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


                            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 February 13, 1998, there were 13,298,982 outstanding shares of Common
Stock.


<PAGE>

                        DESTRON FEARING CORPORATION



                                 FORM 10-Q

                  FOR THE QUARTER ENDED DECEMBER 31, 1997


                                   INDEX


<TABLE>
<CAPTION>
                                                                                         Page
                                                                                         ----
<S>                                                                                      <C>
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

</TABLE>


                                     -2-

<PAGE>

                         PART 1. FINANCIAL INFORMATION


Item 1.  FINANCIAL STATEMENTS                     
DESTRON FEARING CORPORATION AND SUBSIDIARIES      
                                                  
                                                  
CONSOLIDATED BALANCE SHEETS (UNAUDITED)           
DECEMBER 31, 1997 AND SEPTEMBER 30, 1997          
(in thousands, except share and per share amounts)

-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                      ASSETS                     December 31,   September 30,
                                                    1997           1997
                                                 -----------    ------------
<S>                                              <C>            <C>
CURRENT ASSETS:
  Cash and cash equivalents                       $    972       $  1,075 
  Accounts receivable, net                           2,010          1,911 
  Inventories, net                                   5,247          5,292 
  Deposits on purchase commitments                     677            162 
  Prepaid expenses and other current assets             33             49 
                                                  --------       --------

      Total current assets                           8,939          8,489 

PROPERTY AND EQUIPMENT, net                          2,006          2,001 
GOODWILL, net                                        1,980          2,001 
OTHER ASSETS, net                                      163            191 
                                                  --------       --------

                                                  $ 13,088       $ 12,682 
                                                  --------       --------
                                                  --------       --------

       LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Line of credit                                  $  1,068       $    373 
  Accounts payable                                   1,073            524 
  Accrued liabilities                                  421            472 
  Current portion of long-term obligations           2,266          1,554 
                                                  --------       --------

      Total current liabilities                      4,828          2,923 

LONG-TERM OBLIGATIONS,                                                   
      net of current portion                         2,034          3,121 
                                                  --------       --------

      Total liabilities                              6,862          6,044 
                                                  --------       --------

SHAREHOLDERS' EQUITY:
      Common stock, $.01 par value;
        20,000,000 shares authorized;
        13,294,000 and 11,644,000 shares
        issued and outstanding, respectively           133            133 
      Additional paid-in capital                    19,789         19,789 
      Accumulated deficit                          (13,696)       (13,284)
                                                  --------       --------

      Total shareholders' equity                     6,226          6,638 
                                                  --------       --------

                                                  $ 13,088       $ 12,682 
                                                  --------       --------
                                                  --------       --------

</TABLE>

                  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 THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(in thousands, except per share amounts)             

-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                 Three Months Ended December 31,
                                                 ------------------------------

                                                     1997            1996    
                                                 ------------    ------------
<S>                                              <C>             <C>

NET REVENUE                                       $2,630          $  3,168  
                                                  ------          --------
                                                             
COSTS AND EXPENSES:                                          
     Cost of sales                                 1,883             1,957  
     Selling, general and administrative             780               705  
     Research and development                        268               198  
     Interest expense and other                      111               227  
                                                  ------          --------
                                                             
     Total costs and expenses                      3,042             3,087  
                                                  ------          --------
                                                             
INCOME (LOSS) BEFORE INCOME TAXES                   (412)               81  
                                                             
PROVISION FOR INCOME TAXES                            --                --  
                                                  ------          --------
                                                             
NET INCOME (LOSS)                                 $ (412)         $     81  
                                                  ------          --------
                                                  ------          --------
                                                             
BASIC AND DILUTED EARNINGS                                   
  (LOSS) PER COMMON SHARE                         $(0.03)         $   0.01  
                                                  ------          --------
                                                  ------          --------

</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 THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(in thousands)                                       
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                 Three Months Ended December 31,
                                                 ------------------------------

                                                     1997            1996    
                                                 ------------    ------------
<S>                                              <C>             <C>

OPERATING ACTIVITIES:
   Net income (loss)                               $ (412)         $    81 
   Adjustments to reconcile net income (loss) 
     to net cash used in operating activities:                                                        
     Depreciation and amortization                    133              127 
     Changes in operating items:
       Accounts receivable                            (99)          (1,052)
       Inventories                                     45              419 
       Prepaid expenses and other current assets     (499)              (4)
       Accounts payable and accrued liabilities       498               53 
                                                   ------          -------

       Net cash used in operating activities         (334)            (376)
                                                   ------          -------

INVESTING ACTIVITIES:
   Purchases of fixed assets                          (89)             (15)
                                                   ------          -------

       Net cash (used in) investing activities        (89)             (15)
                                                   ------          -------

FINANCING ACTIVITIES:
   Issuance of common stock, net                       --                5 
   Repayments of long-term obligations               (375)              (7)
   Net borrowings on bank line of credit              695              410 
                                                   ------          -------

       Net cash provided by financing activities      320              408 
                                                   ------          -------

NET CHANGE IN CASH                                   (103)              17 

CASH, beginning of period                           1,075               39 
                                                   ------          -------

CASH, end of period                                $  972          $    56 
                                                   ------          -------
                                                   ------          -------

SUPPLEMENTAL CASH FLOW INFORMATION:
   Interest paid                                   $  120          $   216 
                                                   ------          -------
                                                   ------          -------

</TABLE>

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


                                     -5-

<PAGE>

DESTRON FEARING CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 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-K 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.   INVENTORIES

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

<TABLE>
<CAPTION>

                            December 31, 1997      September 30, 1997
                            -----------------      ------------------
<S>                         <C>                    <C>
Raw materials                    $2,310                  $2,354
Finished goods                    2,937                   2,938
                                 ------                  ------

     Total inventories           $5,247                  $5,292
                                 ------                  ------
                                 ------                  ------

</TABLE>

3.   PRIVATE PLACEMENTS OF COMMON STOCK

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 proceeds from these offerings have been and will be used to 
finance working capital needs and new product development.

4.   LEGAL PROCEEDINGS

Colorado Action

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.


                                     -6-

<PAGE>

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, found 
that the defendants had willfully infringed on the Company's patent, and 
awarded damages of $444,000, including prejudgment interest.  The defendants  
appealed the judgment against them, and the Company cross-appealed the 
failure of the court to increase Destron's damages.  On July 24, 1997, the 
Court of Appeals for the Federal Circuit handed down its decision in the 
appeal.  The decision of the Court of Appeals affirmed the trial court's 
judgment, holding the Company's patent is valid and was willfully infringed 
by the competitors.  In addition, the issue of inequitable conduct was 
remanded to the trial court for further proceedings as to the Company's 
intent in prosecuting the patent application before the United States Patent 
Office. 

On November 7, 1997, the U.S. District Court of Colorado, on remand on the 
issue of inequitable conduct, found that the Company's patent was enforceable 
because of the lack of clear and convincing evidence of inequitable conduct 
before the U.S. Patent and Trademark Office.

Further, during the pendency of the appeal, the Company pursued a contempt 
action against the defendants for willful violations of the District Court's 
permanent injunction.  On November 7, 1997, the District Court found the 
defendants in willful contempt of the permanent injunction and awarded the 
Company double damages, amounting to $33,000, as well as attorneys' fees and 
costs.  On January 23, 1998, the Company filed a second Motion for Contempt 
against the defendants.  The Court has not ruled upon that Motion as of the 
date of this Quarterly Report on Form 10-Q.

The defendants have failed to pay the Company on either of its judgments. 
Accordingly, the Company has instituted a supplemental proceeding in the 
Colorado action, requesting seizure and sale of various assets in an attempt 
to collect its judgment.  Issues raised in the proceeding have been fully 
briefed and argued.  As of the date of this Quarterly Report on Form 10-Q, 
the Company is awaiting the Court's decision on the outstanding motion.

Minnesota Actions

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.  

On May 16, 1997, the plaintiffs amended the lawsuit and, in their complaint 
as amended, allege patent infringement, false advertising, unfair competition 
and attempted monopolization on the part of the Company, among other matters, 
stemming from the ISO standards.  While management of the Company is unable, 
at this time, to estimate the potential impact of this litigation, the 
Company and its legal counsel believe that its products do not infringe any 
valid asserted claims of the patents owned by the plaintiffs, that the false 
advertising and unfair competition claims are without merit, that the Company 
is likely to prevail on the attempted monopolization 


                                     -7-

<PAGE>

claim, 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 result of operations.  However, any litigation has an inherent risk 
of loss at trial, and there can be no assurance of the ultimate outcome of 
this lawsuit.  Furthermore, the costs of litigation could be substantial.

5.   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). SFAS No. 128 replaces primary EPS with basic EPS.  Basic EPS is 
computed by dividing reported earnings (loss) by weighted average shares 
outstanding, excluding potentially dilutive securities.  Fully diluted EPS, 
termed diluted EPS under SFAS No.  128, is also to be disclosed.  This 
standard establishes new guidelines for computing and presenting earnings 
(loss) per share (EPS).  The Company adopted SFAS No. 128 effective in the 
quarter ended December 31, 1997. As a result, the Company's reported EPS data 
have been restated as follows for the quarter ended December 31, 1996:

<TABLE>

     <S>                                               <C>
     Primary earnings per share as reported            $0.01
     Effect of SFAS No. 128                               --
                                                       -----
     Basic earnings per share as restated              $0.01
                                                       -----
                                                       -----

     Fully diluted earnings per share as reported      $  --
     Effect of SFAS No. 128                            $0.01
                                                       -----

     Diluted earnings per share as restated            $0.01
                                                       -----
                                                       -----

</TABLE>

A reconciliation of EPS calculations under SFAS No. 128 is as follows for the 
quarters ended December 31 (in thousands):

<TABLE>
<CAPTION>

                                              1997      1996
                                             ------    ------
<S>                                          <C>       <C>
     Net income (loss)                       $  (412)  $    81
                                             -------   -------
                                             -------   -------
     Weighted average number of common 
     shares outstanding                       13,294    11,644

     Dilutive effect of stock options and
     warrants after application of the
     treasury stock method                        --       302
                                             -------   -------

                                              13,294    11,946
                                             -------   -------
                                             -------   -------

     Basic and diluted earnings (loss)
     per common share                        $ (0,03)  $  0.01
                                             -------   -------
                                             -------   -------

</TABLE>


                                     -8-

<PAGE>

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

RESULTS OF OPERATIONS

Net revenue for the first quarter ended December 31, 1997, was $2,630,000, a 
decrease of $538,000 or 17% from the comparable quarter of fiscal 1997.  
Radio Frequency Identification (RFID) revenues for 1998 declined 22% from the 
first quarter of fiscal 1997 because of lower sales in Japan and Europe, 
partially offset by higher revenues in the United States fisheries market.  
Visual identification revenue also declined 10% in the first quarter of 
fiscal 1998 from the level in comparable fiscal 1997 period.  During the 
first quarter last year, visual identification revenues were higher than 
normal as a result of certain large shipments to existing customers which did 
not occur in the fiscal 1998 quarter. 

Cost of sales for the first quarter of fiscal 1998 was $1,883,000, a decrease 
of 4% from the comparable period of fiscal 1997.  The decrease in the current 
fiscal year reflects lower revenue levels offset by higher material and 
overhead costs.  Further, fixed overhead costs in the current period were 
absorbed over a lower revenue base which, along with an unfavorable product 
mix, contributed to a lower gross profit margin.  As a percentage of revenue, 
gross profit was 28% in the first quarter of fiscal 1998 as compared to 38% 
in the first quarter of fiscal 1997.

Selling, general and administrative expenses for the first quarter of fiscal 
1998 were $780,000, an increase of 11% over last year's comparable period.  
RFID selling expenses increased principally because of higher salaries and 
travel expense brought about by personnel additions to support the Company's 
livestock market development efforts.  General and administrative expenses 
declined in the first quarter of fiscal 1998 period relative to last year 
principally due to lower legal expenses.

Research and development expenses were $268,000 in the first quarter of 
fiscal 1998 compared to $198,000 in the first quarter of last year, for an 
increase of 35%.  Higher salary expense resulting from personnel additions 
and the development of prototype scanning products for the United States 
fisheries industry were the principal reasons for the current year's increase 
in research and development expenses.

Interest and other for the first quarter of fiscal 1998 was $111,000, a 
decrease of 51% over the first quarter fiscal 1997 amount of $227,000.  
Interest expense declined in the current fiscal year, even though average 
outstanding borrowings were higher, because the first quarter of fiscal 1997 
included recognition of imputed interest on an outstanding balance payable to 
a vendor.

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.  The Company believes 
that its cash on hand at December 31, 1997 and funds available under its 
existing credit agreement combined with funds generated by operations and 
remaining funds from private placements of common stock in 1997 will 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, and elsewhere 
in this Quarterly Report on Form 10-Q, 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, or cash flow needs are greater than 
planned, the Company may need additional financing 


                                     -9-

<PAGE>

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 $334,000 during the three-month 
period ended December 31, 1997, primarily to finance the net loss incurred 
during that period.  Net cash used in the three-month period reflects 
increases in accounts receivable and prepaid expenses and other current 
assets that were funded principally by depreciation and amortization and 
increases in accounts payable and accrued liabilities.

The Company's investing activities used $89,000 during the three-month period 
ended December 31, 1997, for the purchase of fixed assets.  Its financing 
activities provided net cash of $320,000 during the same period through 
increases in its net line of credit borrowings totaling $695,000, offset by 
repayments of long-term obligations totaling $375,000.

As of December 31, 1997, the Company had net working capital of $4,111,000 
with a current ratio of 1.85 to 1.0, which represents a $1,455,000 decrease 
in working capital from September 30, 1997.

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 outstanding indebtedness and to provide 
additional working capital for operations.  These notes were repaid in August 
1997.

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 to 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.

In June 1997, the Company entered into a $3,000,000 revolving credit facility 
with Coast Business Credit, a division of Southern Pacific Thrift & Loan 
Association of Los Angeles, California.  The credit facility is secured by 
all of the Company's receivables, inventories, investment property, equipment 
and general intangibles, as defined in the agreement.  Borrowings under the 
facility are payable on demand and are limited to a portion of eligible 
accounts receivable and inventories, as defined in a borrowing formula in the 
agreement. The agreement is effective through June 30, 1999, with provisions 
for automatic extensions of the maturity date.  Interest on the credit 
facility is paid monthly at a rate equal to the greater of eight percent (8%) 
or prime plus one and three-quarters percent (1 3/4%).  At December 31, 1997, 
the Company had outstanding borrowings of $1,068,000 under the facility and 
had a maximum availability under the borrowing formula of $1,304,000.  The 
new revolving credit facility replaced a previous credit line agreement with 
a bank, and it will be used for general corporate working capital needs. 


                                    -10-

<PAGE>

In June 1997, the Company completed an agreement with a vendor whereby 
$4,290,000 of an account payable was converted into a promissory note.  The 
note provides for monthly payments of $150,000 in fiscal 1998 and $175,000 in 
fiscal 1999.  An additional principal payment of $600,000 is required in 
October 1998 and further principal payments are called for under certain 
conditions set forth in the agreement.  The note bears interest at 9.25% per 
annum as of December 31, 1997, with a scheduled increase to 11.25% per annum 
at the beginning of fiscal year 1999.  The scheduled term of the note is 
twenty-seven (27) months, with the final payment due in August 1999. 


                                    -11-

<PAGE>

                        PART II.  OTHER INFORMATION


Item 1.   Legal Proceedings

          Colorado Actions

          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 $444,000, including
          prejudgment interest.  The defendants appealed the judgment against
          them, and the Company cross-appealed the failure of the court to
          increase Destron's damages.  On July 24, 1997, the Court of Appeals
          for the Federal Circuit handed down its decision in the appeal.  The
          decision of the Court of Appeals affirmed the trial court's judgment,
          holding the Company's patent is valid and was willfully infringed by
          the competitors.  In addition, the issue of inequitable conduct was
          remanded to the trial court for further proceedings as to the
          Company's intent in prosecuting the patent application before the
          United States Patent Office. 

          On November 7, 1997, the U.S. District Court of Colorado, on remand on
          the issue of inequitable conduct, found that the Company's patent was
          enforceable because of the lack of clear and convincing evidence of
          inequitable conduct before the U.S. Patent and Trademark Office.

          Further, during the pendency of the appeal, the Company pursued a
          contempt action against the defendants for willful violations of the
          District Court's permanent injunction.  On November 7, 1997, the
          District Court found the defendants in willful contempt of the
          permanent injunction and awarded the Company double damages, amounting
          to $33,000, as well as attorneys' fees and costs.  On January 23,
          1998, the Company filed a second Motion for Contempt against the 
          defendants.  The Court has not ruled upon that Motion as of the date
          of this Quarterly Report on Form 10-Q.

          The defendants have failed to pay the Company on either of its
          judgments.  Accordingly, the Company has instituted a supplemental
          proceeding in the Colorado action, requesting seizure and sale of
          various assets in an attempt to collect its judgment.  Issues raised
          in the proceeding have been fully briefed and argued.  As of the date
          of this Quarterly Report on Form 10-Q, the Company awaits the Court's
          decision on the outstanding motion.


                                    -12-

<PAGE>

          Minnesota Actions

          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.  

          On May 16, 1997, the plaintiffs amended the lawsuit and, in their
          complaint as amended, allege patent infringement, false advertising,
          unfair competition and attempted monopolization on the part of the
          Company, among other matters, stemming from the ISO standards.  While
          management of the Company is unable, at this time, to estimate the
          potential impact of this litigation, the Company and its legal counsel
          believe that its products do not infringe any valid asserted claims of
          the patents owned by the plaintiffs, that the false advertising and
          unfair competition claims are without merit, that the Company is
          likely to prevail on the attempted monopolization claim, 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 result of operations.  However, any litigation has an inherent risk
          of loss at trial, and there can be no assurance of the ultimate
          outcome of this lawsuit.  Furthermore, the costs of litigation could
          be substantial.


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

                   No current reports on Form 8-K were filed during the quarter
                   ended December 31, 1997 or since December 31, 1997 and to
                   the date of this Quarterly Report on Form 10-Q.


                                      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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