SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarter ended . . . . . . . . . . . . . . . . . March 31, 2001
Commission file number . . . . . . . . . . . . . . . . . . . . .0-9347
ALANCO TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Arizona 86-0220694
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
15900 North 78th Street, Suite 101, Scottsdale, Arizona 85260
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(Address of principal executive offices) (Zip Code)
(480) 607-1010
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(Registrant's telephone number, including area code)
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
YES XX NO
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As of May 7, 2001 there were 6,778,918 shares of common stock
issued and outstanding.
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
Consolidated Balance Sheets
March 31, 2001 and June 30, 2000 . . . . . . . . 3
Consolidated Statements of Operations
For the three months ended
March 31, 2001 and 2000 . . . . . . . . . . . . .4
Consolidated Statements of Operations
For the nine months ended
March 31, 2001 and 2000 . . . . . . . . . . . . .5
Consolidated Statements of Cash Flows
For the nine months ended
March 31, 2001 and 2000 . . . . . . . . . . . . .6
Notes to Consolidated Financial Statements . . . . . . . 8
Note A - Basis of Presentation
Note B - Inventories
Note C - Sale of Assets
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . .9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . .11
Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . . .11
Signature . . . . . . . . . . . . . . . . . . . . . . . . . .12
2
ALANCO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2001 AND JUNE 30, 2000
ASSETS
March 31, 2001 June 30, 2000
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CURRENT ASSETS
Cash $ 41,600 $ 176,700
Accounts receivable, net 1,737,700 1,078,300
Notes receivable, current 872,200 3,019,000
Inventories 1,136,400 1,112,700
Prepaid expenses 50,100 38,300
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Total current assets 3,838,000 5,425,000
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PROPERTY, PLANT AND EQUIPMENT, NET 592,900 628,600
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OTHER ASSETS
Intangible assets, net 1,456,300 1,558,000
Notes Receivable 971,100 560,000
Investment at cost 2,474,900 2,465,700
Net assets held for sale 606,600 770,900
Other assets 38,500 26,000
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Total other assets 5,547,400 5,380,600
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TOTAL ASSETS $ 9,978,300 $ 11,434,200
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable & accruals $ 888,400 $ 1,096,800
Bank line 690,400 498,500
Notes payable, current 3,200 868,100
Deferred gain, pollution control products 589,700 --
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Total Current Liabilities 2,171,700 2,463,400
LONG TERM LIABILITIES
Lease payable, long term 2,600 --
Deferred gain, pollution control products 378,000 --
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TOTAL LIABILITIES 2,552,300 2,463,400
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SHAREHOLDERS' EQUITY
Preferred Stock:
Class A, cumulative convertible
preferred stock; 5,000,000 shares
authorized, of which 500,000 have been
classified as Series B. Series B issued
and outstanding of 294,600 at 3/31/01 1,178,300 1,040,000
Class B, cumulative preferred stock:
2,000,000 authorized and none outstanding -- --
Common Stock, no par value, 100,000,000 shares
6,778,918 and 6,286,415 shares issued,
respectively 55,791,900 55,738,300
Treasury Stock (40,000) --
Accumulated deficit (49,504,200) (47,807,500)
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Total shareholders equity 7,426,000 8,970,800
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TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 9,978,300 $ 11,434,200
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The accompanying notes are an integral part of these financial statements
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ALANCO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
2001 2000
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NET SALES $ 2,385,300 $ 497,400
Cost of goods sold 1,529,700 299,300
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GROSS MARGIN 855,600 198,100
Selling, general and administrative 1,634,900 693,400
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OPERATING LOSS (779,300) (495,300)
Other income (expense), net 7,500 (1,800)
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LOSS - CONTINUING OPERATIONS (771,800) (497,100)
Preferred stock dividend (41,700) --
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LOSS - CONTINUING OPERATIONS ATTRIBUTABLE TO
COMMON SHAREHOLDERS (813,500) 497,100)
LOSS - DISCONTINUED OPERATIONS (9,500) (27,600)
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NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS $ (823,000) $ 524,700)
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LOSS PER SHARE - BASIC AND DILUTED
- Continuing Operations $ (0.12) $ (0.09)
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- Discontinued Operations $ (0.00) $ (0.00)
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- Net Loss $ (0.12) $ (0.09)
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WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 6,787,900 5,616,700
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The accompanying notes are an integral part of these financial statements
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ALANCO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31,
2001 2000
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NET SALES $ 7,694,500 $ 1,142,800
Cost of goods sold 4,665,000 589,600
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GROSS MARGIN 3,029,500 553,200
Selling, general and administrative 4,899,600 1,517,300
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OPERATING LOSS (1,870,100) (964,100)
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Other income (expense), net 22,700 (6,500)
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LOSS - CONTINUING OPERATIONS (1,847,400) (970,600)
Preferred stock dividend (98,300) --
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LOSS - CONTINUING OPERATIONS ATTRIBUTABLE
TO COMMON SHAREHOLDERS (1,945,700) (970,600)
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Operating income (loss) - disc. operations (3,000) 91,000
Gain - sale of pollution control products 252,000 --
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INCOME - DISCONTINUED OPERATIONS 249,000 91,000
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NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (1,696,700) $ (879,600)
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EARNINGS (LOSS) PER SHARE
- BASIC AND DILUTED
- Continuing Operations $ (0.29) $ (0.17)
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- Discontinued Operations $ 0.04 $ 0.02
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- Net Loss $ (0.25) $ (0.16)
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,787,900 5,616,700
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The accompanying notes are an integral part of these financial statements
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ALANCO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing operations $ (1,847,400) $ (970,600)
Adjustments to reconcile net income to net
Cash used in operating activities:
Depreciation and amortization 308,700 251,700
(Increase) decrease in:
Accounts receivable (659,400) 366,300
Inventory (23,600) (411,600)
Prepaid expenses and other assets (11,700) (129,300)
Other -- 84,200
(Increase) decrease in:
Accounts payable and accrued expenses 208,400 327,800
Billings in excess of costs & est.
earnings -- (95,200)
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Net cash used in continuing operations (2,441,800) (576,700)
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Income from discontinued operations 249,000 91,100
Net assets of disposed operations 164,300 --
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Net cash used in operating activities (2,028,500) (485,600)
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CASH FLOWS FROM INVESTING ACTIVITIES
Collection of notes receivable 1,735,700 --
Purchase of property, plant and equipment (165,200) (449,100)
Intangible Assets, related to acquisitions (6,100) (542,300)
Deferred Gain 967,700 --
Purchase of treasury stock (40,000) --
Other (21,900) (22,700)
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Net cash provided by (used in) investing
activities 2,470,200 (1,014,100)
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The accompanying notes are an integral part of these financial statements
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ALANCO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
2001 2000
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CASH FLOWS FROM FINANCING ACTIVITIES
Repayment on borrowings (670,400) 8,500
Issuance of Stock 11,100 888,300
Proceeds from sale of preferred stock 138,300 --
Dividends on Preferred Stock (98,300) --
Proceeds from exercise of options 42,500 361,000
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Net cash provided by (used in) financing
activities (576,800) 1,257,800
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NET DECREASE IN CASH $ (135,100) $ (241,900)
CASH AND CASH EQUIVALENTS, beginning of year $ 176,700 $ 661,700
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CASH AND CASH EQUIVALENTS, end of quarter $ 41,600 $ 419,800
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SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest $ 15,287 $ 20,900
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Value of stock issued for services $ 11,100 $ 81,900
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The accompanying notes are an integral part of thse financial statements
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ALANCO TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR NINE MONTHS ENDED MARCH 31, 2001
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared 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. These interim consolidated financial statements
should be read in conjunction with the Company's June 30, 2000, Annual Report on
Form 10-KSB. In the opinion of management, the accompanying consolidated
financial statements include all adjustments consisting of normal recurring
accruals necessary to present fairly the financial position, results of
operations and statement of cash flows as of March 31, 2001, and for all periods
presented. The results of operations for the nine months ending March 31, 2001,
are not necessarily indicative of the operating results to be expected for an
entire year.
All significant intercompany balances, transactions and stock holdings
have been eliminated from the accompanying interim financial statements.
Note B - Inventories
Inventories have been recorded at the lower of cost or market. The
composition of inventories as of March 31, 2001 and June 30, 2000, is listed
below:
March 31, 2001 June 30, 2000
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Finished goods $ 706,700 $ 1,008,100
Work-in-process 147,300 87,100
Raw material 282,400 17,500
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$ 1,136,400 $ 1,112,700
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Note C - Sale of Assets
During the quarter ended December 31, 2000, the Company sold its
subsidiary, Alanco Environmental Technologies (Beijing) Co., Ltd., and the
patents related to Charged Dry Sorbent Injection (CDSI) technology to a private
New Jersey corporation for $1,450,000. The transaction completed the sale of the
Company's remaining Pollution Control Products assets.
The sales proceeds consist of cash and notes with payments scheduled
through December 31, 2003. In addition, the Company will receive a cash royalty
on each CDSI system sold for a period of five years.
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The transaction resulted in a potential Gain on Sale of approximately
$1.2 million, of which $252,000 was recognized during the second quarter with
the remaining gain to be recognized upon receipt of future payments. At March
31, 2001, approximately $589,700 of the deferred gain was classified as current
and $378,000 was classified as long term.
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
1. Results of Operation
In accordance with Generally Accepted Accounting Principles, the
Company has limited its reported consolidated revenues for fiscal quarter and
nine months ended March 31, 2001 to revenues from its Computer Data Storage
segment, the only operation classified currently as a continuing operation. To
maintain comparability, certain balances from the Consolidated Statement of
Operations and Consolidated Statement of Cash Flows for the respective periods
ended March 31, 2000 have been restated.
(A) Three months ended 3/31/01 versus 3/31/00
Consolidated revenue for the quarter ended March 31, 2001 was
$2,385,300 compared to $497,400 for the comparable quarter of the previous year.
Consolidated revenue for the quarter ended March 31, 2001 included revenues from
Excel/Meridian Data, Inc. ("Excel/Meridian"), an acquisition that was effective
in June of 2000. If that acquisition had been effective during the quarter ended
March 31, 2000, comparative prior fiscal year quarter revenues would increase by
approximately $1,730,400 (pro forma).
The Company reported a loss from continuing operations attributable to
common shareholders for the quarter ended March 31, 2001 of $813,500, or $.12
per share, compared to a loss of $497,100, or $.09 per share, for the comparable
quarter in 2000. The higher loss reported for the current quarter was primarily
attributable to increased investments in the Company's Storage Area Network
(SAN) market development initiative and weakness in the general IT markets,
which caused delays in purchase commitments for SAN products, and resulted in
reduced revenue from other data storage products, including Network Attached
Storage (NAS) products.
The Consolidated Statement of Operations for the quarter ended March
31, 2001 reflected a loss from discontinued operations of $9,500, or $nil per
share, compared to a loss from discontinued operations of $27,600, or $nil per
share, for the comparable quarter in 2000.
The net loss for the quarter attributed to common shareholders was
$823,000, or $.12 per share, compared to a loss of $524,700, or $.09 per share,
for the same quarter in 2000.
9
Gross profit for the quarter amounted to $855,600, or 35.9%, compared
to $198,100, or 39.8%, for the comparable quarter a year earlier. The increase
in Gross Profit resulted from increases in sales while the decrease in Gross
Profit Percentage resulted from changes in product mix.
Selling, general and administrative expenses for the current quarter
increased to $1,634,900, compared to $693,400 incurred in the comparable quarter
of 2000. The increase is attributable to sales costs associated with the higher
sales volume and the continued operating investment related to the
implementation of the SanOne Storage Area Network (SAN) market development.
(B) Nine Months ended 3/31/01 versus 3/31/00
Consolidated revenue for the nine months ended March 31, 2001 was
$7,694,500, compared to $1,142,800 for the comparable period of the previous
year. Revenues for the nine-month period ended March 31, 2001 include revenues
from Excel/Meridian Data, Inc. ("Excel/Meridian"), an acquisition that was
effective in June of 2000. If that acquisition had been effective during the
comparable nine-month period ended March 31, 2000, reported revenues for the
nine months ended March 31, 2000 would increase by approximately $4,818,000
(pro forma).
The Company reported a loss from continuing operations attributable to
common shareholders for the nine-month period ended March 31, 2001 of
$1,945,700, or $.29 per share, compared to a net loss of $970,600, or $.17 per
share for the comparable period in 2000. The increased loss for the current
period was attributable primarily to planned operating investments related to
the implementation of the Company's SAN market development initiative.
The Consolidated Statement of Operations for the nine months ended
March 31, 2001 reflected income from discontinued operations of $249,000, or
$.04 per share, compared to income from discontinued operations of $91,000, or
$.02 per share, for the comparable period in 2000. Included in income from
discontinued operations for the nine-month period is a gain on sale of pollution
control assets of $252,000.
The net loss for the nine months ended March 31, 2001 attributed to
common shareholders was $1,696,700, or $.25 per share, compared to a loss of
$879,600, or $.16 per share, for the same nine-month period of 2000.
Gross profit for the period amounted to $3,029,500, or 39.4%, compared
to $553,200, or 48.4%, for the comparable nine-month period a year earlier. The
increase in Gross Profit resulted from increased sales while the decrease in
Gross Profit percentage resulted from changes in the types of products sold.
Selling, general and administrative expenses for the current nine
months ended March 31, 2001 increased to $4,899,600, compared to $1,517,300
incurred in the comparable period of 2000. The increase in selling, general and
administrative expense is attributable to costs associated with the
10
substantially higher sales volume and the continued operating investment
related to the implementation of the SanOne Storage Area Network (SAN) market
development initiative.
2. Liquidity and Capital Resources
The Company's current assets at March 31, 2001 of approximately $3.8
million exceeded current liabilities of $2.2 million by $1.6 million, and
resulted in a current ratio of 1.7 to 1. At June 30, 2000 the Company reported
current assets of approximately $5.4 million with current liabilities of $2.5
million, resulting in a current ratio of 2.2 to 1. The decrease in current
assets resulted from collection of notes receivable related to the sale of
Alanco Environmental Manufacturing, Inc. (completed effective June of 2000),
offset by increases in accounts receivable and inventories. The decrease in
current liabilities resulted from reductions in notes payable and accounts
payable and accruals, offset by increases in bank lines and the deferred gain on
sale of assets, (see Note C above).
Cash used in continuing operations for the nine months was
approximately $2,441,800, an increase of $1,865,100 when compared to cash used
in continuing operations of $576,700 for the comparable nine-month period ended
March 31, 2000. The increase in cash used in continuing operations was due to
increases in losses from continuing operations, increases in accounts receivable
and decreases in accounts payable and accrued expenses.
During the second quarter of the current fiscal year, the Company
renewed its formula-based Bank Line of Credit Agreement ("Agreement"). The new
Agreement, which expires on December 26, 2001, increased the line of credit from
$1.0 million to $1.5 million and reduced the interest rate to prime plus 1.0%.
Management believes that cash balances and current bank lines are adequate to
fund the Company's working capital needs for the next twelve months.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - none
Item 6. EXHIBITS
(A) Reports on Form 8-K - None
(B) Reports on Form S-8 - None
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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 there under duly authorized.
ALANCO TECHNOLOGIES, INC.
(Registrant)
/s/John A. Carlson
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John A. Carlson
Chief Financial Officer
Date: May 11, 2001
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