SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
The Securities and Exchange Act of 1934
For the quarter ended...........................September 30,1995
Commission file number.....................................0-9347
ALANCO ENVIRONMENTAL RESOURCES CORPORATION
(formerly known as Alanco Resources Corporation)
(Exact name of registrant as specified in its charter)
Arizona 86-0220694
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4110 North Scottsdale Road, Suite 200, Scottsdale, Arizona 85251
(Address of principal executive office) (Zipcode)
(602) 874-0448
(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 and 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
As of September 30, 1995 there were 30,597,932 shares of
common stock outstanding.
ALANCO ENVIRONMENTAL RESOURCES CORPORATION
INDEX
Page Number
PART I. FINANCIAL INFORMATION
Item 2. Financial Statements
Consolidated Balance Sheets
September 30, 1995 (unaudited) and
June 30, 1995 (audited)................ 3-4
Consolidated Statements of Operations
For the three months ended September
30, 1995 and 1994 (unaudited).......... 5
Consolidated Statements of Shareholders'
Equity for the three months ended
September 30, 1995 and 1994 (unaudited). 6
Consolidated Statements of Cash Flows
For the three months ended September
30, 1995 and 1994 (unaudited).......... 7-8
Notes to Consolidated Financial
Statements (unaudited)................. 9-12
Item 3. Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 13
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............ 13
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ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1995 AND JUNE 30, 1995
September 30, 1995 June 30, 1995
(unaudited) (audited)
-------------- ----------------
ASSETS
CURRENT ASSETS
Cash $ 706,789 $ 607,411
Accounts receivable -net (note 2) 840,598 480,838
Notes receivables 144,406 144,406
Receivable - other (note 2) 658,405 907,368
Inventory of finished and unfinished goods
at lower of cost or market (note 3) 1,173,651 1,011,701
Marketable securities 148,400 148,400
Prepaid expense 24,849 38,435
-------------- ----------------
Total current assets 3,697,098 3,338,559
-------------- ----------------
PROPERTY, PLANT AND EQUIPMENT (note 4)
Manufacturing facilities and property 1,680,723 1,676,247
Manufacturing equipment 1,024,610 1,000,427
Restaurant equipment 846,970 724,470
Furniture and equipment 425,273 386,600
Less accumulated depreciation (486,960) (394,436)
-------------- ----------------
Total property, plant and equipment 3,490,616 3,393,308
-------------- ----------------
OTHER ASSETS
Investment in restricted securities 100,000 100,000
Costs in excess of book value on acquisition of
wholly owned subsidiaries less accumulated
amortization of $ 209,056 at September 30, 1995
and $102,419 at June 30, 1995 6,189,147 6,295,784
Installment sale contract receivable 1,225,000 1,240,000
Patents, patents pending and patent
application technology, less accumulated
amortization of $88,708 at September 30, 1995
and $83,678 at June 30, 1995 116,902 121,647
Mineral properties and related assets
Mineral properties, at cost 6,170,676 6,170,676
Mill and refinery, less accumulated
depreciation of $399,940 at September 30, 1995
and $391,994 at June 30, 1995 288,755 296,702
Other mining equipment, less accumulated
depreciation of $771,383 at September 30, 1995
and $758,783 at June 30, 1995 95,230 107,831
Other 154,309 151,345
-------------- ----------------
Total other assets 14,340,019 14,483,985
-------------- ----------------
TOTAL ASSETS $ 21,527,733 $ 21,215,852
============== ================
See notes to consolidated financial statements
ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1995 AND JUNE 30, 1995
September 30, 1995 June 30, 1995
(unaudited) (audited)
-------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, shareholders $ 53,685 $ 53,685
Current maturities of long-term liabilities 88,639 93,987
Accrued payroll taxes 135,970 141,500
Accounts payable 434,085 416,356
Accrued salaries, wages and commissions 87,838 69,173
Accrued expenses 63,336 112,335
-------------- ---------------
Total current liabilities 863,553 887,036
-------------- ---------------
LONG-TERM LIABILITIES (note 5) 451,312 463,834
-------------- ---------------
Total liabilities 1,314,865 1,350,870
-------------- ---------------
UNREALIZED INCOME ON INSTALLMENT SALES 957,587 969,104
-------------- ---------------
REDEEMABLE PREFERRED STOCK, CLASS A
Preferences established by the Board of Directors
5,000,000 shares at all periods presented, 26 shares,
$20,000 par value, non-cumulative, voting issued and
outstanding at June 30, 1995 303,914 295,062
-------------- ---------------
SHAREHOLDERS' EQUITY
Preferred stock, Class B, cumulative, voting
authorized 20,000,000 shares and none issued - -
Common stock, no par value
100,000,000 shares authorized at all periods
presented, issued and outstanding 30,597,932
at September 30, 1995 and 29,924,057 at
June 30, 1995 (note 6) 48,693,495 47,885,245
Accumulated deficit (29,742,128) (29,284,429)
-------------- ---------------
Total Shareholders' Equity 18,951,367 18,600,816
-------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 21,527,733 $ 21,215,852
============== ===============
See notes to consolidated financial statements.
ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
September 30
----------------------------------
1995 1994
-------------- --------------
REVENUES (note 7)
Environmental services $ - $ -
Restaurant service 172,719 -
Insurance adjusting 295,408 -
Mining and mining services - -
Manufacturing 1,208,553 869,207
All other 5,432 16,060
-------------- --------------
Total revenues 1,682,112 885,267
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OPERATING EXPENSES
Direct Service
Environmental industry 55,179 325,204
Restaurant equipment and supply industry 131,820 -
Insurance adjusting industry 110,847 -
Mining industry 55,040 106,011
Manufacturing industry 740,791 854,038
General and administrative 1,032,917 94,182
-------------- --------------
Total operating expense 2,126,594 1,379,435
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LOSS FROM OPERATIONS (444,482) (494,168)
-------------- --------------
OTHER INCOME AND (EXPENSE)
Interest Income 4,665 34,124
Interest Expense (27,413) (1,415)
Other income (expense) 9,531 11,841
-------------- --------------
NET LOSS $ (457,699) $ (449,618)
-------------- --------------
NET LOSS PER SHARE OF COMMON STOCK $ (0.02) $ (0.02)
============== ==============
Weighted average number of shares
outstanding during period (note 6) 30,303,406 22,728,704
See notes to consolidated financial statements
ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Common Stock Subscriptions Accumulated
------------------------------- ------------- ---------------
Shares Amount Receivable Deficit TOTAL
------------ -------------- ------------- --------------- --------------
Balances, Junes 30, 1994 22,687,487 $ 40,958,846 $ (100,000) $ (24,531,050) $ 16,327,796
Issued for the following:
Cash 50,200 35,938 35,938
Asset acquisition 5,000 5,000 5,000
Services 5,000 5,000 5,000
Net loss (449,618) (449,618)
------------ -------------- ------------- --------------- --------------
Balances, September 30, 1994 22,747,687 $ 41,004,784 $ (100,000) $ (24,980,668) $ 15,924,116
============ ============== ============= =============== ==============
Common Stock Subscriptions Accumulated
------------------------------- ------------- --------------- --------------
Shares Amount Receivable Deficit TOTAL
------------ -------------- ------------- --------------- --------------
Balances, June 30, 1995 29,924,057 $ 47,885,246 $ --- $ (29,284,429) $ 18,600,817
Issued for the following (note 6):
Cash 671,875 806,249 806,249
Services 2,000 2,000 2,000
Net loss (457,699) (457,699)
------------ -------------- ------------- --------------- --------------
Balances, September 30, 1995 30,597,932 $ 48,693,495 $ $ (29,742,128) $ 18,951,367
============ ============== ============= =============== ==============
See notes to consolidated financial statements
ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1995 1994
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (457,699) $ (449,618)
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Adjustments to reconcile net loss
tonet cash (used in) operating activities:
Depreciation 115,189 84,254
Amortization 111,698 3,891
Loss on sale of assets 2,074 -
Gain on sale of assets (11,605) (11,841)
Other 234 -
Stock issued for services 2,000 5,000
Imputed expense preferred stock 8,852 -
(Increase) Decrease in asset:
Prepaid expenses 13,586 4,882
Accounts receivable (note 2) (359,760) (262,561)
Notes receivable 248,964 (37,132)
Inventory (161,950) 86,452
Increase (Decrease) in liabilities:
Accounts payable 17,729 (179,609)
Advances from officers and directors - (13,567)
Accrued liabilities and other (35,863) (26,995)
Current maturities-Long term liabilities (5,348) -
------------- ------------
Total adjustments (54,200) (347,226)
------------- ------------
Net cash (used in) operating activities (511,899) (796,844)
------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (note 4)
Restaurant equipment (122,500)
Manufacturing facility (4,476) (30,215)
Manufacturing equipment (29,269) (13,719)
Furniture and equipment (41,073) (9,194)
Additions to patent value (285) (5,500)
Proceeds from sale of property, plant and
equipment 416 7,390
Deposits paid (263) (14,000)
Collection on installment sale 15,000 10,000
------------- ------------
Net cash provided by (used in)
investing activities $ (182,450) $ (55,238)
------------- ------------
See notes to consolidated financial statements
ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1995 1994
--------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on borrowings $ (12,522) $ (22,805)
Proceeds from sale of stock 806,249 35,938
--------------- --------------
Net cash provided by financing activities 793,727 13,133
--------------- --------------
(DECREASE) INCREASE IN CASH 99,378 (538,949)
CASH AT BEGINNING OF PERIOD 607,411 1,935,915
--------------- --------------
CASH (OVERDRAFT) AT END OF PERIOD $ 706,789 $ 1,096,966
=============== ==============
Supplemental disclosure of non-cash operating,
investing and financing activities:
Issuance of capital stock :
Addition to manufacturing facility $ - $ 5000
See notes to consolidated financial statements
ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED SEPTEMBER 30, 1995
Note 1 - Condensed Consolidated Financial Statements
The consolidated balance sheet as of September 30, 1995, the
consolidated statements of operations for the three months ended
September 30, 1995 and 1994, and the consolidated statements of
cash flows for the three months ended September 30, 1995 and
1994, have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial
position, results of operations, changes in shareholders' equity
and statements of cash flows at September 30, 1995, and for all
periods presented have been made.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's June 30,
1995 Annual Report on Form 10K.
The results of operations for the period ending September
30, 1995, are not necessarily indicative of the operating results
for the full year.
Note 2 - Accounts and Notes Receivable
Accounts receivable increased by $359,760. Manufacturing
receivables accounted for 62% of the increase and was directly
related to additional sales for the quarter. Additional sales in
the restaurant equipment and insurance adjusting business
segments represented the balance of the increase.
The decrease in notes receivable is directly related to the
timely collection of amounts outstanding.
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ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED SEPTEMBER 30, 1995
Note 3 - Inventories
Manufacturing inventories of raw materials, work-in-process
and unfinished goods were $753,350 at the end of the current
quarter. The balance of the inventory is substantially made up
of restaurant equipment held for resale.
Note 4 - Property, Plant and Equipment
During the quarter, the Company placed into service $122,500
of restaurant equipment of which $14,425 was used for
demonstration purposes and the balance, $108,075, represents
rental and other revenue producing units.
The Company added $33,745 to its manufacturing plant in
equipment to enhance capabilities. Other additions included
computers, furniture and communication equipment.
Note 5 - Long-Term Liabilities
The long-term liabilities including current maturities
consist of a bank note of $31,696 for manufacturing equipment
additions. The balance represents capitalized leases for the
acquisition of restaurant equipment of $503,258, and furniture
and office equipment of $4,997.
Note 6 - Shareholders' Equity and Net Loss Per Share
A. Common Stock transactions.
During the quarter ended September 30, 1995, the following
changes occurred in the Company's Common Stock account:
Issued 2,000 shares of restricted securities valued at
$2,000 to directors in lieu of directors' fees.
Issued 671,875 shares of restricted common stock pursuant to
exemption available under Section 4 of the Securities Act, as
amended, for a negotiated price of $806,250 on private placement
agreements to several unrelated qualified investors. The
agreements for placement of 587,500 of these shares include a
warrant to purchase one additional share of restricted stock for
each two shares acquired for a price of $3.00 per share,
exercisable within three years from the date of the subscription.
B. Net Loss Per Share and Weighted Average Number of Shares
Outstanding.
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ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED SEPTEMBER 30, 1995
Net loss per share has been calculated based on net losses
for the periods divided by the weighted average number of shares
of Common Stock outstanding during the periods presented. The
weighted average number of shares and the earnings (loss) per
share data can be found on the pages of the Consolidated
Statement of Operations for the respective periods.
The potential issuance of additional shares through the
exercise of stock warrants was not included in the calculations
of average shares outstanding since the effect would be anti-
dilutive.
Note 7 - Sales to Major Customers and Major Components of
Revenues
During the quarter ended September 30, 1995, revenues from
the manufacturing operation were $1,213,985 or 72% of the total
revenues. One major customer, Boone Aeration & Environmental,
accounted for approximately 65% of the manufacturing revenues.
The balance of the Company's revenues were derived from insurance
adjusting services (18%) and sales of restaurant equipment (10%).
Note 8 - Subsequent Events
Subsequent to the end of the current quarter, the following
transactions occurred which were not reflected in the financial
statements as of the report date:
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ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED SEPTEMBER 30, 1995
Received $580,000 from the sale of restricted common stock
pursuant to exemption available under Section 4 of the Securities
Act, as amended, for a negotiated price of $1.20 per share on
private placement agreements with qualified investors.
The terms of one agreement call for the issuance of
1,700,000 shares of restricted common stock at $1.20 per share.
The payment schedule includes three payments of $480,000 with the
final installment of $600,000 to be paid on or before February
28, 1996. Under terms of the agreement, for each two shares
purchased, the buyer will receive one warrant for the purchase of
an additional share of restricted common stock for $3.00,
exercisable for a period of three years from the date of the
subscription.
Commensurate with each payment received under this
agreement, the Company will issue a special warrant, exercisable
within 90 days of issuance, at an exercise price of $1.00. The
number of warrants will be determined at the date of issuance
based upon performance parameters which management believes the
worst case scenario would have the Company issuing 25,000
warrants on each payment.
- 12 -
Item 3 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
1. Liquidity and Capital Resources.
As of September 30, 1995, the Company's current assets
exceeded current liabilities by $2,833,545, a ratio of 4.3:1.
For the current quarter, available cash increased by $99,378 to
$706,789.
The Company believes that sales of the CDSI Air Pollution
Control Equipment, increases in the sales of restaurant
equipment, expansion of the insurance adjusting business and
continued performance of the manufacturing segment will produce
positive cash flow in the future. (See Note 8 - Subsequent
Events.) Agreements are in place to assure needed working
capital to finance future plans.
2. Results of Operations.
Revenues for the quarter increased from $885,267 to
$1,682,112. Sales in the manufacturing facility increased by
$445,000. The new business segments of restaurant equipment and
insurance adjusting represent the balance of the increase.
Although increases in operating expenses substantially offset the
additional revenue, loss from operations improved by $49,686.
Operations of the manufacturing facility produced a pre-tax
profit of $260,000 compared to a $12,000 profit for the
comparable period ending September 30, 1994. The increase in
these profits was offset by increased costs in the marketing of
the restaurant equipment segment. Although not a cash item, the
Company also recorded addition amortization and depreciation
expense of $139,000 for the quarter.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
None
- 13 -
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 ENVIRONMENTAL
RESOURCES CORPORATION
(Registrant)
KEVIN L. JONES
------------------------
Kevin L. Jones
Chief Financial Officer
Date: 11/7/95
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