SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Quarterly Period Ended
June 30, 1996
[] 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)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 August 12, 1996, there were 11,641,482 outstanding shares of Common Stock.
DESTRON FEARING CORPORATION
FORM 10-QSB
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
Page
PART I -- FINANCIAL INFORMATION
Item 1 -- Financial Statements 3
Item 2 -- Management's Discussion and Analysis or Plan
of Operation 8
PART II -- OTHER INFORMATION
Item 1 -- Legal Proceedings 12
Item 6 -- Exhibits and Reports on Form 8-K 13
Signatures 13
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
DESTRON FEARING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
JUNE 30, 1996 AND SEPTEMBER 30, 1995
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
June 30, September 30,
ASSETS 1996 1995
--------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 63 $ 62
Current portion of royalties receivable -- 402
Accounts receivable, net 1,275 1,823
Inventories, net 8,066 5,305
Prepaid expenses and other current assets 524 573
-------- --------
Total current assets 9,928 8,165
PROPERTY AND EQUIPMENT, net 2,167 2,131
INVESTMENT IN JOINT VENTURE 229 211
GOODWILL, net 2,106 2,168
OTHER ASSETS, net 567 821
-------- --------
$ 14,997 $ 13,496
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit $ 1,145 $ 438
Accounts payable 5,394 4,928
Accrued liabilities 317 299
Current portion of long-term obligations 46 1,446
-------- --------
Total current liabilities 6,902 7,111
LONG-TERM OBLIGATIONS,
net of current portion 1,655 281
-------- --------
Total liabilities 8,557 7,392
-------- --------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value;
20,000,000 shares authorized;
11,641,000 and 10,982,000 shares
issued and outstanding, respectively 116 110
Additional paid-in capital 16,692 14,651
Accumulated deficit (10,368) (8,657)
-------- --------
Total shareholders' equity 6,440 6,104
-------- --------
$ 14,997 $ 13,496
======== ========
The accompanying notes are an integral part
of these consolidated balance sheets.
</TABLE>
<TABLE>
<CAPTION>
DESTRON FEARING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE QUARTER AND NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(in thousands, except per share amounts)
Quarter Ended June 30, Nine Months Ended June 30,
---------------------- -------------------------
1996 1995 1996 1995
------- --------- ---------- ----------
<S> <C> <C> <C> <C>
NET REVENUE $ 2,167 $ 5,557 $ 8,849 $ 11,759
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales 1,671 3,886 6,248 7,659
Selling, general and administrative 882 819 3,441 2,855
Research and development 203 235 683 758
Interest expense and other 159 103 187 235
-------- -------- -------- --------
Total costs and expenses 2,915 5,043 10,559 11,507
-------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS (748) 514 (1,710) 252
PROVISION FOR INCOME TAXES -- -- -- --
-------- -------- -------- --------
NET INCOME (LOSS) $ (748) $ 514 $ (1,710) $ 252
======== ======== ======== ========
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE $ (0.06) $ 0.05 $ (0.15) $ 0.02
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 11,640 11,417 11,479 10,791
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
DESTRON FEARING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(in thousands)
Nine Months Ended June 30,
--------------------------
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ($1,710) $ 252
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 357 312
Equity in income of joint venture and other (18) (8)
Changes in operating items:
Accounts receivable 548 (1,968)
Inventories (2,761) (1,352)
Prepaid expenses and other current assets 49 5
Royalties receivable 402 310
Accounts payable and accrued liabilities 484 1,000
------- -------
Net cash used in operating activities (2,649) (1,449)
------- -------
INVESTING ACTIVITIES:
Purchases of fixed assets (241) (502)
Change in other assets 117 15
Capitalized design costs -- (125)
------- -------
Net cash used in investing activities (124) (612)
------- -------
FINANCING ACTIVITIES:
Issuance of common stock, net 2,047 863
Borrowings under long-term obligations 1,558 --
Repayments of long-term obligations (1,538) (101)
Net borrowings on bank line of credit 707 1,296
------- -------
Net cash provided by financing activities 2,774 2,058
------- -------
NET CHANGE IN CASH 1 (3)
CASH, beginning of period 62 42
------- -------
CASH, end of period $ 63 $ 39
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 326 $ 275
======= =======
The accompanying notes are an integral part
of these consolidated financial statements.
</TABLE>
DESTRON FEARING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and 1995
(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 SIGNIFICANT CUSTOMER
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. To promote acceptance of the product in the marketplace, the
Company agreed to provide readers to Schering-Plough, the value of which will be
realized by the Company through payments to be made by Schering-Plough as the
product is sold to consumers. As of June 30, 1996, the Company had provided
readers with a total cost of $1,144,000 to Schering-Plough.
The Company is recognizing the revenue related to these readers as payments are
received from Schering-Plough. Through July 31, 1996, payments of $34,633 had
been received. The cost of these readers is being charged to expense in an
amount equal to the greater of the amount of cumulative payments received or the
amounts necessary to amortize the cost on a straight-line basis over three
years. The total amount charged to expense as of June 30, 1996, was $256,000. As
of June 30, 1996, $744,000 of the net cost of these readers was included in
other assets in the accompanying consolidated balance sheets.
During October 1995, Schering-Plough suspended purchases, for an indefinite
period, to allow for the sale of its existing inventories. As a result of
previous commitments, the Company was unable to discontinue certain purchases
from its suppliers. Inventories at June 30, 1996 and September 30, 1995 included
$4,462,000 and $3,584,000, respectively, related to the Company's agreement with
Schering-Plough. The Company has the right to recover the costs of certain of
these inventories under the agreement. Management believes that the inventories
on hand will ultimately be sold, will be realizable through enforcement of the
Company's rights under the agreement or will be disposed of by other means.
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):
June 30, 1996 September 30, 1995
------------- ------------------
Raw materials $3,664 $2,396
Finished goods 4,402 2,909
------- -------
Total inventories $8,066 $5,305
======= ======
4. PRIVATE PLACEMENT OF COMMON STOCK
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 an outstanding $600,000 term loan, with the remaining proceeds
expected to be used to finance working capital needs and new product
development.
5. LEGAL PROCEEDINGS
The Company is a party to litigation in which it asserts 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.
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, awarding damages
of approximately $444,000. On May 23, 1996, the defendants filed a "Notice of
Appeal" related to this judgment and other orders, and that appeal is now
pending before the U.S. Court of Appeals for the Federal Circuit. While
management and its legal counsel continue to believe 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, there can be no
assurance of the ultimate outcome of the litigation. The Company incurred legal
expenses of $163,000 and $1,105,000, respectively, during the third quarter and
nine-month periods ended June 30, 1996.
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. REAL ESTATE LOAN
In April 1996, the Company borrowed $658,000 from a commercial bank through the
issuance of a promissory note collateralized by its real estate. The note bears
interest at 8.98% and is due on April 8, 2001. The terms of the note call for 59
monthly payments of $6,668 and a final balloon payment of $533,372. The proceeds
of the loan were used to retire a previous bank loan and industrial development
revenue bonds, both of which were collateralized by real estate. The remaining
proceeds were used to provide additional working capital for operations.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RELATIONSHIP WITH SIGNIFICANT CUSTOMER
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. To promote
acceptance of the product in the marketplace, the Company agreed to provide
readers to Schering-Plough, the value of which will be realized by the Company
through payments to be made by Schering-Plough as the product is sold to
consumers. As of June 30, 1996, the Company had provided readers with a total
cost of $1,144,000 to Schering-Plough.
The Company is recognizing the revenue related to these readers as payments are
received from Schering-Plough. Through July 31, 1996, payments of $34,633 had
been received. The cost of these readers is being charged to expense in an
amount equal to the greater of the amount of cumulative payments received or the
amounts necessary to amortize the cost on a straight-line basis over three
years. The total amount charged to expense as of June 30, 1996, was $256,000. As
of June 30, 1996, $744,000 of the net cost of these readers was included in
other current assets in the accompanying consolidated balance sheets.
During October 1995, Schering-Plough suspended purchases, for an indefinite
period, to allow for the sale of its existing inventories. As a result of
previous commitments, the Company was unable to discontinue certain purchases
from its suppliers. Inventories at June 30, 1996 and September 30, 1995 included
$4,462,000 and $3,584,000, respectively, related to the Company's agreement with
Schering-Plough. The Company has the right to recover the costs of certain of
these inventories under the agreement. Management believes that the inventories
on hand will ultimately be sold, will be realizable through enforcement of the
Company's rights under the agreement or will be disposed of by other means.
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 June 30, 1996 of $2,167,000 was 61% lower than
the $5,557,000 reported for the comparable quarter of fiscal 1995. For the
nine-month period, fiscal 1996 revenues of $8,849,000 declined 25% from the
prior year's revenues of $11,759,000. Revenue from the Radio Frequency
Identification Devices (RFID) decreased 81% during the third quarter and 38% for
the nine-month period compared to last year's amounts, principally because no
shipments were made into the United States companion animal market during these
periods. These volumes of revenue contrast to the very significant shipments
that occurred during the third quarter of fiscal 1995 when the RFID product was
introduced into this market. Visual identification revenue increased 8% in the
third quarter of fiscal 1996 over the previous year but was 3% lower than last
year for the nine-month period because of a general decline in beef production
in the current year.
Cost of sales of $1,671,000 for the third quarter of fiscal 1996 declined 57%
from last year's $3,886,000 and the gross profit percentage dropped from the
prior year's 30% to 23%. Lower sales in the current quarter caused the drop in
this year's cost of sales while the lower gross profit margin resulted from
unabsorbed fixed overhead and low or negative margins on the sales of certain
electronic readers. For the nine-month period ended June 30, 1996, cost of sales
of $6,248,000 was 18% lower than for the comparable period of last year,
principally because of lower net revenue in the third quarter.
Selling, general and administrative expenses of $882,000 in the third quarter
ended June 30, 1996 were 8% higher than for the same period last year. For the
nine-month period, these expenses increased 21% over last year, from $2,855,000
to $3,441,000. Higher expenses in this year's third quarter and nine-month
period are principally attributable to increased legal fees and charges related
to a sales distribution agreement. These were offset, in part, by lower
depreciation expense and pension expense as a result of termination of the
Company's defined benefit program in fiscal 1995. The legal expenses are related
principally to the Company's action to enforce certain patent rights against a
competitor and defend against counteractions in that lawsuit (See Item 1. of
Part II for the current status of the legal proceedings.)
Research and development expenses were $203,000 in the third quarter of fiscal
1996, compared to $235,000 for the third quarter of last year, or a decrease of
14%. For the nine-month period, research and development expenses declined 10%
to $683,000 from last year's $758,000. Lower outside product development and
reduced travel expenses accounted for the reductions in this year's expenses,
which were partially offset by salaries and fringe benefits that increased as a
result of personnel additions.
Interest and other of $159,000 in the third quarter of fiscal 1996 were 54%
higher than the $103,000 reported for the comparable 1995 period. Higher average
borrowings and lower interest income are the primary reasons for the higher net
expense in the current third quarter. For the nine-month period of fiscal 1996,
interest and other of $187,000 were 20% lower than the $235,000 reported for the
same period of fiscal 1995, principally because of the collection of a $137,000
indebtedness in the first quarter of fiscal 1996 that the Company had charged to
expense in a prior 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
those 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
funds available under its existing credit agreement, together with funds
generated by operations and from private placements of common stock in December
1995, issuance of unsecured notes in March 1996 and re-financing of the
Company's real estate loan in April 1996 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
sentence 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 prior to the end of fiscal 1996 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 $2,695,000 during the nine months ended
June 30, 1996, principally to finance the net loss for the period and increases
in inventories of $2,761,000 which resulted from Schering-Plough's suspension of
purchases for an indefinite period to allow it to sell its existing inventory.
This event, combined with previous commitments that required the Company to
accept purchases from its suppliers, resulted in increased inventories. These
uses of funds were offset partially by depreciation and amortization of
$357,000, a decrease of $548,000 in accounts receivable, collection of $402,000
of royalties receivable, and increases in accounts payable and accrued
liabilities of $484,000.
The Company's investing activities used $124,000, primarily for the purchase of
fixed assets of $241,000.
The Company's financing activities provided net cash of $2,774,000 during the
nine months ended June 30, 1996. Proceeds received from the issuance of 625,000
shares of common stock in connection with a private placement accounted for $2.0
million of this amount. The balance resulted from new borrowings of $900,000
from private investors, $658,000 from a commercial bank under a real estate loan
and additional borrowings on the Company's bank line of credit of $707,000.
These funds were used to repay long-term obligations of $1,538,000 and provide
additional working capital for operations.
As of June 30, 1996, the Company had net working capital of $3,026,000 with a
current ratio of 1.4 to 1, which represents an increase in working capital of
$1,972,000 from September 30, 1995.
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. In
connection with this credit agreement, the Company issued warrants to the
Lenders for the purchase of 220,000 shares of common stock at prices ranging
from $1.00 to $1.75 per share (of which 58,671 shares were issued during fiscal
1995 upon the exercise of certain of these warrants). As of September 30, 1995,
the Company had outstanding borrowings of $600,000 under this agreement, which
were repaid in November 1995 from the proceeds of the private placement of
common stock discussed below.
In November 1993, the Company entered into a $2,000,000 discretionary revolving
credit facility with a financial institution (which was increased to $3,000,000
in April 1995 and to $5,000,000 in August 1995). Borrowings under this facility
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. The
agreement is effective through December 31, 1996 and is payable on demand.
Interest on the credit facility is paid monthly at a rate of prime plus
one-quarter of one percent (1/4%); the effective rate was 8.50% at June 30,
1996. At June 30, 1996 the Company had borrowings of $1,145,000 outstanding
under this agreement, with maximum availability under the facility at that date
of $1,246,000.
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. In connection with these notes, the Company issued warrants to
the noteholders for the purchase of 183,000 shares of the Company's common stock
(of which 55,500 shares were issued during fiscal 1995 upon exercise of certain
of these warrants). The warrants have an exercise price of $1.50 per share and
are exercisable for a term of five years from the date of issuance. The value of
these warrants at the time of issuance was deemed to be insignificant. 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 March 1995, a warrant holder exercised a warrant for the purchase of 300,000
shares of the Company's common stock. The transaction was settled through a cash
payment of $3,000 and execution of a 15% promissory note for $297,000 due May 3,
1995 (and subsequently extended to July 3, 1995). The note was paid in full on
May 30, 1995.
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. 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 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 a promissory note collateralized by its real estate. The note bears
interest at 8.98% and is due on April 8, 2001. The terms of the note call for 59
monthly payments of $6,668 and a final balloon payment of $533,372. The proceeds
of the loan were used to retire a previous bank loan and industrial development
revenue bonds, both of which were collateralized by real estate. The remaining
proceeds were used to provide additional working capital for operations.
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
in U.S. District Court for Southern Illinois (which was subsequently
transferred to the U.S. District Court of Colorado) against the
Company requesting actual damages of $20,000,000. 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 approximately $444,000. On May
23, 1996, the defendants filed a "Notice of Appeal" related to this
judgment and other orders, and that appeal is now pending before the
U.S. Court of Appeals for the Federal Circuit. While management and
its legal counsel continue to believe 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, there can be no assurance of the ultimate outcome of the
litigation.
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
Exhibit 27 Financial Data Schedule
b. Reports on Form 8-K
No current reports on Form 8-K were filed during the
quarter ended June 30, 1996.
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)
-------------------------------------
By Thomas J. Ahmann
Vice President Finance,
Chief Financial Officer
and Principal Accounting Officer
EXHIBIT 11.1
<TABLE>
<CAPTION>
DESTRON FEARING CORPORATION
Calculation of Net Income (Loss) Per Common and Common Equivalent Share
(in thousands, except per share amounts)
Quarter Ended June 30, Nine Months Ended June 30,
---------------------- --------------------------
1996 1995 1996 1995
-------- -------- --------- -------
<S> <C> <C> <C> <C>
Net income (loss) ($748) $514 ($1,710) $252
======= ====== ======= =======
Weighted average number of common
and common equivalent shares outstanding:
Weighted average number of
common shares outstanding 11,640 10,683 11,479 10,424
Dilutive effect of stock options after
application of the treasury stock
method -- 734 -- 367
------- ------- ------- -------
11,640 11,417 11,479 10,791
======= ======= ======= =======
Net income (loss) per common
and common equivalent share ($ 0.06) $ 0.05 ($ 0.15) $ 0.02
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 63
<SECURITIES> 0
<RECEIVABLES> 1,347
<ALLOWANCES> (72)
<INVENTORY> 8,066
<CURRENT-ASSETS> 9,928
<PP&E> 2,887
<DEPRECIATION> (720)
<TOTAL-ASSETS> 14,997
<CURRENT-LIABILITIES> 6,902
<BONDS> 0
0
0
<COMMON> 16,808
<OTHER-SE> (10,368)
<TOTAL-LIABILITY-AND-EQUITY> 14,997
<SALES> 8,849
<TOTAL-REVENUES> 8,849
<CGS> 6,248
<TOTAL-COSTS> 6,248
<OTHER-EXPENSES> 3,985
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<INTEREST-EXPENSE> 326
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