ALANCO TECHNOLOGIES, INC.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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For the transition period from to
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Commission file number 0-9347
ALANCO TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
Arizona
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(State or other jurisdiction of incorporation or organization)
86-0220694
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(I.R.S. Employer Identification No.)
15575 N. 83rd Way, Suite 3, Scottsdale, Arizona 85260
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(Address of principal executive offices) (Zip Code)
(480) 607-1010
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of May 1, 2005 there were 26,095,200 shares, net of
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treasury shares, of common stock outstanding
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Transitional Small Business Disclosure Format (Check one): Yes No X
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Forward-Looking Statements: Some of the statements in this Form 10-QSB Quarterly
Report, as well as statements by the Company in periodic press releases, oral
statements made by the Company's officials to analysts and shareholders in the
course of presentations about the Company, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Words or phrases denoting the anticipated results of future events such
as "anticipate," "believe," "estimate," "will likely," "are expected to," "will
continue," "project," "trends" and similar expressions that denote uncertainty
are intended to identify such forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Such factors include,
among other things, (i) general economic and business conditions; (ii) changes
in industries in which the Company does business; (iii) the loss of market share
and increased competition in certain markets; (iv) governmental regulation
including environmental laws; and (v) other factors over which the company has
little or no control.
ALANCO TECHNOLOGIES, INC.
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (Unaudited)
March 31, 2005 and June 30,2004. .........................3
Condensed Consolidated Statements of Operations (Unaudited)
For the three months ended March 31, 2005 and 2004........4
Condensed Consolidated Statements of Operations (Unaudited)
For the nine months ended March 31, 2005 and 2004.........5
Changes in Certain Equity and Preferred Stock Accounts
(Unaudited)for the nine months ended March 31, 2005.......6
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the nine months ended March 31, 2005 and 2004.........7
Notes to Condensed Consolidated Financial Statements (Unaudited)....9
Note A - Basis of Presentation and Recent Accounting
Pronouncements
Note B - Inventories
Note C - Contracts in Process
Note D - Deferred Revenue
Note E - New Commitments
Note F - Loss per Share
Note G - Equity
Note H - Industry Segment Data
Note I - Related Party Transactions
Note J - Line of Credit
Note K - Litigation
Note L - Subsequent Event
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................14
Item 3. Controls and Procedures...................................19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.........................................19
Item 2. Changes in Securities.....................................19
Item 6. Exhibits.................................................20
2
ALANCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2005 AND JUNE 30, 2004
March 31, 2005 June 30, 2004
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ASSETS (unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 613,000 $ 1,975,600
Accounts receivable, net 1,053,500 657,200
Notes receivable, current 45,000 -
Inventories, net 2,257,600 2,282,300
Prepaid expenses and other current assets 411,400 110,600
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Total current assets 4,380,500 5,025,700
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PROPERTY, PLANT AND EQUIPMENT, NET 257,000 247,500
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OTHER ASSETS
Goodwill and other intangible assets, net 5,935,100 6,048,000
Long-term notes receivable, net 11,000 68,000
Net assets held for sale 107,400 156,100
Other assets 35,300 40,600
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Total other assets 6,088,800 6,312,700
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TOTAL ASSETS $ 10,726,300 $ 11,585,900
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,563,200 $ 1,246,500
Notes payable and capital leases, current - 5,200
Billings in excess of cost and est earnings
on uncompleted contracts 25,800
Deferred revenue, current 105,200 27,200
------------ ------------
Total Current Liabilities 1,668,400 1,304,700
LONG TERM LIABILITIES
Notes payable and capital leases, long term 814,100 814,100
Preferred Stock - Series B, 66,300 and 61,500
shares issued and outstanding, respectively 650,000 602,800
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TOTAL LIABILITIES 3,132,500 2,721,600
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SHAREHOLDERS' EQUITY
Preferred Stock - Series A Convertible,
2,781,200 and 2,476,800 shares issued and
outstanding, respectively 3,412,700 2,956,100
Common Stock- 25,995,400, and 23,232,800 shares
outstanding, net of 500,000 shares of Treasury
Stock 70,619,700 68,959,600
Accumulated deficit (66,438,600) (63,051,400)
------------ ------------
Total shareholders' equity 7,593,800 8,864,300
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TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 10,726,300 $ 11,585,900
============ ============
See accompanying notes to the consolidated financial statements
3
ALANCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, (Unaudited)
2005 2004
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NET SALES $ 1,531,200 $ 1,221,100
Cost of goods sold 975,300 780,000
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GROSS PROFIT 555,900 441,100
Selling, general and administrative expense 1,712,200 1,173,700
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OPERATING LOSS (1,156,300) (732,600)
OTHER INCOME & EXPENSES
Interest expense, net (11,200) (21,500)
Other income, net 63,900 9,000
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LOSS FROM OPERATIONS (1,103,600) (745,100)
Preferred stock dividends-paid in kind (252,000) (218,200)
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NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (1,355,600) $ (963,300)
============ ============
NET LOSS PER SHARE - BASIC AND DILUTED
- Net loss attributable to common shareholders $ (0.05) $ (0.05)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 25,514,500 17,875,500
============ ============
See accompanying notes to the consolidated financial statements
4
ALANCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, (Unaudited)
2005 2004
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NET SALES $ 5,353,900 $ 3,492,600
Cost of goods sold 3,493,500 2,180,600
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GROSS PROFIT 1,860,400 1,312,000
Selling, general and administrative expense 4,779,800 3,445,900
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OPERATING LOSS (2,919,400) (2,133,900)
OTHER INCOME & EXPENSES
Interest expense, net (38,800) (128,600)
Other income, net 74,700 48,300
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LOSS FROM OPERATIONS (2,883,500) (2,214,200)
Preferred stock dividends-paid in kind (503,700) (245,200)
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NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (3,387,200) $ (2,459,400)
============ ============
NET LOSS PER SHARE - BASIC AND DILUTED
- Net loss attributable to common shareholders $ (0.13) $ (0.15)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 25,118,000 16,479,500
============ ============
See accompanying notes to the consolidated financial statements
5
ALANCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN CERTAIN SHAREHOLDERS' EQUITY AND PREFERRED
STOCK ACCOUNTS FOR THE NINE MONTHS ENDED MARCH 31, 2005 (Unaudited)
Preferred Stock Preferred Stock
Common Stock - Ser A - Ser B Treasury Stock
Shares Dollars Shares Dollars Shares Dollars Shares Dollars
----------------------- --------------------- ---------------- ------------------
Balances at 06/30/04 23,732,800 $ 69,334,700 2,476,800 $ 2,956,100 61,500 $ 602,800 500,000 $(375,100)
Preferred dividends paid in kind - - 304,400 456,600 4,800 47,200 - -
Shares issued for services and prepayments 324,400 286,600 - - - - - -
Options and Warrants exercised 2,438,200 1,333,100 - - - - - -
Other - 40,400 - - - - - -
----------------------- --------------------- ---------------- ------------------
Balances at 03/31/05 26,495,400 $ 70,994,800 2,781,200 $ 3,412,700 66,300 $ 650,000 500,000 $(375,100)
======================= ===================== ================ ==================
See accompanying notes to the consolidated financial statements
6
ALANCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE NINE MONTHS ENDED MARCH 31
2005 2004
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CASH FLOWS FROM OPERATING ACTIVITIES
Loss from operations $ (2,883,500) $ (2,214,200)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 257,300 257,600
Stock issued for services 73,300 68,800
Income from assets held for sale (74,800) (17,600)
Gain on disposal of asset - (1,000)
Changes in:
Accounts receivable, net (396,300) (3,300)
Inventories, net 24,700 (840,700)
Costs in excess of billings and
estimated earnings on uncompleted
contracts (49,900)
(64,200) (89,000)
Accounts payable and accrued expenses 316,700 62,100
Deferred revenue 78,000 (41,700)
Billings and estimated earnings in
excess of costs on uncompleted
contracts (25,800) -
Other assets 5,300 12,300
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Net cash used in operating activities (2,689,300) (2,856,600)
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CASH FLOWS FROM INVESTING ACTIVITIES
Net cash from assets held for sale 123,400 70,000
Collection of notes receivable, net 12,000 195,000
Purchase of property, plant and equipment (101,700) (17,100)
Proceeds from the sale of property, plant
and equipment - 5,200
Goodwill, acquisition - (5,000)
Patent renewal and other (1,800) -
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Net cash provided by investing activities 31,900 248,100
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See accompanying notes to the consolidated financial statements
7
ALANCO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE NINE MONTHS ENDED MARCH 31, (Continued)
2005 2004
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CASH FLOWS FROM FINANCING ACTIVITIES
Advances on borrowings $ - $ 2,054,500
Repayment on borrowings (5,200) (2,159,900)
Subscriptions receivable - 899,200
Net proceeds from sale of Preferred Stock - 102,400
Net proceeds from sale of Common Stock 1,300,000 1,641,000
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Net cash provided by financing activities 1,294,800 2,537,200
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NET DECREASE IN CASH (1,362,600) (71,300)
CASH AND CASH EQUIVALENTS, beginning of period 1,975,600 97,700
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CASH AND CASH EQUIVALENTS, end of period $ 613,000 $ 26,400
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SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Net cash paid during the period for interest $ 38,800 $ 69,700
============ ============
Non-Cash Activities:
Shares issued in payment of accounts payable $ - $ 245,000
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Value of stocks and warrants issued for
services $ 336,800 $ 68,800
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Value of warrants issued for credit line
extension $ 23,300 $ -
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Series B preferred stock dividend, paid in
kind $ 47,200 $ 41,900
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Series A preferred stock dividend, paid in
kind $ 456,600 $ 203,200
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Value of treasury stock redeemed in
preferred stock and warrant issuance $ - $ 198,400
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Value of treasury stock cancelled $ - $ 1,907,200
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Conversion of debt to equity $ - $ 250,000
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See accompanying notes to the consolidated financial statements
8
ALANCO TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED MARCH 31, 2005
Note A - Basis of Presentation and Recent Accounting Pronouncements
Alanco Technologies, Inc., an Arizona corporation ("Alanco" or
"Company"), operates in two business segments: Computer Data Storage Segment
and RFID Technology Segment.
The unaudited condensed consolidated balance sheet as of March 31,
2005, the related unaudited condensed consolidated statements of operations for
the three months and nine months ended March 31, 2005 and the related unaudited
condensed consolidated statement of cash flows for the nine months ended March
31, 2005 presented herein have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and in accordance with the instructions to Form 10-QSB.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In our opinion, the accompanying
condensed consolidated financial statements include all adjustments necessary
for a fair presentation of such condensed consolidated financial statements.
Such necessary adjustments consist of normal recurring items and the elimination
of all significant intercompany balances and transactions.
These interim condensed consolidated financial statements should be
read in conjunction with the Company's June 30, 2004, Annual Report on Form
10-KSB. Interim results are not necessarily indicative of results for a full
year. Certain reclassifications have been made to conform prior period
financials to the presentation in the current reporting period. The
reclassifications had no effect on net loss.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statement and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
All stock options issued to employees have an exercise price not less
than the fair market value of the Company's Common Stock on the date of grant.
In accordance with accounting for such options utilizing the intrinsic value
method under APB 25, there is no related compensation expense recorded in the
Company's financial statements for the nine months ended March 31, 2005 and
2004. Had compensation cost for stock-based compensation been determined based
on the fair value of the options at the grant dates consistent with the method
of SFAS 123, the Company's net loss and loss per share would have been increased
to the pro forma amounts presented below.
9
ALANCO TECHNOLOGIES, INC.
9 months ended March 31,
2005 2004
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Net loss, as reported $ (3,387,200) $ (2,459,400)
Add: Stock-based Employee compensation expense
included in reported income, net of related
tax effects - -
Deduct: Total stock-based Employee compensation
expense determined under fair value based
methods for all awards, net of related tax
effects $ (178,050) $ (327,200)
------------ ------------
Pro forma net loss $ (3,565,250) $ (2,786,600)
============= ============
Net loss per common share, basic and diluted
As reported $ (0.13) $ (0.15)
============ ============
Pro forma $ (0.14) $ (0.17)
============ ============
Weighted average common shares 25,118,000 6,479,500
============ ============
During the nine months ended March 31, 2005, the Company granted
employee stock options to purchase 420,000 shares of the Company's Class A
Common Stock at an average purchase price of $0.83, market price on date
granted. The fair value of option grants is estimated as of the date of grant,
in accordance with SFAS 123, utilizing the Black-Scholes option-pricing model,
with the assumptions substantively utilized in the year-end financial
statements.
Long-lived assets and intangible assets - The Company reviews carrying
values at least annually or whenever events or circumstances indicate the
carrying values may not be recoverable through projected discounted cash flows.
Recent Accounting Pronouncements -In November 2004, the FASB issued Statement
No. 151 ("SFAS 151"), "Inventory Cost - An Amendment of ARB No. 43, Chapter 4."
SFAS 151 clarifies accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material. It requires that those items be
recognized as current-period charges regardless of whether they meet the
criterion of abnormal. Currently, we do not have any inventory items that fall
into the classifications discussed, accordingly, adoption of SFAS 151 does not
have a significant impact on our financial statements.
In December 2004, the FASB issued Statement No. 152 ("SFAS 152"), "Accounting
for Real Estate Time-Sharing Transactions -- An Amendment of Statements 66 and
67." SFAS 152 amends SFAS 66 and 67 to reference the financial accounting and
reporting guidance for real estate time-sharing transactions and to state that
the guidance for incidental operations and costs incurred to sell real estate
projects does not apply to real estate time-sharing transactions. SFAS 152 is
effective for financial statements for fiscal years beginning after June 15,
2005. Currently, the Company does not have any real estate transactions.
Accordingly, adoption of SFAS 152 does not have a significant impact on our
financial statements.
In December 2004, the FASB issued Statement No. 153 ("SFAS 153"), "Exchanges of
Nonmonetary Assets - An Amendment of APB Opinion No. 29." SFAS 153 amends APB
Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. A nonmonetary exchange
has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. Adoption of SFAS 153 does not
have a significant impact on our financial statements.
In December 2004, the FASB issued Statement No. 123R ("SFAS 123R"), "Share-Based
Payment." This Statement focuses primarily on accounting for transactions in
which an entity obtains employee services in share-based payment transactions.
It requires that the fair-value-based method be used to account for these
transactions for all public entities. This Statement is effective for small
10
ALANCO TECHNOLOGIES, INC.
business issuers for the first reporting period after December 15, 2005, subject
to additional extensions granted by the SEC, and will effect any stock-based
compensation for options issued after that date, or not vested as of that date.
Note B - Inventories
Inventories have been recorded at the lower of cost or market. The
composition of inventories as of March 31, 2005 and June 30, 2004 are summarized
as follows:
March 31, June 30,
2005 2004
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(unaudited)
Raw materials and purchased parts $ 2,257,300 $ 1,894,700
Work-in-progress 140,300 198,300
Finished goods 184,000 279,300
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2,581,600 2,372,300
Less reserves for obsolescence (324,000) (90,000)
------------ ------------
$ 2,257,600 $ 2,282,300
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Note C - Contracts In Process
Costs incurred, estimated earnings and billings in the RFID Technology
segment, related to contracts for the installation of TSI PRISM system in
process at March 31, 2005 and June 30, 2004 consist of the following:
March 31, June 30,
2005 2004
------------ ------------
(unaudited)
Costs incurred on uncompleted contracts $ 252,200 $ 117,300
Estimated gross profit earned to date 162,800 58,200
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Revenue earned to date 415,000 175,500
Less Billing to date (415,000) (201,300)
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Costs and estimated earnings in excess of
Billing (billing in excess of costs and
earnings) $ - $ (25,800)
============ ============
Note D - Deferred Revenue
Deferred Revenues at March 31, 2005 and June 30, 2004 consist of the
following:
March 31, June 30,
2005 2004
------------ ------------
(unaudited)
Extended warranty revenue $ 105,200 $ 27,200
Less - current portion (105,200) (27,200)
------------ ------------
Deferred revenue - long term $ - $ -
============ ============
11
ALANCO TECHNOLOGIES, INC.
Note E - New Commitments
During March 2005, the Company entered into a technology license
agreement ("License") with AeroScout, Inc., a San Mateo, California based
company ("AeroScout"), a developer of RFID real-time location services
technology utilizing 2.4 GHz wireless networking standards (the "RTLS
Technology"). The License grants to Alanco an exclusive five-year worldwide
license for the corrections market, to acquire, modify or combine the AeroScout
2.4 GHz technology with Alanco's TSI PRISM technology. The License requires
royalty payments to AeroScout for units sold, prepayment of $180,000
(nonrefundable) to be paid over an eight-month period during fiscal year ending
June 30, 2006 that may be applied to royalties and inventory purchases through
the second year of the License, and minimum annual purchase requirements
starting in the second year of the License. If these minimum requirements are
not met, the Company may forfeit the right to the exclusive world-wide license.
Note F - Loss Per Share
Basic loss per share of common stock was computed by dividing net loss
by the weighted average number of shares of common stock outstanding.
Diluted earnings per share are computed based on the weighted average
number of shares of common stock and dilutive securities outstanding during the
period. Dilutive securities are options and warrants that are freely exercisable
into common stock at less than the prevailing market price. Dilutive securities
are not included in the weighted average number of shares when inclusion would
increase the earnings per share or decrease the loss per share. As of March 31,
2005 there were 3,803,750 potentially dilutive securities outstanding.
Note G - Equity
During the nine months ended March 31, 2005, the Company issued a total
of 2,762,600 shares of the Company's Class A Common Stock. Included were
2,438,200 shares issued upon exercise of outstanding warrants and options
generating $1,333,100 in proceeds to the Company and 74,400 shares, valued at
fair market value on date of issue of $73,300, in exchange for services rendered
to the Company. The remaining 250,000 shares were issued as a prepayment for
royalty payments and inventory purchases pursuant to minimum purchase
requirements under a technology licensing agreement. The prepayment value for
the 250,000 shares issued will be determined as market value on the effective
date of the registration statement registering the shares. At March 31, 2005,
the shares are valued, due to the lack of registration, at 90% of the March 31,
2005 market value, or $213,300.
The Company granted five-year warrants to purchase 500,000 shares of
the Company's Class A Common Stock at a strike price of $1.00 per share in
conjunction with the execution of a five-year technology licensing agreement and
issued 75,000 five-year warrants at $.90 per share relating to amending the
Company's line of credit agreement. The warrants are valued under the
Black-Scholes pricing model at approximately $50,000 and $23,000, respectively.
The value for the warrant granted in conjunction with the execution of a
five-year technology licensing agreement is recorded as technology licensing
cost and is being amortized over a five-year period of the license agreement.
The value of the warrant granted relating to amending the Company's line of
credit agreement is being amortized over the term of the amended line of credit
agreement.
The Company declared dividends on the Company's preferred shares during
the nine months and paid the dividends-in-kind through the issuance of 304,400
shares of Series A Preferred Stock valued at $453,700 and 4,800 shares of Series
B Preferred Stock valued at $46,100. The Preferred Stocks are more fully
discussed in the Form-10KSB for the year ended June 30, 2004.
12
ALANCO TECHNOLOGIES, INC.
Note H -Industry Segment Data
Information concerning operations by industry segment follows (unaudited):
Nine Months Ended 03/31 Three Months Ended 03/31
2005 2004 2005 2004
------------ ------------ ------------ ------------
Revenue
Data Storage $ 4,638,200 $ 3,335,600 $ 1,450,700 $ 1,088,900
RFID Technology 715,700 157,000 80,500 132,200
------------ ------------ ------------ ------------
Total Revenue 5,353,900 3,492,600 1,531,200 1,221,100
============ ============ ============ ============
Gross Profit
Data Storage 1,579,400 1,227,700 532,400 363,800
RFID Technology 281,000 84,300 23,500 77,300
------------ ------------ ------------ ------------
Total Gross Profit 1,860,400 1,312,000 555,900 441,100
------------ ------------ ------------ ------------
Gross Margin
Data Storage 34.1% 36.8% 36.7% 33.4%
------------ ------------ ------------ ------------
RFID Technology 39.3% 53.7% 29.2% 58.5%
------------ ------------ ------------ ------------
Overall Gross Margin 34.7% 37.6% 36.3% 36.1%
------------ ------------ ------------ ------------
Selling, General and
Administrative Expense
Data Storage 1,351,700 1,222,700 473,100 398,100
RFID Technology 2,069,200 1,521,900 675,300 523,100
------------ ------------ ------------ ------------
Total Segment Operating Expense 3,420,900 2,744,600 1,148,400 921,200
------------ ------------ ------------ ------------
Operating Profit (Loss)
Data Storage 227,700 5,000 59,300 (34,300)
RFID Technology (1,788,200) (1,437,600) (651,800) (445,800)
Corporate Expense, net (1,358,900) (701,300) (563,800) (252,500)
------------ ------------ ------------ ------------
Operating Loss $ (2,919,400) $ (2,133,900) $ (1,156,300) $ (732,600)
============ ============ ============ ============
Depreciation and Amortization
Data Storage 14,500 22,800 6,500 20,100
RFID Technology 240,500 230,600 81,800 73,600
Corporate 2,300 4,200 900 2,100
------------ ------------ ------------ ------------
Total Depreciation and
Amortization $ 257,300 $ 257,600 $ 89,200 $ 95,800
============ ============ ============ ============
Note I - Related Party Transactions
The Company has a $1.3 million line of credit agreement ("Agreement"),
more fully discussed in the Company's Form 10-KSB for the year ended June 30,
2004, with a private trust controlled by Mr. Donald Anderson, a greater than
five percent stockholder and a member of the Company's Board of Directors.
During the quarter ended March 31, 2005, the Agreement was amended and the
expiration date of the Agreement was extended to July 1, 2007. In consideration
for amending the Agreement, the Company granted the lender a five-year warrant
to purchase 75,000 shares of the Company's Class A Common Stock at a purchase
price of $.90 per share.
13
ALANCO TECHNOLOGIES, INC.
Note J - Line of Credit
At March 31, 2005, the Company had an outstanding balance of $500,000,
which is presented as Notes Payable . The balance is under a $1.3 million line
of credit agreement with a private trust ("Lender"), entered into in June 2002
and modified in April and October of 2003, and March 2005. Under the Agreement,
the Company must maintain a minimum balance due under the line of at least
$500,000 through the July 1, 2007 expiration date. At March 31, 2005, the
Company had $800,000 available under the line of credit agreement.
Note K - Litigation
The Company continues to be a defendant in litigation that relates to
the acquisition, in May of 2002, of substantially all the assets of Technology
Systems International, Inc., a Nevada corporation. No significant new activity
has occurred subsequent to our report of litigation in our Form 10-KSB filed for
the year ended June 30, 2004. Due to internal governance issues affecting the
plaintiff, the litigation has been indefinitely stayed. The Company's
management, in consultation with legal counsel, believes the plaintiff's claims
are without merit and the Company will aggressively defend against the action.
Litigation previously reported as arising from an expired property lease between
the Company's subsidiary, Arraid, Inc., and Arraid Property L.L.C., a Limited
Liability Company, has been deemed immaterial. The Company intends to pursue
legal expense reimbursement from both the Company's insurance carrier and the
Plaintiffs in the litigation matters.
Note L - Subsequent Events
In April 2005 the Company announced it had been awarded a contract to
develop and provide modified TSI PRISM inmate tracking technology for a prison
pilot project in Europe that requires a wireless system transmitting over the
European-approved 2.4 GHz band rather than the 900 MHz band utilized in Alanco's
U.S.A. TSI PRISM installations. The project will utilize technology that
combines TSI PRISM and AeroScout WiFi-based Real Time Locating Services ("RTLS")
technologies. The European project marks the start of a formal partnership
agreement between Alanco and AeroScout for Wi-Fi-based location and tracking
solutions that meet the unique needs of the corrections market. The Company had
entered into a technology agreement in March of 2005 that granted Alanco
exclusive worldwide rights to distribute and create solutions based on AeroScout
RTLS technology for the corrections market.
The Company, in May of 2005, elected to modify the exercise price of
warrants granted to four institutional investors to purchase a total of 700,000
shares of the Company's Class A Common Stock. The warrants were granted in
conjunction with a private placement completed in April 2004. The warrants will
expire on June 30, 2005 and were issued with an exercise price of $1.60. The
exercise price of the warrants was modified to a formula basis as follows:
The exercise price shall be determined as 90% of the average closing
price for the ten (10) trading days prior to exercise of the warrant,
excluding the date of exercise, with a maximum exercise price of $1.60
and a minimum exercise price of $1.10.
The expiration date of the warrants remains June 30, 2005.
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for historical information, the statements contained herein are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. All such forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those expressed or implied by those
14
ALANCO TECHNOLOGIES, INC.
statements. These risks and uncertainties include, but are not limited to, the
following factors: general economic and market conditions; reduced demand for
information technology equipment; competitive pricing and difficulty managing
product costs; development of new technologies which make the Company's products
obsolete; rapid industry changes; failure by the Company's suppliers to meet
quality or delivery requirements; the inability to attract, hire and retain key
personnel; failure of an acquired business to further the Company's strategies;
the difficulty of integrating an acquired business; undetected problems in the
Company's products; the failure of the Company's intellectual property to be
adequately protected; unforeseen litigation; the ability to maintain sufficient
liquidity in order to support operations; the ability to maintain satisfactory
relationships with lenders and to remain in compliance with financial loan
covenants and other requirements under current banking agreements; and the
ability to maintain satisfactory relationships with suppliers and customers.
General
Information on industry segments is incorporated by reference from Note
H - Segment Reporting to the Condensed Consolidated Financial Statements.
Critical Accounting Policies and Estimates
Management's discussion and analysis of financial condition and results
of operations are based upon the condensed consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of our financial
statements requires the use of estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent liabilities. On an ongoing basis, estimates are revalued, including
those related to areas that require a significant level of judgment or are
otherwise subject to an inherent degree of uncertainty. These areas include
allowances for doubtful accounts, inventory valuations, carrying value of
goodwill and intangible assets, estimated profit on uncompleted contracts in
process, income and expense recognition, income taxes, ongoing litigation, and
commitments and contingencies. Our estimates are based upon historical
experience, observance of trends in particular areas, information and/or
valuations available from outside sources and on various other assumptions that
we believe to be reasonable under the circumstances and which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual amounts may differ from these
estimates under different assumptions and conditions.
Accounting policies are considered critical when they are significant
and involve difficult, subjective or complex judgments or estimates. We
considered the following to be critical accounting policies:
Principles of consolidation - The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All
material intercompany accounts and transactions have been eliminated in
consolidation.
Revenue recognition - The Company recognizes revenue from the Data
Storage Segment, net of anticipated returns, at the time products are shipped to
customers, or at the time services are provided. Revenue from material long-term
contracts (in excess of $250,000 and over a 90-day completion period) in both
the Data Storage Segment and the RFID Technology Segment are recognized on the
percentage-of-completion method for individual contracts, commencing when
significant costs are incurred and adequate estimates are verified for
substantial portions of the contract to where experience is sufficient to
estimate final results with reasonable accuracy. Revenues are recognized in the
ratio that costs incurred bear to total estimated costs. Changes in job
performance, estimated profitability and final contract settlements would result
in revisions to cost and income, and are recognized in the period in which the
revisions were determined. Contract costs include all direct materials,
subcontracts, labor costs and those direct and indirect costs related to
contract performance. General and administrative costs are charged to expense as
incurred. At the time a loss on a contract becomes known, the entire amount of
the estimated ultimate loss is accrued.
15
ALANCO TECHNOLOGIES, INC.
Long-lived assets and intangible assets - The Company reviews carrying
values at least annually or whenever events or circumstances indicate the
carrying values may not be recoverable through projected discounted cash flows.
Results of Operations
(A) Three months ended 03/31/05 versus 03/31/04
Sales
Consolidated sales for the quarter ended March 31, 2005 was $1,531,200,
compared to $1,221,100 for the comparable quarter of the previous year, an
increase of $310,100, or 25.4%. The increase is attributed to sales increases in
the Data Storage segment, which increased $361,800 to $1,450,700 in the current
quarter from $1,088,900 reported for the three months ended March 31, 2004. The
RFID Technology segment reported a sales decrease to $80,500 in the quarter
ended March 31, 2005 compared to $132,200 for the comparable quarter in the
prior fiscal year. The increase in Data Storage segment sales compared to the
previous year resulted from increased demand for the Company's data storage
products as companies increased technology expenditures in reaction to improving
economic conditions. Sales of the RFID Technology segment decreased due to a
reduction in current contract in progress revenue resulting from the continued
prison contract and funding postponements caused by fiscal budgetary
constraints.
Gross Profit and Operating Expenses
Gross profit generated during the quarter amounted to $555,900, an
increase of $114,800, or 26.0%, when compared to $441,100 reported for the same
quarter of the prior year. Gross margins increased from 36.1% for the quarter
ended March 31, 2004 to 36.3% for the current quarter. The increase in gross
margin resulted from a change in product mix to higher gross margin products in
the Data Storage segment.
Selling, general and administrative expenses for the current quarter
increased to $1,712,200, a $538,500 increase, or 45.9%, when compared to
$1,173,700 incurred in the comparable quarter of fiscal year 2004. The major
component of the increase in selling, general and administrative expense were
increases of approximately $265,000 in legal expense related to the litigation
in which the Company is currently involved (See Litigation Footnote), increases
in sales commissions related to Data Storage segment sales growth and increases
in engineering salaries, R&D expenditures and marketing costs related to the
RFID Technology segment's continued aggressive development in the core United
States prison market, including the recently established lobbying activities in
key states.
Operating Loss
The Operating Loss for the quarter was ($1,156,300) compared to a loss
of ($732,600) for the same quarter of the prior year, an increase of 57.8%. The
increased loss resulted primarily from increased legal expenses and increased
development expenditures for the current quarter compared to the comparable
quarter of the prior fiscal year in our RFID Technology segment.
Interest and Dividends Expense
Interest expense for the quarter amounted to $11,200 compared to
interest expense of $21,500 for the same quarter in the prior year. The interest
expense reduction resulted from a decrease in average borrowing during the
quarter accomplished by the Company's effort in raising additional working
capital. The Company paid quarterly in-kind Series B Preferred Stock dividends
with values of $252,000 and $218,200 in the quarters ended March 31, 2005 and
2004, respectively.
Net Loss Attributable to Common Stockholders
Net Loss Attributable to Common Stockholders for the quarter ended
March 31, 2005 amounted to ($1,355,600), or ($.05) per share, compared to a loss
of ($963,300), or ($.05) per share, in the comparable quarter of the prior year.
Although the Company has shown improved operating results in its Data Storage
segment and anticipates improved future operating results in its RFID Technology
segment as the economy improves, actual results in both the Data Storage segment
and the RFID Technology segment may be affected by unfavorable economic
16
ALANCO TECHNOLOGIES, INC.
conditions and reduced capital spending budgets. If the economic conditions in
the United States worsen or if a wider or global economic slowdown occurs,
Alanco may experience a material adverse impact on its operating results and
business conditions.
(B) Nine months ended 03/31/05 versus 03/31/04
Sales
Consolidated sales for the nine months ended March 31, 2005 was
$5,353,900, an increase of $1,861,300, or 53.3%, compared to $3,492,600 reported
for the comparable period of the previous year. The increase is attributed to
revenue increases in the Company's Data Storage segment which reported sales for
the nine months of $4,638,200, an increase of $1,302,600, or 39.1%, compared to
$3,335,600 reported for the nine months ended March 31, 2004, and the RFID
Technology segment, which reported nine months' sales of $715,700 compared to
$157,000 for the comparable period in the prior fiscal year.
Gross Profit and Operating Expenses
Gross profit generated during the nine months amounted to $1,860,400,
an increase of $548,400, or 41.8%, when compared to the $1,312,000 reported for
the same nine-month period of the prior year. Gross margins decreased from 37.6%
for the nine months ended March 31, 2004 to 34.7% for the current period. The
decrease in gross margin resulted primarily from a change in product mix to
lower gross margin products in the Data Storage segment.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the nine months ended
March 31, 2005 increased to $4,779,800, a $1,333,900 increase, or 38.7%, when
compared to $3,445,900 incurred in the comparable period of fiscal year 2004.
The major components of the increase in selling, general and administrative
expense were increases of approximately $570,000 in legal expense related to the
litigation in which the Company is currently involved (See Litigation Footnote),
an increase in R&D expenditures of $225,000 related to new technology in the
RFID Technology segment that reduced the value of existing inventory, increases
in sales commissions related to increases in Data Storage segment sales and RFID
Technology segment's continued aggressive development in the core United States
prison market, including the recently established lobbying activities in key
states.
Operating Loss
The Operating Loss for the nine-month period was ($2,919,400) compared
to a loss of ($2,133,900) for the same nine-month period of the prior fiscal
year, an increase of 36.8%. The increased loss resulted primarily from increased
legal expenses and R&D expenditures for the current period compared to the
comparable nine-month period of the prior year.
Interest and Dividends Expense
Interest expense for the nine months ended March 31, 2005 amounted to
$38,800 compared to interest expense of $128,600 for the same nine-month period
in the prior year. The reduction in interest expense resulted from a decrease in
average borrowing during the period accomplished by the Company's successful
effort in raising additional working capital. The Company paid in-kind Preferred
Stock dividends with values of $503,700 and $245,200 in the nine months ended
March 31, 2005 and 2004, respectively.
Net Loss Attributable to Common Stockholders
Net Loss Attributable to Common Stockholders for the nine months ended
March 31, 2005 amounted to ($3,387,200), or ($.13) per share, compared to a loss
of ($2,459,400), or ($.15) per share, in the comparable period of the prior
year. Although the Company has shown improved operating results in its Data
Storage segment and anticipates improved future operating results in its RFID
Technology segment as the economy improves, actual results in both the Data
Storage segment and the RFID Technology segment may be affected by unfavorable
economic conditions and reduced capital spending budgets. If the economic
conditions in the United States worsen or if a wider or global economic slowdown
occurs, Alanco may experience a material adverse impact on its operating results
and business conditions.
17
ALANCO TECHNOLOGIES, INC.
Liquidity and Capital Resources
The Company's current assets at March 31, 2005 exceeded current
liabilities by $2,712,100, resulting in a current ratio of 2.63 to 1. At June
30, 2004 the Company's current assets exceeded current liabilities by
$3,721,000, reflecting a current ratio of 3.85 to 1. The decrease in the current
ratio at March 31, 2005 when compared to June 30, 2004 resulted from losses
incurred during the period. Accounts receivable of $1,053,500 at March 31, 2005,
reflects an increase of $396,300, or 60.3%, when compared to the $657,200
reported as consolidated accounts receivable at June 30, 2004. The accounts
receivable balance at March 31, 2005 represented fifty-three days' sales in
receivables compared to fifty-one days' sales at June 30, 2004.
.
Consolidated inventories at March 31, 2005 amounted to $2,257,600, a
decrease of $24,700, or 1%, when compared to $2,282,300 at June 30, 2004. The
March 31, 2005 reflects an inventory turnover of 2.1 compared to 1.3 at June 30,
2004. Although the March 31, 2005 balance reflects only a slight decrease from
the June 30, 2004 balance, it is a much larger increase when compared to
inventory levels of prior reporting periods and reflects management's continued
anticipated revenue increases for both the Data Storage segment and the RFID
Technology segment.
At March 31, 2005, the Company had an outstanding balance of $500,000
under a $1.3 million formula-based revolving bank line of credit agreement with
interest calculated at prime plus 4%. The line of credit agreement formula is
based upon current asset values and is used to finance working capital. At March
31, 2005, the Company had $800,000 available under the line of credit. See Line
of Credit Footnote J for additional discussion of the existing line of credit
agreement.
Cash used in operations for the nine- month period was $2,689,200, a
decrease of $167,400 when compared to cash used in operations of $2,856,600 for
the comparable period ended March 31, 2004. The decrease was due primarily to
the stabilization in inventory values over the nine-month period ended March 31,
2005 when compared to the same period in the prior year, offset by an increase
in loss from operations for the nine-month period.
During the nine months ended March 31, 2005, the Company reported cash
flows from investing activities of $31,800, compared to $248,100 reported for
the nine months ended March 31, 2004. The reduction reflects the reduced
collections of notes receivable balances and an increase in the purchase of
property, plant and equipment, offset somewhat by the increase in net cash from
discontinued operations.
Cash provided by financing activities for the nine months ended March
31, 2005 consisted primarily of $1.3 million in net proceeds received from the
sale of common stock. Cash provided by financing activities during the same
period in the prior fiscal year included the collection of subscription
receivables in the amount of $899,200 and net proceeds from the sale of common
and preferred stock of $1,743,400, offset by net repayment on borrowings during
the period of $105,400.
The Company believes that additional cash resources may be required for
working capital to achieve planned operating results for fiscal year 2006 and,
18
ALANCO TECHNOLOGIES, INC.
if working capital requirements exceed current availability, the Company
anticipates raising capital through additional borrowing, the exercise of stock
options and warrants and/or the sale of stock in a private placement. The
additional capital would supplement the projected cash flows from operations and
the line of credit agreement in place at March 31, 2005. If additional working
capital was required and the Company was unable to raise the required additional
capital, it may materially affect the ability of the Company to achieve its
financial plan. The Company has raised a significant amount of capital in the
past and believes it has the ability, if needed, to raise the additional capital
to fund the planned operating results for fiscal year 2006. See Footnote G -
Equity for additional information related to working capital raised by the
Company during the nine months ended March 31, 2005, necessary to achieve
planned operating results for the current fiscal year results for fiscal year.
Item 3 - CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures designed to
ensure that it is able to collect the information it is required to disclose in
the reports it files with the Securities and Exchange Commission (SEC), and to
process, summarize and disclose this information within the time periods
specified in the rules of the SEC. Based on various evaluations of the Company's
disclosure controls and procedures, some of which occurred during the 90 days
prior to the filing date of this report, the Chief Executive and Chief Financial
Officers believe that these controls and procedures are effective to ensure that
the Company is able to collect, process and disclose the information it is
required to disclose in the reports it files with the SEC within the required
periods.
The Company also maintains a system of internal controls designed to
provide reasonable assurance that: transactions are executed in accordance with
management's general or specific authorization; transactions are recorded as
necessary (1) to permit preparation of financial statements in conformity with
generally accepted accounting principles, and (2) to maintain accountability for
assets. Access to assets is permitted only in accordance with management's
general or specific authorization; and the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
Since the date of the most recent evaluation of the Company's internal
controls by the Chief Executive and Chief Financial Officers, there have been no
significant changes in such controls or in other factors that could have
significantly affected those controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company continues to be a defendant in litigation that relates to
the acquisition, in May of 2002, of substantially all the assets of Technology
Systems International, Inc., a Nevada corporation. No significant new activity
has occurred subsequent to our report of litigation in our Form 10-KSB filed for
the year ended June 30, 2004. Due to internal governance issues affecting the
plaintiff, the litigation has been indefinitely stayed. The Company's
management, in consultation with legal counsel, believes the plaintiff's claims
are without merit and the Company will aggressively defend the actions.
Litigation previously reported as arising from an expired property lease between
the Company's subsidiary, Arraid, Inc. and Arraid Property L.L.C., a Limited
Liability Company, has been deemed immaterial. The Company intends to pursue
legal expense reimbursement from both the Company's insurance carrier and the
Plaintiffs in the litigation matters.
Item 2. CHANGES IN SECURITIES
During the nine months ended March 31, 2005, the Company issued 304,400
shares of Series A Preferred Stock and 4,800 Shares of Series B Preferred Stock
as dividend in-kind payments, 2,438,200 shares of Class A Common Stock for the
exercise of existing warrants and options and 324,400 shares of Common Stock for
services rendered.
19
ALANCO TECHNOLOGIES, INC.
Item 6. EXHIBITS
31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Certification of Chief Executive Officer and Chief Financial
Officer
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
ALANCO TECHNOLOGIES, INC.
(Registrant)
/s/ John A. Carlson
-------------------
John A. Carlson
Executive Vice President and
Chief Financial Officer
20
ALANCO TECHNOLOGIES, INC.
EXHIBIT 31.1
Certification of
Chairman and Chief Executive Officer
of Alanco Technologies, Inc.
I, Robert R. Kauffman, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Alanco
Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the period presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 16, 2005
/s/ Robert R. Kauffman
---------------------
Robert R. Kauffman
Chairman and Chief Executive Officer
21
ALANCO TECHNOLOGIES, INC.
EXHIBIT 31.2
Certification of
Vice President and Chief Financial Officer
of Alanco Technologies, Inc.
I, John A. Carlson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Alanco
Technologies, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this report.
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the period presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: May 16, 2005
/s/ John A. Carlson
---------------------
John A. Carlson
Executive Vice President and Chief Financial Officer
22
ALANCO TECHNOLOGIES, INC.
EXHIBIT 32.1
Certification of
Chief Executive Officer and Chief Financial Officer
of Alanco Technologies, Inc.
This certification is provided pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and accompanies this quarterly report of Form 10-QSB
(the "Report") for the period ended March 31, 2005 of Alanco Technologies, Inc.
(the "Issuer").
Each of the undersigned, who are the Chief Executive Officer and Chief
Financial Officer, respectively, of Alanco Technologies, Inc., hereby certify
that, to the best of each such officer's knowledge:
(i) the Report fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or
78o(d)); and
(ii) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Issuer.
Dated: May 16, 2005
/s/ Robert R. Kauffman
----------------------
Robert R. Kauffman
Chief Executive Officer
/s/ John A. Carlson
----------------------
John A. Carlson
Chief Financial Officer