Item 8.01 Other Events

As previously disclosed, under the terms of the Stock Purchase Agreement related to the sale of 100% of the outstanding capital stock of Destron Fearing Corporation between Allflex USA, Inc. and Digital Angel Corporation (the "Company"), $2.5 million of the purchase price payable to the Company was placed in an escrow fund, from which $59,275.33 was previously released to Allflex to cover certain agreed expenses, leaving a current balance of approximately $2.44 million remaining in escrow. The escrow agreement provides for a January 22, 2013 release of funds. On January 17, 2013, the Company received a formal updated notice of a claim under the purchase agreement from Allflex alleging that certain implantable chips supplied to an overseas customer were defective and stating that Allflex's claim against the funds held in escrow is $2.453 million. The Company believes that Allflex's claims are not recoverable from the escrow pursuant to the terms of the purchase agreement and therefore intends to vigorously dispute this claim.

---