Edgar Filing: ALANCO TECHNOLOGIES INC

ALANCO TECHNOLOGIES, INC.
15575 North 83rd Way, Suite 3
Scottsdale, Arizona 85260
(480) 607-1010

PROXY STATEMENT

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Be Held November 19, 2004

TO THE SHAREHOLDERS OF ALANCO TECHNOLOGIES, INC.

NOTICE HEREBY IS GIVEN that the Annual Meeting of Shareholders of Alanco
Technologies, Inc., an Arizona corporation ("Alanco" or the "Company"), will be
held at 15575 North 83rd Way, Suite 3, Scottsdale, Arizona 85260, on November
19, 2004, at 10:00 a.m., Mountain Standard Time, and at any adjournment or
postponement thereof, for the purpose of considering and acting upon the
following Proposals:

Proposal No. 1 ELECTION OF DIRECTORS.

Proposal No. 2 APPROVAL OF THE ALANCO 2004 STOCK OPTION PLAN.

Proposal No. 3 APPROVAL OF THE ALANCO 2004 DIRECTORS AND OFFICERS STOCK
OPTION PLAN.

Holders of the outstanding Common Stock and Preferred Stock of the Company of
record at the close of business on September 27, 2004, will be entitled to
notice of and to vote at the Meeting or at any adjournment or postponement
thereof.

All shareholders, whether or not they expect to attend the Annual Meeting of
Shareholders in person, are urged to sign and date the enclosed Proxy and return
it promptly in the enclosed postage-paid envelope which requires no additional
postage if mailed in the United States. The giving of a proxy will not affect
your right to vote in person if you attend the Meeting.

BY ORDER OF THE BOARD OF DIRECTORS.

Scottsdale, Arizona ADELE L. MACKINTOSH
September 28, 2004 SECRETARY

ALANCO TECHNOLOGIES, INC.
15575 North 83rd Way, Suite 3
Scottsdale, Arizona 85260
(480) 607-1010

---------------
PROXY STATEMENT
---------------

ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 19, 2004

GENERAL INFORMATION

The enclosed Proxy is solicited by and on behalf of the Board of Directors of
Alanco Technologies, Inc., an Arizona corporation (the "Company"), for use at
the Company's Annual Meeting of Shareholders to be held at 15575 North 83rd Way,
Suite 3, Scottsdale, Arizona 85260, on the 19th day of November, 2004, at 10:00
a.m., Mountain Standard Time, and at any adjournment or postponement thereof. It
is anticipated that this Proxy Statement and the accompanying Proxy will be
mailed to the Company's shareholders on or before October 18, 2004.

The expense of soliciting proxies, including the cost of preparing, assembling
and mailing this proxy material to shareholders, will be borne by the Company.
It is anticipated that solicitations of proxies for the Meeting will be made
only by use of the mails; however, the Company may use the services of its
Directors, Officers and employees to solicit proxies personally or by telephone
without additional salary or compensation to them. Brokerage houses, custodians,
nominees and fiduciaries will be requested to forward the proxy soliciting
materials to the beneficial owners of the Company's shares held of record by
such persons, and the Company will reimburse such persons for their reasonable
out-of-pocket expenses incurred by them in that connection.

Shares not voting as a result of a proxy not marked or marked to abstain will be
counted as part of total shares voting in order to determine whether or not a
quorum has been achieved at the Meeting. Shares registered in the name of a
broker-dealer or similar institution for beneficial owners to whom the
broker-dealer distributed notice of the Annual Meeting and proxy information and
which such beneficial owners have not returned proxies or otherwise instructed
the broker-dealer as to voting of their shares, will be counted as part of the
total shares voting in order to determine whether or not a quorum has been
achieved at the Meeting.

All shares represented by valid proxies will be voted in accordance therewith at
the Meeting unless such proxies have previously been revoked. Proxies may be
revoked at any time prior to the time they are voted by: (a) delivering to the
Secretary of the Company a written instrument of revocation bearing a date later
than the date of the proxy; or (b) duly executing and delivering to the
Secretary a subsequent proxy relating to the same shares; or (c) attending the
meeting and voting your proxy in person (although attendance at the Meeting will
not in and of itself constitute revocation of a proxy.)

The Company's Annual Report to Shareholders for the fiscal year ended June 30,
2004, has been previously mailed or is being mailed simultaneously to the
Company's shareholders, but does not constitute part of these proxy soliciting
materials.

SHARES OUTSTANDING AND VOTING RIGHTS

Voting rights are vested in the holders of the Company's Common Stock and
Preferred Stock. Only shareholders of record at the close of business on
September 27, 2004 are entitled to notice of and to vote at the Meeting or any
adjournment or postponement thereof. As of September 27, 2004, the Company had
25,389,756 shares of Class A Common Stock issued and outstanding, no shares of
Class B Common Stock issued and outstanding, 2,624,656 shares of Series A
Convertible Preferred Stock issued and outstanding and 61,635 shares of Series B
Convertible Preferred Stock issued and outstanding. Each Class A Common share is
entitled to one vote, each Series A Convertible Preferred share is entitled to
three votes (the equivalent number of common shares into which the Series A
Convertible Preferred Stock is convertible), and each Series B Convertible
Preferred share is entitled to thirteen votes (the equivalent number of common

shares into which the Series B Convertible Preferred Stock is convertible). If
the number of common shares into which the preferred stock is convertible (the
"common stock equivalent") is considered, the total shares eligible to vote,
including the common stock and the common stock equivalent, on the record date
are 34,064,979 shares, each of which is entitled to one vote on all matters to
be voted upon at the Meeting, including the election of Directors. No fractional
shares are presently outstanding. A majority of the Company's outstanding voting
stock represented in person or by proxy shall constitute a quorum at the
Meeting. The affirmative vote of a majority of the votes cast, providing a
quorum is present, is necessary to approve each proposal.

Each shareholder present, either in person or by proxy, will have cumulative
voting rights with respect to the election of Directors. Under cumulative
voting, each shareholder is entitled to as many votes as is equal to the number
of shares of Common Stock (or common stock equivalent) of the Company held by
the shareholder on the Record Date multiplied by the number of directors to be
elected, and such votes may be cast for any single nominee or divided among two
or more nominees. The seven nominees, or such fewer number of nominees as may
stand for election, receiving the highest number of votes will be elected to the
Board of Directors. There are no conditions precedent to the exercise of
cumulative voting rights. Unless otherwise instructed in any proxy, the persons
named in the form of proxy which accompanies this Proxy Statement (the "Proxy
Holders") will vote the proxies received by them for the Company's seven
nominees set forth in "Election of Directors" below. If additional persons are
nominated for election as directors, the Proxy Holders intend, unless otherwise
instructed in any proxy, to vote all proxies received by them in such manner in
accordance with cumulative voting as will assure the election of as many of the
Company's nominees as possible, and, in such event, the specific nominees for
whom votes will be cast will be determined by the Proxy Holders. If authority to
vote for any nominee of the Company is withheld in any proxy, the Proxy Holders
intend, unless otherwise instructed in such proxy, to vote the shares
represented by such proxy, in their discretion, cumulatively for one or more of
the other nominees of the Company.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND OF MANAGEMENT

Security Ownership of Certain Beneficial Owners

The following table sets forth certain information with respect to each
shareholder known by Alanco to be the beneficial owner of more than 5% of the
outstanding Alanco common stock or common stock equivalent as of September 27,
2004. Information regarding the stock ownership of Robert R. Kauffman, Alanco
Chairman and Chief Executive Officer, and Donald E. Anderson, Alanco Director,
is also shown in the table in the following section, Current Directors and
Executive Officers.

Five Percent Owners

Class A Total Total
Common Common Total Stock,
Shares Stock Stock Options &
Owned Equivalent Exercisable Owned Warrants
Class A Percent Series A Total Owned Stock and Percent of
Common of Preferred Common Percent Options Options Common
Shares Class Shares Stock of and and Equivalent
Owned (5) Owned (4) Equivalent Class (5) Warrants Warrants Class (6)
--------- -------- ----------- ----------- ----------- ----------- ---------- ----------

Technology Systems 6,000,000 23.63% -- 6,000,000 17.61% -- 6,000,000 17.61%
International, Inc. (1)

Donald E. Anderson (2) 1,808,161 7.12% 901,327 4,512,142 13.25% 1,050,000 5,562,142 15.84%

Robert R. Kauffman (3) 287,000 1.13% 562,304 1,973,912 5.79% 2,405,000 4,378,912 12.01%

(1) Technology Systems International, Inc., a Nevada corporation, (TSIN) is a
privately owned entity with no person or entity owning in excess of 25% of
the outstanding shares. The only TSIN shareholder that we are aware of who
beneficially controls 19% or more of the outstanding shares of TSIN, who
could potentially own more than 5% of the outstanding Alanco common stock
equivalent, is Richard C. Jones, who, to the best of our knowledge, owns
5,301,826 TSIN shares, representing 23.10% of the outstanding TSIN shares.
TSIN has previously indicated their intention to distribute the 6,000,000
shares of Alanco common stock in excess of certain corporate litigation and
liquidation expenses on a pro-rata basis to their shareholders; however,
the shares have not been distributed as of the date of this Proxy

Statement, and there is no assurance that the shares will be distributed.
The address of TSIN is c/o Jeffrey M. Proper, 3550 N. Central Avenue, Suite
1200, Phoenix, Arizona 85012.
(2) The number of shares, options and warrants owned includes The Anderson
Family Trust, owner of 1,448,161 shares of Alanco Class A Common Stock,
499,826 shares of Alanco Series A Convertible Preferred Stock and 550,000
exercisable warrants; Programmed Land, Inc., owner of 360,000 shares of
Alanco Class A Common Stock, 401,501 shares of Alanco Series A Convertible
Preferred Stock and 400,000 exercisable warrants, both of which Mr.
Anderson claims beneficial ownership; and 100,000 exercisable options owned
by Mr. Anderson. The 901,327 shares of Series A Convertible Preferred Stock
beneficially owned by Mr. Anderson represent 34.34% of the total Series A
Convertible Preferred shares outstanding. Mr. Anderson's address is 11804
North Sundown Drive, Scottsdale, Arizona 85260.
(3) In addition to the shares shown above, Robert R. Kauffman, Alanco Chairman
and Chief Executive Officer, also beneficially owns 455,000 shares of TSIN
stock, representing an ownership position of less than 2% of the
outstanding TSIN shares. If TSIN distributes the 6,000,000 shares of Alanco
common stock owned by TSIN to TSIN shareholders on a proportionate basis,
Mr. Kauffman may acquire up to an additional approximately 118,700 shares
of Alanco common stock, thereby increasing his percentage of common shares
owned to approximately 1.60% and total stock and options percentage of
common stock equivalent owned to approximately 12.33%. The 562,304 shares
of Series A Convertible Preferred Stock beneficially owned by Mr. Kauffman
represent 21.42% of the total Series A Convertible Preferred shares
outstanding. The address for Mr. Kauffman is: c/o Alanco Technologies,
Inc., 15575 N. 83rd Way, Suite 3, Scottsdale, Arizona 85260.
(4) Preferred Shares are Series A Convertible Preferred Stock, each share of
which is convertible into three (3) shares of Class A Common Stock. The 5%
owners do not own any shares of the Series B Convertible Preferred Stock.
(5) The percentages for Class A Common Stock shown are calculated based upon
25,389,756 shares of Class A Common Stock outstanding on September 27,
2004. The percentages for Total Common Stock Equivalent are calculated
based upon 34,064,979 shares outstanding on September 27, 2004.
(6) In calculating the percentage of ownership, option and warrant shares are
deemed to be outstanding for the purpose of computing the percentage of
shares of common stock equivalent owned by such person, but are not deemed
to be outstanding for the purpose of computing the percentage of shares of
common stock equivalent owned by any other stockholders.

Current Directors and Executive Officers

The following table sets forth the number of exercisable stock options and the
number of shares of the Company's Common Stock and Preferred Stock beneficially
owned as of September 27, 2004, by individual directors and executive officers
and by all directors and executive officers of the Company as a group.

The number of shares beneficially owned by each director or executive officer is
determined under rules of the Securities and Exchange Commission, and the
information is not necessarily indicative of the beneficial ownership for any
other purpose. Unless otherwise indicated, each person has sole investment and
voting power (or shares such power with his or her spouse) with respect to the
shares set forth in the following table.

Securities of the Registrant Beneficially Owned (1)

Total
Stock,
Options &
Class A Shares Series A Shares Total Exercisable Total Warrants
Common Owned Preferred Owned Common Stock Stock, Percent of
Stock Percent Stock Percent Stock Options & Options & Common
Name of Shares of Class Shares of Class Equivalent Warrants Warrants Equivalent
Beneficial Owner (2) Owned (7) Owned (7) Owned (8) Owned Class (9)
-------------------- ---------- ------- ----------- -------- ---------- ----------- ----------- ------------

Robert R. Kauffman (3) 287,000 1.13% 562,304 21.42% 1,973,912 2,405,000 4,378,912 12.01%
Director/COB/CEO
John A. Carlson 80,644 0.32% 109,251 4.16% 408,397 1,025,000 1,433,397 4.08%
Director/EVP/CFO
Harold S. Carpenter (5) 181,541 0.72% 195,719 7.46% 768,698 320,000 1,088,698 3.17%
Director
James T. Hecker (6) 21,357 0.08% 22,843 0.87% 89,886 240,000 329,886 0.96%
Director
Steven P. Oman 10,000 0.04% 11,247 0.43% 43,741 205,000 248,741 0.73%
Director
Thomas C. LaVoy 35,265 0.14% 39,416 1.50% 153,513 180,000 333,513 0.97%
Director
Donald E. Anderson (4) 1,808,161 7.12% 901,327 34.34% 4,512,142 1,050,000 5,562,142 15.84%
Director
Greg M. Oester 12,888 0.05% 11,078 0.42% 46,122 735,000 781,122 2.24%
President - TSIA
---------- ----------- -------------------------------------
Officers and Directors 2,436,856 9.60% 1,853,185 70.61% 7,996,411 6,160,000 14,156,411 35.19%
as a Group (8 individuals) ========== =========== =====================================

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC") and generally indicates voting
or investment power with respect to securities. In accordance with SEC
rules, shares that may be acquired upon conversion or exercise of stock
options, warrants or convertible securities which are currently
exercisable or which become exercisable within 60 days are deemed
beneficially owned. Except as indicated by footnote, and subject to
community property laws where applicable, the persons or entities named
in the table above have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned.
(2) COB is Chairman of the Board; CEO is Chief Executive Officer; EVP is
Executive Vice President; CFO is Chief Financial Officer. (3) In addition
to the shares shown above, Robert R. Kauffman, Alanco Chairman and Chief
Executive Officer, also beneficially owns
455,000 shares of TSIN stock. If TSIN distributes the 6,000,000 shares of
Alanco common stock owned by TSIN to TSIN shareholders on a proportionate
basis, Mr. Kauffman may acquire up to an additional approximately 118,700
shares of Alanco common stock, thereby increasing his percentage of Class
A Common Stock owned to approximately 1.60% and total stock and options
percentage of common stock equivalent owned to approximately 12.33%.
(4) The number of shares and warrants owned includes The Anderson Family
Trust, owner of 1,448,161 shares of Alanco Class A Common Stock, 499,826
shares of Alanco Series A Convertible Preferred Stock and 550,000
exercisable warrants; Programmed Land, Inc., owner of 360,000 shares of
Alanco Class A Common Stock, 401,501 shares of Alanco Series A
Convertible Preferred Stock and 400,000 exercisable warrants, both of
which Mr. Anderson claims beneficial ownership; and 100,000 exercisable
options owned by Mr. Anderson. Mr. Anderson's address is 11804 North
Sundown Drive, Scottsdale, Arizona 85260.
(5) Excludes 240,000 shares of Class A Common Stock, 268,414 shares of Series
A Convertible Preferred Stock and 220,000 warrants to purchase Class A
Common Stock owned by Heartland Systems Co., a company for which Mr.
Carpenter serves as an officer. Mr. Carpenter disclaims beneficial
ownership of such shares.
(6) Excludes 265,000 shares of Class A Common Stock, 296,923 shares of Series
A Convertible Preferred Stock and 245,000 warrants to purchase Class A

Common Stock owned by Rhino Fund LLLP. The fund is controlled by Rhino
Capital Incorporated, for which Mr. Hecker serves as Treasurer and
General Counsel. Mr. Hecker disclaims beneficial ownership of such
shares.
(7) The percentages for Class A Common Stock shown are calculated based upon
25,389,756 shares of Class A Common Stock outstanding on September 27,
2004. The percentages for Series A Convertible Preferred Stock are
calculated based upon 2,624,656 shares of Series A Convertible Preferred
Stock outstanding on September 27, 2004, each of which is convertible
into three (3) shares of Class A Common Stock.
(8) Represents unexercised stock options and warrants issued to named
executive officers and directors. All options and warrants issued to the
executive officers and directors were exercisable at September 27, 2004.
Greg Oester also holds the following options: 250,000 options which
become exercisable in fiscal year 2005 and 125,000 options which become
exercisable in fiscal year 2006.
(9) The number and percentages shown include the shares of common stock
equivalent actually owned as of September 27, 2004 and the shares of
common stock that the identified person or group had a right to acquire
within 60 days after September 27, 2004. The percentages shown are
calculated based upon 34,064,979 Common Stock Equivalent shares
outstanding as of September 27, 2004. In calculating the percentage of
ownership, option and warrant shares are deemed to be outstanding for the
purpose of computing the percentage of shares of common stock equivalent
owned by such person, but are not deemed to be outstanding for the
purpose of computing the percentage of shares of common stock equivalent
owned by any other stockholders.

Meetings and Committees of the Board of Directors

The Board of Directors has a Compensation/Administration Committee, which was
formed in 1995 and is comprised of Messrs. Harold Carpenter and James Hecker,
who are independent directors of the Company. The Compensation/Administration
Committee recommends to the Board the compensation of executive officers and
serves as the Administrative Committee for the Company's Stock Option Plans. The
Compensation/Administration Committee met three times during the fiscal year
ended June 30, 2004.

The Board of Directors also has an Audit/Corporate Governance Committee. The
Audit Committee was originally formed in 1995. In September 2004, the Board of
Directors approved a name change for the committee to Audit/Corporate Governance
Committee to more accurately reflect the additional duties and responsibilities
of the committee as required by the Sarbanes-Oxley Act of 2002. The
Audit/Corporate Governance Committee, comprised of Messrs. Harold Carpenter,
James Hecker, and Thomas LaVoy, all of whom are independent non-employee
directors of the Company who have significant business experience and are deemed
to be financially knowledgeable, serves as a liaison between the Board and the
Company's auditor. The Audit/Corporate Governance Committee provides general
oversight of the Company's financial reporting and disclosure practices, system
of internal controls, and the Company's processes for monitoring compliance with
Company policies. The Audit/Corporate Governance Committee reviews with the
Company's independent auditors the scope of the audit for the year, the results
of the audit when completed, and the independent auditor's fee for services
performed. The Audit/Corporate Governance Committee also recommends independent
auditors to the Board of Directors and reviews with management various matters
related to its internal accounting controls. The Audit/Corporate Governance
Committee is comprised of independent members as defined under the National
Association of Securities Dealers listing standards. The Audit/Corporate
Governance Committee met three times during the fiscal year ended June 30, 2004.
All meetings held by the Board of Directors' committees were attended by each of
the directors serving on such committees.

The final Board committee is the Nominating/Independent Directors Committee,
which is comprised of Messrs. Harold S. Carpenter, James T. Hecker, Thomas C.
LaVoy, and Donald E. Anderson, all members of the Company's Board of Directors
who have been determined by the Board to meet the qualification as "independent"
director as set forth in Rule 10A-3 of the Exchange Act. Per Board resolution,
the Nominating/Independent Directors Committee approves all management
nominations for members of the Company's Board of Directors. In addition, the
Nominating/Independent Directors Committee meets in regularly scheduled
executive sessions at which only the independent directors are present.

The Company's Board of Directors held three meetings during the fiscal year
ended June 30, 2004, at which time all Directors were present. All current
members of the Board of Directors' committees are expected to be nominated for
reelection at a meeting of the Board of Directors following the annual meeting.

Compliance with Section 16(a) of Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Officers and Directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in

ownership with the Securities and Exchange Commission ("SEC"). Officers,
Directors and greater than 10% shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely upon a review of the copies of such forms furnished to the Company, or
written representations that no Form 5's were required, the Company believes
that as of the date of filing of this Proxy Statement, all Section 16(a) filing
requirements applicable to its officers, Directors and greater than 10%
beneficial owners were satisfied. However, some reportable events were not
timely reported. The names of the involved persons, the event dates, and the
filing dates are as follows:

Name of Reporting Person Reportable Event Event Date Date Reported
------------------------ ---------------- ---------- -------------

Donald E. Anderson Series A Preferred Stock Dividend 1/20/2004 8/13/2004
Class A Common Stock Options 5/21/2004 8/13/2004
John A. Carlson Series A Preferred Stock Dividend 1/20/2004 8/13/2004
Class A Common Stock Options 5/21/2004 8/13/2004
Harold S. Carpenter Series A Preferred Stock Dividend 1/20/2004 8/13/2004
Class A Common Stock Options 5/21/2004 8/13/2004
James T. Hecker Series A Preferred Stock Dividend 1/20/2004 8/13/2004
Class A Common Stock Options 5/21/2004 8/13/2004
Robert R. Kauffman Series A Preferred Stock Dividend 1/20/2004 8/13/2004
Class A Common Stock Options 5/21/2004 8/13/2004
Thomas C. LaVoy Series A Preferred Stock Dividend 1/20/2004 8/13/2004
Class A Common Stock Options 5/21/2004 8/13/2004
Greg M. Oester Series A Preferred Stock Dividend 1/20/2004 8/13/2004
Class A Common Stock Options 5/21/2004 8/13/2004
Steven P. Oman Series A Preferred Stock Dividend 1/20/2004 8/13/2004
Class A Common Stock Options 5/21/2004 8/13/2004

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the compensation paid or accrued by the Company
for the services rendered during the fiscal years ended June 30, 2004, 2003 and
2002 to the Company's Chief Executive Officer, Chief Financial Officer, and
President of the Company's subsidiary, Technology Systems International, Inc.,
an Arizona corporation (TSIA), acquired effective June 1, 2002, whose salaries
and bonus exceeded $100,000 during the last fiscal year (collectively, the
"Named Executive Officers"). No stock appreciation rights ("SARs") have been
granted by the Company to any of the Named Executive Officers during the last
three fiscal years.

Annual Compensation Long Term Compensation
------------------------------------------------ ----------------------

Name and Other Securities (# shares)
Principal Annual Annual Underlying Options
Position Salary Bonus Compensation (1) Granted during FY
-------- ------ ----- ---------------- -----------------
Robert R. Kauffman, C.E.O.
FY 2004 $180,000 None $17,400 650,000
FY 2003 180,000 None 17,400 150,000
FY 2002 134,812 None 17,400 250,000
John A. Carlson, C.F.O.
FY 2004 160,000 None 9,467 350,000
FY 2003 160,000 None 8,866 75,000
FY 2002 124,270 None 9,280 100,000
Greg M. Oester, President, TSIA
FY 2004 146,625 None None 250,000
FY 2003 148,234 None None None
FY 2002 12,875 (2) None None 750,000

(1) Represents supplemental executive benefit reimbursement for the year
and Company matching for Alanco's 401(K) Profit Sharing Plan.
(2) Represents salary for one month of fiscal year ended June 30, 2002.

Option Grants in Last Fiscal Year

The following table sets forth each grant of stock options made during the
fiscal year ended June 30, 2004, to each of the Named Executive Officers and/or
Directors and to all other employees as a group. No stock appreciation rights
("SARs") have been granted by the Company.

INDIVIDUAL GRANTS

Number of
Securities
Underlying % of Total Exercise
Options Options Price Grant Expiration
Name Granted Granted ($/Sh) Date Date
---- ------- ------- ----- ---- ----

Robert Kauffman 250,000 18.73% $0.37 7/31/03 7/31/13
400,000 0.90 5/21/04 5/21/14
John Carlson 150,000 10.09% 0.37 7/31/03 7/31/13
200,000 0.90 5/21/04 5/21/14
Harold Carpenter 40,000 3.46% 0.37 7/31/03 7/31/13
80,000 0.90 5/21/04 5/21/14
James Hecker 40,000 4.03% 0.37 7/31/03 7/31/13
20,000 1.00 4/06/04 4/06/09
80,000 0.90 5/21/04 5/21/14
Steven Oman 40,000 3.46% 0.37 7/31/03 7/31/13
80,000 0.90 5/21/04 5/21/14
Thomas LaVoy 40,000 3.46% 0.37 7/31/03 7/31/13
80,000 0.90 5/21/04 5/21/14
Donald Anderson 40,000 3.46% 0.37 7/31/03 7/31/13
80,000 0.90 5/21/04 5/21/14
Greg Oester 100,000 7.20% 0.37 7/31/03 7/31/13
150,000 0.90 5/21/04 5/21/14
Other Employees 1,600,000 46.11% $0.37 - $1.50 Various (1)
--------- -------

Total 3,470,000 100.00%
========= =======

(1) These options expire ten years from the date of grant.

All options are granted at a price not less than "grant-date market." During the
fiscal year 234,750 previously granted stock options expired or were cancelled.

Aggregated Options and Warrants - Exercised in Last Fiscal Year and Values at
Fiscal Year End

The following table sets forth the number of exercised and unexercised options
held by each of the Named Executive Officers and/or Directors at June 30, 2004,
and the value of the unexercised, in-the-money options at June 30, 2004.

Unexercised Value of
Options & Warrants Unexercised
Shares Value at Fiscal In-The-Money
Acquired On Realized Year End Options & Warrants
Name Exercise ($) (1) (Shares) (2) at FYE (3)
---- -------- -------- ----------- ----------

Robert Kauffman 300,000 $390,000 2,605,000 $2,319,800
John Carlson 25,000 31,750 1,025,000 762,750
Harold Carpenter None -- 495,000 389,700
James Hecker None -- 261,000 189,860
Steven Oman 40,000 54,000 215,000 131,800
Thomas LaVoy 20,000 25,000 215,265 152,181
Donald Anderson 40,000 31,600 1,868,161 1,490,651
Greg Oester None -- 745,000 466,700

(1) Calculated as the difference between closing price on the date exercised
and the exercise price, multiplied by the number of options exercised.
(2) Represents number of securities underlying unexercised options and
warrants at Fiscal Year End. All options and warrants issued to Named
Executive Officers and Directors were exercisable at 2004 Fiscal Year
End. Greg Oester also holds the following options: 250,000 options which
become exercisable in fiscal year 2005 and 125,000 options which become
exercisable in fiscal year 2006.
(3) Calculated as the difference between the closing price of the Company's
Common Stock on June 30, 2004 and the exercise price for those options
exercisable on June 30, 2004, with an exercise price less than the
closing price, multiplied by the number of applicable options.

Option Grants Subsequent to Fiscal Year End

None of the officers or directors of the Company were granted options subsequent
to fiscal year end. The only options granted after June 30, 2004 were 75,000
options granted in September 2004 pursuant to the 2000 Stock Option Plan to
other employees at an exercise price of $1.20 per share. The options, scheduled
to expire on September 6, 2014, have a vesting schedule of 25% on December 6,
2004, 25% on September 6, 2005, and the remaining 50% on September 6, 2006.

Employment Agreements and Executive Compensation

The Executive Officers are at-will employees without employment agreements.

Compensation of Directors

During Fiscal Year 2004, non-employee Directors were compensated for their
services in cash ($750 per meeting per day up to a maximum of $1,500 per
meeting) and through the grant of options to acquire shares of Class A Common
Stock as provided by the 1996, 1998, 1999, 2000, and 2002 Directors and Officers
Stock Option Plans (the "D&O Plans") which are described below. All Directors
are entitled to receive reimbursement for all out-of-pocket expenses incurred
for attendance at Board of Directors meetings.

The 1996 Directors and Officers Stock Option Plan was approved by the Board of
Directors on September 9, 1996. Shareholders approved the 1998, 1999, 2000, and
2002 Directors and Officers Stock Option Plans on November 6, 1998, November 5,
1999, November 10, 2000, and November 22, 2002, respectively. The purpose of the
1996, 1998, 1999, 2000, and 2002 D&O Plans is to advance the business and
development of the Company and its shareholders by affording to the Directors
and Officers of the Company the opportunity to acquire a propriety interest in
the Company by the grant of Options to acquire shares of the Company's common
stock. All Directors and Executive Officers of the Company are eligible to
participate in the 1996, 1998, 1999, 2000, and 2002 Plans. Newly appointed
Directors receive options to purchase shares of common stock at fair market
value. Upon each subsequent anniversary of the election to the Board of
Directors, each non-employee Director may receive an additional option to
purchase shares of common stock at fair market value.

Transactions with Management

The following directors and executive officers of the Company participated in
Alanco's June/July 2003 private exchange offering. Each unit purchased through
the private exchange offering consisted of one (1) share of the Company's Series
A Convertible Preferred Stock and one (1) warrant to purchase one share of the
Company's Class A Common Stock at an exercise price of $0.50 per share in
exchange for $0.50 plus two (2) shares of the Company's Class A Common Stock for
each unit purchased. Robert Kauffman, Chief Executive Officer, purchased 500,000
units in exchange for 1,000,000 shares of Class A Common Stock and $250,000;
John Carlson, Chief Financial Officer, purchased 100,000 units in exchange for
200,000 shares of Class A Common Stock and $50,000; Thomas LaVoy, a member of
the Board of Directors and a nominee, purchased 35,265 units in exchange for
70,530 shares of Class A Common Stock and $17,632.50; Steven P. Oman, a member
of the Board of Directors and a nominee, purchased 10,000 units in exchange for
20,000 shares of Class A Common Stock and $5,000; Programmed Land, Inc.,
beneficially owned by Donald Anderson, a member of the Board of Directors and a
nominee, purchased 360,000 units in exchange for 720,000 shares of Class A
Common Stock and $180,000; The Anderson Family Trust, also beneficially owned by
Donald Anderson, purchased 448,161 units in exchange for 896,322 shares of Class
A Common Stock and $224,080.50; Harold Carpenter, a member of the Board of
Directors and a nominee, purchased 175,000 units in exchange for 350,000 shares
of Class A Common Stock and $87,500; James Hecker, a member of the Board of
Directors and a nominee, purchased 21,000 units in exchange for 42,000 shares of
Class A Common Stock and $10,500; and Greg Oester, President of the Company's
subsidiary, Technology Systems International, Inc., an Arizona corporation
(TSIA), purchased 10,000 units in exchange for 20,000 shares of Class A Common

Stock and $5,000. The Rhino Fund LLLP, controlled by Rhino Capital Incorporated,
for which James Hecker serves as Treasurer and General Counsel, purchased
265,000 units in exchange for 530,000 shares of Class A Common Stock and
$132,500. Mr. Hecker disclaims beneficial ownership of these shares. Heartland
Systems Co., a company for which Harold Carpenter serves as an officer,
purchased 240,000 units in exchange for 480,000 shares of Class A Common Stock
and $120,000. Mr. Carpenter disclaims beneficial ownership of these shares.

Mr. Steve Oman, a member of the Board of Directors and a nominee, received
compensation in the amount of $104,752 for legal services to the Company for the
fiscal year ended June 30, 2004.

AUDIT/CORPORATE GOVERNANCE COMMITTEE REPORT (1)

The Audit/Corporate Governance Committee of the Board of Directors is currently
comprised of three independent directors, and operates under a written charter
adopted by the Board. The charter, which is periodically reviewed and reassessed
for adequacy, has been revised and is attached as Exhibit A. The members of the
Audit/Corporate Governance Committee are Harold S. Carpenter, a CEO with over 30
years senior management experience, James T. Hecker, an attorney and CPA, and
Thomas C. LaVoy, a CPA. All three individuals are experienced in reading and
understanding financial statements, and, in fact, are deemed to be financial
experts as defined by audit committee requirements.

The Audit/Corporate Governance Committee is directly responsible for the
appointment, compensation, retention and oversight of the work of the
independent auditor engaged for the purpose of preparing an audit report or
performing other audit, review or attest services for the Company. The auditor
reports directly to the Audit/Corporate Governance Committee. The
Audit/Corporate Governance Committee has established "whistleblower" procedures
for the receipt, retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters, including procedures for the
confidential anonymous submission by employees of the Company of concerns
regarding questionable accounting or auditing matters.

Authority to engage independent counsel and other advisors has been given to the
Audit/Corporate Governance Committee as it determines is necessary to carry out
its duties. The Company provides appropriate funding for the Audit/Corporate
Governance Committee to compensate the outside auditors and any lawyers and
advisors it employs and to fund ordinary administrative expenses of the
Audit/Corporate Governance Committee that are necessary in carrying out its
duties.

The Audit/Corporate Governance Committee provides general oversight of the
Company's financial reporting and disclosure practices, system of internal
controls, and the Company's processes for monitoring compliance by the Company
with Company policies. The Audit/Corporate Governance Committee reviews with the
Company's independent auditors the scope of the audit for the year, the results
of the audit when completed, and the independent auditor's fee for services
performed. The Audit/Corporate Governance Committee also recommends independent
auditors to the Board of Directors and reviews with management various matters
related to its internal accounting controls. During the last fiscal year, there
were three meetings of the Audit/Corporate Governance Committee.

Management is responsible for the Company's internal controls and the financial
reporting process. The independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with the auditing standards of the Public Company Accounting
Oversight Board (United States) and issuing a report thereon. The
Audit/Corporate Governance Committee is responsible for overseeing and
monitoring the quality of the Company's accounting and auditing practices.

The members of the Audit/Corporate Governance Committee are not professionally
engaged in the practice of auditing or accounting and may not be experts in the
fields of accounting or auditing, or in determining auditor independence.
Members of the Audit/Corporate Governance Committee rely, without independent
verification, on the information provided to them and on the representations
made by management and the independent accountants. Accordingly, the
Audit/Corporate Governance Committee's oversight does not provide an independent
basis to determine that management has maintained procedures designed to assure
compliance with accounting standards and applicable laws and regulations.
Furthermore, the Audit/Corporate Governance Committee's considerations and
discussions referred to above do not assure that the audit of the Company's
financial statements has been carried out in accordance with auditing standards
generally accepted in the United States, that the financial statements are
presented in accordance with accounting principles generally accepted in the
United States of America or that the Company's auditors are in fact
"independent."

Review of Audited Financial Statements

In this context, the Audit/Corporate Governance Committee reviewed and discussed
the Company's audited financial statements with management and with the
Company's independent auditors. Management represented to the Audit/Corporate
Governance Committee that the Company's consolidated financial statements were
prepared in accordance with accounting standardsof the Public Company Accounting
Oversight Board (United States). Discussions about the Company's audited
financial statements included the auditor's judgments about the quality, not
just the acceptability, of the accounting principles, the reasonableness of
significant judgments and the clarity of disclosures in its financial
statements. The Audit/Corporate Governance Committee also discussed with the
auditors other matters required by Statement on Auditing Standards, ("SAS") No.
61 "Communication with Audit Committees," as amended by SAS No. 90, "Audit
Committee Communications."

The Company's auditors provided to the Committee written disclosures required by
the Independence Standards Board Standard No. 1 "Independence Discussion with
Audit Committee." The Audit/Corporate Governance Committee discussed with the
auditors their independence from the Company, and considered the compatibility
of non-audit services with the auditor's independence.

Audit Fees

The aggregate fees billed by Semple & Cooper, LLP, the Company's independent
auditor, for professional services rendered for the audit of the Company's
annual financial statements for the fiscal year ended June 30, 2004 and the
review of the financial statements included in the Company's Forms 10-QSB for
such fiscal year were approximately $78,500.

Financial Information Systems Design and Implementation

There were no fees billed for the professional services described in Paragraph
(c)(4)(ii) of Rule 2-01 of Regulation S-X rendered by Semple & Cooper, LLP for
the fiscal year ended June 30, 2004.

All Other Fees

Semple & Cooper, LLP billed the Company during the current fiscal year a total
of approximately $10,000 for tax preparation and tax consulting services. The
Audit Committee has considered whether the provision of these services is
compatible with maintaining the principal accountant's independence.

Recommendation

Based on the Audit/Corporate Governance Committee's discussion with management
and the auditors, and the Audit/Corporate Governance Committee's review of the
representations of management and the report of the auditors to the
Audit/Corporate Governance Committee, the Audit/Corporate Governance Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-KSB for the year ended June
30, 2004, filed with the Securities and Exchange Commission.

AUDIT/CORPORATE GOVERNANCE COMMITTEE
James T. Hecker
Harold S. Carpenter
Thomas C. LaVoy
-------------------------------
(1) The material in this report is not "soliciting material," is not deemed
filed with the commission and is not to be incorporated by reference in any
filing of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the
date hereof and irrespective of any general incorporation language in any such
filing.

Proposal No. 1 ELECTION OF DIRECTORS

The Articles of Incorporation presently provide for a Board of Directors of not
more than nine members. The number of Directors of the Company has been fixed at
seven by the Company's Board of Directors. The Company's Board of Directors
recommends the election of the seven nominees listed below to hold office until
the next Annual Meeting of Shareholders or until their successors are elected
and qualified or until their earlier death, resignation or removal. The persons
named as "proxies" in the enclosed form of Proxy, who have been designated by

Management, intend to vote for the seven nominees for election as Directors
unless otherwise instructed in such proxy. If at the time of the Meeting, any of
the nominees named below should be unable to serve, which event is not expected
to occur, the discretionary authority provided in the Proxy will be exercised to
cumulatively vote for the remaining nominees, or for a substitute nominee or
nominees, if any, as shall be designated by the Board of Directors.

Nominees

All nominees for Director have been approved by the Company's
Nominating/Independent Directors Committee. The following table sets forth the
name and age of each nominee for Director, indicating all positions and offices
with the Company presently held by him, and the period during which he has
served as such:

Year
Name Age Position First Director
---- --- -------- --------------

Harold S. Carpenter 70 Director 1995
James T. Hecker 47 Director 1997
Robert R. Kauffman 64 Director/C.O.B./C.E.O. 1998
Thomas C. LaVoy 44 Director 1998
Steven P. Oman 55 Director 1998
John A. Carlson 57 Director/E.V.P./C.F.O. 1999
Donald E. Anderson 70 Director 2002

Business Experience of Nominees

Robert R. Kauffman: Mr. Kauffman was appointed as Chief Executive Officer and
Chairman of the Board effective July 1, 1998. Mr. Kauffman was formerly
President and Chief Executive Officer of NASDAQ-listed Photocomm, Inc., from
1988 until 1997 (since renamed Kyocera Solar, Inc.). Photocomm was the nation's
largest publicly owned manufacturer and marketer of wireless solar electric
power systems with annual revenues in excess of $35 million. Prior to Photocomm,
Mr. Kauffman was a senior executive of the Atlantic Richfield Company (ARCO)
whose varied responsibilities included Senior Vice President of ARCO Solar,
Inc., President of ARCO Plastics Company and Vice President of ARCO Chemical
Company. Mr. Kauffman earned an M.B.A. in Finance at the Wharton School of the
University of Pennsylvania, and holds a B.S. in Chemical Engineering from
Lafayette College, Easton, Pennsylvania.

Harold S. Carpenter: Mr. Carpenter is presently the President of Superiorgas
Co., Des Moines, Iowa, which is engaged in the business of trading and brokering
bulk refined petroleum products with gross sales of approximately $500 million
per year. He is also the General Partner of Superiorgas L.P., an investment
company affiliated with Superiorgas Co. Mr. Carpenter founded these companies in
1984 and 1980, respectively. Mr. Carpenter is also the President of Carpenter
Investment Company, Des Moines, Iowa, which is a real estate investment company
holding properties primarily in central Iowa. From 1970 until 1994, Mr.
Carpenter was the Chairman of the George A. Rolfes Company of Boone, Iowa, which
manufactured air pollution control equipment. Mr. Carpenter graduated from the
University of Iowa in 1958 with a Bachelor of Science and Commerce degree.

James T. Hecker: Mr. Hecker is both an Attorney and a Certified Public
Accountant. Since 1987 Mr. Hecker has been Vice President, Treasurer and General
Counsel of Rhino Capital Incorporated, Evergreen, Colorado, a private capital
management company which manages a $60 million portfolio. He also served, since
1992, as a trustee of an $11 million charitable trust. From 1984 to 1987, Mr.
Hecker was the Controller of Northern Pump Company, Minneapolis, Minnesota, a
multi-state operating oil and gas company with more than 300 properties, with
responsibility of all accounting and reporting functions. Prior to that, from
1981 to 1984, Mr. Hecker was Audit Supervisor of Total Petroleum, Inc., Denver,
responsible for all phases of internal audit and development of audit and
systems controls. Mr. Hecker received a J.D. degree from the University of
Denver in 1992, and a B.B.A. degree in Accounting and International Finance from
the University of Wisconsin in 1979. He is a member in good standing of the
Colorado and the American Bar Associations, the Colorado Society of CPAs, and
the American Institute of CPAs.

Steven P. Oman: Mr. Oman was appointed to the Board in June 1998. Since 1991 Mr.
Oman has been in the private practice of law in Phoenix, Arizona. From 1986 to
1991, Mr. Oman served as Vice President and General Counsel of Programmed Land,
Inc., a Scottsdale-based diversified holding company engaged in real estate,
including ownership, development, marketing and management of properties, as
well as non-real estate subsidiaries involved in the electronics and automotive
industries. Prior to that, from 1978 to 1986, Mr. Oman was President and General
Counsel of Charter Development, Inc., a real estate development firm in St.
Paul, Minnesota. Mr. Oman received a J.D. degree, cum laude, in 1975 from
William Mitchell College of Law, St. Paul, and a Bachelor of Mechanical
Engineering degree from the University of Minnesota, Institute of Technology,
Minneapolis, in 1970.

Thomas C. LaVoy: Thomas C. LaVoy has served as Chief Financial Officer of
SuperShuttle International, Inc., since July 1997 and as Secretary since March
1998. From September 1987 to February 1997, Mr. LaVoy served as Chief Financial
Officer of NASDAQ-listed Photocomm, Inc. Mr. LaVoy was a Certified Public
Accountant with the firm of KPMG Peat Marwick from 1980 to 1983. Mr. LaVoy has a
Bachelor of Science degree in Accounting from St. Cloud University, Minnesota,
and is a Certified Public Accountant.

John A. Carlson: Mr. Carlson, Executive Vice President and Chief Financial
Officer of Alanco Technologies, Inc., joined the Company in September 1998 as
Senior Vice President/Chief Financial Officer. Mr. Carlson started his career
with Price Waterhouse & Co. in Chicago, Illinois. He has over twenty-five years
of public and private financial and operational management experience, including
over twelve years as Chief Financial Officer of a Fortune 1000 printing and
publishing company. He earned his Bachelor of Science degree in Business
Administration at the University of South Dakota, and is a Certified Public
Accountant.

Donald E. Anderson: Donald E. Anderson is President and owner of Programmed
Land, Inc., a Minnesota and Scottsdale, Arizona, based company. Programmed Land
is a diversified holding company engaged in real estate, including ownership,
development, marketing and management of properties. He is also majority owner
of a company involved in the automotive industry. From 1988 until 1997, Mr.
Anderson was Chairman of the Board of NASDAQ-listed Photocomm, Inc., a company
involved in the solar electric business. Since 1983, Mr. Anderson has also been
President of Pine Summit Bible Camp, a non-profit organization that operates a
year-round youth camp in Prescott, Arizona. Mr. Anderson has a B.A. degree in
accounting.

Proposal No. 2 APPROVAL OF THE ALANCO 2004 STOCK OPTION PLAN

The Company's Board of Directors approved submitting the Alanco Technologies,
Inc. 2004 Stock Option Plan to the shareholders for approval. The Board of
Directors recommends approval of the Plan. The purpose of the Plan is to advance
the business and development of the Company and its shareholders by affording to
Employees of the Company the opportunity to acquire an equity interest in the
Company by the grant of Options to acquire shares of the Company's common stock.

The Options granted to Employees can be either "Incentive Stock Options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or
"Non-Statutory Options." The issuance of qualified Incentive Stock Options
pursuant to this Plan is not expected to be a taxable event for qualified
recipients until such time that the recipient elects to sell the shares received
from the exercise whereupon the recipient is expected to recognize income to the
extent the sale price of the shares exceeds the exercise price of the option on
the date of sale. The issuance of Non-Statutory Stock Options pursuant to this
Plan is not expected to result in a tax liability to the recipient since the
options are granted at fair market value on date of grant. The recipient is
expected to recognize income to the extent the market price of the shares
exceeds the exercise price of the option on the date of exercise.

The Plan is administered by the Compensation/Administration Committee of the
Board of Directors. The Plan may issue Options to acquire up to 2,000,000 shares
to Employees. The Company will not receive any consideration for the grant of
options under the Plan and the approximate market value of the shares to be
reserved for the plan is $2,310,000 based upon the average ten trading day
closing price for the Company's common stock for the period ending September 17,
2004. The maximum number of shares subject to Incentive Stock Options granted to
any one Employee which are first exercisable during any single calendar year
shall not exceed a fair market value of $100,000. The exercise price for Options
shall be set by the Compensation/Administrative Committee but shall not be for
less than the fair market value of the shares on the date the Option is granted.
Fair market value shall mean the closing price at which the Stock is listed in
the NASDAQ quotation system ending on the day prior to the date an Option is
granted.

The period in which Options can be exercised shall be set by the
Compensation/Administration Committee not to exceed ten years from the date of
Grant. Incentive Stock Options are exercisable once vested. Vesting schedule
shall be as follows: twenty-five percent (25%) of the shares issuable under the
Options shall vest six months from date of Grant provided that the Optionee has
remained an Employee of the Company for not less than six months from date of
Grant, twenty-five percent (25%) of the shares issuable under the Options shall
vest one year from date of Grant provided that the Optionee has remained an
Employee of the Company for not less than one year from the date of Grant, and
the remaining fifty percent (50%) shall vest two years from date of Grant
provided that the Optionee has remained an Employee of the Company for not less
than two years from the date of Grant, or other alternative vesting as may be
determined by the Compensation/Administration Committee. The Incentive Stock
Options must be exercised within 3 months following Optionee's termination of
relationship with the Company, or within one (1) year following death or

permanent and total disablement of the Optionee. Otherwise, the Incentive Stock
Options shall lapse. The vesting schedule, and the exercise schedule following
termination, death or total and permanent disablement of the Optionee, of
Non-Statutory Stock Options will be determined by the Committee at the time of
grant. The Plan may be terminated, modified or amended by the Board of Directors
upon the recommendation of the Compensation/Administration Committee. Provided,
however, if the Plan has been submitted to and approved by the shareholders of
the Company, no such action by the Board may be taken without approval of the
majority of the shareholders of the Company which: (a) increases the total
number of shares of Stock subject to the Plan; (b) changes the manner of
determining the Option price; or (c) withdraws the administration of the Plan
from the Committee.

All Employees of the Company and its subsidiaries are eligible to participate in
the Plan. An Employee is defined in the Plan as a person, including officers and
directors, employed by the Company who in the judgment of the
Compensation/Administration Committee has the ability to positively affect the
profitability and economic well-being of the Company. Part-time employees,
independent contractors, consultants and advisors performing bona fide services
to the Company shall be considered employees for purposes of participation in
the Plan. Neither the Board of Directors nor the Compensation/Administration
Committee have estimated the number of Options to be granted to Employees and
are expected to make this determination on a discretionary basis. The aggregate
number of shares within the Plan and the rights under outstanding Options
granted hereunder, both as to the number of shares and Option price, will be
adjusted accordingly in the event of a split or a reverse split in the
outstanding shares of the Common Stock of the Company.

Proposal No. 3 APPROVAL OF THE ALANCO 2004 DIRECTORS AND OFFICERS
STOCK OPTION PLAN

The Company's Board of Directors approved submitting the Alanco Technologies,
Inc. 2004 Directors and Officers Stock Option Plan to the shareholders for
approval. The Board of Directors recommends approval of the Plan. The purpose of
the Plan is to advance the business and development of the Company and its
shareholders by affording to the Directors and Executive Officers of the Company
the opportunity to acquire an equity interest in the Company by the grant of
Options to acquire shares of the Company's common stock.

The Options granted are not "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended. The issuance of
such non-qualified options pursuant to this Plan is not expected to be a taxable
event for recipient until such time that the recipient elects to exercise the
option whereupon the recipient is expected to recognize income to the extent the
market price of the shares exceeds the exercise price of the option on the date
of exercise.

The Plan is administered by the Compensation/Administration Committee, which
shall consist of up to three (3) individuals appointed by the Board from among
its members, at least two (2) of which are non-employee Directors. The Plan may
issue Options to acquire up to 1,000,000 shares to Directors and Executive
Officers. The Company will not receive any consideration for the grant of
options under the Plan and approximate market value of the shares to be reserved
for the plan is $1,155,000 based upon the average ten trading day closing price
for the Company's common stock for the period ending September 17, 2004. The
vesting and exercise price for Options shall be set by the
Compensation/Administration Committee but shall not be for less than the fair
market value of the shares on the date the Option is granted. Fair market value
shall mean the closing price at which the Stock is listed in the NASDAQ
quotation system ending on the day prior to the date an Option is granted. The
period in which Options can be exercised shall be set by the
Compensation/Administration Committee not to exceed ten years from the date of
Grant. Options are exercisable once vested. The Plan may be terminated, modified
or amended by the Board of Directors upon the recommendation of the
Compensation/Administration Committee. Provided, however, if the Plan has been
submitted to and approved by the shareholders of the Company, no such action by
the Board may be taken without approval of the majority of the shareholders of
the Company which: (a) increases the total number of shares of Stock subject to
the Plan; (b) changes the manner of determining the Option price; or (c)
withdraws the administration of the Plan from the Committee. The aggregate
number of shares within the Plan and the rights under outstanding Options
granted hereunder, both as to the number of shares and Option price, will be
adjusted accordingly in the event of a split or a reverse split in the
outstanding shares of the Common Stock of the Company.

INDEPENDENT AUDITOR

Semple & Cooper, LLP, Phoenix, Arizona, was appointed as the Company's
Independent Auditor for the fiscal years ended June 30, 2000, 2001, 2002, 2003,
and 2004. The Company anticipates the appointment of Semple & Cooper, LLP to
audit the Company's financial statements for the fiscal year ending June 30,
2005. A representative of Semple & Cooper, LLP is expected to attend the
Shareholders' Meeting and will have an opportunity to make a statement if the
representative desires to do so and is expected to be available to respond to
appropriate questions.

REQUEST FOR COPY OF FORM 10-KSB

Shareholders may receive a copy of the Form 10-KSB or the Company's adopted Code
of Conduct, without charge, via e-mail request to alanco@alanco.com, by calling
the Company at 480 607-1010, Ext. 857, or by writing to the Company, to the
attention of the Company's Corporate Secretary at 15575 N. 83rd Way, Suite 3,
Scottsdale, Arizona 85260.

SHAREHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL MEETING;
DISCRETIONARY AUTHORITY; OTHER BUSINESS

Any shareholder who intends to present a proposal at the annual meeting of
shareholders for the year ending June 30, 2005 and have it included in the
Company's proxy materials for that meeting generally must deliver the proposal
to us for our consideration not less than 120 calendar days in advance of the
date of the Company's proxy statement released to security holders in connection
with the previous year's annual meeting of security holders and must comply with
Rule 14a-8 under the Securities Exchange Act of 1934, as amended. In accordance
with the above rule, the applicable proposal submission deadline for the 2005
annual meeting of shareholders would be June 20, 2005.

Pursuant to Rule 14a-4 under the Securities Exchange Act of 1934, as amended,
the Company intends to retain discretionary authority to vote proxies with
respect to shareholder proposals properly presented at the Meeting, except in
circumstances where (i) the Company receives notice of the proposed matter a
reasonable time before the Company begins to mail its proxy materials (including
this proxy statement), and (ii) the proponent complies with the other
requirements set forth in Rule 14a-4.

The Board of Directors is not aware of any other business to be considered or
acted upon at the Meeting other than that for which notice is provided, but in
the event other business is properly presented at the Meeting, requiring a vote
of shareholders, the proxy will be voted in accordance with the judgment on such
matters of the person or persons acting as proxy (except as described in the
preceding paragraph). If any matter not appropriate for action at the Meeting
should be presented, the holders of the proxies shall vote against the
consideration thereof or action thereon.

ADELE L. MACKINTOSH
SECRETARY
Scottsdale, Arizona
September 28, 2004

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert R. Kauffman, Chief Executive Officer of Alanco Technologies, Inc.,
certify that:

1. The Proxy Statement of Alanco Technologies, Inc. for use at the Company's
Annual Meeting of Shareholders to be held on November 19, 2004, as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), which
this statement accompanies, fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of Alanco
Technologies, Inc.

/s/ Robert R. Kauffman
Robert R. Kauffman
Chief Executive Officer
September 28, 2004

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, John A. Carlson, Chief Financial Officer of Alanco Technologies, Inc.,
certify that:

2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of Alanco
Technologies, Inc.

/s/ John A. Carlson
John A. Carlson
Chief Financial Officer
September 28, 2004

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Adele L. Mackintosh, Secretary of Alanco Technologies, Inc., certify that:

2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of Alanco
Technologies, Inc.

/s/ Adele L. Mackintosh
Adele L. Mackintosh
Secretary
September 28, 2004

EXHIBIT A

ALANCO TECHNOLOGIES, INC.
AUDIT/CORPORATE GOVERNANCE COMMITTEE CHARTER

I. PURPOSE

1.1 There shall be a committee of the Board of Directors of Alanco
Technologies, Inc. (the "Company"), known as the Audit/Corporate
Governance Committee (the "Committee"). The primary purpose of the
Committee is to assist the Company's Board of Directors (the
"Board") in fulfilling its responsibility to oversee reports and
other financial information provided by the Company to governmental
or regulatory bodies (such as the Securities and Exchange
Commission), the public, and other users thereof, the Company's
systems of internal accounting and financial controls, and the
annual independent audit of the Company's financial statements.

1.2 In discharging its oversight role, the Committee is empowered to
investigate any matter brought to its attention with full access to
all books, records, facilities and personnel of the Company. If
necessary, the Committee is authorized to retain outside counsel,
auditors, or other experts and professionals for this purpose. The
Board and the Committee are in place to represent the Company's
stockholders; accordingly, the outside auditors are ultimately
accountable to the Board and the Committee.

1.3 The Committee shall review the adequacy of this Charter on an annual
basis.

II. MEMBERSHIP

2.1 The Committee shall be comprised of not less than three members of
the Board, and the Committee's composition shall meet all
requirements of the Audit/Corporate Governance Committee Policy of
the NASDAQ Exchange.

2.2 Accordingly, all of the members must be independent directors:

(a) who have no relationship to the Company that may interfere
with the exercise of their independence from management and
the Company, and

(b) who are financially literate or who become financially
literate within a reasonable period of time after appointment
to the Committee. In addition, at least one member of the
Committee must have accounting or related financial
management expertise.

2.3 The members of the Committee should be elected by the Board of
Directors at its quarterly meeting held on or near the
Corporation's annual meeting or until their successors shall be
duly elected and qualified. Unless a Chair is elected by the full
Board of Directors, the members of the Committee may designate a
Chair by majority vote of the full Committee membership.

III. KEY RESPONSIBILITIES

3.1 The Committee's job is one of oversight and it recognizes that the
Company's management is responsible for preparing the Company's
financial statements. Additionally, the Committee recognizes that
financial management, as well as the outside auditors, has more
time, knowledge and more detailed information regarding the Company
than do the Committee members. Consequently, in discharging its
oversight responsibilities, the Committee is not providing any
experts or special assurance as to the Company's financial
statements or any professional certificates as to the outside
auditor's work.

3.2 While the Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Committee to plan or
conduct audits or to determine accepted accounting principles. This
is the responsibility of management and the independent auditors.
Nor is it the duty of the Committee to conduct investigations, to
resolve disagreements, if any, between management and the
independent auditors or to assure compliance with laws and
regulations and the Company's policies.

3.3 The following functions shall be the common recurring activities of
the Committee in carrying out its oversight function. These
functions are set forth as a guide with the understanding that the
Committee may diverge from this guide as appropriate under the
circumstances.

(a) The Committee shall review with management and the outside
auditors the audited financial statements to be included in
the Company's Annual report on Form 10-K (or the Annual Report
to Shareholders if distributed prior to the filing of Form
10-K) and review and consider with the outside auditors the
matters required to be discussed by Statement of Auditing
Standards ("SAS") No. 61, as amended by SAS No. 90, "Audit
Committee Communications."

(b) As a whole, or through the Committee chair, the Committee
shall review with the outside auditors the Company's interim
financial results to be included in the Company's Quarterly
Reports on Form 10-Q to be filed with the Securities and
Exchange Commission and the matters required to be discussed
by SAS No. 61. Such review shall occur prior to the filing of
the Company's Quarterly Reports on Form 10-Q.

3.4 The Committee shall discuss with management and the outside
auditors the quality and adequacy of the Company's internal
controls.

3.5 The Committee shall:

(a) request from the outside auditors annually a formal written
statement delineating all relationships between the auditors
and the Company consistent with Independence Standards Board
Standard No. 1;

(b) discuss with the outside auditors any such disclosed
relationships and their impact on the outside auditors'
independence; and

(c) recommend that the Board take appropriate action in response
to the outside auditors' report to satisfy the auditors'
independence.

3.6 The Committee shall establish procedures for the "receipt,
retention, and treatment of complaints" received by the Company
regarding accounting, internal controls and auditing.

3.7 The Committee, subject to any action that may be taken by the full
Board, shall have the ultimate authority and responsibility to
select (or nominate for stockholder approval), evaluate and,
wherever appropriate, replace the outside auditors.