That Human-Cow Microchip Implant Merger Is Not Going Smoothly

Last Updated Sep 30, 2010 8:53 AM EDT

Digital Angel (DIGA), which makes implantable microchips for farm animals, is resisting a takeover bid by PositiveID (PSID), which makes them for humans, and both companies face being delisted by NASDAQ because their respective stocks trade for under $1.

The spat illustrates just how badly managed both companies are. In addition to both being in penny stock territory, both reported a loss last quarter. PositiveID had revenue of just $678,000 on marketing costs of $3.8 million. Digital Angel -- which makes electronic tags for cows and pigs -- is a money loser because its admin costs and its manufacturing costs are both more than half of its revenues.

Whether merging these two unprofitable companies will somehow create a profitable one is an open question. Digital Angel hinted that PositiveID's enthusiasm for the deal might be something to do with the incestuous nature of the two companies: PositiveID was formerly a unit of Digital Angel, spun off from the company in 2008. PositiveID now says it will take its offer directly to Digital Angel's shareholders and financial advisers.

Of course, PositiveID did make some money recently. It sold its Health Link product -- a radio-frequency readable microchip implant that links to your online medical records -- to Health Plexus for $1 million. The company's next 10-Q filing with SEC should be interesting if only because it might identify who or what Health Plexus actually is. PositiveID did not give out any information about Health Plexus in its statement on the deal, not even the company's physical location.

I failed to find the company in a recent internet search. One of the two PR people listed on the press release describing the deal said he did not have contact information for the company. The other PR person did not immediately respond to a message. The voicemail system at PositiveID continues to tell callers that the company is "proudly offering Health Link" as a service.

If you're reading this, Health Plexus, get in touch! I'd love to hear your story.

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