Positive Sign

7/16/2010

On Tuesday, the USDA released pork and beef export data for May 2010. According to the statistics -- pork and beef exports collectively increased 25% year-over-year and were up 8% from April 2010.

In 2009, Livestock producers faced higher costs and lower demand which drove herd sizes down to near historic lows and impacted the demand for visual and electronic identification tags.

In the swine market pork producers had a particularly tough year. The demand for corn increased with the popularity of ethanol fuel, resulting in higher feed prices for pork producers. Additionally, the "swine flu" pandemic was erroneously linked to pig consumption and scared consumers away from eating pork. The result - the cost of sustaining a herd far exceeded the potential income for many producers and farmers.

As we have been reporting, market conditions and herd sizes for our customers have been improving. The May 2010 data put out by the USDA is consistent with what we have been seeing.

In my annual letter to shareholders in April (on page 3 of the 2009 Digital Angel Annual Report), I said:

"Our potential to grow in livestock will be impacted by three major trends; the first is a rebound in herd sizes. Historically, we have not seen herd sizes this low since the middle of last century. With the global economic market beginning to recover, we are starting to see an increase in herd sizes. Even using conservative estimates, we expect growth in herds to positively impact the identification market……"

So what does the USDA report mean for Digital Angel and its shareholders???

It means the market for identification tags should pick up as farmers increase their herd sizes. This could bode especially well for Digital Angel, particularly since Destron Fearing is a leader in the swine market and has a sizable share within the other livestock markets.

Enjoy the weekend,

JOE

History

7/12/2010

With the divesture of non-core businesses and recent changes to the corporate structure, animal ID and Destron Fearing have become the main focus of Digital Angel. Because of this shift, I have been spending more time in Minnesota.

When you're in the livestock business working in an office located near the former South St. Paul Stockyards it's hard to ignore the history. These days, when I talk about Destron Fearing I focus on growth and geographical expansion, but I think it's important not to forget the past.

Just 65 years ago, David Fearing needed to create a product that would quickly identify and easily differentiate the thousands of cattle going through the South St. Paul Stockyards.

Fearing's father was a livestock commissioner at the stockyard, so growing up David heard all the stories about the cattle getting mixed up. Being an inventor at heart, David decided to create a way to identify the cattle. He initially worked with 3M to develop a cardboard tag that could be slapped onto the cattle's hide. The challenge was in the adhesive - it needed to be sticky enough to stay attached; but not too sticky to not come off. This was the beginning of Fearing Manufacturing, which officially started in 1945.

Always looking for other ways to expand, David took advantage of a new product emerging in the 1950's… plastic. Individual cattle tags could now be made with plastic, and then be attached to the ear of the cattle. Later in the 1960's, the hard plastic tags were replaced with thermoplastic, which was more flexible. Numbers and logos were later added to the tags, providing additional data for management.

In 1987, a Fearing employee purchased the company and quickly integrated RFID technology through the purchase of Destron, a Colorado based technology company -- henceforth, Fearing Manufacturing became Destron Fearing.

Destron Fearing was born in the South St. Paul Stockyards 65 years ago; however, unlike back then, our growth opportunities have expanded beyond the Stockyards to prospects in Europe, South America, and China. Now 65 years later, I am writing about global growth from our little corner of the world in South St. Paul. There's something comforting about being close to the roots and history of the business.

JOE

Thank You

7/7/2010

It was announced earlier today in a press release, that Digital Angel has eliminated an unneeded "corporate structure" resulting in an annual savings of approximately $2 million.

Following the divestitures of non-core businesses we have become a smaller company and the announced changes appropriately address our current business needs and reduced overhead.

In addition to the cost savings, the elimination of our corporate structure benefits our core business, Destron Fearing. By streamlining operations and focusing on animal ID we not only strengthen our balance sheet but also shift resources to Destron Fearing, where we see the largest growth opportunities.

These changes are part of a strategic turnaround plan that began in 2008. Lorraine Breece, Parke Hess, Pat Petersen, Jay McKeage, and Ron Landers have all played a key role in orchestrating and supporting this transition. I am fortunate to have worked with each of them and Digital Angel has benefited from their dedication and "company first" mentality.

These executives have worked hard to help restructure the business and establish a stronger financial foundation knowing full well that the result would most likely be the elimination of their positions.

Lorraine Breece has been with Digital Angel for over 10 years. She has been a vital member of the Digital Angel management team. As CFO, she oversaw the financial reporting of 2 separate business segments that at one time was comprised of multiple separate companies. With the divesture of businesses in the emergency ID segment, we have become a smaller company and it made sense to integrate the CFO position to the operational management level.

In December, Parke Hess will step down as Chief Operating Officer (COO). Parke oversaw the divestitures of the emergency identification segment and the restructuring of Digital Angel. This effort will be substantially completed by the end of 2010, and as such, the position is being eliminated. We thank Parke for all his work.

Pat Petersen came to Digital Angel in 2006. As in-house Corporate Counsel, Pat was vital in handling logistical issues and legal matters that stemmed from the ADSX/DOC merger. When Pat steps down in December, the majority of that work will have been completed, and as a smaller company, the need for in-house council is no longer necessary.

Jay McKeage has served as VP of Business Development for the past 3 years and will be stepping down in October. Jay's commitment Digital Angel's business and communications effort has been a key part of this transition.

Ron Landers joined Digital Angel in 1999. As VP Internal Audit, Ron has been a valued member of the team for over 11 years and significantly contributed to our business. We thank him for all of his hard work over the years.

With these changes, there is no longer a separate Digital Angel management team overseeing multiple business units. Instead, operational and corporate management are now one in the same and eliminating positions and outsourcing resources will allow the company to reduce its overhead and focus on Destron Fearing and the growing Animal Identification market.

JOE

The Polls Are Still Open.....

6/25/2010

While I won't say that The National Horse ID Poll is the most exciting contest I've ever seen…. I do find the results interesting.

Earlier this year, US magazine "The Horse" asked its readers if they thought the USA should institute a national horse ID system. The results - 64% of voters were against it, while 27% of voters are for it…… but don't fret, the polls are still open so you have time to make your vote count!!

Australian magazine "Horse Yard" posed the same question to its readers, and the results………… drum roll please…….. 75.7% of those polled in Australia think a National Horse ID system would be a good idea.

In both polls voters were asked what type of Horse ID they preferred and the number 1 choice in both….. MICROCHIPPING!!!

Cast your vote in The Nation Horse ID Poll here.

Enjoy the weekend,

JOE

On the Radar - Bovine Tuberculosis

6/23/2010

A discovery of Bovine Tuberculosis (TB) within a state has traditionally been cause for concern as it leads to onerous disease testing requirements and trade restrictions…Too many cases and a state can lose its TB free status, and gaining back its good health standing is an undertaking that can take years.

Bovine TB has popped up in Colorado, New Mexico, Michigan, Minnesota, Kentucky and California in recent months; as a result, the TB status of some of those states has been threatened.

• Four cows at a Colorado dairy were confirmed positive for Bovine TB;
• A beef herd in Alpena County, Michigan tested positive. Farms in the county have been quarantined and no cattle can leave except to go to slaughter;
• In Kentucky, the disease was discovered when a cow slaughtered in a Pennsylvania plant tested positive. The rest of the herd was tested and so far one other animal was confirmed positive with results pending on a third animal.

Fortunately in the Colorado case, the cow that red-flagged the infected herd had an ear tag, which allowed health officials to trace the animal's history….. Had it not been for the tag, officials would have had to quarantine 11 herds for further testing.

Colorado State Veterinarian Keith Roehr serves as one of five state veterinarians on a federal working group drafting the framework of a proposed rule for an animal traceability plan expected to be published early next year.

Roehr estimated that fully half of the ranchers in the West are receptive to a coordinated animal ID program, but Midwestern states like Texas, Oklahoma and Kansas are experiencing more resistance from producers. "National animal ID is not totally dead," he said. "We are still using components and parts of it as we continue moving ahead."

Animal identification is not a new practice; in fact, it has been around for thousands of years through the humble origins of branding. It wasn't until sometime in the 1700s that animal traceability became more important as disease in Europe prompted the need to record an animal's history.

Yet after 300 years and the advent of technology allowing for easy traceability, only 28 percent of cattle slaughtered in the U.S. are officially identified.

In short, disease outbreaks are costly. To trace a diseased animal to its source, packers as well as producers will have to do their part to maintain traceability.

JOE

Annual Meeting

6/21/2010

I announced in the Digital Angel Proxy Statement the details of our annual meeting of stockholders.

As a reminder - please see the details below:

When:
Friday, June 25, 2010
8:30am CDT.

Where:
Capella Tower
225 South Sixth Street
Minneapolis, Minnesota 55402

An admission card for entry to the meeting was attached to your proxy card. If you did not receive the proxy, please bring a brokerage statement to the meeting, so that ownership can be verified.

If you have questions regarding the meeting or its location please contact me at joe@digitalangel.com and/or digitalangel@kcsa.com.

JOE

Employee Profile: Marie Arroyo

6/21/2010

Energetic. Creative. Positive. These are just three words that describe Marie Arroyo, a production supervisor at Destron Fearing. Marie has been a part of the DF team for 8 years, and in her role she supervises 15 employees. Originally from Puerto Rico, Marie came to Minnesota 30 years ago to learn English and decided she loved it so much, she stayed.

Marie's pride in her job comes from her belief that the products Destron Fearing manufacturers help keep people safe. "I truly believe that not only what I do, but what Destron Fearing does, helps to ensure a safe food supply," said Marie. "Knowing this means a lot not only to me, but to all of my co-workers as well."

Marie's supervisor, Larry Davis, Operations Manager for North America, nominated Marie for this profile. "Marie always has the best interest of the company in mind," commented Larry. "She consistently strives to outperform all of her assigned tasks."

Marie's drive to learn new things is also evident in her personal life. A very artistic person, Marie enjoys painting and creating stained glass works that she often gives to family and friends as birthday and holiday gifts.

Thank you Marie for all of your hard work and dedication. We truly appreciate it.

JOE

Not just talk….

6/7/2010

I hope you all had a chance to read my letter to shareholders that I issued as a press release at 9:00am ET this morning.

As we reported in our 1st quarter earnings, this morning's letter highlighted the positive signals we continue to see in our business. I remain positive and optimistic about Digital Angel going forward.

With the recent pullback in the overall market, I thought now was a good opportunity to personally invest in Digital Angel.

As evident by the form 4 that I filed with the Securities and Exchange Commission, I personally bought shares of DIGA on the open market this past Friday.

The entire management team remains committed to the goals that we have discussed and laid out in our communications to shareholders and in our most recent earnings release and conference call.

I encourage all investors to review our most recent investor presentation and to be in touch with any questions you may have about Digital Angel.

The management team and board of directors of Digital Angel are committed to achieving our goals and continuing the turnaround effort.

Thanks,
JOE

What does a Scotsman wear under his kilt?

5/17/2010

Ok, I don't know…but I got your attention, didn't I?

The electronic identification (EID) of sheep in Scotland began earlier this year as a pilot program, and includes installing and testing readers at auction markets, abattoirs and other Critical Control Points (CCPs), and scaling up the database and data systems for full implementation in 2011.

At the European Association of Livestock markets' annual conference last week at Thainstone Centre, Inverurie, Bob Yuill, deputy chief executive of Scotland's umbrella co-operative organization, said that the accuracy would be sufficient to ensure speedy traceability in the event of another major disease outbreak in Scotland.

"Our view is that rates better than 95 percent are achievable and sufficient to improve traceability," said Yuill. "The overall average being achieved in our pilot scheme is 95.7 percent and improving."

Not too shabby.

Also in attendance at the conference was Scotland's Cabinet secretary for rural affairs, Richard Lochhead, who told the attendees there were increasing signs that the decline in Scotland's sheep flocks and beef herds was "bottoming out."

"People are beginning to talk about increased livestock numbers for the first time in a long time," said Lochhead.

Who says Scots are cheap?

JOE

Earnings Call

5/13/2010

I'd like to thank the 44 investors who listened to this morning's earnings conference call live.

For those that were unable to participate or may have missed the call, a replay is available until June 23rd. You can listen online using this link or dial in by calling (800) 642-1687 (USA/Canada) or (706) 645-9291 (international), and using the access code 74543176. Additionally, the slides that support the call can be found on the Digital Angel website or by using this link.

Following my review of the quarter, I had hoped that my presentation was so informative that I had left no room for questions….. But I guess I wasn't that efficient because as soon as the call ended I started getting some emails from investors who were looking for additional clarity.

If you have questions don't be shy - shoot me an email at joe@digitalangel.com. The Digital Angel investor relations team can be reached at digitalangel@kcsa.com or by calling (212) 896-1206.

JOE

Can you hear me now?

5/12/2010

It's déjà vu all over again. The USDA is…wait for it…holding public hearings on traceability. Yes, again. Two months after dropping the previous iteration of animal traceability (NAIS), they will be holding public meetings in three states to discuss their new approach, with more meetings expected to be announced in the coming weeks.

The three announced locations are Kansas City, Missouri (May 11th), Riverdale, Maryland (May 13th) and Denver, Colorado (May 17th) and members of the Digital Angel team will be in attendance at at least one of the meetings. As you know, I have often tried my hand at reading the tea leaves on this issue, and it's not as easy as it seems. However, what I believe is evident is that food safety is important to this administration; and in an effort to build consensus, they are trying to bring all parties to the table. The end goal of a safer food supply is not in argument; it is how we get there that seems to cause the most angst. I've stated my opinion here more than once, and I remain steadfast in believing there will be government involvement in the meat supply in the U.S. The who, what, when and where remain to be seen.

One of the leading voices in this debate has been the American Veterinary Medical Association. The AVMA seems (to me) to have the most level-headed views on the issue, and a recent piece in their Journal does a great job of evaluating the pros and cons.

The article outlines the American Association of Swine Veterinarians (AASV), the American Association of Bovine Practitioners (AABP) and the National Cattlemen's Beef Association's (NCBA) opinion on the issue. The AASV had supported the now-defunct NAIS system, and views its demise as a backslide. The AASV's position is in alignment with the National Pork Producers Council, which has favored implementation of a mandatory federal animal identification system for all livestock and poultry.

The AABP, however, has not taken a position on the proposed new system, saying its members have a mix of opinions both favoring and opposing a mandatory system. Dr. M. Gatz Riddell, executive vice president of AABP, said that the general consensus, however, was that "having a robust animal ID system with 48-hour traceback capability is critical to the protection of the health of the national cattle herds."

Lastly, the NCBA supports implementation of a voluntary, market-driven animal identification system. Bethany Shively, a spokeswoman for the NCBA, said it is important that the new system build on existing identification databases and systems, including private databases.

Like I said above, all parties want a safer food supply. All parties want some type of accountability. We will get there…one step at a time.

JOE

Employee Profile: Andriy Konoplyanko

5/6/2010

I would like to introduce Andriy Konoplyanko, Senior Production Technician at Destron Fearing. Since 2003, Andriy has been an integral part of the production process team at Destron Fearing, providing upper level technical support to the Reader Department, coordination between Destron Fearing and vendors, overseeing the quality control of pre-manufactured parts and components, as well as fielding technical questions from vendors, suppliers and customers.

A native of Ukraine, Andriy holds a Bachelor Degree in electronics engineering from the National Technical University of Ukraine. A natural born "tinkerer," Andriy is continually trying to "improve" things around his house. This impulse is also evident in his work, as he is always looking for ways to improve products and processes for better performance and more value.

"Andriy has consistently demonstrated an ability to complete tasks in an extremely efficient manner and always meets his scheduled commitments even when these schedules are very short," said Keith Kuhnly, Vice President of Research and Development. "To meet these commitments he is always willing to work extra hours and work on his own time at home. He shows great initiative at solving problems even when these issues fall outside of his normal responsibilities. He is also an excellent team member, interacting very effectively with his team to ensure everyone has his full and timely support and all of the required communication."

Away from work, Andriy spends most of his time with his 6-year-old son, and enjoys exploring his adopted home state of Minnesota.

Thanks for all your hard work Andriy. We're glad you're part of our team.

JOE

Clifford and Snell sale

5/4/2010

In case you missed it, we announced the sale of our Clifford and Snell business to R. Stahl, a German public company, on Friday. The key terms of the deal were set out in the press release, but I wanted to take this opportunity to go over the transaction itself, and explain what this means for Digital Angel going forward.

First let's start with the deal…. We sold Clifford and Snell in an all-cash transaction for £2.3 million, or approximately $3.5 million, based on current exchange rates.

After repaying money borrowed against Clifford and Snell's receivables of about $500,000, and covering the costs of the deal, we received a cash payment of about $1.7 million on Friday. This represents the first of 3 payments we expect to receive.

The second payment of roughly $350,000 (£230,000) will be made in the fall, upon a 'second closing.' The Clifford and Snell operations will be transitioned to the new owners in a systematic process and R. Stahl will take over day-to-day operations of the business in 6 months. In the interim, R. Stahl will purchase products from us before taking control of operations at the second closing.

The balance of the purchase price, about $570,000 at today's exchange rates, will be held in escrow for up to 18 months. Any amounts remaining after any valid claims will also be paid in cash at that time.

When all is said and done, Digital Angel will realize as much as $2.6 million in cash to reinvest in to our business from this transaction.

This transaction is part of an overall refocusing effort that we began implementing over a year ago. During this time we have continued to improve our balance sheet and financial performance while positioning Digital Angel to benefit from the economic recovery that we are now beginning to see.

At the same time, the Clifford and Snell business has found a good new partner, with international reach and strategically aligned in the same industry. We think this was a win-win

JOE

"We've had a colossal failure…

5/3/2010

…It cannot be done on a strictly voluntary effort. Farmers and ranchers do have legitimate concerns such as privacy issues and cost. But there must be a common vision."

These provocative words were spoken by Congressman David Scott (D-GA) at last week's Animal Agriculture Alliance meeting in Arlington, Virginia. Congressman Scott is the ranking member of the House of Representatives Subcommittee on Livestock, Dairy and Poultry and supports a mandatory animal ID system.

"We must communicate with industry why it's so important. There are terrorists out there who want to kill us and there is no more direct way than getting some foreign disease in our animals. We need to deal with animal ID in a very intelligent and smart way moving forward."

These statements may seem inflammatory to some, but there were many other heavy hitters speaking at the event, such as Asa Hutchinson, former congressman and former Undersecretary of Homeland Security, who said that animal agriculture was a "likely target for terrorism."

David Silverberg, editor of Homeland Security Today, spoke on the topic of Terrorism Against the Food Industry - Impacting Food Safety and Security. He described some early attempts at livestock and food supply terrorism, saying, "There is a lot of vulnerability in the agriculture industry. There is a possibility that someone might do something that might harm the feed or the livestock and create an incident that would harm the industry."

I often talk about the dangers of more "natural" or "organic" disasters, such as hoof and mouth disease or E. coli outbreaks, but in light of the most recent dodged terrorism bullet in Times Square this weekend in New York City, I thought it was most prudent to keep our eyes on other external and man-made potential threats. This type of 'agri-terrorism' is not outside the realm of possibility, and one that is obviously garnering a lot of attention.

JOE

Containing Kobe

4/28/2010

Sports fans, don't get too excited by the title, I'm not about to discuss the Oklahoma City Thunder containing Kobe Bryant. The Kobe I'm talking about is BEEF, aka Wagyu beef, Japan's most expensive cattle export.

As you may have read over the weekend, Japan confirmed its first hoof-and-mouth disease outbreak in 10 years. The government followed this by imposing a temporary ban on beef exports. Japanese officials suspended beef exports after cows tested positive for foot-and-mouth disease at farms in the southern part of the country. This is the first outbreak of the disease in Japan since 2000, but we've seen severe cases in other countries more recently.

Hoof-and-mouth or foot-and-mouth disease (FMD) is a severe, highly communicable viral disease of cattle and swine. The disease itself is ugly and is characterized by fever and blister-like lesions followed by erosions on the tongue and lips and between the hooves. Many animals recover, but the disease leaves them debilitated.

That same week, Korea banned the movement of animals near sites where hoof-and-mouth outbreaks have been confirmed, and increased decontamination efforts to stem the spread of the highly contagious livestock disease.

This stemmed from a report that the disease, first reported earlier this month on Ganghwa Island along the west coast, had spread to a pig farm in Chungju, which is about 150 kilometers southeast of Seoul. There are currently a total of eight contaminated farms that will be barred from moving their animals.

And just last Monday, the United Arab Emirates banned the importation of cloven-hoof animals and their products from the Namibia after an outbreak of the disease there.

From an economic standpoint, it is one disease that farmers dread the most. It causes severe losses in production of meat and milk. Not only does it spread widely and rapidly, it also has grave clinical consequences for the herd.

As I have blogged before… farm to fork traceability is one of the ways to help contain or minimize an epidemic.

According to Japanese experts, the current outbreak may be relatively mild; however, there is no question that even a minor outbreak has far-reaching consequences. In an article in Tuesday's Wall Street Journal entitled Japan's Beef Bans Hits Prime Eateries, restaurants were scrambling to get their hands on the dwindling supply of authentic Japanese Kobe beef.

Just as I wouldn't bet against the Lakers because of Kobe Bryant, I wouldn't want to take a chance that the Japanese Government contained this outbreak without the use of animal identification tags.

JOE

An announcement, a follow-up and a warm-n-fuzzy

4/21/2010

First, the housekeeping….we have tentatively* scheduled our 1Q 2010 results call for May 13, 2010. * due to my last…shall we say….misspoken date, I am using the word tentatively until the date has been absolutely positively set in stone.

Second, I wanted to follow-up on our press release yesterday about our deal in Brazil. One of my alert blog readers, Barbara, sent me a note about this and how so many people don't realize what a large market Brazil is for our products. As we said in our press release, Brazil has the second largest population of dogs in the world (currently at approximately 30 million), followed by China (25 million), Japan (10 million) and Russia (10 million).

Of course, Brazil is not only an opportunity for our companion animal business, but also for our livestock identification and traceability products. Brazil is also the world's largest beef exporter. In fact, just last month the USDA's Foreign Agricultural Service issued their Global Agricultural Information Network (GAIN) Report in which it states, "Post forecasts beef production and exports [in Brazil] to rebound in 2010 at an average rate of 4 and 5 percent, respectively. Pork production and exports are also forecasted to increase in 2010 by 2 percent after a good performance in 2009. Domestic demand will remain steady in 2010 due to the forecasted growth of 5.3 [percent] of the Brazilian economy. The export market is expected to rebound for beef in 2010 due to shipments to new markets."

As I've stated before, Brazil is at the top of our list for those markets that are rich in potential, and we are well positioned with both staff and resources to grow that market exponentially.

Lastly, a touching reunion. This story has been making the rounds and while we don't know for sure that "Charles" was fitted with a chip from Destron Fearing, it certainly exemplifies the value of our products. Charles the Cat approves of this message.

JOE

Employee Profile - Bonnie Martinez

4/7/2010

As most people know, the true foundation of any company is its employees. Here at Digital Angel, we are fortunate to have so many dedicated and experienced employees who don't often receive the attention they deserve. So, I am going to be doing a series of "employee profiles" on this blog so that you too can get to know these wonderful professionals.

First up is Bonnie Martinez, customer service representative extraordinaire. Bonnie has been with Digital Angel for 6 years, and as a customer service rep, her duties range from fielding incoming customer calls and entering orders, to obtaining freight and international shipping quotes.

"By far, the best thing about working at Digital Angel is the people, both my colleagues and the management," said Bonnie. "We not only stand behind our product, we also support each other."

Dan Ellsworth, North America Vice President for Sales and Marketing, nominated Bonnie for this profile. "Bonnie has been a rock for the customer service department; consistently positive and reliable," commented Dan.

Bonnie works the 7am to 4pm shift, Monday through Friday, and outside of work, her 6 year old daughter keeps her on the go. To unwind, Bonnie says, "There is nothing like an old black and white movie or curling up with a good book!"

So, thank you Bonnie, for all your hard work here at Digital Angel. We couldn't do it without you.

JOE

Past, present, future

Coming off of our conference call Monday, I wanted to reiterate some of what I believe are the prime take-away points. Since I came on board two years ago, we have significantly reduced our debt, increased our gross margins and shifted the focus of our business to one market, Animal ID where we have longevity, strong brands, technical prowess and improving economic conditions. All of the cost cutting measures and overhead reductions are now coming to fruition, and with the general economy beginning to show the first signs of a recovery, we are well positioned to leverage our lower costs as revenue picks up.

We continue to meet with potential investors, will increase this activity in the coming weeks and months and with our improved financial results believe that this will be reflected in our share price.

Of course, the brighter future isn't just my opinion. ABI Research recently issued its Semi-Annual RFID Market Data report. ABI's practice director Michael Liard said, "To 2014, the greatest growth will be found in RTLS (Real Time Location Systems), baggage handling, animal ID, and item-level tagging in fashion apparel and retail." ABI anticipates the RFID market will reach $5.5 billion this year and grow steadily for the next five years, reaching over $8.25 billion in 2014. Nice to see I'm not the only one bullish on the animal ID market.

P.S. Read here about California state veterinarian and president of the U.S. Animal Health Association Dr. Richard Breitmeyer's throw down over NAIS.

P.P.S. Cinnabun was found…again! It's too bad Sandra Bullock didn't keep a chip in Jesse.

JOE

I yield my time to the gentleman from Nebraska

On March 17th, United States Senator Mike Johanns (R-Nebraska) made a speech on the floor of the Senate about the National Animal Identification System (NAIS). While I don't agree with everything he said, he makes some very valid points on the practicality of the new, proposed regulations. It is interesting to note that he feels, as do I, that this is essentially a mandatory program. Even though it is officially referred to as voluntary, in practice, it is mandatory. Coming from a Republican senator, from a conservative, farming state, who is also a former U.S. Secretary of Agriculture, his opinion carries a lot of weight.

There was another interesting point of view from the U.K.-based industry publication Meat Trade News Daily on NAIS. For those of you who are interested in the global meat trade, this publication offers a truly international perspective with industry news from every continent. Their recent editorial on NAIS offers global insight, something rarely seen in U.S.-based publications. While it is often easy to get lost in the details, it is imperative to maintain the long view; our economy is not self-funded. We depend heavily on international trade in all sectors, and turning a blind eye to regulations and standards adopted by most other countries just does not make good business sense.

JOE

Oops, my bad

3/23/2010

Well, this is embarrassing. I just realized that I've been giving the wrong date for our Q4 / Fiscal Year 2009 conference call. The date for the call is Monday March 29th at 10:00 a.m. EDT.

Apparently, the memory does go after you turn 50.

JOE

This is NOT a post about the health care bill

Who is sick (pardon the pun) of hearing about the health care bill? Yeah, me too. Regardless of your political position on this issue, I, for one, am glad it is finally coming to a vote, so we can talk about other, more important votes.

Like what, you ask? Well, the great state of Georgia passed HB 1106, which will require animal shelters to scan any cat or dog that's to be adopted or euthanized for an owner-identifying microchip.

Sponsored by state Rep. Gene Maddox (R-Cairo), a veterinarian, the bill passed the House 150 - 0. That's a pretty definite "yes" vote.

I also wanted to remind you that our Q4 / Fiscal Year 2009 conference call will be on March 25th at 10am EDT. Hope you tune in!

JOE

The real fall-out

Now that the dust has settled after the NAIS announcement, voices of reason are finally able to be heard.

Dr. Ron DeHaven, chief executive officer of the American Veterinary Medical Association (AVMA) and former head of the USDA Animal and Plant Health Inspection Service (APHIS) posted a video on YouTube outlining his concerns over the decision to not make NAIS mandatory.

In this video, Dr. DeHaven says one of the biggest problems with this announcement is that there will be no animal ID system during this new development period, which could take years. He is also critical of the USDA's announcement that cattle branding - an outdated form of theft deterrent - will now be an acceptable form of animal identification.

While Dr. DeHaven expresses concerns from the animal health perspective, Glynn Tonsor, an agricultural economist at Michigan State University, recently spoke on the effect this will have on the economy of the beef industry.

Tonsor spoke at Kansas State University's 2010 Cattlemen's Day in March 5, saying, "Our lack of a good system when it comes to traceabilty and identification sends a certain signal to the public." According to Tonsor, leaving identification and traceback mechanisms up to individual states would impair beef trade with other countries, particularly Asian buyers.

Mr. Tonsor must have had a premonition, because less than one week later, two prominent United States Senators proposed a resolution urging Japan ease "unfair" import restrictions on US beef.

Japan halted imports in 2003 after mad cow disease was found in an animal in Washington state. Japan now accepts only meat from animals aged 20 months and younger.

"Sound science tells us that our product is safe," Blanche Lincoln, Democrat from Arkansas and the chairwoman of the Senate Agriculture Committee, said in the statement. "Asia continues to hold the greatest growth potential in market access for American beef exports, and these non-tariff trade barriers from Japan must be brought down."

Now, I'm not one to say "I told you so" but…since we've known all along that a mandatory identification system was crucial for easing Japan's fears, and prior to 2003, Japan was the world's largest importer of US beef, I don't see how this should come as a surprise.

JOE

Beware of dog

Micro chipping pets isn't just about the touchy-feely reunion of a lost loved-one and its owner. The British government has recently proposed all new dog owners to have their pets chipped. According to Home Secretary Alan Johnson, "status dogs" are being used by some irresponsible owners to intimidate communities or as a weapon by gangs.

The UK already has in place a Dangerous Dog Law since 1991 making it illegal to own any Specially Controlled Dog (these include four types: Pit Bull Terriers, Japanese Tosa, Dogo Argentino and Fila Brasileiro) without a specific exemption from a court. These Specially Controlled Dogs have to be muzzled and kept on a leash when in public, as well as being registered and insured, neutered, tattooed and receive microchip implants.

Secretary Johnson is not only proposing expanding this law to include all dogs, but also extending the law to cover attacks by dogs on private property to protect postmen, and making third-party insurance compulsory so that victims can be financially compensated.

If this new plan is made mandatory, owners would face a fine for failing to microchip their dogs. Secretary Johnson is expected to give details of the proposal in an upcoming speech on "crime and antisocial behaviour."

Thanks to our partnership with UK-based Animalcare Limited, already a dominant player in the UK market, enactment of this enhanced law would be a nice boost to our bottom line. Additionally, it is nice to see countries continue to take serious the value of microchipping not only in companion animals, but in wildlife and livestock as well.

JOE

Save the date!

Yup, it's that time again. The Q4 / Fiscal Year 2009 conference call is tentatively scheduled for March 25th. Once that date is firmed up, I'll let you know the time and the call-in details.

In the meantime, the Wall Street Journal had a great article yesterday on the USDA's decision on NAIS. They took what has often been an emotional topic and laid out the pros and cons to both industry and the public at large. You can read the article here.

JOE

NAIS talking points

As I am sure you are all aware, the US federal government announced last week that it has decided not to continue with the USDA's National Animal Identification System (NAIS). I have been writing quite a bit about the NAIS on this blog, attempting to read the tea leaves and to predict the outcome. Before anyone gets too excited, I think the take-away message from this announcement is that the end of NAIS is not necessarily the end of traceability. And it doesn't change our strategy one bit, which I'll expand on shortly.

But first here are some thoughts on this newest development. What the US federal government has announced is an effort to "push down" the requirement to establish traceability requirements to the state and tribal authorities, which will be applicable to livestock being transported across state and tribal borders. This approach differs from the old NAIS program, which had as its focus both identification and traceability for both intrastate and interstate livestock, and was driven "top-down" from USDA.

This new framework, as announced, will apply specifically to livestock traveling across state borders. It is important to note that, while it's virtually impossible to get hard data on this point, industry participants that we know believe that something like 95% of livestock sales are interstate, whether in live or harvested form. It is too early to tell whether the new system will be mandatory, although we believe that USDA would like it to be so, but as I'll discuss further below, this is not a key issue for us.

By the way, if you'd like a bit more background on this issue, Dr. John Clifford, Deputy Administrator of the USDA Animal Plant Health Inspection Service (APHIS) gave an interview to AgriTalk about this new decision by the USDA, and you may wish to listen to this short interview.

How does this new development affect Digital Angel and our Destron Fearing business? Not one bit, and in fact we think the proposed new framework actually validates our approach to the industry. At Destron Fearing, our business model has always been to develop and sell innovative herd management products to producers that add value to their businesses. This has been our strategy with our without any mandatory animal identification program in place. Our philosophy continues to be to serve our customers by listening to their concerns and to respond accordingly, and not to try to influence federal government agencies through costly lobbying with questionable outcomes.

Regardless of any mandatory traceability program at the federal or local level, we will continue to offer producers EID products whose benefits add value in their daily operations, giving them a positive return on their investment. The importance of 48-hour trace-back, and age and source verification, has been with us for a long time without a mandatory NAIS system in place, and we think will be with us forever. RFID makes it easy for the industry to serve these needs. Destron Fearing products have been widely adopted for these requirements, and we continue to see growth in these segments. So we will stay the course, working with our customers to develop and provide products that result in positive solutions to help them improve their productivity.

We have long recognized that any likelihood of a mandatory program from the USDA would be a long and protracted process. So by focusing on the customer, we have tried to develop programs that make it easier for producers to do business with us, and for us to provide them with products that enhance their productivity and business success. We continue to believe, and the marketplace continues to tell us, that RFID is absolutely the best way to assist producers in their business. Accordingly we have not ceased to develop new features and functionalities for our Electronic ID products, in keeping with our reputation as an industry leader in product innovation.

By providing products that give producers more information at their fingertips as they work in the field, we believe that their productivity will be enhanced. For example, with the ability to monitor animal behavior, producers will be able to achieve early detection of potential illnesses in their herds, helping to prevent both the spread of disease, and to give them better tools to maintain the health of their herds.

This is only one example of where Destron Fearing will continue to focus its efforts. We believe that our rTAG rollout, and other low-frequency product enhancements that we are making today, will continue bring efficiencies to the livestock producers of tomorrow.

I know this has been a long-winded communication. But I appreciate the feedback I continue to get from our shareholders, and I always welcome your comments.

JOE

Video Blog

2/8/2010

JOE

HDX + FDX + News

2/3/2010

A next-gen cattle tag without a price increase? Yep.

Destron Fearing has introduced the next generation of HDX cattle tags, and will be offering the product at the same cost as their current FDX product offerings.

Destron Fearing will be offering this new HD tag in 11 different product combinations, including the typical RFID HDX button only tag, a Combo Panel Tag (where the RFID HDX button is attached to the panel) or the Choice Set offering (a panel tag for the right ear and the RFID HDX button tag for the left).

So, what's the difference between an HDX and a FDX? I'm glad you asked. The primary difference is the mode of communication with the reader. Both technologies are passive, meaning the reader must excite the tag in order to activate it. In HDX, the "H" represents "Half Duplex," meaning the excite signal is on for half the time; whereas FDX, the "F" represents "Full Duplex," with the excite signal on all the time. You can read all about both HDX and FDX here.

Speaking of excite…I came across this interesting news item. Of course, Digital Angel won't officially comment on the validity of theory behind the story, but if it increases pork sales, we're ok with that.

JOE

NCBA Convention report

2/1/2010

As most of you probably saw, we announced last week a new partnership between Destron Fearing and Animal Profiling International (API). The goal of this joint program is to increase the number of animals tested for BVD-PI (Bovine Viral Diarrhea Persistent Infection) in the United States. As part of this program, API will offer special test pricing to producers who purchase Destron Fearing™ cattle tags this spring.

The announcement of this new partnership coincided with the National Cattlemen's Beef Association annual convention in San Antonio, Texas held last week. Dan Ellsworth, Destron Fearing's Vice President of Sales & Marketing for North America, attended the trade show and reported back on the great reception received for this new DF / API partnership.

"This first-of-its-kind relationship between a tag manufacturer and a testing lab allows for a greater level of access for the smaller producers," said Ellsworth. "Coming out of 2009, producers were upbeat about the future and expressing a fair amount of optimism for the New Year. A number of producers I spoke with are looking at a deeper integration of RFID in their operations and are looking for ways to utilize the technology in their herd management operations."

2009 was certainly a difficult year for all business sectors; so hearing that producers are feeling upbeat about 2010 is good news indeed. As this new optimism translates to increased demand, Destron Fearing is ready to convert demand into sales with its superb sales team, continually updated products, and robust support staff. Game on!

JOE

The Golden Arches

1/29/2010

Well, this should come as no surprise. McDonalds Canada just announced it is supporting the Canadian government to implement mandatory livestock traceability by 2011.

Jeff Kroll, senior vice president of McDonald's Restaurants of Canada says, "McDonald's believes that a robust, national traceability system is critical to ensuring consumer confidence and building brand trust in the beef industry. While it is an additional cost, we believe that it's simply the right thing to do. Traceability is the right thing for all of us to do for our businesses and our customers, both domestically and abroad."

McDonalds is likely the key player in the fast-food beef industry, just as Wal*Mart is the key player in retail consumer goods. Key players in any industry have the ability to set the rules, and by supporting mandatory livestock traceability, McDonalds Canada has now set the bar for all other countries to follow suit.

JOE

Congratulations are in order!

1/27/2010

I would like to extend my congratulations to Dr. Elisabeth Hagen on her nomination by President Barack Obama to the post of Under Secretary for Food Safety within the U.S. Department of Agriculture. This post is charged with overseeing the safety of meat, poultry and egg products at the USDA's Food Safety and Inspection Service (FSIS).

Prior to her current post as USDA's Chief Medical Officer, Dr. Hagen was a senior executive at FSIS, where she was instrumental in building relationships and fostering coordination with food safety and public health partners at the federal, state and local level.

In his announcement, Agriculture Secretary Tom Vilsack said, ""There is no more fundamental function of government than protecting consumers from harm, which is why food safety is one of USDA's top priorities. We can and must do a better job of ensuring the safety of meat and poultry products regulated by USDA, and Dr. Hagen brings the background, skills, and vision to lead USDA's efforts to make sure that Americans have access to a safe and healthy food supply."

Her nomination was greeted with praise from consumer advocate groups. Carol Tucker-Foreman, a food safety advocate with the Consumer Federation of America, says, "There has been no consistent decline in recalls, illnesses or deaths in six years. From the beginning of the Obama Administration we have urged that the food safety initiative include modernizing this program. We look forward to working with Dr. Hagen in achieving that goal and others that will reduce the toll of food borne illness."

With a decision pending on the status of a mandatory National Animal Identification System, I, for one, see this as a very good omen.

JOE

Rapid Response

1/18/2010

I wanted to talk about something that rarely gets airtime, but that is the true backbone of any manufacturing-based company, and that is our manufacturing and shipping turnaround time, which we call our Rapid Response Program.

Digital Angel, specifically Destron Fearing, has one of the fastest manufacturing turnaround times in the U.S., raising the bar for excellent customer service.

All standard orders placed in Destron Fearing's Rapid Response Program ship out the same day. This is critical, especially for our retail customers, allowing them to minimize their own inventory and to transition to a 'just in time' inventory model.

All custom orders placed in the Rapid Response Program ship out the next day. I don't know of many companies that can guarantee a custom order the next day. This allows our customers quick delivery directly to their site of operations, they can order the exact amount of tags they need, and this speeds the adoption of Destron Fearing tags into new retailers not currently carrying our products.

Manufacturing and shipping operations are often the unsung heroes, but Digital Angel and Destron Fearing would not be able to supply and service our customers around the world without them.

JOE

Product Update

1/14/2010

Electronic Identification is upon us, from Jan 1st 2010 when livestock in many EU countries are required to be electronically identified. Readers will be required by sheep farmers, vet doctors, vet institutes, custom services at border controls, and Digital Angel is ready to serve the markets with the DTR4 EU reader.

The DTR4 EU has passed all the EU ISO regulations but more importantly, has been designed based on the farmers' requirements and lifestyle. The DTR4 EU is a very easy to use, hand-held battery powered reader, but is also robust enough for the daily rigors of farm life.

With an integrated display and memory capable of storing over 2,000 IDs, the DTR4 EU reader can decode FDXA, FDXB, FDXB bio-thermal, HDX, Trovan and AVID technologies. The identification code and temperature measurement of animals contained within an RFID tag on the animal are all read and stored in the DTR4 EU.

If the screen can't be read owing to weather conditions, the reader gives a vibration through the handle as well as a visual indication (LED) to ensure the farmer knows he has a positive reading.

Additionally, downloading information from the reader can be done wirelessly via Bluetooth technology, or by connecting to a PC or PDA.

The DTR4 EU just went on sale this month and we have already received great feedback. I would like to thank the product development team for collaborating with their customers to create a unique, user-friendly and world-class product. Job well done!

JOE

Weekend Reading

1/8/2010

TGIF! There have been quite a few animal ID related news stories this week, so I thought I would add them to the weekend reading list.

As I mentioned in my last blog, several foreign governments are concerned with the safety of food exports from the U.S. Just yesterday, Business Week published an article on Japan's recent banning of poultry from Texas due to fears of avian influenza. This is yet another example of how being behind the technology curve in a global environment can end up being very costly.

Another NAIS-related news bit, the American Veterinary Medical Association's Executive Board approved two revisions recommended by the AVMA Animal Agriculture Liaison Committee to the National Animal Identification System policy.

One revision calls for state and federal animal health officials to have 24-hour access to identification databases and encourage the immediate inclusion of imported animals into the national ID system.

The second revision added a 10th key element to the policy which states, "The incorporation of all imported animals into the NAIS immediately upon their arrival, unless going directly to slaughter, while also maintaining country of origin identity within the database."

I've talked quite a bit on this blog about the EU regulations requiring individual identification of sheep and goats. The goal is to have every sheep and goat with an electronic identification device (EID) locked on it within the next five years.

A recent article in the Evesham (U.K.) Journal about the regulations profiles Jake Freestone, farm manager at Overbury Farms. When asked about implementing the new system, Mr. Freestone was quoted as saying, "The equipment has been quite expensive to buy and set up but it will pay for itself with far more accurate sheep records, providing detailed management information for shepherd Tod Phillips that can be easily carried around the farm." I couldn't have said it better!

Have a great weekend everyone!

JOE

Happy New Year!

1/5/2010

Hi everyone…I hope your holidays were spent enjoying family, friends and food. I wanted to pass along two interesting news articles I recently received.

The first article is about the problem of 21st century cattle rustling. This may seem a thing of the past, but unfortunately, the crime seems to be making a comeback. The article by the Associated Press chronicles a cattle ranch in Oregon called Three Mile Creek. In the Great Basin outback, where Oregon, Idaho and Nevada meet, there has been an estimated 1,200 cattle, worth a total of $1 million, gone missing.

Unfortunately, none of the ranchers in the article use RFID tracking; relying instead on old-fashioned branding. This makes it much easier for the cattle thieves to re-sell the stolen cattle, especially in states that have no branding laws. A uniform animal identification system would surely cut down on these thefts, and the cost of implementation would not be near the money ranchers are currently losing.

The second article is by the Centre for Research and Globalization, a not-for-profit, independent research organization based in Montreal, Quebec, Canada. The article in question is about the state of US meat processing plants and the implementation of the National Animal Identification System (NAIS).

The article draws correlations between governments of major US beef markets and increased, mandatory traceability. Japan and South Korea are now moving toward mandatory traceability on imports, with South Korea planning to mandate animal monitoring by 2010, and Japan's new prime minister vowing to mandate it for beef imports.

JOE

Dasher and Dancer and Prancer and Fido

12/23/2009

The holidays are a time to be spent with family, friends and loved ones…including the family pet. Unfortunately, the incidents of pet theft have been on the rise; a 30% increase in the last year alone. The American Kennel Club issued a press release today urging pet owners to heed the warnings about the alarming rise in "dog nappings."

Lisa Peterson, director of communications for the AKC, appeared on Good Morning America today to talk about this recent trend.

"We have seen a dramatic increase in this type of crime," said Ms. Peterson. "In fact, the FBI National Crime Information Center tracks stolen pets and pet owners don't know that if their dog is stolen and has a microchip that they can file a police report to help them get their pet back."

Because things like collars and tags can be removed, the AKC recommends having your pet microchipped. It is the best way to increase your pet's chances of being recovered and returned you.

On another note, I would like to wish everyone a very happy and healthy holiday, and to thank you all for being supportive and involved in Digital Angel. It means a great deal to myself, the management team and the board of directors.

JOE

A snowy Monday animal ID update

12/21/2009

Well, we got plowed in with snow here in the States…about a foot and a half in my neck of the woods. So while waiting to be plowed out, I thought I would blog a bit about some recent animal ID news items.

Results from a food survey released last week show food safety to be the number one concern. Conducted by meatingplace.com (an online community for red meat and poultry processors in North America), the survey polled one thousand Americans on food related issues. Coming in second and third were two items related to the poor economy: "the newly poor swell lines at food banks" and "consumers cut food spending sharply." It's no surprise that even in a tough economy, food safety continues to be of the utmost importance to consumers.

Starting next month, all cattle in Canada must have EID ear tags. Effective January 2010, visual and barcode dangle tags are no longer an acceptable form of identification.

Destron's hand held and panel readers have also been approved, including:

• Destron Pocket Reader EX
• Destron 2001 L-ISO
• Destron Livestock Paddle Reader - LSRD01-1SO
• Destron AN4003A ComboReader (RFID and Barcode)
• Destron DTR-3E Universal Wireless RFID Handheld Reader
• Destron Panel
• Destron AN450 Portable Walk-Through Cattle Antenna Reader
• Destron AN4211 Headgate Neck-Extender Antenna Reader
• Destron Axiz-SB-1 Stationary Universal RFID Reader

A great way to ring in the New Year!

JOE

Interesting news bits

12/11/2009

Just wanted to share an op-ed I ran across in the Yakima (Washington state) Herald. This is a very well written editorial about what the U.S. could learn from Australia and Canada regarding animal identification. It offers a possible solution, which has been mentioned before, about creating a hybrid system, incorporating aspects of both the Aussie and Canadian systems.

You can read the article here.

There was also an article in the New York Times on December 3rd about an experimental vaccine against E.coli bacteria in beef. The woman who was profiled by the New York Times a couple of months ago, Stephanie Smith, who was left paralyzed by a burger tainted with E. coli bacteria, this week filed a $100 million lawsuit against the maker of those burgers.

Obviously, food safety will continue to be a hot topic unless or until decisions are made about shoring up the processes to ensure the food supply is safe.

JOE

This little piggy went to market…

12/07/2009

On November 30th, China lifted its import ban on U.S., Canada and Mexico pork. Earlier this year, China banned imports from these three countries on fears of an outbreak of H1N1. Here is the official site of the General Administration of Quality Supervision, Inspection and Quarantine of P.R.C. where they announced the ban lifting. The United States is the largest exporter of pork products to China ($560 million in 2008 alone).

China is the world's largest consumer of pork, and has recently begun to increase its own production, driven largely by the subsidies from the government for breeding sows. Just last week, Zhongpin Inc., a leading meat and food processing company in the People's Republic of China, announced it had received two payments totaling RMB 21.4 million (about $3.1 million) in cash subsidies from the Chinese government.

Mr. Xianfu Zhu, Chairman and CEO of Zhongpin, was quoted as saying, "We have embraced and adopted every modern technology available to produce our food products with the highest product quality and safety. As the meat processing industry consolidates in China, we believe that Zhongpin will thrive as the safest and one of the largest and most profitable suppliers."

Notice the repetition of the words "safe"?

This brings me to another recent news story…On November 20th, a city official in Chengdu, China announced that pigs are being tagged with identification chips to provide the public and officials with data. China's Xinhua news agency said that 45 markets in Chengdu are selling pork from pigs tagged with the identification chips. The spokesman said all vendors are required to scan all pieces of pork into the market system, enabling officials to determine if any illegal pork products are being sold.

Consumers can check on their pork purchases by phone, text message or on the administration's website to ensure it was safety bred, butchered, stored and transported, as well as properly examined. I wonder if the iPhone will have an app for that… iPig? iPork?

Pork seller Wu Bo welcomed the policy. "Customers can now buy without hesitation. With the chips, they can eat without worry."

I couldn't have said it better Wu.

The swine market in China has an incredible upside potential, and one that we will be looking to invest more resources on in the future.

JOE

New product alert

12/02/2009

I hope everyone had an enjoyable Thanksgiving holiday last week. I wanted to write a quick note about a new product in the Destron Fearing line.

Litter Max²™* is a new ear tag product for piglets, and is designed to dramatically increase retention (meaning reduce tag loss) due to its shape. This square shaped button (1.25" x 1.25") is made from molded high-grade polyurethane and can be applied from birth to approximately 40lbs. The field tests conducted showed a decrease in tag loss from 5.89% in the traditional round tags to 1.01% with the Litter Max² tag (from birth to market) and from 12.08% loss in round tags to 6.94% with the Litter Max² (from birth to harvest). Retention levels such as these are unmatched in the industry. This, of course, comes as no surprise since Destron Fearing is the industry leader in swine tags in North America.

We have several more new products in the development pipeline, and now that we are able to focus our resources on one business, you will be seeing many more new product bulletins in the future.

Congrats to the Destron Fearing team on a great new product!

JOE

* patent applied for

Washington round-up

11/25/2009

There has been quite a bit of activity in the political realm these last few weeks, and I don't even mean the health care debate.

The buzz in D.C. is that Ag Secretary Vilsack will be announcing a mandatory animal ID program by the end of this year. Here is an audio clip from the National Association of Farm Broadcasting, with an interview of Colin Woodall, Director of Legislative Affairs for the National Cattlemen's Beef Association.

Today, there was an article in the BARN Online about the U.S. Cattlemen's Association (USCA) members visiting policy makers in Washington D.C. You can read the entire article here, but the most interesting quote (to DIGA) was by the President of the USCA, Jon Wooster:

Wooster explained that the group also participated in discussions with administrators of the National Animal Identification System (NAIS), a hot-button issue for cattle producers.

"The Secretary of Agriculture has indicated that he will be announcing his plans for a redirection of animal identification and we await that announcement. It is clear that the animal identification issue is not dead," warned Wooster. "Despite the fact that NAIS funding was drastically slashed in the most recent Congressional spending bill, a considerable cash reserve remains at USDA that can be used to develop an animal identification system for disease mitigation programs and to initiate some type of trace-back for disease outbreaks. This cash reserve, estimated in the millions, is the result of groups failing to meet prescribed benchmarks in their grants to promote premise registrations. As a result of those failures, grant funds were withheld and remain at the disposal of USDA. There is also a concern that a mandatory identification proposal may come up based on the identification systems used in the tuberculosis and brucellosis programs for interstate shipment of cattle."

Wooster continued, "Animal health officials are having an increasingly difficult time tracing animal disease outbreaks due to the phasing-out of historically successful animal health programs like the programs for tuberculosis and brucellosis, and due to reducing the number of cattle being identified with an official ear tag. These are serious issues that will require the engagement of cattle producers across the country."

These are some serious players in the anti-NAIS campaign that, now, seem to be conceding that a mandatory program may very well be put in place, and soon. These two people have a true inside track, and (I believe) would only admit "defeat" if it were truly imminent.

This, coupled with the recent (unanimous) passage by the Senate HELP (Health, Education, Labor and Pensions) Committee of S. 510, which would grant the FDA authority to oversee everything from food production and processing, to distribution and retail, is creating momentum for a truly safe food supply. The full Senate still has to vote on this, which may not be until early 2010, depending on when the issue of overhauling the health care system gets resolved.

Lastly, I wanted to wish everyone a safe and happy Thanksgiving. My plan is to be in a tryptophan-induced coma, in front of the TV, by 3:00.

Have a great holiday, and talk to you next week!

JOE

Viewer Mail!

11/23/2009

Sorry it's been a while since my last viewer mail post, but as you can imagine, events these past few weeks have generated many questions and comments. So, let's dive right in:

Norbert asked:

- You said that DIGA will get 9.5MM cash with the deal. (During the conference call) Ms Breece said that McMurdo will have about 2.5MM $US in receivable as of the day of the sale and basically no inventory. Can you be more specific and tell me how much cash TOTAL including receivable tax expenses inventory etc etc...DIGA will get?

Details of the transaction will be provided through the formal public disclosures that we file. There are some timing issues with the receivables/payables aspect that prevent an easy calculation. Taxes should be minimal due to past losses and the structure of the deal. We believe we got a fair price and that the cash that flows from the deal (including the eventual escrow) will help us to focus more resources on the Animal ID/Destron Fearing business in the future.

Shannon asked:

- What is your take on CHIP/PSID making the announcement that they are going into the Animal ID business?

Positive ID (PSID), formerly VeriChip (CHIP), announced last week they were creating a new animal identification segment. At first blush it might look like they would be competing with us; however, by focusing on chemistry based analytical products, in actuality, they are not. In fact, there may be partnership opportunities in the future if they make good business sense for us.

Barbara asked:

- Would you and the Board consider a stock buy back upon profitability?

I've received this question from a couple of other blog viewers as well. Stock buybacks are always an option, though I think there are other ways to invest spare cash (if and when there might be some) that could offer a higher rate of return to shareholders

Bob asked:

- In regards to the new rTag…are these tags now readily available and has Digital Angel experienced any sales for this new animal ID system?

Major rTag introduction to the market has been somewhat delayed by lack of resources to fully put product into production and do an appropriate marketing rollout. With our renewed focus on the Destron Fearing animal ID business, we hope to accomplish this in 2010 with a couple of key strategic partners.

Lastly, I have received several questions about our relationship with Yorkville. No one (myself included) likes to see dilution, but survival has been the prominent concern for debt laden micro caps like DIGA. Yorkville's purchase and subsequent resale of stock has helped stabilize our working capital situation while we continue to execute on bolstering the balance sheet by selling non-core assets and restructuring activities that have increased our margins. The good news is that we are still standing to take advantage of the much brighter future opportunities that will mostly certainly present themselves.

JOE

Rabid fans

11/20/2009

A few days ago, the Associated Press reported a story about Joe Namath's yellow lab Leo. Apparently, Leo, as well as Namath's other dog, a Weimeraner named Stella, has a bad case of the grumpies. Leo was declared "dangerous" during a hearing in West Palm Beach, Florida, where Namath now resides, and as a result, must be muzzled and leashed (even on Namath's property) and must have a microchip implanted (in Leo, not Namath).

Apparently, animal control in West Palm Beach has received four reports of Namath's dogs attacking people on his property since 2007:

- May 2007 - A UPS driver was "accosted by a pack of dogs" on Nathan's property. Leo was identified out of a lineup

- May 2008 - a home nurse mistakenly went to Namath's home and was bitten by one of his dogs

- February 2009 - a contractor working at Namath's home was reportedly "pinned up against his vehicle and bitten on the wrist." This was allegedly Stella's handiwork, but the contractor failed to show up for the hearing, so the case was dropped

- August 2009 - a landscaper was bitten on Namath's property

Namath had no comment, but the upside of this negative press is that his house is most definitely off the "must visit" list of Amway representatives and Jehovah's Witnesses.

Now, this got me thinking. Thanks to YouTube, we can all re-live some of Joe's better moments. I have listed my top three for you below (in no particular order).

Joe loves Suzy

Joe knows pantyhose

Joe and Farrah forever

On another note, thanks to everyone who has been e-mailing me questions. I appreciate your feedback and will be doing another "viewer mail" blog post next week!

JOE

IFT Guidelines

11/18/2009

Last Thursday, the Institute of Food Technologists (IFT), a nonprofit scientific society focusing on the science of food, delivered to the Food and Drug Administration a new study that recommends guidelines to establish a comprehensive product tracing system to track the movement of food products from farm to point of sale or service.

The IFT was commissioned by the FDA's Center for Food Safety and Applied Nutrition to conduct a study on traceability in the food system. The study's authors, which included experts from academia, industry and government, collected information from 58 food companies involved in produce, packaged consumer goods, processed ingredients, distribution, foodservice, retail and animal feed.

You can view the complete findings of the study here, but the key take-away messages for DIGA are the recommendations by the IFT for systems and practices to help track the movement of food products from farm to fork, something we have been talking about for some time.

This study confirms what public interest and consumer protection groups have been saying for years: track-and-trace is vital for a safe food supply.

JOE

Lost pets

11/12/2009

I realized that I have been talking quite a bit about our livestock identification, which is going great guns, as we announced another partnership yesterday with the UK and the Republic of Ireland. However, there is another significant part of DIGA's business that supplies chips for the identification of domestic pets.

The Destron Fearing unit of Digital Angel supplies chips to Schering-Plough's Home Again® product line. Home Again is the leading pet identification and recovery tagging system in the U.S., and lately, there has been a push to initiate laws requiring the microchipping of all pets.

Dr. Elton Gissendanner, a veterinarian in Lake Placid, Florida, recently asked the Highlands County (Florida) commissioners to consider putting mandatory microchipping on a list of topics the state legislature should consider.

Why?

"I'll tell you why," said Dr. Gissendanner, who has dedicated his practice to spaying and neutering pets in south central Florida. "Who wants to dump their dog out on the street if it has their name on it?"

Dr. Gissendanner believes that mandatory chipping will not only help reunite lost pets with their responsible owners, but will be a motivating factor in helping all pet owners to treat their pets with the care they deserve.

Currently, several states and local county governments in the U.S., as well as countries such as the U.K. and South Korea, are considering making the chipping of domestic pets mandatory.

Like the issue of identification of livestock, this is an issue that we will continue to follow and I will continue to update you via my blog.

JOE

Over a billion Chinese can't be wrong

11/9/2009

Last week, a group of government, industry and academic leaders from China visited Minnesota as part of a trip designed to help them examine food safety efforts.

The 22 Chinese delegates met with officials from the Minnesota departments of health and agriculture, as well as the state Board of Animal Health. The delegation toured a General Mills facility, an Ecolab development plant, and participated in a roundtable discussion at Cargill headquarters.

This exchange was designed by the Global Initiative for Food Safety Leadership (GIFSL), an academic organization aimed at connecting public and private institutions across nations.

Mike Robach, vice president for Corporate Food Safety and Regulatory Affairs at Cargill, explained his company's involvement with GIFSL and the Chinese delegation as "an attempt to correct the lack of consistency in food safety standards around the world."

"Every day you and I eat foods that come from 20 to 30 different countries," said University professor and GIFSL Executive Director Will Hueston .

"This partnership helps us build and connect more broadly with food safety leaders around the world in advancing our shared goal of strengthening and improving food safety worldwide," said Mark Fryling, director of Quality and Regulatory Operations at General Mills.

So, how does this relate to DIGA? You may recall in December 2008 we announced that Cargill has adopted our USDA-approved Swine Premise Tag for its pork division. Cargill is the leading international producer and marketer of food, agricultural and industrial products with sales topping $116 billion in 2009…that's billion with a B.

To say Cargill has some sway in the food safety arena is an understatement. As these large, international food providers (like Cargill, McDonald's, etc…) start coming out in favor of stricter food safety guidelines, it brings more and more pressure on the U.S. to finally implement meaningful improvements to the current food safety laws, and yes…implementing a mandatory animal identification system for the meat supply in the U.S.

JOE

The Olympics aren't the only thing coming to Brazil…

11/4/2009

Well, it looks like Chicago's loss is DIGA's gain. I wonder if Brazil's recent announcement that they will be enforcing full traceability of cattle within two years is a direct result of Rio being chosen to host the Olympic Games in 2016? No matter.

The law, which was approved by Brazil's upper house, is a new program aimed at providing a safety assurance system throughout an animal's life stages for the whole Brazilian herd, through to the final product supply chain.

All animals will need to carry proper identification, and all agents involved in the cattle supply chain will be responsible for maintaining records of cattle transactions and invoices for a period of five years. Animal transit and sanitary inspection records will also be required as prove of traceability.

This is a great example of both the economic and political importance of food safety. And with new investment being made by Destron Fearing in this country it is a good example of our future focus on Animal ID.

JOE

SARBE

11/2/2009

I have often spoken about our McMurdo commercial emergency beacon business, especially the hot selling FAST FIND. As you know, we also sell emergency radios beacons under the SARBE brand for military and defense applications. Built using the same basic technology, but with a higher level of sophistication and robustness, These applications include both combat-capable and non combat-capable versions.

Within SARBE, we do business with 40 countries for the non-combat version of our emergency beacon. On the combat side, which we can't talk so much about, we do business with over 14 countries. Sales of the SARBE product line, due to the "lumpy" nature of defense programs and contracts, varies widely. However sales have ranged in the $5M plus area per annum in the recent past and, going into 2010, could be as much as twice that, depending on currency effects.

Our main competitor, General Dynamics, has a similar product called PRC 112 that has been on the market for more than 20 years with sales totaling over 18,000. Our SARBE G2R has been on the market only since 2005 and we have sold over 6,000 units, including in countries that have traditionally purchased our competitors products. Not too shabby for the new kid in town.

Our customers are both NATO and non-NATO affiliated countries in all parts of Asia, the Middle East, South America and Europe, and include Air Force and Special Forces Operations. One unfortunate drawback about this part of our business is that we are most often not allowed to speak publicly about specific customers or contracts for national security reasons.

We will, however, be making some announcements about particular customers and contracts that we are be able to disclose in the coming weeks and months.

Since WWII, SARBE has been a clear leader in this highly specific technology product niche.

Stay tuned...

JOE

Up North

10/29/2009

As I've talked about before, the Canadian government is well ahead of the U.S. in terms of using RFID to track and trace in their meat supply.

Now, they've done us one better: they are going to be performing a cost-benefit analysis for auction level RFID.

The CCIA (Canadian Cattle Identification Agency) announced earlier this week it's Auction Market Applied Research Project to analyze RFID systems for implementation "to enable traceability at the speed of commerce to the auction market industry."

The project is backed by the federal / provincial Growing Forward ag policy framework, and will install, operate and test commercially available RFID reader technologies in eight auction markets across Canada.

The impetus of this project is the statements by the Canadian government that by the end of 2011, the Canadian cattle industry is to have full traceability (meaning animal identification, premise identification and movement tracking). The CCIA estimates that over 250 auction marts and buying stations in Canada will need tracking systems installed to achieve "full traceability."

Here's the kicker…the day after the news of this project was released, the government of Saskatchewan (one of Canada's provinces) announced a $5 million voluntary livestock traceability rebate program. Among other businesses eligible for the rebate, a participating Saskatchewan livestock auction market could get back up to 70 percent of eligible RFID costs to a maximum $100,000.

So, while we wait for the U.S. to get on board, we'll be reaping the benefits of an increasingly robust market north of the border.

JOE

E I E I O D

10/27/2009

Since Digital Angel has such a large presence in the European livestock ID industry, we have been keeping an eye on the new Electronic Identification (EID) rules for sheep that will be coming into effect in the new year.

Under these new regulations, all sheep born on or after December 31, 2009 will need to have two identifiers: one electronic (either an ear tag, a pastern tag or a bolus) and one non-electronic. This new regulation includes all EU Member States, except those with a combined sheep and goat population of less than 600,000. In all, 13 Member States will have to electronically identify their animals.

There is an exception for lambs that will be slaughtered within 12 months of birth, and you can find many more details here.

This situation creates a substantial opportunity for DIGA's Destron Fearing unit to expand its sales and market share in Europe. After restructuring our supply chain operations in Europe over the past year to address and improve gross margins, we are better positioned for this opportunity. New distribution channels and strategic partners, more flexibility in capabilities to fulfill orders and offer a higher level of customer service are the result of the focus on sales, products and customer service. We are forecasting good growth in Destron Fearing's European business next year and beyond.

It is interesting to note that these regulations were put into place in order to give the sheep industry a competitive edge, as so many other countries already have an EID program in place.

There was, of course, controversy during the discussion stages.

In the April 15, 2009 edition of The Register (a U.K. paper), John Mercer, chief livestock adviser to the National Farmers' Union, said about the EID plan, "It's a crazy rule. It's not wanted. It's not needed. And it could, potentially, devastate the sheep industry. We really need political pressure now."

Seven months later, Mr. Mercer was quoted in the October 23, 2009 edition of the Farmers Guardian (another U.K. publication) saying, ""It is important farmers consider what lies ahead now. We have had some concessions over the last six months, which have made them far more workable than originally proposed although they are still far from ideal. With the flexibilities we have got it is now up to us as farmers to use those as best we can to maximise returns."

Even the head of a national union of farmers saw the light that it not only makes sense from a public health point of view, but also from a market forces level.

The U.S. is the last one standing…for now.

JOE

H.E.L.P.

10/23/2009

Yesterday, the Health, Education, Labor and Pension (H.E.L.P.) Committee of the U.S. Senate held a hearing titled, "Keeping America's Families Safe: Reforming the Food Safety System." (If you're feeling especially civic-minded, you can watch a video of the entire hearing here)

On the panel were:

- Dr. Margaret Hamburg, Commissioner, US FDA

- Caroline Smith DeWaal, Director of Food Policy, Center for Science in the Public Interest

- Michael Roberson, Food Marketing Institute

- Daniel L. Ragan, Director, North Carolina Department of Agriculture & Consumer Services, Food and Drug Protection Division

- Thomas Stenzel, President and CEO, United Fresh Produce Association

The focus of the testimony centered on the need for recall and traceability systems in the food supply. In Ms. DeWaal's opening statement, she mentions a recent poll commissioned by The Pew Charitable Trusts titled Americans' Attitudes on Food Safety. In it, 94% of the respondents support requiring tracing systems that enable the FDA to trace food back to its source.

While the FDA does not have jurisdiction over the meat industry (that falls under the Department of Agriculture), the public sentiment about food safety will eventually call for change in that area as well. In the public view, the safety of the food supply ought to cover all food, regardless of which government bureaucracy it falls under

With the recent increased media attention, the food safety issue has been heating up. I've said it before, but I truly believe implementation of a mandatory traceability system in the U.S. is a matter of "when," not "if."

JOE

SAFE Symposium

10/21/2009

This week, our great SARBE team is attending the 47th annual SAFE Symposium in San Diego, California. The Symposium, which is sponsored by the SAFE Association, presents topics that range from desert survival to the latest aircraft passenger egress aids. The Symposium is attended by an international group of military and defense professionals who are there to share problems and solutions in the field of safety and survival.

The team from SARBE is there meeting with customers and talking about the AAPLB (Advanced Aircrew Personal Locator Beacon). Once activated, the AAPLB transmits a distress signal on 406MHz containing a unique identity and precise GPS coordinates. The signal is received and processed on the COSPAS-SARSAT network, which then alerts the relevant authorities in the country of registration.

With all the focus lately on H1N1, I wanted to try to give some equal time to the other half of our business. Our SARBE brand of military search and rescue beacons are used in nearly 40 countries worldwide. The AAPLB is just another great product in Digital Angel's portfolio and I'm glad that our team is spreading the word on this side of the pond.

JOE

T.G.I.F.

10/16/2009

Happy Friday everyone…this week just flew by. But…I wanted to do a quick viewer mail post:

- Derek emailed me asking, "I just read your blog entry (nice work slapping around that idiot Beck btw) and I saw that you say your chips are not destined for the human population. According to your previous website http://web.archive.org/web/20070813220934/http://www.digitalangelcorp.com/ "Digital Angel Corporation develops advanced RFID and GPS technologies that enable rapid and accurate identification, location tracking, and condition monitoring of high-value assets. Applications for our products include identification and monitoring of pets, humans, fish and livestock…" This concerns me because not only are humans mentioned here, but they are also classified as a high-value asset. Could you clarify this for me please?"

As Derek points out in his question, that was from our old website, and subsequently, from the "old" Digital Angel, before current management came in with different strategy and philosophies as of Jan. 1 2008. When we sold our interest in VeriChip in 2008, we also got out of the human implantation business.

At the time, and still today, we feel there is not enough current traction in the market to justify a significant portion of Digital Angel being in the human implantation business. Further, I felt we needed to have a very focused strategy and that the animal identification market has the most upside potential in the short and mid term. Anyone who saw Larry King Live this week will see that the implementation of the National Animal Identification System (NAIS), or another iteration of it, may very well be inevitable.

Ok, I'm getting off my soapbox (for now). Have a great weekend everyone and talk with you next week.

JOE

An open letter to Glenn Beck

10/12/2009

Dear Mr. Beck,

Can I call you Glenn? Thanks. This past Friday we were surprised to get a phone call from someone at your program looking for information on Digital Angel and the swine flu. Since Digital Angel has no products associated with H1N1, we pretty much figured you were looking for information on VeriChip.

We spoke to your producer at length about the relationship between Digital Angel and VeriChip (there isn't one anymore!), as well as the products and technology that we at Digital Angel produce. So we were somewhat surprised to watch your show and hear you make several mistakes.

First, you stated that VeriChip "used to be part of Digital Angel" and that "the former partner of Digital Angel is called VeriChip."

Well, not exactly. VeriChip was once part of a company called Applied Digital Solutions. In February of 2007, a minority stake in VeriChip was IPO’d by Applied Digital. In January of 2008, Applied Digital acquired Digital Angel, and the combined company, re-named Digital Angel, sold all remaining interests in VeriChip the same year.

Secondly, you said that the RFID chips contain medical information. Again…not quite. There is no information stored on the chip except an identifying number that corresponds to an electronic record stored in a secure server. We at Digital Angel manufacture RFID chips and tags for the animal industry - everything from wildlife to cattle to companion pets that only have that identification. VeriChip's products are for human implantation.

There is no big mystery, intrigue or conspiracy theory that can possibly be associated with the products manufactured by Digital Angel. We manufacture RFID chips that veterinarians and animal shelters implant and use in pets so that they can be safely returned to their owner. This is accomplished by scanning the animal at very close range (2-3 inches), and cross referencing the number read by the scanner to the animal's owner's name and address, which they voluntarily provided for a data base used for just this purpose. Our RFID chips are also put into wild salmon to help assure the long-term management of the species in the wild. And our RFID and visual ID tags that are put onto swine and cattle help to ensure that traceability of food raw materials is possible in case of a breakout in an animal borne disease that could affect our safe food supply. Period, full stop.

Lastly, you stated that "misinformation, half-truths, that is the problem in our country. We don't tell each other the truth. We tell each other half-truths. And then it makes the problem bigger."

Exactly, Glenn.

P.S. Our RFID chips cannot be tracked by satellite…but guess what? Your cell phone can and is. I am sure you know that an individual's movements and location can be tracked, recorded and (ahem) given to the government by telecom service providers. So if you and your viewers are worried about being tracked, I suggest you stop using, and dispose of, your cell phones. And maybe your credit cards which can also be used to track activity….Stick that in your aluminum foil hat, Glenn.

JOE

Blogs are ablaze

10/09/2009

It seems the front-page New York Times article this past Sunday has sparked lots of follow-up articles and chatter on blogs about the question of food safety. This increased attention has mobilized victims of food borne illness to head to Washington to lobby members of congress for stronger food safety laws.

As I mentioned in my last blog post, there are several pending pieces of legislation related to food safety and securing the food supply chain. Interestingly, Congresswoman Rosa DeLauro (D-CT), in response to the article, wrote a letter to Agriculture Secretary Tom Vilsack demanding accountability from large slaughterhouses. She wrote, "I am writing to strongly urge the [USDA] and Food Safety and Inspection Service [FSIS] to investigate the disturbing allegations that were revealed in Sunday's New York Times article about the beef inspection process."

Why do I say "interestingly"? Because it was Ms. DeLauro who zeroed out funding for NAIS earlier this year. Never underestimate what a front page NY Times story can do for an issue (or for someone running for re-election).

But…back to the blogs. The blog obamafoodorama.com wrote about a group of food poisoning victims and their survivors visiting members of Congress, urging them to pass meaningful food safety legislation. They dropped off t-shirts and fact sheets about the issue, created by Bill Marler, a representative of the victim profiled in the NY Times article, and in the Washington Post article (see below). Attorney Marler is campaigning to be put out of business. Yep, an attorney looking to be put out of work. Amazing.

The Federal Eye blog of the Washington Post wrote about Secretary Vilsack's response to the NY Times article, in which he said, "The story we learned about over the weekend is unacceptable and tragic. We all know we can and should do more to protect the safety of the American people and the story in this weekend's paper will continue to spur our efforts to reduce the incidence of E. coli O157:H7."

Foodpolitics.com blogger Marion Nestle wrote a post titled "The high human cost of unsafe food" in which she also mentions a recent article in the Washington Post about another tragic incidence of food poisoning.

Public pressure on legislators to pass meaningful food safety legislation is reaching a peak. I am confident that our elected officials will realize the critical importance of passing this legislation.

JOE

Monday morning politics

10/07/2009

The continuing resolution signed by President Barack Obama last Wednesday contains $5.3 million for the National Animal Identification System (NAIS). While anti-NAIS groups are spinning this as a defeat (because the original amount requested was higher than $5.3 million), I put this decisively in the "win column."

You may recall that the House of Representatives zeroed out funding for NAIS earlier this year. At that time, opponents of NAIS were hailing this as the end of the program. It seems to have been brought back to life.

There are also many food safety bills pending in Congress, including:

- H.R. 759: Food and Drug Administration Globalization Act of 2009

- H.R. 875: Establishes in the Department of Health and Human Services the Food Safety Administration

- H.R. 2749: Food Safety Enhancement Act of 2009

- H.R. 2800: Imported Food Safety Improvement Act of 2009

- H.R. 815: calls for the amendment of the Federal Meat Inspection Act, the Poultry Products Inspection Act, and the Federal Food, Drug and Cosmetic Act to provide for improved public health and food safety through enhanced enforcement

- H.R. 3076: to establish a comprehensive process to inform American consumers about food recalls

- S. 425: to establish a traceability system for all stages of manufacturing, processing, packaging and distribution of food

- S. 510: amends the Federal Food, Drug, and Cosmetic Act (FFDCA) to expand the authority of the Secretary of Health and Human Services to regulate food, including by authorizing the Secretary to suspend the registration of a food facility.

Additionally, there was an article in the New York Times Saturday about E.Coli and beef inspection.

The issue of food safety, including securing the food supply chain, is currently in the forefront of the public mind. Every food-borne illness outbreak heightens the public pressure on politicians to make meaningful change to the current system. At some point, the system needs to change from reactive to proactive. And looking at the pending bills in Congress, this change might come sooner rather than later.

JOE

NAIS ProTECTS

09/29/2009

Caution: This blog post contains lots of acronyms.

First, a quick note about NAIS (National Animal Identification System). The AVMA's (American Veterinary Medical Association) CEO Dr. Ron DeHaven recently posted a video on their AVMAtv website supporting a mandatory NAIS. You can view his video HERE.

Secondly, McMurdo has joined an alliance of mobile satellite industry companies and emergency response communities to form the ProTECTS (Promotion of Two-way Emergency Communication and Tracking Systems) Alliance. This alliance, whose primary goal is to foster the rapid and orderly adoption of portable, two-way satellite-based location, tracking and messaging technologies, will provide a forum for addressing issues affecting the suppliers and users of these vital safety devices. The addition of a two-way communication function will help mitigate any false alerts or inadvertent activations.

JOE

Shareholder Meeting

09/25/2009

Happy Friday everyone! We just finished our Shareholder Meeting here in Minneapolis, where we talked about the progress of Digital Angel over the past six quarters. We had a good turnout with a number of shareholders turning up and making positive comments and asking great questions about the progress we have made and our outlook on the future of the business.

I've posted my PowerPoint presentation on this site if you would like to take a look.

I would like to thank everyone who attended the meeting, as well as everyone who took the time to vote online. The entire management team and myself appreciate your continued support of Digital Angel.

Have a great weekend,

JOE

The end is near…

09/24/2009

…for bar code ear tags in Canada. The Canadian Cattle Identification Agency (CCIA) recently issued a reminder that as of January 1, 2010, all cattle must be tagged with RFID tags.

Only RFID tags have been issued for cattle beginning September 1, 2006, but producers were allowed to phase out bar code tags for mature breeding stock and bulls. This phase out period ends December 31, 2009.

According to Steve Primrose, chair for CCIA and owner of Primrose Livestock Ltd., "It is important that we implement RFID technology across the board, as this will enable us to move forward on traceability. Of the three pillars of traceability, we have achieved animal identification. Once we have completed the second pillar - premises identification - the industry will require RFID technology to support the reporting of animal movement."

JOE

Thunder down under

09/22/2009

A recent article in the Weekly Times of Australia talked about the surge in microchip identification of horses. According to the article, horse owners believe "chipping" is the only sure way to identify horses, particularly when many breeds are so homogenous it would be hard to tell one from another.

Additionally, any new horse or pony registered with the Equestrian Federation now must be chipped.

As I've talked about before, Australia and New Zealand have been trailblazers in the RFID identification of livestock, so it is no surprise that the adaptation to the equine world has been a fast one.

JOE

Lucky 10,000

09/17/2009

The U.K. Maritime and Coastguard Agency last week announced it had registered the 10,000th new beacon for 2009, bringing the overall registered to just under 38,000. In comparison, by the same time in 2008, they had registered only 3,390 new beacons.

The reason for such an increase in the number of Emergency Position Indicating Radio Beacons (EPIRBs) and Personal Locator Beacons (PLBs) is the switch from the 121.5 MHz distress alert system to the 406 MHz, as well as a heightened public awareness of the importance these safety devices.

Steve Huxley, Search and Rescue Communications Manager at Falmouth (U.K.) Coastguard stated, "A 406 MHz beacon is the simplest means of providing a way to alert Rescue Authorities ashore. The proper registration of a beacon could make the difference between success and failure of a Search and Rescue Mission."

And the lucky 10,000th beacon? A McMurdo FAST FIND , of course!

JOE

What do chicken feet and tires have in common?

09/15/2009

More than you would think. The Chinese government has taken the first steps towards imposing tariffs on American exports of automotive products and chicken meat in retaliation against the decision by the U.S. to levy tariffs on tires from China.

China's commerce ministry announced it would be investigating automotive products and chicken meat products (mostly feet and other parts that are eaten in China but not other parts of the world) to determine if they are being "dumped" below cost. If China finds evidence of such, it would allow them to impose tariffs on these imports.

How did this all begin, you ask? Some point to the outbreak of bird flu in 2004. Back then, both China and the U.S. imposed bans on imports of each others' poultry. China lifted the ban a few months later, but the U.S. did not…much to the consternation of China.

According to data from Global Trade Information Services in Columbia, South Carolina (U.S.), in the first seven months of 2009, the U.S. exported about $376 million in chicken meat to China.

"This spat about tires and chickens could turn ugly very quickly," said Eswar Prasad, a former China division chief at the International Monetary Fund.

"American business in China should be prepared for what might be a zealous retaliatory response from China, which might impact a broad range of U.S. commercial interests," said James Zimmerman, a partner in the law firm of Squire Sanders and Dempsey in Beijing. Considering China imports 80% of it's poultry, this could be potentially disastrous to poultry farmers worldwide.

What this situation clearly portrays is that the world, indeed, is flat. The G20 Summit begins next week, and this will surely be at the top of the agenda.

Stay tuned…

JOE

Attention Shareholders

09/10/2009

This is your friendly reminder to exercise your right to vote! You should have received a notice in the mail with instructions on how to vote on-line. If you have not, or have misplaced it, please let me know. You can vote on-line up until 11:59 p.m. on September 24, 2009 (the day before the shareholder meeting), or in person at the meeting on the 25th.

Thanks again to all our shareholders for their continued support. The management team truly appreciates it.

JOE

Grass roots

09/04/2009

A UK man has started a campaign to legalize the use of PLBs on land after a life-threatening event he and a friend experienced. Currently in the UK, the use of PLBs, such as FAST FIND , is relegated to water rescues and is under the authority of the Maritime Coastguard Agency. The UK government is examining the infrastructure needed to support land-based responses to PLB signals.

The man in question, David Currie of Skipton (UK), was hiking England's highest mountain, Scafell Pike, with a friend when his friend suddenly had a heart attack. David was unable to get a mobile signal for his phone at the site of the incident, so his only other choice was to leave his friend and climb higher until he got a signal.

Thankfully, he did get a signal, and thanks to the prompt response from emergency services, his friend survived.

The event, however, got David thinking about what would have happened if he had been alone and had suffered a heart attack or been injured. He would surely not have been able to climb higher in order to get a mobile phone signal.

David is now a vocal supporter for the increased use of PLBs by casual hikers and adventure-seekers alike. Thank you, David, for your support and advocacy.

JOE

Meet Chloe

09/01/2009

There was an article last week on the Veterinary Information Network about a new company called Chloe Standard that is trying to streamline the process of reuniting stray pets with their owners. Based in Silicon Valley, California (where else), the founders of the company saw potential gaps in the pet chip / identification process.

What Chloe Standard points out is that chips manufactured in the U.S. are manufactured using chips that operate in different frequencies. Some are 125-kHz, some 134.3-kHz, some are encrypted and some are not. This makes it difficult to get an accurate read from even "universal" scanners. While an international standard for chips exists, and is used in most countries, it is not followed in the U.S.

The ISO (International Organization for Standardization) established guidelines in 1996 for the use of 134.2-kHz chips. These guidelines have been accepted by Asia, Australia, Canada and Europe, but not by the U.S. Additionally, several leading pet identification companies in the U.S. have staunchly resisted adherence to this standard.

However, Schering-Plough, whose Home Again product is supplied by Destron Fearing (a subsidiary of Digital Angel), has been advocating for support of the ISO guidelines, and beginning in July 2008, began selling ISO-compliant 134.2-kHz chips. In addition, the Home Again scanner is the most accurate of all scanners in reading chips of all frequency ranges.

So what does this mean for DIGA? It is evident that the U.S. lags behind most other countries when it comes to implementing global standards, whether it is for companion animals, or for the National Animal Identification System. It is only a matter of time before the U.S. must cease thinking it is an island unto itself and begin to implement these international standards. Digital Angel is already manufacturing and selling these standard-compliant products, giving us a definitive edge in the market.

P.S.: Presentations from the ID EXPO last week are now available on line. Check them out here.

JOE

The Friday round-up

08/28/2009

The National Conference on Animal Identification (ID INFO) concluded yesterday in Kansas City, Missouri. There were several high-level officials from both government and private sectors that spoke on the need for traceability in the food system.

Minnesota Agriculture Commissioner Gene Hugoson talked about the change from local to international, noting that food used to be grown, processed and consumed locally, while today food crosses state, national and international borders.

Dr. William Hartmann, Minnesota state veterinarian and executive director of the Minnesota Board of Animal Health, said animal identification "is not a question of mandatory or voluntary. It's necessary." Hartmann relayed a story about an incident of bovine tuberculosis in his state last year that was quickly traced to northwestern Minnesota. A study by economists at the University of Minnesota showed that the cost of this outbreak totaled $3.25 million, compared to the cost of $15.85 million if the entire state had been quarantined.

Also in attendance was Dr. Douglas Meckes, director of food, agriculture and veterinary defense at the U.S. Department of Homeland Security. Meckes stated that animal identification is part of the nation's critical infrastructure, noting that a new paradigm of "prevention, protection, preparedness, response and recovery" is vitally important.

The number and caliber of attendees and speakers at ID INFO demonstrates the importance of animal identification and food traceability. While most speakers pointed to the issue of safety, the underlying current was money. This is big business, and the potential loss to the bottom line due to disease outbreaks is huge.

And this does not take into account the markets with the most upside potential: South America and Asia. South America's herd sizes are much larger than in the US, and they export a significant percentage to European markets, which require strict traceability. Additionally, the swine business in China (which has an estimated 475 million pigs) has yet to implement a cohesive traceability system.

The global market for animal identification has significant growth potential, and be assured that Digital Angel is poised to take advantage of it.

JOE

Shareholder Meeting

08/26/2009

Digital Angel is going green. For our annual shareholders meeting (being held this year on September 25, 2009), we are incorporating the ability for shareholders to vote on-line. This will cut down on the amount of paper produced for mailings, as well as make it more user-friendly for voters.

Notification cards were recently mailed with information on how to register to vote, so keep an eye out.

On a side note, I have to say that DIGA's shareholders are some of the most involved and dedicated I have ever worked for. Our management team sincerely appreciates the support and we hope that everyone takes the time to vote.

JOE

It's an honor just to be nominated…

08/24/2009

…but soooo much better to win! FAST FIND has won "Product of the Year" at West Marine's annual vendor show. The show, called the VIV (Very Important Vendor) Awards, celebrates vendors who continually seek to satisfy their customers through innovation, consistent excellence in product quality, sales growth, and helpfulness of sales support staff.

FAST FIND is quickly becoming the iPhone of its market; the product to beat. At the risk of sounding like a broken record, I am very proud of our product, sales and marketing team at McMurdo UK for doing such a fantastic job. Right out of the gate, we were beating all sales forecasts for FAST FIND , and continue to surpass expectations.

Great job team!

JOE

In the news…

08/21/2009

It's been a busy news cycle for animal ID stories. Below are links to some of the more interesting articles:

The Economic Times of India published an article on an insurance company requiring the implantation of RFID tags in cattle in an attempt to decrease the number of fraudulent claims. The company, Iffco Tokio, is making this change to their cattle insurance policies to make it more difficult for farmers to make a claim for the death of uninsured cattle.

RFID Journal has a story on Israel's largest pig farm using an RFID system to track the health and productivity of its sows as they produce piglets. The system, which tracks the amount of feed the pigs eat, their weight, pregnancies and the number of piglets they produce, is expected to increase litter size and frequency, while also reducing the piglets' mortality rate.

The American Veterinary Medical Association published an article on NAIS. The AVMA is in support of a mandatory ID system, and this article discusses the recent public comment sessions held by the USDA.

And one footnote: Destron Fearing, DIGA's subsidiary, will be attending the ID-INFO Expo next week in Kansas City, Missouri. This conference will feature the latest information industry and government programs regarding traceability, as well as a trade show focused on identification and information systems technology.

I've always believed that there would be a slow but steady momentum towards the use of RFID (electronic identification) versus VID (visual identification) for animal ID applications. I've seen it before in other industries, and as this occurs in our industry, Destron Fearing should continue to play it's role as both the industry leader and innovator in the application of electronics and radio frequency technology for animal ID purposes.

Have a great weekend everyone!

JOE

Animal pHarm

08/19/2009

The animal health industry is getting a lot of airtime with the recent announcement of the merger of Merck and Schering-Plough. Both Merck and Schering-Plough have animal health units: Merck's joint venture with sanofi-aventis called Merial, and Schering-Plough's Intervet. To avoid any anti-trust issues, one of these animal health units would have to be spun off.

Enter a phrase we haven't heard since the market tanked: bidding war. Yes, that's right. Rumored to be in the bidding were Eli Lilly, Novartis and Boehringer Ingelheim. Bayer offered $8.5 billion for Intervet.

In the end, Merck decided to keep Intervet and sell it's 50% stake in Merial to sanofi-aventis for $4 billion in cash; a price that valued Merial at three times sales and 10 times earnings.

David Moskowitz, an analyst with Caris & Co. recently told Bloomberg, "Animal health is a much steadier business than the human pharmaceuticals business these days. Animal products tend to have very nice margins, there's much lower threat of generic competition, and there's lots of brand loyalty."

I like the sound of that.

JOE

For your reading pleasure

08/17/2009

Happy Monday everyone!

Our 2008 Annual Report is now available on our website. While the information contained in it is not the most current, it does give a good recap of the accomplishments brought about by the new management team in 2008, showing just how far we have come in such a short time.

I'm on the road again this week, but will be writing a post about developments in the animal health industry. Look for it around Wednesday.

JOE

Results redux

08/12/2009

So, how did you like my video blog? I've been told I'm a natural, but since that was my mom, I'll have to take it with a grain of salt.

Joe joined Digital Angel as President and CEO in January 2008. Prior to that, he was President and CEO of ASSA ABLOY's Global Technologies Division, responsible for $800m in annual revenues, EBITDA of $120m and 3,000 employees around the globe. ASSA ABLOY is a publicly held global manufacturer in the security industry, based in Stockholm, Sweden.

An RFID-industry veteran, Joe is a past president of the Security Industry Association and graduated magna cum laude from the University of Connecticut with a BS degree in Finance.

Have a question for me?
Email me: joe@digitalangel.com