-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JsS3ib62b2cLcAfMKmnzlOZ9Xy2OV19jYo9e81ug9YgIc89DrLAH4PcyeI/Yb6+Z 1ksG4ZUSOikhFpHRjk5A8A== 0000098618-99-000001.txt : 19990512 0000098618-99-000001.hdr.sgml : 19990512 ACCESSION NUMBER: 0000098618-99-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALANCO ENVIRONMENTAL RESOURCES CORP CENTRAL INDEX KEY: 0000098618 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL & COMMERCIAL FANS & BLOWERS & AIR PURIFYING EQUIP [3564] IRS NUMBER: 860220694 STATE OF INCORPORATION: AZ FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-09347 FILM NUMBER: 99616888 BUSINESS ADDRESS: STREET 1: 15900 N 78TH ST STREET 2: SUITE 101 CITY: SCOTTSDALE STATE: AZ ZIP: 85260 BUSINESS PHONE: 6026071010 MAIL ADDRESS: STREET 1: 15900 N 78TH ST STREET 2: SUITE 101 CITY: SCOTTSDALE STATE: AZ ZIP: 85260 FORMER COMPANY: FORMER CONFORMED NAME: ALANCO RESOURCES CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ALANCO LTD DATE OF NAME CHANGE: 19901004 FORMER COMPANY: FORMER CONFORMED NAME: TOMBSTONE MINERAL RESERVES INC DATE OF NAME CHANGE: 19801106 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of The Securities and Exchange Act of 1934 For the quarter ended . . . . . . . . . . . . . . . . . . . . . .March 31, 1999 Commission file number. . . . . . . . . . . . . . . . . . . . . . . . . .0-9347 ALANCO ENVIRONMENTAL RESOURCES CORPORATION -------------------------------------------- (Exact name of registrant as specified in its charter) Arizona 86-0220694 ---------------------------------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 15900 North 78th Street, Suite 101, Scottsdale, Arizona 85260 -------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (480) 607-1010 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES XX NO ---------------------- As of April 30, 1999, there were 4,927,483 shares of common stock outstanding. ALANCO ENVIRONMENTAL RESOURCES CORPORATION INDEX Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets March 31, 1999 (unaudited) and June 30, 1998 (audited). . . . . . . . . . . . . . 3 Consolidated Statements of Operations For the three months ended March 31, 1999 and 1998 (unaudited). . . . . . . . . . . . . 4 Consolidated Statements of Operations For the nine months ended March 31, 1999 and 1998 (unaudited). . . . . . . . . . . . . 5 Consolidated Statements of Cash Flows For the nine months ended March 31, 1999 and 1998 (unaudited). . . . . . . . . . . . . 6 Notes to Consolidated Financial Statements (unaudited). . . . . . . . . . . . . . . . . . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 8-9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 10 Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2
ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 1999 AND JUNE 30, 1998 Mar 31, 1999 June 30, 1998 ASSETS (unaudited) (audited) -------------- -------------- Current Assets: Cash $ 899,202 $ 1,116,857 Accounts receivable, net 1,078,146 1,192,547 Notes receivable, current portion 100,600 349,212 Inventories 1,968,104 540,371 Prepaid expenses and other current assets 94,692 64,544 billings on uncompleted projects - 105,070 -------------- -------------- Total current assets 4,140,744 3,368,601 Property, plant and equipment, net 1,740,924 3,380,124 Intangible assets, net 208,245 223,381 Assets held for sale 2,443,000 2,443,000 Other assets 190,986 243,303 -------------- -------------- Total assets $ 8,723,899 $ 9,658,409 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Capital lease obligations and notes payable, current portion $ 594,604 $ 1,306,672 Accounts payable and accrued expenses 576,785 600,798 Billings in excess of cost and est earnings 219,846 173,248 -------------- -------------- Total current liabilities 1,391,235 2,080,718 Capital lease obligations and notes payable, long-term portion 70,168 410,671 Shareholders' equity Preferred Stock, Class B, cumulative voting; 20,000,000 shares authorized and none issued Common Stock, no par value, 100,000,000 shares authorized; 4,927,483 shares and 5,050,683 issued and outstanding on March 31, 1999 and June 30, 1998 respectively. 53,744,637 53,742,005 Accumulated deficit (46,361,953) (46,574,985) -------------- -------------- 7,382,684 7,167,020 Less treasury stock @ cost (120,188) - -------------- -------------- Total shareholders' equity 7,262,496 7,167,020 -------------- -------------- Total liabilities & shareholders' equity $ 8,723,899 $ 9,658,409 ============== ==============
The accompanying notes are an integral part of these financial statements. 3
ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended March 31, 1999 and 1998 March 31 ----------------------------- 1999 1998 ------------- ------------- Net sales $ 1,600,464 $ 2,731,892 ------------- ------------- Operating expenses: Direct service and cost of goods sold 957,991 1,198,435 Selling, general and administrative 537,419 866,554 Depreciation and amortization 89,036 288,066 ------------- ------------- Total operating expenses 1,584,446 2,353,055 ------------- ------------- Income from operations 16,018 378,837 Interest expense - net of interest income (17,920) (69,548) Other income 17,012 - ------------- ------------- Net income $ 15,110 $ 309,289 ============= ============= Basic earnings per share Earnings per common share $ 0.00 $ 0.06 ============= ============= Diluted earnings per common share $ 0.00 $ 0.06 ============= ============= Weighted average common shares and equivalents outstanding during period -Basic 5,037,846 5,049,504 -Diluted 5,779,707 5,049,504
The accompanying notes are an integral part of these financial statements. 4
ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Nine Months Ended March 31, 1999 and 1998 March 31 ------------------------------ 1999 1998 ------------- ------------- Net sales $ 5,763,631 $ 7,951,584 ------------- ------------- Operating expenses: Direct service and cost of goods sold 2,965,846 3,702,917 Selling, general and administrative 2,139,761 2,742,073 Depreciation and amortization 379,366 846,400 ------------- ------------- Total operating expenses 5,484,973 7,291,390 ------------- ------------- Income from operations 278,658 660,194 Interest expense - net of interest income (90,226) (200,154) Other income 24,600 697 ------------- ------------- Net income $ 213,032 $ 460,737 ============= ============= Basic earnings per share Earnings per share $ 0.04 $ 0.09 Diluted earnings per share $ 0.04 $ 0.09 Weighted average common shares and equivalent outstanding during period -Basic 5,046,404 5,049,504 -Diluted 5,512,791 5,049,504
The accompanying notes are an integral part of these financial statements. 5
ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended March 31, 1999 and 1998 March 31 -------------------------------- 1999 1998 ------------- -------------- Cash flows from operating activities: Net income from continuing operations $ 213,032 $ 460,737 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 379,366 846,400 (Increase) decrease in: Accounts receivable and notes receivable 363,013 (510,385) Cost & est earnings in excess of billing 105,070 - Inventory(see supplemental disclosure below)* (82,483) (24,441) Prepaid expenses and other current assets (30,147) 124,433 Other assets 41,517 (29,938) Increase (decrease) in: Accounts payable and accrued expenses (24,013) 86,864 Billings in excess of costs and est earnings 46,598 - ------------- -------------- Net cash provided by continuing operations 1,011,953 953,670 Net cash used in discontinued operations - (127,903) ------------- -------------- Net cash provided by operating activities 1,011,953 825,767 ------------- -------------- Cash flows from investing activities: Purchase of property, plant and equipment (60,960) (87,662) Other 1,479 19,396 ------------- -------------- Net cash used in investing activities (59,481) (68,266) ------------- -------------- Cash flows from financing activities: Payments on capital lease obligations (1,052,571) (722,534) Proceeds from the sale of common stock 2,632 - Purchase of treasury stock (120,188) - ------------- -------------- Net cash used in financing activities (1,170,127) (722,534) ------------- -------------- Net increase (decrease) in cash (217,655) 34,967 Cash, beginning of period 1,116,857 526,851 ------------- -------------- Cash, end of period $ 899,202 $ 561,818 ============= ============== Supplemental disclosure: Capital leases entered into during period: $ - $ 537,875
*In December of 1998, certain fryer equipment was reclassified to inventory as a result of the Company's decision to sell the fryers in the ordinary course of business. The amount transferred amounted to $1,345,250, net of $1,097,987 of accumulated depreciation. As of March 31, 1999, $1,318,827 remained in inventory. See Management's analysis of Liquidity and Capital Resources. The accompanying notes are an integral part of these financial statements. 6 ALANCO ENVIRONMENTAL RESOURCES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR NINE MONTHS ENDED MARCH 31, 1999 Note 1 - Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles for interim financial information and in accordance with the instructions to Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles have been condensed or omitted. These interim consolidated financial statements should be read in conjunction with the Company's June 30, 1998, Annual Report on Form 10-K. In the opinion of management, the accompanying consolidated financial statements include all adjustments consisting of normal recurring accruals necessary to present fairly the financial position as of March 31, 1999, and the results of operations and cash flows for the periods ended March 31, 1999. The results of operations for the nine months ending March 31, 1999, are not necessarily indicative of the operating results to be expected for an entire year. All significant intercompany balances, transactions and stock holdings have been eliminated from the accompanying interim financial statements. Note 2 - Inventories Inventories have been recorded at the lower of cost or market. The composition of inventories as of March 31, 1999, and June 30, 1998, is listed below: March 31, 1999 June 30, 1998 -------------- ------------- Finished goods $1,503,409 $226,116 Work-in-process 11,185 24,835 Raw material 453,510 289,420 -------------- ------------- $1,968,104 $540,371 ============== ============= In December of 1998, certain fryer equipment was reclassified to inventory as a result of the Company's decision to sell the fryers in the ordinary course of business. The amount transferred amounted to $1,345,250, net of $1,097,987 of accumulated depreciation. As of March 31, 1999, $1,318,827 remained in inventory. See Management's Discussion of Liquidity and Capital Resources. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATION Liquidity and Capital Resources As of March 31, 1999, the Company's current assets exceeded current liabilities by $2,749,509, or a ratio of 3.0 to 1, compared to $1,288,883, a ratio of 1.6 to 1, as of June 30, 1998. The significant increase in the current ratio was primarily a result of the reclassification of fryer units from Property, Plant and Equipment to Inventory due to the Company's decision to market the units. (See discussion below concerning termination of the Wal- Mart contract.) Without the transfer of equipment to inventory, the ratio would have increased to 2.0. Net cash decreased $217,655 over the first nine months of the year, compared to a gain of $34,967 for the prior year. Capital lease obligations were reduced a total of $1,052,571 during the first nine months, compared with a net reduction of $722,534 the prior year. One lease was restructured resulting in a $27,000 gain. During fiscal year 1998, Wal-Mart notified the Company of their intent to terminate its contract with the Fry Guy subsidiary, and began a self-managed food program. More than 1,500 fryers have been returned to the Company by Wal- Mart. Nearly all of these machines have been cleaned, refurbished and prepared for resale. The Company continues to expand its sales distribution network to resell the refurbished fryers. 2. Results of Operations (a.) Three months ended 3/31/99 versus 3/31/98 Consolidated revenue for the quarter ended March 31, 1999 was $1,600,464, a decrease of 41.4% from the same period last year. This was primarily a result of the termination of the Wal-Mart contract. Net income decreased to $15,110 from $309,289 for the same period last year. Direct service and COGS declined 20%, to $982,168 this quarter from $1,198,435 for the comparable quarter last year. General and administrative expense also decreased, to $513,242 from $866,554 last year, or a 41% decrease. Depreciation and amortization expenses decreased to $89,036 for the quarter ending March 31, 1999, compared to $288,066 for the comparable quarter last year, a 69% decrease. This is a result of the reclassification of Fry Guy equipment from a depreciable asset to inventory held for resale. Net interest expense decreased to $17,920 from $69,548 in the comparable quarter last year. The decrease is a result of the payoff of capitalized leases. During the quarter, a $173,500 contract was signed between Alanco China and Beijing Electric Power in China. Work has already begun on this project, and completion is projected by the end of calendar 1999. 8 (b.) Nine months ended 3/31/99 versus 3/31/98 Consolidated revenues for the nine months ended March 31, 1999 was $5,763,631, a 27.5% decrease from the $7,951,584 of the comparable period last year. The decrease resulted from the decrease in Fry Guy revenue due to the termination of the Wal-Mart contract offset by an increase of 12% in the pollution control segment. Consolidated net income for the period was $213,032, or $.04 per share, compared to $460,737, or $.09, for the same period last year. This decrease in sales resulted from the decrease in sales partially mitigated by a 25% decrease in operating and overhead expenses, as well as the increase in earnings in the pollution control segment. Direct service and COGS decreased 20% to $2,965,846 from $3,702,917 for the comparable nine months last year. General and administrative expenses decreased 22% to $2,139,761 for the current nine months, from $2,742,073 last year. Depreciation and amortization expenses decreased to $379,366, or 55%, from $846,400 for the same time period last year, due to the reclassification of Fry Guy equipment. Net interest expense decreased 55% to $90,226, from $200,154 last year. The decrease is a result of the payoff of capitalized leases. 3. Year 2000 Issue The Company has consulted with an outside Management Information Systems analyst and determined that all computer systems currently in use by the Company are either in compliance with the Year 2000 issue or can be made to comply with minor modifications. The estimate for modification required for the Year 2000 issue is well under $10,000. An upgrade to the Company's accounting package has been purchased as well as several upgrades to the manufacturing segment's in-house systems, to allow for 4 digit dates. The Company does not anticipate significant problems with any of its suppliers of data necessary for the Company's operations. The potential risk to the Company concerning the Year 2000 issue appears to be problems that customers may incur and the effect on their ability to pay the Company for services and products. The Company does not have a formal contingency plan to resolve this issue. However, due to the Company's diverse customer base, management anticipates the problems should be limited in scope. 4. Subsequent Event On April 30, 1999 the Company announced that it has signed a Letter of Intent to acquire ASI Communications,Inc., a Tempe, Arizona company that operates in three telecommunications areas, and had 1998 sales of approximately $5.6 million. See Exhibit (c) attached. 9 PART II. OTHER INFORMATION Item 1. Legal proceedings None Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits (27) Financial Data Schedule (b) Reports on Form 8-K None (c) Press release dated April 30, 1999 titled _Alanco Letter of Intent To Acquire ASI Communications, Inc._ SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunder duly authorized. ALANCO ENVIRONMENTAL RESOURCES CORPORATION (Registrant) /s/ John A. Carlson ________________________ John A. Carlson Chief Financial Officer Date: 11 May 1999 10 EX-27 2
5 9-MOS JUN-30-1999 MAR-31-1999 899202 0 1780138 701992 1968104 4140744 2996907 1255983 8723899 1391235 70168 0 0 53744637 (46361954) 8723899 5763631 5763631 2965846 5484973 (46301) 30904 136527 213032 0 213032 0 0 0 213032 .04 .04
EX-99 3 ALANCO ENVIRONMENTAL RESOURCES CORPORATION FOR IMMEDIATE RELEASE CONTACT: Alanco Environmental Resources Corporation (602) 607-1010 ALANCO LETTER OF INTENT TO ACQUIRE ASI COMMUNICATIONS, INC. Combined companies to focus on growth of ASI's internet and IP telephony business segments. (Scottsdale, AZ _ April 30, 1999) _ ALANCO ENVIRONMENTAL RESOURCES CORPORATION (NASDAQ:ALAN) announced today that it has signed a Letter of Intent to acquire ASI Communications, Inc. (ASI), a Tempe, Arizona company with 1998 sales of approximately $5.6 million, and operating in three telecommunications-related business segments: internet access services, IP telephony (telecommunications utilizing internet technologies), and security alarm monitoring. The proposed acquisition will be a stock exchange transaction, with ASI shareholders owning approximately 45% of Alanco's outstanding stock at the close. The combined company's strategic objective will be to accelerate growth of the ASI internet business segments _ internet access services, and IP telephony. A supporting plan will be to divest non-strategic business assets and redeploy this capital into the high growth potential internet businesses. It is anticipated that, upon completion, the name of the company will be changed to reflect the new strategic focus. Robert R. Kauffman will continue as Chairman and Chief Executive Officer. Kay C. Zahn, currently President of ASI Communications, Inc., will be appointed President of the new company. The proposed transaction will require approval of both Alanco and ASI shareholders. Alanco Environmental Resources Corporation is an Arizona corporation headquartered in Scottsdale, Arizona, primarily engaged in environmental products businesses. Alanco is traded on the NASDAQ stock market under the symbol ALAN. THIS PRESS RELEASE CONTAINS STATEMENTS THAT MAY BE CONSIDERED FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN, AND THE ACTUAL RESULTS MAY DIFFER FROM MANAGEMENT'S EXPECTATIONS. # # # -----END PRIVACY-ENHANCED MESSAGE-----