<PAGE>
As filed with the Securities and Exchange Commission on April 4, 1997
Registration No. 333-22381
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 TO FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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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
INCORPORATION OR ORGANIZATION) NUMBER)
490 VILLAUME AVENUE
SOUTH ST. PAUL, MINNESOTA 55075
TELEPHONE: (612) 455-1621
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
RANDOLPH K. GEISSLER
490 VILLAUME AVENUE
SOUTH ST. PAUL, MINNESOTA 55075
TELEPHONE: (612) 455-1621
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES OF COMMUNICATIONS TO:
TREVOR V. GUNDERSON, ESQ.
WINTHROP & WEINSTINE, P.A.
3000 DAIN BOSWORTH PLAZA
60 SOUTH SIXTH STREET
MINNEAPOLIS, MINNESOTA 55402
TELEPHONE: (612) 347-0700
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Approximate date of commencement of proposed sale to the public:
FROM TIME TO TIME, AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If the only securities being offered on this Form are to be offered pursuant to
dividend or interest reinvestment plans, check the following box. / /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
<CAPTION>
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Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Amount to Offering Price Aggregate Registration
Securities to Be Registered Be Registered(1) Per Share (1) Offering Price (1) Fee(1)
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value 53,278 shares $ 2.125 $ 113,216 $ 35
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</TABLE>
(1) Pursuant to Rule 457(c), the offering price is equal to the average of the
high and low prices of the common stock as of March 31, 1997 as quoted on
the Nasdaq SmallCap market. The registration fee relates to an additional
53,278 shares which are being registered in connection with an increase in
the size of the offering. The registrant previously paid a fee of $660 for
the registration of 809,261 shares in connection with its initial filing.
- -----------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED APRIL 4, 1997
PROSPECTUS
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862,539 SHARES
DESTRON FEARING CORPORATION
COMMON STOCK
This Prospectus relates to the sale of up to 212,539 shares of Common
Stock of Destron Fearing Corporation (the "Company") that may be or have been
purchased upon the exercise of common stock purchase warrants (the
"Warrants") and the sale of up to 650,000 additional shares by certain
selling stockholders (the "Selling Stockholders") (collectively, the
"Shares"). All Shares will be sold by the holders of the Warrants (the
"Warrantholders") and the Selling Stockholders, and the Company has agreed to
pay the expenses of this offering. The Company will not receive any of the
proceeds from the sale of Shares by the Warrantholders or Selling
Stockholders, but will receive proceeds from the Warrantholders upon their
exercise of the Warrants. The aggregate proceeds to the Selling Stockholders
and Warrantholders will be the purchase price of the Shares sold, less the
aggregate brokers' and dealers' discounts, commissions and concessions, and
other expenses of the issuance and distribution not borne by the Company.
See "Use of Proceeds," "Selling Stockholders" and "Plan of Distribution."
The Company's Common Stock is currently traded on the Nasdaq SmallCap Market
under the symbol "DFCO." On April 3, 1997, the last reported sale price
for the Company's Common Stock reported thereon was $2.31 per share. See
"Price Range of Common Stock."
The Selling Stockholders and Warrantholders may sell the Shares from time
to time directly, through agents designated from time to time, or through
dealers or underwriters also to be designated, on terms to be determined at the
time of sale. To the extent required, the specific Shares to be sold, the names
of the Selling Stockholders or Warrantholders, the purchase price, the public
offering price, the names of any such agents, dealers or underwriters, and the
amount of any applicable commissions or discount with respect to a particular
offer will be set forth in an accompanying Prospectus supplement. Such
Prospectus supplement will also set forth information regarding indemnification
by the Company of the Selling Stockholders and Warrantholders and any
underwriter, dealer or agent against certain liabilities, including liabilities
under the Securities Act of 1933 ("Securities Act"). See "Plan of
Distribution."
The Selling Stockholders and Warrantholders and any broker-dealers, agents
or underwriters that participate with the Selling Stockholders and
Warrantholders in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act. See "Plan of Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is April ____, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices located at Northwestern Atrium Center,
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material may also
be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Website that contains reports, proxy statements,
registration statements and other information regarding registrants that file
electronically with the Commission at http://www.sec.gov. In addition, the
Company's Common Stock is listed on the Nasdaq SmallCap Market. Reports, proxy
statements and other information concerning the Company can be inspected and
copied at the Public Reference Room of the National Association of Securities
Dealers, Inc., 1735 K Street N.W., Washington, D.C. 20006.
This Prospectus is part of a Registration Statement on Form S-3 (the
"Registration Statement") which the Company has filed with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"), relating to the
securities offered hereby. This Prospectus omits certain information contained
in the Registration Statement, to which reference is hereby made for further
information with respect to the Company and the Shares offered hereby. Copies
of the Registration Statement may be inspected without charge at the offices of
the Commission or obtained at prescribed rates from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated by reference in this Prospectus: (i) the Company's
Annual Report on Form 10-KSB for the fiscal year ended September 30, 1996;
(ii) the Company's report on Form 10-QSB for the quarter ended December 31,
1996; (iii) the Company's Current Report on Form 8-K dated February 6, 1997; and
(iv) the description of the Company's Common Stock contained in the Company's
Prospectus/Proxy Statement dated October 12, 1993 filed by the Company with the
Commission (File No. 0-19688). All documents filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Prospectus and prior to the termination of the offering
of the Shares offered hereby shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing such
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including a
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any or all documents that have been or may be
incorporated by reference herein (other than exhibits to such documents which
are not specifically incorporated by reference into such documents). Such
requests should be directed to the Chief Financial Officer at the Company's
principal executive offices at 490 Villaume Avenue, South St. Paul, Minnesota
55075, telephone number (612) 455-1621.
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<PAGE>
SUMMARY
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS OF THE COMPANY, INCLUDING THE NOTES
THERETO, INCORPORATED BY REFERENCE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES AND THAT ARE
QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONS AND RISK FACTORS CONTAINED ELSEWHERE
IN THIS PROSPECTUS AND IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN.
PURCHASERS OF THE COMPANY'S COMMON STOCK ARE CAUTIONED THAT THE COMPANY'S ACTUAL
RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE THOSE FACTORS DISCUSSED HEREIN UNDER "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
Destron Fearing Corporation (the "Company") develops, manufactures, and
markets a broad line of electronic and visual identification devices for the
companion animal, livestock, laboratory animal, fish and wildlife markets
worldwide. The Company's visual identification products, such as numbered ear
tags, are marketed under the Fearing brand name, principally to livestock
producers. The Company's radio frequency identification products consist of
miniature electronic transponders, readers and injection systems. The Company
holds patents on its syringe-injectable transponder, which is encased in a glass
capsule and incorporates an antenna and a microchip with a unique permanent
identification code for the animal in which it is implanted. An associated
reader device uses radio frequency to interrogate the transponder and read the
code. The transponder is typically injected under the skin using a hypodermic
syringe, without requiring surgery.
The Company's strategy is to position itself as the leader in the growing
market for electronic animal identification. With an estimated world population
of 195 million dogs and cats, governments and consumers have seen the need to
permanently identify animals in order to, among other things, establish national
rabies programs and return lost pets to their owners. Several European
countries now require some form of permanent identification for cats and dogs.
In France, where permanent identification of eight million dogs currently is
mandatory, the Company expects legislation to be adopted in early 1997 which
would add microchips to such identification mandate.
The Company has also recently introduced its new "universal" reader which
permits shelters and veterinarians to identify companion animals which have been
injected with transponders manufactured by the Company and others. The Company
believes the presence of its universal reader will encourage veterinary clinics
to recommend the use of microchip implants in the future.
In addition to developing its implantable electronic identification device
and scanner, the Company has established strategic marketing partnerships for
the companion animal market. In the United States, the Company's marketing
partner is Schering-Plough, which markets the Company's products in connection
with its Home Again-TM- pet identification system. Rhone Merieux, which is the
Company's European marketing partner and is also Europe's largest veterinary
marketer, has placed an order for 300,000 transponders for shipment in February
and March 1997. The Company has also now made its first shipments to Japan,
where an estimated four million dogs are subject to mandatory annual
registration. Dainippon Pharmaceutical, the Company's Japanese marketing
partner, promotes the use of the Company's microchips as a convenient and less
costly alternative to the annual registration process.
In addition to pursuing the market for permanent identification of
companion animals, the Company plans to leverage its traditional core business
of visual identification products to promote permanent electronic identification
of livestock. As the size of farms has increased, automated, permanent
individual identification has become a necessary tool for managing large
livestock herds. With over four billion livestock animals worldwide, the
Company believes that implantable electronic identification devices will be used
in an increasing number of programs to manage herds, to reduce the loss of
livestock, to implement feeding programs, and to track, control and eradicate
diseased livestock. Recently, the U.S. Department of Agriculture ("USDA") gave
clearance for the implanting of microchips in food animals, enabling the Company
to market its electronic identification products to the United States livestock
market. Implantation of the Company's electronic transponders was previously
cleared by the U.S. Food and Drug Administration ("FDA"), subject to a
determination by the USDA as to anatomical implant sites in livestock animals.
The
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USDA has now identified four implantation sites, all in inedible tissue, where
it has been demonstrated there will be minimal or no migration of the implanted
device. The Company is now able to actively promote its implantable system in
the United States, and anticipates that the USDA clearance will result in
increased use of microchips in connection with disease control programs.
The Company is currently involved in a pilot livestock identification program in
the private sector and has begun working with large cattle and hog producers to
develop appropriate systems for their use. In connection with the recent
incidence of "mad cow disease" in Europe, permanent identification and tracking
of food animals has assumed new importance in Europe, where there are
approximately 107 million cattle, 168 million hogs, and 130 million sheep.
The Company's principal offices are located at 490 Villaume Avenue, South
St. Paul, Minnesota 55075, and its telephone number is (612) 455-1621.
THE OFFERING
Common Stock Offered by:
Selling Stockholders. . . . 650,000 shares
Warrantholders. . . . . . . 212,539 shares
Common Stock Outstanding . . 13,293,982 shares
Use of Proceeds . . . . . . . To provide general working capital
Nasdaq SmallCap Symbol. . . . "DFCO"
4
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS,
IN CONNECTION WITH AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY.
WHEN USED BELOW AND ELSEWHERE IN THIS PROSPECTUS, INCLUDING THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE, THE WORDS "BELIEVES," "ANTICIPATES," "PLANS,"
AND "INTENDS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED.
RECENT OPERATING LOSS; NEED FOR ADDITIONAL CAPITAL
The Company experienced a net loss of $3,855,000 during the fiscal year
ended September 30, 1996, and there can be no assurance that the Company will
not experience losses in the future. The Company's principal sources of
working capital during the fiscal year ended September 30, 1995 were net
income of $661,000, proceeds from the issuance of Common Stock on the
exercise of stock options and warrants, and its bank line of credit. For the
fiscal year ended September 30, 1996, the Company's principal sources of
working capital came from the issuance of 625,000 shares of Common Stock in a
private placement of $2,000,000, new borrowings of $900,000 from private
investors and additional borrowings on the Company's bank line of credit, as
well as a new real estate loan. During fiscal 1996, these funds were used to
repay long-term obligations of $1,550,000 and to provide additional working
capital for operations. As of the date of this Prospectus, the outstanding
balance under the Company's bank line of credit was $1,814,000. This bank
line expired on January 24, 1997, but the Company has entered into a
Forbearance Agreement extending the maturity to July 31, 1997. Under the
terms of the Forbearance Agreement, the available line of credit will be
reduced to $2,000,000 on March 31, 1997 and to $500,000 on June 30, 1997 and
is further limited based upon eligible accounts receivable and inventories,
as defined in the line of credit agreement. The Company is currently
attempting to negotiate a new line of credit with its existing lender or a
new lender. Although the Company has been able to finance its operations
from among the above-listed sources during fiscal 1995 and 1996, there can be
no assurance it will continue to have sufficient funds or obtain the
financing necessary to meet immediate and ongoing cash needs for operations
and debt service. If the Company is unable to obtain additional financing
when needed, its operations and prospects would be materially and adversely
affected. Because of the Company's recent operating losses and negative
operating cash flow, the absence of a new line of credit, and the lack of a
definitive payment and forbearance agreement with a significant supplier
regarding a demand payable of approximately $4,800,000, the auditor's report
on the Company's financial statements as of and for the year ended September
30, 1996 contains a modification which indicates substantial doubt about the
Company's ability to continue as a going concern.
IMPACT OF SALE OF SHARES; SHARES ELIGIBLE FOR FUTURE SALE
The Company had approximately 13,293,982 shares of Common Stock
outstanding as of March 31, 1997 and had warrants and stock options to
purchase additional Common Stock outstanding totaling approximately 1,725,996
shares. Possible sources of future financing include the sale of additional
shares of capital stock which would dilute the ownership of investors
purchasing Shares in this Offering. In addition to the sale of 650,000
shares to the Selling Stockholders in January 1997, the Company recently
completed a private sale of 1,000,000 shares of its Common Stock pursuant to
Regulation S under the 1933 Act at an offering price of $2.00 per share. The
shares sold in the Regulation S offering became eligible for resale in the
United States without registration beginning on March 11, 1997. The resale
of such shares and the sale of additional shares of Common Stock which may
become elligible for sale in the public market from time to time upon
exercise of warrants and stock options and upon the expiration of holding
periods applied to securities sold in private placements could have the
effect of depressing the market price for the Company's Common Stock. See
"Recent Developments."
5
<PAGE>
INVENTORY BUILD-UP; AMOUNTS DUE TO SUPPLIER
In October 1995, the Company's United States distributor,
Schering-Plough, notified the Company that it would suspend purchases for an
indefinite period to allow it to sell its existing inventory of the Company's
product. In response to this notification, the Company curtailed purchases
of materials required to manufacture the product, but because of long lead
times and outstanding commitments with suppliers, the Company still received
significant quantities of product to meet Schering-Plough's previous
forecasts. As a result, the Company has inventories of approximately
$3,700,000 on hand related to the Schering-Plough agreement. Management
believes that these inventories ultimately will be purchased by the Company's
distributors or disposed of by the Company through alternate means. Disposal
of such inventories through alternate means would likely result in losses to
the Company, which, if significant, would have a material adverse impact on
the Company's results of operations.
The loss of the Schering-Plough revenue since October 1995, combined with
the above-described inventory build-up, has reduced the Company's working
capital and caused the Company to defer payments of approximately $4,800,000
due to a significant supplier. While the Company is negotiating an agreement
with this supplier regarding payment terms, there can be no assurance that
the Company will reach such an agreement or that it can comply with the terms
of such an agreement, when and if obtained. If the Company is unable to
successfully negotiate, and comply with, an agreement with the supplier, the
supplier could bring an action to force payment of the balance due, which
would have a material adverse effect on the Company.
LITIGATION
On December 17, 1996, three competitors filed a lawsuit against the
Company and its United States distributor, Schering-Plough Corporation, in
the United States District Court for the District of Minnesota. The
plaintiffs allege that the defendants participated in unfair competition,
breached an oral contract and infringed three of the plaintiff's United
States Patents. The Company is obligated to defend, indemnify and hold
Schering-Plough Corporation harmless from and against all liabilities,
claims, demands, expenses or damages (including attorneys' fees) relating to
or arising out of, directly or indirectly, any litigation involving the same
or related claims. On January 28, 1997, the plaintiffs withdrew the lawsuit.
See "Recent Developments."
In November 1993, the Company initiated a lawsuit against three
competitors in the U.S. District Court of Colorado alleging infringement of
its patent issued regarding certain technology used in a transmitter for
transmitting an identification signal for an animal (U.S. Patent No.
5,211,129). At a hearing held on November 12, 1993, the Court determined it
did not have jurisdiction in Colorado over two of the defendant competitors
and dismissed the Company's Colorado lawsuit against them without prejudice.
The Court allowed the case against the third defendant competitor to proceed
but did not grant the temporary injunction requested by the Company. On
December 1, 1993, the two dismissed defendant competitors commenced an action
against the Company in the U.S. District Court of Southern Illinois (which
subsequently was transferred to the U.S. District Court of Colorado)
requesting actual damages of $20,000,000. In this lawsuit, the plaintiffs
sought to invalidate the above-described patent of the Company and alleged
unfair competition, violation of U.S. antitrust laws by the Company,
interference with business relationships and abuse of process due to the
actions the Company allegedly took 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 $445,000, including prejudgment interest. However, the
defendants have appealed the judgment against them, and the Company has
cross-appealed the failure of the Court to increase the amount of the Company's
damages. While management and its legal counsel continue to believe that the
final 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
6
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assurance of the ultimate outcome of the litigation. In addition, the Company
will continue to incur additional legal costs in connection with pursuing and
defending such appeals.
DEPENDENCE ON PROPRIETARY PROTECTION
The Company's success will depend, in part, on its ability to maintain
patent and trade secret protection, obtain future patents and licenses, and
operate without infringing on the proprietary rights of third parties. There
can be no assurance that any patent application, when filed, will result in an
issued patent, or that the Company's existing patents, or any patents that may
be issued in the future, will provide the Company with significant protection
against competitors. Moreover, there can be no assurance that any patents
issued to or licensed by the Company will not be infringed upon or designed
around by others. In such event, the Company may not have sufficient resources
to defend its patent or to compete with new products or designs. The Company
also relies to a lesser extent on unpatented proprietary technology, and no
assurance can be given that others will not independently develop substantially
equivalent proprietary information, techniques or processes or that the Company
can meaningfully protect its rights to such unpatented proprietary technology.
NEGATIVE FACTORS AFFECTING ANIMAL IDENTIFICATION MARKET
To date, the electronic animal identification market has not achieved
strong results due to numerous factors, including food safety concerns, consumer
perceptions regarding cost and efficacy, international technology standards,
national infrastructures, FDA reviews, United States Federal Communications
Commission ("FCC") approvals, and slaughterhouse removal of transponders. In
addition, certain foreign governmental standards which require specific codes
may limit the Company's ability to sell transponders from its current inventory
in such countries. With respect to sales of electronic identification devices
for fish, many of the principal customers are government contractors that rely
on funding from the United States government, and thus the market could be
adversely affected by any decline in the availability of government funds.
Additionally, the Company is vying for an industry endorsement of its universal
reader which reads a variety of transponders. However, such an endorsement may
be given to a competitor's product. There can be no assurance that the Company
will not be adversely affected by these and other factors described herein
affecting the animal identification market.
DEPENDENCE ON PRINCIPAL CUSTOMERS
In the fiscal year ended September 30, 1996, and the three months ended
December 31, 1996, sales to Rhone Merieux accounted for approximately 18% and
15%, respectively, of the Company's net sales and Pacific States Marine
accounted for approximately 10% and 19%, respectively. For the fiscal year
ended September 30, 1995, Schering-Plough accounted for 41% of the Company's
net sales, while the Company made only nominal sales to Schering-Plough in
fiscal 1996. The loss of, or a significant reduction in, orders from these
or the Company's other major customers has and could continue to have a
material adverse effect on the financial condition and results of operations
of the Company. See "Risk Factors -- Inventory Build-up; Amounts Due to
Supplier."
RELIANCE ON EXPORT SALES
Export sales by the Company to locations outside of the United States
constituted approximately $3,446,000, $1,786,000, and $2,275,000 for the years
ended September 30, 1996, 1995, and 1994, respectively, and $1,052,000 for the
three month period ended December 31, 1996. The Company generally sells its
products at prices quoted in U.S. dollars to limit the risks associated with
currency exchange rate fluctuations. However, fluctuations in foreign exchange
rates may adversely affect the Company's ability to compete against local
product offerings and adversely affect the Company's results of operations. In
addition, export sales expose the Company to the risks inherent in international
sales, including unpredictable and inconsistent regulatory requirements,
political and economic changes and disruptions, tariffs or other restrictions on
unencumbered trade, transportation or shipping delays, and difficulties in
staffing and managing foreign operations.
7
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COMPETITION
The market for visual and permanent electronic identification for companion
animals and livestock is highly competitive. Specifically, the Company is aware
of two principal competitors who have developed permanent electronic
identification devices for the companion animal market. The Company is also
aware of two companies that have demonstrated prototypes of injectable
transponders for use in livestock applications. Certain of the Company's
competitors have substantially greater financial and other resources than the
Company. There can be no assurance that the Company will compete successfully
with its current and future competitors, or that such competitors will not
succeed in developing or marketing technologies and products that are more
widely accepted than those being developed by the Company or that would render
the Company's products obsolete or noncompetitive.
RESTRICTIONS IMPOSED BY GOVERNMENT REGULATION
The Company is subject to federal, state and local regulation and the
Company cannot predict the extent to which it may be affected by legislative
and other regulatory developments concerning its products and markets. The
Company is required to obtain regulatory approval before marketing most of
its products. The Company's readers must and do comply with the FCC Part 15
Regulations for Electromagnetic Emissions, and its insecticide products have
been approved by the U.S. Environmental Protection Agency (the "EPA") and are
produced under EPA regulations. Sales of insecticide products are incidental
to the Company's primary business and do not represent a material part of its
operations. The Company's products also are subject to compliance with
foreign government agency requirements. The Company's contracts with its
distributors generally require the distributor to obtain all necessary
regulatory approvals from the governments of the countries into which they
sell the Company's products. However, any such approval may be subject to
significant delays. Some regulators also have the authority to revoke
approval of previously approved products for cause, to request recalls of
products and to close manufacturing plants in response to violations. Any
such actions could materially adversely affect the Company's business.
DEPENDENCE ON RETENTION AND ATTRACTION OF KEY EMPLOYEES
The Company's operations are materially dependent upon the services of
Randolph K. Geissler, Chief Executive Officer and President. The loss of the
services of Mr. Geissler could have a material adverse effect on the Company's
operating results. The Company is also dependent on the principal members of
its management, marketing and technical staff, the loss of whose services might
impede the achievement of the Company's business objectives. Furthermore,
recruiting and retaining additional qualified management, marketing and
technical personnel will also be important to the Company's success. Except for
Mr. Geissler, the Company has no key person insurance covering its officers or
other employees, and has no non-compete agreements with any other of its
employees. The Company has required all new key employees (including all
members of management) to enter into a confidentiality agreement which prohibits
the disclosure of confidential information proprietary to the Company or to a
third party for whom the Company is performing work during the term of each such
employee's employment with the Company and for five years thereafter. There can
be no assurance that the Company will be able to retain skilled and experienced
management, marketing and technical personnel on acceptable terms, given the
competition for such experienced individuals.
ABSENCE OF DIVIDENDS
The Company has not paid any cash dividends since inception and does not
anticipate paying cash dividends in the foreseeable future. In addition, the
Company's current agreement with its principal bank lender prohibits the payment
by the Company of dividends.
POTENTIAL VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock may be highly volatile.
Factors such as fluctuations in the Company's operating results, announcements
of technological innovations or new
8
<PAGE>
commercial products by the Company or its competitors, government regulations,
developments in or disputes regarding patent or other proprietary rights,
economic and other external factors and general market conditions may have a
significant effect on the market price of the Company's Common Stock.
RISKS OF LOW-PRICED STOCK
If the shares of the Company's Common Stock were to be suspended or
delisted from the Nasdaq system, the Common Stock would be subject to rules
under the Exchange Act which impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and "accredited investors" (for example, individuals with a net worth
in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000
together with their spouses). For transactions covered by such rules, a
broker-dealer must make a special suitability determination of the purchase and
must have received the purchaser's written consent to the transaction prior to
the sale. Consequently, such rules, if applicable, could negatively affect the
ability of broker-dealers to sell shares of the Company's Common Stock.
The Commission has enacted rules that define a "penny stock" to be any
equity security that has a price (as therein defined) of less than $5.00 per
share, subject to certain exceptions, including securities listed on an
exchange and, generally, the Nasdaq system. At the date of this Memorandum,
the Company's Common Stock is exempt from the "penny stock" rules because it
is quoted on the Nasdaq system. For any transaction involving a penny stock,
unless exempt, the rules require the delivery, prior to any transaction in a
penny stock, of a disclosure schedule prepared by the Commission relating to
the penny stock market. Disclosure also is required to be made regarding the
risks of investing in penny stocks in both public offerings and in secondary
trading and regarding commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities, and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements must be sent disclosing recent
price information for the penny stocks held in the account and information on
the limited market in penny stocks. If shares of the Company's Common Stock
are no longer quoted on the Nasdaq system or are not otherwise exempt from
the provisions of the Commission's "penny stock" rules, such rules may
adversely affect the ability of broker-dealers to sell shares of the
Company's Common Stock, including the Shares being sold pursuant to this
Memorandum, when eligible for resale. See "Terms of the Offering -
Registration Under the Securities Act."
RECENT DEVELOPMENTS
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. This Prospectus covers the resale of the shares
issuable upon exercise of the Warrants.
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.
9
<PAGE>
On December 19, 1996, three competitors filed a lawsuit against the Company
and its United States distributor, Schering-Plough Corporation, 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. Under
the terms of its arrangement with Schering-Plough Corporation, the Company is
obligated to defend, indemnify and hold Schering-Plough harmless from and
against all liabilities, claims, demands, expenses and damages relating to or
arising out of any litigation involving such claims or similar claims. On
January 28, 1997, the plaintiffs withdrew their lawsuit. There can be no
assurance as to whether or not the plaintiffs will refile their lawsuit or file
another lawsuit against the Company.
On January 24, 1997, the Company entered into a Forbearance Agreement with
its bank lender extending the maturity of its bank line of credit until July 31,
1997. Under the terms of the Forbearance Agreement, the available line of
credit will be reduced to $2,000,000 on March 31, 1997 and to $500,000 on June
30, 1997. The Company is currently attempting to negotiate a new line of credit
with its existing lender or a new lender. There can be no assurance that the
Company will successfully obtain a replacement line of credit prior to the
expiration of its current facility.
On January 29, 1997, the Company completed the sale of 1,000,000 shares of
its common stock to a group of foreign investors at a price of $2.00 per share
in an offering conducted pursuant to Regulation S under the Securities Act of
1933. John G. Kinnard and Company, Inc. acted as the Company's placement agent
(the "Agent") in connection with the Regulation S offering. In exchange for its
services, the Agent received a commission equal to 7% of the aggregate offering
price, reimbursement of its out-of-pocket expenses (including attorney's fees),
and a stock purchase warrant to purchase up to 100,000 shares of the Company's
common stock at an exercise price of $3.50 per share. The net proceeds raised
from the Regulation S offering will be used to satisfy the Company's general
working capital requirements. Pursuant to Regulation S, the shares placed in
the Regulation S offering will be eligible for resale in the United States
beginning on March 11, 1997.
On January 30, 1997, the Company completed a private placement of 650,000
shares of its common stock for an aggregate offering price of $1,300,000. In
connection with the private placement, the Company paid a fee of $20,000 to the
Agent in exchange for its agreement to waive a right of first refusal granted
under the Agency Agreement executed in connection with the Company's Regulation
S offering. The Company plans to use the proceeds from the private placement
for general working capital purposes.
10
<PAGE>
USE OF PROCEEDS
The Company may receive up to $937,531 from the exercise of all Warrants to
purchase a total of 212,539 shares of Common Stock. There can be no assurance
as to the number of Warrants (if any) that will be exercised. The Company
intends to use any proceeds it receives from the exercise of the Warrants for
general working capital purposes.
PRICE RANGE OF COMMON STOCK
The quotations set forth below represent the high and low bid prices for
the Common Stock as quoted on the Nasdaq SmallCap Market and were provided by
the National Association of Securities Dealers, Inc. (the "NASD"). The
following quotations represent prices between dealers, do not include retail
mark-ups, mark-downs or commissions, and do not necessarily represent actual
transactions. As of March 31, 1996, there were approximately 345
stockholders of record.
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
September 30, 1997(1) September 30, 1996 September 30, 1995
----------------------- -------------------- --------------------
High Low High Low High Low
-------- -------- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Fiscal Quarters
First Quarter $4.19 $2.13 $5.00 $2.75 $2.13 $1.50
Second Quarter 3.88 2.13 5.25 3.25 3.75 1.88
Third Quarter 2.31 1.88 4.44 2.94 9.00 3.00
Fourth Quarter 4.63 1.94 8.75 5.25
</TABLE>
- --------------------------
(1) The price range for the third quarter of the fiscal year ended
September 30, 1997 reflects the reported prices through April 3, 1997.
DIVIDEND POLICY
The Company has never paid or declared any cash dividends on its Common
Stock and does not intend to pay cash dividends on its Common Stock in the
foreseeable future. The Company presently expects to retain its earnings to
finance the development and expansion of its business. Furthermore, the
Company's current agreement with its principal bank lender prohibits the
Company's payment of dividends. The payment by the Company of cash dividends,
if any, on its Common Stock in the future will be subject to the discretion of
the Board of Directors and will depend on the Company's earnings, financial
condition, capital requirements and other relevant factors. See "Description of
Capital Stock."
11
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned by each Selling Stockholder and each Warrantholder prior to
and after the offering, assuming the exercise of all Warrants and the sale of
all Shares (of which there can be no assurance).
<TABLE>
<CAPTION>
Shares
Shares Beneficially Shares Beneficially
Owned Prior Owned After
To Offering (1) Offering (1)
----------------------------- ----------------------------
Beneficial Owner Number Percent (2) To be Sold(3)(4) Number Percent (2)
- ---------------- ------ ----------- ---------------- ------ -----------
<S> <C> <C> <C> <C> <C>
William W. Bednarczyk(3) 70,868 * 8,197 62,671 *
James Braeseth(4) 81,393 * 81,393 0 *
Harold W. Cottle(3) 8,197 * 8,197 0 --
William Diaz(3) 4,098 * 4,098 0 --
Everen Clearing Corp. Custodian
FBO Gordon S. Holm(3) 4,598 * 4,098 500 *
Sheldon Fleck(4) 500,000 3.8% 500,000 0 --
John D. and Beth J. Freeman(3) 20,197 * 8,197 12,000 *
Coleman Griffing(3) 56,393 * 16,393 40,000 *
Richard and Karol Kubat(3) 8,197 * 8,197 0 --
Larry J. Laughlin(3) 7,098 * 4,098 3,000 *
National Sales Associates, Inc.
Profit Sharing Plan & Trust
Inc.(3) 8,197 * 8,197 0 --
James F. Pfau(3) 8,197 * 8,197 0 --
Piper Jaffray Cust. Fbo
Lynne H. Patin IRA(5) 10,000 * 10,000 0 --
Piper Jaffray Cust. Fbo
Thomas J. Patin IRA(5) 140,000 1.1% 140,000 0 --
Victor P. Reim(3) 43,043 * 16,393 26,650 *
Karen Rylander
and Robert Schachter(3)(6) 35,493 * 16,393 19,100 --
Terry G. Sampson (IRA)(3) 8,197 * 8,197 0 --
Elizabeth L. Swanson(3) 18,098 * 4,098 14,000 *
Daryl J. Werneke(3) 50,098 * 4,098 46,000 *
Robert J. Werneke(3) 10,098 * 4,098 6,000 *
--------
862,539
</TABLE>
- ------------------
(1) Each person has sole voting and sole dispositive power with respect to all
outstanding shares, except as noted.
(2) Based on 13,293,982 shares outstanding as of March 31, 1997 and
13,506,521 shares outstanding after the offering and after the exercise of
the Warrants. Such amounts do not include 1,725,996 shares of Common Stock
reserved for issuance upon the exercise of outstanding stock options and
warrants (including the Warrants), but the number of outstanding shares
after the offering includes the 212,539 shares issued upon the exercise of
the Warrants. Each figure showing the percentage of outstanding shares
owned beneficially has been calculated by treating as outstanding and owned
the shares which could be purchased by the indicated person within 60 days
upon the exercise of stock options and warrants (including the Warrants).
12
<PAGE>
(3) Includes 147,539 shares to be sold upon the exercise of the Warrants which
were issued in connection with the sale of the Company's 11% Subordinated
Notes in March 1996.
(4) Includes 65,000 shares to be sold upon the exercise of warrants which
were issued to Mr. Braeseth in connection with the Company's January 1997
private placement of Common Stock.
(5) The Shares to be sold by Sheldon Fleck, Thomas Patin and Lynne Patin were
issued by the Company in a private placement in January 1997.
(6) Includes 15,600 shares owned by Robert Schachter, 2,500 shares owned by
Karen Rylander, and 1,000 shares owned by a minor child.
PLAN OF DISTRIBUTION
Any or all of the Shares may be sold from time to time to purchasers
directly by any of the Warrantholders, after the exercise of the Warrants, or
by Selling Stockholders or by their respective pledgees, donees, or other
applicable transferees or successors in interest. Alternatively, the Shares
may from time to time be offered through underwriters, dealers or agents who
may receive compensation in the form of underwriting discounts, concessions
or commissions from the sellers and/or the purchasers of Shares for whom they
may act as agents. Any such underwriters, dealers or agents that participate
in the distribution of Shares may be deemed to be underwriters, and any
profit on the sale of the Shares by them and any discounts, commissions or
concessions received by them may be deemed to be underwriting discounts and
commissions under the Securities Act. The Shares may be sold from time to
time in one or more transactions at a fixed offering price, which may be
changed, or at varying prices determined at the time of sale or at negotiated
prices. In addition, the Shares may be transferred in connection with call
options, loans or pledges of shares, hedging transactions, or similar
transactions may be effected by the Warrantholders or Selling Stockholders
directly or with or through broker dealers.
At the time a particular offer of Shares is made, to the extent required,
a supplement to this Prospectus will be distrusted which will identify and
set forth the aggregate amount of Shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents,
the purchase price paid by any underwriter for Shares purchased from the
Warrantholders and Selling Stockholders, any discounts, commissions and other
items constituting compensation from the Warrantholders and Selling
Stockholders and/or the Company, and any discounts, commissions or
concessions allowed or reallowed or paid to dealers, including the proposed
selling price to the public. The Company will not receive any of the
proceeds from the sale by the Warrantholders or Selling Stockholders of the
Shares offered hereby.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may not simultaneously engage in
market making activities with respect to the Shares for a period of days
prior to the commencement of such distribution, as set forth in such rules and
regulations. In addition, and without limiting the foregoing, the
Warrantholders and Selling Stockholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder which
provisions may limit the timing of purchases and sales of the Shares by the
Warrantholders and Selling Stockholders.
In order to comply with certain states' securities laws, if applicable, the
Shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. In certain states the Shares may not be sold unless the
Shares have been registered or qualified for sale in such state, or unless an
exemption from registration or qualification is available and is obtained.
13
<PAGE>
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue up to 20,000,000 shares of Common Stock,
$.01 par value, of which 13,293,982 shares were outstanding as of March 31,
1997. Upon exercise of all of the Warrants (of which there can be no
assurance), 13,506,521 shares would be outstanding. At March 31, 1997, there
were approximately 345 holders of record of the Company's Common Stock.
Holders of Common Stock are entitled to receive such dividends as are
declared by the Board of Directors of the Company out of funds legally available
for the payment of dividends. The Company expects to retain any earnings to
finance the development of its business. Furthermore, the Company's agreement
with its principal bank lender prohibits the Company's payment of dividends.
Accordingly, the Company does not anticipate the payment of any dividends on the
Common Stock for the foreseeable future. In the event of any liquidation,
dissolution or winding-up of the Company, the holders of Common Stock will be
entitled to receive a pro rata share of the net assets of the Company remaining
after payment or provision for payment of the debts and other liabilities of the
Company.
Holders of Common Stock are entitled to one vote per share in all matters
to be voted upon by stockholders. There is no cumulative voting for the
election of directors, which means that the holders of shares entitled to
exercise more than 50% of the voting rights in the election of directors are
able to elect all of the directors. Holders of Common Stock have no preemptive
rights to subscribe for or to purchase any additional shares of Common Stock or
other obligations convertible into shares of Common Stock which may hereafter be
issued by the Company.
All of the outstanding shares of Common Stock are, and the shares to be
sold pursuant to this offering will be, fully paid and non-assessable. Holders
of Common Stock of the Company are not liable for further calls or assessments.
Norwest Bank Minnesota, N.A., Minneapolis, Minnesota, is the Transfer Agent
for the Common Stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. That section provides, with certain exceptions, that a
Delaware corporation may not engage in any of a broad range of business
combinations with a person or affiliate or associate of such person who is an
"interested stockholder" for a period of three years from the date that such
person became an interested stockholder unless: (i) the transaction resulting in
a person's becoming an interested stockholder, or the business combination, is
approved by the board of directors of the corporation before the person becomes
an interested stockholder; (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding shares owned by
persons who are both officers and directors of the corporation and shares held
by certain employee stock ownership plans); or (iii) on or after the date the
person becomes an interested stockholder, the business combination is approved
by the corporation's board of directors and by the holders of at least 66-2/3%
of the corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. An "interested
stockholder" is defined as any person (other than the corporation or any direct
or indirect majority-owned subsidiary of the corporation) that is (i) the owner
of 15% or more of the outstanding voting stock of the corporation or (ii) an
affiliate or associate of the corporation who was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within the three
year period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder.
14
<PAGE>
INDEMNIFICATION AND WAIVER OF DIRECTOR LIABILITY
The Delaware Corporation Law provides that a corporation shall have the
power to indemnify its current and former officers, directors and employees for
liability arising out of certain actions. The Company has included in its
Bylaws a provision to indemnify its directors and officers to the fullest extent
permitted by Delaware law, including circumstances in which indemnification is
otherwise discretionary. Such indemnification may be available for liabilities
arising in connection with this offering. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers or persons controlling the Company pursuant to such indemnification
provisions, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
The Company has adopted in its Certificate of Incorporation a provision
which limits personal liability for breach of the fiduciary duty of its
directors to the extent provided by Section 102(7) of the Delaware Corporation
Law. Such provision eliminates the personal liability of directors for damages
occasioned by breach of fiduciary duty, except for liability based on the
director's duty of loyalty to the Company, liability for acts or omissions not
made in good faith, liability for acts or omissions involving intentional
misconduct or knowing violation of law, liability based on payments of improper
dividends, transactions for which the director derived any improper personal
benefit, and liability for acts occurring prior to the date such provision was
added.
LEGAL MATTERS
The validity of the shares of Common Stock being offered hereby will be
passed upon for the Company by Winthrop & Weinstine, P.A., Minneapolis,
Minnesota.
EXPERTS
The consolidated financial statements for the years ended September 30,
1996 and September 30, 1995, incorporated by reference in this Prospectus and
elsewhere in the Registration Statement, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
THE WARRANTHOLDERS OR SELLING STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO PURCHASE BY ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary....................................................... 3
Risk Factors............................................................. 5
Recent Developments...................................................... 9
Use of Proceeds......................................................... 11
Price Range of Common Stock.............................................. 11
Dividend Policy......................................................... 11
Selling Stockholders.................................................... 12
Plan of Distribution.................................................... 13
Description of Capital Stock............................................ 14
Legal Matters........................................................... 15
Experts................................................................. 15
862,539 Shares
DESTRON FEARING
CORPORATION
Common Stock
--------------------
--------------------
PROSPECTUS
--------------------
April ___, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the shares of Common Stock offered hereby:
Company
-------
SEC registration fee $ 695
------------
Legal fees and expenses 3,000
------------
Accounting fees and expenses 1,000
------------
Blue Sky fees and expenses 500
------------
Printing expenses 500
------------
Transfer agent fees and expenses 500
------------
Miscellaneous 305
------------
TOTAL $ 6,500
---------
---------
Each amount set forth above, except the SEC registration fee, is estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware Corporation Law provides that a corporation
shall have the power to indemnify its current and former officers, directors,
employees and agents against expenses (including attorneys' fees), judgments,
penalties, fines and amounts paid in settlement and which were incurred in
connection with actions, suits, or proceedings in which such persons are parties
by reason of the fact that they are or were an officer, director, employee or
agent of the corporation, if they acted in good faith, reasonably believed that
the conduct was not opposed to the best interests of the corporation, and in the
case of a criminal proceeding, had no reasonable cause to believe the conduct
was unlawful. Section 145(g) also permits a corporation to purchase and
maintain insurance on behalf of its officers, directors, employees and agents
against any liability which may be asserted against, or incurred by, such
persons in their capacities as officers, directors, employees or agents of the
corporation, whether or not the corporation would have had the power to
indemnify the person against the liability under the provisions of such section.
Article XII of the Bylaws of the Registrant provides that the directors,
officers, and committee members of the Registrant and certain other persons
shall have the rights to indemnification in accordance with, and to the fullest
extent provided by, Section 145 of the Delaware Corporation Law.
II-1
<PAGE>
ITEM 16. EXHIBITS
The following exhibits have been filed as part of this Registration Statement on
Form S-3.
EXHIBIT
NO. DESCRIPTION
- -------- -----------
5.1 Opinion of Winthrop & Weinstine, P.A. (previously filed)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Winthrop & Weinstine, P.A. (contained in the opinion filed
as Exhibit 5.1)
24.1 Powers of Attorney (contained on the signature page of this
Registration Statement)
- --------------------
ITEM 17. UNDERTAKINGS
(a) If the information set forth in Paragraph (1)(i) or (1)(ii) below is
not incorporated by reference from periodic reports filed by the Company
under the Securities Exchange Act of 1934, as amended, the Company will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement; and
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act of 1933, as
amended, treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers,
and controlling persons of the small business issuer pursuant to the
provisions summarized in Item 15 above, or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
small business issuer of expenses incurred or paid by a director, officer
or controlling person of the small business issuer in the successful
defense of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act, as amended, and
will be governed by the final adjudication of such issue.
II-2
<PAGE>
(c) The undersigned small business issuer hereby undertakes that it will:
(1) For determining any liability under the Securities Act of 1933,
treat the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the small business issuer
under Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part
of this registration statement as of the time the Commission declared
it effective.
(2) For determining any liability under the Securities Act of 1933,
treat each post-effective amendment that contains a form of prospectus
as a new registration for the securities offered in the registration
statement, and that offering of the securities at that time as the
initial bona fide offering of those securities.
(d) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
amendment to registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of South St. Paul, State
of Minnesota, on April 4, 1997.
DESTRON FEARING CORPORATION
/s/ Randolph K. Geissler
--------------------------------------------------
Randolph K. Geissler
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ---------- ----- ----
/s/ Randolph K. Geissler President, Chief Executive Officer April 4, 1997
- ---------------------- and Director
Randolph K. Geissler
* Director April 4, 1997
- ----------------------
David A. Henderson
* Director April 4, 1997
- ----------------------
Kenneth D. Larson
/s/ Thomas J. Ahmann Chief Financial Officer, April 4, 1997
- ---------------------- Secretary and Treasurer
Thomas J. Ahmann (Principal Accounting Officer)
*/s/ Randolph K. Geissler April 4, 1997
- ------------------------
Randolph K. Geissler
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page
- ----------- ---------------------- ----
5.1 Opinion of Winthrop & Weinstine, P.A. (previously filed)
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Winthrop & Weinstine, P.A. (contained in the opinion
filed as Exhibit 5.1)
24.1 Powers of Attorney (contained on the signature page of this
Registration Statement)
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated December 30, 1996,
incorporated by reference in Destron Fearing Corporation's Form 10-KSB for the
year ended September 30, 1996 and to all references to our Firm included in this
registration statement.
Minneapolis, Minnesota
April 4, 1997
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