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| ALAN > SEC Filings for ALAN > Form 10-Q on 14-May-2012 | All Recent SEC Filings |
14-May-2012
Quarterly Report
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 or their opposites, 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; 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; 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; the ability to maintain satisfactory relationships with current and future suppliers; federal and/or state regulatory and legislative action; 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.
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, stock-based compensation, income taxes, ongoing litigation, commitments and contingencies, and marketable securities. 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:
Fair value of financial instruments - The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The carrying amounts of accounts receivable, note receivable, accounts payable, accrued liabilities, and notes payable approximate fair value given their short-term nature and borrowing rates currently available to the Company for loans with similar terms and maturities.
Marketable Securities - The Company determines the appropriate classification of its investments in marketable equity securities at the time of acquisition and reevaluates such determinations at each balance sheet date. Marketable securities are classified as held to maturity when the Company has the positive intent and ability to hold securities to maturity. Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with the unrealized gains and losses recognized in earnings. Marketable securities not classified as held to maturity or as trading, are classified as available for sale, and are carried at fair market value, with the unrecognized gains and losses, net of tax, included in the determination of comprehensive income (loss) and reported in shareholders' equity. The Company has classified all of its marketable securities as available for sale. The fair value of substantially all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market prices is based on similar types of securities that are traded in the market.
Other than temporary decline in market value - The Company reviews its marketable securities on a regular basis to determine if any security has experienced an other-than-temporary decline in fair value. The Company considers the investee company's cash position, earnings and revenue outlook, stock price performance, liquidity and management ownership, among other factors, in its review. If it is determined that an other-than-temporary decline exists in a marketable security, the Company writes down the investment to its market value and records the related write-down as an investment loss in its Statement of Operations.
Results of Operations
Presented below is management's discussion and analysis of financial condition and results of operations for the periods indicated:
(A) Three months ended March 31, 2012 versus three months ended March 31, 2011
Net Sales
In accordance with accounting principles generally accepted in the United States
of America, the Company is not reporting operating revenues for the quarters
ended March 31, 2012 and 2011 because, as of June 30, 2011, all business
segments had been sold and the Company had effectively become a holding company
without operating entities. The quarter ended March 31, 2011 operating results
for the business segments are reported as Discontinued Operations.
Operating Loss
Operating Loss for the quarter ended March 31, 2012 was ($270,800), an increase
of $8,600 compared to an Operating Loss of ($262,200) reported for the same
quarter of the prior year. The increased operating loss results from a change in
operating expense as discussed above.
Other Income and Expense
Net interest income for the quarter ended March 31, 2012 was $6,300, an
improvement of $136,700 when compared to interest expense of $130,400 for the
quarter ended March 31, 2011. The decrease resulted from the May 2011 sale of
the Wireless Asset Management segment that allowed the Company to repay debt and
terminate its credit agreements. During the quarter ended March 31, 2012, the
Company recorded a net gain on sale of marketable securities of $321,700,
resulting from the sale of approximately 539,809 shares of its ORBCOMM Common
Stock at an average selling price of $3.51 per share. The Company did not own
marketable securities during the same quarter of the previous fiscal year. The
Company had other income of $2,700 during the three months ended March 31, 2012
as compared to no other income or expense reported in the same quarter of the
prior year.
Discontinued Operations
The Company reported no activity from discontinued operations for the current
fiscal quarter compared to an $800 income from discontinued operations for the
quarter ended March 31, 2011. The $800 income from discontinued operations
reflected the operating income generated by the Wireless Asset Management
segment during the quarter ended March 31, 2011.
Dividends and Redemption
The Company had zero dividend expense for the three months ended March 31, 2012,
as compared to $79,400 in preferred stock dividends recorded in the comparable
quarter ended March 31, 2011. The decrease resulted from the retirement of all
Series D and Series E Convertible Preferred Stock in June 2011 and the
repurchase of all Series B Convertible Preferred Stock in December 2011. See
Form 10-K for the fiscal year ended June 30, 2011 for additional discussions
relative to the retirement of the Series D and E Convertible Preferred Stock.
Net Income (Loss) Attributable to Common Shareholders Net Income Attributable to Common Shareholders for the quarter ended March 31, 2012 amounted to $59,900, or $.01 per share, a $531,100 improvement when compared to a loss of ($471,200), or ($.09) per share, in the comparable quarter of the prior year for reasons discussed above.
Comprehensive Income (Loss)
Comprehensive Income (Loss) represents the unrealized change in market value of
the Company's Marketable Securities. During the three months ended March 31,
2012, the Company reported an Unrealized Gain on Marketable Securities, net of
tax, of $1,007,800 resulting from a 28.8% increase in the market value of the
shares held at the end of the quarter when compared to December 31, 2011, offset
by an adjustment for unrealized gains previously recorded related to securities
sold during the period. At March 31, 2012 the Company valued 1,171,884 shares
(net of escrow shares) of ORBCOMM, Inc. Common Stock at $3.85 per share for a
total value of $4,511,600. At December 31, 2011, the Company reported the
1,711,693 net shares at $2.99 per share for a total value of $5,117,700.
Net Sales
In accordance with accounting principles generally accepted in the United States
of America, the Company is not reporting operating revenues for the nine months
ended March 31, 2012 and 2011 because, as of June 30, 2011, all business
segments had been sold and the Company had effectively become a holding company
without operating entities. The nine months ended March 31, 2011 operating
results for the business segments are reported as Discontinued Operations.
Operating Expenses
Operating expenses for the nine months ended March 31, 2012, consisting of
corporate expenses, amortization of stock-based compensation and depreciation
expense, were $812,200, a $229,100, or 22%, decrease when compared to the
$1,041,300 reported for the comparable nine month period of the prior
year. Corporate expenses reported for the nine months ended March 31, 2012 of
$802,400 represents a decrease of $45,000, or 5.3%, compared to corporate
expenses of $847,400 reported for the comparable nine months ended March 31,
2011. The decrease is primarily due to reduction of costs for business
insurance, audit fees, consulting and investor relations. Amortization of
stock-based compensation for the nine months ended March 31, 2012 was $7,800, a
decrease of $185,600 or 96% when compared to $193,400 in the comparable nine
month period of the prior year. The decrease was primarily due to a $182,000
expense in the prior period resulting from the Company's election to re-price
certain employee stock options during the quarter ended September 30, 2010 and
to expense the entire increase in Black Scholes value of the re-priced options
in that period. Depreciation and amortization expense for the nine months ended
March 31, 2012 was $2,000, an increase of $1,500 compared to the $500 reported
in the comparable nine months of the prior year.
Operating Loss
Operating Loss for the nine months ended March 31, 2012 was ($812,200), a
decrease of ($229,100) compared to an Operating Loss of ($1,041,300) reported
for the same nine months of the prior year. The decreased operating loss results
from a reduction in operating expense as discussed above.
Other Income and Expense
Net interest income for the nine months ended March 31, 2012 was $7,100, an
improvement of $391,500 when compared to interest expense of $384,400 for the
nine months ended March 31, 2011. The improvement resulted from the May 2011
sale of the Wireless Asset Management segment that allowed the Company to repay
debt and terminate its credit agreements. During the nine months ended March 31,
2012, the Company recorded a net gain on sale of marketable securities of
$360,400, resulting from the sale of approximately 914,329 shares of its ORBCOMM
Common Stock at an average selling price of $3.30 per share. The Company did not
own marketable securities during the same nine months of the previous fiscal
year. The Company had $2,700 of other income during the nine months ended March
31, 2012 as compared to other expense of ($9,300) reported in the same nine
month period of the prior year. Other expense for the nine month period of the
prior year was the result of a write down in the value of an investment; there
was no such write down in the current period.
Discontinued Operations
The Company reported no activity from discontinued operations for the current
nine months compared to a ($1,008,900) loss from discontinued operations for the
nine months ended March 31, 2011. The ($1,008,900) loss from discontinued
operations reflected the operating loss incurred by the Wireless Asset
Management and Data Storage segments during the nine months ended March 31,
2011.
Dividends and Redemption
Dividend expense for the nine months ended March 31, 2012 was $30,500, as
compared to $239,000 in preferred stock dividends recorded in the comparable
nine months ended March 31, 2011. The decrease resulted from the retirement of
all Series D and Series E Convertible Preferred Stock in June 2011 and the
repurchase of all Series B Convertible Preferred Stock in December 2011. See
Form 10-K for the fiscal year ended June 30, 2011 for additional discussions
relative to the retirement of the Series D and E Convertible Preferred
Stock. The Company recorded a net gain on redemption of the Series B Convertible
Preferred Stock of $443,200, net of $600 of related legal expense in the quarter
ended December 31, 2011 directly to equity. See Note G - Equity for additional
information regarding the repurchase of the Series B Convertible Preferred
Stock.
ALANCO TECHNOLOGIES, INC.
Net Loss Attributable to Common Shareholders
Net Loss Attributable to Common Shareholders for the nine months ended March 31,
2012 amounted to ($29,300), or ($.01) per share, a $2,653,600, or 98.9% decrease
when compared to a loss of ($2,682,900), or ($.50) per share, in the comparable
nine months of the prior year for reasons discussed above.
Comprehensive Income (Loss)
Comprehensive Income (Loss) represents the unrealized change in market value of
the Company's Marketable Securities. During the nine months ended March 31,
2012, the Company reported an Unrealized Gain on Marketable Securities, net of
tax, of $843,800 resulting from a 23% increase in the market value of the shares
held at the end of the nine months, offset by an adjustment for unrealized gains
previously recorded related to securities sold during the period. At March 31,
2012 the Company valued 1,171,884 shares (net of escrow shares) of ORBCOMM, Inc.
Common Stock at $3.85 per share for a total value of $4,511,600. At June 30,
2011, the Company reported the 2,120,483 net shares at $3.13 per share for a
total value of $6,637,100.
Liquidity and Capital Resources
The Company's current assets at March 31, 2012 exceeded current liabilities by $6,357,200, resulting in a current ratio of 13.5 to 1. At June 30, 2011, current assets exceeded current liabilities by $7,028,400 reflecting a current ratio of 13.1 to 1. The reduction in net current assets at March 31, 2012 versus June 30, 2011 was due primarily to the ($442,000) Net Loss reported for the nine months ended March 31, 2012, the repurchase of the Series B Convertible Preferred Stock for $800,000, of which $600,000 had been paid by the end of the quarter, offset by an unrealized gain on marketable securities of $635,200, net of tax, reported separately in the equity section of the balance sheet due to market value increases of Marketable Securities - Restricted held at March 31, 2012 and June 30, 2011.
Consolidated accounts receivable of $48,000 at March 31, 2012 reflects a decrease of $101,900, or 68%, when compared to the $149,900 reported as consolidated accounts receivable at June 30, 2011. Consolidated accounts receivable at both March 31, 2012 and June 30, 2011 represents amounts due to the Company relating to the sale of its StarTrak Systems, LLC subsidiary in May 2011.
Cash used in operations for the nine month period ended March 31, 2012 was $1,006,500; a similar amount to the $1,106,100 of cash used in operations for the comparable period ended March 31, 2011. The net cash used in operations for the nine months ended March 31, 2012 of $1,006,500 was due to net losses and increases in working capital, other than cash. The net cash used in operations for the nine months ended March 31, 2011 was also due to significantly larger net losses offset by a reduction in working capital.
Cash provided by investing activities for the nine month period ended March 31, 2012 was $2,719,500, an increase of $741,000, or 37.5%, when compared to cash provided by investing activities for the comparable period ended March 31, 2011 of $1,978,500. The cash provided by investing activities during the current nine month period was the result of the sale of marketable securities of $3,021,100 offset by $300,000 in cash loans. The net cash provided by investing activities for the nine month period ended March 31, 2011 was due primarily to $2,000,000 in proceeds from the sale of the Company's RFID Technology segment.
Cash used in financing activities for the nine months ended March 31, 2012 amounted to ($474,100), a decrease of $247,000, or 34.3%, compared to net cash used in financing activities for the nine months ended March 31, 2011 of ($721,100). Debt repayment was the significant item in both periods.
During fiscal 2012, the Company expects to meet its working capital and other cash requirements with its current cash reserves and sales of marketable securities as required. However, the Company may require additional working capital for future operations. While the Company believes that it will succeed in attracting additional required capital and will generate capital from future operations, there can be no assurance that the Company's efforts will be successful. The Company's continued existence is dependent upon its ability to achieve and maintain profitable operations, identify profitable merger candidates and/or successfully invest its capital.
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