Alanco Technologies, Inc. and Subsidiaries Pro Forma Condensed Consolidated Balance Sheet (Unaudited) March 31, 2006 Pro Forma Consolidated Unaudited Financial Information: The following represents a pro forma condensed consolidated balance sheet as of March 31, 2006, assuming the Company's acquisition of StarTrak Systems, LLC was consumated as of that date. --------------(Dollars in Thousands)---------------- Alanco StarTrak Pro Forma Pro Forma Technologies Systems Adjustments Consolidated Inc. LLC Amounts ASSETS Current Assets: Cash $ 197 $ 49 $ $ 246 Accounts Receivable, Net 925 1,011 1,936 Notes receivable 30 0 30 Inventory 2,253 794 3,047 Other Current Assets 545 89 634 Total Current Assets 3,950 1,943 5,893 Property and Equipment, net 196 47 243 Goodwill 5,356 13,700 (1) 19,056 Intangible Assets, Net 395 1,600 (2) 1,995 Other Assets, Net 97 6 103 ----------------------------------------------------- $ 9,994 $ 1,996 $ 15,300 $ 27,290 ===================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Notes payable - current portion $ 89 $ 555 $ 257 (1) $ 901 Due to Members 838 838 Accounts Payable & Accrued Expense 1,494 2,928 168 (1) 4,590 Deferred Revenue & Customer Advances 47 1,243 1,290 Billing in exess of Costs and Est. Earnings 32 32 ----------------------------------------------------- Total Current Liabilities 1,662 5,564 425 7,651 Notes Payable, Long-term - Net 1,314 2,000 3,314 Preferred Stock - Series B 719 719 Shareholders Equity 6,299 (5,568) 9,307 (1) 15,606 5,568 (1) ----------------------------------------------------- Total Liabilities & Shareholders' Equity $ 9,994 $ 1,996 $ 15,300 $ 27,290 ===================================================== (1) Pro forma adjustments to reflect the purchase of StarTrak Systems,LLC ("StarTrak") for the assumption of $5,568 million in liabilities over assets and the issuance of 13.2 million of Alanco Class A Common Shares to the owners valued at $9.2 million. Costs associated with the acquisition amounted to approximately $532,000, resulting in a short term note payable of $257,000, accounts payable of $168,000 and the issuance of approximately 153,500 common shares valued at $107,000. The amount allocated to other intangible assets represents management's estimate of the value of other intangible assets, including patents, trademarks, software, etc. The Company has engaged an independent consultant to appraise StarTrak's assets and propose an allocation of the purchase price. The results of the appraisal will be used to record the acquisition effective June 30, 2006. ALANCO TECHNOLOGIES, INC AND SUBSIDIARIES PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) For the Year ended June 30, 2005 The following represents an unaudited pro forma condensed consolidated statement of operations for the year ended June 30, 2005, assuming the Company's acquisition of StarTrak Systems LLC was consumated on July 1, 2004. - - --------------(Dollars in Thousands)-------------- Alanco StarTrak Pro Forma Pro Forma Technologies, Systems Adjustments Consolidated Inc. LLC Amounts ------------------------------------------------- Sales $7,184 $6,404 $13,588 ------------------------------------------------- Cost of Sales 4,676 4,645 9,321 Selling, General and Administrative Expense 6,371 5,815 12,186 Amortization of Intangibles - Startrak 220 (2) 220 ------------------------------------------------- 11,047 10,460 21,727 ------------------------------------------------- Operating Loss (3,863) (4,056) (8,139) Other Income (Expense) Interest Expense, net (35) (272) (53) (1) (360) Other Income 107 200 307 ------------------------------------------------- Loss From Operations (3,791) (4,128) (53) (1) (8,192) Preferred Stock Dividends - paid in kind (521) 0 (521) ------------------------------------------------- Net Loss Attributable to Common Stockholders ($4,312) ($4,128) ($8,713) ================================================= Net Loss Per Share - Basic and Diluted ($0.17) ($0.23) ========== ============ Weighted Average Common Shares Outstanding - shares in thousands 25,356 13,353 (1) 38,709 ================================================= (1) Additional interest expense and common shares related to acquisition (2) To record management's estimate of amortization expense-related purchase price allocation. ALANCO TECHNOLOGIES, INC AND SUBSIDIARIES PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) For the Nine Months ended March 31, 2006 The following represents an unaudited pro forma condensed consolidated statement of operations for the nine months ended March 31, 2006, assuming the Company's acquisition of StarTrak Systems LLC was consumated on July 1, 2005. --------------(Dollars in Thousands)-------------- Alanco StarTrak Pro Forma Pro Forma Technologies, Systems Adjustments Consolidated Inc. LLC Amounts ------------------------------------------------- Sales $4,693 $5,764 $10,457 ------------------------------------------------- Cost of Sales 3,085 4,035 7,120 Selling, General and Administrative Expense 4,717 4,417 9,134 Amortization of Intangibles - StarTrak 165 (2) 165 ------------------------------------------------- 7,802 8,452 16,419 ------------------------------------------------- Operating Loss (3,109) (2,688) (5,962) Other Income (Expense) Interest Expense, net (66) (282) (40) (1) (388) Other Income 77 143 220 ------------------------------------------------- Loss From Operations (3,098) (2,827) (6,130) Preferred Stock Dividends - paid in kind (565) 0 (565) ------------------------------------------------- Net Loss Attributable to Common Stockholders ($3,663) ($2,827) ($6,695) ================================================= Net Loss Per Share - Basic and Diluted ($0.13) ($0.16) ========== ========= Weighted Average Common Shares Outstanding - shares in thousands 28,352 13,353 (1) 41,705 ================================================= (1) Additional interest expense and common shares related to acquisition (2) To record management's estimate of amortization expense-related purchase price allocation.