<PAGE>

                                       
                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549


                                   FORM 10-Q
     (Mark One)

         [X]       QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                      OF THE SECURITIES EXCHANGE ACT OF 1934

                         For the Quarterly Period Ended
                                 March 31, 1997

         [ ]       TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                           OF THE EXCHANGE ACT

                         For the Transition Period From
                          ____________ to ____________

                         Commission file number 0-19688

                          DESTRON FEARING CORPORATION

             (Exact name of Registrant as specified in its charter)


           Delaware                                     84-1079037
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                              490 Villaume Avenue
                           South St. Paul, MN  55075
                                 (612) 455-1621
                    (Address of principal executive offices)


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

As of May 14, 1997, there were 13,293,982 outstanding shares of Common Stock.


<PAGE>

                          DESTRON FEARING CORPORATION



                                   FORM 10-Q

                       FOR THE QUARTER ENDED MARCH 31, 1997


                                      INDEX
                                      -----


                                                                            Page
                                                                            ----
PART I -- FINANCIAL INFORMATION

    Item 1 -- Financial Statements                                            3


    Item 2 -- Management's Discussion and Analysis of Financial 
              Condition and Results of Operations                             9


PART II -- OTHER INFORMATION

    Item 1 -- Legal Proceedings                                              12


    Item 6 -- Exhibits and Reports on Form 8-K                               13

    Signatures                                                               13


                                      -2-
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                        PART 1.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS
DESTRON FEARING CORPORATION AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, 1997 AND SEPTEMBER 30, 1996
(in thousands, except share and per share amounts)
--------------------------------------------------------------------------------

                  ASSETS                              March 31,   September 30,
                                                        1997           1996
                                                      ---------   -------------
CURRENT ASSETS:
  Cash                                                  $1,044            $39
  Accounts receivable, net                               2,908          1,016
  Inventories, net                                       6,799          7,219
  Prepaid expenses and other current assets                 28             28
                                                       -------        -------
      Total current assets                              10,779          8,302

PROPERTY AND EQUIPMENT, net                              1,993          2,104
INVESTMENT IN JOINT VENTURE                                225            225
GOODWILL, net                                            2,043          2,085
OTHER ASSETS, net                                          248            306
                                                       -------        -------
                                                       $15,288        $13,022
                                                       -------        -------
                                                       -------        -------
       LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Line of credit                                        $   --           $866
  Accounts payable                                       5,370          5,597
  Accrued liabilities                                      516            528
  Current portion of long-term obligations                 949             47
                                                       -------        -------
      Total current liabilities                          6,835          7,038

LONG-TERM OBLIGATIONS,
     net of current portion                                761          1,688
                                                       -------        -------
      Total liabilities                                  7,596          8,726
                                                       -------        -------
SHAREHOLDERS' EQUITY:
     Common stock, $.01 par value;
        20,000,000 shares authorized;
        13,294,000 and 11,641,000 shares
        issued and outstanding, respectively               133            116
      Additional paid-in capital                        19,789         16,692
      Accumulated deficit                              (12,230)       (12,512)
                                                       -------        -------
     Total shareholders' equity                          7,692          4,296
                                                       -------        -------
                                                       $15,288        $13,022
                                                       -------        -------
                                                       -------        -------

                      The accompanying notes are an integral part
                          of these consolidated balance sheets.


                                      -3-
<PAGE>

DESTRON FEARING CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE QUARTER AND SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(in thousands, except per share amounts)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                         Quarter Ended March 31,  Six Months Ended March 31,
                                         -----------------------  --------------------------
                                             1997      1996            1997      1996
                                            ------    ------          ------    ------
<S>                                         <C>       <C>             <C>       <C>
NET REVENUE                                 $4,046    $4,206          $7,214    $6,682
                                            ------    ------          ------    ------
COSTS AND EXPENSES:
  Cost of sales                              2,494     2,946           4,451     4,577
  Selling, general and administrative        1,032     1,570           1,737     2,559
  Research and development                     195       267             393       480
  Interest expense and other                   124        83             351        28
                                            ------    ------          ------    ------
  Total costs and expenses                   3,845     4,866           6,932     7,644
                                            ------    ------          ------    ------
INCOME (LOSS) BEFORE INCOME TAXES              201      (660)            282      (962)

PROVISION FOR INCOME TAXES                      --        --              --        --
                                            ------    ------          ------    ------
NET INCOME (LOSS)                             $201     ($660)           $282     ($962)
                                            ------    ------          ------    ------
                                            ------    ------          ------    ------
NET INCOME (LOSS) PER COMMON AND
  COMMON EQUIVALENT SHARE                    $0.02    ($0.06)          $0.02    ($0.08)
                                            ------    ------          ------    ------
                                            ------    ------          ------    ------
WEIGHTED AVERAGE NUMBER OF 
  COMMON AND COMMON EQUIVALENT
  SHARES OUTSTANDING                        13,010    11,612          12,449    11,399
                                            ------    ------          ------    ------
                                            ------    ------          ------    ------
</TABLE>

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


                                      -4-
<PAGE>

DESTRON FEARING CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(in thousands)
--------------------------------------------------------------------------------

                                                      Six Months Ended March 31,
                                                      -------------------------
                                                           1997        1996
                                                      ------------ ------------
OPERATING ACTIVITIES:
  Net income (loss)                                        $282       ($962)
  Adjustments to reconcile net income (loss) to
    net cash used in operating activities:
    Depreciation and amortization                           253         237
    Equity in income of joint venture and other              --         (18)
    Changes in operating items:
      Accounts receivable                                (1,892)     (1,422)
      Inventories                                           420      (3,346)
      Prepaid expenses and other current assets              --           8
      Royalties receivable                                   --         402
      Accounts payable and accrued liabilities             (239)      1,845
                                                         ------      ------
      Net cash used in operating activities              (1,176)     (3,256)
                                                         ------      ------
INVESTING ACTIVITIES:
  Purchases of fixed assets                                 (42)       (189)
  Change in other assets                                     --          11
                                                         ------      ------
      Net cash used in investing activities                 (42)       (178)
                                                         ------      ------
FINANCING ACTIVITIES:
  Issuance of common stock, net                           3,114       2,026
  Borrowings under long-term obligations                     --         875
  Repayments of long-term obligations                       (25)     (1,245)
  Net borrowings (repayments) on bank line of credit       (866)      1,753
                                                         ------      ------
      Net cash provided by financing activities           2,223       3,409
                                                         ------      ------
NET CHANGE IN CASH                                        1,005         (25)

CASH, beginning of period                                    39          62
                                                         ------      ------
CASH, end of period                                      $1,044         $37
                                                         ------      ------
                                                         ------      ------
SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest paid                                            $343        $173
                                                         ------      ------
                                                         ------      ------


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

                                      -5-
<PAGE>


DESTRON FEARING CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997 and 1996
(unaudited)
--------------------------------------------------------------------------------

1.  GENERAL

The information included in the accompanying consolidated interim financial 
statements is unaudited and should be read in conjunction with the audited 
consolidated financial statements and notes thereto contained in the most 
recent Annual Report on Form 10-KSB filed for Destron Fearing Corporation and 
its subsidiaries (collectively, the "Company"). In the opinion of management, 
all adjustments, consisting of normal recurring items, necessary for a fair 
presentation of the financial position and results of operations for the 
interim periods presented have been reflected herein.  The results of 
operations for interim periods are not necessarily indicative of the results 
to be expected for the entire fiscal year.

2.  RELATIONSHIP WITH SCHERING-PLOUGH

In January 1995, the Company entered into an agreement with Schering-Plough 
Animal Health ("Schering-Plough"), under which Schering-Plough would market 
and distribute a companion animal permanent identification product 
manufactured by the Company. 

In October 1995, Schering-Plough notified the Company that it would suspend 
purchases for an indefinite period of time to allow for the sales of its 
existing inventories.  In response to this notification, the Company began to 
curtail the purchase of materials required to manufacture and package the 
product.  However, as a result of previous commitments, the Company was 
unable to discontinue certain purchases from its suppliers.  As of March 31, 
1997 and September 30, 1996, inventories included readers, transponders and 
other components and packaging of $3,347,000 and $3,678,000 related to the 
Company's agreement with Schering-Plough.  The Company has the right to 
recover the costs of certain of these inventories under this agreement.

Management believes that the cost of inventories on hand will be realized 
through sales of the product to Schering-Plough or other customers, or 
through enforcement of the Company's rights under the agreement to receive 
reimbursement from Schering-Plough.  However, it is also possible that the 
Company will be required to dispose of these inventories through alternate 
means, which could result in significant losses.

3.  INVENTORIES

Inventories are valued at the lower of first in, first out cost or market, 
and consist of the following (in thousands):

                                       March 31, 1997    September 30, 1996
                                       --------------    ------------------
Raw materials                              $3,409             $3,352
Finished goods                              3,390              3,867
                                           ------             ------
    Total inventories                      $6,799             $7,219
                                           ------             ------
                                           ------             ------

                                      -6-
<PAGE>

4.  PRIVATE PLACEMENTS OF COMMON STOCK

In December 1995, the Company completed a private placement of 625,000 shares 
of common stock for gross proceeds of $2.0 million.  A portion of these 
proceeds was used to retire an outstanding $600,000 term loan, with the 
remaining proceeds expected to be used to finance working capital needs and 
new product development.

In January 1997, the Company sold an aggregate of 650,000 shares of common 
stock to two United States investors for gross proceeds of $1.3 million.  
Also in January 1997, the Company sold an aggregate of 1,000,000 shares of 
common stock in a private placement to three foreign investors pursuant to 
Regulation S under the Securities Act of 1933 for gross proceeds of 
$2,000,000 (the Regulation S Offering").  The proceeds from these offerings 
have been and will be used to finance working capital needs and new product 
development.

5.  LEGAL PROCEEDINGS

Destron is party to litigation in which it is asserting infringement by a 
competitor of one of the Company's patents related to certain of its 
technology. The defendants assert that the patent is not infringed, is 
invalid and is unenforceable.  The defendants also have asserted antitrust 
and unfair competition claims against the Company and Hughes Aircraft Company 
(Hughes).

The trial in the litigation commenced on January 8, 1996.  On January 29, 
1996, the jury in the trial returned a verdict in favor of the Company, found 
that the defendants had willfully infringed on the Company's patent, and 
awarded damages of $444,000, including prejudgment interest.  The defendants 
have appealed the judgment against them, and the Company cross-appealed the 
failure of the court to increase Destron's damages.  While management and its 
legal counsel continue to believe that the final outcome of this litigation 
will not have a significant impact on the Company's future financial 
position, cash flows or results of operations, there can be no assurance of 
the ultimate outcome of the litigation.

On December 17, 1996, three competitors filed a lawsuit against the Company 
and its United States distributor, Schering-Plough, in the United States 
District Court for the District of Minnesota.  The plaintiffs alleged that 
the defendants participated in unfair competition, breached an oral contract 
and infringed on three of the plaintiffs' United States patents.  On January 
24, 1997, the plaintiffs withdrew this lawsuit in its entirety.

On April 21, 1997, four plaintiffs (including the three competitors 
identified in the foregoing paragraph) filed a lawsuit against the Company 
and Schering-Plough and another of the Company's competitors in the United 
States District Court for the District of Minnesota.  The plaintiffs allege 
that the defendants participated in unfair competition, breached an oral 
agreement and infringed on three of the plaintiffs' United States patents and 
requested that the Court award compensatory and treble damages of an 
unspecified amount.  The Company and its legal counsel believe that the 
claims are without merit and that the ultimate outcome of this litigation 
will not have a significant adverse impact on the Company's future financial 
position, cash flows or results of operations. However, there can be no 
assurance of the ultimate outcome of this lawsuit.

6.  PRIVATE PLACEMENT OF DEBT

In March 1996, the Company borrowed a total of $875,000 (and an additional 
$25,000 in April 1996) from private investors through the issuance of 
unsecured notes due October 21, 1997 and bearing interest at the rate of 11% 
per annum. As part of the transaction, the Company issued warrants to the 
noteholders to purchase a total of 147,539 shares of the Company's common 
stock.  The warrants are exercisable at $4.8125 per share for a term of five 
(5) years beginning March 21, 1996.  The value of these warrants at the time 
of issuance was not deemed to be significant.  Funds received from these 
notes were used to retire indebtedness that was due on March 21, 1996, and to 
provide additional working capital for operations.

                                      -7-
<PAGE>

7.  REAL ESTATE LOAN

In April 1996, the Company borrowed $658,000 from a commercial bank through 
the issuance of a promissory 8.98% note collateralized by its real estate.  
The proceeds of the loan were used to retire a previous bank loan and 
industrial development revenue bonds and to provide additional working 
capital for operations. 

8.  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT

In February 1997, the Financial Accounting Standards Board issued Statement 
of Financial Accounting Standards No. 128, earnings per share (SFAS No. 128). 
This standard establishes new guidelines for computing and presenting 
earnings (loss) per share (EPS).  Management believes that the adoption of 
SFAS No. 128 will not have a material impact on the Company's calculation of 
EPS.


                                      -8-
<PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RELATIONSHIP WITH SCHERING-PLOUGH

In January 1995, the Company entered into an agreement with Schering-Plough 
under which Schering-Plough would market and distribute a companion animal 
permanent identification product manufactured by the Company. 

In October 1995, Schering-Plough notified the Company that it would suspend 
purchases for an indefinite period of time to allow for the sales of its 
existing inventories.  In response to this notification, the Company began to 
curtail the purchase of materials required to manufacture and package the 
product.  However, as a result of previous commitments, the Company was 
unable to discontinue certain purchases from its suppliers.  As a result, at 
March 31, 1997 the Company had an outstanding balance payable to a major 
vendor of approximately $4.6 million that it has been unable to pay in the 
normal course of business and inventories of approximately $3,347,000 on hand 
related to the Schering-Plough agreement.  Also see "Liquidity and Capital 
Resources."  The Company has the right to recover the costs of certain of 
these inventories under this agreement.

Management believes that the cost of inventories on hand will be realized 
through sales of the product to Schering-Plough or other customers, or 
through enforcement of the Company's rights under the agreement to receive 
reimbursement from Schering-Plough.  However, it is also possible that the 
Company will be required to dispose of these inventories through alternate 
means, which could result in significant losses.

RESULTS OF OPERATIONS

Net revenue for the quarter ended March 31, 1997 of $4,046,000 was 4% lower 
than the $4,206,000 reported for the comparable quarter of fiscal 1996.  For 
the six-month period, fiscal 1997 revenue was $7,214,000, which represented 
an 8% increase over the $6,682,000 fiscal 1996 amount.  Second quarter 
revenue from the Radio Frequency Identification Device (RFID) electronic 
products declined 6% from last year principally because of reduced sales in 
Europe in the current quarter.  For the six-month period, RFID revenue 
increased 11% over the fiscal 1996 period primarily due to increased sales to 
the fisheries industries and sales into the new companion animal market in 
Japan.  Revenue from visual identification products during the second quarter 
of fiscal 1997 was relatively unchanged from the prior year, while revenue 
for the six-month period was 4% higher than for the comparable period of 
fiscal 1996.  Increased unit sales and a general price increase accounted for 
the higher six-month sales of visual identification products in fiscal 1997.

Cost of sales of $2,494,000 for the second quarter and $4,451,000 for the 
six-month period were lower than the comparable fiscal 1996 periods by 15% 
and 3%, respectively.  The lower costs are attributable to a more profitable 
product mix, improved gross profit margins on the sales of electronic readers 
and increased manufacturing efficiency of visual identification products.  As 
a result of these factors, the reported gross profit percentage increased for 
the second quarter and six-month period of fiscal 1997 to 38% from 34% for 
the fiscal 1996 second quarter and 32% for the six-month period ended March 
31, 1996.

Selling, general and administrative expenses of $1,032,000 in the second 
quarter ended March 31, 1997, were 34% lower than for the same period last 
year.  For the six-month period ended March 31, 1997, these expenses were 
$1,737,000, which represented a 32% reduction from the comparable period in 
fiscal 1996.  The reduced expenses resulted primarily from significantly 
lower legal fees in the current year (decreases of $464,000 in the second 
quarter and $647,000 for the six-month period when compared to the fiscal 
1996 period).  Also, selling expenses declined for both the RFID and visual 
identification product lines for the current quarter and six-month period 
from the fiscal 1996 levels principally because of lower travel and travel 
related expenses.

                                      -9-
<PAGE>

Research and development expenses of $195,000 in the second quarter of fiscal 
1997 declined 27% from fiscal 1996 while, for the six-month period, they 
declined 18% from the previous year to $393,000.  This year's reductions for 
both the quarter and six-month period primarily resulted from lower outside 
production development expenses.

Interest and other of $124,000 in the second quarter of fiscal 1997 were 49% 
higher than the $83,000 reported for the comparable 1996 period.  Interest 
expense increased in the current quarter principally because of the  
recognition of imputed interest on an outstanding balance payable to a 
vendor.  For the six-month period of fiscal 1997, interest and other of 
$351,000 exceeded the $28,000 reported for the comparable fiscal 1996 period 
because of the imputed interest expense incurred in fiscal 1997 and the 
offsetting income recognized in fiscal 1996 from the collection of a $137,000 
note that had been written off in a prior fiscal year.

The Company derives a significant portion of its revenue from export sales.  
The gross profit and cash requirements of these sales do not vary materially 
from the requirements of its domestic sales.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has utilized financing sources such as public and 
private equity offerings and borrowings from financial institutions and 
individual investors to fund its operating activities.  In addition, during 
fiscal 1996 and in fiscal 1997 to date, the Company has been required to 
extend the term on payments to a significant vendor.  As of the date of this 
quarterly report, the Company is engaged in discussions with this vendor 
regarding settlement of the approximately $4.6 million balance payable.  In 
order for the Company to continue to fund its operations in fiscal 1997, it 
will be required to negotiate an agreement with the vendor with payment terms 
that do not severely restrict other cash flow requirements.  The Company 
believes that funds available under its existing credit agreement or a credit 
agreement with an alternative lending institution; funds generated by 
operations and from private placements of common stock in January 1997; and 
the successful negotiation of a satisfactory agreement with the 
above-discussed vendor, will be sufficient to provide the Company with 
adequate liquidity and capital resources for working capital and other cash 
requirements.  

However, the information set forth in the preceding paragraph is 
forward-looking information.  Therefore, if, for any reason (including, 
without limitation, those described below), the Company's operations require 
more capital than anticipated, revenues do not reach anticipated levels, the 
Company does not reach a satisfactory agreement with its major vendor, or 
cash flow needs are greater than planned, the Company may need additional 
financing prior to the end of fiscal 1997 in order to maintain its 
operations.  There can be no assurance that the Company would be able to 
obtain any required additional financing when needed or that such financing, 
if obtained, would be on terms favorable or acceptable to the Company.  If 
the Company was unable to obtain additional financing when needed and under 
acceptable conditions, it would be required to significantly scale back plans 
for growth and perhaps reduce the scope of its operations.  Factors that may 
affect the Company's revenues, use of capital, expenses and/or cash flow, and 
that would cause actual results to differ materially from those anticipated 
include, but are not limited to, the introduction of competing products with 
performance equivalent to or exceeding that of the Company's products, a 
claim (whether or not successfully made) that the Company's products infringe 
a patent held by another company or individual, any performance problems 
involving the Company's products, changes in technology that could cause the 
Company's products to become obsolete, the departure of key members of 
management and/or key employees, regulatory requirements that would make the 
Company's products difficult or uneconomical to produce, and general economic 
conditions.

The Company's operating activities used $1,176,000 during the six-month 
period ended March 31, 1997.  Funds were generated from $282,000 of net 
income for the period, depreciation and amortization of $253,000, and a 
decrease in inventories of $420,000. Additionally, funds were used to finance 
an increase in accounts receivable of $1,892,000 and decreases in accounts 
payable and accrued liabilities of $239,000.

                                      -10-
<PAGE>

The Company's financing activities provided net cash of $2,223,000 during the 
six months ended March 31, 1997, principally through the issuance of common 
stock in private placements, including the Regulation S Offering, which 
generated $3,114,000, offset by reductions in its net borrowings on a bank 
line of credit of $866,000.

As of March 31, 1997, the Company had net working capital of $3,944,000 with 
a current ratio of 1.6 to 1, which represents a $2,680,000 increase in 
working capital from September 30, 1996.

In June 1993, the Company entered into a $750,000 revolving credit agreement 
with private investors (the "Lenders") that was amended in November 1993 to 
reduce the principal to $600,000 and convert the indebtedness to a term loan. 
One of the Lenders was a director of the Company through November 1995.  This 
term was repaid in November 1995 from the proceeds of the private placement 
of common stock discussed below.

The Company has a discretionary revolving credit facility with a financial 
institution, under which borrowings are limited based upon eligible accounts 
receivable and inventories, as defined in the agreement.  The credit facility 
is collateralized by an interest in the Company's accounts receivable, 
inventories, equipment and intangibles.  Interest is payable monthly at a 
rate of prime plus one and one-half percent (11/2%).  The agreement expired 
on January 24, 1997, and was replaced  by a forbearance agreement which is 
effective through July 31, 1997.  On April 23, 1997, the Company received 
notice from the lender of a covenant default and was advised that the Company 
must be in complete compliance with all terms of the forbearance agreement by 
May 20, 1997.  In the interim period, the lender will not advance any funds 
to the Company.  The Company is presently negotiating a credit facility with 
a new different financial institution and expects to have this agreement, or 
an agreement with another financial institution, in place during its fiscal 
third quarter.  At March 31, 1997, the Company had no borrowings under its 
existing credit facility, and believes that no such borrowings will be 
required during the remaining term of the forbearance agreement.

In September 1994, the Company borrowed a total of $610,000 from private 
investors (including certain executive officers and directors) through the 
issuance of unsecured notes bearing interest at the rate of 12% per annum, 
due March 21, 1996.  Funds received on these notes were used to reduce 
outstanding borrowings under the Company's bank line of credit and to provide 
additional working capital for operations.  These notes were repaid in March 
1996 from the proceeds of the 11% unsecured notes discussed below.

In December 1995, the Company completed a private placement of 625,000 shares 
of common stock for proceeds of $2.0 million.  A portion of these proceeds 
was used to retire the outstanding $600,000 term loan with the Lenders, with 
the remaining proceeds used to finance working capital needs and new product 
development.

In March and April 1996, the Company borrowed a total of $900,000 from 
private investors through the issuance of unsecured notes due October 21, 
1997 and bearing interest at the rate of 11% per annum. Funds received from 
these notes were used to retire the $610,000 indebtedness that was due on 
March 21, 1996, and to provide additional working capital for operations.

In April 1996, the Company borrowed $658,000 from a commercial bank through 
the issuance of an 8.98%  promissory note collateralized by its real estate.  
The proceeds of the loan were used to retire a previous bank loan and 
industrial development revenue bonds, and provide additional working capital 
for operations.

In January 1997, the Company sold an aggregate of 650,000 shares of common 
stock to two United States investors for gross proceeds of $1.3 million.  
Also in January 1997, the Company sold an aggregate of 1,000,000 shares of 
common stock in a private placement to three foreign investors pursuant to 
Regulation S under the Securities Act of 1933 for gross proceeds of 
$2,000,000 (the "Regulation S Offering").

                                      -11-
<PAGE>

                          PART II.  OTHER INFORMATION


Item 1.  Legal Proceedings

         In November 1993, the Company initiated a lawsuit for patent
         infringement against three competitors in the U.S. District Court in
         Colorado.  (The patent involved is No. 5,211,129, which relates to the
         Company's injectable transponder technology.)  At a hearing on
         November 12, 1993, the Court found that it did not have jurisdiction
         in Colorado over two of the competitors and dismissed the Colorado
         case against them without prejudice.  The Court suggested that the
         third competitor may be an infringer on the patent, but did not order
         the temporary injunction requested by the Company.

         On December 1, 1993, the two dismissed competitors commenced an action
         against the Company in U.S. District Court for Southern Illinois
         requesting actual damages of $20,000,000 This action was subsequently
         transferred to the U.S. District Court of Colorado.   In the suit, the
         plaintiffs sought to invalidate the above-described patent of the
         Company and alleged unfair competition, violation of U.S. antitrust
         laws, interference with business relationships and abuse of process
         due to the actions the Company had allegedly taken in obtaining,
         announcing and enforcing its patent rights against the plaintiffs.

         The trial in the litigation commenced on January 8, 1996.  On January
         29, 1996, the jury in the trial returned a verdict in favor of the
         Company and found that the defendants had willfully infringed on the
         Company's patent and awarded damages of $445,000, including
         prejudgment interest.    The defendants have appealed the judgment
         against them, and the Company cross-appealed the failure of the court
         to increase Destron's damages.  While management and its legal counsel
         continue to believe that the ultimate outcome of this litigation will
         not have a significant impact on the Company's future financial
         position, cash flows or results of operations, there can be no
         assurance of the ultimate outcome or effect of the litigation.

         On December 17, 1996, three competitors filed a lawsuit against the
         Company and its United States distributor, Schering-Plough, in the
         United States District Court for the District of Minnesota.  The
         plaintiffs alleged that the defendants participated in unfair
         competition, breached an oral contract and infringed on three of the
         plaintiffs' United States patents.  On January 24, 1997, the
         plaintiffs withdrew this lawsuit in its entirety.

         On April 21, 1997, four plaintiffs (including the three competitors
         identified in the foregoing paragraph) filed a lawsuit against the
         Company and Schering-Plough and another of the Company's competitors
         in the United States District Court for the District of Minnesota. 
         The plaintiffs allege that the defendants participated in unfair
         competition, breached an oral agreement and infringed on three of the
         plaintiffs' United States patents and requested that the Court award
         compensatory and treble damages of an unspecified amount.  The Company
         and its legal counsel believe that the claims are without merit and
         that the ultimate outcome of this litigation will not have a
         significant adverse impact on the Company's future financial position,
         cash flows or results of operations.  However, there can be no
         assurance of the ultimate outcome of this lawsuit.

                                      -12-
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

              a.   Exhibits:

                   Exhibit 11.1   Calculation of Net Income (Loss) Per Common 
                                  and Common Equivalent Share

              b.   Reports on Form 8-K

                   Registrant filed a Current Report dated January 29, 1997,
                   reporting 1) the sale of an aggregate of 650,000 shares of
                   common stock for $2.00 per share in a private placement to
                   two United States investors and 2) the sale of an aggregate
                   of 1,000,000 shares of common stock for $2.00 per share in
                   the Regulation S Offering to three foreign investors.


                                   SIGNATURES


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

                                       DESTRON FEARING CORPORATION
                                       (Registrant)

                                       /s/ Thomas J. Ahmann
                                       --------------------------------
                                       By  Thomas J. Ahmann
                                       Vice President Finance,
                                       Chief Financial Officer
                                       and Principal Accounting Officer


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