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                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended    September 30, 1996
                          -----------------------------------------------------

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 

For the transition period from      to 
                              ------  -------
Commission file number   0-18921
                       --------------------------------------------------------

                             RINGER CORPORATION
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               (Name of small business issuer in its charter)


           Minnesota                                      41-0848688
        --------------                                 ----------------
(State of incorporation or organization)    (I.R.S. Employer Identification No.)

9555 James Avenue South, Suite 200, Bloomington, Minnesota               55431
--------------------------------------------------------------------------------
(Address of principal executive offices)                             (Zip Code)

Issuer's telephone number, including area code     (612) 703-3300
                                               ---------------------------------
       Securities registered pursuant to Section 12(b) of the Act:   None

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

                    Common Stock, $.01 par value per share
                    --------------------------------------
                                (Title of class)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months, and (2)
has been subject to such filing requirements for the past 90 days.
            [X] Yes    [  ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B 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-KSB or any amendment to
this Form 10-KSB.      [X]

Revenues for the fiscal year ended September 30, 1996 totaled $14,672,784.

As of December 12, 1996, the Company had 10,921,930 shares of Common Stock
outstanding.  The aggregate market value of the 10,126,033 shares of Common
Stock held by non-affiliates of the Company was $15,189,050, based on the
closing share price on December 12, 1996 on the Nasdaq National Market.

Documents incorporated by reference:  Certain responses to Part III are
incorporated herein by reference to information contained in the Company's
definitive proxy statement for its 1997 annual meeting of stockholders to be
filed with the Securities and Exchange Commission on or before January 28,
1997.

Transitional small business disclosure format:    [  ] Yes    [X] No
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                                     PART I

Item 1.  BUSINESS.

GENERAL

         Ringer Corporation is a developer and leading marketer of
premium-performance, environmentally-oriented lawn, garden and turf products
for consumers and for specialty commercial and professional markets.  The
Company's product lines include proprietary microbially-driven fertilizer
systems, oxygen-releasing water soluble fertilizer systems and biological and
botanical pest controls, which are offered as products of choice over
traditional fertilizers and pesticides. The Company also offers a line of
composting products.

         The Company was incorporated in 1961 as a regionally-based,
closely-held business founded by C. Judd Ringer.  In 1986, Mr. Ringer sold a
majority interest in the Company to new investors and retired from active
management. Subsequently, the Company reorganized, with  new management in most
areas during the periods from 1986 through 1988 and again from 1992 through the
summer of 1993. During these years, the Company increased its product offerings
and expanded its distribution channels into national lawn, garden and turf care
markets.

         Since 1986, the Company has raised approximately $27 million in
capital through private equity offerings to venture capital organizations and
individuals, and through public offerings of common stock in 1990 and 1992.
The capital raised was used by the Company to acquire a pest control product
line, to fund programs for product packaging redesign, advertising, promotion
and product development and to increase working capital. The Company's pest
control product line is sold under the Safer(R) brand name through Safer, Inc.,
a wholly owned subsidiary of the Company acquired in 1991.

         The Company's products are sold in the consumer lawn and garden and
the commercial golf course turf management markets.  Product lines are composed
of granular fertilizers, water soluble fertilizers, pesticides and composting
products.

         The Company's granular fertilizer products use proprietary
microbially-based delivery systems that control release of nutrients for
extended uniform plant feeding and are marketed under the Restore(R), Supreme
Garden Fertilizer(TM) and Safer(R) Lawn Fertilizer brand names.

         The Company's water soluble fertilizer products use proprietary oxygen
releasing compounds that enhance root growth and function to promote more
vigorous and healthy plants. Water soluble fertilizers were added to the
Company's product lines in December 1994 through the acquisition of the assets
of Plant Research Laboratories (See "Plant Research Laboratories" below). These
products were marketed by the Company under the Oxygen Plus(R) brand name for
fiscal 1995 and under the Safer(R) brand name in fiscal 1996.

         The Company's Safer(R) brand pest control products use microbial,
botanical and mechanical technologies to effectively control insects, weeds and
fungal diseases. Safer(R) brand biological and botanical pest control products
are designed to work on targeted pests without harming beneficial insect
populations or leaving harmful residues on turf and garden plants.

         The Company's composting products also use a microbially-based
delivery system and are sold under the Ringer(R) brand name.  The
microbially-based composting products accelerate and enhance the process of
decomposing yard waste into humus, a valuable organic amendment that can be
added back to lawn or garden soil.

         The Company's products are developed to provide premium performance
using available technologies with the lowest environment impact.  The Company's
products are directed toward wholesale consumer fertilizer





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and pesticide markets which exceed $1 billion according to the 1991 Kline &
Company industry survey report.  The Company believes that environmental
considerations are playing an increasingly important role in consumer choice of
lawn care and gardening products and further believes that this trend will
provide increasing opportunities for the Company to market premium performance
environmentally conscious lawn and garden products.

         The Company anticipates that its future growth will be derived from
increased sales of its existing products, from sales of future products
developed by the Company or licensed from others, and from the acquisition of
additional product lines or companies with additional product lines.

PLANT RESEARCH LABORATORIES

         In December 1994, the Company acquired substantially all of the assets
of Plant Research Laboratories ("PRL"), a California based developer and
marketer of water soluble fertilizers for the indoor houseplant and outdoor
lawn and garden markets with annual sales of less than $1 million generated
principally in the western United States. The water soluble fertilizer products
acquired utilize oxygen releasing compounds which are patented technologies
under exclusive license to the Company for use in the lawn, garden, turf
management and agricultural industries.

SALES AND MARKETING

         The Company's focus is primarily sales and marketing. The Company's
products are marketed in the United States through both retail and commercial
distribution channels. Retail channels consist principally of specialty lawn
and garden stores, hardware cooperatives and mass merchants. Commercial
channels consist of primarily of specialty distributors who sell products to
golf course turf management professionals.  In fiscal 1996, U.S. retail and
commercial markets accounted for 79% and 5%, respectively, of the Company's
sales.  The remaining 16% is attributable to foreign retail and commercial
market sales, primarily in Canada.

         Retail sales in the United States are conducted through a variety of
retail outlets in all fifty states.  These outlets consist of mass
merchandisers and several lawn and garden wholesale distributors who, in turn,
resell to retail garden centers, nurseries, hardware and home center stores.
National retailers selling the Company's products include The Home Depot,
Target, Cotter True Value Stores and Frank's Nursery & Crafts, although some of
these retailers currently carry only limited selections of the Company's
products or only carry them in certain regions of the country.

         The Company's retail sales efforts in the United States are managed by
a vice president of sales located in the Company's main office, and by four
regional sales managers located in Maryland, Georgia,  Indiana and Washington.
The Company uses a combination of direct sales personnel and independent
manufacturers' representatives to market its products. The direct sales
personnel and independent representatives, who report to the regional managers,
are assigned territories that cover all 50 states. In addition, Ringer uses its
wholesalers' sales and merchandising personnel and other merchandising service
organizations to contact and service some of the larger retail outlets who sell
the Company's products.

         Most of the Company's distribution and marketing activities are
concentrated in the United States and Canada, however, a level of international
over-seas business has been maintained for a number of years.  The Company
currently sells certain pest control products to foreign manufacturers and
distributors and has sold products to customers in Germany, Switzerland and
other European markets for over ten years.  International sales are currently
managed by Safer, Ltd., the Company's subsidiary in Toronto, Ontario, Canada.
Safer, Ltd. maintains its own sales and marketing organization, its own product
development operation and most of its own sources of supply and manufacturing.
Although management believes there are significant future international market
opportunities, management expects to concentrate the Company's marketing
efforts in the United States





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and Canada for the foreseeable future while the Company focuses on establishing
profitable operations in these primary market areas.

         The Company's commercial sales are supervised by the manager of
commercial sales. Approximately 30 professional turf distributors, with several
locations throughout the U.S. and Canada, buy products from the Company for
sale primarily to golf courses with some sales going to lawn service operators,
specialty landscapers and government landscape services.  The commercial
product line includes several microbial fertilizer formulations specifically
designed for the needs of professional turf managers.

         Over the past several years the Company has used various forms of
advertising and promotion to market its products. These forms include
television, radio and print advertising,  cooperative advertising programs and
point-of-purchase marketing materials.

         In fiscal 1996, 1995 and 1994, the Company spent approximately $3.3
million, $4.8 million and $4.6 million, respectively, on sales and marketing
expenses.

DISTRIBUTION AND TRANSPORTATION

         The Company relies primarily on common carrier transportation, leased
warehouse facilities and public warehouse services to distribute its products
nationwide. The Company's distribution and freight costs tend to be significant
as a percentage of sales. This is due to the relatively heavy weight and bulky
nature of the Company's products and the substantial shipping distances from
distribution locations to some of the Company's major market areas.

         Some of the Company's fertilizer competitors are located in closer
proximity to some of the Company's major market areas and, as a result, incur
relatively lower freight costs. Lower freight costs can be an element of
advantage to local or regional competitors when competing against the Company's
fertilizer products shipped from distant distribution points. Consequently, the
Company's relatively high distribution and freight costs can hinder fertilizer
sales growth in some markets.

         In fiscal years 1996, 1995 and 1994, the Company spent approximately
$1.6 million, $1.9 million and $1.9 million, respectively, on product
transportation and warehousing costs.

COMPANY TECHNOLOGIES

         The Company's experience in biological systems has been applied to the
development or acquisition of technologies in four product areas. First, two
types of granular microbially-activated fertilizer systems have been developed
for specific lawn, garden and commercial turf uses. Second, two types of
oxygen-releasing water soluble fertilizers have been added to the Company's
product offerings for use on indoor plants, outdoor container plants, and other
lawn and garden uses. Third, a line of biological and botanical pest control
products have been developed which focus on a broad spectrum of plant pests
which include insects, weeds and fungal diseases. Fourth, a line of microbial
composting inoculant systems has been developed to enhance and accelerate
decomposition of organic yard and garden waste materials.

         The Company's granular fertilizer technologies are based on the use of
naturally occurring soil microbes in combination with plant nutrients and high
energy carbohydrate sources to produce a superior controlled release fertilizer
system. These fertilizer technologies are focused on the "rhizosphere", which
is the biologically dynamic zone in the upper six inches of topsoil where plant
roots and soil interact.  The microbial activity in the rhizosphere is
essential to the health and vigor of plants and soil.  Active microbial
populations help to make nutrients available to plants and are essential in
developing good soil structure. They also play an important role in regulating
plant diseases.





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         The Company's water soluble fertilizer technologies use a patented
oxygen releasing compound ("ORC") in combination with high quality plant
nutrients. This fertilizer technology is focused on providing a reliable supply
of oxygen and nutrients to plant roots. Research has shown that an adequate
supply of oxygen at the root level is essential to maintaining a healthy
balance of chemical and microbial activity which promotes growth and vitality
in most plants. Certain unfavorable soil conditions resulting from physical
compaction, heavy clay content, over watering, flooding, and other causes, can
result in oxygen deficiency in the soil and, consequently, a less healthy plant
environment.  Through the use of ORC, the Company's water soluble fertilizers
help to reduce oxygen deficient conditions and promote a heathy growing
environment by providing a reliable supply of timed-release oxygen and other
beneficial plant nutrients directly to the plant root system.

         The Company's pest control technologies are based primarily on
fatty-acid compounds, naturally occurring plant extracts and microorganisms,
and mechanical traps to control unwanted pests. The Company holds numerous
patents for fatty-acid based pest control products and products using
fatty-acids as synergists in combination with both natural and synthetic
pesticides.

         The Company performs extensive product performance tests through
contract research and development facilities, as well as at its field lab in
Minneapolis, Minnesota.

         To assist the process of investigating new product opportunities, the
Company consults, from time to time, with knowledgeable scientists and other
experts regarding trends and technologies in fertilizers, pesticides and turf
management.

PRODUCTS

         The Company's four major product categories are microbial fertilizers,
water soluble fertilizers, pest control products and composting products.

         MICROBIAL FERTILIZERS

         The Company offers three types of proprietary microbial fertilizer
products. These include all-natural fertilizers, marketed under the Restore(R)
brand name, hybrid fertilizers using the B.A.S.E.(TM) (or "Biologically-Active
Soil Enrichment") system, marketed under the Supreme Garden Fertilizers(TM)
brand name and Low Phosphate Lawn Fertilizers using a natural nutrient
component marketed under the Safer(R) brand name.  Each type is discussed
below. These microbial fertilizers provide high performance, non-burning,
slow-release fertilization programs for improved plant growth and extended
feeding. From 1989 through 1994, product performance tests were conducted on
the Company's microbial fertilizers at North Carolina State University, Iowa
State University, the University of Florida, Michigan State University, Penn
State University, Rhode Island University, the University of Nebraska, Texas
A&M University, Washington State University, the University of Georgia, and
Cornell University. Tests were conducted on various types of turf comparing
turf color, turf quality, disease suppression characteristics and thatch
reduction characteristics between Company's microbial fertilizers and common
synthetic nitrogen fertilizer sources used in most competitors' products. In
each study, the Company's microbial fertilizers were found to perform equal to
or superior to the competing synthetic nitrogen fertilizer sources tested.
Microbial fertilizer products accounted for 26%, 31% and 39% of the Company's
sales in fiscal 1996, 1995 and 1994, respectively.

         ALL NATURAL RESTORE(R) FERTILIZERS - The Company's Restore(R) brand
fertilizer is an all natural two-part fertilizer system that combines selected
naturally occurring soil microorganisms with selected nutrient sources.
Nutrient sources are designed to meet specific plant growth requirements while
promoting improved soil quality. The sources include a balance of high-quality,
feed-grade proteins and carbohydrates.  The microorganisms use the
carbohydrates as an energy source to convert the proteins and other materials
into the nitrogen, phosphorous and potassium required for plant growth.  The
microbial fertilization system releases its nutrients slowly so that





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the potential for nutrient losses due to leaching, run-off and evaporation is
reduced. All natural Restore(R) fertilizers are ideally suited for diseased or
problem lawns.

         LOW PHOSPHATE SAFER(R) BRAND LAWN FERTILIZERS- The Company's Safer(R)
brand fertilizers use low phosphate formulations, designed to be used around
environmentally sensitive areas where water quality is an issue.  Safer(R)
Brand fertilizers use an exclusive  blend of nitrogen sources that provide
four-way greening.  This process greens up treated  lawns quickly and provides
extended feeding for up to 12 weeks.  The natural nutrient component in
Safer(R) Brand fertilizers provides slow release non-burning nitrogen and
enhanced microbial activity for a more vital soil.

         B.A.S.E(TM) TECHNOLOGY - SUPREME GARDEN FERTILIZERS(TM)- B.A.S.E.(TM)
(or "Biologically-Active Soil Enrichment") technology is a unique fertilizing
system developed by Ringer Corporation.  In 1995, the Company introduced Supreme
Garden Fertilizers(TM) to the garden market. The B.A.S.E.(TM) system combines
three different nitrogen sources that vary in water solubility. These three
nitrogen sources are blended with high energy natural carbohydrates, derived
from molasses, and selected soil microorganisms to form a pelleted matrix.  This
matrix is bound together by a water absorbent natural gum that maintains pellet
integrity and regulates water movement into the pellet.  The result is a
nitrogen fertilizer system that provides a quick release water soluble component
for fast initial plant response  followed by a controlled slow-release nitrogen
component for extended feeding. When the B.A.S.E.(TM) system is applied to the
soil and watered, the pellet slowly absorbs moisture into the fertilizer matrix
by way of the absorbent gum binders. The soil microorganisms present are
activated by the moisture and start using the high energy carbohydrates and
soluble nitrogen as food sources promoting growth of microbial cell bio-mass.  A
portion of the water soluble nitrogen is solubilized and released from the
pellet to be available immediately for uptake by the plant. This provides the
quick initial response. A fraction of the soluble nitrogen that is used by the
microbes for food is also eventually released to be available for uptake by the
plant. The remaining fraction is water insoluble natural organic nitrogen bound
up in proteins. The proteins are slowly broken down by soil microorganisms to
provide extended feeding to the plant.

         WATER SOLUBLE FERTILIZERS

         The Company offered water soluble fertilizers for the first time in
fiscal 1995 which were acquired from Plant Research Laboratories in December
1994. (See "Plant Research Laboratories" above.) The Company's water soluble
fertilizers are marketed in both liquid and powdered formulas under the Oxygen
Plus(R) brand name. Oxygen Plus(R) water soluble fertilizers utilize, in
combination with macro nutrients, a patented ingredient called Oxygen Releasing
Compound ("ORC"). ORC was developed to overcome plant growth problems caused by
oxygen deficient soil. Soil can become oxygen deficient due to many causes
including heavy clay content, physical compaction, over watering and flooding
to name a few.  Oxygen deficiency in the soil has been shown to cause a number
of chemical and microbial imbalances that interfere with plant growth and
health. In most plants, an adequate supply of oxygen in the soil is essential
for healthy growth and function of the plant roots. Oxygen assists the chemical
process that allows plant roots to absorb and metabolize nutrients from the
soil that are essential for healthy plant respiration and photosynthesis. ORC
utilizes the plant's own soil as an organic catalyst to provide the plant
time-released oxygen, activated by water, for an optimal balance of soil,
water, air and nutrients. Sales of water soluble fertilizers accounted for
approximately 3% and 4% of the Company's sales in fiscal 1996 and 1995,
respectively. The Company had no water soluble fertilizer sales prior to fiscal
1995.

         ENVIRONMENTALLY ORIENTED PEST CONTROLS

         The Company first introduced pest control products in 1989.  The
Company's pest control business was greatly expanded in 1991 with the
acquisition of its Safer(R) brand pest control product line.

         The active ingredients in the Company's pest control products are
naturally occurring microbial and botanical derivatives and synthesized
versions of naturally occurring botanical derivatives. These active ingredients
have been developed to control specific insects, weeds and fungal diseases. The
Company's biological





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and botanical pest controls biodegrade more rapidly and have a lower mammalian
toxicity rating than most traditional pesticides.

         The Company's pest control products accounted for 70%, 63% and 58% of
sales in fiscal 1996, 1995 and 1994, respectively.

         The pest control products sold by the Company fall into eight
categories:

         Pyrethrums Plus Fatty Acids ("SAP").  SAP is a proprietary technology
that uses fatty acids as a synergist for pyrethrum.  This patented combination
allows the Company to market a fast acting, highly effective, environmentally
focused pest control product. The Company believes this protected technology
allows it to maintain a unique position in the market for pyrethrum based pest
controls. Products currently formulated using SAP technology include Safer(R)
Tomato and Vegetable Insect Killer, and Safer(R) Yard and Garden Insect Killer.
Pyrethrums are non-proprietary botanical insect controls of low toxicity.
Liquid spray application of a pyrethrum solution kills certain insects rapidly
by attacking their nervous systems. Pyrethrums are derived from certain
chrysanthemum flowers grown in certain climatic regions of the world. In past
years, production of pyrethrum was limited and, at times, pyrethrums were
available only in controlled amounts. The production of pyrethrums has expanded
into other areas of the world in recent years resulting in a more reliable
supply of this ingredient. Management believes that pyrethrums are now readily
available in adequate amounts to meet the Company's needs for the foreseeable
future.

         Synthetic Pyrethroids.  Synthetic pyrethroids are man-made variations
of the natural insecticide pyrethrum. (See Pyrethrums Plus Fatty Acids above).
Synthetic pyrethroids are highly effective insecticides with low mammalian
toxicity profiles, comparable to or better than pyrethrum, with the added
advantages of being lower in price and more readily available. The Company has
a non-exclusive license to use certain synthetic pyrethroid technologies
included in some of the Company's pest control products. These products include
Safer(R) Wasp and Hornet Killer, Safer(R) Indoor Insect Fogger and Safer(R)
Outdoor Insect Fogger, Safer(R) Home Patrol(TM) Insect Killer, and Safer(R)
Superstop(TM) Ant, Roach and Insect Killer.

         Insecticidal Soaps.  Insecticidal soap pest controls are based on
potassium salts of fatty acids which, upon spray application, kill small
soft-bodied insects by disrupting the cell membranes. Many of the Company's
insecticidal soaps contain citrus aromatics which enhance the products' odor.
Insecticidal soaps are of low mammalian toxicity and are used to control
insects such as aphids, mites, mealy bugs, whitefly and others.  The Company
believes that the raw materials and manufacturing capacity for insecticidal
soaps are readily available.  The Company markets insecticidal soap products
for specific types of  plants such as house plants, roses and flowers, and
lawns, trees and shrubs.

         Herbicidal Soaps.  This patented technology employs short chain fatty
acids to kill unwanted vegetation on a non-selective basis.  The Company
believes it is the only marketer of a naturally derived technology employed to
control plant material. Superfast(R) Brand Weed and Grass Killer, Safer(R) Lawn
Moss Killer and Safer(R) Home, Deck & Patio Moss & Algae Killer products are
based on the Company's proprietary herbicidal soap technology.

         Fungicides.  Products such as Safer(R) Flower, Fruit & Vegetable
Garden Fungicide use elemental sulfur in an easy-to-use formulation to control
fungal diseases on plant foliage.  The Company believes it is the only marketer
to sell a ready-to-use sulfur based fungicide.

         Traps.  The Company sells mechanical traps, such as Safer(R) Beetle
Trap for Japanese Beetles which attracts and catches Japanese beetles.
Mechanical traps attract by means of sex lures, floral lures and/or color.
Once lured to the trap, the insect falls into a container from which it cannot
escape, and eventually the insect dies.





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         Bacillus thuringiensis ("Bt").  Bt is a bacterium that contains a
protein crystal toxin.  When ingested by certain insects, this toxin disrupts
the stomach lining and causes paralysis or death in the insect.  Various
strains of Bt may be insect-specific and are marketed by the Company for
insect-specific control such as Safer(R) Tree, Shrub & Vegetable Caterpillar
Killer. Food crops may be treated with Bt and harvested the same day.  The
Company holds no proprietary rights to Bt technology, which has been widely
available for many years and is used by many of the Company's competitors.  The
Company believes sources for Bt will be readily available at competitive
prices.

         Neem.  The Company markets a broad spectrum organic insecticide and
insect repellent called "Neem". Ringer markets Neem insecticide and repellent
under the brand name Safer(R) BioNEEM(R). BioNEEM(R) insecticide was first
introduced by the Company to retail distribution in the spring of 1993.
BioNEEM(R) was introduced as a Japanese Beetle repellent for the 1995 season.
The active ingredient in Neem is Azadirachtin.  Azadirachtin is obtained from
the Neem tree, a tropical evergreen mahogany that grows in Asia, Africa and
Central America, and is extracted from the Neem seed which is harvested as a
renewable resource. Neem insecticide is currently labeled for over thirty
insects. Additional insects may be added in the future. According to the
National Research Council, Neem materials have been shown to affect more than
200 species of insects. When insects come in contact with Neem insecticide,
through ingestion or contact, the normal developmental cycle of the insect is
disrupted preventing it from molting or maturing. When sprayed on plant
foliage, Neem acts as a strong repellent to many insects that will either avoid
the sprayed plant or land on it but not feed. Beneficial insects generally do
not feed on plants and, therefore, are typically not affected by Neem.
Azadirachtin has a residual effect lasting up to seven days, a unique
characteristic when compared to other organic pesticide technologies. Home
owners can use Neem products in place of traditional synthetic pesticides, such
as diazinon and carbaryl.  The Company believes that the supply of Azadirachtin
will be adequate to satisfy the Company's needs for the foreseeable future.

         COMPOSTING PRODUCTS

         Composting is the process by which yard, garden and certain kitchen
wastes may be broken down into humus, the organic part of soil.  During this
process, a variety of naturally occurring microorganisms and enzymes break down
the carbohydrates and woody cell walls of plants into simple forms of the basic
nutrients - nitrogen, phosphorus and potassium - required for lawn and plant
growth.  Finished compost may be used as a fertilizer and may also be applied
to the soil surface as a mulch or soil amendment which can insulate plant roots
from extreme temperatures, reduce erosion, control weeds and improve moisture
retention. The Company's composting products are designed to enhance and
accelerate the composting process.

         The Company has applied its expertise in formulating microorganisms
with enzymes and nutrient sources to the development of a line of compost
inoculants specifically designed for the materials to be composted. The
nutrient sources are specially designed to balance the carbon/nitrogen ratio in
the compost pile to allow for a more rapid breakdown of the organic material.
The microorganisms used in these composting inoculants have been specifically
selected to work at the elevated temperatures that occur in a compost
environment and to successfully compete with indigenous microorganisms for
available nutrient sources.  The microbes are also selected for their ability
to produce enzymes which will accelerate the breakdown of complex organic
materials.  The Company believes that its composting products are unique in
that they combine a microbial load with a balanced nutrient package to promote
the initial growth of the organisms which accelerates the rate of decomposition
of yard debris such as leaves and grass clippings.

         The Company's composting products accounted for 1%, 2% and 3% of the
Company's sales in fiscal 1996, 1995 and 1994, respectively.





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PRODUCT DEVELOPMENT

         The Company conducts ongoing product development efforts to enhance
existing products and develop new products.  Most of the Company's product
development, research and testing is conducted by university and government
researchers unaffiliated with the Company.

          Since the acquisition of Safer, Inc. ("Safer") in 1991, the Company
has maintained an exclusive right-of-first refusal option to manufacture and
market in North America certain products developed by Eco-Care Technologies,
Inc. ("Eco-Care"), a research company located in Vancouver, British Columbia,
which was formed by scientists formerly employed by Safer. In return for these
rights, the Company granted to Eco-Care a non-exclusive license to use certain
Safer(R) brand technologies.

         In fiscal 1996, 1995 and 1994, the Company spent $748,932, $981,495
and $1,212,263, respectively, on research and development expenditures.

MANUFACTURING

         The Company uses outside subcontract manufacturers to produce its
products. This provides the Company flexibility to react quickly and
economically to seasonal production demands and new product introductions and
to control fixed costs.

         The Company's Restore(R) brand Safer(R) brand and Supreme Lawn(TM)
brand microbial fertilizers and its composting products are produced pursuant
to short-term manufacturing agreements with two subcontractors.  The Company
believes that these subcontractors have sufficient available manufacturing
capacity to satisfy the Company's needs for the foreseeable future.

         The Company's pest control products are manufactured by two
subcontract companies located in Minnesota and Missouri. The Company believes
that these subcontractors have sufficient available manufacturing capacity to
satisfy the Company's needs for the foreseeable future.  Products for Canada
and overseas markets are manufactured by subcontractors in Canada, Europe and
the United States.

         The manufacture of the Company's microbial fertilizers, compost
inoculants and certain pest control products involves formulation and
granulation processes for which the Company must obtain large supplies of
microorganisms. These microorganisms are generally available from several
suppliers. The Company believes that sufficient industry capacity exists to
satisfy the Company's microbial needs for the foreseeable future.

         The Company believes that its fertilizers and composting products and
its non-microbial pest control products are manufactured using generally
available raw materials and processes common to the industry. The Company does
not anticipate any shortages of such raw materials or manufacturing capacity
which would materially affect the supply of finished goods, although price
fluctuations may affect total product costs.

GOVERNMENT REGULATION AND PRODUCT REGISTRATION

         Government regulation in the United States and other countries is a
significant factor in the research, development, production and marketing of
pesticides and, to a lesser extent, fertilizers.  To develop and sell a
pesticide product, federal and state product registration must be obtained for
each pest and plant for which the product is used.  In the United States,
pesticides are regulated by the Environmental Protection Agency ("EPA") under
the Federal Insecticide, Fungicide and Rodenticide Act, as amended ("FIFRA"),
which requires extensive efficacy, toxicology and environmental testing to
substantiate product performance and safety prior to registration.  In
addition, many states have additional registration requirements that go beyond
FIFRA.





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         Under FIFRA, field efficacy testing may be conducted on a small scale
in certain instances.  To conduct large-scale field tests, a company must
obtain an experimental use permit ("EUP"), which generally requires
satisfactory completion of certain toxicology and environmental studies.
Initial EPA registration for a new pesticide may therefore be a lengthy and
expensive process. In addition, the U.S.  Congress has mandated that the EPA
require that all pesticide products registered prior to 1984 be re-registered
by 1997 using today's stricter testing protocols.  Registration applicants also
must submit their proposed labeling for EPA approval.  FIFRA creates a complex
and detailed scheme for pesticide labeling. After a pesticide is registered, it
must be sold with labeling and claims exactly as approved by the EPA.

         To regulate the development and use of biological pest controls,
including those based on naturally occurring microorganisms, the EPA
established special guidelines for their registration which are set forth in
Subdivision M of the EPA's Pesticide Assessment Guidelines.  Biological pest
controls currently are subject to a three-tier toxicology testing procedure and
a four-tier environmental testing procedure.  A biological pest control product
that satisfactorily completes both the toxicology and environmental Tier I
tests is not required to go through the tests specified in subsequent tiers.
Should questions arise during any tier of testing, additional tests may be
required.  The cost of registering biological pest control products is
generally substantially lower than that for chemical pesticides.  Most of the
Company's products have only required Tier I testing. Stricter registration
requirements apply to products based on genetically engineered organisms.  The
Company does not currently use any genetically modified organisms. Based on
current EPA regulations, management believes that biological pest control
product registrations can be obtained at a reasonable cost to the Company.

         The fertilizer products produced and marketed by the Company are
currently regulated by individual state departments of agriculture.
Requirements for obtaining registrations to sell fertilizers vary from state to
state.  Every fertilizer product must be registered and licensed in each state
where it is sold, and a registration or license fee to maintain this
registration must be paid on an annual basis.

         The Company's product performance claims for its fertilizers are more
extensive than those typical of traditional fertilizers, and include claims
that the products improve soil and minimize conditions that promote certain
diseases.  As part of the registration process, research data in support of
these claims must be submitted to the appropriate state agencies.  This
research must be independently generated, preferably at the university level.
The Company's fertilizer products have been tested at several state
universities across the country, as well as in a leading independent turf
research facility in Europe.

         The Company's fertilizer products are currently registered in most
states under a national label which makes certain performance claims. Several
states object to certain claims made on the packaging or require claims
specific to a state. The Company, where possible, has designed special
packaging, citing limited claims, to permit as wide of registration and sale as
possible. The Company continues to work with all states to improve registration
status nationwide, and to substantiate the performance claims through studies
conducted at universities.

         The Company's products will also be subject to regulation by agencies
of foreign countries in which the products are tested, sold or used.  The
Company's activities may be subject to regulation under various other federal
and international laws, regulations and guidelines, and state and local
regulatory requirements, including approvals prior to shipping the products
into a country, state or locality for either experimental or commercial
purposes. The Company currently maintains product registrations in 11 foreign
countries and has registrations pending in three additional foreign countries.
The Company cannot predict the effect of future legislation and regulation on
the Company's operations.

         There can be no assurance that any testing approvals or registrations
will be granted on a timely basis, if at all, or that the Company's resources
will be adequate to meet the costs of regulatory compliance.  Any or all of
those approvals may be the subject of disputes that could postpone or prevent
research, development, production and/or marketing of the Company's products.





                                     -10-
<PAGE>   11

         Some states have laws imposing liability on certain parties for the
release of pesticides and/or fertilizers into the environment in a manner or in
concentrations not permitted by law.  Such liability could include, among other
things, responsibility for cleaning up the damage resulting from such a
release.  In addition, the Comprehensive Environment Response, Compensation and
Liability Act, commonly known as the federal Superfund law, imposes liability
on certain parties for the release into the environment of hazardous
substances, which might include fertilizers and pesticides under certain
circumstances.  The federal Superfund law has been interpreted to impose
liability on a producer of pesticides for cleaning up environmental damage
resulting from the release of its products into the environment during their
manufacture.  The Company has not been subject to any claims for responsibility
relating to impermissible releases of pesticides under such federal or state
statutes.  However, there can be no assurance that the Company will not be
subject to claims under such statutes at some time in the future.  The Company
believes that it does not need, and it does not maintain, insurance for any
environmental claims which might result from the release of its products into
the environment in a manner or in concentrations not permitted by law.

COMPETITION

         The Company faces significant competition in the fertilizer and
pesticide industries from numerous manufacturers and suppliers, several of
which significantly dominate their respective markets and many of which have
substantially greater financial, technical, marketing and other resources than
the Company.  The principal competitive factors in the Company's markets are
efficacy, ease of application, price, health and environmental compatibility
and name recognition.  The Company's products generally cost more than those of
their conventional chemical counterparts, and therefore the Company is
generally not able to compete on pricing alone.

         The Company believes that it has three categories of competitors in
the pesticides market:  large chemical pesticide companies, companies with
existing bio-pesticide product lines, and companies developing new
bio-pesticide products.  The pesticide industry is dominated by large chemical
companies located in the United States and Europe.  These companies generally
operate throughout the world and have the capability to manufacture chemical
pesticides very efficiently.

         The Company's principal competitors in the consumer chemical pesticide
market are Solaris (Ortho) and Spectracide. There are several companies which
manufacture and market bio-pesticides for agricultural use, including Abbott
Laboratories and Sandoz AG.  Many of the large chemical pesticide companies are
currently conducting research on biological pest control technology.  In
addition, the Company is aware that at least one dominant chemical pesticide
manufacturer has introduced a limited line of alternative pest control
products.  There are also small biotechnology companies which are conducting
research in the biological pest control area.  These companies may represent
significant competition in the future.

         The Company's principal competitor in the consumer fertilizer market
is The Scotts-Miracle Grow Company.  Other significant competitors include
Lebanon (Greenview), Milwaukee Sewer Improvement District (Milorganite) and
Estech (Vigoro). Freight cost involved in shipping bulk fertilizer products
across the country are a significant factor in national competition. In
addition to national competitors, the Company has many regional and local
competitors who incur lower freight costs and are therefore more price
competitive in regional and local markets. The Company estimates that
approximately 35% of the market share is held by smaller regional and local
fertilizer manufacturers.

         The Company's principal competitor in the compost inoculant market is
Sudbury. A number of relatively small competitors also participate in the
market. The composting product market is very competitive and has been
declining over the past few years. Management believes that competition will
remain aggressive and that the market may continue to decline, which, together,
may contribute to further decreases in the Company's composting product sales.





                                     -11-
<PAGE>   12

         Products developed by the Company may also be subject to competition
from products developed by companies using other technologies.  One potential
source of competition in the future may come from plant science technology,
including development of pest-resistant plants by genetic engineering and other
methods.

SEASONALITY

         Sales of the Company's products are highly seasonal, with Company
shipments of fertilizers and pest controls being heavily concentrated in the
winter (second fiscal quarter) and spring (third fiscal quarter).  See Item 6,
Management's Discussion and Analysis - Quarterly Performance.

PATENTS AND PROPRIETARY TECHNOLOGIES

         The Company seeks to protect its product technologies through a
variety of means including patents, trade secrets, proprietary know-how,
technological innovation and customer education.

         The Company relies on the use of proprietary processes in the
formulation of its microbial fertilizer products to protect them against
duplication by competitors. The Company acknowledges that there can be no
assurance that such proprietary processes will provide sufficient protection.

         The Company owns patents covering the herbicidal soap and the soap
synergized pyrethrum (SAP) technology.  These patents expire in the years 2008
and 2007, respectively. Also, in connection with the December 1994 acquisition
from Plant Research Laboratories (see "Plant Resource Laboratories" above) of a
water soluble fertilizer product line, marketed under the Oxygen Plus(R) brand
name, the Company acquired an exclusive worldwide license to practice patents
relating to oxygen releasing technology in the horticultural, agricultural and
lawn and garden markets. The license covers currently existing patents and any
further patents on the technology that may be issued in the future. The current
patents on oxygen releasing technology expire in the year 2011.

         As of December 1996, the Company owned 31 patents, including 20 U.S.
patents, and licensed two additional U.S. patents, which expire at various
times during the year from 2006 through 2012. The Company acknowledges that
there can be no assurances that its owned or licensed patents will provide
sufficient protection for its products or be of commercial benefit to the
Company.

         The Company obtains confidentiality agreements from current Company
employees, scientific consultants and potential strategic corporate partners
prior to disclosing Company trade secrets and know-how.  There can be no
assurance that these confidentiality agreements will be honored or that such
proprietary know-how or trade secrets will not be independently created by
third parties.

EMPLOYEES

         As of December 12, 1996, the Company had 36 employees, all of whom are
full-time, located in the U.S. and Canada. Of these employees, 3 were engaged
in product development, 13 in sales and marketing, 12 in distribution and
material control and 8 in general administration. The Company plans to hire
additional personnel as required by the needs of its business. The Company does
not currently anticipate difficulties in attracting sufficient numbers of
qualified employees.  None of the employees are covered by collective
bargaining agreements, and the Company has experienced no work stoppages.  The
Company believes that its employee relations are good.

Item 2.  DESCRIPTION OF PROPERTY.

         The Company leases approximately 6,000 square feet of office
facilities located in Bloomington, Minnesota. In addition, the Company leases
approximately 26,000 square feet of warehouse and office space in





                                     -12-
<PAGE>   13

Eagan, Minnesota.  The Company's corporate office lease and its warehouse lease
expire in September 1999 and December 2001, respectively.  A subsidiary of the
Company leases approximately 13,600 square feet of office and warehouse space
in a suburb of Toronto, Canada.  The lease for the subsidiary's office and
warehouse space expires in fiscal 2000.  The Company anticipates that it will
be able to renew such leases or enter into new leases on substantially similar
terms. See Note 5 of Notes to Consolidated Financial Statements for annual
rental commitments. The Company believes that the properties are adequately
covered by insurance.

Item 3.  LEGAL PROCEEDINGS.

         The Company is not a party to any legal proceedings.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matters were submitted to a vote of stockholders during the quarter
ended September 30, 1996.





                                     -13-
<PAGE>   14

                                    Part II


Item 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's Common Stock trades on the Nasdaq National Market tier
of The Nasdaq Stock Market under the symbol: RING. The following table sets
forth the high and low sales prices of the Company's common stock for the last
two fiscal years as reported by Nasdaq.

                 QUARTERLY STOCK PRICES - FISCAL 1995 AND 1996

<TABLE>
<CAPTION>               
                                                               Sale Prices     
                                                             ----------------
                                                               High       Low  
                                                             -------     -----
<S>                                                          <C>        <C>
Quarter of 1995:
    First   . . . . . . . . . . . . . . . . . . . . . . .    $2 1/8      $1 3/8
    Second  . . . . . . . . . . . . . . . . . . . . . . .    $2 1/2      $1 1/2
    Third   . . . . . . . . . . . . . . . . . . . . . . .    $2 3/8      $1 3/8
    Fourth  . . . . . . . . . . . . . . . . . . . . . . .    $1 21/32    $1 1/4

Quarter of 1996:
    First   . . . . . . . . . . . . . . . . . . . . . . .    $2 1/8      $1 3/8
    Second  . . . . . . . . . . . . . . . . . . . . . . .    $2          $1 5/8
    Third   . . . . . . . . . . . . . . . . . . . . . . .    $2 3/4      $1 3/8
    Fourth  . . . . . . . . . . . . . . . . . . . . . . .    $2 3/8      $1 3/8
</TABLE>


HOLDERS.

        As of December 12, 1996, there were 264 holders of record of the
Company's common stock, and the Company estimates there were approximately
2,300 beneficial holders at such date.

DIVIDENDS.

        The Company has not paid or declared any cash dividends in the past
five years.





                                     -14-
<PAGE>   15

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

ACQUISITION ACTIVITIES

On May 30, 1996, the Company entered into a letter of intent to acquire all
outstanding stock of The Chas. H. Lilly Company ("Lilly"), a regional provider
of lawn and garden fertilizers, pesticides and packet seeds headquartered in
Portland, Oregon. On December 12, 1996, the Company announced that it elected
to discontinue efforts to acquire Lilly. Accordingly, the costs associated with
this acquisition attempt, which amounted to $312,771, have been charged to
expense in the accompanying fiscal 1996 Consolidated Statement of Operations.

In December 1994, the Company acquired substantially all of the assets of Plant
Research Laboratories ("PRL"), a California based developer and marketer of
water soluble fertilizers for the indoor houseplant and outdoor lawn and garden
care markets with annual sales of less than $1 million. The water soluble
fertilizer products acquired use a proprietary oxygen releasing technology.
These products were sold by PRL prior to the acquisition and have been sold by
the Company thereafter, primarily in the western United States, under the
Oxygen Plus(R) brand name.  The Company introduced these products into national
markets in fiscal 1996 and plans to utilize the acquired technology in the
development of future products.

Management believes that new product introductions are essential to the future
growth and profitability of the Company. The Company is actively seeking
additional new product opportunities through a number of internal and external
means including the possibility of licensing arrangements with other companies
and further acquisitions. It should be noted, however, that the successful
culmination of these efforts or the profitable introduction of new products
cannot be assured.

RESULTS OF OPERATIONS

The following table sets forth selected information derived from the Company's
Consolidated Statements of Operations:

<TABLE>
<CAPTION>
                                                                           Percentage of Net Sales
                                                                         For Years Ended September 30,
                                                                  --------------------------------------
                                                                     1996            1995          1994    
                                                                  --------        --------      --------
     <S>                                                           <C>             <C>           <C>
     Net sales  . . . . . . . . . . . . . . . . . . . . . . .      100.0%          100.0%        100.0%
     Cost of sales  . . . . . . . . . . . . . . . . . . . . .       52.1            49.2          47.4
                                                                  ------          ------        ------
     Gross margin   . . . . . . . . . . . . . . . . . . . . .       47.9            50.8          52.6
                                                                              
     Operating expenses:                                                      
         Distribution and warehousing   . . . . . . . . . . .       10.6            13.3          12.9
         Sales and marketing  . . . . . . . . . . . . . . . .       22.7            33.9          31.6
         General and administrative   . . . . . . . . . . . .        9.1            10.2          10.7
         Research and development   . . . . . . . . . . . . .        5.1             6.9           8.3
         Amortization of intangibles  . . . . . . . . . . . .        2.7             2.7           2.5
                                                                  ------          ------        ------
            Total operating expenses  . . . . . . . . . . . .       50.2            67.0          66.0
                                                                  ------          ------        ------
         Loss before other income (expense)   . . . . . . . .       (2.3)          (16.2)        (13.4)
            Other income (expense)  . . . . . . . . . . . . .       (1.6)             .9          11.7
                                                                  ------          ------        ------
         Net loss   . . . . . . . . . . . . . . . . . . . . .       (3.9)%         (15.3)%        (1.7)%
                                                                  ======          ======        ======   
</TABLE>





                                     -15-
<PAGE>   16


The following table sets forth the percentage of net sales represented by each
of the Company's major product categories:

<TABLE>
<CAPTION>
                                                                        Year Ended September 30,
                                                                   ----------------------------------
                                                                    1996           1995         1994  
                                                                   ------         ------       ------
<S>                                                                 <C>           <C>         <C>
Pest control  . . . . . . . . . . . . . . . . . . . . . .            70%           63%         58%
Fertilizer & Composting . . . . . . . . . . . . . . . . .            30             37         42
</TABLE>


FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO FISCAL YEAR ENDED SEPTEMBER
30, 1995

Net Sales

Net sales for the fiscal year ended September 30, 1996 increased by $478,886,
or 3.4%, to $14,672,784 from $14,193,898 for the previous fiscal year ended
September 30, 1995.  The sales increase for fiscal 1996 was primarily due to
increased sales of Safer(R) brand pesticide products which were partially
offset by lower sales of fertilizer products. Increased pesticide sales was
partially due to increased retail distribution and to new product sales.
Decreased fertilizer sales were largely due to lower second year sales of
Ringer(R) Supreme Lawn Fertilizers(TM). The Company plans to discontinue
Supreme Lawn Fertilizers(TM) for the fiscal 1997 season and to introduce a new
fertilizer under the Safer(R) brand name in an effort to compete more
effectively in the broader consumer lawn fertilizer market.

Gross Margin

Gross margins as a percent of sales decreased to 47.9% in fiscal 1996 compared
to 50.8% in fiscal 1995. The decline in gross margin as a percent of sales was
caused primarily by a continuing change in product mix to a higher proportion
of newer products and new promotional combination packs which carry lower
average gross margins.

The Company is dependent on certain raw material ingredients which are traded
in agricultural and industrial commodity markets, such as feather, bone and
blood meal.  Price fluctuations for such commodities are common to the market
and can adversely affect prices paid for these ingredients and, consequently,
the Company's gross margins.  Aggregate price changes on such items did not
materially affect gross margins in fiscal 1996.

Operating Expenses

Distribution and warehousing expenses decreased $330,873, or 17.5%, to
$1,555,897 in fiscal 1996 compared to $1,886,770 in fiscal 1995 and decreased
as a percentage of sales in fiscal 1996 to 10.6% compared to 13.3% in fiscal
1995. The decrease as a percentage of sales in fiscal 1996 compared to fiscal
1995 was primarily due to lower freight and outside distribution costs
resulting from consolidation of distribution processes and reduced freight
rates. Sales and marketing expenses decreased $1,478,315, or 30.7%, to
$3,332,333 in fiscal 1996 compared to $4,810,648 in fiscal 1995 and decreased
as a percentage of sales to 22.7% in fiscal 1996 from 33.9% in fiscal 1995. The
decrease in sales expenses was due largely to lower compensation, benefits and
travel expenses due to staffing reductions, offset in part by increased
commissions incurred from expanded utilization of manufacturer representative
organizations and to lower advertising expenses.  In addition, sales and
marketing expenses were favorably impacted by the reversal in fiscal 1996 of
approximately $198,000 in estimated co-operative advertising expenses, which
were accrued in fiscal 1995, resulting from a change in estimate based on
actual utilization of co-op advertising allowances. General and administrative
expenses decreased $113,844, or 7.9%, to $1,331,266 in fiscal 1996 compared to
$1,445,110 in fiscal 1995 and decreased as a percentage of sales to 9.1% in
fiscal 1996 from 10.2% in fiscal 1995. The decrease was due largely to reduced
facility rental costs resulting from the sublease of approximately half of the
Company's former office facility. Research and development expenses decreased





                                     -16-
<PAGE>   17

$232,563, or 23.7% to $748,932 in fiscal 1996 from $981,495 in fiscal 1995. The
decrease was largely due to lower product registration costs resulting from
discontinued registrations on certain products no longer being sold.
Amortization of intangible assets increased to $402,778 in fiscal 1996 compared
to $379,358 in fiscal 1995. The increase was due primarily to multi-year
foreign product registrations obtained in fiscal 1996 which are being amortized
over the life of the registrations.

Other income and expense

Other income and expense includes a fourth quarter charge of $312,771 for
expenses associated with an election not to proceed with a previously announced
acquisition. (See "Merger and Acquisition Activities" above.)  Interest income
decreased $9,164, or 11.0%, to $73,866 in fiscal 1996 compared to $83,030 in
fiscal 1995. The decrease in interest income was largely due to declining
interest rates on investments. Interest expense increased to $68,250 in fiscal
1996 from $66,690 in fiscal 1995. The increase in interest expense was due
primarily to increased average borrowings in fiscal 1996 compared to fiscal
1995. Net royalty income decreased to $87,136 in fiscal 1996 from $106,352 in
fiscal 1995.  The decrease in net royalty income was primarily caused by
additional royalty expenses incurred by the Company in fiscal 1996 in
connection with licensed technology used in the Company's water soluble
fertilizer line. There was no license fee income in fiscal 1996 and fiscal 1995
compared to one-time license fee income of $1,500,000 recognized in fiscal
1994.

FISCAL YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO FISCAL YEAR ENDED SEPTEMBER
30, 1994

Net Sales

Net sales declined by $432,656, or 3.0%, to $14,193,898 in fiscal 1995 compared
to $14,626,554 in fiscal 1994. This overall decrease is the combined result of
decreases in fertilizer and composting product sales which were partially
offset by an increase in pesticide product sales.  The increase in pesticide
product sales was due primarily to increased sales of new or recently
introduced products including Safer(R) Superfast(R) Brand Weed and Grass Killer
and the Company's new aerosol pesticide product line. The decrease in
fertilizer and composting product sales was partly caused by higher retail
inventory carryover from the prior year.

Gross Margin

Gross margins as a percent of sales decreased to 50.8% in fiscal 1995 compared
to 52.6% in fiscal 1994. The decline in gross margin as a percent of sales was
caused primarily by a change in product mix to a higher proportion of newer
products and new promotional combination packs which carry a lower average
gross margin and to increased raw material and packaging costs which the
Company could not pass on to customers due to competitive pressures.

Operating Expenses

In fiscal 1995, principally in the fourth quarter, the Company took a number of
cost control measures including personnel reductions and other operating
expense reductions.

Distribution and warehousing expenses declined slightly to $1,886,770 in fiscal
1995 compared to $1,890,117 in fiscal 1994, but increased as a percentage of
sales in fiscal 1995 to 13.3% compared to 12.9% in fiscal 1994. The increase as
a percentage of sales in fiscal 1995 compared to fiscal 1994 was due primarily
to a reduction in the average shipment size, which carries higher freight rates
per pound shipped, and to the spread of fixed warehousing expenses over a lower
sales base.  Sales and marketing expenses increased $192,436 to $4,810,648 in
fiscal 1995 compared to $4,618,212 in fiscal 1994 and increased as a percentage
of sales to 33.9% compared to 31.6% for the same prior year periods. The
increase in sales expenses was due largely to increased expenditures for
package design services and merchandising materials.  General and





                                     -17-
<PAGE>   18

administrative expenses decreased 7% to $1,445,110 in fiscal 1995 compared to
$1,558,998 in fiscal 1994. The decrease was due primarily to lower compensation
expenses resulting from staff reductions and lower depreciation expense
resulting from a substantial increase in the amount of fully depreciated
equipment and furnishings.  Research and development expenses decreased 19% to
$981,495 in fiscal 1995 compared to $1,212,263 in fiscal 1994. The decrease was
primarily due to lower compensation expenses resulting from staff reductions
and to reduced administrative overhead. Amortization of intangible assets
increased to $379,358 in fiscal 1995 compared to $367,926 in fiscal 1994. The
increase was due to the amortization of goodwill recorded as a result of the
acquisition of the Oxygen Plus(R) product line in December 1994.

Other income and expense

Interest income decreased $12,008, or 13%, to $83,030 in fiscal 1995 compared
to $95,038 in fiscal 1993. The decrease in interest income resulted from lower
average excess cash balances available for investment in fiscal 1995. Interest
expense increased $32,057 to $66,690 in fiscal 1995 compared to $34,633 in
fiscal 1994. The increase in interest expense was caused by higher average
borrowings on the Company's seasonal line of credit and on higher average
interest rates on borrowings. Net royalty income decreased to $106,352 in
fiscal 1995 from $147,788 in fiscal 1994. The decrease in net royalty income
was primarily caused by the addition of royalty expenses in fiscal 1995 which
was paid by the Company in connection with the license of technology used in
the Company's newly acquired water soluble fertilizer line. There was no
license fee income in fiscal 1995 compared to one-time license fee income of
$1,500,000 recognized in fiscal 1994.

INCOME TAXES

Income tax benefits of net deferred tax assets have been offset by valuation
allowances for the years ended September 30, 1996, 1995 and 1994 because it is
more likely than not that the tax benefits could not be carried back or
realized in future periods.

At September 30, 1996, the Company has approximately $23.2 million in combined
U.S. net operating loss carryforwards for federal income tax purposes. These
loss carryforwards expire between 1997 and 2011. Of the total, approximately
$3.6 million are U.S. net operating loss carryforwards of Safer, Inc., the
Company's wholly owned subsidiary. The use of the unexpired net operating loss
carryforwards of Ringer which were generated prior to September 1990, totaling
approximately $10.9 million, are restricted to $2,025,000 in any one year under
Internal Revenue Code Section 382 because of a significant ownership change
resulting from the Company's initial public offering. The use of net operating
loss carryforwards of Ringer generated after the ownership change are not
restricted. The use of the net operating losses of Safer, Inc. are limited to
approximately $700,000 in any one year under Internal Revenue Code Section 382
because of a significant ownership change resulting from the Company's
acquisition of Safer, Inc. in January 1991. At September 30, 1996, the Company
has approximately $986,000 of net operating loss carryforwards in Canada which
expire between 1997 and 1999.

QUARTERLY PERFORMANCE

The following table sets forth a summary of quarterly results for the past two
fiscal years in order to show the highly seasonal pattern of the Company's
business and quarterly fluctuations in sales and earnings or losses.   This
information is unaudited but contains all adjustments, consisting of normal
recurring accruals, which the Company believes are necessary for a fair
presentation.





                                     -18-
<PAGE>   19

<TABLE>
<CAPTION>
                                                       Fiscal 1996                                 Fiscal 1995
                                                    Three months ended                          Three months ended
                                                    ------------------                          ------------------

                                                                           (In thousands, except earnings per share data)
                                           Dec 31    Mar 31    June 30  Sept 30        Dec 31   Mar 31     June 30   Sept 30
                                           ------    ------    ------- --------       -------   -------    --------  --------
<S>                                        <C>      <C>       <C>       <C>             <C>     <C>      <C>       <C>
Net sales                                  $3,636    $5,613    $ 4,005  $ 1,419         $3,180   $ 5,584    $3,915   $ 1,515
Gross profit                                1,850     2,878      1,709      588          1,724     2,925     1,933       622
Operating expenses                          1,921     2,383      1,619    1,448          2,225     2,910     2,487     1,882
Income (loss) before                                                                               
  other income                                                                                      
  (expense)                                   (71)      495         90     (860)          (501)       15      (554)   (1,260)
                                                                                                    
Other income                                                                                        
  (expense)                                    19        12         14     (267)            83        16       (11)       39
Net income (loss)                          $  (52)   $  507    $   104  $(1,127)        $ (418)  $    31    $ (565)  $(1,221)
                                                                                                    
Income (loss)                                                                                       
per share                                  $ (.00)   $  .05    $   .01  $  (.10)        $ (.04)  $   .00    $ (.05)  $  (.11)

Average common and
  common equivalent
  shares outstanding                       10,922    10,923    10,931     10,922         10,827    10,928    10,922    10,922
</TABLE>

SEASONAL FACTORS AFFECTING OPERATIONS

The Company's business is very seasonal which causes operations to vary
dramatically from quarter to quarter. This can be significantly influenced by
variations in the Company's early season marketing programs and by retail
inventory carryover from year to year. Activities during the first quarter of
each fiscal year are focused heavily toward order solicitation, production
planning and inventory building and shipments to distributors under early order
programs. Inventory balances increase substantially during this period. Normal
seasonal buildup of raw material inventory begins in August and September.
Heavy finished goods production usually begins in October and continues into
the second quarter. Typically, the Company experiences the highest inventory
balances near the end of January and its lowest balances near the end of June.

Sales during the first quarter largely occur in December under early order
marketing programs offered to distributors. These programs normally offer
extended seasonal payment terms common to the industry. Operating costs during
the first quarter, especially sales and marketing expenses, are often higher as
a percentage of sales than in other quarters. This is due to seasonal sales
patterns and increased marketing and promotional expenditures which are
incurred in preparation for the spring retail selling season. As a result of
normal seasonal sales and expenditures patterns during this period, the Company
anticipates that it will frequently incur an operating loss during the first
quarter of each fiscal year. The  Company's early season marketing programs
which encouraged distributors to take delivery of inventory in December by
offering substantially higher early season sales discounts can have a
significant effect on the timing quarterly sales.

The second and third fiscal quarters is historically the Company's peak selling
season which usually accounts for over 70% of yearly sales.  Most of these
sales occur during February through April. Second quarter sales largely consist
of shipments of spring season early orders as mass merchandisers place initial
stocking orders. Billings for these early order shipments during this period
are normally given extended payment terms common to the industry. This
contributes to a rapid increase in trade receivables during the second quarter
which is substantially reduced during the third quarter when extended-term
billings come due. The majority of third quarter sales are the result of spring
and early summer restocking orders.

Fourth quarter sales are primarily attributed to orders of pesticides sold into
the southern markets and to orders of fall fertilizer and composting products
sold under fall promotional programs. Fall promotion programs





                                     -19-
<PAGE>   20

generally include extended payment terms common to the industry, though amounts
involved are much smaller than those experienced earlier in the year. The
fourth quarter also reflects certain marketing expenses incurred in preparation
for the upcoming fiscal year's spring selling season.  Also, during this
period, analysis of current year peak season performance is completed and any
changes in product, sales and marketing strategies are implemented. Due to this
yearly pattern, fourth quarter operations may be charged from time to time with
material expenses associated with the implementation of these changes. As a
result of these issues, fourth quarter operations may also show a loss, the
existence and size of which will vary depending on the nature and timing of
sales and expenses discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Historically the Company's cash and working capital needs have been provided
through public and private equity offerings as well as seasonal bank lines of
credit.

Each year the Company experiences an early season build up of accounts
receivable which it normally funds with cash on hand and a revolving bank line
of credit. Accounts receivable increase dramatically during the second and
third quarter of each year which is the Company's peak selling season. Most of
the Company's sales occur during this period and frequently are made with
seasonal extended payment terms offered to customers under early season order
programs common to the industry. Usually accounts receivable are highest, and
bank line borrowings the greatest, around the middle to end of the third
quarter of each fiscal year. In 1996, the Company's maximum borrowings were
$3,405,417 from its bank line of credit compared to maximum borrowings of
$3,123,902 in fiscal 1995. The Company's bank line of credit expires October
31, 1997.  Maximum available borrowings under this line of credit total
$5,000,000. (See Note 4 of Notes to Consolidated Financial Statements.)
Management believes that cash on hand and this line of credit are adequate to
meet the Company's seasonal working capital requirements for fiscal 1997.
There were no line of credit borrowings outstanding at September 30, 1996.

Normal seasonal build-up of raw material inventory begins in the fourth quarter
of each year in preparation for production required to meet demand during the
peak shipping season in February through April. Inventory purchases have been
funded with cash from operations.

In fiscal 1996, cash and cash equivalents increased $532,404 to $3,288,781 at
September 30, 1996. The increase resulted primarily from cash provided by
operating activities of $699,044, partially offset by cash used in investing
activities of $158,506. The $699,044 provided by operating activities was
primarily the result of decreased inventory and receivables of $502,224 and
$205,861, respectively, and increased accrued expenses of $249,746, which was
partially offset by cash used to fund the net operating loss of $568,119, less
net non-cash expenses of $511,896, and a reduction in accounts payable of
$194,464. Cash used in investing activities was primarily used to purchase
property and equipment of $60,861 and to invest in patent and trademark
applications and other intangible assets of $118,674, partially offset by
proceeds from the sale of fixed assets of $20,849.

In fiscal 1995, cash and cash equivalents decreased $2,091,246 to $2,756,377 at
September 30, 1995. The decline resulted primarily from cash used in operating
activities of $1,640,482, cash used in investing activities of $440,526 and
cash used in financing activities of $2,063. The $1,640,482 used in operating
activities was used primarily to fund the net loss of $2,173,104 and increases
in inventory of $748,040, which was partially offset by decreases in accounts
receivable and prepaid expenses of $313,494 and $90,174, respectively, and
increases in accounts payable of $331,887. Cash used in investing activities
was primarily used to acquire substantially all the assets of Plant Research
Laboratories (see Item 1. Business, "Plant Research Laboratories"), to purchase
property and equipment of $101,536 and to invest in patent and trademark
applications and other intangible assets of $106,288. Cash used in financing
activities resulted from final payments on capital lease obligations of $3,667
partially offset by cash of $1,604 received from the exercise of employee
incentive stock options.





                                     -20-
<PAGE>   21

In fiscal 1994, cash and cash equivalents decreased $573,902 to $4,847,623 at
September 30, 1994. The decrease resulted primarily from cash used in
operations of $413,100 and cash used in investing activities of $292,100 which
was partially offset by cash provided from financing activities of $117,963.
The $413,100 used in operating activities was used primarily to fund decreases
in accrued expenses and accounts payable of $928,067 and $336,325,
respectively, and increases in accounts receivable of $174,867, which were
partially offset by decreases in inventory and prepaid expenses of $490,123 and
$114,945, respectively. Cash used in investing activities was primarily used to
purchase property and equipment of $102,302 and intangible assets  consisted
primarily of patents and trademark applications in progress of $198,388. Cash
provided by financing activities consisted of cash received resulting from the
exercise of employee incentive stock options totaling $130,979, which was
partially offset by $13,016 in capital lease payments.

There are no commitments for capital expenditures in fiscal 1997. The Company's
bank line of credit agreement, as amended, limits the Company to capital asset
purchases of not more than $250,000 per year during the term of the credit
agreement ending October 31, 1997.

The Company's line of credit contains certain provisions which require the
Company to maintain certain minimum financial ratios based on net worth. In
addition, there are prohibitions on payment of dividends and restrictions on
the amount of fixed assets that may be purchased during a loan year.

The Company intends to renew its line of credit at the end of its term. Should
the Company be unable to renew its credit line, the Company would need to find
alternative seasonal financing. Should the Company need to seek alternative
seasonal financing, there is no assurance that the Company would be able to
obtain this financing. Management believes that working capital of $4.40
million at September 30, 1996, together with seasonal bank lines of credit,
will be sufficient to fund its operations through at least fiscal 1997. The
Company has been able to obtain adequate financing in the past. However, there
is no assurance that future financing will be available to the Company when
needed.

EFFECTS OF INFLATION

The Company believes that, during the periods discussed above, inflation has
not had a material impact on the Company's business.

ACCOUNTING PRONOUNCEMENTS

The Company adopted Statement on Financial Accounting Standards ("SFAS") No.
107, "Disclosures About Fair Value of Financial Instruments" and SFAS No. 119,
"Disclosures About Derivative Financial Instruments and Fair Value of Financial
Instruments" at the beginning of the fiscal year ended September 30, 1996. The
adoption of these statements did not have a material impact on the Company
because the Company limits its investments to cash equivalent instruments and
because the Company does not invest in derivative securities.

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 123, " Accounting for Stock-Based
Compensation." This Statement requires adoption of the disclosure provisions no
later than fiscal years beginning after December 15, 1995. The new standard
defines a fair value method of accounting for stock options and other equity
instruments. Under the fair value method, compensation cost is measured at the
grant date based on the fair value of the award and is recognized over the
service period, which is usually the vesting period.

Pursuant to the new standard, companies are encouraged, but not required, to
adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," but would be required to disclose in a note to the
financial statements the pro forma net income and net income per common and
common equivalent share as if the Company had applied the new method of
accounting.





                                     -21-
<PAGE>   22

The accounting requirements of the new method are effective for all employee
awards granted after the beginning of the fiscal year of adoption.  The Company
has not yet determined if it will elect to change to the fair value method, nor
has it determined the effect the new standard will have on net income and
income per common and common equivalent share, should it elect to make such a
change. Adoption of the new standard, if elected, will have no effect on cash
flow.

FORWARD LOOKING INFORMATION

The information contained in this Annual Report includes forward-looking
statements as defined in Section 21E of the Securities Exchange Act of 1934, as
amended.  These forward-looking statements involve a number of risks and
uncertainties, including demand from major customers, competition, changes in
product or customer mix or revenues, and changes in product costs and operating
expenses, and other factors disclosed throughout this Annual Report and the
Company's other filings with the Securities and Exchange Commission.  The
actual results that the Company achieves may differ materially from any
forward-looking statements due to such risks and uncertainties.  The Company
undertakes no obligation to revise any forward-looking statement in order to
reflect events or circumstances that may arise after the date of this report.
Readers are urged to carefully review and consider the various disclosures made
by the Company in this report and in the Company's other reports filed with the
Securities and Exchange Commission that attempt to advise interested parties of
the risks and uncertainties that may affect the Company's financial condition
and results of operations.





                                     -22-
<PAGE>   23


Item 7.   FINANCIAL STATEMENTS.

The following consolidated financial statements are included as a separate
section following the signature page to this Form 10-KSB:

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                        Page

<S>                                                                     <C>
Independent Auditors' Report  . . . . . . . . . . . . . . . . . . . .    F-2

Consolidated Balance Sheets as of
  September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . .    F-3

Consolidated Statements of Operations for the years ended
  September 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . .    F-4

Consolidated Statements of Stockholders' Equity for the years ended
  September 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . .    F-5

Consolidated Statements of Cash Flows for the years ended
  September 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . .    F-6

Notes to Consolidated Financial Statements  . . . . . . . . . . . . . F-7 to F-13

</TABLE>


Item 8.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL DISCLOSURE.

                None.





                                     -23-
<PAGE>   24

                                    PART III


Item 9.   SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.

          The information set forth under the heading "ELECTION OF DIRECTORS",
"EXECUTIVE OFFICERS" and "COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934" in the Company's definitive proxy statement for its 1997
Annual Meeting of Shareholders to be filed with the Securities and Exchange
Commission on or before January 28, 1997 (the "Proxy Statement") is hereby
incorporated by reference.

Item 10.  EXECUTIVE COMPENSATION.

          The information set forth under the heading "EXECUTIVE COMPENSATION"
in the Proxy Statement referred to in Item 9 above is hereby incorporated by
reference.

Item 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

          The information set forth under the heading "PRINCIPAL SHAREHOLDERS"
in the Proxy Statement referred to in Item 9 above is hereby incorporated by
reference.

Item 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

          The information set forth under the heading "CERTAIN TRANSACTIONS" in
the Proxy Statement referred to in Item 9 above is hereby incorporated by
reference.





                                     -24-
<PAGE>   25


Item 13.  EXHIBITS AND REPORTS ON FORM 8-K.

a.        Listing of Exhibits

<TABLE>
<CAPTION>
Exhibit
Number        Description
------        -----------
<S>       <C>
   3.1    Restated Articles of Incorporation of the Company, as amended to date (incorporated by reference to Exhibit 3.2 of the
          Company's Registration Statement on Form S-18, SEC File No. 33-36205-C).

   3.2    Bylaws of the Company, as amended to date (incorporated by reference to Exhibit 3.3 of the Company's Registration
          Statement on Form S-18, SEC File No. 33-36205-C).

   4.1    Specimen certificate of Common Stock, $.01 par value (incorporated by reference to Exhibit 4.1 of the Company's
          Registration Statement on Form S-18, SEC File No. 33-36205-C).

* 10.1    1986 Employee Incentive Stock Option Plan (incorporated by reference to Exhibit 4.4 of the Company's Registration
          Statement on Form S-8, SEC File No. 33-37806).

* 10.2    Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.2 of the Company's Annual Report on
          Form 10-KSB for the fiscal year ended September 30, 1993, SEC File No. 0-18921).

  10.3    Lease Agreement between the Company and 94th Street Associates, a Minnesota Partnership, dated August 15, 1996.

  10.4    Lease Agreement between the Company and MEPC American Properties, Inc., a Delaware corporation, dated August 16, 1996.

* 10.5    Employment Agreement between the Company and Stanley Goldberg dated September 13, 1992 (incorporated by reference to
          Exhibit 10.6 of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1992, SEC File No.
          0-18921). 

  10.6    Credit and Security Agreement and Supplement A to Credit and Security Agreement between the Company and FBS Business
          Finance Corporation relating to the Company's line of credit (incorporated by reference to Exhibit 10.7 of the Company's
          Annual Report on Form 10-K for the fiscal year ended September 30, 1992, SEC File No. 0-18921).

  10.7    Waiver and First Amendment to Credit and Security Agreement referred to in 10.6 above  (incorporated by reference to
          Exhibit 10.9 of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1993, SEC File No.
          0-18921). 

  10.8    Second Amendment to Credit and Security Agreement referred to in 10.6 and 10.7 above (incorporated by reference to Exhibit
          10.10 of the Company's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1993, SEC File No. 0-18921)

  10.9    Third Amendment to Credit and Security Agreement referred to in 10.6, 10.7 and 10.8 above (incorporated by reference to
          Exhibit 10.10 of the Company's Annual Report on Form 10-KSB for the fiscal year ended September 20, 1994, SEC File No.
          0-18921) 
</TABLE>





                                     -25-
<PAGE>   26

<TABLE>
<S>       <C>
 10.10    Waiver and Fourth Amendment to Credit and Security Agreement referred to in 10.6, 10.7, 10.8 and 10.9 above (incorporated
          by reference to Exhibit 10.10 of the Company's  Annual Report on Form 10-KSB for the fiscal year ended September 30, 1995,
          SEC File No. 0-18921).

 10.11    Stock Subscription Warrant between the Company and Robert W. Fischer Co., Inc. dated July 18, 1990 (incorporated by
          reference to Exhibit 10.16 of the Company's Registration Statement on Form S-18, SEC File No. 33-36205-C).

*10.12    Ringer Corporation Contingency Retention Plan, and Amendment No.1 to Ringer Corporation Contingency Retention Plan, dated
          October 26, 1993 (incorporated by reference to the Company's Annual Report on Form 10-KSB for the fiscal year ended
          September 30, 1994, SEC File No. 0-18921).

 10.13    Cross-Licensing and Joint Licensing/Sale Agreement between Ringer Corporation and Mycogen Corporation, dated May 31, 1994
          (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended
          June 30, 1994, SEC File No. 0-18921).

 10.14    Patent License Agreement between Ringer Corporation, Mycogen Corporation and Monsanto Company, dated June 29, 1994
          (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-QSB for the fiscal quarter ended
          June 30, 1994, SEC File No. 0-18921).

*10.15    Ringer Corporation 1996 Employee Stock Option Plan

 21.1     Subsidiaries of the Registrant.

 23.1     Consent of Deloitte & Touche LLP.

 24.1     Power of Attorney.

 27.1     Financial Data Schedule
</TABLE>

   *   Management contract or compensation plan or arrangement.

   See Exhibit Index and Exhibits attached as a separate section of this
report.


b.     Reports on Form 8-K

       No reports on Form 8-K were filed for the quarter ended September 30,
1996.





                                     -26-
<PAGE>   27


                                   SIGNATURES

       In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                    RINGER CORPORATION

                                    By  /S/ Stanley Goldberg
                                       --------------------------
                                        Stanley Goldberg
                                        President & CEO



Dated:   December 26, 1996

       In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.


<TABLE>
<CAPTION>
       Name                         Title                                  Date
       ----                         -----                                  ----
<S>                           <C>
 /S/ Stanley Goldberg         President, CEO and Director           December 26, 1996
---------------------         (principal executive officer)
Stanley Goldberg              


 /S/ Mark G. Eisenschenk      Chief Financial Officer               December 26, 1996
------------------------      (principal financial officer)
Mark G. Eisenschenk           


 /S/ Joseph R. Price          Controller                            December 26, 1996
--------------------          (principal accounting officer)
Joseph R. Price               


Gordon F. Stofer *            Chairman of the Board and Director

Robert W. Fischer *           Director

Donald E. Lovness *           Director

Dr. Franklin Pass *           Director

John F. Hetterick *           Director

Frederick F. Yanni, Jr. *     Director


*  /S/ Stanley Goldberg       Attorney-in-fact                   December 26, 1996
  ---------------------                                    
  Stanley Goldberg
</TABLE>





                                     -27-
<PAGE>   28

                       RINGER CORPORATION AND SUBSIDIARY


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                   Page
                                                                                   ----
<S>                                                                                 <C>
Independent Auditors' Report. . . . . . . . . . . . . . . . . . . . . . . .         F-2

Consolidated Balance Sheets as of
  September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . .         F-3

Consolidated Statements of Operations for the years ended
  September 30, 1996, 1995 and 1994   . . . . . . . . . . . . . . . . . . .         F-4

Consolidated Statements of Stockholders' Equity for the years ended
  September 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . .         F-5

Consolidated Statements of Cash Flows for the years ended
  September 30, 1996, 1995 and 1994 . . . . . . . . . . . . . . . . . . . .         F-6

Notes to Consolidated Financial Statements  . . . . . . . . . . . . . . . .     F-7 to F-13

</TABLE>




                                      F-1
<PAGE>   29


INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders
Ringer Corporation
Bloomington, Minnesota

We have audited the accompanying consolidated balance sheets of Ringer
Corporation and subsidiary as of September 30, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended September 30, 1996. 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 generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement.  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 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 Ringer
Corporation and subsidiary as of September 30, 1996 and 1995 and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1996 in conformity with generally accepted accounting
principles.




DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
December 3, 1996 (December 12, 1996 as to Note 13)





                                      F-2
<PAGE>   30

RINGER CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                September 30
                                                          ---------------------------
                                                           1996                1995  
                                                         --------            --------
<S>                                                      <C>              <C>
ASSETS
------
CURRENT ASSETS:
 Cash and cash equivalents                              $ 3,288,781       $ 2,756,377
 Trade accounts and notes receivable, less allowance 
    for doubtful accounts of $126,000 and $208,000, 
    respectively                                            992,198         1,200,352
 Inventories (Note 2)                                     1,519,692         2,026,981
 Prepaid expenses                                           133,746           132,607
                                                         ----------       -----------
       Total current assets                               5,934,417         6,116,317

PROPERTY AND EQUIPMENT, net (Note 3)                        238,297           299,374

INTANGIBLE ASSETS, at cost, less accumulated 
 amortization of $2,264,349 and $1,762,019, 
 respectively (Note 1)                                    5,297,329         5,582,957
                                                         ----------       -----------
                                                        $11,470,043       $11,998,648
                                                         ==========        ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:                                      
 Accounts payable                                       $   651,546       $   847,733
 Accrued expenses:
    Co-op advertising                                       319,691           302,925
    Other accrued expenses                                  559,908           327,684
                                                         ----------        ----------
       Total current liabilities                          1,531,145         1,478,342


COMMITMENTS AND CONTINGENCIES (Note 5)

STOCKHOLDERS' EQUITY (Note 6):
 Preferred stock, undesignated, par value $.01
    per share, authorized 5,000,000 shares,
    no shares issued and outstanding
 Common stock, par value $.01 per share, authorized
    25,000,000 shares, issued and outstanding
    10,921,930 shares                                       109,219           109,219
 Additional paid-in capital
                                                         32,036,675        32,036,675
 Accumulated deficit                                    (22,067,276)      (21,499,157)
 Cumulative translation adjustment                         (139,720)         (126,431)
                                                         ----------        ----------
                                                          9,938,898        10,520,306
                                                         ----------        ----------
                                                        $11,470,043      $ 11,998,648
                                                         ==========        ==========
</TABLE>
See notes to consolidated financial statements.





                                     
                                     F-3
<PAGE>   31

RINGER CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                             Year Ended September 30                
                                                                    ---------------------------------------
                                                                       1996          1995          1994      
                                                                    ----------    ---------    -----------
<S>                                                             <C>             <C>             <C>
NET SALES                                                       $   14,672,784  $ 14,193,898    $14,626,554
                                                                                   
COST OF GOODS SOLD                                                   7,647,293     6,990,175      6,933,995
                                                                   -----------    ----------      ---------
 Gross profit                                                        7,025,491     7,203,723      7,692,559
                                                                                   
OPERATING EXPENSES:                                                                
 Distribution and warehousing                                        1,555,897     1,886,770      1,890,117
 Sales and marketing                                                 3,332,333     4,810,648      4,618,212
 General and administrative                                          1,331,266     1,445,110      1,558,998
 Research and development                                              748,932       981,495      1,212,263
 Amortization of intangibles                                           402,778       379,358        367,926
                                                                   -----------    ----------      ---------
                                                       
                                                                     7,371,206     9,503,381      9,647,516
                                                                   -----------    ----------      ---------
                                                       
    Loss before other                                                              
      income (expense)                                                (345,715)   (2,299,658)    (1,954,957)
                                                                                   
OTHER INCOME (EXPENSE):                                                            
 Interest income                                                        73,866        83,030         95,038
 Interest expense                                                      (68,250)      (66,690)       (34,633)
 Royalties, net (Note 5)                                                87,136       106,352        147,788
 License fee income (Note 10)                                                                     1,500,000
 Other income (expense), net                                            (2,385)        3,862          4,299
 Abandoned acquisition expenses (Note 13)                             (312,771)    
                                                                    -----------   ----------      ---------
                                                       
                                                                      (222,404)      126,554      1,712,492
                                                                    -----------   ----------      ---------
                                                       
                                                                                   
NET LOSS                                                        $    ( 568,119) $ (2,173,104)    $ (242,465)
                                                                    ==========    ==========      =========
   
   
NET LOSS PER WEIGHTED
  AVERAGE COMMON SHARE                                          $         (.05)  $      (.20)    $     (.02)
                                                                    ==========    ==========      =========
                                                      

WEIGHTED AVERAGE COMMON
  SHARES OUTSTANDING                                                10,921,930    10,897,704     10,769,957
                                                                    ==========    ==========     ========== 

</TABLE>


See notes to consolidated financial statements.





                                      F-4
<PAGE>   32


RINGER CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                    Common Stock             
                                              -------------------------      Additional                  Cumulative    
                                              Number of                       paid-in     Accumulated    translation
                                                shares        Amount          capital       deficit      adjustment     Total
                                              ----------     ---------     -----------    -----------    ----------- -----------
<S>                                           <C>           <C>            <C>           <C>             <C>         <C>
BALANCE AT SEPTEMBER 30, 1993                 10,716,112     $ 107,161     $31,693,650   $(19,083,588)   $(122,517)  $12,594,706
                                                 
 Issuance of common stock upon                   
   exercise of stock options                      64,901           649         130,330                                   130,979
 Issuance of common stock as non-cash            
   compensation to officer (Note 11)               5,000            50          11,825                                    11,875
 Foreign currency translation adjustments                                                                   (9,102)       (9,102)
 Net loss                                                                                    (242,465)                  (242,465)
                                             -----------      --------     -----------   ------------    ---------    ----------
                                                 
BALANCE AT SEPTEMBER 30, 1994                 10,786,013       107,860      31,835,805    (19,326,053)    (131,619)   12,485,993
                                                 
 Issuance of common stock in connection          
   with the purchase of Oxygen Plus              125,000         1,250         186,250                                   187,500
 Issuance of common stock upon                   
   exercise of stock options                         917             9           1,595                                     1,604
 Issuance of common stock as non-cash            
   compensation to officer (Note 11)              10,000           100          13,025                                    13,125
 Foreign currency translation adjustments                                                                    5,188         5,188
 Net loss                                                                                  (2,173,104)                (2,173,104)
                                             -----------      --------     -----------   ------------    ---------    ----------
                                                 
BALANCE AT SEPTEMBER 30, 1995                 10,921,930       109,219      32,036,675    (21,499,157)    (126,431)   10,520,306
                                                 
 Foreign currency translation adjustments                                                                  (13,289)      (13,289)
 Net loss                                                                                    (568,119)                  (568,119)
                                             -----------      --------     -----------   ------------    ---------    ----------
BALANCE AT SEPTEMBER 30, 1996                 10,921,930      $109,219     $32,036,675   $(22,067,276)   $(139,720)   $9,938,898
                                             ===========      ========     ===========   ============    =========    ==========
</TABLE>

 See notes to consolidated financial statements.





                                      F-5
<PAGE>   33


RINGER CORPORATION AND SUBSIDIARY
---------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Note 11)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                             Year ended September 30                       
                                                                    ----------------------------------------------
                                                                       1996             1995              1994      
                                                                    ----------       ----------        ----------

<S>                                                            <C>                  <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                          $  (568,119)     $(2,173,104)        $(242,465)
 Adjustments to reconcile net loss to net cash
  provided by (used in) operating activities:
     Depreciation and amortization                                     514,940          519,928           652,813
     Write-off of intangible assets                                      1,312           42,564            15,216
     Stock issued as compensation for services                                           13,125            11,875
     Income from investment in joint venture                            (4,356)                            (9,198)
     Gain on sale of property
        and equipment                                                  (11,449)          (5,786)           (7,150)
     (Increase) decrease in assets:
        Trade accounts receivable                                      205,861          313,494          (174,867)
        Inventories                                                    502,224         (748,040)          490,123     
        Prepaid expenses                                                 3,349           90,174           114,945
     Increase (decrease) in liabilities:
        Accounts payable                                              (194,464)         331,887          (336,325)
        Accrued expenses                                               249,746          (24,724)         (928,067)
                                                                     ---------       ----------         ---------
         Net cash provided by (used in) operating activities           699,044       (1,640,482)         (413,100)

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property and equipment                                   ( 60,681)        (101,536)         (102,302)
 Purchase of intangible assets                                        (118,674)        (106,288)         (198,388)
 Proceeds from sale of property and equipment                           20,849           24,958             8,590
 Net cash paid relating to acquisition of Oxygen Plus                                  (257,660)  
                                                                     ---------       ----------         ---------
       Net cash used in investing activities                          (158,506)        (440,526)         (292,100)

CASH FLOWS FROM FINANCING ACTIVITIES:                                          
 Proceeds from issuance of common stock                                                   1,604           130,979
 Principal payments on capital lease obligations                                         (3,667)          (13,016)
                                                                     ---------       ----------         ---------
       Net cash (used in) provided by financing activities                   0           (2,063)          117,963

Effect of exchange rate changes on cash                                ( 8,134)          (8,175)           13,335
                                                                     ---------       ----------         ---------

Increase (decrease) in cash and cash equivalents                       532,404       (2,091,246)         (573,902)

CASH AND CASH EQUIVALENTS:
 BEGINNING OF PERIOD                                                 2,756,377        4,847,623         5,421,525
                                                                     ---------       ----------         ---------
 END OF PERIOD                                                    $  3,288,781      $ 2,756,377        $4,847,623
                                                                     =========       ==========         =========
</TABLE>

See notes to consolidated financial statements.






                                     F-6
<PAGE>   34

RINGER CORPORATION AND SUBSIDIARY
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994                        
--------------------------------------------------------------------------------
1.  BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Business - The Company develops and markets a broad line of
    environmentally-oriented turf, lawn and garden treatments to consumer and
    specialty professional markets.  The Company's product lines include
    microbially-driven fertilizers and biological and botanical pest controls
    which are offered as products of choice over traditional chemical
    fertilizers and pesticides.  The Company also offers a line of composting
    products.

    Principles of consolidation - The consolidated financial statements include
    the accounts of Ringer Corporation and Safer, Inc., its wholly owned
    subsidiary. All material intercompany accounts and transactions have been
    eliminated.

    Revenue recognition - The Company recognizes revenue on the date of
    shipment for sales other than "bill and hold" sales. Revenue on infrequent
    "bill and hold" sales is recognized at the time that title and risk of
    ownership passes to purchaser.

    Translation of foreign financial statements - The Company's foreign
    operations are translated from functional foreign currency to U.S.
    dollars. Assets and liabilities are translated at year end rates of
    exchange and the statements of operations are translated at the average
    rates of exchange for the applicable reporting years. Gains and losses
    resulting from translating foreign currency financial statements are not
    included in operations but are accumulated as a separate component of
    stockholders' equity.

    Inventories - Inventories are stated at the lower of cost (first-in,
    first-out method) or market.

    Property and equipment - Property and equipment are recorded at cost.
    Depreciation is computed using the straight-line method over the estimated
    useful lives of the assets of three to ten years.

    Acquisition of the assets of Plant Research Laboratories - On December 1,
    1994, the Company issued 125,000 shares of its common stock with a fair
    market value of $187,500 at December 1, 1994 and paid cash of $257,660 to
    acquire substantially all of the assets of Plant Research Laboratories
    ("PRL"), a California based developer and marketer of water soluble
    fertilizers for the indoor houseplant and outdoor lawn and garden markets.
    The acquisition was accounted for using the purchase method using a
    combination of cash and the issuance of common stock.  The products,
    marketed under the Oxygen Plus(R) brand name, have been previously sold by
    PRL primarily in the western United States.  The historical annual sales of
    Oxygen Plus were less than one million dollars.  The pro forma impact on
    net loss and net loss per share is immaterial.

    Intangible assets and evaluation of potential impairment - Intangible
    assets consist primarily of goodwill which represents the purchase price
    and related acquisition costs in excess of the fair value of identifiable
    assets acquired. Other intangible assets include patents and trademarks.
    Intangible assets are amortized on a straight-line basis over estimated
    lives of five to twenty years. The Company regularly evaluates its
    intangible assets for potential permanent impairment. Such evaluations take
    into consideration anticipated future operating results and cash flows on
    an undiscounted basis. Anticipated future operating results and cash flows
    are estimated based on current product sales trends, expected sales from
    related products in development, general market trends and other market and
    business circumstances.

    Concentration of credit risks - The percentage of consolidated net sales in
    fiscal 1996 to U.S. retail and commercial markets totaled 79.3% and 4.4%,
    respectively. The percentage of consolidated net sales in fiscal 1995 to
    U.S. retail and commercial markets totaled 81.0% and 5.1%, respectively.
    The remaining percentage of consolidated net sales in fiscal 1996 and 1995
    of 16.3% and 13.9%, respectively, represent foreign sales, primarily in
    Canada.  In fiscal 1996 and 1995, sales to one U.S. retail customer
    accounted for 15.3% and 14.5%, respectively, of consolidated net sales
    while sales during the same periods to one distributor that resells to
    retailers accounted for 14.8% and 12.4%, respectively, of consolidated net
    sales.






                                     F-7
<PAGE>   35

    Cash and cash equivalents - Cash and cash equivalents include cash on hand
    and in banks and money market funds with maturities of three months or less
    when acquired.

    Fair value of financial instruments - The Financial Accounting Standards
    Board has issued two Financial Accounting Standards ("FAS") related to
    disclosures about the fair value of financial instruments. FAS 107 and 119
    are effective for the fiscal year ended September 30, 1996. The estimated
    fair values of financial instruments approximate their carrying amounts in
    the consolidated balance sheets.

    Income taxes - The Company accounts for income taxes as required by
    Statement of Financial Accounting Standards No. 109, "Accounting for Income
    Taxes."  The Statement requires recognition of deferred assets and
    liabilities for the expected future tax consequences of events that have
    been included in the financial statements or tax returns.  Under this
    method, deferred tax assets and liabilities are determined based on the
    differences between the financial statements and the tax basis of assets
    and liabilities using enacted tax rates in effect for the years in which
    the differences are expected to reverse.

    Loss per share - Loss per common share is computed using the weighted
    average number of shares outstanding during each period.  Common stock
    equivalents, consisting of options and warrants, have been excluded from
    the computation  because their effect is antidilutive.

    Use of estimates - The preparation of financial statements in conformity
    with generally accepted accounting principles requires management to make
    estimates and assumptions that affect the reported amount of assets and
    liabilities and disclosures of contingent assets and liabilities at the
    date of the financial statements and the reported amounts of revenues and
    expenses during the reporting period.  Actual results could differ from
    those estimates.

    Change in estimates - Fiscal 1996 includes the reversal of approximately
    $198,000 in estimated co-op advertising expenses, which were accrued in
    fiscal 1995, resulting from a change in estimate based on actual
    utilization of co-op advertising allowances. Fiscal 1994 includes a
    reversal of approximately $195,000 in estimated co-op advertising expenses
    which were accrued in fiscal 1993 and a reversal of approximately $100,000
    in estimated legal and contingency expenses accrued in prior years.

2.  INVENTORIES

    Inventory consists of the following:

<TABLE>
<CAPTION>                       
                                                                 September 30           
                                                         ----------------------------
                                                                1996           1995      
                                                         ------------     ------------    
    <S>                                                 <C>                <C>
    Raw materials                                         $   726,099      $1,172,967
    Finished goods                                            793,593         854,014
                                                          -----------       ---------
                                                          $ 1,519,692      $2,026,981
                                                          ===========      ==========
                                                                            
</TABLE>

3.  PROPERTY AND EQUIPMENT

    Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                  September 30           
                                                           --------------------------
                                                             1996             1995     
                                                          -----------      ----------- 
      <S>                                                <C>              <C>
       Office furniture and equipment                     $  791,464      $1,042,375
       Machinery and equipment                               786,442         903,667
       Leasehold improvements                                  8,091          89,223
       Transportation equipment                                6,400          24,560
                                                          ----------      ----------
                                                           1,592,397       2,059,825
       Less accumulated depreciation                      (1,354,100)     (1,760,451)
                                                          ----------      ---------- 
                                                          $  238,297      $  299,374
                                                          ==========      ==========

</TABLE>





                                     F-8
<PAGE>   36
4.  LINE OF CREDIT

    The Company has a revolving bank line of credit agreement that expires
    October 31, 1997. Under the agreement, as amended, available borrowings
    under this line are secured by substantially all of the assets of the
    Company and its subsidiary and are limited to the lesser of $5,000,000 or a
    borrowing base of 70% of eligible receivables, as defined in the credit
    agreement. Interest is at prime plus 1 3/4% (10.0% at September 30, 1996).
    The Company is required to pay a commitment fee of 1/2% on any unused
    portion of the line in addition to credit management fees of $3,000 per
    month over the term of the agreement. Management believes that this line of
    credit will meet the Company's seasonal working capital requirements for
    fiscal 1997. There are no outstanding borrowings under the line of credit
    as of September 30, 1996.

    The Company's line of credit contains certain provisions which require the
    Company to maintain certain minimum financial ratios based on net worth. In
    addition, there are prohibitions on payment of dividends and restrictions
    on the amount of fixed assets that may be purchased during a loan year.

5.  COMMITMENTS AND CONTINGENCIES

    Leases - The Company leases office and warehouse space and various vehicles
    and equipment under noncancelable operating leases.  In addition to minimum
    lease payments, these leases require the Company to pay its proportionate
    share of real estate taxes, special assessments and maintenance costs. The
    lease on the Company's corporate offices expires in September  1999. The
    lease on the Company's warehouse facility expires in December 2001. The
    Company is also required to carry liability insurance on the premises.

    Costs incurred under operating leases are recorded as rent expense and
    totaled $220,176, $290,343 and $313,381 for the years ended September 30,
    1996, 1995 and 1994, respectively.

    The future minimum lease payments due under operating leases are as
    follows:

<TABLE>
<CAPTION>
                                             Operating
                                               Leases      
                                             ------------
       <S>                                  <C>  
       Year ending September 30:             
         1997                                 $151,024
         1998                                  160,536
         1999                                  159,206
         2000                                  116,359
         2001                                  116,240
       Thereafter                               29,060 
                                              --------
       Total minimum obligation               $732,425 
                                              ========
</TABLE>

    Royalty agreements - The Company has paid royalties for the use of
    technologies licensed under two agreements entered into in connection with
    the acquisition of a water soluble fertilizer product line on December 1,
    1994. The licenses calls for royalty payments of from 2% to 5% of the net
    selling price of applicable water soluble fertilizers. Payments under the
    agreements terminate in 1999 and 2011. Royalty expense incurred under these
    agreements totaled $18,197 and $23,786 for the years ended September 30,
    1996 and 1995, respectively.

    Royalty income of $105,333, $130,138 and $147,788 for the fiscal years
    ended September 30, 1996, 1995 and 1994, respectively, was generated by the
    Company through licensing pesticide technologies to certain foreign and
    commercial pesticide distributors for a royalty fee.

    Contingencies

    The Company has a Contingency Retention Plan which provides for payment to
    certain key employees of the Company, including all of the officers, of a
    lump sum termination benefit plus continuation of life insurance, health
    insurance and dental benefits for a period of time in the event the
    employment of such employees is terminated within two years after a "change
    of control," as defined. The amount of the lump sum termination benefit
    varies from the equivalent of three months to two years of salary and bonus
    at the time of termination. The period during which health and welfare
    benefits continue after termination varies from three months to two years,
    but is terminated if the employee obtains other employment with similar
    benefits. The Contingency Retention Plan continues in effect





                                     F-9
<PAGE>   37

    unless terminated, prior to a change in control, by a resolution approved
    by at least two-thirds of the Board of Directors.

6.  STOCKHOLDERS' EQUITY

    Preferred stock - The Board of Directors of the Company is authorized to
    issue preferred stock or other senior equity securities in one or more
    series, and with certain limitations, to determine preferences as to
    dividends, liquidation, conversion and redemption.

    Stock warrants - As of September 30, 1996, a total of 1,000 shares of
    common stock were reserved for currently exercisable outstanding warrants
    described below.
<TABLE>
<CAPTION>
                                                  Warrant
         Expiration                               Shares              Exercise Price 
    -------------------                          ---------            ----------------
    <S>                                          <C>                  <C>
    September 20, 1998                            1,000                   $2.00
</TABLE>

    1986 Employee Incentive Stock Option Plan -  The 1986 Employee Incentive
    Stock Option Plan terminated according to its terms on September 17, 1996.
    After this date no further stock options may be granted under the Plan
    although previously granted options remain outstanding and exercisable
    under the terms of each option. At termination of the Plan, the Company had
    reserved a total of 833,068 shares of common stock for issuance upon the
    exercise of outstanding options previously granted under the Plan.

    Under the terms of the 1986 Employee Incentive Stock Option plan, options
    to purchase shares of the Company's common stock were granted at a price
    not less than 100% of the fair market value of the stock at the date of
    grant.  Options have a vesting period of from three to five years and
    expire ten years from the date of grant. Options become fully vested upon
    the occurrence of a change in control, as defined.  Activity under the plan
    is as follows:

<TABLE>
<CAPTION>
                                                                                    
                                                                                           Average
                                                                          Option         Exercise Price
                                                                          Shares           Per Share  
                                                                         ---------       --------------
    <S>                                                                <C>                    <C>
    Balance, September 30, 1993 (at $1.88 to $2.70 per share)             445,855             $2.28
        Granted                                                           139,650              2.34
        Canceled                                                          (32,160)             2.41
        Exercised                                                         (64,901)             2.02
                                                                       ----------

    Balance, September 30, 1994 (at $1.75 to $3.25 per share)             488,444              2.32
        Granted                                                           512,050              1.98
        Canceled                                                         (132,247)             2.34
        Exercised                                                            (917)             1.75
                                                                       ----------

    Balance, September 30, 1995 (at $1.75 to $2.70 per share)             867,330              2.13
        Granted                                                            28,500              1.58
        Canceled                                                          (62,762)             1.98
                                                                       ----------
    Balance, September 30, 1996 (at $1.50 to $2.70 per share)             833,068             $2.11
                                                                       ==========
    Exercisable, September 30, 1996                                       465,875             $2.20
                                                                       ==========

</TABLE>

    Stock Option Plan for Non-Employee Directors - The Company has reserved
    200,000 shares of the Company's common stock for issuance upon the exercise
    of stock options granted under the Stock Option Plan for Non-Employee
    Directors.

    Under provisions of the Plan, non-employee directors are granted, upon
    election or appointment as a director of the Company,  options for the
    purchase of 10,000 shares of the Company's common stock. In addition,
    non-employee directors receive, on the first day of each fiscal year while
    the director remains in office, options to purchase 5,000 shares of the
    Company's common stock. The exercise price of options granted under the
    Plan is 100% of the fair







                                     F-10
<PAGE>   38

    market value of the Company's common stock on the date of grant. Options
    are immediately exercisable in full and may be exercised within five years
    of the date of grant. Activity under the plan is as follows:

<TABLE>
<CAPTION>
                                                                         
                                                                       Average
                                                         Option      exercise price
                                                         Shares       per share    
                                                         -------     -------------
    <S>                                                  <C>           <C>
    Balance, September 30, 1993                           20,000       $1.81
    Granted                                               35,000        2.13
                                                          ------           
                                                         
    Balance, September 30, 1994                           55,000        2.01
    Granted                                               30,000        2.13
                                                          ------           
                                                         
    Balance, September 30, 1995                           85,000        2.05
    Granted                                               30,000        2.13
                                                          ------           
                                                         
    Balance, September 30, 1996                          115,000       $2.07
                                                         =======            
</TABLE>

    Recent Accounting Pronouncement - The Financial Accounting Standards Board
    has issued Statement of Financial Accounting Standards ("SFAS") No. 123, "
    Accounting for Stock-Based Compensation." This Statement requires adoption
    of the disclosure provisions no later than fiscal years beginning after
    December 15, 1995. The new standard defines a fair value method of
    accounting for stock options and other equity instruments. Under the fair
    value method, compensation cost is measured at the grant date based on the
    fair value of the award and is recognized over the service period, which is
    usually the vesting period.

    Pursuant to the new standard, companies are encouraged, but not required,
    to adopt the fair value method of accounting for employee stock-based
    transactions. Companies are also permitted to continue to account for such
    transactions under Accounting Principles Board Opinion No. 25, "Accounting
    for Stock Issued to Employees," but would be required to disclose in a note
    to the financial statements the pro forma net income and net income per
    common and common equivalent share as if the Company had applied the new
    method of accounting.

    The accounting requirements of the new method are effective for all
    employee awards granted after the beginning of the fiscal year of adoption.
    The Company has not yet determined if it will elect to change to the fair
    value method, nor has it determined the effect the new standard will have
    on net income and income per common and common equivalent share, should it
    elect to make such a change. Adoption of the new standard, if elected, will
    have no effect on cash flow.

7.  PROFIT SHARING PLAN

    The Company has a defined contribution plan which conforms to IRS
    provisions for 401(k) plans. Employees are eligible to participate in the
    plan providing they have attained the age of twenty-one and have completed
    thirty days of service. Participants may contribute up to 10% of their
    earnings. The Company can also make matching contributions, as determined
    by the Board of Directors. The Company may also make discretionary profit
    sharing contributions to the Plan as determined by the Board of Directors.
    The Company made employer 401(k) matching contributions of $37,607,  none
    and $41,927 for the years ended September 30, 1996, 1995 and 1994,
    respectively. There were no employer discretionary profit sharing
    contributions for the years ended September 30, 1996, 1995 and 1994.

8.  INCOME TAXES

    The Company accounts for income taxes as required by Statement of Financial
    Standards No. 109, "Accounting for Income Taxes".  The Statement requires
    recognition of deferred assets and liabilities for the expected future tax
    consequences of events that have been included in the financial statements
    or tax returns. Under this method, deferred tax assets and liabilities are
    determined based on the differences between the financial statements and
    the tax basis of assets and liabilities using enacted tax rates in effect
    for the years in which the differences are expected to reverse. Net
    deferred tax assets have been offset by valuation allowances for the years
    ended September 30, 1996, 1995 and 1994 because it is more likely than not
    that the tax benefits could not be carried back or realized in future
    years.





                                     F-11
<PAGE>   39

    Net deferred tax assets at September 30 are comprised of the following:

<TABLE>
<CAPTION>
    Current:                                                      1996             1995     
                                                               ----------       ---------
       <S>                                                     <C>            <C>
       Prepaid expenses                                        $  (9,000)     $  (16,000)
       Accrued expenses                                          185,000         128,000    
       Reserves for doubtful accounts                             50,000          82,000
       Inventory valuation reserves                               55,000         124,000
       Expenses capitalized to inventory for tax purposes        274,000         329,000
       Sales returns and allowance reserves                       69,000          69,000
       Less valuation allowance                                 (624,000)       (716,000)
                                                                --------       --------- 
                                                               $     -0-      $      -0-
                                                                ========       =========
    Noncurrent:                                                
       Excess of tax over book depreciation                    $ (11,000)     $  (26,000)
       Packaging design costs                                    152,000
       U.S. net operating loss carryforwards                   8,398,000       8,623,000
       Foreign net operating loss carryforwards                  394,000         298,000
       U.S. and foreign tax credit carryforwards                 704,000         706,000
       Less valuation allowances                              (9,637,000)     (9,601,000)
                                                              ----------      ---------- 
                                                              $      -0-     $       -0-
                                                              ==========      ==========
</TABLE>

    At September 30, 1996, the Company has approximately $23,200,000 in
    combined U.S. net operating loss carryforwards for federal income tax
    purposes. These loss carryforwards expire between 1997 and 2011. Of the
    total, approximately $3,600,000 are U.S. net operating loss carryforwards
    of Safer, Inc., the Company's wholly owned subsidiary.

    The use of the unexpired net operating loss carryforwards of Ringer which
    were generated prior to September 30, 1990, totaling approximately
    $10,900,000 as of September 30, 1996, are limited to $2,025,000 in any one
    year under Internal Revenue Code Section 382 because of a significant
    ownership change resulting from the Company's initial public offering. The
    use of net operating loss carryforwards of Ringer generated after the
    ownership change are not limited.

    The use of the net operating losses of Safer, Inc. are limited to
    approximately $700,000 in any one year under Internal Revenue Code Section
    382 because of a significant ownership change resulting from the Company's
    acquisition of Safer, Inc. in January 1991.

    At September 30, 1996, the Company has approximately $986,000 net operating
    loss carryforwards in Canada which expire between 1997 and 2002.

10.   LICENSE FEE INCOME

    During the fiscal year ended September 30, 1994, the Company recognized
    $1,500,000 in one-time license fee income as a result of entering into a
    license agreement with a major chemical company. The Company does not
    expect to receive any further payments as a result of entering into this
    license agreement.

11.   SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

    The Company paid and received cash for the following items:
<TABLE>
<CAPTION>
                                                   Year ended September 30                
                                          -----------------------------------------
                                            1996            1995            1994   
                                          -------         ---------       ---------
    <S>                                   <C>             <C>           <C>
    Interest paid                         $  68,106       $  66,690      $  34,633
    Interest received                        69,908          82,064         92,582
</TABLE>








 

                                     F-12
<PAGE>   40

 Investing and financing transactions not affecting cash during the years ended
 September 30, 1996, 1995 and 1994 are described below:

 -  In 1995, the Company issued 125,000 shares of its common stock as a portion
    of the total consideration paid for the acquisition of substantially all of
    the assets of Plant Research Laboratories. In connection with this issuance
    of common stock, the Company recorded $187,500 to common stock and
    additional paid-in capital, which represented the fair market value of the
    common stock on the date of issuance. Additional acquisition costs included
    $257,660 in cash consideration and direct acquisition expenses.

 -  In 1995, the Company issued 10,000 shares of restricted common stock to an
    officer in lieu of cash compensation and recorded a $13,125 increase to
    compensation expense and to common stock and additional paid-in capital
    which was the fair market value of the restricted stock on the date of
    issuance.

 -  In 1994, the Company issued 5,000 shares of restricted common stock to an
    officer in lieu of cash compensation and recorded an $11,875 increase to
    compensation expense and to common stock and additional paid-in capital
    which was the fair market value of the restricted stock on the date of
    issuance.

12.   FOREIGN OPERATIONS

    International sales activity, consisting of sales outside the United
    States, primarily in Canada, accounted for approximately 16%,  14% and 11%
    of total sales for the years ended September 30, 1996, 1995 and 1994,
    respectively. A reconciliation of fiscal 1996, 1995 and 1994 domestic and
    foreign activity for net sales, net income (loss) and identifiable assets
    is as follows:

<TABLE>
<CAPTION>
       Fiscal 1996:                               Domestic           Foreign             Total      
       -----------                              ------------      -----------         ----------
 <S>                                            <C>               <C>                 <C>
    Net Sales                                    $12,274,927      $2,397,857           $14,672,784
    Net Income (Loss)                               (743,106)        174,987              (568,119)
    Identifiable Assets                          $10,488,502      $  981,541           $11,470,043

    Fiscal 1995:                                  Domestic           Foreign              Total      
    -----------                                 -------------     ------------         -----------
    Net Sales                                   $ 12,223,014      $1,970,884           $14,193,898
    Net Income (Loss)                             (2,231,595)         58,491            (2,173,104)
    Identifiable Assets                         $ 10,621,910      $1,376,738           $11,998,648

    Fiscal 1994:                                  Domestic           Foreign              Total      
    -----------                                 -------------     -------------        -----------
    Net Sales                                   $ 12,955,530      $1,671,024           $14,626,554
    Net Income (Loss)                               (292,779)         50,314              (242,465)
    Identifiable Assets                         $ 12,594,523      $1,044,267           $13,638,790
</TABLE>

13.   SUBSEQUENT EVENT

    On May 30, 1996, the Company entered into a letter of intent to acquire all
    outstanding stock of The Chas. H. Lilly Company ("Lilly"), a Portland based
    developer and marketer of lawn and garden fertilizers, pesticides and
    packet seeds. On December 12, 1996, the Company announced that it elected
    to discontinue efforts to acquire Lilly. Accordingly, the costs associated
    with this acquisition attempt, which amounted to $312,771, have been
    charged to expense in the accompanying fiscal 1996 Consolidated Statement
    of Operations and is included in other expense.





                                     F-13
<PAGE>   41


                               INDEX OF EXHIBITS

<TABLE>
<CAPTION>
Exhibit Number                                     Description                         Pages
----------------------------------------------------------------------------------------------
<S>      <C>                                                                          <C>
   10.3    Lease Agreement between the Company and 94th Street Associates, a
           Minnesota Partnership, dated August 15, 1996.                                 _____
                                                                              
   10.4    Lease Agreement between the Company and MEPC American Properties, Inc.,
           a Deleware corporation, dated August 16, 1996.                                _____
                                                                                      
* 10.15    Ringer Corporation 1996 Employee Stock Option Plan    

   21.1    Subsidiaries of the Registrant.                                               _____
                                                      
   23.1    Consent of Deloitte & Touche LLP.                                             _____

   24.1    Power of Attorney.                                                            _____

   27.1    Financial Data Schedule                                                       _____

</TABLE>

*   Management contract or compensation plan or arrangement.








                                     F-14