ALANCO TECHNOLOGIES, INC.
15575 North 83rd Way, Suite 3
Scottsdale, Arizona 85260
(480) 607-1010
PROXY STATEMENT
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 28, 2006
TO THE SHAREHOLDERS OF ALANCO TECHNOLOGIES, INC.
NOTICE HEREBY IS GIVEN that the Annual Meeting of Shareholders of Alanco
Technologies, Inc., an Arizona corporation ("Alanco" or the "Company"), will be
held at 15575 North 83rd Way, Suite 3, Scottsdale, Arizona 85260, on December
28, 2006, at 10:00 a.m., Mountain Standard Time, and at any adjournment or
postponement thereof, for the purpose of considering and acting upon the
following Proposals:
Proposal No. 1 ELECTION OF DIRECTORS
Proposal No. 2 APPROVAL OF THE ALANCO 2006 STOCK OPTION PLAN
Proposal No. 3 APPROVAL OF THE ALANCO 2006 DIRECTORS AND OFFICERS STOCK
OPTION PLAN
Proposal No. 4 APPROVAL OF WARRANTS ISSUED TO AFFILIATES OF THE COMPANY
TO PURCHASE CLASS A COMMON STOCK FROM THE COMPANY
Proposal No. 5 APPROVAL OF ISSUANCE OF CLASS A COMMON STOCK AS
PAYMENT IN LIEU OF CASH RELATED TO OBLIGATIONS INCURRED
IN CONNECTION WITH THE COMPANY'S ACQUISITION OF STARTRAK
SYSTEMS, LLC
Holders of the outstanding Common Stock and Preferred Stock of the Company of
record at the close of business on October 30, 2006, will be entitled to notice
of and to vote at the Meeting or at any adjournment or postponement thereof.
All shareholders, whether or not they expect to attend the Annual Meeting of
Shareholders in person, are urged to sign and date the enclosed Proxy and return
it promptly in the enclosed postage-paid envelope which requires no additional
postage if mailed in the United States. The giving of a proxy will not affect
your right to vote in person if you attend the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS.
Scottsdale, Arizona ADELE L. MACKINTOSH
October 31, 2006 SECRETARY
ALANCO TECHNOLOGIES, INC.
15575 North 83rd Way, Suite 3
Scottsdale, Arizona 85260
(480) 607-1010
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 28, 2006
GENERAL INFORMATION
The enclosed Proxy is solicited by and on behalf of the Board of Directors of
Alanco Technologies, Inc., an Arizona corporation (the "Company"), for use at
the Company's Annual Meeting of Shareholders to be held at 15575 North 83rd Way,
Suite 3, Scottsdale, Arizona 85260, on the 28th day of December, 2006, at 10:00
a.m., Mountain Standard Time, and at any adjournment or postponement thereof. It
is anticipated that this Proxy Statement and the accompanying Proxy will be
mailed to the Company's shareholders on or before November 27, 2006.
The expense of soliciting proxies, including the cost of preparing, assembling
and mailing this proxy material to shareholders, will be borne by the Company.
It is anticipated that solicitations of proxies for the Meeting will be made
only by use of the mails; however, the Company may use the services of its
Directors, Officers and employees to solicit proxies personally or by telephone
without additional salary or compensation to them. Brokerage houses, custodians,
nominees and fiduciaries will be requested to forward the proxy soliciting
materials to the beneficial owners of the Company's shares held of record by
such persons, and the Company will reimburse such persons for their reasonable
out-of-pocket expenses incurred by them in that connection.
Shares not voting as a result of a proxy not marked or marked to abstain will be
counted as part of total shares voting in order to determine whether or not a
quorum has been achieved at the Meeting. Shares registered in the name of a
broker-dealer or similar institution for beneficial owners to whom the
broker-dealer distributed notice of the Annual Meeting and proxy information and
which such beneficial owners have not returned proxies or otherwise instructed
the broker-dealer as to voting of their shares, will be counted as part of the
total shares voting in order to determine whether or not a quorum has been
achieved at the Meeting.
All shares represented by valid proxies will be voted in accordance therewith at
the Meeting unless such proxies have previously been revoked. Proxies may be
revoked at any time prior to the time they are voted by: (a) delivering to the
Secretary of the Company a written instrument of revocation bearing a date later
than the date of the proxy; or (b) duly executing and delivering to the
Secretary a subsequent proxy relating to the same shares; or (c) attending the
meeting and voting your proxy in person (although attendance at the Meeting will
not in and of itself constitute revocation of a proxy.)
The Company's Annual Report to Shareholders for the fiscal year ended June 30,
2006, has been previously mailed or is being mailed simultaneously to the
Company's shareholders and includes a copy of Form 10-KSB, which constitutes
part of this proxy. All other information included in the Annual Report does not
constitute part of these proxy soliciting materials.
SHARES OUTSTANDING AND VOTING RIGHTS
Effective October 16, 2006, the Company effected a 2:5 reverse stock split. All
references to both number of shares and price per share of Class A Common Stock
issued and outstanding, options and warrants granted, and common stock
equivalent shares are presented herein on a post-split basis.
Voting rights are vested in the holders of the Company's Common Stock and
Preferred Stock. Only shareholders of record at the close of business on October
30, 2006, are entitled to notice of and to vote at the Meeting or any
adjournment or postponement thereof. As of October 30, 2006, the Company had
15,474,995 shares of Class A Common Stock issued and outstanding, 3,549,061
shares of Series A Convertible Preferred Stock issued and outstanding and 76,890
shares of Series B Convertible Preferred Stock issued and outstanding. Each
Class A Common share is entitled to one vote, each share of Series A Convertible
Preferred stock is entitled to 1.2 votes (the equivalent number of common shares
into which the Series A Convertible Preferred Stock is convertible), and each
share of Series B Convertible Preferred stock is entitled to 5.2 votes (the
equivalent number of common shares into which the Series B Convertible Preferred
Stock is convertible). If the number of common shares into which the preferred
stock is convertible (the "common stock equivalent") is considered, the total
shares eligible to vote, including the common stock and the common stock
equivalent, on the record date are 20,133,705 shares, each of which is entitled
to one vote on all matters to be voted upon at the Meeting, including the
election of Directors. No fractional shares are outstanding. A majority of the
Company's outstanding voting stock represented in person or by proxy shall
constitute a quorum at the Meeting. The affirmative vote of a majority of the
votes cast, providing a quorum is present, is necessary to approve each
proposal.
Each shareholder present, either in person or by proxy, will have cumulative
voting rights with respect to the election of Directors. Under cumulative
voting, each shareholder is entitled to as many votes as is equal to the number
of shares of Common Stock (or common stock equivalent) of the Company held by
the shareholder on the Record Date multiplied by the number of directors to be
elected, and such votes may be cast for any single nominee or divided among two
or more nominees. The seven nominees receiving the highest number of votes will
be elected to the Board of Directors. There are no conditions precedent to the
exercise of cumulative voting rights. Unless otherwise instructed in any proxy,
the persons named in the form of proxy which accompanies this Proxy Statement
(the "Proxy Holders") will vote the proxies received by them for the Company's
seven nominees set forth in "Election of Directors" below. If additional persons
are nominated for election as directors, the Proxy Holders intend, unless
otherwise instructed in any proxy, to vote all proxies received by them in such
manner in accordance with cumulative voting as will assure the election of as
many of the Company's nominees as possible, and, in such event, the specific
nominees for whom votes will be cast will be determined by the Proxy Holders. If
authority to vote for any nominee of the Company is withheld in any proxy, the
Proxy Holders intend, unless otherwise instructed in such proxy, to vote the
shares represented by such proxy, in their discretion, cumulatively for one or
more of the other nominees of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND OF MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information with respect to each
shareholder known by Alanco to be the beneficial owner of more than 5% of the
outstanding Alanco common stock or common stock equivalent as of October 30,
2006. Information regarding the stock ownership of Robert R. Kauffman, Alanco
Chairman and Chief Executive Officer, Donald E. Anderson, Alanco Director, and
Timothy P. Slifkin, Alanco Director and President and Chief Executive Officer of
the Company's subsidiary, StarTrak Systems, LLC, is also shown in the table in
the following section, Current Directors and Executive Officers.
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Five Percent Owners
Class A Total Total
Common Common Total Stock,
Shares Share Stock Options &
Owned Equivalent Exercisable Owned Warrants
Class A Percent Series A Total Owned Stock and Percent of
Common of Preferred Common Percent Options Options Common
Shares Class Shares Share of and and Equivalent
Owned (6) Owned (5) Equivalent Class (6) Warrants Warrants Class (7)
Technology Systems 1,800,000 11.63% -- 1,800,000 8.94% -- 1,800,000 8.94%
International, Inc. (1)
Donald E. Anderson (2) 1,328,504 8.58% 1,196,349 2,764,124 13.73% 1,012,000 3,776,124 17.86%
Robert R. Kauffman (3) 232,800 1.50% 768,924 1,155,509 5.74% 1,409,000 2,564,509 11.90%
Timothy P. Slifkin (4) 1,025,882 6.63% -- 1,025,882 5.10% 160,000 1,185,882 5.84%
(1) Technology Systems International, Inc., a Nevada corporation, (TSIN) is an
independent, private company, which was issued 2,400,000 shares of Alanco
common stock in 2002 in connection with the acquisition of the assets of
TSIN effective in June 2002. The only Form 13D filed by TSIN was filed on
September 9, 2002, and indicated TSIN ownership of 2,400,000 Alanco common
shares. TSIN is currently in bankruptcy proceedings and to our knowledge,
no filings have been made by TSIN to adjust that initial Form 13D filing.
However, based on stock transfer records and information obtained from
public bankruptcy hearings, we believe the current TSIN ownership of Alanco
common stock is approximately 1.8 million shares. To our knowledge, no
person or entity owns enough TSIN shares that upon distribution of the
Alanco shares to the TSIN shareholders such person would own in excess of
5% of Alanco. TSIN has previously indicated their intention to distribute
the shares of Alanco common stock in excess of certain corporate litigation
and liquidation expenses on a pro-rata basis to their shareholders;
however, the shares have not been distributed as of the date of this Proxy
Statement, and there is no assurance that the shares will be distributed.
The address of TSIN is c/o Jill H. Ford, Trustee, P.O. Box 5845, Carefree,
AZ 85377.
(2) Donald E. Anderson is a member of the Board of Directors of Alanco
Technologies, Inc. The number of shares, options and warrants owned
includes The Anderson Family Trust, owner of 1,027,264 shares of Alanco
Class A Common Stock, 690,157 shares of Alanco Series A Convertible
Preferred Stock and 690,000 exercisable warrants (includes 400,000 warrants
which require shareholder approval prior to being exercisable - see
Proposal No. 4 below); Programmed Land, Inc., owner of 293,240 shares of
Alanco Class A Common Stock, 506,192 shares of Alanco Series A Convertible
Preferred Stock and 200,000 exercisable warrants, both of which Mr.
Anderson claims beneficial ownership; and 8,000 shares of Alanco Class A
Common Stock and 122,000 exercisable options owned by Mr. Anderson. In
addition to the exercisable stock options and warrants shown above, Donald
Anderson also holds the following options: 15,000 options exercisable in
fiscal year 2008, 25,000 options exercisable in fiscal year 2009, 25,000
options exercisable in fiscal year 2010, and 25,000 options exercisable in
fiscal year 2011. The 1,196,349 shares of Series A Convertible Preferred
Stock beneficially owned by Mr. Anderson represent 33.71% of the total
Series A Convertible Preferred shares outstanding. Mr. Anderson's address
is 11804 North Sundown Drive, Scottsdale, Arizona 85260.
(3) In addition to the shares shown above, Robert R. Kauffman, Alanco Chairman
and Chief Executive Officer, also beneficially owns 455,000 shares of TSIN
stock, representing an ownership position of less than 2% of the
outstanding TSIN shares. If TSIN distributes the shares of Alanco common
stock owned by TSIN to TSIN shareholders on a proportionate basis, Mr.
Kauffman may acquire additional shares of Alanco common stock, thereby
slightly increasing his percentage of Alanco common shares owned; but due
to matters as discussed in Footnote 1 above, we are unable to accurately
calculate the changes to Mr. Kauffman's ownership. Included in the
1,409,000 exercisable stock options and warrants shown above are 72,000
warrants which require shareholder approval prior to being exercisable -
see Proposal No. 4 below. In addition to the exercisable stock options and
warrants shown above, Robert Kauffman also holds the following options:
9,000 options exercisable in fiscal year 2008, 15,000 options exercisable
in fiscal year 2009, 15,000 options exercisable in fiscal year 2010, and
15,000 options exercisable in fiscal year 2011. The 768,924 shares of
Series A Convertible Preferred Stock beneficially owned by Mr. Kauffman
represent 21.67% of the total Series A Convertible Preferred shares
outstanding. The address for Mr. Kauffman is: c/o Alanco Technologies,
Inc., 15575 North 83rd Way, Suite 3, Scottsdale, Arizona 85260.
3
(4) Timothy P. Slifkin is a Director of the Company as of June 30, 2006, and
President and Chief Executive Officer of the Company's subsidiary, StarTrak
Systems, LLC ("StarTrak"). The Company acquired StarTrak, a provider of GPS
tracking and wireless asset management services to the transportation
industry, effective June 30, 2006. In addition to the exercisable stock
options and warrants shown above, Tim Slifkin also holds the following
options: 60,000 options exercisable in fiscal year 2007, 60,000 options
exercisable in fiscal year 2008, 60,000 options exercisable in fiscal year
2009, and 60,000 options exercisable in fiscal year 2010. The address for
Mr. Slifkin is: c/o StarTrak Systems, LLC, 106 American Road, Morris
Plains, NJ 07950.
(5) Preferred Shares are Series A Convertible Preferred Stock, each share of
which is convertible into 1.2 shares of Class A Common Stock. As of October
30, 2006, there are 3,549,061 shares of Series A Convertible Preferred
Stock outstanding. The 5% owners do not own any shares of the Series B
Convertible Preferred Stock.
(6) The percentages for Class A Common Stock shown are calculated based upon
15,474,995 shares of Class A Common Stock outstanding on October 30, 2006.
The percentages for Total Common Stock Equivalent are calculated based upon
20,133,705 shares outstanding on October 30, 2006.
(7) In calculating the percentage of ownership, option and warrant shares are
deemed to be outstanding for the purpose of computing the percentage of
shares of common stock equivalent owned by such person, but are not deemed
to be outstanding for the purpose of computing the percentage of shares of
common stock equivalent owned by any other stockholders.
Current Directors and Executive Officers
The following table sets forth the number of exercisable stock options and
warrants and the number of shares of the Company's Common Stock and Preferred
Stock beneficially owned as of October 30, 2006, by individual directors and
executive officers and by all directors and executive officers of the Company as
a group.
The number of shares beneficially owned by each director or executive officer is
determined under rules of the Securities and Exchange Commission, and the
information is not necessarily indicative of the beneficial ownership for any
other purpose. Unless otherwise indicated, each person has sole investment and
voting power (or shares such power with his or her spouse) with respect to the
shares set forth in the following table.
Securities of the Registrant Beneficially Owned (1)
Total
Class A Shares Series A Shares Total Shares Total Stock,
Common Owned Preferred Owned Common Owned Exercisable Stock Options
Stock Percent Stock Percent Stock Percent Stock Owned + & Warrants
Name of Shares of Class Shares of Class Equivalent of Class Options & Options & Percent of
Beneficial Owner (2) Owned (10) Owned (10) Owned (10) Warrants Warrants Class (11)
----------------------- ------- -------- -------- ------- --------- -------- --------- --------- -----------
Robert R. Kauffman (3) 232,800 1.50% 768,924 21.67% 1,155,509 5.74% 1,409,000 2,564,509 11.90%
Director/COB/CEO
John A. Carlson (4) 100,257 0.65% 137,741 3.88% 265,547 1.32% 586,000 851,547 4.11%
Director/EVP/CFO
Harold S. Carpenter (5) 122,216 0.79% 306,754 8.64% 490,321 2.44% 276,000 766,321 3.75%
Director
James T. Hecker (6) 28,156 0.18% 28,804 0.81% 62,721 0.31% 160,000 222,721 1.10%
Director
Timothy P. Slifkin (7) 865,882 5.60% 0 0.00% 865,882 4.30% 160,000 1,025,882 5.06%
Director/CEO-StarTrak
Thomas C. LaVoy 22,106 0.14% 49,697 1.40% 81,743 0.41% 152,000 233,743 1.15%
Director
Donald E. Anderson (8) 1,328,504 8.58 1,196,349 33.71% 2,764,124 13.73% 1,012,000 3,776,124 17.86%
Director
Greg M. Oester 23,155 0.15% 13,969 0.39% 39,918 0.20% 488,000 527,918 2.56%
President - ATSI
Thomas A. Robinson (9) 577,255 3.73% 0 0.00% 577,255 2.87% 160,000 737,255 3.63%
EVP - StarTrak
--------- --------- --------- --------- ----------
Officers and Directors 3,300,331 21.33% 2,502,238 70.50% 6,303,020 31.31% 4,403,000 10,706,020 43.63%
========= ========= ========= ========= ==========
as a Group (9 individuals)
4
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC") and generally indicates voting
or investment power with respect to securities. In accordance with SEC
rules, shares that may be acquired upon conversion or exercise of stock
options, warrants or convertible securities which are currently
exercisable or which become exercisable within 60 days are deemed
beneficially owned. Except as indicated by footnote, and subject to
community property laws where applicable, the persons or entities named
in the table above have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned.
(2) COB is Chairman of the Board; CEO is Chief Executive Officer; EVP is
Executive Vice President; CFO is Chief Financial Officer, ATSI is the
Company's wholly-owned subsidiary, Alanco/TSI PRISM, Inc.
(3) In addition to the shares shown above, Robert R. Kauffman, Alanco
Chairman and Chief Executive Officer, also beneficially owns 455,000
shares of TSIN stock, representing an ownership position of less than 2%
of the outstanding TSIN shares. If TSIN distributes the shares of Alanco
common stock owned by TSIN to TSIN shareholders on a proportionate basis,
Mr. Kauffman may acquire additional shares of Alanco common stock,
thereby slightly increasing his percentage of Alanco common shares owned;
but due to matters as discussed in Footnote 1 to the Five Percent Owners
table above, we are unable to accurately calculate the changes to Mr.
Kauffman's ownership. Included in the 1,409,000 exercisable stock options
and warrants shown above are 72,000 warrants which require shareholder
approval prior to being exercisable - see Proposal No. 4 below. In
addition to the exercisable stock options and warrants shown above,
Robert Kauffman also holds the following options: 9,000 options
exercisable in fiscal year 2008, 15,000 options exercisable in fiscal
year 2009, 15,000 options exercisable in fiscal year 2010, and 15,000
options exercisable in fiscal year 2011. The 768,924 shares of Series A
Convertible Preferred Stock beneficially owned by Mr. Kauffman represent
21.67% of the total Series A Convertible Preferred shares outstanding.
(4) In addition to the exercisable stock options and warrants shown above,
John A. Carlson, Alanco Executive Vice President and Chief Financial
Officer, also holds the following options: 3,000 options exercisable in
fiscal year 2008, 5,000 options exercisable in fiscal year 2009, 5,000
options exercisable in fiscal year 2010, and 5,000 options exercisable in
fiscal year 2011.
(5) Excludes 176,000 shares of Class A Common Stock, 338,404 shares of Series
A Convertible Preferred Stock and 92,000 warrants to purchase Class A
Common Stock owned by Heartland Systems Co., a company for which Mr.
Carpenter serves as an officer. Mr. Carpenter disclaims beneficial
ownership of such shares. In addition to the exercisable stock options
and warrants shown above, Harold Carpenter also holds the following
options: 6,000 options exercisable in fiscal year 2008, 10,000 options
exercisable in fiscal year 2009, 10,000 options exercisable in fiscal
year 2010, and 10,000 options exercisable in fiscal year 2011.
(6) Excludes 204,000 shares of Class A Common Stock, 434,345 shares of Series
A Convertible Preferred Stock and 174,000 warrants to purchase Class A
Common Stock owned by Rhino Fund LLLP. The fund is controlled by Rhino
Capital Incorporated, for which Mr. Hecker serves as Treasurer and
General Counsel. Mr. Hecker disclaims beneficial ownership of such
shares.
(7) Timothy P. Slifkin is a Director of the Company as of June 30, 2006, and
President and Chief Executive Officer of the Company's subsidiary,
StarTrak Systems, LLC ("StarTrak"). The Company acquired StarTrak, a
provider of GPS tracking and wireless asset management services to the
transportation industry, effective June 30, 2006. In addition to the
exercisable stock options and warrants shown above, Tim Slifkin also
holds the following options: 60,000 options exercisable in fiscal year
2007, 60,000 options exercisable in fiscal year 2008, 60,000 options
exercisable in fiscal year 2009, and 60,000 options exercisable in fiscal
year 2010.
(8) Donald E. Anderson is a member of the Board of Directors of Alanco
Technologies, Inc. The number of shares, options and warrants owned
includes The Anderson Family Trust, owner of 1,027,264 shares of Alanco
Class A Common Stock, 690,157 shares of Alanco Series A Convertible
Preferred Stock and 690,000 exercisable warrants (includes 400,000
warrants which require shareholder approval prior to being exercisable -
see Proposal No. 4 below); Programmed Land, Inc., owner of 293,240 shares
of Alanco Class A Common Stock, 506,192 shares of Alanco Series A
Convertible Preferred Stock and 200,000 exercisable warrants, both of
5
which Mr. Anderson claims beneficial ownership; and 8,000 shares of
Alanco Class A Common Stock and 122,000 exercisable options owned by Mr.
Anderson. In addition to the exercisable stock options and warrants shown
above, Donald Anderson also holds the following options: 15,000 options
exercisable in fiscal year 2008, 25,000 options exercisable in fiscal
year 2009, 25,000 options exercisable in fiscal year 2010, and 25,000
options exercisable in fiscal year 2011. The 1,196,349 shares of Series A
Convertible Preferred Stock beneficially owned by Mr. Anderson represent
33.71% of the total Series A Convertible Preferred shares outstanding.
(9) Thomas A. Robinson is an Executive Vice President of the Company's
subsidiary, StarTrak Systems, LLC ("StarTrak"). The Company acquired
StarTrak, a provider of GPS tracking and wireless asset management
services to the transportation industry, effective June 30, 2006. In
addition to the exercisable stock options and warrants shown above, Tom
Robinson also holds the following options: 60,000 options exercisable in
fiscal year 2007, 60,000 options exercisable in fiscal year 2008, 60,000
options exercisable in fiscal year 2009, and 60,000 options exercisable
in fiscal year 2010.
(10) The percentages for Class A Common Stock shown are calculated based upon
15,474,995 shares of Class A Common Stock outstanding on October 30,
2006. The percentages for Series A Convertible Preferred Stock are
calculated based upon 3,549,061 shares of Series A Convertible Preferred
Stock outstanding on October 30, 2006, each share of which is convertible
into 1.2 shares of Class A Common Stock. The percentages for Common Stock
Equivalent shares are calculated based upon 20,133,705 Common Stock
Equivalent shares outstanding as of October 30, 2006.
(11) The number and percentages shown include the shares of common stock
equivalent actually owned as of October 30, 2006 and the shares of common
stock that the identified person or group had a right to acquire within
60 days after October 30, 2006. The percentages shown are calculated
based upon 20,133,705 Common Stock Equivalent shares outstanding as of
October 30, 2006. In calculating the percentage of ownership, option and
warrant shares are deemed to be outstanding for the purpose of computing
the percentage of shares of common stock equivalent owned by such person,
but are not deemed to be outstanding for the purpose of computing the
percentage of shares of common stock equivalent owned by any other
stockholders.
Meetings and Committees of the Board of Directors
The Board of Directors has a Compensation/Administration Committee, which was
formed in 1995 and is comprised of Messrs. Harold S. Carpenter and James T.
Hecker, who are independent directors of the Company. The
Compensation/Administration Committee recommends to the Board the compensation
of executive officers and serves as the Administrative Committee for the
Company's Stock Option Plans. The Compensation/Administration Committee met
three times during the fiscal year ended June 30, 2006.
The Board of Directors also has an Audit/Corporate Governance Committee. The
Audit Committee was originally formed in 1995. In September 2004, the Board of
Directors approved a name change for the committee to Audit/Corporate Governance
Committee to more accurately reflect the additional duties and responsibilities
of the committee as required by the Sarbanes-Oxley Act of 2002. The
Audit/Corporate Governance Committee, comprised of Messrs. Harold S. Carpenter,
James T. Hecker, and Thomas C. LaVoy, all of whom are independent non-employee
directors of the Company who have significant business experience and are deemed
to be financially knowledgeable, serves as a liaison between the Board and the
Company's auditor. The Audit/Corporate Governance Committee provides general
oversight of the Company's financial reporting and disclosure practices, system
of internal controls, and the Company's processes for monitoring compliance with
Company policies. The Audit/Corporate Governance Committee reviews with the
Company's independent auditors the scope of the audit for the year, the results
of the audit when completed, and the independent auditor's fee for services
performed. The Audit/Corporate Governance Committee also recommends independent
auditors to the Board of Directors and reviews with management various matters
related to its internal accounting controls. The Audit/Corporate Governance
Committee is comprised of independent members as defined under the National
Association of Securities Dealers listing standards. The Audit/Corporate
Governance Committee met three times during the fiscal year ended June 30, 2006.
All meetings held by the Board of Directors' committees were attended by each of
the directors serving on such committees with the following exceptions: Mr.
Hecker and Mr. LaVoy were each absent from one meeting for each committee on
which they serve.
6
The final Board committee is the Nominating/Independent Directors Committee,
which is comprised of Messrs. Harold S. Carpenter, James T. Hecker, Thomas C.
LaVoy, and Donald E. Anderson, all members of the Company's Board of Directors
who have been determined by the Board to meet the qualification as "independent"
director as set forth in Rule 10A-3 of the Exchange Act. Per Board resolution,
the Nominating/Independent Directors Committee approves all management
nominations for members of the Company's Board of Directors. In addition, the
Nominating/Independent Directors Committee meets in regularly scheduled
executive sessions at which only the independent directors are present.
The Company's Board of Directors held three meetings during the fiscal year
ended June 30, 2006, at which time all Directors were present, with the
exception of Mr. Hecker and Mr. LaVoy, each being absent from one Board of
Directors meeting. Mr. Slifkin was appointed to the Board on June 30, 2006. All
current members of the Board of Directors' committees are expected to be
nominated for reelection at a meeting of the Board of Directors following the
annual meeting.
Compliance with Section 16(a) of Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Officers and Directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Officers,
Directors and greater than 10% shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely upon a review of the copies of such forms furnished to the Company, or
written representations that no Form 5's were required, the Company believes
that as of the date of filing of this Proxy Statement, all Section 16(a) filing
requirements applicable to its officers, Directors and greater than 10%
beneficial owners were satisfied, with the exception of Technology Systems
International, Inc., a Nevada corporation (TSIN), who, to the best of our
knowledge, continues to own approximately 1.8 million shares of the Company's
Class A Common Stock. TSIN is currently in Chapter 7 Bankruptcy proceedings and
has not, to our knowledge, filed any current Section 16 (d) forms. Also, some
reportable events were not timely reported. The names of the involved persons,
the event dates, and the filing dates are as follows:
Name of Reporting Person Reportable Event Event Date Date Reported
Donald E. Anderson Class A Common Stock Options 6/30/2006 7/11/2006
John A. Carlson Class A Common Stock Options 6/30/2006 7/11/2006
Harold S. Carpenter Class A Common Stock Options 6/30/2006 7/11/2006
James T. Hecker Class A Common Stock Options 6/30/2006 7/11/2006
Robert R. Kauffman Class A Common Stock Options 6/30/2006 7/11/2006
Thomas C. LaVoy Class A Common Stock Options 6/30/2006 7/11/2006
Timothy P. Slifkin Class A Common Stock Options 6/30/2006 7/11/2006
Class A Common Stock 6/30/2006 7/11/2006
Thomas A. Robinson Class A Common Stock Options 6/30/2006 7/11/2006
Class A Common Stock 6/30/2006 7/11/2006
Steven P. Oman Class A Common Stock Options 6/30/2006 7/11/2006
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation paid or accrued by the Company
for the services rendered during the fiscal years ended June 30, 2006, 2005 and
2004 to the Company's Chief Executive Officer, Chief Financial Officer, and
President of the Company's subsidiary, Alanco/TSI PRISM, Inc., an Arizona
corporation (ATSI), acquired effective June 1, 2002, whose salaries and bonus
exceeded $100,000 during the last fiscal year (collectively, the "Named
Executive Officers"). No stock appreciation rights ("SARs") have been granted by
the Company to any of the Named Executive Officers during the last three fiscal
years.
7
Annual Compensation Long Term Compensation
--------------------------------- ----------------------
Name and Other Securities (# shares)
Principal Annual Annual Underlying Options
Position Salary Bonus Compensation (1) Granted during FY
Robert R. Kauffman, C.E.O.
FY 2006 $225,000 None $17,400 376,000
FY 2005 183,750 None 17,400 40,000
FY 2004 180,000 None 17,400 260,000
John A. Carlson, C.F.O.
FY 2006 200,000 None 10,400 228,000
FY 2005 163,333 None 10,033 30,000
FY 2004 160,000 None 9,467 140,000
Greg M. Oester, President, ATSI
FY 2006 154,500 None None 48,000
FY 2005 154,500 None None 14,000
FY 2004 146,625 None None 100,000
(1) Represents supplemental executive benefit reimbursement for the year
and Company matching for Alanco's 401(K) Profit Sharing Plan.
Option Grants in Last Fiscal Year
The following table sets forth each grant of stock options made during the
fiscal year ended June 30, 2006, to each of the Named Executive Officers and/or
Directors and to all other employees as a group. No stock appreciation rights
("SARs") have been granted by the Company.
INDIVIDUAL GRANTS
Number of
Securities
Underlying % of Total Exercise
Options Options Price Grant Expiration
Name Granted Granted ($/Sh) Date Date
---- --------- -------- -------- ----- ----------
Robert Kauffman 160,000 5.25% $2.02 9/13/2005 9/13/2015
Robert Kauffman 16,000 0.52% $1.15 11/16/2005 11/16/2015
Robert Kauffman 200,000 6.56% $1.82 6/30/2006 6/30/2011
John Carlson 80,000 2.62% $2.02 9/13/2005 9/13/2015
John Carlson 48,000 1.57% $1.15 11/16/2005 11/16/2015
John Carlson 100,000 3.28% $1.82 6/30/2006 6/30/2011
Harold Carpenter 32,000 1.05% $2.02 9/13/2005 9/13/2015
Harold Carpenter 40,000 1.31% $1.82 6/30/2006 6/30/2011
James Hecker 32,000 1.05% $2.02 9/13/2005 9/13/2015
James Hecker 40,000 1.31% $1.82 6/30/2006 6/30/2011
Timothy Slifkin 400,000 13.12% $1.82 6/30/2006 6/30/2011
Thomas LaVoy 32,000 1.05% $2.02 9/13/2005 9/13/2015
Thomas LaVoy 16,000 0.52% $1.15 11/16/2005 11/16/2015
Thomas LaVoy 40,000 1.31% $1.82 6/30/2006 6/30/2011
Donald Anderson 32,000 1.05% $2.02 9/13/2005 9/13/2015
Donald Anderson 40,000 1.31% $1.82 6/30/2006 6/30/2011
Greg Oester 40,000 1.31% $2.02 2/16/2005 2/16/2015
Greg Oester 8,000 0.26% $1.15 11/16/2005 11/16/2015
Thomas Robinson 400,000 13.12% $1.82 6/30/2006 6/30/2011
Other Employees 1,292,000 42.39% $1.25 - $2.50 Various (1)
-------------------
Total 3,048,000 100.00%
===================
(1) The expiration dates for these options range from 9/27/2007 to 5/25/2016.
8
All options are granted at a price not less than "grant-date market." During the
fiscal year 349,600 previously granted stock options expired or were cancelled.
Aggregated Options and Warrants - Exercised in Last Fiscal Year and Values at
Fiscal Year End
The following table sets forth the number of exercised and unexercised options
and warrants held by each of the Named Executive Officers and/or Directors at
June 30, 2006, and the value of the unexercised, in-the-money options at June
30, 2006.
Shares
Acquired On Unexercised Value of
Exercise Options & Warrants Unexercised
During Value at Fiscal In-The-Money
2006 Fiscal Realized Year End Options &Warrants
Name Year ($) (1) (Shares) (2) at FYE ($) (3)
---- ---- ------- ------------ --------------
Robert Kauffman 48,000 $ 4,600 1,331,000 $417,800
John Carlson 34,000 5,800 584,000 112,650
Harold Carpenter 40,000 4,000 200,000 37,400
James Hecker 0 0 160,000 14,400
Thomas LaVoy 8,000 1,800 152,000 10,800
Donald Anderson 160,000 16,000 930,000 164,100
Timothy Slifkin 0 0 160,000 0
Thomas Robinson 0 0 160,000 0
Greg Oester 4,000 900 488,000 37,800
(1) Calculated as the difference between closing price on the date
exercised and the exercise price, multiplied by the number of
options exercised.
(2) Represents the number of securities underlying unexercised options and
warrants that were exercisable at 2006 Fiscal Year End. The numbers shown
above for Donald Anderson include a warrant owned by The Anderson Family
Trust, of which Mr. Anderson claims beneficial ownership, for 328,000
shares which requires shareholder approval prior to being exercisable.
See Proposal No. 4 below.
(3) Calculated as the difference between the closing price of the Company's
Common Stock on June 30, 2006, and the exercise price for those options
exercisable on June 30, 2006, with an exercise price less than the
closing price, multiplied by the number of applicable options.
Option Grants Subsequent to Fiscal Year End
Number of
Underlying
Securities
Options Date of Date Expiration Option
Name Granted Grant Exercisable Date Price
Robert R. Kauffman 60,000 (1) 8/15/06 (3) 8/15/11 $1.37
John A. Carlson 20,000 (2) 8/15/06 (3) 8/15/11 $1.37
Harold S. Carpenter 40,000 (2) 8/15/06 (3) 8/15/11 $1.37
Donald E. Anderson 100,000 (1) 8/15/06 (3) 8/15/11 $1.37
(1) Issued pursuant to the 2005 Stock Option Plan.
(2) Issued pursuant to the 2005 Directors & Officers Stock Option Plan.
(3) 10% vest on 8/15/2006, 15% vest on 8/15/2007, 25% vest on 8/15/2008,
25% vest on 8/15/2009 and 25% vest on 8/15/2010.
Employment Agreements and Executive Compensation
The Executive Officers of the Company are at-will employees without employment
agreements with the exception of Timothy Slifkin and Thomas Robinson, executive
officers of the Company's subsidiary, StarTrak Systems, LLC, acquired by Alanco
9
effective June 30, 2006. Both Messrs. Slifkin and Robinson have employment
contracts with StarTrak Systems, LLC, which pre-date the Company's acquisition
of StarTrak. The contracts terminate on June 30, 2009, and specify that Mr.
Slifkin is to be employed as the Executive Director of Technology and Mr.
Robinson is to be employed as an Executive Vice President. However, Mr. Slifkin
currently is the Chief Executive Officer of StarTrak. The contracts specify a
salary of $160,000 per year with a performance bonus of up to 20% of said base
salary for both Mr. Slifkin and Mr. Robinson. The contracts require certain
severance payments in the event of termination by the Company without cause, or
if either officer resigns with good reason, as defined in the contracts.
Compensation of Directors
During Fiscal Year 2006, non-employee Directors were compensated for their
services in cash ($750 per meeting per day up to a maximum of $1,500 per
meeting) and through the grant of options to acquire shares of Class A Common
Stock as provided by the 2004 Directors and Officers Stock Option Plan. All
Directors are entitled to receive reimbursement for all out-of-pocket expenses
incurred for attendance at Board of Directors meetings.
The 1996 Directors and Officers Stock Option Plan was approved by the Board of
Directors on September 9, 1996. Shareholders approved the 1998, 1999, 2000,
2002, 2004, and 2005 Directors and Officers Stock Option Plans ("D&O Plans") on
November 6, 1998, November 5, 1999, November 10, 2000, November 22, 2002,
November 19, 2004, and January 20, 2006,respectively. The purpose of the 1996,
1998, 1999, 2000, 2002, 2004, and 2005 D&O Plans is to advance the business and
development of the Company and its shareholders by affording to the Directors
and Officers of the Company the opportunity to acquire a propriety interest in
the Company by the grant of Options to acquire shares of the Company's common
stock. All Directors and Executive Officers of the Company are eligible to
participate in the 1996, 1998, 1999, 2000, 2002, 2004, and 2005 Plans. Newly
appointed Directors receive options to purchase shares of common stock at fair
market value. Upon each subsequent anniversary of the election to the Board of
Directors, each non-employee Director may receive an additional option to
purchase shares of common stock at fair market value.
Transactions with Management
Mr. Steve Oman, a former member of the Board of Directors, received compensation
in the amount of approximately $70,200 for legal services to the Company for the
fiscal year ended June 30, 2006. Mr. Oman resigned from his position on Alanco's
Board of Directors on June 30, 2006, to allow for a continuing majority of
independent directors on the Company's Board. Mr. Oman's resignation was not due
to any disagreement with the registrant but was solely for the purpose of
compliance with the Sarbanes-Oxley requirement that the Company's Board of
Directors be comprised of a majority of independent members. Mr. Oman will
continue as Alanco's Corporate Counsel.
Mr. Donald Anderson, a member of the Board of Directors and trustee and
beneficial owner of the Anderson Family Trust, was paid interest in fiscal year
2006 under the Line of Credit Agreement in the amount of approximately $89,500.
AUDIT/CORPORATE GOVERNANCE COMMITTEE REPORT (1)
The Audit/Corporate Governance Committee of the Board of Directors is currently
comprised of three independent directors, and operates under a written charter
adopted by the Board. The members of the Audit/Corporate Governance Committee
are Harold S. Carpenter, a CEO with over 30 years senior management experience,
James T. Hecker, an attorney and CPA, and Thomas C. LaVoy, a CPA. All three
individuals are experienced in reading and understanding financial statements,
and, in fact, are deemed to be financial experts as defined by audit committee
requirements.
The Audit/Corporate Governance Committee is directly responsible for the
appointment, compensation, retention and oversight of the work of the
independent auditor engaged for the purpose of preparing an audit report or
performing other audit, review or attest services for the Company. The auditor
reports directly to the Audit/Corporate Governance Committee. The
Audit/Corporate Governance Committee has established "whistleblower" procedures
for the receipt, retention and treatment of complaints regarding accounting,
internal accounting controls or auditing matters, including procedures for the
confidential anonymous submission by employees of the Company of concerns
regarding questionable accounting or auditing matters.
10
Authority to engage independent counsel and other advisors has been given to the
Audit/Corporate Governance Committee as it determines is necessary to carry out
its duties. The Company provides appropriate funding for the Audit/Corporate
Governance Committee to compensate the outside auditors and any lawyers and
advisors it employs and to fund ordinary administrative expenses of the
Audit/Corporate Governance Committee that are necessary in carrying out its
duties.
The Audit/Corporate Governance Committee provides general oversight of the
Company's financial reporting and disclosure practices, system of internal
controls, and the Company's processes for monitoring compliance by the Company
with Company policies. The Audit/Corporate Governance Committee reviews with the
Company's independent auditors the scope of the audit for the year, the results
of the audit when completed, and the independent auditor's fee for services
performed. The Audit/Corporate Governance Committee also recommends independent
auditors to the Board of Directors and reviews with management various matters
related to its internal accounting controls. During the last fiscal year, there
were three meetings of the Audit/Corporate Governance Committee.
Management is responsible for the Company's internal controls and the financial
reporting process. The independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with the auditing standards of the Public Company Accounting
Oversight Board (United States) and issuing a report thereon. The
Audit/Corporate Governance Committee is responsible for overseeing and
monitoring the quality of the Company's accounting and auditing practices.
The members of the Audit/Corporate Governance Committee are not professionally
engaged in the practice of auditing or accounting and may not be experts in the
fields of accounting or auditing, or in determining auditor independence.
Members of the Audit/Corporate Governance Committee rely, without independent
verification, on the information provided to them and on the representations
made by management and the independent accountants. Accordingly, the
Audit/Corporate Governance Committee's oversight does not provide an independent
basis to determine that management has maintained procedures designed to assure
compliance with accounting standards and applicable laws and regulations.
Furthermore, the Audit/Corporate Governance Committee's considerations and
discussions referred to above do not assure that the audit of the Company's
financial statements has been carried out in accordance with auditing standards
generally accepted in the United States, that the financial statements are
presented in accordance with accounting principles generally accepted in the
United States of America or that the Company's auditors are in fact
"independent."
Review of Audited Financial Statements
In this context, the Audit/Corporate Governance Committee reviewed and discussed
the Company's audited financial statements with management and with the
Company's independent auditors. Management represented to the Audit/Corporate
Governance Committee that the Company's consolidated financial statements were
prepared in accordance with auditing standards of the Public Company Accounting
Oversight Board (United States). Discussions about the Company's audited
financial statements included the auditor's judgments about the quality, not
just the acceptability, of the accounting principles, the reasonableness of
significant judgments and the clarity of disclosures in its financial
statements. The Audit/Corporate Governance Committee also discussed with the
auditors other matters required by Statement on Auditing Standards, ("SAS") No.
61 "Communication with Audit Committees," as amended by SAS No. 90, "Audit
Committee Communications."
The Company's auditors provided to the Committee written disclosures required by
the Independence Standards Board Standard No. 1 "Independence Discussion with
Audit Committee." The Audit/Corporate Governance Committee discussed with the
auditors their independence from the Company, and considered the compatibility
of non-audit services with the auditor's independence.
Audit Fees
The aggregate fees billed by Semple & Cooper, LLP, the Company's independent
auditor, for professional services rendered for the audit of the Company's
annual financial statements for the fiscal years ended June 30, 2006 and 2005,
the review of the financial statements included in the Company's Forms 10-QSB
for such fiscal years, and other services performed for the Company by Semple &
Cooper, LLP, were approximately $158,000 and $123,000, respectively.
11
Financial Information Systems Design and Implementation
There were no fees billed for the professional services described in Paragraph
(c)(4)(ii) of Rule 2-01 of Regulation S-X rendered by Semple & Cooper, LLP for
the fiscal year ended June 30, 2006.
All Other Fees
Semple & Cooper, LLP billed the Company during fiscal year 2006 and 2005 a total
of approximately $11,000 and $10,000, respectively, for tax preparation and tax
consulting services. The Audit Committee has considered whether the provision of
these services is compatible with maintaining the principal accountant's
independence.
Audit Committee Pre-Approval Policies and Procedures
The fiscal year 2006 and 2005 audit services provided by Semple & Cooper, LLP
were approved by our Audit/Corporate Governance Committee. The Audit/Corporate
Governance Committee implemented pre-approval policies and procedures related to
the provision of audit and non-audit services. Under these procedures, the
Audit/Corporate Governance Committee pre-approves both the type of services to
be provided by our independent accountants and the estimated fees related to
these services. During the approval process, the Audit/Corporate Governance
Committee considers the impact of the types of services and related fees on the
independence of the auditor. These services and fees must be deemed compatible
with the maintenance of the auditor's independence, in compliance with the SEC
rules and regulations. Throughout the year, the Audit/Corporate Governance
Committee and, if necessary, the Board of Directors, reviews revisions to the
estimates of audit and non-audit fees initially approved.
Recommendation
Based on the Audit/Corporate Governance Committee's discussion with management
and the auditors, and the Audit/Corporate Governance Committee's review of the
representations of management and the report of the auditors to the
Audit/Corporate Governance Committee, the Audit/Corporate Governance Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-KSB for the year ended June
30, 2006, filed with the Securities and Exchange Commission.
AUDIT/CORPORATE GOVERNANCE COMMITTEE
James T. Hecker
Harold S. Carpenter
Thomas C. LaVoy
-------------------------------
(1) The material in this report is not "soliciting material," is not deemed
filed with the commission and is not to be incorporated by reference in any
filing of the Company under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, whether made before or after the
date hereof and irrespective of any general incorporation language in any such
filing.
Proposal No. 1 ELECTION OF DIRECTORS
The Articles of Incorporation presently provide for a Board of Directors of not
more than nine members. The number of Directors of the Company has been fixed at
seven by the Company's Board of Directors. The Company's Board of Directors
recommends the election of the seven nominees listed below to hold office until
the next Annual Meeting of Shareholders or until their successors are elected
and qualified or until their earlier death, resignation or removal. The persons
named as "proxies" in the enclosed form of Proxy, who have been designated by
Management, intend to vote for the seven nominees for election as Directors
unless otherwise instructed in such proxy. If at the time of the Meeting, any of
the nominees named below should be unable to serve, which event is not expected
to occur, the discretionary authority provided in the Proxy will be exercised to
cumulatively vote for the remaining nominees, or for a substitute nominee or
nominees, if any, as shall be designated by the Board of Directors.
Nominees
All nominees for Director have been approved by the Company's
Nominating/Independent Directors Committee. The following table sets forth the
name and age of each nominee for Director, indicating all positions and offices
with the Company presently held by him, and the period during which he has
served as such:
12
Year
Name Age Position First Director
Harold S. Carpenter 72 Director 1995
James T. Hecker 49 Director 1997
Robert R. Kauffman 66 Director/C.O.B./C.E.O. 1998
Thomas C. LaVoy 47 Director 1998
John A. Carlson 59 Director/E.V.P./C.F.O. 1999
Donald E. Anderson 73 Director 2002
Timothy P. Slifkin 51 Director/C.E.O. - StarTrak 2006
Business Experience of Nominees
Robert R. Kauffman: Mr. Kauffman was appointed as Chief Executive Officer and
Chairman of the Board effective July 1, 1998. Mr. Kauffman was formerly
President and Chief Executive Officer of NASDAQ-listed Photocomm, Inc., from
1988 until 1997 (since renamed Kyocera Solar, Inc.). Photocomm was the nation's
largest publicly owned manufacturer and marketer of wireless solar electric
power systems with annual revenues in excess of $35 million. Prior to Photocomm,
Mr. Kauffman was a senior executive of the Atlantic Richfield Company (ARCO)
whose varied responsibilities included Senior Vice President of ARCO Solar,
Inc., President of ARCO Plastics Company and Vice President of ARCO Chemical
Company. Mr. Kauffman earned an M.B.A. in Finance at the Wharton School of the
University of Pennsylvania, and holds a B.S. in Chemical Engineering from
Lafayette College, Easton, Pennsylvania.
Harold S. Carpenter: Mr. Carpenter is the former the President of Superiorgas
Co., Des Moines, Iowa, which is engaged in the business of trading and brokering
bulk refined petroleum products with gross sales of approximately $500 million
per year. He is also the General Partner of Superiorgas L.P., an investment
company affiliated with Superiorgas Co. Mr. Carpenter founded these companies in
1984 and 1980, respectively. Mr. Carpenter is also the President of Carpenter
Investment Company, Des Moines, Iowa, which is a real estate investment company
holding properties primarily in central Iowa. From 1970 until 1994, Mr.
Carpenter was the Chairman of the George A. Rolfes Company of Boone, Iowa, which
manufactured air pollution control equipment. Mr. Carpenter graduated from the
University of Iowa in 1958 with a Bachelor of Science and Commerce degree.
James T. Hecker: Mr. Hecker is both an Attorney and a Certified Public
Accountant. Since 1987, Mr. Hecker has been Vice President, Treasurer and
General Counsel of Rhino Capital Incorporated, Evergreen, Colorado, a private
capital management company which manages a $60 million portfolio. He also
served, since 1992, as a trustee of an $11 million charitable trust. From 1984
to 1987, Mr. Hecker was the Controller of Northern Pump Company, Minneapolis,
Minnesota, a multi-state operating oil and gas company with more than 300
properties, with responsibility of all accounting and reporting functions. Prior
to that, from 1981 to 1984, Mr. Hecker was Audit Supervisor of Total Petroleum,
Inc., Denver, Colorado, responsible for all phases of internal audit and
development of audit and systems controls. Mr. Hecker received a J.D. degree
from the University of Denver in 1992, and a B.B.A. degree in Accounting and
International Finance from the University of Wisconsin in 1979. He is a member
in good standing of the Colorado and the American Bar Associations, the Colorado
Society of CPAs, and the American Institute of CPAs.
Thomas C. LaVoy: Thomas C. LaVoy has served as Chief Financial Officer of
SuperShuttle International, Inc., since July 1997 and as Secretary since March
1998. From September 1987 to February 1997, Mr. LaVoy served as Chief Financial
Officer of NASDAQ-listed Photocomm, Inc. Mr. LaVoy was a Certified Public
Accountant with the firm of KPMG Peat Marwick from 1980 to 1983. Mr. LaVoy has a
Bachelor of Science degree in Accounting from St. Cloud University, St. Cloud,
Minnesota, and is a Certified Public Accountant.
John A. Carlson: Mr. Carlson, Executive Vice President and Chief Financial
Officer of Alanco Technologies, Inc., joined the Company in September 1998. Mr.
Carlson started his career with Price Waterhouse & Co. in Chicago, Illinois. He
has over twenty-five years of public and private financial and operational
management experience, including over twelve years as Chief Financial Officer of
a Fortune 1000 printing and publishing company. He earned his Bachelor of
Science degree in Business Administration at the University of South Dakota, and
is a Certified Public Accountant.
Donald E. Anderson: Donald E. Anderson is President and owner of Programmed
Land, Inc., a Minnesota and Scottsdale, Arizona, based company. Programmed Land
is a diversified holding company engaged in real estate, including ownership,
development, marketing and management of properties. He is also majority owner
of a company involved in the automotive industry. From 1988 until 1997, Mr.
Anderson was Chairman of the Board of NASDAQ-listed Photocomm, Inc., a company
involved in the solar electric business. Since 1983, Mr. Anderson has also been
President of Pine Summit Bible Camp, a non-profit organization that operates a
year-round youth camp in Prescott, Arizona. Mr. Anderson has a Bachelor of Arts
degree in Accounting.
13
Timothy P. Slifkin: Timothy P. Slifkin, President and Chief Executive Officer of
the Company's subsidiary, StarTrak Systems, LLC, is directly responsible for
development of StarTrak's wireless product line and for leading the North
American transportation industry's acceptance of the technology for damage
prevention, refrigeration transport, and asset management applications. Mr.
Slifkin has been developing remote monitoring systems since founding Elexor
Associates in 1986, and in developing and deploying wireless systems (satellite
and terrestrial) since 1992. He has several patents issued or pending on related
technology. Prior to founding StarTrak, Mr. Slifkin was employed with Hewlett
Packard, Johannson Microwave, American Microsystems, and Jet Propulsion
Laboratories. He holds a Bachelors Degree in Engineering.
Proposal No. 2 APPROVAL OF THE ALANCO 2006 STOCK OPTION PLAN
The Company's Board of Directors approved submitting the Alanco Technologies,
Inc. 2006 Stock Option Plan to the shareholders for approval. The Board of
Directors recommends approval of the Plan. The purpose of the Plan is to advance
the business and development of the Company and its shareholders by affording to
Employees of the Company the opportunity to acquire an equity interest in the
Company by the grant of Options to acquire shares of the Company's common stock.
The Company has no current plans, proposals, or arrangements to issue options
pursuant to the 2006 Stock Option Plan. The benefits or amount of options that
will be received by or allocated to any particular employee of the Company under
the Plan is not determinable.
The Options granted to Employees can be either "Incentive Stock Options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or
"Non-Statutory Options." The issuance of qualified Incentive Stock Options
pursuant to this Plan is not expected to be a taxable event for qualified
recipients until such time that the recipient elects to sell the shares received
from the exercise whereupon the recipient is expected to recognize income to the
extent the sale price of the shares exceeds the exercise price of the option on
the date of sale. The issuance of Non-Statutory Stock Options pursuant to this
Plan is not expected to result in a tax liability to the recipient since the
options are granted at fair market value on date of grant. The recipient is
expected to recognize income to the extent the market price of the shares
exceeds the exercise price of the option on the date of exercise.
The Plan is administered by the Compensation/Administration Committee of the
Board of Directors. The Plan may issue Options to acquire up to 3,000,000 shares
to Employees. The Company will not receive any consideration for the grant of
options under the Plan and the approximate market value of the shares to be
reserved for the Plan is $3,840,000 based upon the average ten trading day
closing price for the Company's common stock for the period ending October 30,
2006. The maximum number of shares subject to Incentive Stock Options granted to
any one Employee which are first exercisable during any single calendar year
shall not exceed a fair market value of $100,000. The exercise price for Options
shall be set by the Compensation/Administration Committee but shall not be for
less than the fair market value of the shares on the date the Option is granted.
Fair market value shall mean the closing price at which the Stock is listed in
the NASDAQ quotation system ending on the day an Option is granted.
The period in which Options can be exercised shall be set by the
Compensation/Administration Committee not to exceed ten years from the date of
Grant. Incentive Stock Options are exercisable once vested. The vesting schedule
shall be as follows: ten percent (10%) of the shares issuable under the Options
shall vest on the Date of Grant, fifteen percent (15%) of the shares issuable
under the Options shall vest one year from date of Grant provided that the
Optionee has remained an Employee of the Company for not less than one year from
date of Grant, twenty-five percent (25%) of the shares issuable under the
Options shall vest two years from date of Grant provided that the Optionee has
remained an Employee of the Company for not less than two years from the date of
Grant, twenty-five percent (25%) of the shares issuable under the Options shall
vest three years from date of Grant provided that the Optionee has remained an
Employee of the Company for not less than three years from the date of Grant,
and the remaining twenty-five percent (25%) of the shares issuable under the
Options shall vest four years from date of Grant provided that the Optionee has
remained an Employee of the Company for not less than four years from the date
of Grant, or other alternative vesting as may be determined by the
Compensation/Administration Committee. The Stock Options must be exercised
within three months following Optionee's termination of relationship with the
Company, or within one (1) year following death or permanent and total
disablement of the Optionee. Otherwise, the Incentive Stock Options shall lapse.
The vesting schedule and the exercise schedule following termination, death or
total and permanent disablement of the Optionee of Non-Statutory Stock Options
will be determined by the Committee at the time of grant. The Plan may be
terminated, modified or amended by the Board of Directors upon the
recommendation of the Compensation/Administration Committee. Provided, however,
if the Plan has been submitted to and approved by the shareholders of the
Company, no such action by the Board may be taken without approval of the
majority of the shareholders of the Company which: (a) increases the total
number of shares of Stock subject to the Plan; (b) changes the manner of
determining the Option price; or (c) withdraws the administration of the Plan
from the Committee.
14
All Employees of the Company and its subsidiaries are eligible to participate in
the Plan. An Employee is defined in the Plan as a person, including officers and
directors, employed by the Company who in the judgment of the
Compensation/Administration Committee has the ability to positively affect the
profitability and economic well-being of the Company. Part-time employees,
independent contractors, consultants and advisors performing bona fide services
to the Company shall be considered employees for purposes of participation in
the Plan. The aggregate number of shares within the Plan and the rights under
outstanding Options granted hereunder, both as to the number of shares and
Option price, will be adjusted accordingly in the event of a split or a reverse
split in the outstanding shares of the Common Stock of the Company.
Proposal No. 3 APPROVAL OF THE ALANCO 2006 DIRECTORS AND OFFICERS
STOCK OPTION PLAN
The Company's Board of Directors unanimously approved submitting the Alanco
Technologies, Inc. 2006 Directors and Officers Stock Option Plan to the
shareholders for approval. The Board of Directors recommends approval of the
Plan. The purpose of the Plan is to advance the business and development of the
Company and its shareholders by affording to the Directors and Executive
Officers of the Company the opportunity to acquire an equity interest in the
Company by the grant of Options to acquire shares of the Company's common stock.
The Company has four (4) non-employee directors as well as employee directors
and executive officers who are eligible to receive options under the Plan. The
Option Plan provisions indicate that on an annual basis non-employee directors
will be granted an option to purchase 20,000 shares of common stock, which
number may be adjusted at the discretion of the Board of Directors. The
following table provides information as to option grants to the non-employee
directors. Grant amounts to the other eligible officers are not determinable at
this time.
NEW PLAN BENEFITS
2006 Directors and Officers Stock Option Plan
Name Position Shares to be Granted Dollar Value ($) (1)
------------------------------------------------------------------------------------
Donald E. Anderson Director 20,000 $26,000
Thomas A. LaVoy Director 20,000 $26,000
James T. Hecker Director 20,000 $26,000
Harold S. Carpenter Director 20,000 $26,000
(1) Dollar value is calculated based on $1.30 per share, the closing bid price
of the Company's Class A Common Stock listed on the NASDAQ Capital Market on
November 8, 2006.
The Options granted are not "Incentive Stock Options" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended. The issuance of
such non-qualified options pursuant to this Plan is not expected to be a taxable
event for recipient until such time that the recipient elects to exercise the
option whereupon the recipient is expected to recognize income to the extent the
market price of the shares exceeds the exercise price of the option on the date
of exercise.
The Plan is administered by the Compensation/Administration Committee, which
shall consist of up to three (3) individuals appointed by the Board from among
its members, at least two (2) of which are non-employee Directors. The Plan may
issue Options to acquire up to 1,000,000 shares to Directors and Executive
Officers. The Company will not receive any consideration for the grant of
options under the Plan and approximate market value of the shares to be reserved
for the plan is $1,280,000 based upon the average ten trading day closing price
for the Company's common stock for the period ending October 30, 2006. The
vesting and exercise price for Options shall be set by the
Compensation/Administration Committee but shall not be for less than the fair
market value of the shares on the date the Option is granted. Fair market value
shall mean the closing price at which the Stock is listed in the NASDAQ
quotation system ending on the day an Option is granted. The period in which
Options can be exercised shall be set by the Compensation/Administration
Committee not to exceed ten years from the date of Grant. Options are
exercisable once vested. The Plan may be terminated, modified or amended by the
Board of Directors upon the recommendation of the Compensation/Administration
Committee. Provided, however, if the Plan has been submitted to and approved by
the shareholders of the Company, no such action by the Board may be taken
15
without approval of the majority of the shareholders of the Company which: (a)
increases the total number of shares of Stock subject to the Plan; (b) changes
the manner of determining the Option price; or (c) withdraws the administration
of the Plan from the Committee. The aggregate number of shares within the Plan
and the rights under outstanding Options granted hereunder, both as to the
number of shares and Option price, will be adjusted accordingly in the event of
a split or a reverse split in the outstanding shares of the Common Stock of the
Company.
Proposal No. 4 APPROVAL OF WARRANTS ISSUED TO AFFILIATES OF THE COMPANY
TO PURCHASE CLASS A COMMON STOCK FROM THE COMPANY
Purpose of Proposal
The Company sold Units consisting of shares of the Company's Class A Common
Stock or Series A Convertible Preferred Stock and Warrants to purchase
additional shares of Class A Common Stock of the Company to The Anderson Family
Trust of which Donald E. Anderson, Director of the Company, is a trustee and
beneficial owner; Robert R. Kauffman, Chairman of the Board and Chief Executive
Officer of the Company; and the Harold S. Carpenter Revocable Trust of which
Harold S. Carpenter, Director of the Company, is a trustee and beneficial owner
(the "Purchasers"), among others, during the period commencing April 26, 2006
through July 14, 2006. The Purchasers are affiliates as described in Rule 144
under the Securities Act of 1933, which includes any officer, director, or 10%
or greater shareholder of the Company. Under the rules of NASDAQ, where the
Company's Class A Common Stock is traded, certain issuances of securities to
affiliates of the Company can only occur with the Company's shareholders'
approval. Issuance of the Warrants issued to the affiliates requires such
shareholder approval, and the Warrants are not exercisable by the Purchasers,
either by agreement of the Purchasers or in accordance with the terms of the
Warrants, until shareholder approval of issuance of the Warrants is obtained.
This Proposal is requesting shareholder approval related to the transactions
outlined below for a warrant to purchase 328,000 shares of Class A Common Stock
at a purchase price of $1.62 per share and three warrants to purchase 72,000
shares of Class A Common Stock at a purchase price of $1.50 per share.
Background of Stock and Warrant Issuance
The following table indicates data concerning these sales and the relationship
of each Purchaser to the Company resulting in their classification as an
affiliate of the Company.
# of Shares Warrant
Sale Date Unit # of Units Underlying Exercise Relationship
Purchaser Unit Description Price Purchased Warrant Price
Donald E. Anderson 4/26/2006 Common Stock and $0.61 820,000 328,000 $1.62 10% Shareholder and
Anderson Family Trust Warrant (1) Director
Robert R. Kauffman 7/14/2006 Preferred Stock $1.71 60,000 72,000 $1.50 Director and Officer
and Warrant (2)
Donald E. Anderson 7/14/2006 Preferred Stock $1.71 60,000 72,000 $1.50 10% Shareholder and
Anderson Family Trust and Warrant (2) Director
Harold S. Carpenter
Harold S. Carpenter Preferred Stock
Revocable Trust 7/14/2006 and Warrant (2) $1.71 60,000 72,000 $1.50 Director
(1) Each Unit consisted of two-fifths of one share of Class A Common Stock of
the Company and a Warrant to purchase two-fifths of one share of Class A
Common Stock of the Company for a total purchase price of $500,200. The
Warrant to purchase 328,000 (two-fifths of 820,000) shares of Class A
Common Stock is exercisable for a period of ten years following issuance at
an exercise price of $1.62 per share. A copy of the Stock and Warrant
Purchase Agreement and the Warrant issued in connection with this
transaction were filed as exhibits to the Company's Form 8-K filed with the
SEC on May 4, 2006.
(2) Each Unit consisted of one share of the Company's Series A Preferred Stock
and a Warrant to purchase 1.2 shares of Class A Common Stock of the Company
16
for a total purchase price of $307,800. The Series A Preferred Stock is
convertible into the Company's Class A Common Stock at a ratio of 1.2
shares of Common Stock for each share of Series A Preferred Stock. The
Warrant to purchase 72,000 (1.2 times 60,000) shares of Class A Common
Stock is exercisable for a period of five years following approval by the
Company's shareholders at an exercise price of $1.50 per share. A copy of
the Stock and Warrant Purchase Agreement and the Warrant issued in
connection with this transaction were filed as exhibits to the Company's
Form 8-K filed with the SEC on July 17, 2006.
Issuance of Warrants in addition to stock as an investment unit is a common
practice of companies similar to Alanco. It allows companies to entice investors
to acquire shares directly from the company rather than in the market, thereby
providing needed capital for the Company. The terms of the purchases of Units
purchased by the affiliates of the Company were the same as Units purchased by
non-affiliates. If the Warrants are not approved by the shareholders, they will
not be exercisable by the affiliates. The directors believe that such result
would significantly impair the Company's ability to raise future monies from
affiliates of the Company, upon whom the Company has relied heavily for needed
capital in the past.
Recommendation of the Alanco Board of Directors
The Alanco Board of Directors has determined that issuance of the Warrants to
the affiliates was in the best interests of Alanco and its shareholders and
thereby unanimously recommends that you vote in favor of the proposal to approve
the issuance of the Warrants to the affiliates.
Proposal No. 5 APPROVAL OF ISSUANCE OF CLASS A COMMON STOCK AS
PAYMENT IN LIEU OF CASH RELATED TO OBLIGATIONS INCURRED
IN CONNECTION WITH THE COMPANY'S ACQUISITION OF STARTRAK
SYSTEMS, LLC
Purpose of Proposal
Effective June 30, 2006, the Company acquired StarTrak Systems, LLC, a Delaware
limited liability company ("StarTrak"), located in Morris Plains, New Jersey.
The transaction was structured as a merger between a newly formed subsidiary of
the Company and StarTrak resulting in the Company owning all of the
post-transaction membership interests in StarTrak, and the previous StarTrak
members ("Sellers") receiving shares of the Company's Class A Common Stock and
the right to receive, if approved by the Company's shareholders, additional
shares of the Company's Class A Common Stock. If shareholder approval is not
obtained, the Company is obligated to make a cash payment valued at the market
price of the Class A Common shares that were to be issued. This proposal is not
approval of the StarTrak acquisition, which has been completed; rather it is the
shareholder approval required for the Company to issue shares of Class A Common
Stock in lieu of cash for payment of future obligations.
ALTHOUGH THE STARTRAK ACQUISITION HAS OCCURRED, AND THIS VOTE WILL NOT APPROVE
OR DISAPPROVE OF THAT TRANSACTION, YOU HAVE THE RIGHT TO VOTE CONCERNING WHETHER
THE FUTURE CONSIDERATION TO BE PAID TO THE SELLERS WILL BE IN THE FORM OF CASH
OR SHARES OF ALANCO'S CLASS A COMMON STOCK IN LIEU OF CASH. BY VOTING IN FAVOR
OF PAYING FOR THE ACQUISITION IN STOCK, CERTAIN DILUTION EFFECTS WILL OCCUR AS
SET FORTH BELOW. HOWEVER, IF THE ADDITIONAL CONSIDERATION IS TO BE CASH, THE
COMPANY WILL HAVE TO RAISE SUCH CASH FROM LENDERS OR OTHER EQUITY ISSUANCES,
WHICH COULD ALSO HAVE DILUTION EFFECTS. THERE CAN BE NO ASSURANCE THAT SUCH CASH
WOULD BE AVAILABLE TO THE COMPANY.
Dilutive Effect of Transaction on Alanco Shareholders. Under the terms of the
transaction, 2,000,000 shares of Alanco Class A Common Stock were issued upon
the closing, and 3,280,000 shares of Alanco Class A Common Stock will be issued
upon approval of the Alanco shareholders immediately following the Annual
Shareholders Meeting. In addition, an undetermined number of shares of Alanco
Class A Common Stock may be issued as an "earn-out" payment based upon the gross
profit of StarTrak and the market value of said shares in the future as
described below (see Terms of the Transaction below). Issuance of these Class A
common shares may cause a dilutive effect on the value of your investment in
Alanco stock.
17
Terms of the Transaction
Effective June 30, 2006, Alanco acquired StarTrak, which is organized as a
Delaware limited liability company. The transaction was structured as a merger
between a newly formed subsidiary of Alanco and StarTrak resulting in Alanco
owning all of the post-transaction membership interests in StarTrak, and the
Sellers receiving shares of the Company's Class A Common Stock and the right to
receive in the future either cash or additional shares of the Company's Class A
Common Stock.
The future consideration to be paid to the Sellers for their membership
interests includes a fixed payment due following Alanco's 2006 Annual
Shareholders Meeting, but not later than January 31, 2007, and potential
"earn-out" payments based upon the gross profit of the StarTrak business for
fiscal years ending June 30, 2007 and June 30, 2008. The fixed payment due by
January 31, 2007 totals either (i) 3,280,000 shares of the Company's Class A
Common Stock, or (ii) if Alanco's shareholders do not approve the issuance of
said shares, then the value of such shares with the value of each share for such
purpose equal to the average NASDAQ closing market price for Alanco Class A
Common Stock for the five (5) trading days immediately preceding the date of
Alanco's Annual Shareholders Meeting. As of October 30, 2006, based upon the
average NASDAQ closing market price for Alanco Class A Common Stock for the last
five (5) trading days, the amount of cash to be paid to the Sellers, in lieu of
Alanco common stock, would be $4,362,400.
In addition to the fixed payment due by January 31, 2007, the Sellers have the
right to receive two earn-out payments based upon the gross profits of the
StarTrak business for fiscal years ending June 30, 2007 and June 30, 2008. In
particular, the first earn-out payment shall be equal to twice the gross profit
of StarTrak in excess of $6,000,000 for the twelve months ended June 30, 2007,
but not more than the sum of $4,000,000 (the "2007 Earn-Out Payment"). Provided
the Alanco shareholders have approved the issuance of the additional shares, the
2007 Earn-Out Payment shall be paid in the form of Alanco Common Stock valued
for such purpose at the average NASDAQ closing market price for the twenty (20)
trading days immediately following the filing with the Securities Exchange
Commission of Alanco's form 10-KSB for such 2007 fiscal year. In the event that
the Alanco shareholders have not approved the issuance of such additional
shares, the 2007 Earn-Out Payment shall be paid in cash. The 2007 Earn-Out
Payment shall be paid by Alanco in the form required on or before December 31,
2007.
The second earn-out payment shall be equal to twice the gross profit of StarTrak
in excess of the greater of (i) $8,000,000 or (ii) the gross profit of StarTrak
for the twelve months ended June 30, 2008, but not more than the sum of
$4,000,000 (the "2008 Earn-Out Payment"). Provided the Alanco shareholders have
approved the issuance of the additional shares, the 2008 Earn-Out Payment shall
be paid in the form of Alanco Common Stock valued for such purpose at the
average NASDAQ closing market price for the twenty (20) trading days immediately
following the filing with the Securities Exchange Commission of Alanco's form
10-KSB for such 2008 fiscal year. In the event that the Alanco shareholders have
not approved the issuance of such additional shares, the 2008 Earn-Out Payment
shall be paid in cash. The 2008 Earn-Out Payment shall be paid by Alanco in the
form required on or before December 31, 2008.
In addition to the consideration paid or to be paid to the Sellers, a commission
is payable to Cronus Partners, LLC, the investment banking firm involved in the
transaction as follows: (i) 61,406 shares of Alanco common stock issued at
closing, (ii) $150,000 paid at closing, (iii) $150,000 paid on August 31, 2006,
and (iv) $107,000 due seven days following Alanco's 2006 Annual Shareholders
Meeting, payable in cash, or at Alanco's option, in shares of Alanco common
stock with each share valued for such purpose at the average NASDAQ closing
market price for Alanco common stock for the five (5) trading days immediately
preceding the issuance date of such stock.
Background of the Acquisition
The Company was contacted in June 2005 by Cronus Partners, LLC, an investment
banker located in Norwalk, Connecticut, relative to a prospective investment in
its client company, StarTrak Systems, LLC. A Confidential Disclosure Agreement
between the Company and StarTrak Systems was executed on July 5, 2005 and
preliminary discussions commenced with exchange of business information by both
parties.
The Company and StarTrak principals primarily involved in the transaction
discussions and negotiations were Robert Kauffman, CEO, and John Carlson, CFO,
for the Company, and Tim Slifkin, CEO, and Tom Robinson, EVP, for StarTrak.
18
The initial personal meeting between the parties occurred on July 26, 2005 with
Mr. Kauffman's visit to StarTrak's Morris Plains, New Jersey, headquarters and
meeting with Messrs. Slifkin and Robinson. Subsequently, StarTrak's Messrs.
Slifkin and Robinson visited Alanco corporate headquarters on August 2 and 3,
2005, and met with additional Alanco management personnel and directors. A
preliminary proposal whereby Alanco would acquire StarTrak Systems, LLC was
presented to Messrs. Slifkin and Robinson by the Company CEO, Mr. Kauffman.
Based upon the expressed interest at the August 3rd meeting, both parties agreed
to explore a possible acquisition transaction. The Company's CFO, Mr. Carlson,
initiated preliminary due diligence activities with a visit to StarTrak's Morris
Plains offices on August 15 and 16, 2005. The Company's Board of Directors, at
its regularly scheduled meeting on October 16, 2005, reviewed and approved
Management's preliminary plan to acquire StarTrak Systems, LLC.
During the period from November, 2005, to February, 2006, minimal discussions
occurred between the parties pending final resolution of internal StarTrak
partnership issues and the completion of audited StarTrak financial statements.
In February, 2006, the Company contracted for a StarTrak marketing due diligence
survey conducted by consultant Myron Anduri, which was summarized in a report
dated April 7, 2006.
Transaction negotiations between the parties recommenced with a visit to the
Company's Scottsdale headquarters by Messrs. Slifkin and Robinson on April 17,
2006.
The final transaction negotiations, which resulted in mutual verbal agreement
between the parties, occurred on May 17, 2006, at a meeting in the Courtyard
Marriott Hotel, Newark, New Jersey, attended by the Company's Messrs. Kauffman
and Carlson and StarTrak's Messrs. Slifkin and Robinson.
On June 16, 2006, the Company's Board of Directors unanimously approved a
resolution to acquire 100% of StarTrak Systems, LLC in accordance with terms set
forth in the Definitive Acquisition Agreement.
The Definitive Acquisition Agreement was executed by the parties on June 26,
2006, followed by the formal closing of the transaction effective June 30, 2006.
Regulatory Approvals. Alanco was not and is not aware of any pending legal
proceeding relating to the acquisition. Alanco is not aware of any governmental
license or regulatory permit that appears to be material to its business that
might be adversely affected by Alanco's acquisition of StarTrak or of any
approval or other action by any governmental, administrative or regulatory
authority or agency, domestic or foreign, that is required for such acquisition.
Antitrust. Under the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder by
the Federal Trade Commission, certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the United States Department of Justice and the FTC and certain
waiting requirements have been satisfied. Because the aggregate acquisition
price of the transaction was under $50 million, the transaction was not subject
to such requirements.
Accounting Treatment. The acquisition of assets will be accounted for using the
purchase method of accounting in accordance with the provisions of SFAS 141,
Business Combinations, which requires the allocation of the purchase price to
the fair value of the assets acquired and the liabilities assumed by balance
sheet classifications. The Company has engaged the services of an independent
consultant for valuation services related to FASB 141.
Independent Appraisals and/or Opinions. Independent opinions and/or appraisals
have not been obtained by Alanco due to StarTrak's stage of development and the
fact that a significant portion of the acquisition consideration is contingent
on StarTrak achieving certain minimum gross profit results within fiscal years
2007 and 2008, which regulates the potential shares of Alanco common stock that
may be issued under the Acquisition Agreement.
Interests of Certain Persons in the Acquisition, Possible Conflicts of Interest.
Alanco is not aware of any possible conflicts of interest of any of its officers
or directors with respect to the acquisition transaction.
19
Information about StarTrak
General scope of business
StarTrak, based in Morris Plains, New Jersey, is a leading provider of GPS
tracking and wireless asset management services to the transportation industry
and the dominant provider of tracking, monitoring and control services to the
refrigerated or "Reefer" segment of the transportation marketplace. StarTrak
products increase efficiency and reduce costs of the refrigerated supply chain
through the wireless monitoring and control of critical Reefer data, including
GPS location, cargo temperatures and Reefer fuel levels. StarTrak offers
complete integrated solutions for tracking, monitoring and controlling
refrigerated trailers, trucks, railcars, and containers.
The company's focus is on delivering advanced monitoring and control solutions
to the mobile refrigeration market, taking advantage of its unique interactive
tracking and control hardware and software and its relationship with two U. S.
producers of mobile refrigeration units who dominate that market. The company's
integrated product and service package provides measurable return on investment
benefits to its customers through improved equipment utilization, less freight
spoilage and better reporting of shipping conditions being required by
regulatory authorities as well as customers. Today, StarTrak enjoys the largest
market share of wireless monitoring and control equipment in the North American
mobile refrigeration markets.
STARTRAK REEFER PRODUCTS/SERVICES
StarTrak's hardware is attached to the asset to which it is to track, monitor
and control. The device is designed by StarTrak for the specific application and
includes the Company's proprietary software. The hardware has an expected
service life of approximately four years. Units are typically installed by
reefer dealers and maintained at their repair facilities. The StarTrak hardware
includes a GPS locator, processors, memory, interfaces to various reefer unit
sensors (including temperature, fuel levels, battery load, etc.) power systems
and one or several communicators. The unit provides frequent readings of various
sensors, evaluates conditions, sends appropriate event notifications and
receives commands over a wireless link.
StarTrak's ReeferTrak hardware and firmware is connected directly into the
electronic control system of the reefer unit and collects sensory data from the
microprocessor and executes commands through the microprocessor interfaces,
making it the only solution that is able to both monitor and to control a reefer
remotely. With this connection, StarTrak devices are able to remotely deliver
information such as a discrete ID number, the reefer's location, current
operational status, readings from discrete sensors such as temperature set
point, actual temperature, fuel level, battery voltage, engine hours, dwell time
at location and reefer state (on, off or standby). StarTrak's solution can be
retrofitted to reefer units up to ten years of age.
At its data center, StarTrak processes the signals received with its proprietary
software and integrates it with information systems of the client, such as
shipper bill of lading, asset location, specific carrier or logistics company
information systems and transmits to the customer. The customer can view its
information in the format and protocol that fits its normal operational
requirements.
The complete StarTrak hardware, software and network solution consists of
approximately 30 design elements. StarTrak's intellectual property is protected
through its knowledge and integration of the entire business process and its
exclusive business and technical arrangements with two U.S. producers of mobile
refrigeration units. StarTrak also has some proprietary components protected by
U.S. patents.
THE REEFER MARKET
StarTrak interactive tracking capability can be used on multiple asset types.
However, because of its relationship with two North American reefer
manufacturers, StarTrak is focusing its technology solutions on the refrigerated
transportation industry. These reefers are managed by an on-board electronics
control system equipped with sensors and control systems that extend inside the
storage space of the trailer, container or rail car. A microprocessor in the
reefer unit controls and manages the temperature of the freight by interfacing
with numerous sensors, generates alarms and stores relevant data. Typically, a
reefer unit is managed "locally" by a driver or yard worker who is physically
present to manipulate the electronic controls manually.
We estimate that there are approximately 450,000 reefer units in service in
North America. StarTrak capabilities can be retrofitted to almost any unit in
service.
Recommendation of the Alanco Board of Directors
The Alanco Board of Directors has determined that it is in the best interests of
Alanco and its shareholders that payment of all additional consideration to be
paid to the Sellers should be paid in the form of the Company's Class A Common
Stock rather than in cash and unanimously recommends that you vote in favor of
the proposal to approve the issuance of the Class A Common Stock to the Sellers.
20
INDEPENDENT AUDITOR
Semple & Cooper, LLP, Phoenix, Arizona, was appointed as the Company's
Independent Auditor for the fiscal years ended June 30, 2000, 2001, 2002, 2003,
2004, 2005, and 2006. The Company anticipates the appointment of Semple &
Cooper, LLP to audit the Company's financial statements for the fiscal year
ending June 30, 2007. A representative of Semple & Cooper, LLP is expected to
attend the Shareholders' Meeting and will have an opportunity to make a
statement if the representative desires to do so and is expected to be available
to respond to appropriate questions.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" information into this Proxy
Statement, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. This Proxy
Statement incorporates by reference documents which are not presented in this
Proxy Statement or delivered to you with it. The information incorporated by
reference is an important part of this Proxy Statement. We incorporate by
reference the documents listed below and amendments to them. These documents and
their amendments were previously filed with the SEC.
The following documents filed by us with the SEC are incorporated by reference
in this Proxy Statement:
1. Our Form 8-K filed with the SEC on September 11, 2006.
2. Our Form 10-KSB/A filed with the SEC on November 14, 2006.
3. Our Form 10-QSB filed with the SEC on November 20, 2006.
REQUEST FOR COPY OF FORM 10-KSB/A OR FORM 8-K
Shareholders may receive a copy of the Form 10-KSB/A or Form 8-K without charge
via e-mail request to alanco@alanco.com, by calling the Company at 480-607-1010,
Ext. 857, or by writing to the Company to the attention of the Company's
Corporate Secretary at 15575 North 83rd Way, Suite 3, Scottsdale, Arizona 85260.
SHAREHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL MEETING;
DISCRETIONARY AUTHORITY; OTHER BUSINESS
Any shareholder who intends to present a proposal at the annual meeting of
shareholders for the year ending June 30, 2007, and have it included in the
Company's proxy materials for that meeting generally must deliver the proposal
to us for our consideration not less than 120 calendar days in advance of the
date of the Company's proxy statement released to security holders in connection
with the previous year's annual meeting of security holders and must comply with
Rule 14a-8 under the Securities Exchange Act of 1934, as amended. In accordance
with the above rule, the applicable proposal submission deadline for the 2007
annual meeting of shareholders would be July 30, 2007.
Pursuant to Rule 14a-4 under the Securities Exchange Act of 1934, as amended,
the Company intends to retain discretionary authority to vote proxies with
respect to shareholder proposals properly presented at the Meeting, except in
circumstances where (i) the Company receives notice of the proposed matter a
reasonable time before the Company begins to mail its proxy materials (including
this proxy statement), and (ii) the proponent complies with the other
requirements set forth in Rule 14a-4.
The Board of Directors is not aware of any other business to be considered or
acted upon at the Meeting other than that for which notice is provided, but in
the event other business is properly presented at the Meeting, requiring a vote
of shareholders, the proxy will be voted in accordance with the judgment on such
matters of the person or persons acting as proxy (except as described in the
preceding paragraph). If any matter not appropriate for action at the Meeting
should be presented, the holders of the proxies shall vote against the
consideration thereof or action thereon.
ADELE L. MACKINTOSH
SECRETARY
Scottsdale, Arizona
October 31, 2006