been included in the consolidated statement of operations since July 8, 2013, the date of acquisition~~5. NOTES Unaudited pro forma results of operations for the year ended December 31, 2013 are included below. Such pro forma information assumes that the VeriTeQ Transaction had occurred as of January 1, 2013. This summary is not necessarily indicative of what the Company’s results 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.PAYABLE

Notes payable at December 31, 2015 and 2014 consist of the following:

	2015			2014
	(in thousands)
Convertible notes payable with a bifurcated conversion option		3,345			2,828
Related party notes payable		1,142			169
Other notes payable		61			185
Discount on notes payable		(70	)		(531	)
		4,478			2,651
Less current portion		(4,478	)		(2,365	)
Non-current notes payable		-			286

Convertible Notes with a Bifurcated Conversion Option

On November 13, 2013, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with a group of institutional investors (the “Investors”), whereby the Company issued to the Investors senior secured convertible promissory notes in the principal amount of $1,816,667, including a $150,000 note payable to the placement agent in lieu of a cash fee (the “November 2013 Notes”). The November 2013 Notes were issued with an original issue discount of $166,667. Therefore, the November 2013 Notes were issued for a cash purchase price of $1,500,000, and with warrants to purchase up to 2,644 shares of the Company’s common stock, including 222 warrants granted to the placement agent (the “November 2013 Warrants”) without giving effect to the July 2015 Reverse Split.

F-11

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

(In thousands, except per share amounts)	Year Ended December 31, 2013
Net operating revenue	$	18
Net loss	$	(18,577	)
Net loss per common share – basic and diluted	$	(2,030	)

In connection with the sale of the November 2013 Notes and the November 2013 Warrants, (i) the Company entered into a registration rights agreement with the Investors (the "Registration Rights Agreement"), (ii) the Company and certain of its subsidiaries entered into a security and pledge agreement in favor of the collateral agent for the Investors (the "Security Agreement"), (iii) certain of the Company’s subsidiaries entered into a guaranty in favor of the collateral agent for the Investors (the “Guaranty”), and (iv) the Company 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 Purchase Agreement and related agreements.

4Upon the closing of this transaction, $750,000 of the proceeds were placed in restricted bank accounts in amounts proportionate to each Investor’s note balance, to be applied to pay any redemption or other payment due under the applicable note to the applicable holder from time to time (see note 10 for further information). ~~INTANGIBLE~~In ~~ASSETS~~ addition, $115,000 of the Investors’ expenses was paid by the Company. As a result, the Company received net proceeds in 2013 of $635,000 from this transaction. During the year ended December 31, 2014, $0.4 million of the restricted funds were used to prepay a portion of one of the outstanding November 2013 Notes and all but approximately $12,000 of the remaining funds were released to the Company.

~~Intangibles~~The November ~~and~~2013 ~~other~~Notes ~~assets~~had ~~consist~~an original maturity date of November 13, 2014. Interest does not accrue on the November 2013 Notes unless there is an event of default (as defined in the notes), in which case interest on the November 2013 Notes commences accruing daily at a rate of 18% per annum. The November 2013 Notes were originally convertible into shares of the Company’s common stock, at the option of the holder, at any time following issuance at a conversion price of $7,500,000 per share, unless such conversion or share issuance thereunder would cause the holder to beneficially own in excess of 4.99% of the Company’s common stock. The conversion price is subject to adjustment for stock dividends, stock splits or stock combinations, whereby in any such case the conversion price would be multiplied by the following fraction: (i) the number of shares of common stock outstanding immediately before such event and (ii) the number of shares of common stock outstanding immediately after such event. Under the terms of the November 2013 Notes, in the event the Company were to issue or sell, or is deemed to have issued or sold, any shares of common stock for a consideration per share (the “New Issuance Price”) that is less than the conversion price in effect immediately prior to such issue or sale or deemed issuance or sale (a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the conversion price then in effect is reduced to an amount equal to the New Issuance Price. As a result of various issuances of convertible promissory notes subsequent to November 13, 2013 and through December 31, 2015, the conversion price as of December 31, 2015 was $0.057 per share.

	December 31, 2014							December 31, 2013
	Gross Carrying		Accumulated					Gross Carrying		Accumulated
($000's)	Amount		Amortization			Total		Amount		Amortization			Total
Proprietary Technology	$	1,500	$	(318	)	$	1,182	$	6,870	$	(626	)	$	6,244
Customer relationship		500		(212	)		288		500		(141	)		359
Trademarks		-		-			-		450		(35	)		415
	$	2,000	$	(530	)	$	1,470	$	7,820	$	(802	)	$	7,018

The November 2013 Warrants became exercisable at issuance and entitle the Investors to purchase shares of the Company’s common stock for a period of five years at an initial exercise price of $28,400,000 per share, and contain a cashless exercise provision. The exercise price is also subject to adjustment for stock dividends, stock splits and stock combinations. In addition, the exercise price of the warrant is subject to downward adjustment in the event the Company issues common stock or securities convertible into common stock at an issuance price or conversion price that is less than the exercise price of the November 2013 Warrants. Moreover, the November 2013 Warrants provide that the holder of the warrant has the right to invest the same aggregate amount, regardless of changes in the price of the Company’s common stock. Accordingly, decreases in the price of the Company’s common stock result in an increase in the number of shares exercisable under the Warrants (see note 8 for further information).

AtThe November ~~December~~2013 ~~31,~~Notes ~~2014,~~rank senior to the Company’s ~~determined~~other ~~that~~indebtedness ~~the~~and ~~proprietary~~are ~~technology~~secured ~~and~~by ~~trademarks~~a ~~acquired~~perfected ~~from~~first ~~SNC~~lien ~~Holding~~security ~~Corp.~~ interest in ~~December~~all ~~2012~~of ~~was~~the ~~fully~~Company’s ~~impaired~~ and ~~not~~its ~~recoverable.~~subsidiaries’ ~~These~~ assets ~~had~~except acertain ~~net~~assets ~~book value at the time~~ of ~~impairment~~VTQ ~~evaluation~~IP ofHolding ~~$5.0~~Corporation ~~million.~~(IP Atrelated to the ~~time the assets were acquired, the~~ Company’s ~~recognized~~dosimeter atechnology). ~~royalty~~The ~~obligation~~November in2013 ~~the~~Notes ~~amount~~contain ofcertain ~~$3.4~~covenants ~~million~~and ~~for~~restrictions, ~~estimated~~including, ~~royalties~~among others, that, ~~would~~for beso ~~paid~~long as ~~a result of anticipated sales derived from~~ the ~~acquired~~November ~~SNC~~2013 ~~assets.~~Notes Asare ~~a result~~outstanding, the Company ~~recorded~~will annot ~~impairment~~incur ~~charge~~any atindebtedness ~~December~~except 31permitted indebtedness, ~~2014~~permit inliens ~~the~~on ~~amount~~its ofproperties ~~$5.0~~(other ~~million~~than ~~related~~permitted toliens ~~the~~under ~~intangible assets and a reduction in~~ the ~~fair~~November ~~value~~2013 ofNotes), ~~the~~pay ~~estimated~~dividends ~~royalty~~or ~~obligation~~transfer certain ~~in the amount of $3~~assets.~~4 million.~~

~~Amortization~~During the year ended December 31, 2014, $400,000 of ~~intangibles~~the ~~reflected~~November 2013 Notes was repaid using a portion of the Company’s restricted cash, and $568,990 of the November 2013 Notes was converted into 7 shares of common stock in ~~operating~~accordance ~~loss~~with ~~amounted~~the terms of the November 2013 Notes or under Right to ~~$0.6~~Shares ~~million~~Agreements ~~for~~entered ~~each~~into in 2014 with certain of the ~~years~~Investors. ~~ended~~The outstanding balance on the November 2013 Notes at December 31, 2014 ~~and~~was ~~2013~~$718,010. ~~Estimated~~On ~~aggregate~~October ~~amortization~~31, ~~expense~~2014, ~~for~~the ~~each~~Company entered into an amendment to the Purchase Agreement with some of the ~~five~~original ~~years~~parties ~~subsequent~~to the Purchase Agreement. As a result of this amendment, as well as a sale of one of the November 2013 Notes to ~~December~~another 31accredited investor, the maturity date on $642,121 of the outstanding November 2013 Notes was extended to July 13, 2015. The remaining $205,556 of notes that was due on November 14, 2014 ishas asnot ~~follows~~been ~~(in~~repaid, ~~thousands):~~and default interest on these notes has been recognized from the maturity date.

2015	$	179
2016		179
2017		179
2018		179
2019		107

5. ACCRUED EXPENSES

The following table summarizes the significant components of accrued expenses:

	December 31, 2014		December 31, 2013
	(in thousands)
Accrued payroll and payroll related (including $1,060 and $1,734 to related parties)	$	1,204	$	1,734
Accrued legal		477		445
Accrued other expenses (including $111 and $30 to related parties)		830		539
Total accrued expenses	$	2,511	$	2,718

F-12

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

6During the year ended December 31, 2014, the Company issued additional convertible promissory notes with an aggregate principal amount of $2,107,350, and satisfied the obligation to PSID under a shared services agreement through the issuance to PSID of a convertible promissory note (see note 10) in the amount of $222,115 (collectively, the “2014 Convertible Notes”). ~~NOTES~~The ~~PAYABLE~~2014 Convertible Notes contain terms that are substantially similar to those of the November 2013 Notes, including variable conversion price formulas with downward adjustment features. No warrants were issued in conjunction with the 2014 Convertible Notes, and except for $322,222 of notes issued to the Investors (the “May 2014 Notes”), they do not contain priority liens on the Company’s assets. The 2014 Convertible Notes generally mature within 9 to 12 months from the date of issuance, bear interest at rates ranging from 8% to 12% per annum with all interest payable at maturity, and are convertible into shares of common stock at 60% to 61% of the market price of the Company’s common stock based on the low end of the trading range of the common stock during the 10 to 25 days prior to conversion, depending on the specific note being converted.

~~Notes~~During the ~~payable~~year atended December 31, 2014, ~~and~~$233,750 ~~2013~~of ~~consist~~the 2014 Convertible Notes, along with $375 of accrued interest were converted into 12 shares of the ~~following:~~Company’s common stock in accordance with their terms, and the outstanding balance on the 2014 Convertible Notes was $2,095,715 at December 31, 2014.

	2014			2013
	(in thousands)
Convertible notes payable with a bifurcated conversion option		2,943			1,817
Related party notes payable		169			60
Other notes payable		185			175
Discount on notes payable		(531	)		(1,585	)
		2,766			467
Less current portion		(2,480	)		(467	)
Non-current notes payable		286			-

During the year ended December 31, 2015, the Company issued convertible promissory notes in the aggregate principal amount of $1,349,471, and received net proceeds of $1,208,835. These notes are generally due one year after the date of issuance, bear interest at rates of 1% to 12% per annum, and are convertible into shares of common stock at 57% to 61% of the market price of the Company’s common stock based on the low end of the trading range of the common stock during the 10 to 30 days prior to conversion, depending on the specific note being converted.

~~Convertible~~With respect ~~Notes~~to ~~with~~the foregoing notes, in the event the Company were to issue or sell, or is deemed to have issued or sold, any shares of common stock for a ~~Bifurcated~~consideration ~~Conversion~~per ~~Option~~share (the “New Issuance Price”) that is less than the conversion price in effect immediately prior to such issue or sale or deemed issuance or sale (a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the conversion price then in effect is reduced to an amount equal to the New Issuance Price.

OnIn connection ~~November~~with ~~13,~~the ~~2013~~issuance of one of the foregoing notes, the Company ~~entered~~issued ~~into~~ a ~~securities~~warrant to purchase ~~agreement~~50 (shares of the ~~“Purchase~~Company’s common ~~Agreement”)~~stock ~~with~~at aan ~~group~~exercise price of ~~institutional~~$210 ~~investors~~per share, subject to adjustment for stock splits, stock dividends and stock combinations (the “~~Investors~~March 2015 Warrant”),. ~~whereby~~The ~~the~~March ~~Company~~2015 ~~issued~~Warrant tois ~~the~~exercisable ~~Investors~~at ~~senior~~any ~~secured~~time ~~convertible~~until ~~promissory~~three ~~notes~~years inafter the ~~principal~~date ~~amount~~of issuance. The terms of ~~$1,816,667,~~the ~~including~~warrant provides for a ~~$150,000~~proportional ~~note~~downward ~~payable~~adjustment toof the ~~placement~~exercise ~~agent~~price in ~~lieu~~the ofevent athat ~~cash fee (~~the Company ~~“November~~issues ~~2013~~or ~~Notes”).~~sells, ~~The~~or ~~November~~is ~~2013~~deemed ~~Notes~~to ~~were~~have issued ~~with~~or ansold, ~~original~~shares ~~issue~~of ~~discount~~common ofstock ~~$166,667.~~at ~~Therefore,~~an ~~the~~issuance ~~November~~price ~~2013~~that ~~Notes~~is ~~were~~less ~~issued~~than ~~for~~the market aprice ~~cash~~of ~~purchase~~the ~~price~~common stock at the time of $1issuance,~~500,000,~~ ~~and~~as ~~with~~defined ~~warrants~~in tothe ~~purchase~~warrant upagreement. toThe ~~2,644~~Company ~~shares~~determined that the fair value of ~~our~~the ~~common~~March ~~stock,~~2015 ~~including~~Warrant ~~222~~was ~~warrants~~de ~~granted~~minimus toat the ~~placement~~date ~~agent~~of ~~(the~~issuance ~~“November~~and ~~2013~~at ~~Warrants”)~~December 31, 2015.

InDuring the ~~connection~~year ~~with~~ended ~~the~~December ~~sale~~31, of2015, ~~the~~$597,474 ~~November~~of ~~2013~~previously ~~Notes~~issued ~~and~~convertible ~~the~~notes, ~~November~~along ~~2013~~with ~~Warrants~~$10,375 ~~(i)~~of ~~the~~accrued ~~Company~~interest, ~~entered~~were converted into a461,211 ~~registration~~shares ~~rights~~of ~~agreement with~~ the ~~Investors~~Company’s ~~(the~~common ~~"Registration~~stock, ~~Rights~~and ~~Agreement")~~$94,675 ~~(ii)~~of ~~the~~convertible ~~Company~~notes ~~and~~were ~~certain~~repaid ofin ~~its~~accordance with ~~subsidiaries~~their ~~entered~~terms. ~~into~~In aconnection ~~security~~with ~~and~~the ~~pledge~~notes ~~agreement~~converted, inapproximately ~~favor~~$168,000 of the ~~collateral~~bifurcated ~~agent~~option ~~for~~liability ~~the~~was ~~Investors~~reclassified into (additional paid-in capital. Also during the ~~"Security~~year ~~Agreement"),~~ended ~~(iii)~~December ~~certain~~31, of2015, the Company’s ~~subsidiaries~~ entered into a ~~guaranty~~settlement inagreement with ~~favor~~one of ~~the~~its ~~collateral~~convertible ~~agent~~noteholders ~~for~~which reduced the ~~Investors~~outstanding ~~(the~~principal ~~“Guaranty”)~~balance on their notes by $9,375, ~~and~~which ~~(iv)~~was recorded as a gain on the ~~Company~~settlement of debt and ~~each~~is ~~depository~~reflected ~~bank~~in other income in ~~which~~the ~~such~~accompanying ~~bank~~consolidated ~~account~~statements isof ~~maintained~~operations for ~~entered~~the ~~into~~year ~~certain~~ended ~~account~~December ~~control~~31, ~~agreements~~2015. ~~with~~In ~~respect~~addition, tothe ~~certain~~Company ~~accounts~~received ~~described~~additional innotices for the ~~Purchase~~conversion ~~Agreement~~of ~~and~~$3,860 ~~related~~convertible notes ~~agreements.~~that the Company was unable to honor.

~~Upon~~In November ~~the~~and ~~closing~~December of ~~this transaction~~2015, the Company issued convertible notes in the aggregate principal amount of $~~750~~194,~~000~~118 ofin connection with the ~~proceeds~~acquisition ~~were~~transaction ~~placed~~discussed in ~~restricted~~note ~~bank~~15. ~~accounts~~The inCompany ~~amounts~~received ~~proportionate~~no cash proceeds with the issuance of these notes. These notes are due one year after the date of issuance, bear interest at rates of 10% to ~~each~~12% ~~Investor~~per annum, and are convertible into shares of common stock at 60% of the average of the three lowest trading prices of the Company’s ~~note~~common ~~balance,~~stock toduring bethe 10 ~~applied~~days prior to ~~pay~~conversion. ~~any~~These ~~redemption~~notes oralso ~~other~~contain ~~payment~~terms ~~due~~similar ~~under~~to the ~~applicable~~Company’s ~~note~~previously toissued convertible notes, whereby in the ~~applicable~~event ~~holder~~the ~~from~~Company ~~time~~were to ~~time~~issue ~~(see~~or ~~note~~sell, 10or ~~for~~is ~~further~~deemed ~~information).~~to Inhave ~~addition,~~issued ~~$115~~or sold,~~000~~ any shares of common stock for a consideration per share (the ~~Investors’~~“New ~~expenses~~Issuance ~~was~~Price”) ~~paid~~that byis less than the ~~Company.~~conversion Asprice in effect immediately prior to such issue or sale or deemed issuance or sale (a ~~result~~“Dilutive Issuance”), ~~the~~then, ~~Company~~immediately ~~received~~after ~~net~~such ~~proceeds~~Dilutive Issuance, the conversion price then in ~~2013~~effect ofis ~~$635,000~~reduced ~~from~~to ~~this~~an ~~transaction.~~amount equal to the New Issuance Price.

The November 2013 Notes had an original maturity date of November 13, 2014. Interest does not accrue on the November 2013 Notes unless there is an event of default (as defined in the notes), in which case interest on the November 2013 Notes commences accruing daily at a rate of 18% per annum. The November 2013 Notes were originally convertible into shares of the Company’s common stock, at the option of the holder, at any time following issuance at a conversion price of $750 per share, unless such conversion or share issuance thereunder would cause the holder to beneficially own in excess of 4.99% of the Company’s common stock. Under the terms of the November 2013 Notes, in the event the Company were to issue or sell, or is deemed to have issued or sold, any shares of common stock for a consideration per share (the “New Issuance Price”) that is less than the conversion price in effect immediately prior to such issue or sale or deemed issuance or sale (a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the conversion price then in effect is reduced to an amount equal to the New Issuance Price. As a result of various issuances of convertible promissory notes subsequent to November 13, 2013 and through December 31, 2014, the conversion price as of December 31, 2014 was $0.90 per share. The conversion price is subject to adjustment for stock dividends, stock splits or stock combinations, whereby in any such case the conversion price would be multiplied by the following fraction: (i) the number of shares of common stock outstanding immediately before such event and (ii) the number of shares of common stock outstanding immediately after such event.

The November 2013 Warrants became exercisable at issuance and entitle the Investors to purchase shares of the Company’s common stock for a period of five years at an initial exercise price of $2,840 per share, and contain a cashless exercise provision. The exercise price is also subject to adjustment for stock dividends, stock splits and stock combinations. In addition, the exercise price of the warrant is subject to downward adjustment in the event the Company issues common stock or securities convertible into common stock at an issuance price or conversion price that is less than the exercise price of the November 2013 Warrants. Moreover, the November 2013 Warrants provide that the holder of the warrant has the right to invest the same aggregate amount, regardless of changes in the price of the Company’s common stock. Accordingly, decreases in the price of the Company’s common stock result in an increase in the number of shares exercisable under the Warrants (see note 9 for further information).

F-13

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

AsThe Company’s afailure ~~result~~to of(i) timely file its Quarterly Report on Form 10-Q for the ~~original~~period ~~issue~~ending ~~discount~~June 30, 2015 with SEC, (ii) repay certain convertible notes that had reached their maturity date and (iii) honor the ~~fair~~foregoing ~~value~~conversion notices, constitute events of default under the terms of the convertible notes, including the November 2013 ~~Warrants~~Notes ~~issued~~and atthe May 2014 Notes (collectively, the ~~time~~“Senior Notes”). The terms of some of the ~~issuance~~convertible ofnotes require that the ~~November~~outstanding ~~2013~~principal ~~Notes~~amount on the notes increase by as much as 50% in the event of a default. As a result, the Company ~~recognized~~recorded aadditional ~~discount~~principal on ~~the~~these ~~November~~notes and ~~2013~~a ~~Notes~~corresponding interest charge in the amount of $1456,~~816,667~~684. The ~~discount~~Company ~~was~~also ~~amortized~~accrued ~~over~~additional ainterest ~~one-year~~in ~~period~~connection towith these defaults in the ~~original~~amount ~~maturity~~of ~~date~~$508,659. ~~and~~In addition, the ~~unamortized~~Company ~~discount~~entered ~~was~~into ~~approximately~~discussions $1with Magna Equities I,~~585~~ LLC,~~000~~ as(together with its affiliate, Magna Equities II, “Magna”) the collateral agent for the holders of ~~December~~the 31Senior Notes, ~~2013~~and agreed to the actions taken below.

~~The~~On October ~~November~~19, ~~2013~~2015, ~~Notes rank senior to~~ the Company’s ~~other~~entered ~~indebtedness~~into ~~and are secured by~~ a ~~perfected~~letter ~~first~~agreement ~~lien~~with ~~security~~Magna ~~interest~~pursuant into ~~all~~which of the Company’s ~~and~~agreed ~~its~~to ~~subsidiaries’~~exchange ~~assets~~approximately $1.3 ~~except~~million ~~certain~~aggregate ~~assets~~principal amount of ~~VTQ~~outstanding IPunsecured ~~Holding~~convertible ~~Corporation~~promissory ~~(IP~~notes ~~related~~held toby ~~the~~Magna ~~Company’s~~for ~~dosimeter~~an ~~business)~~equal ~~and~~principal amount ~~certain~~of ~~intellectual~~new ~~property~~secured ~~assets~~convertible ofpromissory ~~PAH~~notes (~~IP related to~~ the ~~Company’s~~“New ~~Unique~~Magna ~~Device Identification business~~Notes”), ~~which~~intended ~~are~~to ~~secured~~be bypari apassu ~~second~~in ~~priority~~rank ~~lien. The November 2013 Notes contain certain covenants~~ and ~~restrictions,~~priority with ~~including, among others, that, for so long as~~ the ~~November~~Senior ~~2013~~ Notes. ~~are~~There ~~outstanding,~~was ~~the~~no ~~Company~~accounting ~~will~~effect ~~not~~to ~~incur~~this ~~any indebtedness except permitted indebtedness, permit liens on its properties (other than permitted liens under the November 2013 Notes), pay dividends or transfer certain assets~~amendment.

~~During~~On October 19, 2015, the ~~year~~Company ~~ended~~received ~~December~~a ~~31,~~default ~~2014,~~notice ~~$400~~from Magna,~~000~~ ofacting in its capacity as collateral agent under the ~~November~~security agreement ~~2013~~pertaining to the Senior Notes. At the time of the notice, Magna was ~~repaid~~the ~~using~~holder aof ~~portion~~outstanding convertible promissory notes of the Company’s ~~restricted~~in ~~cash,~~the ~~and~~aggregate principal amount of approximately $~~568~~1.6 million (excluding all accrued but unpaid interest),~~990~~ consisting of ~~the~~approximately ~~November~~$0.3 ~~2013~~million ~~Notes~~of ~~was~~Senior ~~converted~~Notes ~~into~~and ~~72,745~~$1.3 ~~shares~~million of ~~common~~New ~~stock~~Magna inNotes, ~~accordance~~and ~~with~~had ~~the~~entered ~~terms~~into agreements with holders of ~~the~~an ~~November~~additional ~~2013~~$500,000 ~~Notes~~aggregate orprincipal ~~under~~of ~~Right~~Senior Notes to ~~Shares~~acquire ~~Agreements~~such ~~entered~~Senior ~~into~~Notes. inThe ~~2014~~default ~~with~~notice ~~certain~~demanded repayment of the ~~Investors.~~entire ~~The~~amount ~~outstanding~~due ~~balance~~under onthe Senior Notes (including the ~~November~~$500,000 ~~2013~~of Senior Notes atMagna ~~December~~had ~~31,~~the ~~2014~~right ~~was~~to ~~$847,677.~~acquire) and Onthe ~~October~~New ~~31,~~Magna ~~2014~~Notes (collectively, the "Magna Notes"). The Company ~~entered~~did ~~into~~not anhave ~~amendment~~the financial resources to repay this indebtedness. The default notice also advised the ~~Purchase~~Company ~~Agreement~~and ~~with~~its ~~some~~subsidiaries that Magna was exercising all of its rights and remedies under the ~~original~~Magna ~~parties~~Notes toand the ~~Purchase~~related ~~Agreement~~debt documents. AsIn aconjunction ~~result~~with of this ~~amendment~~default notice, asthe ~~well~~Company asreceived from Magna a ~~sale~~Notification of ~~one~~Disposition of Collateral (the ~~November~~“NDC”). ~~2013~~The ~~Notes~~NDC toadvised ~~another~~the ~~accredited~~Company ~~investor,~~that ~~the~~Magna ~~maturity~~intended to ~~date~~sell, onlease ~~$642,121~~or oflicense the ~~outstanding~~assets ~~November~~securing ~~2013~~the Magna Notes ~~was~~at ~~extended~~a public auction to ~~July~~take ~~13,~~place in early November of 2015. ~~The~~These assets ~~remaining~~constitute ~~$205,556~~substantially all of ~~notes~~the ~~that~~assets ~~was~~of ~~due~~the onCompany and its subsidiaries, except for those assets securing the SNC Note, as defined in note 6. On November 144, ~~2014~~2015, ~~has~~the ~~not~~public ~~been~~auction ~~repaid~~took place, and ~~default~~Magna ~~interest~~purchased onthe ~~these~~assets, ~~notes~~including ~~has~~the capital ~~been~~stock ~~recognized~~of ~~from~~the Company’s VAC and PositiveID Animal Health subsidiaries, for $1 million, which was credited against the ~~maturity~~Company’s ~~date.~~outstanding Magna Notes.

~~During~~Magna’s purchase of the ~~year~~$500,000 ~~ended~~of ~~December~~Senior ~~31,~~Notes ~~2014,~~from the ~~Company~~previous ~~issued~~holders ~~additional~~was ~~convertible~~completed ~~promissory~~on ~~notes~~November ~~with~~10, an2015. ~~aggregate~~In ~~principal~~connection ~~amount~~with ~~of $2~~this transaction,~~107,350,~~ ~~and satisfied~~ the ~~obligation~~Company toamended ~~PSID under~~ a ~~shared~~previously ~~services~~issued ~~agreement~~unsecured ~~through the issuance to PSID of a~~ convertible promissory note ~~(see~~with ~~note~~one ~~11)~~of in the ~~amount~~holders ofby ~~$222,115 (collectively,~~ increasing the ~~“2014~~principal ~~Convertible~~amount ~~Notes”). The 2014 Convertible Notes contain terms that are substantially similar to those~~ of the ~~November~~note ~~2013~~by ~~Notes~~$102,500, ~~including~~which ~~variable~~was ~~conversion~~charged ~~price~~to ~~formulas~~interest ~~with~~expense ~~downward adjustment features. No warrants were issued~~ in ~~conjunction with~~ the ~~2014~~accompanying ~~Convertible~~consolidated ~~Notes, and except for $322,222~~ statement of ~~notes issued to the Investors, they do not contain priority liens on the Company’s assets~~operations. The ~~2014~~Company ~~Convertible~~did ~~Notes~~not ~~generally~~receive ~~mature~~any ~~within~~cash 9proceeds ~~to 12 months~~ from ~~the~~this date of issuance, bear interest at rates ranging from 8% to 12% per annum with all interest payable at maturity, and are convertible into shares of common stock at 60% to 61% of the market price of the Company’s common stock based on the low end of the trading range of the common stock during the 10 to 25 days prior to conversion, depending on the specific note being convertedtransaction.

~~During~~The remaining ~~the~~outstanding ~~year~~unsecured ~~ended~~convertible ~~December~~notes ~~31,~~currently ~~2014,~~accrue ~~$233~~default interest at rates ranging from of 18% to 22% per annum,~~750~~ and the holders of the ~~2014~~notes ~~Convertible~~retain ~~Notes,~~their ~~along~~right ~~with~~to ~~$375~~convert ofthe outstanding principal plus accrued ~~interest~~and ~~were~~unpaid ~~converted~~interest into ~~128,670~~ shares of the Company’s common stock in accordance with ~~their~~the terms, ~~and~~of the ~~outstanding balance on the 2014 Convertible Notes was $2,095,715 at December 31, 2014~~notes.

Related Party Notes Payable

Related party notes payable at December 31, 2013 consisted of two promissory notes payable to Scott Silverman, the Company’s Chief Executive Officer, each in the principal amount of $30,000, bearing interest at a rate of 5% per annum, payable on demand. The outstanding principal on these notes was repaid during the year ended December 31, 2014 and Mr. Silverman elected to forgo receiving interest on these notes.

During the year ended December 31, 2014, the Company issued unsecured promissory notes to several of its officers and directors, including Mr. Silverman, in the aggregate principal amount of $185,000. These notes bear interest at 5% per annum, with accrued interest and principal payable on demand. The Company repaid $66,000 of these notes during the year ended December 31, 2014.

On April 16, 2014 and May 1, 2014, the Company issued promissory notes to Ned L. Siegel in the principal amount of $30,000 and $20,000, respectively (collectively, the “Siegel Notes”). The Siegel Notes bear interest at a rate of 9% per annum, with principal and interest due on these notes one year after their date of issuance. The Siegel Notes are convertible into shares of the Company’s common stock at the option of the holder at a conversion price of $3,500,000 per share. Based on the value of a warrant issued in conjunction with these notes, as well as the price of the Company’s common stock at the time the Siegel Notes became convertible, the Company recognized a discount on the Siegel Notes in the amount of $50,000, which was amortized over a period of one year. Mr. Siegel was appointed a director of the Company on June 17, 2014, and resigned from the Company’s board of directors on January 28, 2015. On February 27, 2015, the Siegel Notes were amended to (i) extend the maturity date to March 1, 2016, and (ii) reduce the per share conversion price to 60% of the average of the three lowest closing prices of the Company’s common stock for the 10 trading days prior to conversion.

F-14

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

OnAs discussed ~~April~~in ~~16,~~note ~~2014 and May 1~~4, ~~2014,~~during the ~~Company~~year ~~issued~~ended ~~promissory~~December ~~notes to Ned L. Siegel in the principal amount of $30~~31,~~000~~ ~~and $20~~2015,~~000,~~ ~~respectively~~three ~~(collectively,~~of the ~~“Siegel~~Company’s ~~Notes”).~~executive ~~The~~officers ~~Siegel Notes bear interest at a rate of 9% per annum, with principal~~ and ~~interest~~two ~~due~~other onsenior level ~~these~~employees ~~notes~~entered ~~one year after their date of issuance. The Siegel Notes are convertible~~ into ~~shares~~agreements ofwith the Company’s ~~common~~whereby ~~stock~~certain atamounts ~~the option~~ of ~~the~~accrued ~~holder~~but atunpaid acompensation ~~conversion~~that ~~price~~each individual ofwas ~~$350~~entitled ~~per~~to ~~share.~~receive Inwould ~~connection~~be ~~with~~paid in the ~~issuance~~form of ~~the~~Officer ~~May 1~~Notes, ~~2014~~and ~~note, Mr. Siegel also received a warrant to purchase 100 shares of~~ the Company’s ~~common~~issued ~~stock at~~ an ~~exercise~~aggregate ~~price~~ of $~~350 per share~~1, ~~subject to adjustment for stock splits~~010,474 of ~~stock~~Officer ~~dividends~~Notes orin ~~stock~~satisfaction ~~combinations.~~of ~~Based on~~ the ~~value~~accrued ofliabilities. ~~this~~In ~~warrant~~addition, asMr. ~~well~~Geissler asand ~~the~~Mr. ~~price~~Krawitz ofagreed ~~the~~to ~~Company’s~~have ~~common~~their ~~stock~~previously issued atand ~~the~~outstanding ~~time~~demand ~~the~~notes ~~Siegel~~due ~~Notes~~from ~~became convertible,~~ the Company, ~~recognized~~in ~~a discount on~~ the ~~Siegel~~principal ~~Notes~~amounts inof ~~the~~$34,000 ~~amount~~and of $5060,000, ~~which~~respectively, isconverted into ~~being~~separate ~~amortized~~Officer ~~over~~Notes. ~~the~~The ~~life~~Officer ofNotes ~~the~~bear ~~notes.~~interest ~~Mr.~~at ~~Siegel~~a ~~was~~rate ~~appointed~~of a5% ~~director~~per ofannum, ~~the~~with ~~Company~~principal onand ~~June~~interest ~~17,~~due ~~2014~~on March 1, ~~and~~2016. ~~resigned~~As ~~from~~of the ~~Company’s~~date ~~board~~ of ~~directors~~this onreport ~~January~~these ~~28,~~notes ~~2015~~are in default.

During the year ended December 31, 2015, $37,924 of related party notes, along with $1,483 of accrued interest, were converted into 26,718 shares of common stock.

Other Notes Payable

Other notes payable as of December 31, 2013 consists of a note originally payable to PSID in the amount of $200,000 issued in connection with the acquisition of a PSID subsidiary in January of 2012 (the “PSID Note”). Pursuant to the terms of a July 8, 2013 letter agreement between PSID and the Company, the Company and PSID agreed that the note would be paid in shares of the Company’s common stock. Accordingly, in October 2013, the Company issued 16 shares of common stock to PSID and the principal balance on PSID Note was reduced to $175,000, and that the balance of the note is to be repaid through the issuance of an additional 135 shares of common stock, prior to giving effect to the July 2015 Reverse Split. In connection with the issuance of the November 2013 Notes, PSID assigned the PSID Note to the Investors. In February of 2014, one of the Investors converted approximately $60,000 of this note, along with approximately $10,000 of accrued interest, into 46 shares of the Company’s common stock. The remaining balance on the PSID Note at December 31, 2015 and 2014 is ~~approximately~~$0 and $114,000, respectively.

During the year ended December 31, 2014, the Company issued several promissory notes to accredited investors with an aggregate principal amount of $111,225. Each note had a maturity date one year after the date of issuance, bears interest at a rate of 9% per annum, and is generally convertible into shares of the Company’s common stock at the option of the holder at a conversion price of $~~350~~3,500,000 per share. For some of these notes, the Company may, at its sole option, elect to convert the note into common stock at a conversion price that is equal to 60% of the market price of the Company’s common stock, as defined in the notes. During the year ended December 31, 2014, $40,600 of these notes, plus $1,330 of accrued interest, was converted into 272 shares of the Company’s common stock. During the year ended December 31,~~092~~ 2015, $9,400 of these notes, plus $1,537 of accrued interest, was converted into 10 shares of the Company’s common stock.

At December 31, ~~2014~~2015, the total of all of the Company’s outstanding promissory notes was convertible into an aggregate of 382,~~196~~388,~~575~~ 120 shares of the Company’s common stock. ~~The scheduled payments due based on maturities of current and long-term debt and at December 31, 2014 are presented in the following table:~~

Year:	Amount
	(in thousands)
2015		2,822
2016		361
Total payments	$	3,183	*

Interest expense was approximately $2.4 million for the year ended December 31, 2015, including non-cash interest expense of $1.7 million. Non-cash interest expense includes additional debt principal of $0.5 million recognized upon the default of the Company’s convertible notes and the amortization of debt discounts. Interest expense was approximately $2.5 million for the year ended December 31, 2014, including $2.4 million of non-cash interest expense, which is primarily related to the amortization of debt discount.

*6. SUBORDINATED -DEBT ~~Excludes~~REPORTED ~~$114,000~~AT ~~outstanding under~~FAIR ~~the PSID Note which can only be settled through the issuance of 135 shares of the Company’s common stock.~~VALUE

~~Interest~~In December ~~expense~~2012, ~~was~~VAC ~~approximately~~entered ~~$2.5~~into ~~million~~an ~~for~~asset ~~the~~purchase ~~year~~agreement ~~ended~~and ~~December~~royalty ~~31,~~agreement ~~2014,~~with ~~including~~SNC $2Holding Corp.4 ~~million~~wherein ofVAC ~~non-cash~~acquired various ~~interest~~technology ~~expense,~~and ~~which~~trademarks ~~is primarily~~ related to ~~the~~its ~~amortization~~radiation ofdose ~~debt~~measurement ~~discount~~technology. ~~Interest~~Under ~~expense~~the ~~was~~terms ~~approximately~~of ~~$7.1 million for~~ the ~~year ended December 31~~agreements, ~~2013,~~VAC issued ~~including~~a ~~approximately~~non-interest ~~$2.8~~bearing ~~million~~secured ~~for~~subordinated ~~the~~convertible ~~initial~~promissory ~~fair~~note ~~value of the conversion option embedded~~ in the ~~November~~principal ~~2013~~amount ~~notes,~~of ~~approximately~~ $3.43 million ~~for~~ (the ~~value~~“SNC Note”). ofThe ~~warrants~~SNC ~~issued~~Note inis ~~connection~~convertible ~~with~~into ~~debt,~~one-third ~~including~~of ~~$0.4~~the ~~million~~beneficial ~~associated~~common ~~with~~stock ~~the~~ownership ~~warrants~~of ~~issued~~VC asheld aby ~~placement~~Scott ~~agent~~Silverman. Mr. ~~fee,~~Silverman ~~approximately~~did ~~$0.4~~not ~~million~~own ofany ~~debt~~shares ~~issuance~~of ~~costs,~~common ~~which~~stock ~~were~~as ~~expensed~~of asDecember ~~incurred~~31, ~~approximately $0~~2015.3 ~~million~~The ofnote ~~debt~~was ~~discount~~amended ~~amortization~~in ~~and~~July ~~approximately~~2013 ~~$0.1~~to ~~million~~extend ~~for~~the maturity ~~shares~~date ~~issued as an inducement~~ to ~~convert~~June ~~debt~~2015 ~~into~~and ~~equity~~has ~~during~~not ~~2013.~~been repaid.

7. SUBORDINATED DEBT REPORTED AT FAIR VALUE

In December 2012, VAC entered into an asset purchase agreement and royalty agreement with SNC Holding Corp. wherein VAC acquired various technology and trademarks related to its radiation dose measurement technology. Under the terms of the agreements, VAC issued a non-interest bearing secured subordinated convertible promissory note in the principal amount of $3.3 million (the “SNC Note”). The SNC Note is convertible into one-third of the beneficial common stock ownership of VC held by Scott Silverman, or 2,148 shares as of December 31, 2014 and 2013, and was amended in July 2013 to extend the maturity date to June 2015.

F-15

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

The SNC ~~Company~~Note ~~made~~is ansecured ~~irrevocable~~by ~~election~~all atof the ~~time~~assets acquired by the Company under the 2012 asset purchase agreement, consisting primarily of ~~issuance~~intellectual toproperty ~~report~~and certain property and equipment (the ~~note~~“SNC Collateral”) carried at ~~fair~~zero ~~value~~cost basis as of December 31, ~~with~~2015. ~~changes~~The inSNC ~~fair~~Collateral ~~value~~was ~~recorded~~not ~~through~~included in the ~~Company’s~~foreclosure ~~statement~~transaction discussed in note 5. Under the terms of the ~~operations~~SNC Note, as ~~Other~~amended, ~~expense~~the holder of the SNC Note may look solely to the SNC Collateral to satisfy all obligations of the Company to it under the SNC Note and not to any other assets of the Company and/~~income~~or its subsidiaries. In October of 2015, the Company contacted the holder of the SNC Note regarding the return of the SNC Collateral to the holder in ~~each~~satisfaction ~~accounting~~of ~~period~~the SNC Note. AtBy ~~December~~letter agreement ~~31,~~dated ~~2014~~February ~~and~~18, ~~2013~~2016, the ~~fair~~Company ~~value~~agreed to return the SNC Collateral to the holder of the SNC Note, ~~was~~and ~~$0.3~~the ~~million~~holder agreed to discharge the Company of all of its obligations and $4liabilities under the SNC Note upon receipt of the assets.9 ~~million~~As of the date of this report, ~~respectively~~the ~~(see~~collateral ~~note~~has 8not ~~for~~been ~~further~~accepted ~~information~~by the holder of the SNC Note and the SNC Note remains outstanding (see note 15).

8Pursuant to ASC 825-10-25-1, Fair Value Option, the Company made an irrevocable election at the time of issuance to report the note at fair value, with changes in fair value recorded through the Company’s statement of operations as Other expense/income in each accounting period. ~~FINANCIAL~~The ~~INSTRUMENTS~~ fair value recorded as of December 31, 2015 was $2.9 million less than the actual principal due of $3.3 million. At December 31, 2015 and 2014, the fair value of the SNC Note was $0.4 million and $0.3 million, respectively (see note 7 for further information) and the principal amount due was $3.3 million.

7. FINANCIAL INSTRUMENTS

Fair Value Measurements

Fair value is defined 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 that are required to be recorded at fair value, the Company considers the principal or most advantageous market in which it 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.

The Company applies 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 ~~year~~years ~~end~~ended December 31, ~~2013~~2015 and 2014, the SNC Note (which the Company ~~had~~elected ato ~~short-term~~be ~~investment~~accounted for at fair value), the bifurcated embedded option in ~~marketable~~other ~~securities~~convertible notes and the warrant liabilities were valued using Level 13 inputs. ~~The~~During ~~marketable~~the ~~securities~~year ended December 31, 2014, the Company’s royalty obligations were ~~sold~~also invalued ~~November~~using ~~2013~~Level 3 inputs. The estimated values at December 31, 2014 also considered the value of the Company’s stock price of $0.11 per share following the February 2015 Reverse Stock Split. The closing price on December 31, 2014 was $0.002 per share (without giving effect to the reverse split). The changes in fair value of the SNC Note, the bifurcated embedded option in the convertible notes and the warrant liability during 2015 and 2014 are reflected in the changes in fair value of derivative and other fair valued instruments in the Company’s consolidated statement of operations.

~~During~~As of ~~the years ended~~ December 31, ~~2014~~2015 and ~~2013,~~2014 the ~~convertible note issued to SNC Holdings Corp. (which the Company elected to be accounted for at~~ fair value), of the ~~bifurcated embedded option in other~~ convertible ~~notes,~~subordinated ~~the~~debt ~~warrant~~was ~~liabilities~~determined ~~and the estimated royalty obligations were valued~~ using ~~Level 3 inputs. At December 31, 2014, the Company’s stockholders had approved~~ a ~~reverse~~discounted ~~split~~cash ~~of the common stock, which was not effectuated by the Company until February 11, 2015~~flow model. The ~~estimated~~fair ~~values also considered the~~ value of the ~~Company’s~~November ~~stock~~2013 ~~price~~Warrants ofand ~~$0.11 per share following~~ the reverse stock split of 1 for 1,000, which was effective on February 11, 2015. The closing price on December 31, 2014 was $0.002 per share (without giving effect to the reverse split). The changes in fair value of the convertible note, the bifurcated embedded option in the convertible notes ~~and~~were ~~the~~determined using ~~warrant~~various ~~liability~~Monte ~~during~~Carlo ~~2014 and 2013 are reflected in the changes in fair value of derivative instruments in the Company’s consolidated statement of operations~~simulations. ~~The change in estimated fair value of the royalty obligation was recorded in the Company’s statement of operations, together with the asset impairment charge (see note 4).~~

As of December 31, 2014, a probability weighted expected return method (“PWERM”) was used to estimate the total enterprise value of approximately $2.5 million. For the PWERM analysis, the Company assumed four scenarios: (a) income approach scenario where the Company raises substantially all of the financing required within 6 months to carry out its plans to bring its products to market and an assumed probability of 20% due to lack of success in raising such funding to date; (b) market approach scenario with the likelihood of a sale or merger of the Company within 2 years, and an assumed probability of 15%; (c) continued operations scenario where the Company maintains the current operating levels with minimal financing, and an assumed probability of 35%, and (d) dissolution of the Company, and an assumed probability of 30%.

F-16

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

AnThe following ~~Option~~table ~~Pricing~~summarizes ~~Method~~our ~~allocation~~financial ~~model~~assets ~~(“OPM”)~~and ~~was~~liabilities ~~used~~measured toat ~~allocate~~fair ~~the estimated enterprise~~ value toas ~~the~~presented ~~debt~~in ~~and equity tranches within~~ the ~~Company’s~~consolidated ~~capitalization~~balance sheets ~~structure~~as ~~which resulted in a per share common stock value~~ of ~~$0.13.~~December ~~A binomial lattice model~~31, ~~including~~2015 ~~a “with”~~ and ~~“without”~~December ~~analysis~~31, ~~was~~2014 used to estimate the value of the “down-round” features of the instruments outstanding under the scenario of the company management assumed future financing. A Monte Carlo simulation model was used to estimate the value impact of multiple future financings. The total values of the various debt and equity securities (in ~~the Company generated from the above valuation methodologies were allocated to the total estimated enterprise value of $2.5 million.~~thousands):

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

	December 31, 2015						December 31, 2014
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3

Liabilities:
SNC Note	$	—	$	—	$	370	$	—	$	—	$	316
Bifurcated option in convertible notes						5,337					$	2,128
Warrant liabilities	$	—	$	—	$	1,410	$	—	$	—	$	1,802

	December 31, 2014						December 31, 2013
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Liabilities:
SNC Note	$	—	$	—	$	316	$	—	$	—	$	4,925
Bifurcated option in convertible notes						930					$	3,124
Warrant liabilities	$	—	$	—	$	534	$	—	$	—	$	6,114
Royalty obligations	$	—	$	—	$	600	$	—	$	—	$	4,000

The following is a summary of activity of Level 3 liabilities for the years ended December 31, 2015 and 2014:

The following is a summary of activity of Level 3 liabilities for the year ended December 31, 2014:

	SNC Note			Bifurcated embedded option in convertible notes			Warrant liabilities
Balance at December 31, 2013	$	4,925		$	3,124		$	6,114
Issuance of additional debt					1,009
Gains (losses) included in net loss		(4,609	)		(1,959	)		2,741
Conversion of notes and exercise of warrants into shares of common stock					(46	)		(7,053	)
Balance at December 31, 2014		316			2,128			1,802
Issuance of additional debt					386
Cancellation of warrants								(657	)
Conversion of notes and exercise of warrants into shares of common stock					(168	)		(11	)
Losses (gains) included in net loss		54			2,991			276
Balance at December 31, 2015	$	370		$	5,337		$	1,410

	SNC Note			Bifurcated embedded option in convertible notes			Warrant liabilities			Royalty obligations
Balance at December 31, 2013	$	4,925		$	3,124		$	6,114		$	4,000
Issuance of additional debt					1,009
Conversion of notes and exercise of warrants into shares of common stock					(47	)		(7,052	)
(Gains) losses included in earnings (loss)		(4,609	)		(3,156	)		1,472			(3,400	)
Balance at December 31, 2014	$	316		$	930		$	534		$	600	**

8. STOCKHOLDERS’ DEFICIT

** Includes $160,000 and $60 thousand of current royalty obligations included in accounts payable and accrued expenses at December 31, 2014 and 2013, respectively.Preferred Stock

~~Bifurcated~~On October ~~Option~~31, in2014, the Company entered into agreements with Mr. Silverman and Mr. Geissler, officers of the Company, whereby Messrs. Silverman and Geissler agreed to convert amounts owed to them by the Company of $1.4 million and $441,000, respectively, into a total of 1,841 shares of the Company’s newly designated Series D Convertible ~~Notes~~Preferred Stock, 2,000 shares designated, par value $0.01 per share (the “Series D Preferred Stock”) with a stated value of $1,000 per share. Since the shares were issued to related party officers any gain was recorded as temporary equity resulting in a total credit to temporary equity equal to the settled debt amount of $1.841 million. The Series D Preferred Stock issued under this agreement will vest on January 1, 2017 and will automatically vest upon a change of control event.

AtAbsent ~~December~~a ~~31,~~change ~~2013,~~of ~~the~~control ~~fair~~or ~~value~~certain ofother transformational events, the ~~bifurcated~~Series ~~embedded~~D ~~option~~Preferred ofStock, the ~~convertible~~terms ~~notes~~of ~~was~~which ~~estimated~~were ~~using~~amended aon ~~Monte~~May ~~Carlo~~13, ~~simulation~~2015, ~~model~~will ~~with~~convert ~~the~~on ~~following~~January ~~inputs:~~2, ~~market~~2017 ~~price~~(immediately after ~~$2.29,~~it ~~term~~vests) ~~0.92~~into ~~years,~~shares ~~standard~~of ~~deviation~~the ~~0.18~~Company’s ~~and~~common stock at a conversion price ~~$0.75.~~per Atshare ~~December~~equal to the lesser of $31,000 per ~~2014,~~share or the ~~inputs~~average toclosing price of the ~~binomial~~common ~~lattice~~stock ~~model~~for ~~included:~~any ~~(i)~~5 ~~stock~~consecutive ~~price~~trading ofdays ~~$0.13~~occurring ~~per~~between ~~share~~March 12, ~~(ii)~~2015 and ~~volatility~~the ofconversion ~~58%~~date, ~~(iii)~~which ~~risk~~5-~~free~~day ~~interest~~period ~~rate~~is ofelected ~~0.89%,~~by ~~(iv)~~the ~~strike~~holder ~~price~~in oftheir $0conversion notice.~~94,~~ ~~and~~The ~~(v)~~Series anD ~~expected~~Preferred ~~term~~Stock is entitled to ~~liquidity~~vote along with shares of ~~1.0~~common ~~year~~stock. The ~~binomial~~number ~~lattice~~of ~~model~~votes ~~considered~~that a holder of the ~~conversion~~Series ~~price~~D asPreferred Stock is able to cast is equal to the ~~minimum~~number of: ~~(i)~~common shares that the ~~conversion~~Series ~~price~~D ~~adjusted~~Preferred ~~upon~~Stock awould ~~future~~convert ~~financing~~into on any record date for any shareholder vote. At December 31, ~~and~~2015, ~~(ii)~~the aSeries ~~variable~~D ~~price~~Preferred ~~based~~Stock onis ~~60%~~convertible into an aggregate of ~~the~~46,964,286 shares of common stock, ~~price~~subject atto ~~the~~adjustment ~~date~~for ofstock asplits ~~future~~or ~~conversion~~stock combinations.

~~Warrant~~In the ~~Liabilities~~event that the Company did not have a sufficient number of authorized shares to effect the conversion of all of the outstanding Series D Preferred Stock into common stock prior to April 2, 2017, then the Company is required to redeem all of the outstanding shares of Series D Preferred Stock for cash, based on the value of the shares of common stock that would otherwise have been issued. This amount may exceed stated value but is unknown until this date occurs. Because the circumstances under which the Company may be required to redeem the Series D Preferred Stock for cash remains contingent but is potentially within the Company’s control, the stated value of the Series D Preferred Stock is classified outside of permanent equity in the Company’s consolidated balance sheet as of December 31, 2015 and 2014.

At December 31, 2013, the fair value of the warrant liability was based on the Black Scholes model and using the following assumptions: expected term of 4.87 years, expected volatility of 155%, risk-free interest rate of 1.75%, and expected dividend yield of 0%. At December 31, 2014, the inputs to the binomial lattice model included: (i) stock price of $0.13 per share, (ii) volatility of 58%, (iii) risk-free rate of 0.89%, (iv) strike price of $0.90, and (v) an expected term to liquidity of approximately 1.0 year. The binomial lattice model considered the conversion price as the minimum of: (i) the strike price adjusted upon a future financing, and (ii) the strike price as of December 31, 2014.

F-17

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

~~Convertible~~As of ~~Note~~December ~~Payable~~31, 2015, the Company has authorized 5 million shares of preferred stock, par value $0.01 per share, with 1,841 shares of Series D Preferred Stock issued and outstanding. On April 29, 2016, Mr. Silverman transferred his Series D shares to ~~SNC~~a ~~Holdings~~third party ~~Corp~~lender of the Company and Mr. Geissler relinquished his shares of Series D Preferred Stock and there remained 1,400 outstanding shares of Series D Preferred Stock as of that date.

At December 31, 2013, the convertible note payable to SNC Holdings Corp. has been valued based on the market value of the shares of the Company’s common stock into which the note is convertible into. Due to the decline in the Company’s stock price at December 31, 2014, the fair value of the convertible note payable to SNC Holdings Corp. was estimated using inputs to the OPM which included: (i) total enterprise value of $2.5 million, (ii) volatility of 136%, (iii) risk-free rate of 0.89%, and (iv) an expected term to liquidity of 1.0 year.

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 estimated royalty obligations decreased in 2014 due to the lack of performance of the related assets purchased, and an impairment charge was also recorded for the related intangible assets.

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.

9. STOCKHOLDERS’ DEFICIT

Preferred Stock

Upon the closing of the VeriTeQ transaction on July 8, 2013, VAC exchanged all of its issued and outstanding shares of common stock for 410,759 shares of its Series C Preferred Stock. Each share of Series C Preferred Stock was automatically converted into 0.02 shares of VC’s common stock upon the effectiveness of the 2013 Reverse Stock Split.

On October 31, 2014, the Company entered into agreements with Mr. Silverman and with Randolph Geissler, the Company’s President, whereby Messrs. Silverman and Geissler agreed to convert amounts owed to them by the Company of $1.4 million and $441,000, respectively, into a total of 1,841 shares of the Company’s newly designated Series D Convertible Preferred Stock, par value $0.01 per share (the “Series D Preferred Stock”). The Series D Preferred Stock issued under this agreement will vest on January 1, 2017. If Mr. Silverman or Mr. Geissler separate from the Company because of a termination for cause or by resigning without good reason, as defined under the terms of their respective employment agreements, then they shall forfeit the shares of Series D Preferred Stock acquired under this agreement. The Series D Preferred Stock will automatically vest upon a change of control event.

In the event that the Company does not have a sufficient number of authorized shares to effect the conversion of all of the outstanding Series D Preferred Stock into common stock prior to April 2, 2017, then the Company is required to redeem all of the outstanding shares of Series D Preferred Stock for cash, based on the value of the shares of common stock that would otherwise have been issued. Because the circumstances under which the Company may be required to redeem the Series D Preferred Stock for cash remains contingent but is potentially within the Company’s control, the stated value of the Series D Preferred Stock is classified outside of permanent equity in the Company’s consolidated balance sheet as of December 31, 2014.

F-18

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2014 and 2013

As of December 31, 2014, the Company has authorized 5 million shares of preferred stock, par value $0.01 per share, with 1,841 shares of Series D Preferred Stock outstanding.

Common Stock

InAs previously ~~July~~discussed ofin ~~2013~~note 1, the ~~Company~~February ~~issued~~2015 41Reverse ~~shares~~Stock ofSplit ~~common~~became ~~stock~~effective toon anFebruary ~~investment~~11, ~~advisory~~2015, ~~firm~~and ~~for~~the ~~services~~July ~~rendered~~2015 Reverse ~~for~~Stock anSplit ~~aggregate~~became ~~value~~effective ofon ~~$62~~July 29,~~500~~ 2015. ~~The~~All ~~shares~~share, ~~were~~per ~~valued~~share atand ~~the~~capital ~~fair~~stock ~~market~~amounts ~~value~~have been retroactively restated as of December 31, 2015 and 2014 to give effect to the reverse stock onsplits. In conjunction with the ~~date~~effectiveness of the ~~issuance~~July ~~which~~2015 ~~was~~Reverse $1Stock Split,~~500~~ ~~per~~the ~~share.~~number of common shares that the Company is authorized to issue increased to 100 billion.

InOn April ~~October~~20, ~~and November of 2013~~2015, the Company ~~issued~~sold ~~163~~526 shares of its common stock to ~~three~~a ~~investor~~director ~~relation~~of ~~firms~~the ~~for~~Company ~~services rendered~~ for ana ~~aggregate~~purchase ~~value~~price of ~~approximately~~ $~~353~~10,000. The ~~shares~~purchase ~~were~~price ~~valued~~was atbased on the ~~fair~~closing ~~market~~price ~~value~~ of the Company’s common stock on ~~the~~April ~~dates of issuance which were $2~~19,~~700,~~ ~~$2,100 and $2,000 per share~~2015.

On April 22, 2015, the Company sold 666 shares of its common stock to Mr. Silverman for $10,000. The purchase price was based on the closing price of the Company’s common stock on April 21, 2015.

On May 12, 2015, a director of the Company converted outstanding amounts owed to him in the amount of $32,101, into 10,700 shares of common stock. The number of shares issued was based on the closing price of the Company’s common stock on May 11, 2015.

During the year ended December 31, 2015, 487,978 shares of common stock were issued upon the conversion of $658,193 of notes payable and accrued interest, 223,818 shares of common stock were issued upon the cashless exercise of warrants with $11,135 of warrant liabilities reclassified into equity and $167,600 of derivative liabilities related to the embedded conversion option in convertible notes payable were reclassified into equity.

As of December 31, 2015, the Company had 100 billion shares of common stock authorized and 723,718 shares were issued and outstanding.

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 were reserved for issuance.

The Company filed 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 August 27, 2014.

In July of 2014, the Company entered into consulting and advisory agreements with three separate entities providing investment and advisory and investor relations services. In connection with these agreements, the Company issued an aggregate of 1,550 shares (prior to adjustment for the July 2015 Reverse Stock Split) to these service providers valued at approximately $336,000 which was expensed over the same periods in 2014.

During the year ended December 31, 2014, the Company issued ~~66,071~~6 shares of common stock to warrant holders upon the cashless exercise of outstanding warrants or under Right to Shares agreements entered into with certain holders of the November 2013 Warrants, and 363 shares (prior to adjustment for the July 2015 Reverse Stock Split) of common stock upon the cashless exercise of outstanding stock options. As a result, $7,052,249 of warrant liabilities were reclassified into equity.

~~On December 18,~~ During 2014, the Company ~~filed~~issued an23 ~~amendment to its Amended and Restated Certificate of Incorporation increasing the number of~~ shares of common stock ~~which~~upon itconversion isof ~~authorized to issue from 500 million to 10 billion~~$916,589 ~~and to decrease the par value~~ of ~~the~~convertible ~~Company’s~~promissory ~~common~~notes ~~stock~~and ~~from~~accrued $0interest.~~01 per share to $0.00001 per share. The amendment was approved by the Company’s stockholders on December 18, 2014.~~

AsOn December ~~previously~~18, ~~discussed~~2014, inthe ~~note~~Company 1,filed an amendment to ~~the~~its ~~Company’s~~ Amended and Restated Certificate of Incorporation increasing the number of shares of common stock which it is authorized to ~~effect~~issue ~~the~~from ~~1:1~~500 million to 10 billion,~~000~~ ~~Reverse~~to ~~Stock~~decrease ~~Split~~the ~~became~~par ~~effective~~value onof ~~February~~the ~~11,~~Company’s common ~~2015.~~stock ~~All~~from ~~share,~~$0.01 per share ~~and~~to ~~capital~~$0.00001 ~~stock~~per ~~amounts~~share ~~have~~and ~~been~~to ~~restated~~increase asthe number of ~~and~~shares ~~for~~issuable under the ~~years~~Company’s 2014 ~~ended~~Stock ~~December~~Incentive ~~31,~~Plan ~~2014~~from ~~and~~50 ~~2013~~million to ~~give~~500 ~~effect~~million. toThe amendment was approved by the ~~Reverse~~Company’s ~~Stock~~stockholders ~~Split~~on December 18, 2014.

~~As of December 31, 2014, the Company had 10 billion shares of common stock authorized and 306,646 shares of common stock were outstanding.~~ F-18

F-19

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

On February 24, 2015, in accordance with the terms of the 2014 Plan, the Company’s board of directors approved a decrease in the number of shares reserved for issuance under the 2014 Plan from 500,000,000 to 250,000,000.

Warrants Deemed as Equity

~~Warrants~~As a result of the July 2015 Reverse Stock Split, the Company no longer has any warrants exercisable for shares of common stock and which qualify for equity treatment as of December 31, ~~2014 are as follows:~~ 2015.

Series/ Issue Date	Outstanding as of December 31, 2013		Exercised			Outstanding as of December 31, 2014		Exercise Price		Exercisable Period (years)
Series A /June 2012		95		(95	)		-	$	370.00
Series B / September 2012		39		-			39	$	1,572.06		3
Series C / October 2012		19		-			19	$	1,572.06		3
Series C / October 2012, reset May 2014		19		-			19	$	350.00		3
Series D / December 2012		14		-			14	$	1,572.06		5
Series E /December 2012		28		-			28	$	1,572.06		5
Series F / March 2013		39		-			39	$	1,572.06		3
Series G / April 2013		47		-			47	$	1,310.05		3
Series G / April 2013, reset May 2014		47		-			47	$	350.00		3
Series H / June 2013		61		-			61	$	1,572.06		3
Series H / June 2013, reset May 2014		19		-			19	$	350.00		3
Series I/May 2014		300		-			300	$	350.00		3
Series J/May 2014		100		-			100	$	350.00		2
Total		827		(95	)		732

Warrants Deemed as Liabilities

~~The~~On November ~~Series~~13, A2013, ~~warrant~~in ~~was~~connection with the issuance of the November 2013 Notes, the Company issued the November 2013 Warrants, which are more fully described in ~~connection~~Note ~~with~~5. aThe November 2013 Warrant agreements provide that if the Company were to issue or sell any shares of its common stock, ~~subscription~~except ~~agreement~~certain specified issuances pursuant to anthe ~~investor~~Company’s stock plans or the issuance of common stock pursuant to agreements existing on November 13, 2013, at a price per share 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. ~~The~~If there ~~Series~~is Aan ~~warrant~~adjustment ~~was~~to ~~exercised~~the exercise price as a result of any of the dilution events specified in ~~February~~the ~~2014~~Warrant ~~under~~agreements, the number ~~cashless~~of shares of common stock that may be purchased upon exercise ~~provisions~~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 ~~warrants.~~same as the aggregate exercise price in effect immediately prior to such adjustment (without regard to any limitations on exercise).

~~The~~In conjunction ~~Series B, C, D, E, F, G and H warrants were issued in connection~~ with ~~promissory~~Magna’s ~~notes.~~purchase ~~These~~of ~~warrants are exercisable at any time during~~ the ~~exercisable~~$500,000 ~~periods. The warrant agreements provide for the number~~ of ~~shares~~Senior toNotes befrom ~~adjusted in~~ the ~~event~~previous ofholders aon ~~stock~~November ~~split~~10, ~~a reverse stock split~~2015, a ~~share~~portion of ~~exchange~~the orNovember ~~other~~2013 ~~conversion~~Warrants orwere ~~exchange~~cancelled. ~~event~~As ina ~~which~~result ~~case~~of the ~~number~~issuances of ~~warrants~~promissory ~~and~~notes ~~the~~with ~~exercise~~variable conversion price formulas ofover the ~~warrants~~course ~~shall~~of befiscal ~~adjusted~~2014 onand a2015, ~~proportional~~the ~~basis.~~reset ~~The~~provisions ~~total~~under ~~value~~the terms of ~~these~~ warrants ofwere ~~approximately $0~~triggered.3 ~~million was~~Because ~~amortized~~the variable toprice ~~interest~~formula ~~expense~~changes ~~over~~with the ~~life~~value of the ~~promissory~~Company’s ~~notes.~~common ~~The~~stock, ~~promissory~~the ~~notes~~number ~~were~~of ~~converted~~shares ~~into~~subject ~~common~~to ~~stock~~warrant ~~during 2013~~varies. As of aDecember ~~result~~31, of2015, ~~the~~if ~~issuances~~all of ~~two~~the ~~promissory~~remaining ~~notes~~November on2013 ~~May~~Warrants ~~30,~~had ~~2014,~~been ~~and~~exercised under the ~~terms~~alternative ofprice ~~a promissory note issued on March 20, 2014,~~ formulation the ~~exercises~~number ~~prices~~ of ~~one-half~~shares of the ~~Series~~Company’s C,common Gstock ~~and~~that Hwould ~~warrants~~have ~~were~~been ~~reduced~~issued towould ~~$350~~have ~~per~~been ~~share~~33,895,080 ofshares ~~common~~based ~~stock~~on an ~~from~~ exercise ~~prices~~price ~~ranging from~~ of $~~1,310~~0.057 ~~to $1,570~~ per share~~. The Company recorded non-cash interest expense of approximately $7~~,~~000~~ ~~during~~subject ~~the~~to ~~year~~adjustment ~~ended~~for ~~December 31, 2014 as a result of~~ the ~~reductions~~cashless ~~in the~~ exercise ~~prices of the warrants~~provisions.

~~The~~During the ~~Series~~year Iended ~~and~~December J31, ~~warrants~~2015, ~~were~~the Company issued inthe ~~connection~~March ~~with~~2015 ~~promissory~~Warrant ~~notes~~(see ~~issued~~note on5). The March ~~20,~~2015 ~~2014~~Warrant ~~and~~is ~~May~~exercisable at 1,any ~~2014,~~time ~~respectively.~~until Asthree ayears ~~result~~after of the ~~issuances~~date of ~~two~~issuance. ~~promissory~~The ~~notes~~terms onof ~~May 30, 2014, provisions under~~ the ~~notes~~warrant ~~issued~~provides onfor ~~March~~a ~~20,~~proportional ~~2014,~~downward ~~and~~adjustment of ~~May~~the 1,exercise ~~2014~~price ~~requiring~~in the ~~issuances~~event ofthat ~~these~~the ~~warrants~~Company ~~were~~issues ~~triggered.~~or ~~The~~sells, ~~warrant~~or ~~agreements~~is ~~provide~~deemed ~~for the number of shares~~ to behave ~~adjusted~~issued inor ~~the~~sold, ~~event~~shares of acommon stock at ~~split,~~an aissuance ~~reverse~~price ~~stock~~that ~~split,~~is aless ~~share~~than ~~exchange~~the ormarket ~~other~~price ~~conversion~~of orthe ~~exchange~~common ~~event~~stock inat ~~which case~~ the ~~number~~time of ~~warrants~~issuance, ~~and~~as ~~the~~defined ~~exercise~~in ~~price of~~ the ~~warrants~~warrant agreement. ~~will~~The beCompany ~~adjusted~~determined onthat athe ~~proportional basis. The relative~~ fair value of ~~these~~the ~~warrants~~March of2015 ~~approximately $0.1~~Warrant ~~million is~~was ~~being~~de ~~amortized~~minimus toat ~~interest expense over~~ the ~~life~~time of ~~the~~issuance ~~promissory~~and ~~notes~~at December 31, 2015.

The terms ~~Company~~of ~~determined~~the March 2015 Warrant and the ~~value~~November 2013 Warrants are such that they do not qualify for equity treatment under ASC 815 and are classified as liabilities at December 31, 2015 and 2014. The carrying amount of the ~~warrants~~warrant ~~issued~~liabilities inapproximate management’s ~~2013~~estimate of their fair value (see note 7) and were determined to be $1.4 million and $1.8 million at December 31 2015 and 2014, onrespectively. ~~the~~The ~~issuance/reset~~Company ~~dates~~recognized ~~utilizing~~expense ~~the~~of ~~following~~approximately ~~assumptions~~$0.3 million and $2.7 million in the ~~binomial~~years ~~valuation~~ended December ~~model:~~31, 2015 and 2014, respectively as a result of the change in fair value of the November 2013 Warrants.

Dates Warrants Issued/Reset	Dividend Yield			Volatility			Expected Lives (Yrs.)		Risk-Free Rate			Date of the Assumptions
October 2012, reset May 2014		0.00	%		223.00	%		1.37		.10	%	May 30, 2014
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
September 2013		0.00	%		126.00	%		3		.52	%	September 1, 2013
September 2013, reset May 2014		0.00	%		215.00	%		2.01		.37	%	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	%

Stock Options and Restricted Stock

In accordance with the Compensation – Stock Compensation Topic of the FASB Codification, awards of stock options are measured at fair value on the date of grant and compensation cost is recognized on a straight line basis over the service period of each award. Upon exercise of stock options, the Company’s policy is to issue new shares from its authorized but unissued balance of common stock outstanding that have been reserved for issuance under the Company’s stock option plans.

On August 13, 2015, the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) granted 100,000,000 shares of restricted common stock to executive officers of the Company and options to purchase 123,500,000 shares of the Company’s common stock to employees and directors of the Company. These grants were under the Company’s 2014 Stock Incentive Plan. Also on August 13, 2015, the Compensation Committee granted an additional 150,000,000 shares of restricted common stock to certain executive officers and a director. The restricted common stock were to have vested on January 2, 2017 or upon a change of control. On April 28, 2016, all of the recipients of the restricted stock grants agreed to relinquish their shares and rescind their grants in their entirety. As a result, in accordance with ASC 718, no compensation expense was recorded for the restricted stock grants and the shares were not reflected as outstanding as of December 31, 2015.

F-19

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

The stock options vested on the date of grant and expire ten years from the date of grant. The stock options were valued at the date of grant using the Black-Scholes valuation model, with the following assumptions: risk-free interest rate of 2.19%, dividend yield of 0% and volatility of 694.91%. For the year ended December 31, 2015, the Company recorded compensation expense of $4.4 million with respect to the stock options. There were no exercises, forfeitures, cancellations or additional grants of stock options during the year ended December 31, 2015. Stock-based compensation expense is reflected within Selling, general and administrative expenses in the accompanying consolidated statements of operations. As of December 31, 2015, the intrinsic value of the outstanding stock options was approximately $11.1 million.

At December 31, 2014, options to purchase 2,203 shares of common stock (prior to adjustment for the July 2015 Reverse Stock Split) were outstanding. These options were no longer outstanding upon the effectiveness of the July 2015 Reverse Stock Split.

On June 17, 2014, the Company issued 650 shares of restricted stock (prior to adjustment for the July 2015 Reverse Stock Split) to a director in connection with his appointment to the Company’s board of directors, of which 150 shares vested on January 2, 2015. The remaining shares were forfeit in 2015 due to this director’s resignation from the board of directors on January 28, 2015. In January 2013, the Company issued approximately 900 shares of restricted common stock (prior to adjustment for the July 2015 Reverse Stock Split) to a member of its senior management. This restricted stock vested in full on January 1, 2015. The total value of the restricted stock of approximately $1.5 million was expensed over the vesting period. During the year ended December 31, 2014, the Company recorded $0.8 million in compensation expense related to the restricted stock.

During 1999, the Company adopted the 1999 Flexible Stock Plan and the 1999 Employees’ Stock Purchase Plan. During 2002 the Company adopted the Digital Angel Corporation Transition Stock Option Plan. During 2003, the Company adopted the 2003 Flexible Stock Plan. No options remain outstanding under these plans and the plans were terminated in February of 2015. The following table displays the Company’s stock option activity for the years ended December 31, 2015 and 2014:

	Options Quantity		Weighted average exercise price
Options outstanding as of December 31, 2013 (after giving effect ot the July 2015 Reverse Stock Split)		-	$	-
Options granted		-		-
Options exercised		-		-
Forfeitures		-		-
Options outstanding as of December 31, 2014		-		-
Options granted		123,500,000		0.036
Options exercised		-
Forfeitures		-
Options outstanding as of December 31, 2015		123,500,000	$	0.036

9. INCOME TAXES

The Company did not have an income tax provision or benefit for the years ended December 31, 2015 and 2014. The Company has incurred losses and therefore has provided a valuation allowance of approximately $5.3 million against net deferred tax assets as of December 31, 2015.

F-20

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

~~Warrants~~The tax ~~Deemed~~effects asof ~~Liabilities~~temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following:

On November 13, 2013, in connection with the issuance of the November 2013 Notes, the Company issued the November 2013 Warrants, which are more fully described in Note 6. The November 2013 Warrant agreements provide that if the Company were to 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 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. 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).

	2015			2014
Deferred tax assets:
Accrued compensation and stock-based compensation	$	2,007		$	1,652
Accrued liabilities and other		1,255			671
Net operating loss carryforwards		2,018			4,151
Gross deferred tax assets		5,280			6,474
Valuation allowance		(5,280	)		(5,908	)
Deferred tax liabilities:
Amortization of intangible assets		—			(566	)
Gross deferred tax liabilities		—			(566	)
Net Deferred Tax Assets	$	—		$	—

AsThe valuation aallowance ~~result~~for ofdeferred ~~the~~tax ~~issuances~~assets ofdecreased ~~promissory~~by ~~notes~~$0.6 ~~with~~million ~~variable~~and ~~conversion~~increased ~~price~~by ~~formulas over the course of fiscal 2014, the reset provisions under the terms of warrants were triggered~~$3.0 ~~Because~~million ~~the~~in ~~variable price formula changes with~~ the ~~value~~years ofended ~~the Company’s common stock~~December 31, ~~the~~2015 ~~number~~and ~~of shares subject to warrant varies. As of December 31~~2014, ~~2014~~respectively, ifprimarily ~~all~~due ofto the ~~remaining~~disposal ~~November 2013 Warrants had been exercised under the alternative price formulation the number~~ of ~~shares of~~ the Company’s ~~common~~VAC ~~stock~~subsidiary ~~that~~and ~~would~~related ~~have~~deferred ~~been~~tax assets ~~issued~~that ~~would~~were ~~have~~not ~~been 3,231,868 shares based on an exercise price of $0~~realized.~~90 per share, subject to adjustment for the cashless exercise provisions.~~

At December 31, 2015, the Company had U.S. net operating loss carryforwards of approximately $5.2 million for income tax purposes, which expire in varying amounts through 2035. The ~~terms~~amount of ~~the~~any ~~November~~benefit ~~2013~~from ~~Warrants~~the ~~are~~Company’s ~~such~~U.S. ~~that~~tax ~~they~~net dooperating ~~not~~losses is ~~qualify~~dependent ~~for~~on: ~~equity~~(1) its ~~treatment~~ability ~~under~~to ~~ASC~~generate ~~815~~future taxable income, and ~~are~~(2) the ~~classified~~unexpired asamount ~~liabilities~~of innet ~~accordance~~operating ~~with~~loss carryforwards ~~ASC~~available ~~480~~to atoffset ~~December~~amounts ~~31,~~payable ~~2014~~on ~~and~~such ~~2013~~taxable income. ~~The~~Any ~~carrying~~change ~~amount~~in ofownership greater than fifty percent under IRC section 382 places significant annual limitations on the ~~warrant~~use ~~liabilities~~of ~~approximate~~the ~~management~~Company’s ~~estimate~~U.S. net operating losses to offset future taxable U.S. income that may be generated. As a result of ~~their~~the ~~fair~~VeriTeQ ~~value~~acquisition, ~~(see~~which ~~note~~was 8)a tax-free reorganization, the Company exceeded the 50 percent threshold and ~~were~~as ~~determined~~a result, effective on the closing date of the VeriTeQ transaction, VC’s U.S. net operating losses became limited to beapproximately $0.5 million ~~and~~in $6the aggregate.1 ~~million~~Accordingly, atthe ~~December~~Company 31eliminated ~~2014~~all ~~and~~prior loss ~~2013,~~carryforwards ~~respectively.~~generated ~~The~~by ~~Company~~VC ~~recognized~~in ~~expense~~excess of ~~approximately~~the $1amount not currently limited.5 In addition, net operating losses totaling $5 million inwere removed due to the ~~year~~disposal ~~ended~~of ~~December~~VAC ~~31,~~in ~~2014~~2015. asCertain future transactions could cause a ~~result~~greater than 50% ownership change in the future, including (a) additional issuances of shares of common stock by the ~~change~~Company or (b) acquisitions or sales of shares by certain holders of the Company’s stock, including persons who have held, currently hold, or accumulate in ~~fair~~the ~~value~~future five percent or more of the ~~November~~Company’s ~~2013~~outstanding ~~Warrants~~stock.

~~Restricted~~The reconciliation ~~Stock~~of ~~Grants~~the effective tax rate with the statutory federal income tax (benefit) rate is as follows:

On June 17, 2014, the Company issued 650 shares of restricted stock to a director in connection with his appointment to the Company’s board of directors, of which 150 shares vested on January 2, 2015. The remaining shares were forfeit in 2015 due to this director’s resignation from the board of directors on January 28, 2015. In January 2013, the Company issued approximately 900 shares of restricted common stock to a member of its senior management. This restricted stock vested in full in January 2015. The total value of the restricted stock of approximately $1.5 million was expensed over the vesting period. During the years ended December 31, 2014 and 2013, the Company recorded $0.8 million and $0.7 million, respectively, in compensation expense related to the restricted stock.

	2015			2014
	%			%

Statutory tax/(benefit) rate		(35	)		(35	)
State income taxes, net of federal benefits		(2	)		(4	)
Non-deductible interest and other permanent items		16			(8	)
Other permanent differences		9			—
Change in deferred tax asset valuation allowance		(5	)		47
Removal of net operating loss on disposal of VAC subsidiary		17			—
		(—	)		(—	)

~~Stock~~The Company ~~Options~~did not have an unrecognized tax benefit at December 31, 2015 and 2014. The Company files income tax returns in the U.S. and in various states in which it operates. Separate federal and state tax returns for VC and VAC for the periods prior to the VAC discontinued operations and consolidated tax returns for subsequent periods will be filed. The Company has not yet filed its U.S. federal and certain state tax returns for VC for 2015 and 2014 and for VAC for 2014 and 2013, and does not currently have any examinations ongoing. Tax returns for the years 2011 onwards are subject to federal, state or local examinations.

In accordance with the Compensation – Stock Compensation Topic of the Codification, awards of stock options are recorded at fair value on the date of grant and compensation cost is recognized on a straight line basis over the service period of each award10. RELATED ~~Upon~~PARTY exercise of stock options, the Company’s policy is to issue new shares from its authorized but unissued balance of common stock outstanding that have been reserved for issuance under the Company’s stock option plans. TRANSACTIONS

~~During~~Included in ~~1999,~~accrued ~~the~~expenses ~~Company~~at ~~adopted~~December ~~the~~31, ~~1999~~2015 ~~Flexible~~and ~~Stock~~2014 ~~Plan~~are ~~and~~approximately ~~the~~$0.9 ~~1999~~million ~~Employees’~~and ~~Stock~~$0.8 ~~Purchase~~million, ~~Plan.~~respectively, ~~During~~owed ~~2002~~to the Company's officers ~~adopted~~and ~~the~~directors ~~Digital~~(see ~~Angel~~note ~~Corporation~~4). ~~Transition~~See ~~Stock~~note ~~Option~~5 ~~Plan~~for a discussion of related party notes payable. ~~During~~On ~~2003~~April 28, ~~the~~2016, ~~Company~~$0.6 ~~adopted~~million of the ~~2003~~amounts ~~Flexible~~owed ~~Stock~~to ~~Plan.~~officers ~~The~~as ~~options~~of ~~granted~~December ~~under~~31, ~~these~~2015 ~~plans~~were ~~have~~discharged ~~contractual~~by ~~terms~~written ~~ranging~~consent ~~from~~and ~~three~~the Company’s no longer has any obligation to ~~ten~~pay ~~years~~these amounts as of that date. AtThe ~~December~~written ~~31,~~consent ~~2014,~~also ~~options~~relieved ~~for~~the 31Company ~~shares~~of ~~are~~its ~~outstanding~~obligations under ~~these~~executive employment ~~plans,~~agreements with ~~72,447~~Mr. ~~shares~~Silverman ~~available~~and ~~for~~Mr. ~~future issuance~~Geissler.

F-21

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

~~The aggregate number of shares of the Company’s common stock that may be subject to awards under the 2013 Plan, subject to adjustment upon a change in capitalization, is 5,000,000 shares~~11. COMMITMENTS ~~Such~~AND shares of common stock may be authorized but unissued, or reacquired shares of common stock. Shares of common stock that were subject to plan awards that expire or become unexercisable without having been exercised in full shall become available for future awards under the 2013 Plan. At December 31, 2014, approximately 2,172 options are outstanding, and approximately 4,997,447 options remain available for issuance under the 2013 Plan.CONTINGENCIES

OnAs a ~~June~~result ~~18,~~of ~~2014,~~ the ~~Company’s~~foreclosure ~~stockholders~~and ~~adopted~~disposal of the ~~VeriTeQ~~Company’s ~~Corporation~~VAC ~~2014~~subsidiary ~~Stock Incentive Plan~~ (~~the~~see ~~“2014~~note ~~Plan”~~3)~~. The 2014 Plan has terms and provisions that are substantially similar to the 2013 Plan~~, ~~and~~approximately ~~provided~~$2.6 ~~for~~million ~~50,000,000 shares~~ of ~~common~~liabilities were ~~stock~~deconsolidated. toThere beis ~~reserved~~a ~~for~~possibility ~~awards~~that ~~under~~creditors ~~the~~could ~~2014~~pursue ~~Plan.~~claims Onagainst ~~December 18, 2014,~~ the Company’s ~~shareholders approved an increase~~ in ~~the~~connection ~~number~~with ofthese ~~authorized shares of common stock issuable under the 2014 Plan to 500,000,000 shares~~liabilities. ~~No grants have been awarded under the 2014 Plan.~~

~~The~~In connection ~~Company~~with ~~did~~the ~~not~~Stock ~~grant~~Purchase ~~any~~Agreement ~~stock~~entered ~~incentive~~into ~~awards~~on ~~during~~November ~~the~~25, ~~year~~2015 ~~ended~~(see ~~December~~note 3115), ~~2014.~~the ~~During~~Company entered into a consulting agreement with a third party under which the ~~year~~Company ~~ended~~is ~~December~~required 31to pay a consulting fee of $50,000 ~~2013~~upon the ~~Company~~closing ~~granted~~of 1the transaction,~~050~~ and ~~options~~to ~~with~~issue a ~~weighted~~3 ~~average~~year ~~fair~~warrant ~~value~~to purchase 2.99% of the Company’s common stock at an exercise price of $~~1,333~~0.01 per share with a cashless exercise provision to the consultant.

~~The~~In March ~~Company accounts for its stock-based compensation plans in accordance with ASC 718-10~~2013, ~~Compensation~~VC –appointed ~~Stock~~a ~~Compensation.~~liquidator ~~Under~~and ~~the~~initiated ~~provisions of ASC 718-10,~~ the ~~fair~~formal ~~value~~liquidation of ~~each~~its ~~stock~~U.K. ~~option~~subsidiary, isSignature ~~estimated~~Industries ~~on the date of grant using a BSM option-pricing formula~~Limited (“Signature”), ~~and~~primarily ~~amortizing~~related ~~that value~~ to ~~expense~~its ~~over~~outstanding ~~the expected performance or service periods using the straight-line attribution method~~liabilities. ~~The~~VC ~~weighted average values of the assumptions~~ used to£40,000 ~~value~~(approximately ~~the options granted in the year ended December 31~~$61,000) ~~2013 were as follows: expected term~~ of the 5proceeds ~~years,~~from ~~expected~~the ~~volatility~~sale of ~~126%,~~Signature’s ~~risk-free~~former ~~interest rates of 0.83%~~division, ~~and~~Digital ~~expected~~Angel ~~dividend~~Radio ~~yield~~Communications ofLimited ~~0%.~~(“DARC”) to ~~The~~satisfy ~~expected~~its ~~life~~estimated ~~represents~~portion ~~an estimate~~ of ~~the~~Signature’s ~~weighted~~outstanding ~~average~~liabilities. ~~period~~However, ofadditional ~~time~~claims ~~that~~submitted ~~options are expected~~ to ~~remain~~the ~~outstanding~~liquidator could ~~given~~result ~~consideration~~in ~~to vesting schedules and~~ the Company’s ~~historical~~being ~~exercise~~required ~~patterns.~~to ~~Expected~~pay ~~volatility~~additional isamounts ~~estimated~~to ~~based~~cover onits ~~the~~share ~~historical volatility~~ of ~~similar companies~~Signature’s ~~common~~outstanding ~~stock~~liabilities. The ~~risk~~Company ~~free~~has ~~interest rate is~~ estimated ~~based~~and onrecorded ~~the~~a ~~U.S.~~potential ~~Federal~~additional ~~Reserve’s~~liability ~~historical data for the maturity~~ of ~~nominal~~approximately ~~treasury instruments that corresponds to the expected term of the option~~$159,000. The ~~expected~~Company ~~dividend yield~~ is 0%not ~~based~~aware onof any ~~the~~claims ~~fact~~through ~~that~~ the ~~Company~~date ~~has~~of ~~never~~this ~~paid dividends and has no present intention to pay dividends~~report.

~~During~~On January 30, 2014, the ~~years~~Company ~~ended~~and ~~December~~the 31buyers of DARC entered into a letter agreement under which the Company agreed to accept a payment of £62,000 ~~2014~~(USD 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, the Company recorded, ~~nil~~a ~~and~~loss on the settlement of this receivable of approximately USD $~~1.4~~55,000 ~~million~~in the year ended December 31, ~~respectively~~2014, which is reflected in ~~compensation~~Other ~~expense~~expenses ~~related~~in tothe ~~stock~~Company’s ~~options~~consolidated ~~granted~~statement of tooperations. ~~its~~All ~~directors~~of the other provisions (including, ~~employees~~without limitation, the indemnities) agreed between VC, and/or ~~consultants.~~the Buyers under the stock purchase agreement and any related documents remain in full force and effect.

In October 2015, the Company executed five Consent and Release Agreements with five different noteholders. The ~~following~~related ~~summary~~notes ~~presents~~totaled $755,620. ~~information~~The ~~regarding~~Company’s ~~outstanding~~interpretation ~~options~~of asthe Consent and Release Agreements was that all the associated debt related to these note holders was forgiven. The noteholders allege the debt is still outstanding. As of December 31, ~~2014~~2015 ~~and~~the ~~2013~~debt ~~and~~is ~~changes~~recorded on ~~during~~the books of the ~~years~~Company ~~then~~until ~~ended~~this ~~with~~dispute ~~regard~~is resolved. Subsequent to ~~all~~year ~~options:~~ end, in April 2016, one of the noteholders forgave $319,000 of his notes in connection with a separate release agreement.

	2014					2013
	Number of Options			Weighted- Average Exercise Price		Number of Options			Weighted- Average Exercise Price
Outstanding on January 1		2,628		$	9,010		1,531		$	310
Granted		—			—		1,050			1,570
Exercised		(382	)		52		—			—
Assumed in VC acquisition		—			—		75			344,150
Effect of fractional shares resulting from the Reverse Stock Split		(32	)		—		—			—
Forfeited or expired		(11	)		527,223		(28	)		151,640
Outstanding at December 31		2,203			5,188		2,628			9,010
Exercisable at December 31		2,203			5,188		1,579			13,950
Vested or expected to vest at December 31(1)		2,203			5,188		2,628			9,010
Shares available on December 31 for options that may be granted		505,070					2,503

12. LEGAL PROCEEDINGS

~~(1)~~We have ~~The~~been ~~weighted~~informed ~~average~~by ~~remaining~~the ~~contractual~~New ~~life~~Jersey Department of Environmental Protection that a subsidiary of a predecessor business, sold a building in 2006 for ~~exercisable~~which ~~options~~an environmental action has been claimed. The claim is 4being reviewed by the Company’s outside legal counsel.15 ~~years~~We ashave ofnot ~~December~~yet 31determined the impact on our financial condition or cash flows, ~~2014~~if any.

In February 2017 the Company received notice of a filing of a lawsuit from a party claiming rights as a partial assignee of debt held by a prior lender to the Company. The lawsuit alleges damages consisting of principal, interest and costs totaling $374,742. The Company has not determined the validity of the claim or potential defenses to the lawsuit. However, to the extent that the claim is based on notes from a lender of record of the Company, all appropriate amounts for principal and interest are believed to be recorded in the Company’s records as of the balance sheet date.

13. SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash investing and financing activities for the years ended December 31, 2015 and 2014 were as follows (in thousands):

	2015		2014
Supplemental disclosure of cash flow information:
Cash paid for interest		-		-
Cash paid for income taxes		-		-
Supplemental schedule of non-cash investing and financing activities:
Notes payable and accrued liabilities converted into common stock		658		917
Accrued liabilities satisfied through the issuance of convertible promissory notes to related parties		1,010		-
Cashless exercises of common stock warrants		11		7,052
Reclassification of derivative liability to equity upon conversion of notes payable		168		-
Discounts recorded for embedded conversion option liabilities of convertible notes		386		-
Cancellation of warrants treated as liabilities		657		-
Settlement of note through foreclosure		1,000		-
Accrued liabilities converted into preferred stock		-		1,841
Deferred financing fees paid through the issuance of convertible promissory notes		-		240

F-22

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

As14. RESTATEMENT ofOF ~~December~~PREVIOUSLY ~~31,~~ISSUED ~~2014,~~FINANCIAL there was no unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Company’s stock incentive plans, as all outstanding options at December 31, 2014 vested on January 1, 2014. STATEMENTS

~~The~~In the ~~following~~course ~~table~~of ~~summarizes~~preparing ~~information~~its ~~about~~consolidated ~~stock~~financial ~~options~~statements ~~outstanding~~for the year ended December 31, 2015, the Company determined that its derivative liabilities related to (i) the bifurcated option in the Company’s convertible promissory notes and (ii) the November 2013 Warrants (see note 7) for the year ended December 31, 2014 were not properly stated at fair value. This error resulted in an understatement in the derivative liability related to the bifurcated option in convertible notes in the amount of $1.2 million, an understatement in the warrant liabilities of $1.3 million and an understatement in net loss of $2.5 million as of and for the year ended December 31, 2014:. Additionally, the warrant liabilities should have been reflected as current liabilities rather than as non-current liabilities. Accordingly, the Company is restating its previously issued financial statements to reflect the fair value of these derivative liabilities and the classification of the warrant liabilities as of December 31, 2014 and for the change in these fair values recognized in the statement of operations for the year ended December 31, 2014. The effect of the restatement on each of the Company’s financial statements as of and for the year ended December 31, 2014 is as follows:

					Outstanding Options						Exercisable StockOptions
Range of Exercise Prices					Shares		Weighted- Average Remaining Contractual Life in Years		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
$	52	to	$	53		874		5.85	$	52		874	$	52
$	1,571	to	$	1,572		1,298		3.01		1,572		1,298		1,572
$	2,100	to	$	872,000		31		3.86		301,333		31		301,333
Total stock options						2,203		4.15		5,188		2,203		5,188

Consolidated Balance Sheet Data

~~9. INCOME~~(in ~~TAXES~~thousands)

The Company did not have an income tax provision or benefit for the years ended December 31, 2014 and 2013. The Company has incurred losses and therefore has provided a valuation allowance of approximately $5.9 million against net deferred tax assets as of December 31, 2014.

LIABILITIES AND STOCKHOLDERS' DEFICIT	As Previously Reported December 31, 2014			Correction			As Restated December 31, 2014
Current liabilities:
Liabilities for conversion options of convertible notes		930			1,198			2,128
Warrant liabilities at fair value		-			1,802			1,802
Total current liabilities		7,378			3,440			10,818
Warrant liabilities at fair value		534			(534	)		-
Total liabilities		8,638			2,466			11,104
Stockholders' deficit:
Accumulated deficit		(23,734	)		(2,466	)		(26,200	)
Total stockholders' deficit		(8,734	)		(2,466	)		(11,200	)

~~The~~Consolidated Statement ~~tax effects~~ of ~~temporary~~Operations ~~differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following:~~ Data

	2014			2013
Deferred tax assets:
Accrued compensation and stock-based compensation	$	1,652		$	1,580
Accrued liabilities and other		671			—
Net operating loss carryforwards		4,151			1,961
Gross deferred tax assets		6,474			3,541
Valuation allowance		(5,908	)		(2,905	)
Deferred tax liabilities:
Amortization of intangible assets		(566	)		(636	)
Gross deferred tax liabilities		(566	)		(636	)
Net Deferred Tax Assets	$	—		$	—

(in thousands, except per share data)

The valuation allowance for deferred tax assets increased by $3.0 million and $2.8 million in the years ended December 31, 2014 and 2013, respectively, due primarily to deferred tax assets not being realizable.

Other (income) expenses
Change in fair value of derivative and other fair valued instruments, net	(6,293	)	2,466		(3,827	)
Total other (income) expenses	(3,766	)	2,466		(1,300	)
Loss before income taxes	(3,910	)	(2,466	)	(6,376	)
Net loss	(3,910	)	(2,466	)	(6,376	)
Net loss per common share - basic and diluted	(524,654	)	(330,894	)	(855,548	)

AtConsolidated Statement ~~December 31, 2014, the Company had U.S. net operating loss carryforwards~~ of ~~approximately~~Stockholders' ~~$10.8~~Deficit million for income tax purposes, which expire in varying amounts through 2034. The amount of any benefit from the Company’s U.S. tax net operating losses is dependent on: (1) its 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 change in ownership greater than fifty percent under IRC section 382 places significant annual limitations on the use of the Company’s U.S. net operating losses to offset any future taxable U.S. income that may be generated. As a result of the VeriTeQ acquisition, which was a tax-free reorganization, the Company exceeded the fifty percent threshold and as a result, effective on the closing date of the VeriTeQ transaction, VC’s U.S. net operating losses became limited to approximately $0.5 million in the aggregate. Accordingly, the Company eliminated all prior loss carryforwards generated by VC in excess of the amount not currently limited. In addition, there may be limitations on VAC net operating losses under IRC Section 382 due to common stock issued since inception. Certain future transactions could cause a more than fifty percent ownership change in the future, including (a) additional issuances of shares of common stock by the Company or (b) acquisitions or sales of shares by certain holders of the Company’s stock, including persons who have held, currently hold, or accumulate in the future five percent or more of the Company’s outstanding stock. Data

(in thousands)

Net loss	(3,910	)	(2,466	)	(6,376	)
Accumulated deficit	(23,734	)	(2,466	)	(26,200	)
Total stockholders' deficit	(8,734	)	(2,466	)	(11,200	)

Consolidated Statement of Cash Flow Data

(in thousands)

Net loss	(3,910	)	(2,466	)	(6,376	)
Change in fair value of conversion options embedded in convertible notes	(3,156	)	1,197		(1,959	)
Change in fair value of warrants	1,472		1,269		2,741

F-23

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

~~The~~15. SUBSEQUENT ~~reconciliation of the effective tax rate with the statutory federal income tax (benefit) rate is as follows:~~ EVENTS

	2014			2013
	%			%
Statutory tax/(benefit) rate		(35	)		(35	)
State income taxes, net of federal benefits		(4	)		(4	)
Transaction costs not deductible		—			1
Non-deductible interest and other permanent items		(40	)		23
Change in deferred tax asset valuation allowance		79			15
		(—	)		(—	)

Issuance of Convertible Notes

~~The~~Between January ~~Company~~1, ~~did~~2016 ~~not~~and ~~have~~March an11, ~~unrecognized~~2016, ~~tax~~the ~~benefit~~Company atissued ~~December~~convertible ~~31, 2014~~promissory ~~and~~notes ~~2013.~~in ~~The~~the ~~Company~~aggregate ~~files~~principal ~~income~~amount ~~tax~~of ~~returns~~$95,493, for inwhich the ~~U.S.~~Company ~~and~~received $81,169 in ~~various~~proceeds, ~~states~~net inof ~~which~~original itissue ~~operates~~discounts. ~~Separate~~In ~~federal~~addition, ~~and~~the ~~state~~Company ~~tax~~issued ~~returns~~convertible promissory ~~for~~notes VCin ~~and~~connection ~~VAC~~with ~~for~~ the ~~periods~~proposed ~~prior~~acquisition toand ~~the~~other ~~VeriTeQ~~transactions ~~Transaction~~discussed ~~and~~below ~~consolidated~~in ~~tax~~the ~~returns~~aggregate ~~for~~principal amount ~~subsequent~~of ~~periods~~$147,059, ~~will~~$125,000 beof ~~filed.~~which ~~The~~was ~~Company~~paid ~~has~~to ~~not~~the ~~yet~~sellers ~~filed~~net ~~its~~of ~~U.S.~~original ~~federal~~discount ~~and~~of ~~certain~~$22,059. ~~state~~The ~~tax~~Company ~~returns~~received ~~for~~no VCcash proceeds ~~for~~with ~~2013~~the ~~and~~issuance ~~for~~of ~~VAC~~these ~~for~~notes. ~~2013~~On ~~and~~March ~~2012~~21, ~~and~~2016 ~~does~~the ~~not~~Company ~~currently~~issued ~~have~~an ~~any~~additional ~~examinations~~promissory ~~ongoing.~~note ~~Tax~~in ~~returns~~the ~~for~~principal amount ~~the~~of ~~years~~$23,529, ~~2010~~for ~~onwards~~which ~~are~~the ~~subject~~Company toreceived ~~federal~~$20,000 ~~state~~in orproceeds, ~~local~~net ~~examinations~~of original issue discount.

10On June 14, 2016, the Company issued additional promissory notes in the aggregate principal amount of $668,502, for which the Company received proceeds of $47,000, net of $53,000 paid directly to vendors and $5,000 of original issue discounts and $563,502 to consolidate and refinance certain previously issued promissory notes with the same lender aggregating $536,670. ~~RESTRICTED~~The ~~CASH~~ two lenders were also issued warrants for 1,565,286 and 291,667 common shares exercisable at $0.1755 and $0.1755 per share (with cashless exercise rights) which warrants expire on June 14, 2018. These notes are due one year after the date of issuance, bear interest at rates of 12% per annum, and are convertible into shares of common stock at the lesser of (i) $0.015 per share or (ii) 60% of the average of the three lowest trading prices of the Company’s common stock during the 10 days prior to conversion.

InOn August ~~connection with the issuance of the November 2013 Notes (see note 6)~~16, ~~approximately~~2016 ~~$750,000 of~~ the ~~proceeds~~Company ~~was~~issued ~~placed~~a inconvertible ~~restricted~~promissory ~~bank accounts in amounts proportionate to each Investor’s~~ note ~~balance.~~with ~~The~~a ~~restricted~~principal ~~funds~~amount ~~were to be utilized to pay any redemption or other payment due under the applicable note to the applicable holder from time to time. Pursuant to the terms~~ of ~~the financing~~$52,500 afor ~~portion~~which of the ~~restricted funds was to be released to the~~ Company ~~upon~~received $45,000 ~~any~~in ~~conversion~~proceeds net of ~~the~~original ~~notes~~issue ordiscount ~~at any time the balance~~ of ~~the~~$2,500 ~~funds~~and ~~placed~~deferred infinancing ~~the~~costs ~~restricted accounts by the note holders exceeds the principal~~ of ~~the~~$5,000. ~~applicable~~ This note ~~then~~is ~~outstanding.~~due Inone ~~accordance~~year ~~with~~after the ~~terms~~date of ~~the Purchase Agreement~~issuance, onbears ~~November~~interest ~~21,~~at ~~2013,~~a ~~upon~~rate ~~the~~of ~~sale~~12% ofper 50annum,~~000~~ ~~shares~~and ofis ~~MGT~~convertible ~~Capital~~into ~~Investments~~shares ~~Inc.’s~~ of common stock ~~owned~~at by the ~~Company,~~lesser ~~approximately $132,500~~ of ~~proceeds~~(i) ~~received by the Company was placed into the restricted accounts. The balance in the restricted bank accounts was approximately~~ $0.918 ~~million~~per atshare ~~December~~or ~~31,~~(ii) ~~2013.~~60% ~~From~~of ~~time to time during~~ the ~~year~~average ~~ended~~of ~~December 31, 2014, to provide~~ the ~~Company~~three ~~with~~lowest ~~additional~~trading ~~liquidity,~~prices ~~approximately $470,000~~ of the ~~restricted funds was released to the~~ Company’s common ~~operating~~stock ~~account.~~during ~~On June 24, 2014, $0.4 million of~~ the ~~restricted~~15 ~~funds~~days ~~were~~prior ~~used~~ to ~~prepay a portion of one of the outstanding November 2013 Notes~~conversion. ~~At December 31, 2014 the balance of the Company’s restricted cash is approximately $12,000.~~

11These above notes include embedded conversion options which will be bifurcated and accounted for as derivative liabilities at fair value (see Note 2). ~~RELATED~~For ~~PARTY~~warrant ~~TRANSACTIONS~~ instruments the Company classifies such instruments as liabilities at their fair values at the time of issuance and adjusts the instruments to fair value at each reporting period. These liabilities are subject to re-measurement at each balance sheet date until extinguished either through conversion or exercise, and any change in fair value is recognized in the Company’s statements of operations.

~~Shared~~Senior Secured ~~Services~~Credit Facility Agreement ~~with~~and ~~PSID~~Convertible Promissory Note

~~The~~On September ~~Company~~30, ~~entered~~2016 ~~into~~with an effective date of November 10, 2016 the Company executed a ~~shared~~Senior ~~services~~Secured ~~agreement~~Credit Facility Agreement (the “~~SSA~~Agreement”) ~~with~~by ~~PSID~~and onamong: ~~January~~(i) the 11Company; (ii) BRACE SHOP, ~~2012~~LLC, ~~pursuant~~a tolimited ~~which~~liability ~~PSID~~company ~~agreed~~organized tounder ~~provide~~the ~~certain~~laws ~~services~~of the State of Florida, ~~including~~BRACESHOP ~~administrative~~REAL ESTATE HOLDINGS, ~~rent~~LLC, ~~accounting~~a Florida limited liability company (each individually, ~~business~~a ~~development~~“Corporate Guarantor” and ~~marketing~~collectively, the to“Corporate ~~the~~Guarantors”); ~~Company~~(iii) inany ~~exchange~~Person ~~for~~to ~~$30,000~~hereafter ~~per~~become ~~month.~~a ~~The~~Subsidiary ~~SSA~~of ~~has~~the ~~also~~Borrower ~~included~~as ~~working~~defined, ~~capital~~and ~~advances~~any Person that from time to time. ~~The~~may ~~term~~hereafter ofbecome liable for the ~~SSA~~Obligations, ~~commenced~~or onany ~~January~~part 23thereof, ~~2012.~~as ~~The~~joint ~~SSA~~and ~~was~~several ~~amended~~guarantors (the ~~from~~“Additional ~~time~~Guarantors”) to(the ~~time~~Corporate ~~during~~Guarantors and the ~~year~~Additional ~~ended~~Guarantors, ~~2012 to~~together, ~~among~~jointly ~~other~~and ~~things~~severally, the ~~reduce~~“Guarantors” and together with the ~~monthly~~Borrower, ~~charge~~the ~~for~~“Credit ~~services~~Parties”); toand ~~$5,000.~~(iv) OnTCA ~~April~~GLOBAL 22CREDIT MASTER FUND, ~~2013~~LP, ~~the~~a ~~Company~~limited partnership organized and ~~PSID~~existing ~~entered~~under ~~into~~the alaws ~~non-binding~~of ~~letter~~the ~~agreement~~Cayman inIslands, ~~which~~as ~~PSID~~lender ~~agreed~~(the “Lender”). The Lender extended a senior secured credit facility to ~~provide~~the Company of up to anOne ~~additional~~Million and No/100 United States Dollars (US$601,000,000.00) for ofworking ~~support~~capital ~~during~~financing ~~April~~for the Company and ~~May~~its ~~2013.~~Subsidiary, and for any other purposes permitted.

OnThe line ~~July~~is 8,joint ~~2013~~and severally guaranteed by the subsidiaries of the Company, the Company’s ~~entered~~CEO/Director ~~into~~and aby ~~letter~~the ~~Agreement~~CEO’s wife, ~~with~~who ~~PSID~~is (a director of the ~~“July~~Company. ~~Letter~~The ~~Agreement”)~~CEO toand ~~amend~~his ~~certain~~wife ~~terms~~have ofalso ~~several~~pledged ~~agreements~~their ~~between~~equity ~~PSID~~holdings ~~and~~in the Company. ~~The~~and ~~July~~its ~~Letter~~subsidiaries and ~~Agreement~~the ~~amended~~Company ~~certain~~has ~~terms~~pledged ofits equity holdings in the ~~SSA,~~Company’s assubsidiaries. ~~amended~~Additionally, the ~~asset~~line ~~purchase~~is ~~agreement~~secured ~~entered~~under ~~into~~a first onpriority ~~August~~security ~~28,~~interest ~~2012,~~by assubstantially ~~amended~~all (assets of the ~~“APA”),~~Company and its subsidiaries and the ~~PSID~~line ~~Note~~is ~~(see~~subject ~~note~~to ~~6).~~negative, affirmative and financial covenants as defined in the Agreement.

In September 2016 the Company amended its Certificate of Incorporation to amend the authorized common shares to 100 million from 100 billion. This change has been retroactively presented in the balance sheet.

F-24

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

On November 810, ~~2013~~2016, the Company ~~entered~~issued ~~into~~a convertible promissory note with a ~~Letter~~principal ~~Agreement~~amount of $750,000 for which the Company received $315,638 in proceeds net of deferred financing fees of $56,400, a payment made directly to a noteholder of $84,050, a payment made directly to a line of credit of $281,771 and a payment made directly to paydown state taxes of $12,141. This note is due on May 10, 2018, eighteen months after the effective date and bears interest at a rate of 18% per annum. At any time while this Note is outstanding, but only upon: (i) the occurrence of an Event of Default under any of the Loan Documents; or (ii) mutual agreement between the Borrower and the Holder, the Holder may convert all or any portion of the outstanding principal, accrued and unpaid interest, Premium, if applicable, and any other sums due and payable hereunder or under any other Loan Documents (such total amount, the “~~November~~Conversion ~~Letter~~Amount”) ~~Agreement~~into shares of Common Stock of the Company (the “Conversion Shares”) at a price equal to: (i) the Conversion Amount (the numerator); divided by (ii) eighty-five percent (85%) of the lowest of the daily volume weighted average price of the Borrower’s Common Stock during the five (5) Business Days immediately prior to the Conversion Date, which price shall be indicated in the conversion notice. This note also contains a make hold provision for any amounts converted into common shares. In connection with ~~PSID~~this convertible promissory note the Company entered into an Advisory Services Agreement with the lender dated November 10, 2016 where a range of advisory services were rendered which ~~further~~may, ~~amended~~or may not, have included (i) identifying, evaluating and advising in relation to the ~~terms~~Company's current structural (including business model), financial, operational, managerial, strategic and other needs and objectives, (ii) preparing and coordinating with the Company and others in the development of business plans, and financial models, (iii) identifying potential merger, acquisition, divestiture, consolidation or other combination ("M&A Transaction") opportunities and negotiating, structuring and advising in connection with potential M&A Transactions, (v) advising and assisting the ~~several~~Company ~~agreements~~in ~~between~~connection ~~PSID~~with the preparation of any registration statements, periodic or other SEC reports or proxies, and (vi) coordinating with, and advising in connection with the activities of, Outside Professionals, including without limitation attorneys, accountants, market professionals, etc. The compensation for these services was $337,500. The management advisory services payable is fully secured under the loan documents and has been expensed as professional fees as of November 10, 2016, the period the management advisory services were provided. The convertible promissory note and the Advisory Service Agreement have the following repayment terms; commencing December 18, 2016 there will be three payments of interest only totaling $11,250; the following fourteen months the Company will repay principal, interest and $5,000 toward the Advisory Service Agreement totaling monthly payments of $61,208. The eighteenth payment will be comprised of principal, interest and a balloon payment of $267,500 related to the Advisory Service Agreement.

~~The July Letter~~ Loan Agreement~~, as modified by the November Letter Agreement, provides for:~~

On October 1, 2016 (iExecution Date) ~~The~~the ~~elimination~~Company executed a loan agreement with a third party (Lender) the terms of ~~minimum~~the ~~royalties~~loan ~~payable~~agreement include toissuance ~~PSID~~of ~~under~~a promissory note dated October 1, 2016 with a principal amount of $42,250, for which the ~~APA~~Company inproceeds of ~~their~~$32,500 ~~entirety.~~net Inof an OID of $9,750; beginning on the ~~event~~date that ~~royalty~~is ~~payments~~one ~~under~~month following the ~~APA~~Execution ~~based~~Date, and continuing on the same ~~Company’s~~calendar ~~attainment~~day of ~~certain~~each ~~sales~~successive ~~levels~~month ~~are~~thereafter, ~~not~~the atLender ~~least~~shall invest an amount equal to $~~800~~12,500, until the Lender has invested an aggregate amount of $70,000 (the Purchase Price). In return for each subsequent investment the Company shall issue the Lender notes in the original principal amount of $16,250 per note; beginning on the fifteenth calendar ~~year~~day ~~2014~~of the month that is six months following the Execution Date, ~~then~~and continuing on the same calendar day of each successive month thereafter, the Company ~~will~~shall ~~grant~~make ~~PSID~~payments ~~Corporation~~in cash to the Lender until a ~~non-exclusive~~total of $91,000 ~~perpetual~~has been paid to the Lender, ~~non-transferrable~~the amount of each cash repayment shall be equal to 50% of the Company's net profit earned in the month prior to the month of the applicable cash payment. Net profit shall be defined as net revenue minus cost of goods sold and marketing expenses less $73,000. As of ~~world-wide~~the date of this report the November 1, ~~fully~~2016 ~~paid~~and ~~license~~December to1, ~~said~~2016 ~~patents~~loans have not been received by the Company.

(ii) VC’s granting to PSID a warrant to purchase 300,000 shares of common stock with an initial exercise price of $2.84. The warrant is exercisable for a period of five years, and the terms and form of the warrant are the same as the November 2013 Warrants granted to the Investors (see notes 6 and 9).SNC Assets

AsThe SNC ofNote ~~December~~(see ~~31,~~note ~~2013,~~4) ~~the~~is ~~Company~~secured ~~owed~~by ~~PSID~~all ~~$0.2~~of ~~million under~~ the ~~SSA~~assets, ~~which~~consisting isprimarily ~~reflected~~of inintellectual ~~Other~~property ~~current~~and ~~liabilities~~certain intangible ~~the~~property and ~~Company’s~~equipment ~~consolidated~~(the ~~balance~~“SNC ~~sheet.~~Collateral”), Onacquired ~~October~~by ~~20,~~the ~~2014,~~Company under the ~~Company~~asset purchase agreement entered into aby ~~GlucoChip~~the Company and ~~Settlement~~SNC ~~Agreement~~Holdings ~~(the~~Corp. ~~“PSID~~on ~~Settlement~~November ~~Agreement”)~~30, ~~with~~2012. ~~PSID~~Under tothe ~~transfer~~terms of the ~~final~~SNC ~~element~~Note, ofas ~~PSID~~amended, ~~implantable~~which ~~microchip~~was ~~business~~due toon ~~the~~June ~~Company~~30, to2015 and ~~provide~~has ~~for~~not abeen ~~period~~repaid, the holder of ~~financial~~the ~~support~~SNC toNote ~~the~~may ~~Company,~~look ~~and~~solely to ~~provide~~the ~~for~~SNC ~~settlement~~Collateral ofto ~~the~~satisfy ~~$0.2~~all ~~million~~obligations ~~owed~~of by the Company to ~~PSID~~it under the ~~SSA.~~SNC ~~The~~Note ~~PSID~~and ~~Settlement~~not ~~Agreement~~to ~~provides~~any ~~for~~other ~~the~~assets ~~termination~~ of the ~~License~~Company ~~Agreement~~and/or ~~entered~~its ~~into~~subsidiaries. ~~between~~In ~~the~~October ~~PSID~~of ~~and~~2015, the Company oncontacted the ~~August~~holder ~~28,~~of ~~2012,~~the ~~whereby,~~SNC ~~PSID~~Note ~~had~~regarding ~~retained~~the anreturn ~~exclusive~~of ~~license~~the SNC Collateral to the ~~GlucoChip~~holder ~~technology.~~in ~~Pursuant~~satisfaction toof the ~~PSID~~SNC ~~Settlement~~Note. ~~Agreement,~~By ~~PSID~~letter agreement ~~retains~~dated ~~its~~February ~~right~~18, to2016, ~~any~~the ~~future~~Company ~~royalties~~agreed ~~from~~to return the ~~sale~~SNC ofCollateral ~~GlucoChip~~to orthe ~~any~~holder ~~other~~of ~~implantable~~the ~~bio~~SNC ~~sensor~~Note, ~~applications.~~and ~~The~~the ~~PSID~~holder agreed ~~Settlement~~to ~~Agreement~~discharge ~~also~~the ~~provided~~Company ~~for~~of ~~the~~all ~~settlement~~ of ~~the~~its ~~amount~~obligations ~~outstanding~~and liabilities under the ~~SSA~~SNC byNote ~~the~~upon ~~Company~~receipt ~~issuing~~of athe ~~convertible~~SNC ~~promissory~~Collateral. In ~~note~~November to2016 ~~PSID~~the ~~(see~~Company ~~note~~returned 6)the ~~with~~SNC ~~terms~~Collateral ~~similar~~ to ~~those~~the holder of ~~other~~the ~~convertible~~SNC ~~promissory~~Note, ~~notes~~but ~~issued~~the byholder ~~the~~has ~~Company~~not ~~during~~yet ~~the~~accepted ~~year~~such collateral ~~ended~~and ~~December~~the ~~31,~~debt ~~2014.~~remains outstanding.

~~Pursuant to the PSID Settlement Agreement, PSID also agreed to provide financial support to the Company, for a period~~ Acquisition of upBrace to two years, in the form of convertible promissory notes. On October 20, 2014, PSID funded the Company $60,000 and the Company issued to PSID a convertible promissory note, with similar terms to other convertible promissory notes issued by the Company during 2014. Pursuant to the PSID Settlement Agreement, PSID agreed to provide the Company with continuing financial support through issuance of additional convertible promissory notes with similar terms and conditions as those notes issued in October 2014. The additional promissory notes are at the option of the Company, which option it can exercise every 100 days unless the parties agree otherwise, and on January 30, 2015 the Company issued a $40,000 convertible promissory note to PSID.Shop

~~Notes~~On November ~~Payable~~25, 2015, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with The Brace Shop, LLC, a Florida limited liability company (“Brace Shop”) and ~~Accrued~~Lynne ~~Expenses~~Shapiro (the “Seller”), whereby the Company agreed to acquire (the “Acquisition”), all of the issued and outstanding membership interests (the “Stock”) of Brace Shop. The Company incurred approximately $125,000 and $165,000, respectively of expenses during the three months ended March 31, 2016 and the year ended December 31, 2015 in connection with the Purchase Agreement, which is reflected in Selling, general and administrative expenses in the Company’s statement of operations. Brace Shop operates as an online retailer of orthopedic braces and related medical devices and had revenues of approximately $1.7 million for the three months ended March 31, 2016 and March 31, 2015.

Included in accrued expenses at December 31, 2014 and 2013 are approximately $1.2 million and $1.8 million, respectively, owed to the Company's officers and directors (see notes 9 and 15). See note 6 for a discussion of related party notes payable.

12. COMMITMENTS AND CONTINGENCIES

The Company leases its principal office facility under a lease expiring in April 2018 and leases additional office and warehouse space on a month to month basis. Rent expense related to operating leases for office space and equipment amounted to approximately $93 thousand and $77 thousand for the years ended December 31, 2014 and 2013, respectively.

The Company also has employment contracts with three of its executive officers requiring payments of salary, bonus and other payments under the terms of the respective agreements.

The approximate minimum payments required under operating leases and employment contracts at December 31, 2014, are as follows (in thousands):

Year	Minimum Rental Payments		Employment Contracts
2015		36		1,478
2016		36		865
2017		36		—
2018		13		—
2019 and thereafter		—		—
	$	121	$	2,343

F-25

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, ~~2014~~2015 and ~~2013~~2014

InThe acquisition ~~March~~of ~~2013~~Brace Shop was completed on May 6, VC2016, ~~appointed~~at which time Brace Shop became a ~~liquidator~~wholly ~~and~~owned ~~initiated~~subsidiary of the Company. ~~formal~~Pursuant ~~liquidation~~to the terms of ~~its~~the ~~U.K.~~Purchase ~~subsidiary~~Agreement, ~~Signature~~the ~~Industries~~Company ~~Limited~~paid (~~“Signature”~~i) $250,000 ~~primarily~~in ~~related~~cash to Mrs. Lynne Shapiro, (ii) 849 shares of its ~~outstanding~~newly ~~liabilities.~~designated VCSeries ~~used~~E ~~£40,000~~Convertible Preferred Stock (~~approximately~~“Series ~~$61,000~~E Preferred Stock”), which is convertible into 84.9% of the ~~proceeds~~issued ~~from~~and ~~the~~outstanding ~~sale~~shares of ~~Signature~~the Company’s ~~former~~common ~~division~~stock on a fully diluted basis, ~~Digital~~and has ~~Angel~~voting ~~Radio~~rights ~~Communications~~on ~~Limited~~an as converted basis and (~~“DARC”~~iii) toa ~~satisfy~~goldenshare ~~its~~in ~~estimated~~the ~~portion~~form of ~~Signature’s~~a ~~outstanding~~5-year ~~liabilities.~~warrant ~~However~~(the “Goldenshare”), ~~additional~~exercisable ~~claims~~at ~~submitted~~$0.00001 toper ~~the~~share ~~liquidator~~with ~~could~~a ~~result~~cashless inexercise ~~the~~provision ~~Company~~for ~~being~~that number of shares of common stock required to ~~pay~~insure ~~additional~~that ~~amounts~~the Series E Preferred Stock issued as part of the purchase price to ~~cover~~Mrs. ~~its~~Lynne ~~share~~Shapiro is convertible into 84.9% of ~~Signature’s~~the issued and outstanding ~~liabilities.~~shares ~~The~~of the Company’s ~~has~~common ~~estimated~~stock, on a ~~potential~~fully ~~additional~~diluted ~~liability~~basis. At the closing of ~~approximately~~the ~~$159~~transaction,~~000~~ Mr. ~~The~~Silverman ~~Company~~received ~~expects~~39 shares of the ~~liquidation~~Series ~~process~~E toPreferred Stock convertible into 3.9% of the issued and outstanding Common Stock on a fully-diluted basis. The shares of Series E Preferred Stock and the Goldenshare shall not be ~~completed~~convertible byuntil the ~~middle~~six (6) month anniversary of ~~2015~~the closing of the transaction. Further, ~~although~~once ita ~~could~~majority ~~extend~~of the ~~beyond~~outstanding Series E Preferred Stock has been converted into common stock, then any other Series E Preferred Stock then outstanding shall automatically be deemed converted into common stock on the ~~expected~~fifth ~~timeframe.~~business day following the date that a majority of the outstanding Series E Preferred Stock is converted into common stock.

OnThe foregoing ~~January~~transaction ~~30,~~was ~~2014,~~accounted ~~the~~for ~~Company~~as ~~and the buyers of DARC entered into~~ a ~~letter~~reverse ~~agreement~~acquisition ~~under which the Company agreed to accept a payment of £62,000 (USD approximately $0.1 million) in full~~ and ~~final~~recapitalization ~~settlement~~ of aBrace ~~deferred purchase price related to VC’s sale of DARC in March 2013~~Shop. ~~As a result~~Accordingly, the ~~Company~~Brace ~~recorded,~~Shop historical afinancial ~~loss~~statements onas ~~the settlement~~ of ~~this~~period ~~receivable of approximately USD $55~~ends,~~000~~ inand ~~the~~for ~~year~~periods ended ~~December 31~~, ~~2014,~~prior ~~which~~to isthe ~~reflected~~acquisition inwill ~~Other~~become ~~expenses in~~ the ~~Company’s~~historical financial ~~consolidated~~statements ~~statement~~ of ~~operations. All of~~ the ~~other~~Company ~~provisions~~prior ~~(including,~~to ~~without limitation,~~ the ~~indemnities)~~date ~~agreed~~of ~~between VC, and/or~~ the ~~Buyers~~reverse ~~under the stock purchase agreement and any related documents remain in full force and effect~~acquisition.

13The aggregate cash payment of $250,000 to the Seller was financed by the sale of senior secured convertible promissory notes in the aggregate principal amount of $294,118 (the “Acquisition Notes”) to an institutional investor who previously purchased convertible debt from the Company (the “Investor”). ~~LEGAL~~The ~~PROCEEDINGS~~ Acquisition Notes bear interest at a rate of 12% per annum, with principal and interest due one year from the date of issuance. The Acquisition Notes are convertible into shares of the Company’s Common Stock at a conversion price equal to the lesser of (i) $0.015 per share or (ii) 60% of the average of the three lowest trading prices during the ten trading days prior to conversion, and contain full-ratchet anti-dilution provisions similar to those of convertible notes previously issued by the Company. The embedded conversion option contained in the Acquisition Notes will be bifurcated and reflected as a derivative liability at fair value. The Company currently anticipates that the $50,000 consulting fee and all other costs and expenses related to the Acquisition and the Company’s ongoing operations will be funded through the sale of additional senior secured convertible promissory notes to the Investor on terms substantially identical to that of the Acquisition Notes.

WeThe Purchase ~~have~~Agreement ~~been~~contemplates ~~informed~~that byall ~~the~~interest, ~~New~~principal ~~Jersey~~and ~~Department~~any ofother ~~Environmental~~required ~~Protection~~payments on all debt instruments of the Company that aare ~~subsidiary~~outstanding as of athe ~~predecessor~~date ~~business,~~of ~~sold~~the aPurchase ~~building~~Agreement in(but ~~2006~~excluding ~~for~~the ~~which~~Acquisition anNotes) ~~environmental~~shall ~~action~~only ~~has~~be ~~been~~paid ~~claimed~~through the issuance of shares of common stock. ~~The~~All ~~claim~~options, iswarrants, ~~being~~shares ~~reviewed~~of bypreferred stock and other securities of the Company’s ~~outside~~outstanding as ~~legal~~of ~~counsel.~~the Wedate ~~have~~of ~~not~~the ~~yet~~Purchase ~~determined~~Agreement ~~the~~are ~~impact~~to remain in place on ~~our~~the ~~financial~~terms ~~condition~~set orforth ~~cash~~in ~~flows~~each of such securities, ifexcept ~~any~~that all options, warrants and shares of preferred stock are to be converted into common stock within six months of the date of closing of the Acquisition or cancelled.

~~14.~~Forgiveness of ~~SUPPLEMENTAL~~Certain ~~CASH~~Debt ~~FLOW~~and ~~INFORMATION~~ Preferred Stock Series D

~~Non-cash~~As of ~~investing~~December 31, 2015 the Company had outstanding accrued salaries and ~~financing~~bonuses ~~activities~~payable to two former officers totaling $565,950. In January 2016 the Company made payments of $9,550 related to the outstanding accrued salaries and bonuses. In April 2016 the two former officers agreed to release the Company from all outstanding accrued salaries and bonuses due to them totaling $556,400. The Company accounted for the ~~years~~above ~~ended~~transaction ~~December~~recognizing 31a gain on the statement of operations of $202,125 ~~2014~~for ~~were~~one asofficer and ~~follows~~a (gain posted to additional paid in ~~thousands):~~capital of $354,275 for the other officer who was a related party.

	2014		2013
Cash paid for interest		-		-
Cash paid for income taxes		-		-
Net assets acquired from VC in excess of cash acquired for common stock		-		117
Notes payable and accrued liabilities converted into common stock		917		662
Accrued liabilities converted into preferred stock		1,841		-
Accrued liabilities converted into and deferred financing fees paid through the issuance of convertible promissory notes		240		-
Cashless exercises of common stock warrants		7,052		-

In April 2016 one former officer agreed to release the Company from a loan payable due to him totaling $319,000 and to the cancellation of 441 Series D shares that he owned. The Company accounted for the above transaction recognizing a gain on the statement of operations of $319,000 and a gain of $441,000 in additional paid in capital resulting from the cancellation of the 441 Series D shares.

In April 2016 one former director of the Company agreed to the cancellation of stock options for 15.,000,000 ~~SUBSEQUENT~~shares, ~~EVENTS~~which were held by him.

~~Issuance~~ Transfer of ~~Additional~~Former ~~Promissory~~Officer’s ~~Notes~~Loans Payable and Preferred Stock to a Lender of the Company

OnIn February ~~January 23~~2016, ~~2015,~~as ~~the~~amended ~~Company~~in ~~borrowed~~April ~~$45~~2016,~~000~~ ~~from~~in ~~Scott~~a ~~Silverman,~~private astransaction ~~evidenced~~between by a ~~promissory~~lender ~~note~~of (the ~~“2015~~Company ~~Silverman Note”). The 2015 Silverman Note is payable on demand~~ and ~~bears interest at~~ a ~~rate~~former ~~of 5% per annum. Between January 30~~officer, ~~2015 and March 31, 2015,~~ the ~~Company~~lender purchased ~~repaid~~ $33194,~~000~~010 of ~~this~~notes ~~note~~payable due to ~~Mr.~~the ~~Silverman,~~officer and ~~the~~1,400 ~~outstanding~~shares ~~balance~~of onSeries ~~the~~D ~~2015~~preferred ~~Silverman~~stock ~~Note~~held asby ofthe ~~March 31, 2015 was $12,000~~officer.

~~Between January 27, 2015 and April 10, 2015, the Company issued additional convertible promissory notes in the aggregate principal amount~~ Conversion of ~~$455,875,~~Debt ~~for which the Company received $423,500 in net proceeds. These notes are generally due one year after the date of issuance, bear interest at rates of 1%~~ to ~~12%~~Common per annum, and are convertible into shares of common stock at 57% to 61% of the market price of the Company’s common stock based on the low end of the trading range of the common stock during the 10 to 30 days prior to conversion, depending on the specific note being converted.Shares

On March 17, 2016, the Company issued 241,917 shares of common stock in satisfaction of $8,955 of convertible notes and $1,520 of accrued interest. The note was converted at the contractual rate of $0.0433. The approximately $46,000 fair value of the related embedded conversion option derivative liability was reclassified to additional paid-in capital.

F-26

VERITEQ CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2014 and 2013

The foregoing notes contain terms similar to those of the November 2013 Notes and the 2014 Convertible Notes, such that in the event the Company were to issue or sell, or is deemed to have issued or sold, any shares of common stock for a consideration per share (the “New Issuance Price”) that is less than the conversion price in effect immediately prior to such issue or sale or deemed issuance or sale (a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the conversion price then in effect is reduced to an amount equal to the New Issuance Price.

In connection with the issuance of one of the foregoing notes, the Company issued a warrant to purchase 500,000 shares of the Company’s common stock at an exercise price of $.021 per share, subject to adjustment for stock splits, stock dividends and stock combinations. The warrant is exercisable at any time until three years after the date of issuance. The terms of the warrant provides for a proportional downward adjustment of the exercise price in the event that the Company issues or sells, or is deemed to have issued or sold, shares of common stock at an issuance price that is less than the market price of the common stock at the time of issuance, as defined in the warrant agreement.

Issuances of Common Stock

Between January 1, 2015 and March 31, 2015, outstanding convertible notes with a principal amount of $270,007, along with accrued interest of approximately $4,000, were converted into 20,970,067 shares of common stock.

Between January 1, 2015 and March 31, 2015, 9,525,401 shares of common stock were issued in connection with cashless exercises of outstanding warrants.

Other Matters

On February 11, 2015, the Reverse Stock Split, as more fully described in note 2, became effective.

On February 27, 2015, the Siegel Notes were amended to (i) extend the maturity date to March 1, 2016, and (ii) change the conversion price, effective as of September 1, 2015, to 60% of the average of the three lowest closing prices of the Company’s common stock for the 10 trading days prior to conversion.

On March 13, 2015, the Company’s Board of Directors approved an amendment to the Certificate of Designations of the Series D Preferred Stock to amend the formula for determining the conversion price of the Series D Preferred Stock.

On April 10, 2015, one of the Company’s convertible noteholders, with the consent of the Company, assigned outstanding notes of the Company in the aggregate principal amount of $125,000 to a third party. In connection with this assignment, the outstanding principal balance on the convertible notes assigned was reduced to $106,250.

F-27

Filing Compare · VERITEQ