FILED PURSUANT TO RULE 424(b)(1) REGISTRATION 333-116608
PROSPECTUS
ALANCO TECHNOLOGIES, INC.
4,570,258 Shares of Class A Common Stock
THE SHARES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGE 5 FOR INFORMATION THAT YOU SHOULD CONSIDER.
This prospectus is being used in connection with offerings from time to time by
some of our stockholders. We issued the shares offered in this prospectus to the
selling stockholders in connection with private placement financings completed
in 2003, the establishment and extension of a line of credit agreement, and the
grant of common shares in exchange for cancellation of put options. We expect
that sales of shares of Class A Common Stock under this prospectus will be made
o in broker's transactions;
o in transactions directly with market makers; or
o in privately negotiated sales or otherwise.
The selling stockholders will determine when they will sell their shares, and in
all cases they will sell their shares at the current market price or at
negotiated prices at the time of the sale. We will pay the expenses incurred to
register the shares for resale, but the selling stockholders will pay any
underwriting discounts, concessions, or brokerage commissions associated with
the sale of their shares of Class A Common Stock. The selling stockholders and
the brokers and dealers that they utilize may be deemed to be "underwriters"
within the meaning of the securities laws, and any commissions received and any
profits realized by them on the sale of shares may be considered to be
underwriting compensation. See "Plan of Distribution."
The selling stockholders beneficially own all 4,570,258 shares of Class A Common
Stock. We will not receive any part of the proceeds from the sale of the shares.
The registration of the shares on behalf of the selling stockholders, however,
does not necessarily mean that any of the selling stockholders will offer or
sell their shares under this registration statement, or at any time in the near
future.
Our Class A Common Stock is listed on the NASDAQ SmallCap Market, or NASDAQ,
under the symbol "ALAN." On June 9, 2004, the last sale price of our Class A
Common Stock on NASDAQ was $1.23 per share.
You should read this prospectus and any prospectus supplements carefully before
deciding to invest.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is August 2, 2004.
TABLE OF CONTENTS
Page
Summary 3
Risk Factors 3
Safe Harbor Statements Under the Private Securities
Litigation Reform Act of 1995 7
Issuance of Securities to Selling Stockholders 7
Use of Proceeds 8
Plan of Distribution 8
Selling Stockholders 10
Description of Securities 15
Legal Matters 19
Experts 19
Where You Can Find More Information 19
Information Incorporated by Reference 19
SUMMARY
The following summary does not contain all of the information that may
be important to purchasers of our Class A Common Stock. Prospective purchasers
of Class A Common Stock should carefully review the detailed information and
financial statements, including notes thereto, appearing elsewhere in or
incorporated by reference into this prospectus.
The Company
Our company, Alanco Technologies, Inc., together with our subsidiaries, is a
provider of advanced information technology solutions. Our operations at the end
of fiscal 2003 (June 30, 2003) were diversified into two reporting business
segments including: (i) design, production, marketing and distribution of RFID
tracking technology, and (ii) manufacturing, marketing and distribution of data
storage products.
Effective June, 2002, we acquired radio frequency identification (RFID) tracking
technology through the acquisition of the operations of Technology Systems
International, Inc., a Nevada corporation. We continue to participate in the
data storage market through two wholly-owned subsidiaries: Arraid, Inc., a
manufacturer of proprietary storage products to upgrade older "legacy" computer
systems; and Excel/Meridian Data, Inc., a manufacturer of network attached
storage systems for mid-range organizations.
Our principal executive offices are located at 15575 North 83rd Way, Suite 3,
Scottsdale, AZ 85260, and our telephone number is (480) 607-1010.
The Offering
Securities offered by the
Selling Shareholders........... 4,570,258 shares of Class A Common Stock
Class A Common Stock
currently outstanding.......... 22,966,399 shares (1)
Use of proceeds.................. We will not receive any of the proceeds of
sales of Class A Common Stock by the Selling
Shareholders. We may, however, receive
proceeds from the exercise of certain rights
held by some of the Selling Shareholders
under stock options or warrants to
purchase Class A Common Stock from us if
that is the origin of shares sold by those
Selling Shareholders.
Risk Factors..................... Prospective purchasers should carefully
consider the factors discussed under "Risk
Factors."
NASDAQ symbol.................... ALAN
(1) Excludes (i) 8,459,000 shares of Class A Common Stock reserved for
issuance upon exercise of stock options outstanding as of June 9, 2004;
(ii) 423,000 shares reserved for issuance upon the exercise of stock
options that may be granted in the future under our stock option plans;
(iii) 6,420,836 shares reserved for issuance upon exercise of
outstanding warrants; (iv) 7,430,508 shares reserved for issuance upon
conversion of the Series A Convertible Preferred Stock; and (v) 781,807
shares reserved for issuance upon conversion of the Series B
Convertible Preferred Stock.
RISK FACTORS
An investment in Alanco involves a high degree of risk. In addition to the other
information included in this prospectus, you should carefully consider the
following risk factors in determining whether or not to purchase the shares of
Class A Common Stock offered under this prospectus. These matters should be
considered in conjunction with the other information included or incorporated by
reference in this prospectus. This prospectus contains statements which
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this prospectus and include statements regarding the intent, belief or
current expectations of our management, directors or officers primarily with
respect to our future operating performance. Prospective purchasers of our
securities are cautioned that these forward-looking statements are not
guarantees of future performance and involve risks and uncertainties. Actual
results may differ materially from those in the forward-looking statements as a
result of various factors. The accompanying information contained in this
prospectus, including the information set out below, identifies important
factors that could cause such differences. See "Safe Harbor Statements Under the
Private Securities Litigation Reform Act of 1995."
TSI acquisition. We acquired the business and assets of Technology Systems
International, Inc. ("TSI") effective June 2002, creating the Company's RFID
Technology segment. The following risks are relevant with respect to the
acquisition:
We are projecting significant revenue growth from sales of the TSI
PRISM tracking system in the corrections market. We do not have
experience in the corrections market, and there is no certainty that we
will be able to capture the required market share for TSI to achieve
its anticipated financial success. The TSI PRISM system is currently
being marketed to the corrections market as an inmate management tool
and officer safety system. Although there are other officer monitoring
systems being marketed to the corrections industry, the TSI PRISM
system is currently the only system, to the best of our knowledge, that
is able to continuously (every two seconds) monitor the location of
both officers and prisoners, both inside and outside of buildings.
There is no certainty that the corrections industry will adopt this
technology broadly enough for us to reach our marketing projections.
We purchase sub-components for the TSI PRISM system technology from a
limited number of subcontractors that have the required technology to
produce the sub-components in the quantities required. We cannot be
assured that required sub-components will be available in the
quantities and at the prices and terms anticipated.
Our TSI PRISM technology is reliant on key personnel who developed and
understand the technology. The loss of the services of those key
technology personnel could have an adverse effect on the business,
operating results and financial condition of our company.
See Legal Matters for a discussion of a legal suit filed in connection
with our acquisition of the operations of TSI.
We are subject to the budget constraints of the governmental agencies purchasing
TSI PRISM systems, which could result in a significant decrease in our
anticipated revenues. We cannot assure you that such governmental agencies will
have the necessary revenue to purchase the systems even though they may want to
do so. The funds available to governmental agencies are subject to various
economic and political influences. Even though the TSI PRISM system may be
recommended for purchase by corrections facility managers, the governmental
agency responsible for the facility may not have sufficient budget resources to
purchase the system. As of the date of this filing, the Company has no current
TSI PRISM sales backlog as defined by unfulfilled signed contracts.
General economic conditions. Recent unfavorable economic conditions and reduced
information technology spending by our customers have adversely affected our
business in recent quarters. If the economic conditions worsen, or continue at
their present level indefinitely, we may experience a material adverse impact on
our business, operating results, and financial condition. Our data storage
product division sells systems designed to upgrade and enhance older Legacy
computer systems as well as network attached storage systems to mid-sized
network users. The recent economic conditions have resulted in reduced spending
by our customers for technology in general, including the data storage systems
sold by us. We have reduced overhead to assist in offsetting our reduced sales
volume; however, no assurance can be given that the current economic conditions
will not worsen further exacerbating the sales slowdown. The TSI PRISM system
sales are less dependent upon current economic conditions as most of the system
purchasers are governmental agencies. However, the current economic conditions
do have an impact on governmental budgets, thereby potentially impacting our
sales. See the previous section discussing the budget constraints of our
governmental purchasers.
Acts of domestic terrorism and war have impacted general economic conditions and
may impact the industry and our ability to operate profitably. On September 11,
2001, acts of terrorism occurred in New York City and Washington, D.C. On
October 7, 2001, the United States launched military attacks on Afghanistan, and
in 2003 launched military attacks on Iraq with ongoing operations in both areas.
As a result of those terrorist acts and acts of war, there has been a disruption
in general economic activity. The demand for our data storage products and
services have declined as layoffs in industries affect the economy as a whole.
There may be other consequences resulting from those acts of terrorism, and any
others which may occur in the future, including civil disturbance, war, riot,
epidemics, public demonstration, explosion, freight embargoes, governmental
action, governmental delay, restraint or inaction, quarantine restrictions,
unavailability of capital, equipment, personnel, which we may not be able to
anticipate. These terrorist acts and acts of war may continue to cause a slowing
of the economy, and in turn, reduce the demand of our data storage products and
services, which would harm our ability to make a profit. Also, as federal
dollars are redirected to military efforts, they may not be available for the
purchase of new federal prison monitoring systems. We are unable to predict the
long-term impact, if any, of these incidents or of any acts of war or terrorism
in the United States or worldwide on the U.S. economy, on us or on the price of
our stock.
Future capital and liquidity needs; Uncertainty of proceeds and additional
financing. The Company incurred significant losses during fiscal year 2003 and
has experienced significant losses in prior years. Although management cannot
assure that future operations will be profitable or that additional debt and/or
equity capital will be raised, we believe that, based on our fiscal 2004
operating plan, cash flow will be adequate to meet our anticipated future
requirements for working capital expenditures, scheduled lease payments and
scheduled payments of interest on our indebtedness. We will need to materially
reduce expenses, or raise additional funds through public or private debt or
equity financing, or both, if the revenue and cash flow elements of our 2004
operating plan are not met. If additional funds are raised through the issuance
of equity securities, the percentage ownership of the then current shareholders
of the company will be reduced, and such equity securities may have rights,
preferences or privileges senior to those of the holders of Class A Common
Stock. If we need to seek additional financing to meet working capital
requirements, there can be no assurance that additional financing will be
available on terms acceptable to us, or at all. If adequate funds are not
available or are not available on acceptable terms, our business, operating
results, financial condition and ability to continue operations will be
materially adversely affected.
Recent losses; Fluctuations in operating results. We had a consolidated loss
from operations of $2,601,800 for the fiscal year ending June 30, 2003, and a
consolidated loss from operations of $6,011,200 for the fiscal year ending June
30, 2002. In addition, our quarterly operating results have fluctuated
significantly in the past and could fluctuate significantly in the future. We
anticipate that our future financial performance will be significantly impacted
by our acquisition of the TSI RFID technology effective June 1, 2002. As a
result, our past quarterly operating results should not be used to predict
future performance.
Intellectual property. Our primary business strategy is to develop the TSI
business opportunity. The long-term success of this strategy depends in part
upon the TSI intellectual property acquired. Third parties may hold United
States or foreign patents which may be asserted in the future against the TSI
technology, and there is no assurance that any license that might be required
under such patents could be obtained on commercially reasonable terms, or
otherwise. Our competitors may also independently develop technologies that are
substantially equivalent or superior to our technology. In addition, the laws of
some foreign countries do not protect our proprietary rights to the same extent
as the laws of the United States.
Despite our efforts to safeguard and maintain our proprietary rights both in the
United States and abroad, there can be no assurance that we will be successful
in doing so or that the steps taken by us in this regard will be adequate to
deter infringement, misuse, misappropriation or independent third-party
development of our technology or intellectual property rights or to prevent an
unauthorized third party from copying or otherwise obtaining and using our
products or technology. Litigation may also become necessary to defend or
enforce our proprietary rights. Any of such events could have a material adverse
effect on our business, operating results and financial condition.
Dependence on key personnel. Our performance is substantially dependent on the
services and performance of our executive officers and key employees. The loss
of the services of any of our executive officers or key employees could have a
material adverse effect on our business, operating results and financial
condition. Our future success will depend on our ability to attract, integrate,
motivate and retain qualified technical, sales, operations and managerial
personnel. None of our executive officers are bound by an employment agreement
or covered by key-man insurance.
Competition. Although early in the market development cycle, the TSI PRISM
business/technology has no current, identified direct competitors. However, it
can be expected that if, and to the extent that, the demand for the TSI
technology increases, the number of competitors will likely increase. Increasing
competition could adversely affect the amount of new business we are able to
attract, the rates we are able to charge for our services and/or products, or
both.
Relative to our data storage businesses, we operate in a very competitive
environment, competing against numerous other companies, many of whom have
greater financial resources and market position than we do.
Possible exercise and issuance of options and warrants may dilute interest of
shareholders. As of the date of this prospectus, options to purchase 8,459,000
shares of our Class A Common Stock were outstanding, and the weighted average
exercise price of such options was $0.86. Additionally, warrants to purchase
6,420,836 shares of our Class A Common Stock were outstanding, and the weighted
average exercise price of such warrants was $1.01. To the extent that any stock
options currently outstanding or granted in the future are exercised, dilution
to the interests of our shareholders may occur.
NASDAQ Listing. Our Class A Common Stock currently trades on the NASDAQ SmallCap
Market under the symbol "ALAN." However, there can be no assurance that an
active trading market in our Class A Common Stock will be available at any
particular future time.
On January 16, 2004, we received notification from NASDAQ that the bid price of
the Company's Common Stock had closed below the minimum $1.00 per share
requirement for the previous 30 consecutive business days. NASDAQ gave the
Company until July 14, 2004, to regain compliance with the minimum closing bid
price of $1.00. However, on May 19, 2004, we received notification from NASDAQ
that our stock had demonstrated a closing bid price of at least $1.00 per share
for at least ten consecutive trading days and was therefore determined to have
regained compliance with all of NASDAQ's listing requirements.
While realizing the importance of our NASDAQ listing and the effect its loss
could have on the price and liquidity of our Common Stock, we received approval
from our Shareholders at our Annual Meeting of Shareholders held on December 22,
2003, for a proposal authorizing a reverse split to be effected only if
necessary to maintain our NASDAQ listing. This authorization, which remains in
effect until December 31, 2006, will allow our Board of Directors to effect up
to a one for ten reverse split if it becomes necessary to maintain our NASDAQ
listing.
Payment of dividends. We do not anticipate that we will pay cash dividends on
our Class A Common Stock in the foreseeable future. The payment of dividends by
us will depend on our earnings, financial condition, and such other factors, as
our Board of Directors may consider relevant. We currently plan to retain
earnings to provide for the development of our business.
Our articles of incorporation and Arizona law may have the effect of making it
more expensive or more difficult for a third party to acquire, or to acquire
control, of us. Our articles of incorporation make it possible for our Board of
Directors to issue preferred stock with voting or other rights that could impede
the success of any attempt to change control of us. Arizona law prohibits a
publicly held Arizona corporation from engaging in certain business combinations
with certain persons, who acquire our securities with the intent of engaging in
a business combination, unless the proposed transaction is approved in a
prescribed manner. This provision has the effect of discouraging transactions
not approved by our Board of Directors as required by the statute which may
discourage third parties from attempting to acquire us or to acquire control of
us even if the attempt would result in a premium over market price for the
shares of common stock held by our stockholders.
Certain provisions in our shareholder rights plan may discourage a takeover
attempt. We have implemented a shareholder rights plan which could make an
unsolicited takeover of our company more difficult. As a result, shareholders
holding a controlling block of shares may be deprived of the opportunity to sell
their shares to potential acquirers at a premium over prevailing market prices.
This potential inability to obtain a premium could reduce the market price of
our common stock.
The market price of our Class A Common Stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control. These
factors include:
o progress of our products through development and marketing;
o announcements of technological innovations or new products by us or
our competitors;
o government regulatory action affecting our products or competitors'
products in both the United States and foreign countries;
o developments or disputes concerning patent or proprietary rights;
o actual or anticipated fluctuations in our operating results;
o the loss of key management or technical personnel;
o the loss of major customers or suppliers;
o the outcome of any future litigation;
o changes in our financial estimates by securities analysts;
o general market conditions for emerging growth and technology
companies;
o broad market fluctuations;
o recovery from natural disasters; and
o economic conditions in the United States or abroad.
Future sales of our Class A Common Stock in the public market could adversely
affect our stock price and our ability to raise funds in new equity offerings.
We cannot predict the effect, if any, that future sales of shares of our common
stock or the availability for future sale of shares of our common stock or
securities convertible into or exercisable for our common stock will have on the
market price of our common stock prevailing from time to time. For example, the
availability of the shares covered by this S-3 registration statement for sale,
or of common stock by our existing stockholders under Rule 144, or the
perception that such sales could occur, could adversely affect prevailing market
prices for our common stock and could materially impair our future ability to
raise capital through an offering of equity securities.
SAFE HARBOR STATEMENTS UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This prospectus includes "forward-looking statements" as that term is defined in
the Private Securities Litigation Reform Act of 1995. The safe harbor provisions
of the Securities Exchange Act of 1934 and the Securities Act of 1933 apply to
forward-looking statements made by us. These statements can be identified by the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"should" or "anticipates" or the negatives or variations of these terms, and
other comparable terminology. In addition, any statements discussing strategy
that involve risks and uncertainties are forward-looking.
Forward-looking statements involve risks and uncertainties, including those
risks and uncertainties identified in the section of this prospectus beginning
on page 5 titled "Risk Factors" and those risks and uncertainties identified
elsewhere in, or incorporated by reference into, this prospectus. Due to these
risks and uncertainties, the actual results that we achieve may differ
materially from these forward-looking statements. These forward-looking
statements are based on current expectations. In preparing this prospectus, we
have made a number of assumptions and projections about the future of our
business. These assumptions and projections could be wrong for several reasons
including, but not limited to, those factors identified in the "Risk Factors"
section.
You are urged to carefully review and consider the various disclosures that we
make in this prospectus, any subsequent prospectus supplements and in our other
reports filed with the SEC. These disclosures attempt to advise interested
parties of the risk factors that may affect our business.
ISSUANCE OF SECURITIES TO SELLING SHAREHOLDERS
The Class A common stock subject to this prospectus was issued by us to the
selling shareholders pursuant to a number of separate transactions. We agreed in
each of these transactions to file a registration statement, of which this
prospectus is a part, to register the resale of the securities issued by us in
these transactions. All of the shares of Class A common stock covered by this
prospectus were "restricted securities" under the Securities Act prior to this
registration. The transactions under which the securities were issued are
described in the following paragraphs.
The first transaction involves the issuance by us of Class A common stock and
warrants to purchase additional shares of Class A common stock to private
investors in April, 2004. The investors are Vertical Ventures, LLC, Iroquois
Capital, LP, Omicron Master Trust, and Cranshire Capital, LP. A total of
1,380,000 shares of common stock were issued in exchange for $2,070,000, or
$1.50 per share. In addition, warrants to purchase 700,000 shares of our common
stock at an exercise price of $1.60 per share and warrants to purchase 700,000
shares of our common stock at an exercise price of $2.00 were issued by us to
the investors. This prospectus includes a total of 2,780,000 shares of Class A
Common Stock issued in connection with this private investment, including the
shares of common stock underlying the warrants.
The second transaction involves the issuance of shares of Class A Common Stock
to EMS Technologies, Inc. ("EMS"), an entity that had, since 1998, assisted in
the development and production of the TSI PRISM system. The shares issued to EMS
represented payments for previous product purchases (payables), new inventory
purchases and tooling purchases from EMS. The EMS Asset Purchase Agreement and
Second Amendment to the Supply and License Agreement dated March 23, 2004 was
included as Exhibit 10.1 to the Company's Form 10-QSB for the period ending
March 31, 2004, filed with the SEC on May 17, 2004. The total number of shares
of our Class A Common Stock issued under the March 23rd agreement was 538,947
shares, including 250,000 shares issued in the conversion of an existing
$250,000 note payable, and 288,947 shares issued in exchange for $288,947 of
other liabilities. Only the 288,947 shares issued in this transaction are
included in this prospectus.
The third transaction involved the issuance by us of Class A common stock, and
warrants to purchase additional shares of Class A common stock, to private
investors in December of 2001. A total of 1,460,000 shares of common stock were
issued in exchange for $912,500. In addition, warrants to purchase 800,000
shares of our common stock at an exercise price of $1.00 per share were issued
by us to the investors. Our S-3 Registration Statement effective on December 11,
2002, covered 600,000 shares of Class A common stock purchased by the investors
as well as 345,000 shares of Class A common stock underlying the warrants issued
to the investors, or a total of 945,000 shares. The remaining shares and
warrants issued in this transaction were not included in the prior S-3
Registration Statement at the request of the participating shareholders. This
prospectus includes only the remaining 455,000 shares of Class A Common Stock
underlying the warrants issued in connection with this private offering which
were not previously registered.
The fourth transaction involves the issuance by us of 135,437 Series A
Convertible Preferred Stock dividend shares on January 20, 2004. The Series A
Convertible Preferred Stock is convertible, at the option of the Holder, into
three shares of our Class A Common Stock. This Prospectus includes the 406,311
shares of Class A Common Stock issuable by us upon conversion of these Series A
Preferred Stock dividend shares.
The fifth transaction involves the issuance by us of Class A Common Stock, and
warrants to purchase additional shares of Class A Common Stock, to accredited
investors through a private offering in December of 2002. The offering was
comprised of units sold at a price of $1.00 per unit, each unit consisting of
two shares of Class A Common Stock and a warrant to purchase one share of Class
A Common Stock. A total of 3,000,000 shares of Class A Common Stock were issued
in exchange for $1,500,000. In addition, warrants to purchase 1,500,000 shares
of our Class A Common Stock at an exercise price of $1.00 per share were issued
by us to the investors. Our S-3 Registration Statement effective on August 21,
2003, covered 1,750,000 shares of Class A common stock purchased by the
investors as well as 875,000 shares of Class A common stock underlying the
warrants issued to the investors, or a total of 2,625,000 shares. This
prospectus includes only the remaining 625,000 shares underlying the warrants
issued under the private offering which were not previously registered.
The sixth transaction involves the issuance by us of 15,000 shares of Class A
Common Stock to Greg M. Oester, President of the Company's wholly owned
subsidiary, Technology Systems International, Inc. The Company issued the shares
in accordance with an agreement reached with Mr. Oester on May 21, 2004, in
exchange for Mr. Oester's surrender of 30,000 previously issued employee stock
options. The value of the options surrendered exceeded the value of the shares
issued based on a Black-Scholes valuation of the options.
USE OF PROCEEDS
All of the shares of Class A Common Stock being offered under this prospectus
are offered by the selling shareholders, which term includes their transferees,
pledgees or donees or other successors in interest. The proceeds from the sale
of the Class A Common Stock are solely for the account of the selling
shareholders. Accordingly, we will not receive any proceeds from the sale of
Class A Common Stock by the selling shareholders. However, if shares to be sold
by the selling shareholders are first to be acquired by them through exercise of
warrants to purchase shares of Class A Common Stock as described in the previous
section (See "Issuance of Securities to Selling Shareholders"), then we would
have received the proceeds required for the exercise of the warrants previously,
or contemporaneously to the selling shareholders' sale of such stock. Such
proceeds, when and if received, would be utilized by the Company for general
working capital.
PLAN OF DISTRIBUTION
The shares of Class A Common Stock covered by this prospectus and, if
applicable, any prospectus supplements may be offered and sold from time to time
in one or more transactions by the selling stockholders, which term includes
their transferees, pledgees or donees or other successors in interest. These
transactions may involve crosses or block transactions. The selling stockholders
will act independently of us in making decisions with respect to the timing,
manner and size of each sale. The shares of Class A Common Stock may be sold by
one or more of the following means of distribution:
o ordinary brokerage transactions and transactions in which the broker-
dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-
dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling stockholders may also engage in short sales against the box, puts
and calls and other transactions in our securities or derivatives of our
securities and may sell or deliver shares in connection with these trades.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved. Any
profits on the resale of shares of common stock by a broker-dealer acting as
principal might be deemed to be underwriting discounts or commissions under the
Securities Act. Discounts, concessions, commissions and similar selling
expenses, if any, attributable to the sale of shares will be borne by a selling
stockholder. The selling stockholders may agree to indemnify any agent, dealer
or broker-dealer that participates in transactions involving sales of the shares
if liabilities are imposed on that person under the Securities Act.
The selling stockholders may from time to time pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock from time to time under
this prospectus after we have filed an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 amending
the list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus.
The selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus
and may sell the shares of common stock from time to time under this prospectus
after we have filed an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 amending the list of
selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus.
The selling stockholders and any broker-dealers or agents that are involved in
selling the shares of common stock may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares of common stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the registration of the
shares of common stock. We have agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
The selling stockholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their shares of common stock, nor is there
an underwriter or coordinating broker acting in connection with a proposed sale
of shares of common stock by any selling stockholder. If we are notified by any
selling stockholder that any material arrangement has been entered into with a
broker-dealer for the sale of shares of common stock, if required, we will file
a supplement to this prospectus. If the selling stockholders use this prospectus
for any sale of the shares of common stock, they will be subject to the
prospectus delivery requirements of the Securities Act.
The selling stockholders are subject to the applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M.
This regulation may limit the timing of purchases and sales of any of the shares
by the selling stockholders. The anti-manipulation rules under the Exchange Act
may apply to sales of shares in the market and to the activities of the selling
stockholders and their affiliates. Furthermore, Regulation M may restrict the
ability of any person engaged in the distribution of the shares to engage in
market-making activities with respect to the particular securities being
distributed for a period of up to five business days before the distribution.
These restrictions may affect the marketability of the shares and the ability of
any person or entity to engage in market-making activities with respect to the
shares. In addition, under the securities laws of certain states, the shares of
common stock may be sold in these states only through registered or licensed
brokers or dealers.
We may suspend the effectiveness of the registration statement and, upon receipt
of written notice from us, the selling stockholders shall cease using this
prospectus if at any time we determine, in our reasonable judgment and in good
faith, that sales of shares of common stock pursuant to the registration
statement or this prospectus would require public disclosure by us of material
nonpublic information that is not included in the registration statement and
that immediate disclosure of such information would be detrimental to us.
If we suspend the effectiveness of the registration statement, we shall use our
reasonable best efforts to amend the registration statement and/or amend or
supplement the related prospectus if necessary and to take all other actions
necessary to allow any proposed sales by the selling stockholders to take place
as promptly as possible, subject, however, to our right to delay further sales
of shares of common stock until the conditions or circumstances referred to
above have ceased to exist or have been disclosed. We agreed with the selling
stockholders that our right to delay sales of shares of common stock held by the
selling stockholders will not be exercised by us more than twice in any twelve
month period and will not exceed 60 days as to any single delay in any twelve
month period.
We cannot assure you that the selling stockholders will sell all or any of the
common stock offered under the registration statement or any amendment of it.
SELLING STOCKHOLDERS
The following table sets forth certain information, received through June 1,
2004, with respect to the number of shares of our Class A Common Stock
beneficially owned by each selling stockholder. The information set forth below
is based on information provided by or on behalf of the selling stockholders
and, with regard to the beneficial holdings of the selling stockholders, is
accurate only to the extent beneficial holdings information was disclosed to us
by or on behalf of the selling stockholders. The selling stockholders and
holders listed in any supplement to this prospectus, and any transferors,
pledgees, donees or successors to these persons, may from time to time offer and
sell, pursuant to this prospectus and any subsequent prospectus supplement, any
and all of these shares.
Except as otherwise described below, no selling stockholder, to our knowledge,
held beneficially one percent or more of our outstanding Class A Common Stock as
of the date of this prospectus. Because the selling stockholders may offer all,
some or none of the shares of our Class A Common Stock listed below, no estimate
can be given as to the amount or percentage of our Class A Common Stock that
will be held by the selling stockholders upon termination of any of the sales.
Except as indicated below, none of the selling stockholders has held any
position or office or had any other material relationship with us or any of our
predecessors or affiliates within the past three years other than as a result of
the ownership of our securities or the securities of our predecessors. We may
amend or supplement this prospectus from time to time to update the disclosure
set forth in it.
The shares of Class A Common Stock offered by this prospectus may be offered
from time to time by the selling stockholders named below:
SHARES OF CLASS A COMMON STOCK
OFFERED BY THIS PROSPECTUS
SHARES
OF CLASS A Shares
NAMES COMMON Available Shares
AND STOCK Shares of By Available
ADDRESSES OF BENEFICIALLY Class A Conversion By
THE SELLING OWNED Common of Exercise Total
STOCKHOLDERS PRIOR TO THE Stock Preferred Of Shares
OFFERING (1) Available Stock Warrants
-------------------------------------------------------------------------------------------------------------
EMS Technologies, Inc. (2) 538,947 288,947 0 0 288,947
660 Engineering Drive
Norcross, GA 30092
Vertical Ventures, LLC (3)
641 Lexington Avenue, 26th Floor
New York, NY 10022 540,000 260,000 0 280,000 540,000
Omicron Master Trust (4)
810 Seventh Avenue, 39th Floor
New York, NY 10019 1,176,410 460,000 0 460,000 920,000
Iroquois Capital (5)
641 Lexington Avenue, 26th Floor
New York, NY 10022 400,000 200,000 0 200,000 400,000
Cranshire Capital, LP (6)
666 Dundee Road, Suite 1901
Northbrook, IL 60062 920,000 460,000 0 460,000 920,000
Byron L. Stoeser (7)
19524 - 230th Avenue N.E.
Woodinville, WA 98072 500,000 0 0 10,000 10,000
Robert R. Kauffman (8)
15575 N. 83rd Way, Suite 3
Scottsdale, AZ 85260 4,283,968 0 91,968 105,000 196,968
Programmed Land, Inc. (9)
9414 E. San Salvador Drive
Suite 99
Scottsdale, AZ 85258 1,896,658 0 56,658 400,000 456,658
Anderson Family Trust (10)
11804 N. Sundown Drive
Scottsdale, AZ 85260 3,513,177 0 70,533 400,000 470,533
Rhino Fund LLLP (11)
32065 Castle Court, Suite 100
Evergreen, CO 80439 1,350,615 0 45,615 20,000 65,615
John A. Carlson (12)
15575 N. 83rd Way, Suite 3
Scottsdale, AZ 85260 1,264,021 0 7,377 25,000 32,377
John A. Carlson, IRA
15575 N. 83rd Way, Suite 3
Scottsdale, AZ 85260 75,875 0 1,875 0 1,875
SHARES OF CLASS A COMMON STOCK
OFFERED BY THIS PROSPECTUS
SHARES
OF CLASS A Shares
NAMES COMMON Available Shares
AND STOCK Shares of By Available
ADDRESSES OF BENEFICIALLY Class A Conversion By
THE SELLING OWNED Common of Exercise Total
STOCKHOLDERS PRIOR TO THE Stock Preferred Of Shares
OFFERING (1) Available Stock Warrants
-------------------------------------------------------------------------------------------------------------
Harold S. Carpenter (13)
939 Office Park Road, Suite 120
West Des Moines, IA 50265 1,055,632 0 29,091 100,000 129,091
Heartland Systems Co. (14)
939 Office Park Road, Suite 120
West Des Moines, IA 50265 1,266,539 0 39,897 20,000 59,897
David P. & Heidi J. Anderson
4620 N. 68th Street #164
Scottsdale, AZ 85251 237,083 0 7,083 0 7,083
Paul D. Anderson
9715 N. 94th Place #112
Scottsdale, AZ 85258 237,083 0 7,083 0 7,083
David J. and Julie R. Dickerson
11804 N. Sundown Drive
Scottsdale, AZ 85260 237,083 0 7,083 0 7,083
James T. Hecker (15)
32065 Castle Court, Suite 100
Evergreen, CO 80439 245,047 0 609 0 609
James T. Hecker - IRA
32065 Castle Court, Suite 100
Evergreen, CO 80439 62,586 0 1,050 0 1,050
Thomas C. LaVoy (16)
29555 N. 69th Place
Scottsdale, AZ 85262 326,853 0 5,793 0 5,793
Steven P. & Catherine A. Oman (17)
10446 N. 74th Street, Suite 130
Scottsdale, AZ 85258 246,842 0 1,842 0 1,842
Lincoln Trust Co.
Custodian FBO Greg M. Oester
11878 N. 114th Way
Scottsdale, AZ 85259 44,247 0 1,359 0 1,359
Greg M. Oester (18)
11878 N. 114th Way
Scottsdale, AZ 85259 1,185,344 15,000 0 0 15,000
SHARES OF CLASS A COMMON STOCK
OFFERED BY THIS PROSPECTUS
SHARES
OF CLASS A Shares
NAMES COMMON Available Shares
AND STOCK Shares of By Available
ADDRESSES OF BENEFICIALLY Class A Conversion By
THE SELLING OWNED Common of Exercise Total
STOCKHOLDERS PRIOR TO THE Stock Preferred Of Shares
OFFERING (1) Available Stock Warrants
-------------------------------------------------------------------------------------------------------------
Thomas E. Burns, III
EBT dtd 8-1-1983
25097 Champlain Road
Laguna Hills, CA 92653 85,674 0 3,126 0 3,126
Thomas E. Burns, III
Revocable Living Trust
Dtd 9-29-1998
25097 Champlain Road 121,640 0 4,188 0 4,188
Laguna Hills, CA 92653
Gary L. and Virginia L. McDaniel
McDaniel Living Trust (19)
Dtd 5-1-1991
2100 Lookout Point Circle 724,481 0 24,081 0 24,081
Las Vegas, NV 89117
-------------------------------------------------
TOTALS 1,683,947 406,311 2,480,000 4,570,258
=================================================
---------------------------------
(1) The number of shares beneficially owned is determined in accordance
with Rule 13d-3 of the Exchange Act and the information is not
necessarily indicative of beneficial ownership for any other purpose.
Under such rule, beneficial ownership includes any shares as to which
the person has sole or shared voting power or investment power and also
any shares which the person has the right to acquire within 60 days of
the date set forth in the applicable footnote through the conversion of
a security or the exercise of any stock option or other right.
Percentage ownership indicated in the footnotes below is based on
22,966,399 shares of our Class A Common Stock outstanding as of June 9,
2004.
(2) EMS Technologies, Inc. ("EMS") is the beneficial owner of 1.77% of the
Company's Class A Common Stock. Mr. Don T. Scartz, Executive Vice
President and Chief Financial Officer of EMS, and William Jacobs, Vice
President and General Counsel of EMS, have voting control and
investment discretion of the shares held by EMS. Messrs. Scartz and
Jacobs disclaim beneficial ownership of the shares held by EMS. In
addition to these shares, EMS also beneficially owns shares of
Technology Systems International, Inc. of Nevada (TSIN), a corporation
that currently holds 6,000,000 shares of Alanco stock received when
Alanco acquired the TSIN operations in June 2002. If TSIN distributes
the 6,000,000 shares of Alanco common stock to TSIN shareholders on a
proportionate basis, EMS could acquire up to approximately 784,217
shares of Alanco common stock, thereby increasing their percentage of
total stock owned to approximately 4.35%.
(3) Vertical Ventures, LLC is the beneficial owner of 1.76% of the
Company's Class A Common Stock. Joshua Silverman has voting control and
investment decision over securities held by Vertical Ventures, LLC. Mr.
Silverman disclaims beneficial ownership of the shares held by Vertical
Ventures, LLC.
(4) Omicron Master Trust is the beneficial owner of 3.78% of the Company's
Class A Common Stock. Omicron Capital, L.P., a Delaware limited
partnership ("Omicron Capital"), serves as investment manager to
Omicron Master Trust, a trust formed under the laws of Bermuda
("Omicron"), Omicron Capital, Inc., a Delaware corporation ("OCI"),
serves as general partner of Omicron Capital, and Winchester Global
Trust Company Limited ("Winchester") serves as the trustee of Omicron.
By reason of such relationships, Omicron Capital and OCI may be deemed
to share dispositive power over the shares of our common stock owned by
Omicron, and Winchester may be deemed to share voting and dispositive
power over the shares of our common stock owned by Omicron. Omicron
Capital, OCI and Winchester disclaim beneficial ownership of such
shares of our common stock. Omicron Capital has delegated authority
from the board of directors of Winchester regarding the portfolio
management decisions with respect to the shares of common stock owned
by Omicron and, as of June 1, 2004, Mr. Olivier H. Morali and Mr. Bruce
T. Bernstein, officers of OCI, have delegated authority from the board
of directors of OCI regarding the portfolio management decisions of
Omicron Capital with respect to the shares of common stock owned by
Omicron. By reason of such delegated authority, Messrs. Morali and
Bernstein may be deemed to share dispositive power over the shares of
our common stock owned by Omicron. Messrs. Morali and Bernstein
disclaim beneficial ownership of such shares of our common stock and
neither of such persons has any legal right to maintain such delegated
authority. No other person has sole or shared voting or dispositive
power with respect to the shares of our common stock being offered by
Omicron, as those terms are used for purposes under Regulation 13D-G of
the Securities Exchange Act of 1934, as amended. Omicron and Winchester
are not "affiliates" of one another, as that term is used for purposes
of the Securities Exchange Act of 1934, as amended, or of any other
person named in this prospectus as a selling stockholder. No person or
"group" (as that term is used in Section 13(d) of the Securities
Exchange Act of 1934, as amended, or the SEC's Regulation 13D-G
controls Omicron and Winchester.
(5) Iroquois Capital is the beneficial owner of 1.31% of the Company's
Class A Common Stock. Joshua Silverman has voting control and
investment decision over securities held by Iroquois Capital. Mr.
Silverman disclaims beneficial ownership of the shares held by Iroquois
Capital.
(6) Cranshire Capital, LP is the beneficial owner of 2.98% of the Company's
Class A Common Stock. Mitchell Kopin, President of Downsview Capital,
Inc., the General Partner of Cranshire Capital, LP, has voting control
and investment decision over securities held by Cranshire Capital, LP.
Mr. Kopin disclaims beneficial ownership of the shares held by
Cranshire Capital, LP.
(7) Byron L. Stoeser is the beneficial owner of 1.64% of the Company's
Class A Common Stock.
(8) Robert R. Kauffman is the beneficial owner of these shares, as well as
the beneficial owner of shares held by his IRA. Mr. Kauffman is the
Chief Executive Officer and a director of the Company. Mr. Kauffman has
beneficial ownership of 12.98% of the Company. In addition to these
shares, Mr. Kauffman also beneficially owns shares of Technology
Systems International, Inc. of Nevada (TSIN), a corporation that
currently holds 6,000,000 shares of Alanco stock received when Alanco
acquired the TSIN operations in June 2002. If TSIN distributes the
6,000,000 shares of Alanco common stock to TSIN shareholders on a
proportionate basis, Mr. Kauffman could acquire up to approximately
118,700 shares of Alanco common stock, thereby increasing his
percentage of total stock and options owned to approximately 13.34%.
(9) Donald E. and Rebecca E. Anderson have beneficial ownership of all of
the outstanding shares of Programmed Land, Inc., and therefore are the
beneficial owners of these shares. See footnote 10 below.
(10) Donald E. and Rebecca E Anderson, who have beneficial ownership of all
of the outstanding shares of the Anderson Family Trust, have beneficial
ownership of 16.77% of the Company. The shares shown include shares
owned by Programmed Land, Inc., which are also offered under this
prospectus and are beneficially owned by the Andersons. Mr. Anderson is
a director of the Company.
(11) The Rhino Fund, LLLP beneficially owns 4.37% of the Company's Class A
Common Stock. MacDonald Hawley, president of Rhino Capital, Inc, the
fund manager, holds voting and dispositive powers over the shares of
the Company's stock owned by The Rhino Fund, LLLP.
(12) John A. Carlson is the beneficial owner of these shares, as well as the
beneficial owner of shares held by his IRA, which are also offered
under this prospectus. Mr. Carlson is the Chief Financial Officer and a
director of the Company. Mr. Carlson has beneficial ownership of 4.26%
of the Company.
(13) Harold S. Carpenter is a director of the Company and is the beneficial
owner of 3.41% of the Company's Class A Common Stock. Mr. Carpenter is
an officer of Heartland Systems Co., whose shares are also offered
under this prospectus; however, Mr. Carpenter disclaims beneficial
ownership of the Heartland Systems Co. shares.
(14) Heartland Systems Co. is the beneficial owner of 4.11% of the Company's
Class A Common Stock. Leanna Hansch, Treasurer, holds voting and
dispositive powers over the shares of the Company's stock owned by
Heartland Systems Co.
(15) James T. Hecker is the beneficial owner of these shares, as well as the
beneficial owner of shares held by his IRA, which are also offered
under this prospectus. Mr. Hecker is a director of the Company, and has
beneficial ownership of 1.00% of the Company. Mr. Hecker is the
treasurer and general counsel for Rhino Capital Incorporated, which
controls The Rhino Fund, whose shares are also offered under this
prospectus; however, Mr. Hecker disclaims beneficial ownership of The
Rhino Fund shares.
(16) Thomas C. LaVoy is a director of the Company and has a beneficial
ownership of 1.07% of the Company.
(17) Steven P. Oman is a director of the Company and has a beneficial
ownership of 0.81% of the Company.
(18) Greg M. Oester, who is an officer of the Company's wholly owned
subsidiary, Technology Systems International, Inc., is the beneficial
owner of these shares, as well as the beneficial owner of shares held
by his IRA, which are also offered under this prospectus. Mr. Oester
has beneficial ownership of 3.90% of the Company. In addition to these
shares, Mr. Oester also beneficially owns shares of Technology Systems
International, Inc. of Nevada (TSIN), a corporation that currently
holds 6,000,000 shares of Alanco stock received when Alanco acquired
the TSIN operations in June 2002. If TSIN distributes the 6,000,000
shares of Alanco common stock to TSIN shareholders on a proportionate
basis, Mr. Oester could acquire up to approximately 70,000 shares of
Alanco common stock, thereby increasing his percentage of total stock
and options owned to approximately 4.12%.
(19) Gary and Virginia McDaniel are the beneficial owners of these shares.
The McDaniels have beneficial ownership of 2.38% of the Company.
DESCRIPTION OF SECURITIES
Our authorized capital consists of 75,000,000 shares of Class A Common Stock,
25,000,000 shares of Class B Common Stock, and 25,000,000 shares of preferred
stock. The preferred stock is issuable in series with such designation,
preferences, voting rights, privileges, and other restrictions and
qualifications as our Board of Directors may establish in accordance with
Arizona law. There were 22,966,399 shares of Class A Common Stock outstanding,
and no shares of Class B Common Stock issued and outstanding as of June 9, 2004.
There were 2,476,836 shares of Series A Convertible Preferred Stock outstanding
and 60,139 shares of Series B Convertible Preferred Stock outstanding as of June
9, 2004. There were no other shares of preferred stock outstanding at June 9,
2004. Shares of the Series A Convertible Preferred Stock are convertible into
shares of Class A Common Stock at a rate of three shares of Class A Common Stock
for every one share of Series A Convertible Preferred Stock. Shares of the
Series B Convertible Preferred Stock are convertible into shares of Class A
Common Stock at a rate of thirteen shares of Class A Common Stock for every one
share of Series B Convertible Preferred Stock. As of June 9, 2004, options to
purchase 8,459,000 shares of Class A Common Stock were outstanding, and the
weighted average exercise price of such options was $0.86. In addition, as of
June 9, 2004, the Company had 6,420,836 warrants to purchase Class A Common
Stock outstanding, and the weighted average exercise price of such warrants was
$1.01. Our Class A Common Stock is traded on the NASDAQ SmallCap Market under
the symbol "ALAN". No other securities of the Company are currently traded on
any market.
Common Stock
Holders of shares of our Class A Common Stock are entitled to one vote per share
on all matters to be voted on by our shareholders. Holders of shares of Class B
Common Stock are entitled to one-one hundredth of one vote per share of Class B
Common Stock on all matters to be voted on by our shareholders. Our Class A
Common Stock and our Class B Common Stock have cumulative voting rights with
respect to the election of directors. Our bylaws require that only a majority of
the issued and outstanding voting shares of common stock need be represented to
constitute a quorum and to transact business at a shareholders' meeting.
Subject to the dividend rights of the holders of preferred stock, if applicable,
holders of shares of common stock are entitled to share, on a ratable basis,
such dividends as may be declared by the Board of Directors out of funds legally
available.
Upon our liquidation, dissolution or winding up, after payment of creditors and
holders of any of our senior securities, including preferred stock, our assets
will be divided pro rata on a per share basis among the holders of the shares of
common stock. Our common stock has no preemptive or other subscription rights,
and there are no conversion rights or redemption or sinking fund provisions. All
outstanding shares of common stock are fully paid and non-assessable.
Preferred Stock
Our Board of Directors is authorized to issue preferred stock in one or more
series and denominations and to fix the rights, preferences, privileges, and
restrictions, including dividend, conversion, voting, redemption, liquidation
rights or preferences, and the number of shares constituting any series and the
designation of such series, without any further vote or action by our
shareholders. The issuance of preferred stock may have the effect of delaying,
deferring, or preventing a change of control of our company without further
action by the shareholders. The issuance of preferred stock with voting and
conversion rights may adversely affect the voting power of the holders of common
stock.
Our Board of Directors has previously authorized the issuance of a series of
preferred stock referred to as Series B Convertible Preferred Stock. Without the
affirmative vote of a majority of the holders of the Series B Preferred Stock,
we may not amend, alter or repeal any of the provisions of our articles of
incorporation or articles of designation for the Series B Convertible Preferred
Stock. We also need the affirmative vote of a majority of the holders of the
Series B Convertible Preferred Stock if we want to authorize any
reclassification of the Series B Convertible Preferred Stock that would
adversely affect the preferences, special rights or privileges or voting power
of the Series B Convertible Preferred Stock. We may not create or issue any
class of stock ranking prior to the Series B Convertible Preferred Stock as to
dividends or distribution of assets, or create or issue any shares of any series
of the authorized preferred stock ranking prior to the Series B Convertible
Preferred Stock's rights to dividends or distribution on liquidation. The Series
B Convertible Preferred Stock shall have voting rights as if converted into
Class A Common Stock.
Our Board of Directors has also authorized the issuance of a series of preferred
stock referred to as Series A Convertible Preferred Stock. Without the
affirmative vote of a majority of the holders of the Series A Preferred Stock,
we may not amend, alter or repeal any of the provisions of our articles of
incorporation or articles of designation for the Series A Convertible Preferred
Stock. We also need the affirmative vote of a majority of the holders of the
Series A Convertible Preferred Stock if we want to authorize any
reclassification of the Series A Convertible Preferred Stock that would
adversely affect the preferences, special rights or privileges or voting power
of the Series A Convertible Preferred Stock. We may not create or issue any
class of stock ranking prior to the Series A Convertible Preferred Stock (other
than the existing Series B Convertible Preferred Stock) as to dividends or
distribution of assets, or create or issue any shares of any series of the
authorized preferred stock ranking prior to the Series A Convertible Preferred
Stock's rights to dividends or distribution on liquidation. The Series A
Convertible Preferred Stock shall have voting rights as if converted into Class
A Common Stock.
Arizona Corporate Takeover Act and Certain Charter Provisions
We are subject to the provisions of the Arizona Corporate Takeover Act. The
Arizona Corporate Takeover Act and certain provisions of our articles of
incorporation and bylaws, as summarized in the following paragraphs, may have
the effect of discouraging, delaying, or preventing hostile takeovers (including
those that might result in a premium over the market price of our common stock),
or discouraging, delaying, or preventing changes in control or management of our
company.
Arizona Corporate Takeover Act
Article 1 of the Arizona Corporate Takeover Act is intended to restrict
"greenmail" attempts by prohibiting us from purchasing any shares of our capital
stock from any beneficial owner of more than 5% of the voting power of our
company at a per share price in excess of the average market price during the 30
trading days prior to the purchase, unless
o the 5% owner has beneficially owned the shares to be purchased for a
period of at least three years prior to the purchase;
o a majority of our shareholders (excluding the 5% owner, its
affiliates or associates, and any officer or director of our
company) approves the purchase; or
o we make the offer available to all holders of shares of our capital
stock.
Article 2 of the Arizona Corporate Takeover Act is intended to discourage the
direct or indirect acquisition by any person of beneficial ownership of our
shares (other than an acquisition of shares from us) that would constitute a
control share acquisition. A "control share acquisition" is defined as an
acquisition of shares by any person, when added to other shares of our company
beneficially owned by such person, immediately after the acquisition entitles
such person to exercise or direct the exercise of
o at least 20% but less than 33 1/3%;
o at least 33 1/3% but less than or equal to 50%; or
o more than 50% of the voting power of our capital stock.
The Arizona Corporate Takeover Act (1) gives our shareholders other than any
person that makes or proposes to make a control share acquisition or our
company's directors and officers the right to limit the voting power of the
shares acquired by the acquiring person that exceed the threshold voting ranges
described above, other than in the election of directors, and (2) gives us the
right to redeem such shares from the acquiring person at a price equal to their
fair market value under certain circumstances.
Article 3 of the Arizona Corporate Takeover Act is intended to discourage us
from entering into certain mergers, consolidations, share exchanges, sales or
other dispositions of our assets, liquidation or dissolution of our company,
reclassification of securities, stock dividends, stock splits, or other
distribution of shares, and certain other transactions with any interested
shareholder (as defined in the takeover act) or any of the interested
shareholder's affiliates for a period of three years after the date that the
interested shareholder first acquired the shares of common stock that qualify
such person as an interested shareholder, unless either the business combination
or the interested shareholder's acquisition of shares is approved by a committee
of our Board of Directors (comprised of disinterested directors or other
persons) prior to the date on which the interested shareholder first acquired
the shares that qualify such person as an interested shareholder. In addition,
Article 3 prohibits us from engaging in any business combination with an
interested shareholder or any of the interested shareholder's affiliates after
such three-year period unless:
o the business combination or acquisition of shares by the
interested shareholder was approved by our Board of Directors
prior to the date on which the interested shareholder acquired
the shares that qualified such person as an interested
shareholder;
o the business combination is approved by our shareholders
(excluding the interested person or any of its affiliates) at
a meeting called after such three-year period; or
o the business combination satisfies each of certain statutory
requirements.
Article 3 defines an "interested shareholder" as any person (other than us and
our subsidiaries) that either (a) beneficially owns 10% or more of the voting
power of our outstanding shares, or (b) is an affiliate or associate of our
company and who, at any time within the three-year period preceding the
transaction, was the beneficial owner of 10% or more of the voting power of our
outstanding shares.
Certain Charter Provisions
In addition to the provisions of the Arizona Corporate Takeover Act described
above, our articles of incorporation and bylaws contain a number of provisions
relating to corporate governance and the rights of shareholders. These
provisions include the following:
o the authority of our Board of Directors to fill vacancies on the Board
of Directors;
o the authority of our Board of Directors to issue preferred
stock in series with such voting rights and other powers as
our Board of Directors may determine;
o a provision that, unless otherwise prohibited by law, special
meetings of the shareholders may be called only by our Board
of Directors, or by holders of not fewer than 10% of all
shares entitled to vote at the meeting; and
o a provision for cumulative voting in the election of directors,
pursuant to Arizona law.
Shareholder Rights Plan
We have established a shareholder rights plan under which each share of common
stock presently outstanding or which is issued hereafter prior to the
"distribution date," defined below, is granted one preferred share purchase
right, or a right, and each share of Series A or Series B preferred stock
presently outstanding or hereafter issued prior to the distribution date, which
is convertible into common stock of the Company, is granted such number of
rights equal to the number of common shares such preferred stock is convertible
in to. Each right entitles the registered holder to purchase from us one
one-hundredth (1/100th) of a share of the series C junior participating
preferred stock of the Company at a price of $25.00 per 1/100th of a series C
preferred share, subject to adjustment in the event of stock dividends and
similar events occurring prior to the distribution date. Each 1/100th of a
series C preferred share would have voting, dividend and liquidation rights
which are the approximate equivalent of one share of Class A common stock.
The rights are not exercisable until the distribution date, which is the earlier
to occur of (i) 10 days following the date, or the stock acquisition date, of a
public announcement that a person or group, or an acquiring person, has acquired
beneficial ownership, of 25% or more of the outstanding common stock of the
Company, or (ii) 10 business days, unless extended by our board, following the
commencement of a tender offer or exchange offer the consummation of which would
result in the beneficial ownership by a person or group of 25% or more of the
outstanding common stock.
Until the distribution date, the rights will be transferred with and only with
the common stock or the preferred stock, and the surrender for transfer of any
certificate for common stock or preferred stock will also constitute the
transfer of the rights associated with the shares represented by such
certificate. As soon as practicable following the distribution date, separate
certificates evidencing the rights will be mailed to holders of record of the
common stock and preferred stock as of the close of business on the distribution
date, and the rights will then become separately tradable.
In the event that any person or group becomes the beneficial owner of 25% or
more of the outstanding shares of common stock, other than pursuant to a tender
or exchange offer for all outstanding shares of common stock at a price and on
terms determined by a majority of our board who are not representatives,
affiliates or associates of an acquiring person, to be at a price which is fair
to our shareholders and otherwise in the best interests of our Company and our
shareholders, each holder of a right, other than rights beneficially owned by,
or in certain circumstances acquired from, the acquiring person or its
associates or affiliates, which will be void, will thereafter have the right to
receive upon exercise that number of shares of common stock, or, in certain
circumstances, cash, property or other securities of our Company, having a value
equal to two times the exercise price of the right. However, the rights are not
exercisable following any such event until such time as the rights are no longer
redeemable by us as set forth below.
In the event that after the stock acquisition date, (i) we engage in a merger or
consolidation in which we are not the surviving corporation or in which shares
of our common stock are converted or exchanged, other than a transaction
pursuant to a qualifying offer, or (ii) 50% or more of the Company's
consolidated assets or earning power are sold or transferred, proper provision
will be made so that each holder of a right, other than rights which have
previously been voided as set forth above, will thereafter have the right to
receive, upon exercise of the right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the right.
At any time after a person or group becomes an acquiring person and prior to the
acquisition by such person or group of 50% or more of the outstanding common
stock, our board may exchange the rights, other than rights owned by such person
or group, which have become void, in whole or in part, at an exchange ratio of
one share of common stock, or 1/100th of a series C junior participating
preferred share, into a share of a class or series of our preferred stock having
equivalent rights, preferences and privileges, per right, subject to adjustment.
At any time until 10 days following the stock acquisition date, our board may
redeem the rights in whole, but not in part, at a redemption price of $.001 per
right, subject to adjustment.
Prior to the distribution date, the terms of the rights may without the consent
of the holders of the rights be amended by our board in any respect whatever,
except for an amendment that would change the redemption price, the exercise
price of the rights, the number of 1/100ths of a series C preferred share
purchasable upon exercise of the rights or the final expiration date of the
rights. After the distribution date, our board may amend the rights agreement to
cure any ambiguity or inconsistency, to make changes which do not adversely
affect the interests of holders of rights, excluding the interest of any
acquiring person, or to shorten or lengthen any time period under the rights
agreement; provided, however, that no amendment to adjust the time period
governing redemption may be made at such time as the rights are not redeemable.
The rights will expire on June 30, 2014, unless the rights are earlier redeemed
by us as described above.
Transfer Agent and Registrar
The transfer agent and registrar for our Class A Common Stock is Computershare
Trust Company, 350 Indiana Street, Suite 800, Golden, Colorado 80401.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the Class
A Common Stock offered hereby will be passed upon by The Law Office of Steven P.
Oman, P.C., Scottsdale, Arizona. Said firm, and Steven P. Oman, owned, as of the
date of this prospectus, an aggregate of 246,842 shares of our Class A Common
Stock on an as-converted basis. Additionally, Steven P. Oman, Esq. is a director
of our company and serves as our general counsel.
Lawyers and employees of The Law Office of Steven P. Oman, P.C. and entities
controlled by lawyers at The Law Office of Steven P. Oman, P.C. may engage in
transactions in the open market or otherwise to purchase or sell our securities
from time to time.
The only material litigation that the Company is a party to relates to the
acquisition in May 2002 of substantially all of the assets of Technology Systems
International, Inc. The action is more fully described below:
On January 30, 2003, a suit was filed by Technology Systems International, Inc.,
a Nevada corporation ("TSIN") versus the Company, its wholly owned subsidiary,
Technology Systems International, Inc., an Arizona corporation ("TSI"), and two
of the directors of TSIN, including Robert Kauffman who is also the Chief
Executive Officer of the Company. The venue for the action is the Arizona
Superior Court in and for Maricopa County, Arizona, as case number
CV2003-001937. The complaint sets forth various allegations and seeks equitable
remedies and damages arising out of the Company's acquisition of substantially
all of the assets of TSIN. As stated in previous periodic reports filed by the
Company with the SEC concerning this matter, the Company's management, in
consultation with legal counsel, believes the plaintiff's claims are without
merit and the Company will aggressively defend the action.
EXPERTS
The consolidated financial statements and related financial statement schedule
incorporated in this prospectus by reference from our Annual Report on Form
10-KSB for the fiscal year ended June 30, 2003 have been audited by Semple &
Cooper, LLP, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 which was filed
with the Securities and Exchange Commission. This prospectus and any subsequent
prospectus supplements do not contain all of the information in the registration
statement. We have omitted from this prospectus some parts of the registration
statement as permitted by the rules and regulations of the SEC. In addition, we
file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any documents that we have filed
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. The SEC also maintains an Internet
site (http://www.sec.gov) that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" information into this prospectus
and any subsequent prospectus supplements, which means that we can disclose
important information to you by referring you to another document filed
separately with the SEC. This prospectus incorporates by reference documents
which are not presented in this prospectus or delivered to you with it. The
information incorporated by reference is an important part of this prospectus
and any subsequent prospectus supplements. Information that we file subsequently
with the SEC, but prior to the termination of this offering, will automatically
update this prospectus and any outstanding prospectus supplements and supersede
this information. We incorporate by reference the documents listed below and
amendments to them. These documents and their amendments were previously filed
with the SEC.
The following documents filed by us with the SEC are incorporated by reference
in this prospectus:
1. Our annual report on Form 10-KSB for the fiscal year ended June 30, 2003,
including our audited consolidated financial statements for the fiscal year
ended June 30, 2003 attached thereto, filed with the SEC on September 29, 2003,
with an amended filing on September 30, 2003 and an amended filing on July 15,
2004.
2. The description of our Class A Common Stock set forth in our registration
statement on Form 10/A filed with the SEC on March 27, 1981, and any subsequent
amendment or report filed for the purpose of updating this description.
3. Our Proxy Statement for our Annual Meeting of Shareholders held on December
22, 2003, filed with the SEC on November 7, 2003.
4. Our quarterly report on Form 10-QSB for the quarter ended September 30, 2003,
filed with the SEC on November 14, 2003, with an amended filing on November 18,
2003.
5. Our quarterly report on Form 10-QSB for the quarter ended December 31, 2003,
filed with the SEC on February 17, 2004.
6. Our quarterly report on Form 10-QSB for the quarter ended March 31, 2004,
filed with the SEC on May 17, 2004.
We also are incorporating by reference in this prospectus and any subsequent
prospectus supplements all reports and other documents that we file pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus and prior to the termination of this offering of common stock. These
reports and documents will be incorporated by reference in and considered to be
a part of this prospectus and any subsequent prospectus supplements as of the
date of filing of such reports and documents.
Upon request, whether written or oral, we will provide without charge to each
person to whom a copy of this prospectus is delivered, including any beneficial
owner, a copy of any or all of the information that has been or may be
incorporated by reference in this prospectus or any prospectus supplements but
not delivered with the prospectus or any subsequent prospectus supplements. You
should direct any requests for this information to the office of the Secretary,
at our principal executive offices, located at 15575 North 83rd Way, Suite 3,
Scottsdale, AZ 85260. The telephone number at that address is (480) 607-1010.
Any statement contained in a document which is incorporated by reference in this
prospectus or in any subsequent prospectus supplements will be modified or
superseded for purposes of this prospectus or any subsequent prospectus
supplements to the extent that a statement contained in this prospectus or
incorporated by reference in this prospectus or in any prospectus supplements or
in any document that we file after the date of this prospectus that also is
incorporated by reference in this prospectus or in any subsequent prospectus
supplements modifies or supersedes the prior statement. Any modified or
superseded statement shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus or any subsequent prospectus
supplements. Subject to the foregoing, all information appearing in this
prospectus is qualified in its entirety by the information appearing in the
documents incorporated by reference in this prospectus.
You should rely only on the information contained or incorporated by reference
in this prospectus or any applicable prospectus supplement. We have not
authorized anyone to provide you with any other information. The securities
offered in this prospectus may only be offered in states where the offer is
permitted, and we and the selling stockholders are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any applicable prospectus supplement
is accurate as of any date other than the dates on the front of these documents.