Forward-Looking Statements: Except for historical information, the statements contained herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The words "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "could," "target," "potential," "is likely," "will," "expect" and similar expressions, as they relate to the Company are intended to identify forward-looking statements within the meaning of the "safe harbor" provisions of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, the Company may publish or otherwise make available forward-looking statements of this nature. All such forward-looking statements are based on the expectations of management when made and are subject to, and are qualified by, risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These risks and uncertainties include, but are not limited to, the following factors, among others, that could affect the outcome of the Company's forward-looking statements: general economic and market conditions; reduced demand for information technology equipment; competitive pricing and difficulty managing product costs; development of new technologies which make the Company's products obsolete; rapid industry changes; failure by the Company's suppliers to meet quality or delivery requirements; the inability to attract, hire and retain key personnel; failure of an acquired business to further the Company's strategies; the difficulty of integrating an acquired business; undetected problems in the Company's products; the failure of the Company's intellectual property to be adequately protected; unforeseen litigation; unfavorable result of current pending litigation; the ability to maintain sufficient liquidity in order to support operations; the ability to maintain satisfactory relationships with lenders and to remain in compliance with financial loan covenants and other requirements under current banking agreements; the ability to maintain satisfactory relationships with suppliers; federal and/or state regulatory and legislative actions; customer preferences and spending patterns; the ability to implement or adjust to new technologies and the ability to secure and maintain key contracts and relationships. New risk factors emerge from time to time and it is not possible to accurately predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statements. Except as otherwise required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this Quarterly Report or in the documents we incorporate by reference, whether as a result of new information, future events, changed circumstances or any other reason after the date of this Quarterly Report on Form 10-Q.

General

Information on industry segments is incorporated by reference from Note I - Industry Segment Data to the Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Management's discussion and analysis of financial condition and results of operations are based upon the condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the United States Securities and Exchange Commission. The preparation of our financial statements requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an ongoing basis, estimates are revalued, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These areas include allowances for doubtful accounts, inventory valuations, carrying value of goodwill and intangible assets, estimated profit and estimated percent complete on uncompleted contracts in process, stock-based compensation, income and expense recognition, income taxes, ongoing litigation, and commitments and contingencies. Our estimates are based upon historical experience, observance of trends in particular areas, information and/or valuations available from outside sources and on various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts may materially differ from these estimates under different assumptions and conditions.

Accounting policies are considered critical when they are significant and involve difficult, subjective or complex judgments or estimates. We considered the following to be critical accounting policies:

Principles of consolidation - The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

Revenue recognition - The Company recognizes revenue, net of anticipated returns, at the time products are shipped to customers, or at the time services are provided. Revenue from material long-term contracts (in excess of $250,000 and not completed in the reporting period) in all business segments are recognized on the percentage-of-completion method for individual contracts, commencing when significant costs are incurred and adequate estimates are verified for substantial portions of the contract to where experience is sufficient to estimate final results with reasonable accuracy. Revenues are recognized in the ratio that costs incurred bear to total estimated costs. Changes in job performance, estimated profitability and final contract settlements would result in revisions to cost and income, and are recognized in the period in which the revisions were determined. Contract costs include all direct materials, subcontracts, labor costs and those direct and indirect costs related to contract performance. General and administrative costs are charged to expense as incurred. At the time a loss on a contract is known, the entire amount of the estimated ultimate loss is accrued.

Long-lived assets and intangible assets - The Company reviews carrying values at least annually or whenever events or circumstances indicate the carrying values may not be recoverable through projected undiscounted cash flows.

Results of Operations

(A) Three months ended March 31, 2009 versus three months ended March 31, 2008

Net Sales

Consolidated comparable net sales for the three months ended March 31, 2009 were $4,609,700, an increase of $1,362,000, or 42.0%, from the $3,247,700 of comparable sales reported for the third quarter of fiscal 2008. The increase resulted from increases in both the Wireless Asset Management and RFID Technology segments. The Wireless Asset Management segment increased sales by 24.7%, to $3,758,000, an increase of $745,400, compared to $3,012,600 reported for the three months ended March 31, 2008. The Company's RFID Technology segment reported quarterly sales of $851,700, compared to $235,100 reported for the same quarter of the prior year, an increase of $616,600.

The increase in the RFID Technology segment sales resulted from revenue recognized under existing contracts, primarily the TSI/PRISM system being installed at the Washington DC jail; and revenue related to fees for a technology license issued during the quarter. The increase in Wireless Asset Management segment sales resulted from increased customer product demand for both hardware and data services. The Company does not consider the current quarter percentage increases or decreases to be indicative of a trend.

Gross Profit

Consolidated gross profit for the quarter ended March 31, 2009 amounted to $1,556,100, an increase of $546,300, or 54.1%, from the comparable gross profit of $1,009,800 reported for the same quarter of the prior year. The gross profit increases were again due to increases in both the Wireless Asset Management and RFID Technology segments. The gross profit of the Wireless Asset Management segment increased by 15.8%, or $153,800, increasing to $1,127,900 in the quarter ended March 31, 2009 when compared to $974,100 reported in the comparable quarter of the prior fiscal year. Gross margins for the Wireless Asset Management segment decreased from 32.3% in the comparable quarter of the prior year to 30.0% in the current quarter. The increase in gross profit was due primarily to higher sales while the decrease in gross margin was due to high warranty costs related to an early version of ReeferTrak product and additional cost incurred to assist current customers in their transition from analog to digital hardware products.

The RFID Technology segment gross profit increased to $428,200 in the quarter ended March 31, 2009, compared to $35,700 reported in the comparable quarter of the prior fiscal year, an increase of $392,500. Gross margins for the RFID Technology segment increased to 50.3% in the current quarter compared to 15.2% for the comparable quarter of the prior year. The increase in gross profit and gross margin was due primarily to a fee related to a perpetual license issued during the quarter and to higher contract sales. The Company does not consider the current quarter margin increases or decreases to be indicative of a trend.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses, excluding corporate expenses of $360,500, for the current quarter decreased to $1,919,600, a decrease of $132,400, or 6.5%, when compared to $2,052,000 incurred in the same quarter of fiscal year 2008. The decrease was due to a $134,700, or 25.6%, decrease in the SG&A expense for the RFID Technology segment, due primarily to deferral of certain engineering costs and TSI cost reduction efforts. The Wireless Asset Management segment reported no significant change, reporting SG&A expense of $1,527,100 in the current quarter compared to $1,524,800 in the comparable quarter of the prior year.

Operating Loss

Operating Loss reported for the quarter was ($724,000) compared to an Operating Loss of ($1,368,800) reported for the same quarter of the prior year, an improvement of $644,800, or 47.1%. The improved operating results are due to improved results in the RFID Technology segment, which reported an Operating Profit of $35,700 for the quarter ended March 31, 2009, compared to an Operating Loss ($491,500) reported for the same quarter of the prior year, and improved results in the Wireless Asset Management segment, which reduced its Operating Loss to ($399,200), a reduction of $151,500, or 27.5%, when compared to ($550,700) reported in the comparable period of the prior fiscal year. Corporate expenses increased to ($360,500), from ($326,600), an increase of $33,900, or 10.4%, related primarily to an increase in outside services.

Other Income and Expense

Net interest expense for the quarter increased to $190,700, an increase of $24,400, or 14.7%, compared to net interest expense of $166,300 for the same quarter in the prior year. The increase was due primarily to additional net borrowings in the current quarter compared to the same quarter in the prior year. The Company reported Other Loss of ($500) in the current quarter compared to Other Income of $21,600 related to the liquidation of restaurant equipment assets for the comparable quarter of the prior fiscal year.

(Loss) Earnings before Interest, Depreciation & Amortization (EBITDA)

The Company believes that (loss) earnings before net interest expense, income taxes, depreciation, and amortization of intangible assets, (EBITDA), is an important measure used by management to measure performance. EBITDA may also be used by certain investors to compare and analyze our operating results between accounting periods. However, EBITDA should not be considered in isolation or as a substitute for net income, cash flows or other financial statement data prepared in accordance with US GAAP or as a measure of our performance or liquidity. EBITDA for Alanco's 2009 fiscal year third quarter ended March 31, 2009 represents a loss of ($660,500) compared to a loss of ($1,230,400) for the same quarter of the prior fiscal year, an improvement of $569,900, or 46.3%. A reconciliation of EBITDA to Net Loss for the quarters ended March 31, 2009 and 2008 is presented below:

                     EBITDA RECONCILIATION to NET LOSS (unaudited)

                                                 3 months ended     3 months ended
                                                   March 31,          March 31,
                                                      2009               2008
     EBITDA                                  $          (660,500) $    (1,230,400)

         Net interest expense                           (190,700)        (166,300)
         Depreciation and amortization                  (156,500)        (161,200)

     NET LOSS                                $        (1,007,700) $    (1,557,900)

Dividends
The Company paid quarterly in-kind Series B Preferred Stock Dividends during the quarter ended March 31, 2009 of $23,600. In addition, the Company accrued quarterly dividends related to the Series D Preferred Stock of $103,600.

Net Loss Attributable to Common Shareholders

Net Loss Attributable to Common Shareholders for the quarter ended March 31, 2009 amounted to ($1,134,900), or ($.04) per share, compared to a loss of ($2,200,000), or ($.09) per share, in the comparable quarter of the prior year. The Company anticipates improved future operating results in all business segments. However, actual results in the Wireless Asset Management segment and the RFID Technology segment may be affected by unfavorable economic conditions and reduced capital spending budgets. If the economic conditions in the United States deteriorate or if a wider global economic slowdown occurs, Alanco may experience a material adverse impact on its operating results and business conditions.

(B) Nine months ended March 31, 2009 versus nine months ended March 31, 2008

Net Sales

Consolidated net sales for the nine months ended March 31, 2009 were $14,670,000, an increase of $5,162,100, or 54.3%, compared to sales of $9,507,900 reported for the nine months ended March 31, 2008. The sales increase resulted from increases in sales for both the RFID Technology and the Wireless Asset Management segments. The RFID Technology segment reported sales of $4,209,700, an increase of $3,294,500, compared to $915,200 reported for the comparable period of the prior year. The Wireless Asset Management segment reported a 21.7% sales increase for the nine month period, reporting sales of $10,460,300, an increase of $1,867,600, compared to $8,592,700 reported for the prior year. The increase in sales for the RFID Technology segment resulted from increased revenues recognized as installation progress continued on existing contracts and revenue was earned related to fees for a technology license issued during the quarter. The increase in Wireless Asset Management segment sales resulted primarily from increased hardware sales. The Company does not consider the first nine-month percentage increases or decreases to be indicative of a trend.

Gross Profit

Consolidated gross profit for the nine months ended March 31, 2009 increased by $794,600, or 24.8%, to $3,993,400 from comparable gross profit of $3,198,800 reported for the same period of the prior year. The gross profit increase was due to an increase of $1,173,800 in the Company's RFID Technology Segment, increasing to $1,272,600 from $98,800 reported on a comparable basis in the prior year. The Wireless Asset Management segment gross profit decreased by $379,200, or 12.2%, to $2,720,800 from $3,100,000 in the prior fiscal year. The increase in gross profit for the RFID Technology segment resulted from increased sales and an increase in gross margin to 30.2% for the nine months ended March 31, 2009 from 10.8% in the same period of the prior fiscal year. The Wireless Asset Management segment's reduction in gross profit and reduced gross margin resulted primarily from unusually high warranty costs related to an early version of ReeferTrak product and additional cost incurred to assist current customers in their transition from analog to digital hardware products.

Consolidated gross margins decreased from 33.6% in the prior year to 27.2% in the current year, due primarily to the reduced gross margin of the Wireless Asset Management segment. Gross margin can be impacted in all business segments by economic conditions and specific market pressures. As a result, the changes in gross margins reported for the current nine-months are not considered to be trends.

Selling, General and Administrative Expenses

Comparable selling, general and administrative ("SG&A") expenses, excluding corporate expenses of $770,200, for the current nine months ended March 31, 2009 decreased to $5,575,200, a decrease of $869,200, or 13.5%, compared to $6,444,400 incurred in the comparable period of fiscal year 2008. The decrease was due to decreases in both business segments, including a $497,400, or 29.7%, decrease in the RFID Technology segment due primarily to deferral of certain engineering costs; and a $371,800, or 7.8%, decrease in SG&A expense for the Wireless Asset Management segment due to reduced sales expense and general expense reductions initiated during the period.

Operating Loss

Operating Loss for the nine-month period was ($2,352,000) compared to an Operating Loss of ($4,230,600) reported for the same period of the prior year, an improvement of $1,878,600, or 44.4%. The improved operating results are due to improved results in the RFID Technology segment, which reported an Operating Profit of $92,300 compared to a ($1,578,900) Operating Loss reported for the same period of the prior year. The Wireless Asset Management segment reported an operating loss for the nine-month period of ($1,674,100), compared to an operating loss of ($1,666,700) for the comparable period of the prior year. Corporate expenses decreased by 21.8% to ($770,200) from ($985,000), a decrease of $214,800, due primarily to the recovery of legal expenses related to the TSIN lawsuit that has been settled.

Other Income and Expense

Net interest expense for the period increased to $702,800, an increase of $138,200, or 24.4%, compared to net interest expense of $564,600 for the same period in the prior year. The increase was due primarily to a one-time accelerated amortization of deferred loan costs of approximately $216,000 related to the prepayment on the ComVest term loan. The increase in interest expense was partially offset by interest rate reduction related to decreases in the prime rate.

The Company reported Other Income (Expense) of ($185,300) for the nine-month period ended March 31, 2009, compared to Other Income of $59,300 reported for the comparable period of the prior fiscal year. The reduction in Other Income was primarily due to a $187,500 charge in the quarter ended September 30, 2008 related to reduction in estimated value of the Company's 8.9% investment in TSIN.

The operations of TSI were acquired in May of 2002 by the issuance of 2.4 million (post October 16, 2006 reverse split) shares of the Company's Class A Common Stock and the assumptions of certain specific liabilities. In anticipation of the transaction, the Company had acquired approximately 8.9% of the then outstanding shares of TSIN. TSIN had stated it was its intent to liquidate enough shares of the Alanco stock to pay off all TSIN liabilities and to distribute the remaining Alanco shares to the TSIN stockholders. To reflect the 8.9% investment in TSIN subsequent to the acquisition, the Company estimated that approximately 2.25 million shares would be remaining after payment of all TSIN liabilities and that an 8.9% ownership would receive approximately 200,000 shares upon distribution. Therefore, the Company recorded 200,000 treasury shares valued at market price on the transaction date.

On January 30, 2003, a shareholder of TSIN filed suit naming as defendants the Company and its wholly owned subsidiary, ATSI. The complaint set forth various allegations and sought damages arising out of the Company's acquisition of substantially all of the assets of TSIN. Eventually, the lawsuit was transferred to TSIN who became the plaintiff and continued the legal process until September 2007 when the parties to the lawsuit entered into a Settlement Agreement more fully explained in Note K - TSIN Litigation Settlement. From 2003 through September 2007, TSIN incurred significant legal expenses associated with the lawsuit, which reduced the number of Alanco shares available to TSIN shareholders upon distribution. To reflect that reduction in investment value of the Company's 8.9% ownership in TSIN, the Company reduced the estimated number of treasury shares to be acquired upon distribution from 200,000 shares to 100,000 shares and recorded a charge to other expenses of $187,500 during the quarter ended September 30, 2008.

(Loss) Earnings before Interest, Depreciation & Amortization (EBITDA)

The Company believes that (loss) earnings before net interest expense, income taxes, depreciation, and amortization of intangible assets, (EBITDA), is an important measure used by management to measure performance. EBITDA may also be used by certain investors to compare and analyze our operating results between accounting periods. However, EBITDA should not be considered in isolation or as a substitute for net income, cash flows or other financial statement data prepared in accordance with US GAAP or as a measure of our performance or liquidity. EBITDA for Alanco's nine months ended March 31, 2009 represents a loss of ($2,344,900) compared to a loss of ($3,983,000) for the same period of the prior fiscal year, an improvement of $1,638,100, or 41.1%. A reconciliation of EBITDA to Net Loss for the nine-month period ended March 31, 2009 and 2008 is presented below:

                     EBITDA RECONCILIATION to NET LOSS (unaudited)

                                                 9 months ended     9 months ended
                                                   March 31,          March 31,
                                                      2009               2008
     EBITDA                                  $        (2,344,900) $    (3,983,000)

         Net interest expense                           (702,800)        (564,600)
         Depreciation and amortization                  (442,400)        (499,300)

     NET LOSS                                $        (3,490,100) $    (5,046,900)

Dividends
The Company paid quarterly in-kind Series B Preferred Stock Dividends during the nine-month period ended March 31, 2009 of $69,600. In addition, the Company accrued dividends on its Series D Preferred Stock during the nine-month period of $277,700, of which approximately $125,000 was paid in cash, $49,100 was paid in shares of the Company's Class A Common Stock (valued at market) and $103,600 remained accrued but unpaid as of March 31, 2009. Preferred stock dividends recorded for the same period of the prior year were $1,020,200 and consisted of quarterly in-kind dividends of $756,200 related to Series A and Series B Preferred Stock; and a special $264,000 dividend recorded due to a beneficial conversion feature based upon the implied value of warrants issued in the Series A Preferred Stock Offering that increased the Net Loss Attributable to Common Shareholders , but has no affect on the Company's cash or equity. All Series A Preferred Stock had been converted to Common Stock as of June 30, 2008.

Net Loss Attributable to Common Shareholders

Net Loss Attributable to Common Shareholders for the nine-months ended March 31, 2009 amounted to ($3,837,400), or ($.12) per share, compared to a loss of ($6,067,100), or ($.27) per share, in the comparable period of the prior year. The Company anticipates improved future operating results in all business segments. However, actual results in the Wireless Asset Management segment, Data Storage segment and the RFID Technology segment may be affected by unfavorable economic conditions and reduced capital spending budgets. If the economic conditions in the United States deteriorate or if a wider global economic slowdown occurs, Alanco may experience a material adverse impact on its operating results and business conditions.

Liquidity and Capital Resources

The Company's current assets at March 31, 2009 exceeded current liabilities by $566,800, resulting in a current ratio of 1.08 to 1. At June 30, 2008, current assets exceeded current liabilities by $698,400 and reflected a current ratio of 1.1 to 1. The slight deterioration in current ratio at March 31, 2009 versus June 30, 2008 resulted primarily from Operating Losses incurred during the nine-month period.

Consolidated accounts receivable, including receivables of the Data Storage segment, of $2,469,000 at March 31, 2009 reflects a decrease of $321,600, or 11.5%, when compared to the $2,790,600 reported as consolidated accounts receivable at June 30, 2008. The accounts receivable balance at March 31, 2009 for the Data Storage segment represents twenty-six days' sales in receivables, an increase compared to eight days' sales at June 30, 2008. The increase was due to a decrease in the proportion of credit card sales. The days' sales calculation of the Data Storage segment can be significantly affected by the proportion of credit card sales in the last month of the reporting period and therefore, the increase or decrease in days' sales for the Data Storage segment is not considered a trend.

The accounts receivable balance for the Wireless Asset Management segment at March 31, 2009 was $1,860,700 compared to $1,783,700 at June 30, 2008, an increase of $77,000, or 4.3%. Days' sales in receivables for the Wireless Asset Management decreased to forty-nine days from fifty-five days' sales in receivables reported at June 30, 2008.

The accounts receivable balance at March 31, 2009 for the RFID Technology segment was $437,100 which represents twenty-eight days' sales in receivables as compared to over two hundred days' sales in receivables at June 30, 2008. Days' sales in receivables for the RFID Technology segment are distorted at both March 31, 2009 and June 30, 2008 due to the minimal reported sales for the period . . .