SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ALANCO TECHNOLOGIES, INC.
(Exact name of registrant specified in charter)
Arizona 86-0220694
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
15575 North 83rd Way, Suite 3
Scottsdale, Arizona 85260
(480) 607-1010
(Address and telephone number of principal executive offices)
Robert R. Kauffman
Chief Executive Officer
Alanco Technologies, Inc.
15575 North 83rd Way, Suite 3
Scottsdale, Arizona 85260
(480) 607-1010
(Name, address and telephone number of agent for service)
With a Copy to:
Steven P. Oman, Esq.
10446 N. 74th Street, Suite 130
Scottsdale, Arizona 85258
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: FROM TIME TO TIME AFTER THE EFFECTIVENESS OF THIS REGISTRATION
STATEMENT
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED PURSUANT
TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(b) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE
SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(c) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
CALCULATION OF REGISTRATION FEE
Title of each Proposed
class of securities maximum aggregate Amount of
to be registered Amount to be Registered offering price (1) registration fee
---------------- ----------------------- ------------------ ----------------
Class A Common Stock 10,037,704 $0.44 $357.30
(1) Calculated for purposes of this offering under Rule 457(c) under the
Securities Act of 1933 using the average of the high and low sales prices for
the Company's Class A Common Stock on the NASDAQ SmallCap Market as of October
1, 2003.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
SUBJECT TO COMPLETION, DATED DECEMBER 3, 2003
PROSPECTUS
ALANCO TECHNOLOGIES, INC.
10,037,704 Shares of Class A Common Stock
(To be issued by the Company upon conversion of outstanding shares of
the Company's Series A Convertible Preferred Stock or upon exercise
of outstanding Warrants to purchase Common Stock.)
THE SHARES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. SEE
"RISK FACTORS" ON PAGE 5 FOR INFORMATION THAT YOU SHOULD
CONSIDER.
This prospectus is being used in connection with offerings from time to time by
some of our stockholders. We issued shares of Series A Convertible Preferred
Stock and Warrants to purchase Common Stock to the selling stockholders in
connection with a private placement completed in 2003. It is the shares of the
Company's Class A Common Stock that the Series A Convertible Preferred Stock and
Warrants may be converted in to which are offered by this prospectus. We expect
that sales of shares of Class A Common Stock under this prospectus will be made
o in broker's transactions;
o in transactions directly with market makers; or
o in privately negotiated sales or otherwise.
The selling stockholders will determine when they will sell their shares, and in
all cases they will sell their shares at the current market price or at
negotiated prices at the time of the sale. We will pay the expenses incurred to
register the shares for resale, but the selling stockholders will pay any
underwriting discounts, concessions, or brokerage commissions associated with
the sale of their shares of Class A Common Stock. The selling stockholders and
the brokers and dealers that they utilize may be deemed to be "underwriters"
within the meaning of the securities laws, and any commissions received and any
profits realized by them on the sale of shares may be considered to be
underwriting compensation. See "Plan of Distribution."
The selling stockholders beneficially own all 10,037,704 shares of Class A
Common Stock. We will not receive any part of the proceeds from the sale of the
shares. The registration of the shares on behalf of the selling stockholders,
however, does not necessarily mean that any of the selling stockholders will
offer or sell their shares under this registration statement, or at any time in
the near future.
Our Class A Common Stock is listed on the NASDAQ SmallCap Market, or NASDAQ,
under the symbol "ALAN." On October 1, 2003, the last sale price of our Class A
Common Stock on NASDAQ was $0.45 per share.
You should read this prospectus and any prospectus supplements carefully before
deciding to invest.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2003.
---------------------
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TABLE OF CONTENTS
Page
Summary 5
Risk Factors 5
Safe Harbor Statements Under the Private Securities
Litigation Reform Act of 1995 9
Issuance of Securities to Selling Stockholders 9
Use of Proceeds 10
Plan of Distribution 10
Selling Stockholders 12
Description of Securities 16
Legal Matters 18
Experts 19
Where You Can Find More Information 19
Information Incorporated by Reference 19
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SUMMARY
The following summary does not contain all of the information that may
be important to purchasers of our Class A Common Stock. Prospective purchasers
of Class A Common Stock should carefully review the detailed information and
financial statements, including notes thereto, appearing elsewhere in or
incorporated by reference into this prospectus.
The Company
Our company, Alanco Technologies, Inc., together with our subsidiaries, is a
provider of advanced information technology solutions. Our operations at the end
of fiscal 2003 (June 30, 2003) were diversified into two reporting business
segments including: (i) design, production, marketing and distribution of RFID
tracking technology, and (ii) manufacturing, marketing and distribution of data
storage products.
Effective June, 2002, we acquired radio frequency identification tracking
technology, known as "RFID", through the acquisition of the operations of
Technology Systems International, Inc., a Nevada corporation. We continue to
participate in the data storage market through two wholly-owned subsidiaries:
Arraid, Inc., a manufacturer of proprietary storage products to upgrade older
"legacy" computer systems; and Excel/Meridian Data, Inc., a manufacturer of
network attached storage systems for mid-range organizations.
Our principal executive offices are located at 15575 North 83rd Way, Suite 3,
Scottsdale, AZ 85260, and our telephone number is (480) 607-1010.
The Offering
Securities offered by the Selling Shareholders.. 10,037,704 shares of Class A Common Stock
Class A Common Stock currently outstanding...... 15,249,400 shares (1)
Use of proceeds................................. We will not receive any of the proceeds of sales of Class A
Common Stock by the Selling Shareholders. We may, however,
receive proceeds from the exercise of certain rights held by
some of the Selling Shareholders under stock options or
warrants to purchase Class A Common Stock from us if that is
the origin of shares sold by those Selling Shareholders.
Risk Factors.................................... Prospective purchasers should carefully consider the factors
discussed under "Risk Factors."
NASDAQ symbol................................... ALAN
(1) Excludes (i) 6,821,250 shares of Class A Common Stock reserved for
issuance upon exercise of stock options outstanding as of September 30,
2003; (ii) 2,515,750 shares reserved for issuance upon the exercise of
stock options that may be granted in the future under our stock option
plans; (iii) 6,009,426 shares reserved for issuance upon exercise of
outstanding warrants; (iv) 7,528,278 shares reserved for issuance upon
conversion of the Series A Convertible Preferred Stock; and (v) 726,245
shares reserved for issuance upon conversion of the Series B
Convertible Preferred Stock.
RISK FACTORS
An investment in Alanco involves a high degree of risk. In addition to the other
information included in this prospectus, you should carefully consider the
following risk factors in determining whether or not to purchase the shares of
Class A Common Stock offered under this prospectus. These matters should be
considered in conjunction with the other information included or incorporated by
reference in this prospectus. This prospectus contains statements which
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
5
places in this prospectus and include statements regarding the intent, belief or
current expectations of our management, directors or officers primarily with
respect to our future operating performance. Prospective purchasers of our
securities are cautioned that these forward-looking statements are not
guarantees of future performance and involve risks and uncertainties. Actual
results may differ materially from those in the forward-looking statements as a
result of various factors. The accompanying information contained in this
prospectus, including the information set out below, identifies important
factors that could cause such differences. See "Safe Harbor Statements Under the
Private Securities Litigation Reform Act of 1995."
TSI acquisition. We acquired the operations of Technology Systems International,
Inc. ("TSI") effective June 2002, creating the Company's RFID Technology
segment. The following risks are relevant with respect to the acquisition:
o We must successfully operate the storage businesses that we already have,
as well as integrate and successfully operate the TSI operations as
contemplated by the acquisition. The process of integrating management
operations, facilities, accounting, billing and collection systems, and
other information systems requires continued investment of time and
resources and can involve difficulties, which could have a material adverse
effect on our business, financial condition, cash flows and results of
operations.
o Our business model for the TSI business projects significant revenue growth
from sales of the TSI PRISM system in the corrections market. We do not
have experience in increasing market share in the corrections market, and
there is no certainty that we will be able to capture the required market
share for TSI to achieve its anticipated financial success. The TSI RFID
technology is currently being marketed to the corrections market to monitor
the continuous location of incarcerated prisoners. Although there are a
number of monitoring systems being marketed to the corrections industry,
the TSI PRISM system is currently the only system, to the best of our
knowledge, that is able to continuously (every two seconds) monitor the
location of prisoners, both inside and outside of buildings. There is no
certainty that the corrections industry will adopt this technology broadly
enough for us to reach our marketing projections.
o We purchase sub-components for the location and tracking system technology
from a limited number of subcontractors that have the required technology
to produce the sub-components in the quantities required. We cannot be
assured that required sub-components will be available in the quantities
and at the prices and terms anticipated.
o Our TSI products are reliant on key personnel who developed and understand
the technology. The loss of the services of those key technology personnel
could have an adverse effect on the business, operating results and
financial condition of our company.
o See Legal Matters for a discussion of a legal suit filed in connection with
our acquisition of the operations of TSI.
We are subject to the budget constraints of the governmental agencies purchasing
TSI's monitoring systems, which could result in a significant decrease in our
anticipated revenues. We are subject to the budget constraints of the
governmental agencies to whom we plan to sell the TSI monitoring systems. We
cannot assure you that such governmental agencies will have the necessary
revenue to purchase the systems even though they may want to do so. The funds
available to governmental agencies are subject to various economic and political
influences. Even though the TSI monitoring system may be recommended for
purchase by corrections facility managers, the governmental agency responsible
for the facility may not have sufficient budget resources to purchase the
system. As of the date of this filing, TSI has no current sales backlog as
defined by unfulfilled signed contracts.
General economic conditions. Recent unfavorable economic conditions and reduced
information technology spending by our customers have adversely affected our
business in recent quarters. If the economic conditions worsen, or continue at
their present level indefinitely, we may experience a material adverse impact on
our business, operating results, and financial condition. Our data storage
product division sells systems designed to upgrade and enhance older Legacy
computer systems as well as network attached storage systems to mid-sized
network users. The recent economic conditions have resulted in reduced spending
by our customers for technology in general, including the data storage systems
sold by us. We have reduced overhead to assist in offsetting our reduced sales
volume; however, no assurance can be given that the current economic conditions
will not worsen further exacerbating the sales slowdown. The TSI RFID system
sales are less dependent upon current economic conditions as most of the system
purchasers are governmental agencies. However, the current economic conditions
do have an impact on governmental budgets, thereby potentially impacting our
sales. See the previous section discussing the budget constraints of our
governmental purchasers.
6
Acts of domestic terrorism and war have impacted general economic conditions and
may impact the industry and our ability to operate profitably. On September 11,
2001, acts of terrorism occurred in New York City and Washington, D.C. On
October 7, 2001, the United States launched military attacks on Afghanistan, and
in 2003 launched military attacks on Iraq with ongoing operations in both areas.
As a result of those terrorist acts and acts of war, there has been a disruption
in general economic activity. The demand for our data storage products and
services have declined as layoffs in industries affect the economy as a whole.
There may be other consequences resulting from those acts of terrorism, and any
others which may occur in the future, including civil disturbance, war, riot,
epidemics, public demonstration, explosion, freight embargoes, governmental
action, governmental delay, restraint or inaction, quarantine restrictions,
unavailability of capital, equipment, personnel, which we may not be able to
anticipate. These terrorist acts and acts of war may continue to cause a slowing
of the economy, and in turn, reduce the demand of our data storage products and
services, which would harm our ability to make a profit. Also, as federal
dollars are redirected to military efforts, they may not be available for the
purchase of new federal prison monitoring systems. We are unable to predict the
long-term impact, if any, of these incidents or of any acts of war or terrorism
in the United States or worldwide on the U.S. economy, on us or on the price of
our stock.
Future capital and liquidity needs; Uncertainty of proceeds and additional
financing. The Company incurred significant losses during fiscal year 2003 and
has experienced significant losses in prior years. Although management cannot
assure that future operations will be profitable or that additional debt and/or
equity capital will be raised, we believe that, based on our fiscal 2004
operating plan, cash flow will be adequate to meet our anticipated future
requirements for working capital expenditures, scheduled lease payments and
scheduled payments of interest on our indebtedness. We will need to materially
reduce expenses, or raise additional funds through public or private debt or
equity financing, or both, if the revenue and cash flow elements of our 2004
operating plan are not met. If additional funds are raised through the issuance
of equity securities, the percentage ownership of the then current shareholders
of the company will be reduced, and such equity securities may have rights,
preferences or privileges senior to those of the holders of Class A Common
Stock. If we need to seek additional financing to meet working capital
requirements, there can be no assurance that additional financing will be
available on terms acceptable to us, or at all. If adequate funds are not
available or are not available on acceptable terms, our business, operating
results, financial condition and ability to continue operations will be
materially adversely affected.
Recent losses; Fluctuations in operating results. We had a consolidated loss
from operations of $2,601,800 for the fiscal year ending June 30, 2003, and a
consolidated loss from operations of $6,011,200 for the fiscal year ending June
30, 2002. In addition, our quarterly operating results have fluctuated
significantly in the past and could fluctuate significantly in the future. We
anticipate our financial performance will be significantly impacted by our
acquisition of the TSI RFID technology effective June 1, 2002. As a result, our
past quarterly operating results should not be used to predict future
performance.
Intellectual property. Our business strategy is to continue the growth of our
data storage businesses and develop the TSI business opportunity. The long-term
success of this strategy depends in part upon the TSI intellectual property
acquired. Third parties may hold United States or foreign patents which may be
asserted in the future against the TSI technology, and there is no assurance
that any license that might be required under such patents could be obtained on
commercially reasonable terms, or otherwise. Our competitors may also
independently develop technologies that are substantially equivalent or superior
to our technology. In addition, the laws of some foreign countries do not
protect our proprietary rights to the same extent as the laws of the United
States.
Despite our efforts to safeguard and maintain our proprietary rights both in the
United States and abroad, there can be no assurance that we will be successful
in doing so or that the steps taken by us in this regard will be adequate to
deter infringement, misuse, misappropriation or independent third-party
development of our technology or intellectual property rights or to prevent an
unauthorized third party from copying or otherwise obtaining and using our
products or technology. Litigation may also become necessary to defend or
enforce our proprietary rights. Any of such events could have a material adverse
effect on our business, operating results and financial condition.
Dependence on key personnel. Our performance is substantially dependent on the
services and performance of our executive officers and key employees. The loss
of the services of any of our executive officers or key employees could have a
material adverse effect on our business, operating results and financial
condition. Our future success will depend on our ability to attract, integrate,
motivate and retain qualified technical, sales, operations and managerial
personnel. None of our executive officers are bound by an employment agreement
or covered by key-man insurance.
Competition. Although early in the market development cycle, the TSI
business/technology has no current, identified direct competitors. However, it
7
can be expected that if, and to the extent that, the demand for the TSI
technology increases, the number of competitors will likely increase. Increasing
competition could adversely affect the amount of new business we are able to
attract, the rates we are able to charge for our services and/or products, or
both.
Relative to our data storage businesses, we operate in a very competitive
environment, competing against numerous other companies, many of whom have
greater financial resources and market position than we do.
Possible exercise and issuance of options and warrants may dilute interest of
shareholders. As of the date of this prospectus, options to purchase 6,821,250
shares of our Class A Common Stock were outstanding, and the weighted average
exercise price of such options was $0.84. Additionally, warrants to purchase
6,009,426 shares of our Class A Common Stock were outstanding, and the weighted
average exercise price of such warrants was $0.76. To the extent that any stock
options currently outstanding or granted in the future are exercised, dilution
to the interests of our shareholders may occur.
Possible de-listing of our stock on NASDAQ. Our Class A Common Stock currently
trades on the NASDAQ SmallCap Market under the symbol "ALAN." However, there can
be no assurance that an active trading market in our Class A Common Stock will
be available at any particular future time. We previously received notice from
NASDAQ that our stock price did not meet the NASDAQ listing eligibility
requirement of a minimum closing bid price of $1.00; however, NASDAQ determined
that we did meet the initial listing requirements for the NASDAQ SmallCap Market
and gave us until December 1, 2003, to meet the closing bid price requirement.
On September 25, 2003, NASDAQ submitted an amended proposal to the SEC to
provide additional extensions for companies failing to meet NASDAQ's minimum
$1.00 bid price requirement. If the NASDAQ proposal is approved by the SEC as
submitted, we could be granted an additional extension up to February, 2004 to
take the appropriate actions necessary to meet the bid price requirement. As the
NASDAQ proposal awaits approval by the Securities and Exchange Commission, the
Company cannot be assured that the bid price grace period will be extended.
Although no assurances can be made, we have received informal comment from
NASDAQ that if further extensions are not possible because the SEC has not
responded to NASDAQ's amended proposal by December 1, 2003, or the SEC's
response does not result in further extension for us, then we will be allowed to
take necessary steps to effect a reverse split of our common stock so that the
closing bid requirement is met. We have a proposal pending that will be acted
upon by our shareholders at our Annual Meeting of Shareholders scheduled for
December 22, 2003 authorizing the reverse split. If our stock does not meet the
minimum bid requirements by the time of our Annual Meeting of Shareholders and
no extension of time to do so is available, then we anticipate that the common
stock will be split so that we can maintain our NASDAQ listing. Any delisting
action may adversely affect the price and liquidity of our Common Stock.
On December 2, 2003, we received an additional notification that NASDAQ has
completed an internal review supporting the conclusion that as of November 28,
2003, Alanco has maintained the $1.00 minimum bid price for 10 consecutive
trading days and now meets NASDAQ's bid price requirement for continued listing.
The Company anticipates receiving formal written notification from the NASDAQ
Listing Qualifications Panel rescinding the NASDAQ delisting action within the
next few days, at which time the Company will issue a press release.
Payment of dividends. We do not anticipate that we will pay cash dividends on
our Class A Common Stock in the foreseeable future. The payment of dividends by
us will depend on our earnings, financial condition, and such other factors, as
our Board of Directors may consider relevant. We currently plan to retain
earnings to provide for the development of our business.
Our articles of incorporation and Arizona law may have the effect of making it
more expensive or more difficult for a third party to acquire, or to acquire
control, of us. Our articles of incorporation make it possible for our Board of
Directors to issue preferred stock with voting or other rights that could impede
the success of any attempt to change control of us. Arizona law prohibits a
publicly held Arizona corporation from engaging in certain business combinations
with certain persons, who acquire our securities with the intent of engaging in
a business combination, unless the proposed transaction is approved in a
prescribed manner. This provision has the effect of discouraging transactions
not approved by our Board of Directors as required by the statute which may
discourage third parties from attempting to acquire us or to acquire control of
us even if the attempt would result in a premium over market price for the
shares of common stock held by our stockholders.
The market price of our Class A Common Stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control. These
factors include:
The market price of our Class A Common Stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control. These
factors include:
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o progress of our products through development and marketing;
o announcements of technological innovations or new products by us or our
competitors;
o government regulatory action affecting our products or competitors'
products in both the United States and foreign countries;
o developments or disputes concerning patent or proprietary rights;
o actual or anticipated fluctuations in our operating results;
o the loss of key management or technical personnel;
o the loss of major customers or suppliers;
o the outcome of any future litigation;
o changes in our financial estimates by securities analysts;
o general market conditions for emerging growth and technology companies;
o broad market fluctuations;
o recovery from natural disasters; and
o economic conditions in the United States or abroad.
Future sales of our Class A Common Stock in the public market could adversely
affect our stock price and our ability to raise funds in new equity offerings.
We cannot predict the effect, if any, that future sales of shares of our common
stock or the availability for future sale of shares of our common stock or
securities convertible into or exercisable for our common stock will have on the
market price of our common stock prevailing from time to time. For example, the
availability of the shares covered by this S-3 registration statement for sale,
or of common stock by our existing stockholders under Rule 144, or the
perception that such sales could occur, could adversely affect prevailing market
prices for our common stock and could materially impair our future ability to
raise capital through an offering of equity securities.
SAFE HARBOR STATEMENTS UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This prospectus includes "forward-looking statements" as that term is defined in
the Private Securities Litigation Reform Act of 1995. The safe harbor provisions
of the Securities Exchange Act of 1934 and the Securities Act of 1933 apply to
forward-looking statements made by us. These statements can be identified by the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"should" or "anticipates" or the negatives or variations of these terms, and
other comparable terminology. In addition, any statements discussing strategy
that involve risks and uncertainties are forward-looking.
Forward-looking statements involve risks and uncertainties, including those
risks and uncertainties identified in the section of this prospectus beginning
on page 5 titled "Risk Factors" and those risks and uncertainties identified
elsewhere in, or incorporated by reference into, this prospectus. Due to these
risks and uncertainties, the actual results that we achieve may differ
materially from these forward-looking statements. These forward-looking
statements are based on current expectations. In preparing this prospectus, we
have made a number of assumptions and projections about the future of our
business. These assumptions and projections could be wrong for several reasons
including, but not limited to, those factors identified in the "Risk Factors"
section.
You are urged to carefully review and consider the various disclosures that we
make in this prospectus, any subsequent prospectus supplements and in our other
reports filed with the SEC. These disclosures attempt to advise interested
parties of the risk factors that may affect our business.
ISSUANCE OF SECURITIES TO SELLING SHAREHOLDERS
The Class A Common Stock subject to this prospectus may be issued by us to the
selling shareholders pursuant to a private offering of Convertible Preferred
Stock and Warrants to purchase Class A Common Stock completed in July 2003. We
agreed in this transaction to file a registration statement, of which this
prospectus is a part, to register the resale of the securities to be issued by
us upon conversion of the Series A Convertible Preferred Stock or exercise of
9
the Warrants in the transaction. All of the shares of Class A Common Stock
covered by this prospectus are "restricted securities" under the Securities Act
prior to this registration. The transaction under which the securities were
issued is described in the following paragraph.
The transaction involved the issuance by us of our Series A Convertible
Preferred Stock which is convertible, at the option of the holder, into three
shares of our Class A Common Stock, and Warrants to purchase additional shares
of Class A Common Stock, to accredited investors through a private offering in
June and July of 2003. The offering was comprised of units sold at a price of
$0.50 per unit plus two existing shares of outstanding Class A Common Stock,
with each unit consisting of one share of Series A Convertible Preferred Stock
and a 5-year warrant to purchase one share of Class A Common Stock at an
exercise price of $0.50 per share. A total of 2,509,426 units were issued,
resulting in the investors having the right to convert the 2,509,426 shares of
Preferred Stock purchased into a total of 7,528,278 shares of Class A Common
Stock and to exercise the Warrants received for an additional 2,509,426 shares
of Class A Common Stock. This prospectus includes all 10,037,704 shares of Class
A Common Stock issuable by us upon conversion of the Series A Preferred Stock or
exercise of the Warrants issued in the private offering.
The following paragraphs describe in more detail the Series A Preferred Stock
and Warrants that were sold by the Company:
Series A Preferred Stock
The Company is authorized to issue 25,000,000 shares of Preferred
Stock, 5,000,000 of which shares have been designated by the Company's Board of
Directors as the Series A Convertible Preferred Stock (the "Series A Preferred
Stock"). Prior to the offering no shares of Preferred Stock were outstanding.
Liquidation Preference
Subject to the prior rights of the the Company's existing Series B
Preferred Stock, holders of Series A Preferred Stock will, upon liquidation,
dissolution, or winding up of the Company, receive $1.50 per share, plus accrued
and unpaid dividends prior to any liquidation distribution to holders of Common
Stock or, if assets are insufficient to make such payment in full, a ratable
distribution per share of the available assets of the Company. The assets of the
Company remaining after payment of the Series A Preferred Stock liquidation
preference, if any, will be distributed pro rata to the holders of Common Stock.
Redemption
Unless previously converted to Common Stock, the Series A Preferred
Stock will be redeemable, in whole or in part, at the option of the Company on
or after the average NASDAQ closing market price for the Company's Class A
Common Stock for ten (10) consecutive trading days equals $2.00 per share at a
price equal to $1.50 per share, plus accrued and unpaid dividends.
Conversion Rights
Each share of Series A Preferred Stock is convertible at any
time, at the option of the holder, unless previously redeemed, into three
shares of Common Stock, subject to adjustment in the event of a stock
split, stock dividend, share combination, or certain similar events which
have a dilutive effect on the Common Stock issuable upon conversion of the
Series A Preferred Stock.
Dividends
The holders of the Series A Preferred Stock will be entitled to receive
cumulative cash, or at the option of the holder, in kind dividends when and as
declared by the Company's Board of Directors, out of funds legally available
therefor, at a rate equal to 12% per annum accruing from the date of first
issuance, payable semi-annually in arrears on the 10th day of each January and
July, commencing January 10, 2004, and if such date is not a business day, on
the next succeeding business day. In the event the Company is unable to declare
a dividend payable fully in cash and the Holders of seventy-five (75%) percent
of all outstanding shares of Series A Convertible Preferred Stock agree in
writing, then some or all of the dividend, as set forth in the agreement, shall
be paid to all holders of the Series A Convertible Preferred Stock in kind.
10
Voting Rights
The holders of shares of Series A Preferred Stock shall be entitled to
notice of any stockholders' meeting and to vote upon matters submitted to
shareholders for a vote, in the same manner and with the same effect as the
holders of shares of Common Stock, voting together with the holders of Common
Stock as a single class to the extent permitted by law. Holders of Preferred
Stock shall have that number of votes equal to the number of shares of Common
Stock into which the Preferred Stock is convertible, as adjusted under certain
circumstances. The holders of the Preferred Stock will also have the right to
vote in connection with actions which adversely affect the rights or preferences
of the Series A Preferred Stock.
Warrants
Each Unit of the offering included one (1) Warrant to purchase one
share of the Company's Class A Common Stock.
Exercise
Each Warrant will be exercisable to purchase one share of Common Stock
at a per share price of $0.50 until June 30, 2008 (the "Warrant Expiration
Date"). The exercise price is subject to adjustment in the event of stock
splits, dividends or combinations. The Warrants will be exercisable according to
the terms set forth in the Warrant Agreement until 5:00 p.m. Phoenix, Arizona
time, on the Warrant Expiration Date. No fractional shares will be issued upon
the exercise of the Warrants.
A Warrant may be exercised upon surrender of the Warrant certificate on
or prior to its expiration date, subject to certain restrictions, at the offices
of the Company, with the "Purchase Form" attached to the applicable Warrant
complete and executed as indicated, accompanied by payment of the full exercise
price (by certified or bank check payable to the order of the Company) for the
number of shares with respect to which the Warrant is being exercised.
The Company has authorized and reserved for issuance the shares of
Common Stock issuable upon exercise of the Warrants. There are no provisions for
cashless exercise of the Warrants in the Warrant Agreements and the Company
has made no provisions for cashless exercise of the Warrants.
Redemption
The Warrants are subject to redemption at the option of the Company.
The Company may redeem any Warrant at a price of $0.01 per Warrant at any time
prior to the exercise of such Warrant, after the closing price of the Common
Stock has exceeded $1.50 for 10 consecutive trading days prior to the issuance
of the notice of redemption.
USE OF PROCEEDS
All of the shares of Class A Common Stock being offered under this prospectus
are offered by the selling shareholders, which term includes their transferees,
pledgees or donees or other successors in interest. The proceeds from the sale
of the Class A Common Stock are solely for the account of the selling
shareholders. Accordingly, we will not receive any proceeds from the sale of
Class A Common Stock by the selling shareholders. However, if shares to be sold
by the selling shareholders are first to be acquired by them through exercise of
warrants to purchase shares of Class A Common Stock as described in the previous
section (See "Issuance of Securities to Selling Shareholders"), then we would
have received the proceeds required for the exercise of the warrants previously,
or contemporaneously to the selling shareholders' sale of such stock.
11
PLAN OF DISTRIBUTION
The shares of Class A Common Stock covered by this prospectus and, if
applicable, any prospectus supplements may be offered and sold from time to time
in one or more transactions by the selling stockholders, which term includes
their transferees, pledgees or donees or other successors in interest. These
transactions may involve crosses or block transactions. The selling stockholders
will act independently of us in making decisions with respect to the timing,
manner and size of each sale. The shares of Class A Common Stock may be sold by
one or more of the following means of distribution:
o on any of the U.S. securities exchanges or quotation services where shares
of our common stock are listed or quoted at the time of sale, including
NASDAQ where our common stock is listed as of the date of this prospectus;
o in the over-the-counter market in accordance with the rules of NASDAQ;
o in transactions otherwise than on the exchanges or services or in the
over-the-counter market described above;
o in negotiated transactions or otherwise;
o through the writing of options, whether the options are listed on
an options exchange or otherwise;
o in connection with the writing of non-traded and exchange-traded call
options or put options, in hedge transactions and in settlement of other
transactions in standardized or over-the-counter options;
o through the distribution of the shares by any
selling stockholder to its partners, members or stockholders;
o a block trade in which the broker-dealer so engaged will attempt to sell
shares of common stock as agent, but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its own account pursuant to this prospectus;
o short sales;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
o a combination of any of the above transactions; or
o any other method permitted pursuant to applicable law.
The selling stockholders may also transfer the shares by gift. We do not know of
any arrangements by the selling stockholders for the sale of any of the shares.
To the extent required, this prospectus may be amended and/or supplemented from
time to time to describe a specific plan of distribution. In addition, any
shares of common stock that qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
prospectus.
In effecting sales, broker-dealers or agents engaged by the selling stockholders
may arrange for other broker-dealers or agents to participate. The selling
stockholders and any broker-dealers or agents who participate in the
distribution of these shares may be deemed to be "underwriters" under the
Securities Act and any discount, commission, concession or profits received by
these persons might be deemed to be an underwriting discount or commission under
the Securities Act. The selling stockholders who are "underwriters" within the
meaning of the Securities Act will be subject to the prospectus delivery
requirements of the Securities Act.
The selling stockholders may sell their shares at market prices prevailing at
the time of sale, at varying prices at the time of sale, at negotiated prices or
at fixed prices. Each of the selling stockholders reserves the right to accept
and, together with their agents from time to time, to reject, in whole or in
part, any proposed purchase of the shares of common stock to be made directly or
through agents.
12
The selling stockholders may sell their shares directly to purchasers or may use
broker-dealers or agents to sell their shares. Broker-dealers or agents who sell
the shares may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders or they may receive compensation from
purchasers of the shares for whom they acted as agents or to whom they sold the
shares as principal, or both.
Broker-dealers may agree with the selling stockholders to sell a specified
number of shares at a stipulated price per share. To the extent that these
broker-dealers are unable to do so acting as agent for the selling stockholders,
they may purchase as principals any unsold shares at the price required to
fulfill the broker-dealers' commitment to the selling stockholders.
Broker-dealers who acquire shares as principals may thereafter resell these
shares from time to time in transactions on any of the U.S. securities exchanges
or quotation services where our common stock is listed or quoted, in the
over-the-counter market, in negotiated transactions or by a combination of these
methods of sale or otherwise. These transactions may involve crosses and block
transactions and may involve sales to and through other broker-dealers,
including transactions of the nature described above. Moreover, these
transactions may be at market prices prevailing at the time of sale or at
negotiated prices and, in connection with these resales, these broker-dealers
may pay to or receive from the purchasers of these shares commissions computed
as described above.
From time to time, one or more of the selling stockholders may pledge,
hypothecate or grant a security interest in some or all of the shares owned by
it or them. The pledgees, secured parties or persons to whom the shares have
been hypothecated will, upon foreclosure in the event of default, be deemed to
be selling stockholders. The number of a selling stockholder's shares offered
under this prospectus will decrease as and when the selling stockholder takes
such actions. The plan of distribution for that selling stockholder's shares
will otherwise remain unchanged. In addition, a selling stockholder may, from
time to time, sell the shares short, and, in those instances, this prospectus
may be delivered in connection with the short sales and the shares offered under
this prospectus may be used to cover short sales.
A selling stockholder may enter into options or other transactions with
broker-dealers or other financial institutions that involve the delivery of the
shares offered hereby to the broker-dealers or other financial institutions, who
may then resell or otherwise transfer those shares pursuant to this prospectus.
A selling stockholder may also loan or pledge the securities offered hereby to a
broker-dealer, and the broker-dealer may sell the loaned shares offered hereby
pursuant to this prospectus or upon a default may sell or otherwise transfer the
pledged shares offered hereby pursuant to this prospectus.
The selling stockholders are subject to the applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Regulation M.
This regulation may limit the timing of purchases and sales of any of the shares
by the selling stockholders. The anti-manipulation rules under the Exchange Act
may apply to sales of shares in the market and to the activities of the selling
stockholders and their affiliates. Furthermore, Regulation M may restrict the
ability of any person engaged in the distribution of the shares to engage in
market-making activities with respect to the particular securities being
distributed for a period of up to five business days before the distribution.
These restrictions may affect the marketability of the shares and the ability of
any person or entity to engage in market-making activities with respect to the
shares. In addition, under the securities laws of certain states, the shares of
common stock may be sold in these states only through registered or licensed
brokers or dealers.
We have agreed to indemnify the selling stockholders, each of their officers,
directors and partners and each person controlling such selling stockholders
(within the meaning of Section 15 of the Securities Act) against certain
liabilities, including liabilities under the Securities Act. The selling
stockholders have agreed to indemnify us, each of our officers and directors and
each person controlling us (within the meaning of Section 15 of the Securities
Act) against certain liabilities, including liabilities under the Securities
Act.
We have agreed to maintain the effectiveness of the registration statement until
the time that all of the shares of common stock covered by this registration
statement are sold in accordance with the intended plan of distribution set
forth in this prospectus.
We will pay all fees and expenses incurred in connection with preparing and
filing the registration statement, any amendments to the registration statement,
this prospectus and any prospectus supplements. The selling stockholders will
pay any legal fees of the selling stockholders, broker's fees or commissions and
similar selling expenses, if any, attributable in connection with the sale of
common stock, including stock transfer taxes due or payable in connection with
the sale of the shares.
13
We may suspend the effectiveness of the registration statement and, upon receipt
of written notice from us, the selling stockholders shall cease using this
prospectus if at any time we determine, in our reasonable judgment and in good
faith, that sales of shares of common stock pursuant to the registration
statement or this prospectus would require public disclosure by us of material
nonpublic information that is not included in the registration statement and
that immediate disclosure of such information would be detrimental to us.
If we suspend the effectiveness of the registration statement, we shall use our
reasonable best efforts to amend the registration statement and/or amend or
supplement the related prospectus if necessary and to take all other actions
necessary to allow any proposed sales by the selling stockholders to take place
as promptly as possible, subject, however, to our right to delay further sales
of shares of common stock until the conditions or circumstances referred to
above have ceased to exist or have been disclosed. We agreed with the selling
stockholders that our right to delay sales of shares of common stock held by the
selling stockholders will not be exercised by us more than twice in any twelve
month period and will not exceed 60 days as to any single delay in any twelve
month period.
We cannot assure you that the selling stockholders will sell all or any of the
common stock offered under the registration statement or any amendment of it.
SELLING STOCKHOLDERS
The following table sets forth certain information, received through September
30, 2003, with respect to the number of shares of our Class A Common Stock
beneficially owned by each selling stockholder. The information set forth below
is based on information provided by or on behalf of the selling stockholders
and, with regard to the beneficial holdings of the selling stockholders, is
accurate only to the extent beneficial holdings information was disclosed to us
by or on behalf of the selling stockholders. The selling stockholders and
holders listed in any supplement to this prospectus, and any transferors,
pledgees, donees or successors to these persons, may from time to time offer and
sell, pursuant to this prospectus and any subsequent prospectus supplement, any
and all of these shares.
Except as otherwise described below, no selling stockholder, to our knowledge,
held beneficially one percent or more of our outstanding Class A Common Stock as
of the date of this prospectus. Because the selling stockholders may offer all,
some or none of the shares of our Class A Common Stock listed below, no estimate
can be given as to the amount or percentage of our Class A Common Stock that
will be held by the selling stockholders upon termination of any of the sales.
Except as indicated below, none of the selling stockholders has held any
position or office or had any other material relationship with us or any of our
predecessors or affiliates within the past three years other than as a result of
the ownership of our securities or the securities of our predecessors. We may
amend or supplement this prospectus from time to time to update the disclosure
set forth in it.
The shares of Class A Common Stock offered by this prospectus may be offered
from time to time by the selling stockholders named below:
14
SHARES OF CLASS A COMMON STOCK
OFFERED BY THIS PROSPECTUS
SHARES OF CLASS
A COMMON STOCK Shares Shares
NAMES AND ADDRESSES OF THE SELLING BENEFICIALLY Available by Available
STOCKHOLDERS OWNED PRIOR TO Conversion of By Exercise Total
THE OFFERING(1) Preferred Stock of Warrants Shares
Anderson Family Trust (2)
FBO Donald E. and Rebecca E. Anderson 4,460,644 1,344,483 448,161 1,792,644
11804 N. Sundown Drive
Scottsdale, AZ 85260
Programmed Land, Inc. (3)
9414 E. San Salvador Dr., Suite 99 1,840,000 1,080,000 360,000 1,440,000
Scottsdale, AZ 85258
David J. & Julie R. Dickerson (4)
11804 N. Sundown Drive 230,000 135,000 45,000 180,000
Scottsdale, AZ 85260
Paul D. Anderson (5)
9715 N. 94th Place #112 230,000 135,000 45,000 180,000
Scottsdale, AZ 85258
David P. & Heidi J. Anderson (6)
4620 N. 68th Street #164 230,000 135,000 45,000 180,000
Scottsdale, AZ 85251
Heartland Systems Co. (7)
939 Office Park Road, Suite 120 1,180,000 720,000 240,000 960,000
West Des Moines, IA 50265
The Rhino Fund LLLP (8)
32065 Castle Court, Suite 700 1,305,000 795,000 265,000 1,060,000
Evergreen, CO 80439
Robert R. Kauffman (9)
15575 N. 83rd Way, Suite 3 3,452,000 1,050,000 350,000 1,400,000
Scottsdale, AZ 85260
Paine Webber (9)
c/f Robert R. Kauffman IRA 665,000 450,000 150,000 600,000
15575 N. 83rd Way, Suite 3
Scottsdale, AZ 85260
Harold S. Carpenter (10)
939 Office Park Road, Suite 120 946,541 525,000 175,000 700,000
West Des Moines, IA 50265
James T. Hecker (11)
32065 Castle Court, Suite 100 164,357 18,000 6,000 24,000
Evergreen, CO 80439
15
James T. Hecker IRA (11)
32065 Castle Court, Suite 100 61,536 45,000 15,000 60,000
Evergreen, CO 80439
John A. Carlson (12)
15575 N. 83rd Way, Suite 3 1,093,144 244,500 81,500 326,000
Scottsdale, AZ 85260
John A. Carlson IRA (12)
15575 N. 83rd Way, Suite 3 74,814 55,500 18,500 74,000
Scottsdale, AZ 85260
Thomas C. LaVoy (13)
29555 N. 69th Place 282,460 105,795 35,265 141,060
Scottsdale, AZ 85262
Steven P. Oman (14)
10446 N. 74th Street, Suite 130 205,000 30,000 10,000 40,000
Scottsdale, AZ 85258
Lincoln Trust Co. (15)
C/F Greg E. Oester 1,063,232 30,000 10,000 40,000
11878 N. 114th Way
Scottsdale, AZ 85259
Thomas E. Burns III, Inc. Employee Bene Tr
dtd 8-1-83 (16) 82,548 61,911 20,637 82,548
25097 Champlain Road
Laguna Hills, CA 92653
Thomas E. Burns, III (16)
Revocable Living Trust dtd 9-26-98 127,452 88,089 29,363 117,452
25097 Champlain Road
Laguna Hills, CA 92653
Gary L. McDaniel & Virginia L. McDaniel
1991 Living Trust (17) 840,000 480,000 160,000 640,000
500 N Rainbow Blvd., Suite 300 ---------- ---------- ----------
Las Vegas, NV 89107
TOTALS 7,528,278 2,509,426 10,037,704
========= ========== ==========
---------------------------------
16
(1) The number of shares beneficially owned is determined in accordance with
Rule 13d-3 of the Exchange Act and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rule,
beneficial ownership includes any shares as to which the person has sole or
shared voting power or investment power and also any shares which the
person has the right to acquire within 60 days of the date set forth in the
applicable footnote through the conversion of a security or the exercise of
any stock option or other right. Percentage ownership indicated in the
footnotes below is based on 15,249,400 shares of our Class A Common Stock
outstanding as of September 29, 2003.
(2) Donald E. and Rebecca E Anderson have beneficial ownership of 25.83% of
the Company. The shares shown include shares owned by Programmed Land,
Inc., which are also offered under this prospectus and are beneficially
owned by the Andersons. Mr. Anderson is a director of the Company.
(3) Donald E. and Rebecca E. Anderson have beneficial ownership of all of
the outstanding shares of Programmed Land, Inc., and therefore are the
beneficial owners of these shares. See footnote 2 above.
(4) David and Julie Dickerson are the beneficial owners of 1.50% of the
Company's Class A Common Stock.
(5) Paul Anderson is the beneficial owner of 1.50% of the Company's Class A
Common Stock.
(6) David and Heidi Anderson are the beneficial owners of 1.50% of the
Company's Class A Common Stock.
(7) Heartland Systems Co. is the beneficial owner of 7.51% of the Company's
Class A Common Stock. Leanna Hansch, Treasurer, holds voting and
dispositive powers over the shares of the Company's stock owned by
Heartland Systems Co.
(8) The Rhino Fund, LLLP beneficially owns 8.28% of the Company's Class A
Common Stock. MacDonald Hawley, president of Rhino Capital, Inc, the
fund manager, holds voting and dispositive powers over the shares of
the Company's stock owned by The Rhino Fund, LLLP.
(9) Robert R. Kauffman is the beneficial owner of these shares, as well as
the beneficial owner of shares held by his IRA, which are also offered
under this prospectus. Mr. Kauffman is the Chief Executive Officer and
a director of the Company. Mr. Kauffman has beneficial ownership of
23.19% of the Company. In addition to these shares, Mr. Kauffman also
beneficially owns shares of Technology Systems International, Inc. of
Nevada (TSIN), a corporation that currently holds 6,000,000 shares of
Alanco stock received when Alanco acquired the TSIN operations in June
2002. If TSIN distributes the 6,000,000 shares of Alanco common stock
to TSIN shareholders on a proportionate basis, Mr. Kauffman could
acquire up to approximately 118,700 shares of Alanco common stock,
thereby increasing his percentage of total stock and options owned to
approximately 23.86%.
(10) Harold S. Carpenter is a director of the Company and is the beneficial
owner of 6.04% of the Company's Class A Common Stock. Mr. Carpenter is
an officer of Heartland Systems Co., whose shares are also offered
under this prospectus; however, Mr. Carpenter disclaims beneficial
ownership of the Heartland Systems Co. shares.
(11) James T. Hecker is the beneficial owner of these shares, as well as the
beneficial owner of shares held by his IRA, which are also offered
under this prospectus. Mr. Hecker is a director of the Company, and has
beneficial ownership of 1.47% of the Company. Mr. Hecker is the
treasurer and general counsel for Rhino Capital Incorporated, which
controls The Rhino Fund, whose shares are also offered under this
prospectus; however, Mr. Hecker disclaims beneficial ownership of The
Rhino Fund shares.
(12) John A. Carlson is the beneficial owner of these shares, as well as the
beneficial owner of shares held by his IRA, which are also offered
under this prospectus. Mr. Carlson is the Chief Financial Officer and a
director of the Company. Mr. Carlson has beneficial ownership of 7.25%
of the Company.
(13) Thomas C. LaVoy is a director of the Company and has a beneficial ownershi
of 1.83% of the Company.
(14) Steven P. Oman is a director of the Company and has a beneficial ownership
of 1.33% of the Company.
(15) Greg M. Oester, who is an officer of the Company's wholly owned
subsidiary, Technology Systems International, Inc., has beneficial
ownership of 6.54% of the Company. In addition to these shares, Mr.
Oester also beneficially owns shares of Technology Systems
International, Inc. of Nevada (TSIN), a corporation that currently
holds 6,000,000 shares of Alanco stock received when Alanco acquired
the TSIN operations in June 2002. If TSIN distributes the 6,000,000
shares of Alanco common stock to TSIN shareholders on a proportionate
basis, Mr. Oester could acquire up to approximately 70,000 shares of
Alanco common stock, thereby increasing his percentage of total stock
and options owned to approximately 6.97%.
(16) Thomas E. Burns is the beneficial owner of these shares, as well as the
beneficial owner of shares held by his IRA, which are also offered
under this prospectus. Mr. Burns has beneficial ownership of 1.37% of
the Company.
(17) Gary and Virginia McDaniel are the beneficial owners of these shares.
The McDaniels have beneficial ownership of 5.38% of the Company.
17
DESCRIPTION OF SECURITIES
Our authorized capital consists of 75,000,000 shares of Class A Common Stock,
25,000,000 shares of Class B Common Stock, and 25,000,000 shares of preferred
stock. The preferred stock is issuable in series with such designation,
preferences, voting rights, privileges, and other restrictions and
qualifications as our Board of Directors may establish in accordance with
Arizona law. There were 15,249,400 shares of Class A Common Stock outstanding,
and no shares of Class B Common Stock issued and outstanding as of September 29,
2003. There were 2,509,425 shares of Series A Convertible Preferred Stock
outstanding and 55,865 shares of Series B Convertible Preferred Stock
outstanding as of September 29, 2003. There were no other shares of preferred
stock outstanding at September 29, 2003. Shares of the Series A Convertible
Preferred Stock are convertible into shares of Class A Common Stock at a rate of
three shares of Class A Common Stock for every one share of Series A Convertible
Preferred Stock. Shares of the Series B Convertible Preferred Stock are
convertible into shares of Class A Common Stock at a rate of thirteen shares of
Class A Common Stock for every one share of Series B Convertible Preferred
Stock. As of September 29, 2003, options to purchase 6,821,250 shares of Class A
Common Stock were outstanding, and the weighted average exercise price of such
options was $0.84. In addition, as of September 29, 2003, the Company had
6,009,426 warrants to purchase Class A Common Stock outstanding, and the
weighted average exercise price of such warrants was $0.76. Our Class A Common
Stock is traded on the NASDAQ SmallCap Market under the symbol "ALAN". No other
securities of the Company are currently traded on any market.
Common Stock
Holders of shares of our Class A Common Stock are entitled to one vote per share
on all matters to be voted on by our shareholders. Holders of shares of Class B
Common Stock are entitled to one-one hundredth of one vote per share of Class B
Common Stock on all matters to be voted on by our shareholders. Our Class A
Common Stock and our Class B Common Stock have cumulative voting rights with
respect to the election of directors. Our bylaws require that only a majority of
the issued and outstanding voting shares of common stock need be represented to
constitute a quorum and to transact business at a shareholders' meeting.
Subject to the dividend rights of the holders of preferred stock, if applicable,
holders of shares of common stock are entitled to share, on a ratable basis,
such dividends as may be declared by the Board of Directors out of funds legally
available.
Upon our liquidation, dissolution or winding up, after payment of creditors and
holders of any of our senior securities, including preferred stock, our assets
will be divided pro rata on a per share basis among the holders of the shares of
common stock. Our common stock has no preemptive or other subscription rights,
and there are no conversion rights or redemption or sinking fund provisions. All
outstanding shares of common stock are fully paid and non-assessable.
Preferred Stock
Our Board of Directors is authorized to issue preferred stock in one or more
series and denominations and to fix the rights, preferences, privileges, and
restrictions, including dividend, conversion, voting, redemption, liquidation
rights or preferences, and the number of shares constituting any series and the
designation of such series, without any further vote or action by our
shareholders. The issuance of preferred stock may have the effect of delaying,
deferring, or preventing a change of control of our company without further
action by the shareholders. The issuance of preferred stock with voting and
conversion rights may adversely affect the voting power of the holders of common
stock.
Our Board of Directors has previously authorized the issuance of a series of
preferred stock referred to as Series B Convertible Preferred Stock. Without the
affirmative vote of a majority of the holders of the Series B Preferred Stock,
we may not amend, alter or repeal any of the provisions of our articles of
incorporation or articles of designation for the Series B Convertible Preferred
Stock. We also need the affirmative vote of a majority of the holders of the
Series B Convertible Preferred Stock if we want to authorize any
reclassification of the Series B Convertible Preferred Stock that would
adversely affect the preferences, special rights or privileges or voting power
of the Series B Convertible Preferred Stock. We may not create or issue any
class of stock ranking prior to the Series B Convertible Preferred Stock as to
dividends or distribution of assets, or create or issue any shares of any series
of the authorized preferred stock ranking prior to the Series B Convertible
Preferred Stock's rights to dividends or distribution on liquidation. The Series
B Convertible Preferred Stock shall have voting rights as if converted into
Class A Common Stock.
18
Our Board of Directors has also authorized the issuance of a series of preferred
stock referred to as Series A Convertible Preferred Stock. Without the
affirmative vote of a majority of the holders of the Series A Preferred Stock,
we may not amend, alter or repeal any of the provisions of our articles of
incorporation or articles of designation for the Series A Convertible Preferred
Stock. We also need the affirmative vote of a majority of the holders of the
Series A Convertible Preferred Stock if we want to authorize any
reclassification of the Series A Convertible Preferred Stock that would
adversely affect the preferences, special rights or privileges or voting power
of the Series A Convertible Preferred Stock. We may not create or issue any
class of stock ranking prior to the Series A Convertible Preferred Stock (other
than the existing Series B Convertible Preferred Stock) as to dividends or
distribution of assets, or create or issue any shares of any series of the
authorized preferred stock ranking prior to the Series A Convertible Preferred
Stock's rights to dividends or distribution on liquidation. The Series A
Convertible Preferred Stock shall have voting rights as if converted into Class
A Common Stock.
Arizona Corporate Takeover Act and Certain Charter Provisions
We are subject to the provisions of the Arizona Corporate Takeover Act. The
Arizona Corporate Takeover Act and certain provisions of our articles of
incorporation and bylaws, as summarized in the following paragraphs, may have
the effect of discouraging, delaying, or preventing hostile takeovers (including
those that might result in a premium over the market price of our common stock),
or discouraging, delaying, or preventing changes in control or management of our
company.
Arizona Corporate Takeover Act
Article 1 of the Arizona Corporate Takeover Act is intended to restrict
"greenmail" attempts by prohibiting us from purchasing any shares of our capital
stock from any beneficial owner of more than 5% of the voting power of our
company at a per share price in excess of the average market price during the 30
trading days prior to the purchase, unless
o the 5% owner has beneficially owned the shares to be purchased for a
period of at least three years prior to the purchase;
o a majority of our shareholders (excluding the 5% owner, its affiliates
or associates, and any officer or director of our company) approves
the purchase; or
o we make the offer available to all holders of shares of our capital stock.
Article 2 of the Arizona Corporate Takeover Act is intended to discourage the
direct or indirect acquisition by any person of beneficial ownership of our
shares (other than an acquisition of shares from us) that would constitute a
control share acquisition. A "control share acquisition" is defined as an
acquisition of shares by any person, when added to other shares of our company
beneficially owned by such person, immediately after the acquisition entitles
such person to exercise or direct the exercise of
o at least 20% but less than 33 1/3%;
o at least 33 1/3% but less than or equal to 50%; or
o more than 50% of the voting power of our capital stock.
The Arizona Corporate Takeover Act (1) gives our shareholders other than any
person that makes or proposes to make a control share acquisition or our
company's directors and officers the right to limit the voting power of the
shares acquired by the acquiring person that exceed the threshold voting ranges
described above, other than in the election of directors, and (2) gives us the
right to redeem such shares from the acquiring person at a price equal to their
fair market value under certain circumstances.
Article 3 of the Arizona Corporate Takeover Act is intended to discourage us
from entering into certain mergers, consolidations, share exchanges, sales or
other dispositions of our assets, liquidation or dissolution of our company,
reclassification of securities, stock dividends, stock splits, or other
distribution of shares, and certain other transactions with any interested
shareholder (as defined in the takeover act) or any of the interested
19
shareholder's affiliates for a period of three years after the date that the
interested shareholder first acquired the shares of common stock that qualify
such person as an interested shareholder, unless either the business combination
or the interested shareholder's acquisition of shares is approved by a committee
of our Board of Directors (comprised of disinterested directors or other
persons) prior to the date on which the interested shareholder first acquired
the shares that qualify such person as an interested shareholder. In addition,
Article 3 prohibits us from engaging in any business combination with an
interested shareholder or any of the interested shareholder's affiliates after
such three-year period unless:
o the business combination or acquisition of shares by the
interested shareholder was approved by our Board of Directors
prior to the date on which the interested shareholder acquired
the shares that qualified such person as an interested
shareholder;
o the business combination is approved by our shareholders
(excluding the interested person or any of its affiliates) at
a meeting called after such three-year period; or
o the business combination satisfies each of certain statutory requirements.
Article 3 defines an "interested shareholder" as any person (other than us and
our subsidiaries) that either (a) beneficially owns 10% or more of the voting
power of our outstanding shares, or (b) is an affiliate or associate of our
company and who, at any time within the three-year period preceding the
transaction, was the beneficial owner of 10% or more of the voting power of our
outstanding shares.
Certain Charter Provisions
In addition to the provisions of the Arizona Corporate Takeover Act described
above, our articles of incorporation and bylaws contain a number of provisions
relating to corporate governance and the rights of shareholders. These
provisions include the following:
o the authority of our Board of Directors to fill vacancies on the Board of
Directors;
o the authority of our Board of Directors to issue preferred
stock in series with such voting rights and other powers as
our Board of Directors may determine;
o a provision that, unless otherwise prohibited by law, special
meetings of the shareholders may be called only by our Board
of Directors, or by holders of not fewer than 10% of all
shares entitled to vote at the meeting; and
o a provision for cumulative voting in the election of directors, pursuant
to Arizona law.
Transfer Agent and Registrar
The transfer agent and registrar for our Class A Common Stock is Computershare
Trust Company, 350 Indiana Street, Suite 800, Golden, Colorado 80401.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the Class
A Common Stock offered hereby will be passed upon by The Law Office of Steven P.
Oman, P.C., Scottsdale, Arizona. Said firm, and Steven P. Oman, owned, as of the
date of this prospectus, an aggregate of 205,000 shares of our Class A Common
Stock on an as-converted basis. Additionally, Steven P. Oman, Esq. is a director
of our company and serves as our general counsel.
Lawyers and employees of The Law Office of Steven P. Oman, P.C. and entities
controlled by lawyers at The Law Office of Steven P. Oman, P.C. may engage in
transactions in the open market or otherwise to purchase or sell our securities
from time to time.
The Company is a party to litigation that relates to the acquisition in May 2002
of substantially all of the assets of Technology Systems International, Inc. and
to litigation arising from an expired property lease between the Company's
subsidiary, Arraid, Inc., and Arraid Property L.L.C. The actions are more fully
described below:
On January 30, 2003, a suit was filed by Technology Systems International, Inc.,
a Nevada corporation ("TSIN") versus the Company, its wholly owned subsidiary,
Technology Systems International, Inc., an Arizona corporation ("TSI"), and two
of the directors of TSIN, including Robert Kauffman who is also the Chief
Executive Officer of the Company. The venue for the action is the Arizona
20
Superior Court in and for Maricopa County, Arizona, as case number
CV2003-001937. The complaint sets forth various allegations and seeks equitable
remedies and damages arising out of the Company's acquisition of substantially
all of the assets of TSIN. As stated in previous periodic reports filed by the
Company with the SEC concerning this matter, the Company's management, in
consultation with legal counsel, believes the plaintiff's claims are without
merit and the Company will aggressively defend the action.
On July 18, 2003, Arraid Property L.L.C., an Arizona Limited Liability Company
("Arraid LLC"), filed a complaint in Superior Court, Arizona (case number CV
2003-13999) against the Company and its wholly owned subsidiary, Arraid, Inc.,
an Arizona corporation ("Arraid"), alleging breach of lease and unjust
enrichment and seeking monetary damages. The suit relates to an expired lease
agreement for property previously leased by Arraid. The Company has filed a
counterclaim against Arraid LLC, and a third party complaint against John Dahl,
Frank Meijers and Keith Blaich (all owners of Arraid LLC and previous employees
of the Company) seeking monetary damages and alleging, among other things,
excess billing and unjust enrichment. The Company's management, in consultation
with legal counsel, believes the plaintiff's claims are without merit and the
Company will aggressively defend the action and pursue the counterclaims and
third party claims specified.
EXPERTS
The consolidated financial statements and related financial statement schedule
incorporated in this prospectus by reference from our Annual Report on Form
10-KSB for the fiscal year ended June 30, 2003 have been audited by Semple &
Cooper, LLP, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 which was filed
with the Securities and Exchange Commission. This prospectus and any subsequent
prospectus supplements do not contain all of the information in the registration
statement. We have omitted from this prospectus some parts of the registration
statement as permitted by the rules and regulations of the SEC. In addition, we
file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any documents that we have filed
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. The SEC also maintains an Internet
site (http://www.sec.gov) that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" information into this prospectus
and any subsequent prospectus supplements, which means that we can disclose
important information to you by referring you to another document filed
separately with the SEC. This prospectus incorporates by reference documents
which are not presented in this prospectus or delivered to you with it. The
information incorporated by reference is an important part of this prospectus
and any subsequent prospectus supplements. Information that we file subsequently
with the SEC, but prior to the termination of this offering, will automatically
update this prospectus and any outstanding prospectus supplements and supersede
this information. 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 prospectus:
1. Our annual report on Form 10-KSB for the fiscal year ended June 30, 2003,
including our audited consolidated financial statements for the fiscal year
ended June 30, 2003 attached thereto, filed with the SEC on September 29, 2003,
with an amended filing on September 30, 2003.
2. The description of our Class A Common Stock set forth in our registration
statement on Form 10/A filed with the SEC on March 27, 1981, and any subsequent
amendment or report filed for the purpose of updating this description.
3. Our Proxy Statement for our Annual Meeting of Shareholders to be held on
November 22, 2002, filed with the SEC on October 16, 2002.
4. Our Form S-3 Registration Statement filed with the SEC on November 27, 2002.
21
5. Our Form S-8 Registration Statement filed with the SEC on January 22, 2003.
6. Our Form S-3 Registration Statement filed with the SEC on February 25, 2003.
7. Our Form 10-QSB for the quarter ended September 30, 2003 filed with the SEC
on November 14, 2003, with an amended filing on November 18, 2003.
We also are incorporating by reference in this prospectus and any subsequent
prospectus supplements all reports and other documents that we file pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus and prior to the termination of this offering of common stock. These
reports and documents will be incorporated by reference in and considered to be
a part of this prospectus and any subsequent prospectus supplements as of the
date of filing of such reports and documents.
Upon request, whether written or oral, we will provide without charge to each
person to whom a copy of this prospectus is delivered, including any beneficial
owner, a copy of any or all of the information that has been or may be
incorporated by reference in this prospectus or any prospectus supplements but
not delivered with the prospectus or any subsequent prospectus supplements. You
should direct any requests for this information to the office of the Secretary,
at our principal executive offices, located at 15575 North 83rd Way, Suite 3,
Scottsdale, AZ 85260. The telephone number at that address is (480) 607-1010.
Any statement contained in a document which is incorporated by reference in this
prospectus or in any subsequent prospectus supplements will be modified or
superseded for purposes of this prospectus or any subsequent prospectus
supplements to the extent that a statement contained in this prospectus or
incorporated by reference in this prospectus or in any prospectus supplements or
in any document that we file after the date of this prospectus that also is
incorporated by reference in this prospectus or in any subsequent prospectus
supplements modifies or supersedes the prior statement. Any modified or
superseded statement shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus or any subsequent prospectus
supplements. Subject to the foregoing, all information appearing in this
prospectus is qualified in its entirety by the information appearing in the
documents incorporated by reference in this prospectus.
You should rely only on the information contained or incorporated by reference
in this prospectus or any applicable prospectus supplement. We have not
authorized anyone to provide you with any other information. The securities
offered in this prospectus may only be offered in states where the offer is
permitted, and we and the selling stockholders are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any applicable prospectus supplement
is accurate as of any date other than the dates on the front of these documents.
22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following is an itemization of all expenses (subject to future
contingencies) incurred or to be incurred by us in connection with the issuance
and distribution of the securities being registered. None of the following
expenses will be borne by the selling stockholders unless specifically indicated
below.
Registration fee $ 357
Printing expenses* $ 200
Accounting fees and expenses* $ 1,000
Legal fees and expenses* $ 1,000
Miscellaneous* $ 500
-----------
Total* $ 3,057
* Estimated
Item 15. Indemnification of Directors and Officers.
The General Corporation Law of the State of Arizona allows corporations to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
or she is or was a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee, partner, trustee, or agent of another corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan, unless it is
established that:
o the act or omission was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of
active and deliberate dishonesty;
o the person actually received an improper personal benefit in money,
property or services; or
o in the case of any criminal proceeding, the person had reasonable cause
to believe that the act or omission was unlawful.
Under Arizona law, indemnification may be provided against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by the person in
connection with the proceeding. The indemnification may be provided, however,
only if authorized for a specific proceeding after a determination has been made
that indemnification is permissible under the circumstances because the person
met the applicable standard of conduct. This determination is required to be
made:
o by the Board of Directors by a majority vote of a quorum consisting of
directors not, at the time, parties to the proceeding or, if a quorum
cannot be obtained, then by a majority vote of a committee of the board
consisting solely of two or more directors not, at the time, parties to the
proceeding and who a majority of the Board of Directors designated to act
in the matter;
o by special legal counsel selected by the board or board committee by the
vote set forth above, o or, if such vote cannot be obtained, by a majority
of the entire board; or
o by the stockholders.
23
If the proceeding is one by or in the right of the corporation, indemnification
may not be provided as to any proceeding in which the person is found liable to
the corporation.
An Arizona corporation may pay, before final disposition, the expenses,
including attorneys' fees, incurred by a director, officer, employee or agent in
defending a proceeding. Under Arizona law, expenses may be advanced to a
director or officer when the director or officer gives a written affirmation of
his or her good faith belief that he or she has met the standard of conduct
necessary for indemnification and a written undertaking to the corporation to
repay the amounts advanced if it is ultimately determined that he or she is not
entitled to indemnification. Arizona law does not require that the undertaking
be secured, and the undertaking may be accepted without reference to the
financial ability of the director or officer to repay the advance. An Arizona
corporation is required to indemnify any director who has been successful, on
the merits or otherwise, in defense of a proceeding for reasonable expenses. The
determination as to reasonableness of expenses is required to be made in the
same manner as required for indemnification.
Under Arizona law, the indemnification and advancement of expenses provided by
statute are not exclusive of any other rights to which a person who is not a
director seeking indemnification or advancement of expenses may be entitled
under any articles of incorporation, bylaw, agreement, vote of stockholders,
vote of directors or otherwise.
Our bylaws provide that we shall indemnify each director, officer or employee
o to the fullest extent permitted by the General Corporation Law of the State
of Arizona, or any similar provision or provisions of applicable law at the
time in effect, in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was at any time serving
at the request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, other enterprise
or employee benefit plan; and
o to the fullest extent permitted by the common law and by any statutory
provision other than the General Corporation Law of the State of Arizona in
connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was at any time a director, officer or
employee of the corporation, or is or was at any time serving at the
request of the corporation as a director, officer, or employee of another
corporation, partnership, joint venture, trust, other enterprise or
employee benefit plan.
Reasonable expenses incurred in defending any action, suit or proceeding
described above shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director, officer or employee to repay such amount to the
corporation if it shall ultimately be determined that he is not entitled to be
indemnified by us.
In addition to the general indemnification described above, Arizona law permits
corporations to include any provision expanding or limiting the liability of its
directors and officers to the corporation or its stockholders for money damages,
but may not include any provision that restricts or limits the liability of its
directors or officers to the corporation or its stockholders:
o to the extent that it is proved that the person actually received an
improper benefit or profit in money, property, or services for the amount
of the benefit or profit in money, property or services actually received;
or
o to the extent that a judgment or other final adjudication adverse to the
person is entered in a proceeding based on a finding in the proceeding that
the person's action, or failure to act, was the result of active and
deliberate dishonesty and was material to the cause of action adjudicated
in the proceeding.
We have adopted, in our articles of incorporation, a provision that eliminates
and limits the personal liability of each of our directors and officers to the
full extent permitted by the laws of the State of Arizona.
24
Item 16. Exhibits.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
4.1 Second Restated Articles of Incorporation. Exhibit 3.1 to the
quarterly report on Form 10-QSB for Alanco Technologies, Inc.
for the quarter ended September 30, 2002 filed with the SEC on
November 14, 2002 is incorporated by reference herein.
4.2 Amended and Restated Bylaws. Exhibit 3.2 to the annual report
on Form 10-KSB for Alanco Technologies, Inc. for the fiscal year
ended June 30, 2002 filed with the SEC on September 30, 2002 is
incorporated by reference herein.
4.3 The Powers, Preferences, Rights and Limitations of the Series
of the Preferred Stock of Alanco Technologies, Inc. Designated
Series A Convertible Preferred Stock
4.4 Alanco Technologies Warrant Agreement
4.5 Declaration of Registration Rights
4.6 Subscription Agreement
5 Opinion of Law Office of Steven P. Oman, P.C.
23.1 Consent of Law Office of Steven P. Oman, P.C. (included in
Exhibit 5).
23.2 Consent of Semple & Cooper, LLP, Independent Auditors.
24.1 Power of Attorney. Located following signature page of this
Registration Statement.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(A) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(B) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(C) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (1)(A) and (1)(B) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the registrant pursuant to Section 13 or 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
25
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) That, for the purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(5) That, for purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of the
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(6) That, for the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Scottsdale, State of Arizona, on October 6, 2003.
ALANCO TECHNOLOGIES, INC.
an Arizona corporation
By: /s/ Robert R. Kauffman
Robert R. Kauffman
Chief Executive Officer
(Principal Executive Officer)
26
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints jointly and severally, Robert R. Kauffman
and John A. Carlson, and each one of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including pre-effective and
post-effective amendments) to this registration statement, and to sign any
registration statement and amendments thereto for the same offering pursuant to
Rule 462(b) under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all which said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do, or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated:
Signature Title Date
/s/ Robert R. Kauffman Chief Executive Officer (Principal Executive
---------------------- Officer), Director and Chairman of the Board October 6, 2003
Robert R. Kauffman
/s/ John A. Carlson Chief Financial Officer (Principal Financial
------------------- Officer and Principal Accounting Officer) and October 6, 2003
John A. Carlson Director
/s/ Harold S. Carpenter
-----------------------
Harold S. Carpenter Director October 6, 2003
/s/ Donald E. Anderson
----------------------
Donald E. Anderson Director October 6, 2003
/s/ James T. Hecker
-------------------
James T. Hecker Director October 6, 2003
/s/ Thomas C. LaVoy
-------------------
Thomas C. LaVoy Director October 6, 2003
Steven P. Oman
------------------
Steven P. Oman Director October 6, 2003
27
Exhibit 4.3
THE POWERS, PREFERENCES, RIGHTS AND LIMITATIONS
OF THE SERIES OF THE PREFERRED STOCK
OF
ALANCO TECHNOLOGIES, INC.
DESIGNATED
SERIES A CONVERTIBLE PREFERRED STOCK
The series designated "Series A Convertible Preferred Stock" of the
Company's Preferred Stock, to be issued as the Board of Directors may determine,
shall have the following preferences, rights and limitations in addition to
those applicable generally to the preferred stock of the Company:
1. Number of Authorized Shares in Series. There shall be a total of 5,000,000
authorized shares of Series B Convertible Preferred Stock.
2. Priority. The Series A Convertible Preferred Stock shall have a priority
ranking superior to the Common Stock of the Company and all other series of
Preferred Stock of the Company, except the Series B Convertible Preferred Stock
of the Company which shall have a ranking superior to the Series A Convertible
Preferred Stock, with respect to payment of dividends and upon dissolution,
liquidation and winding-up of the Company.
3. Dividends. Holders of shares of Series A Convertible Preferred Stock shall be
entitled to receive, when declared by the Board of Directors, out of funds and
assets of the Company legally available therefore, an annual dividend
(calculated on the basis of the redemption price of $1.50 per share of Series A
Convertible Preferred Stock) of twelve (12%) percent per annum, payable
semi-annually on or before January 20th and July 20 for six-month period ended
December 31 and June 30, respectively, to stockholders of record on the
respective record dates (which shall be the tenth day of the last month for the
six-month period just ended. At the option of the Holder, any dividends on the
Series A Convertible Preferred Stock may be paid either in cash or in kind and
if paid in kind each share of Series A Convertible Preferred Stock to be
received shall be valued at $1.50 per share for purposes of such dividend
payment. No fractional shares shall be issued for dividends paid in kind and
such dividends to be paid to any shareholder shall be rounded up to the next
whole share of Series A Convertible Preferred Stock. Notwithstanding anything
herein to the contrary, in the event the Company is unable to declare a dividend
payable fully in cash and the Holders of seventy-five (75%) percent of all
outstanding shares of Series A Convertible Preferred Stock agree in writing,
then some or all of the dividend, as set forth in the agreement, shall be paid
to all holders of the Series A Convertible Preferred Stock in kind. Dividends on
each share of the Series A Convertible Preferred Stock shall accrue and be
cumulative from the date of issue and shall be appropriately prorated with
respect to the period between such date of issue and the first dividend payment
date. Accumulations of unpaid dividends shall not bear interest.
1
So long as any shares of Series A Convertible Preferred Stock are
outstanding, the Company shall not declare and pay or set apart for payment any
dividends or make any other distribution on the Common Stock and shall not
redeem, retire, purchase or otherwise acquire, any shares of Common Stock or
Preferred Stock ranking inferior to the Series A Convertible Preferred Stock,
unless at the time of making such declaration, payment, distribution,
redemption, retirement, purchase or acquisition dividends on all outstanding
shares of Series A Convertible Preferred Stock for all past quarterly dividend
periods shall have been paid or declared and sufficient funds set apart for the
payment thereof.
4. Conversion. Each share of Series A Convertible Preferred Stock shall be
convertible into three (3) shares of Class A Common Stock of the Company,
without the payment of any additional consideration by the holder thereof and at
the option of the holder thereof, subject to readjustment as provided herein
below. The right to convert any shares of Series A Convertible Preferred Stock
called for redemption shall expire at the close of business on the redemption
date thereof.
The holder of a share or shares of Series A Convertible Preferred Stock
may exercise the conversion rights by delivering to the Company during regular
business hours, at the principal office of the Company, or at such other places
as may be designated by the Company, the certificate or certificates for the
shares to be converted, duly endorsed or assigned in blank or to the Company (if
required by it), accompanied in any event by written notice stating that the
holder elects to convert such shares and stating the name or names (with
address) in which the certificate or certificates for Class A Common Stock are
to be issued. Conversion shall be deemed to have been effected on the date when
such delivery is made, and such date is referred to herein as the "Conversion
Date". As promptly as practicable thereafter the Company shall issue and deliver
to or upon the written order of such holder, at such office or other place
designated by the Company, a certificate or certificates for the number of full
shares of Class A Common Stock to which he is entitled and a check in respect of
any fraction of shares provided below. The person in whose name the certificate
or certificates for Class A Common Stock are to be issued shall be deemed to
have become a holder of Class A Common Stock of record on the Conversion Date
unless the transfer books of the Company are closed on that date, in which event
he shall be deemed to have become a holder of Class A Common Stock of Record on
the next succeeding date on which the transfer books are open, but the
conversion rate shall be that in effect on the Conversion Date.
The issuance of Class A Common Stock on conversion of Series A
Convertible Preferred Stock shall be without charge to the converting holder of
Series A Convertible Preferred Stock for any fee, expense or tax in respect of
the issuance therefore, but the Company shall not be required to pay any fee,
expense or tax which may be payable with respect of any transfer involved in the
issuance and delivery of shares in any name other than that of the holder of
record on the books of the Company of the shares of Series A Convertible
Preferred Stock converted, and the Company shall not, in any such case, be
required to issue or deliver any certificate for shares of Class A Common Stock
unless and until the person requesting the issuance thereof shall have paid to
the Company the amount of such fee, expense or tax or shall have established to
the satisfaction of the Company that such fee, expense or tax has been paid.
2
The number of shares of Class A Common Stock deliverable upon
conversion of each share of Series A Convertible Preferred Stock shall be
subject to adjustment from time to time upon the happening of certain events as
follows:
(i) Merger, Sale of Assets, Consolidation. If the Company at any time
shall consolidate with or merge into or sell or convey all or substantially all
its assets to any other entity, the Series A Convertible Preferred Stock shall
thereafter evidence the right to be converted into capital stock in such number
and kind of securities and property as would have been issuable or distributable
on account of such consolidation, merger, sale or conveyance upon or with
respect to the securities subject to the conversion or purchase right
immediately prior to such consolidation, merger, sale or conveyance. The
foregoing provision shall similarly apply to successive transactions of a
similar nature by any such successor or purchaser. Without limiting the
generality of the foregoing, the anti-dilution provisions of the Series A
Convertible Preferred Stock shall apply to such securities of such successor or
purchaser after any such consolidation, merger, sale or conveyance.
(ii) Reclassification. If the Company at any time shall, by
subdivision, combination reclassification of securities or otherwise, change any
of the securities then purchasable upon the exercise of the conversion right
associated with the Series A Convertible Preferred Stock into the same or a
different number of securities of any class or classes, the Series A Convertible
Preferred Stock shall thereafter evidence the right to purchase such number and
kind of securities as would have been issuable as the result of such change with
respect to the securities which were subject to the conversion right immediately
prior to such subdivision, combination, reclassification or other change. If
shares of Class A Common Stock is subdivided or combined into a greater or
smaller number of shares of Class A Common Stock, the number of shares of Class
A Common Stock deliverable upon conversion of each share of Series A Convertible
Preferred Stock shall be proportionately reduced or increased, as appropriate,
by the ratio which the total number of shares of Class A Common Stock to be
outstanding immediately after such event bears to the total number of shares of
Class A Common Stock outstanding immediately prior to such event.
Whenever any adjustment is required in the number of shares into which
each share of the Series A Convertible Preferred Stock is convertible, the
Company shall forthwith file a statement describing in reasonable detail the
adjustment and the method of calculation used at the office or agency maintained
for the purpose for conversion of the Series A Convertible Preferred Stock, and
shall mail a copy thereof the holders of the Series A Convertible Preferred
Stock.
The Company shall at all times keep available for issue and delivery
the full number of shares of Class A Common Stock into which all outstanding
shares of Series A Convertible Preferred Stock are convertible.
3
No certificate for a fraction of a share of Class A Common Stock shall
be issued upon any conversion, but in lieu of any fractional share that would
otherwise be required to be issued in accordance with the foregoing provisions,
the Company shall make a cash payment for any such fractional share interest
based upon a value for such Class A Common Stock equal to the average NASDAQ
closing market price for ten (10) trading days prior to the conversion date.
5. Voting. The holders of shares of Series A Convertible Preferred Stock shall
be entitled to notice of any stockholders' meeting and to vote upon matters
submitted to shareholders for a vote, in the same manner and with the same
effect as the holders of shares of Class A Common Stock, voting together with
the holders of Class A Common Stock as a single class to the extent permitted by
law. Holders of Series A Convertible Preferred Stock shall have that number of
votes equal to the number of shares of Class A Common Stock into which such
preferred stock is convertible, as adjusted from time to time pursuant to
section 4 above.
So long as any shares of the Series A Convertible Preferred Stock are
outstanding, the Company shall not, without the affirmative vote or written
consent of the holders of at least two thirds of the aggregate number of shares
at the time outstanding of the Series A Convertible Preferred Stock:
(i) authorize, create or increase any class of capital stock
ranking equal or prior to the Series A Convertible Preferred Stock as to
dividends or upon liquidation, dissolution or winding-up; or
(ii) alter or change any of the powers, preferences or special
rights given to the Series A Convertible Preferred Stock so as to affect the
same adversely.
6. Redemption. The Company may, at the option of the Board of Directors, redeem
all or any part of the outstanding Series A Convertible Preferred Stock at any
time after the occurrence of both (i) December 31, 2004, and (ii) the average
NASDAQ closing market price for the Company's Class A Common Stock for twenty
(20) consecutive trading days having a trading volume greater than 25,000 shares
equals or exceeds $2.00 per share, at the redemption price equal to $1.50 per
share of the Series A Convertible Preferred Stock to be redeemed, plus accrued
unpaid dividends, if any, provided that notice of redemption is sent by
certified mail to the holders of record of the Series A Convertible Preferred
Stock to be redeemed at least thirty (30) days prior to the date of redemption
specified in such notice, addressed to each such holder at his address as it
appears in the records of the Company. In case of the redemption of a part only
of the Series A Convertible Preferred Stock, the shares of such series to be
redeemed shall be selected pro rata or by lot or in such other manner as the
Board of Directors may determine. The Board of Directors shall have full power
and authority to prescribed the manner in which and subject to the provisions
and limitations herein contained, the terms and conditions upon which such stock
shall be redeemed from time to time.
On or after the redemption date each holder of shares of Series A
Convertible Preferred Stock to be redeemed shall present and surrender his
certificate or certificates for such shares to the Company and thereupon the
redemption price of such shares shall be paid to or on the order of the person
4
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. In case less than all of the
shares represented by any such certificates are redeemed, a new certificate
shall be issued representing the unredeemed shares.
All rights arising under this Designation of Powers, Preferences, Rights and
Limitations, other than the right to receive the redemption price, shall
terminate upon the payment of good funds on or before the redemption date to the
holder of the applicable shares. The Company may also deposit the aggregate
redemption price payable with respect to the shares of Series A Convertible
Preferred Stock to be redeemed (or the portion thereof not already paid in the
redemption of such shares) (the "Redemption Deposit") with the Company's
transfer agent or any bank or trust company in the United States named in the
notice of redemption. Such deposits are to be payable in amounts as aforesaid to
the respective orders of the holders of record of the shares of Series A
Convertible Preferred Stock upon surrender of the certificates evidencing such
shares as described above. From and after the making of the Redemption Deposit,
all rights of the holders of the applicable shares arising under this
Designation of Powers, Preferences, Rights and Limitations shall terminate,
other than the right to receive from such transfer agent, bank or trust company,
without interest, the moneys so deposited with it, and such shares shall not
thereafter be transferred (except with the consent of the Company) on the books
of the Company, and such shares shall not be deemed to be outstanding for any
purpose whatsoever.
7. No Sinking Fund. The shares of the Series A Convertible Preferred Stock shall
not be entitled to benefit of any sinking or purchase fund to be applied to the
redemption or purchase of such stock.
8. Liquidation. In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, holders of Series A Convertible
Preferred Stock shall be entitled to be paid out of the assets of the Company
available for distribution to its stockholders before any payment shall be made
in respect of any class or series of stock which shall rank subordinate thereto
as to assets the fixed sum of $1.50 for each share of Series A Convertible
Preferred Stock held by them plus accrued and unpaid dividends, if any, thereon.
If upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, the assets of the Company available for distribution
to its Series A Convertible Preferred Stock holders shall be insufficient to pay
the holders of Series A Convertible Preferred Stock the full amount to which
they are entitled hereunder, the holders of Series A Convertible Preferred Stock
shall share ratably in any distribution of assets according to the respective
amounts which would be payable in respect of the shares of Series A Convertible
Preferred Stock held by them upon such distribution if all amounts payable on or
with respect to such stock were paid in full. If upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company payments shall
have been made to the holders of the Series A Convertible Preferred Stock of the
full amount to which they shall respectively be entitled hereunder, such holders
shall not be entitled to any further participation in the distribution of the
remaining assets of the Company available for distribution to its stockholders.
5
Neither the merger or consolidation of the Company into or with another
corporation nor the merger or consolidation of any other corporation into or
with the Company, nor the sale, transfer or lease of all or substantially all of
the assets of the Company, shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding-up of the Company.
9. Redeemed Shares. Shares of the Series A Convertible Preferred Stock redeemed
or purchased by the Company or surrendered to the Company on the conversion
thereof into shares of Class A Common Stock as herein above provided shall have
the status of authorized and unissued shares of Series A Convertible Preferred
Stock.
6
Exhibit 4.4
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS
(i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SUBSCRIBERS
MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS
INVOLVED.
Warrant to Purchase
________ shares
WARRANT TO PURCHASE COMMON STOCK
OF
ALANCO TECHNOLOGIES, INC.
THIS CERTIFIES that ____________________________________ or any
subsequent holder hereof in accordance with Section 9 ("Holder"), has the right
to purchase from ALANCO TECHNOLOGIES, INC., an Arizona corporation (the
"Company"), up to __________________ fully paid and nonassessable shares of the
Company's Class A common stock ("Common Stock"), subject to adjustment as
provided herein, at a price equal to the Exercise Price as defined in Section 3
below, at any time beginning on the Date of Issuance (as defined below) and
ending at 5:00 p.m., Phoenix, Arizona time, on June 30, 2008 (the "Exercise
Period").
Holder agrees with the Company that this Warrant to Purchase Common
Stock of Alanco Technologies, Inc. (this "Warrant") is issued and all rights
hereunder shall be held subject to all of the conditions, limitations and
provisions set forth herein.
1. Date of Issuance.
This Warrant shall be deemed to be issued on _____________, 2003.
("Date of Issuance").
2. Exercise.
(a) Manner of Exercise. During the Exercise Period, this
Warrant may be exercised as to all or any lesser number of full shares of Common
Stock covered hereby upon surrender of this Warrant, with the Exercise Form
attached hereto as Exhibit A (the "Exercise Form") duly completed and executed,
together with the full Exercise Price (as defined below) for each share of
Common Stock as to which this Warrant is exercised, at the office of the Company
1
or at such other office or agency as the Company may designate in writing, (such
surrender and payment of the Exercise Price hereinafter called the "Exercise of
this Warrant").
(b) Date of Exercise. The "Date of Exercise" of the Warrant
shall be defined as the date on which this Warrant is received by the Company,
together with the full Exercise Price, in accordance with Section 2(a) above.
(c) Cancellation of Warrant. This Warrant shall be canceled
upon the Exercise of this Warrant, and, as soon as practicable after the Date of
Exercise, Holder shall be entitled to receive Common Stock for the number of
shares purchased upon such Exercise of this Warrant, and if this Warrant is not
exercised in full, Holder shall be entitled to receive a new Warrant (containing
terms identical to this Warrant) representing any unexercised portion of this
Warrant in addition to such Common Stock.
(d) Holder of Record. Each person in whose name any Warrant
for shares of Common Stock is issued shall, for all purposes, be deemed to be
the Holder of record of such shares on the Date of Exercise of this Warrant,
irrespective of the date of delivery of the Common Stock purchased upon the
Exercise of this Warrant. Nothing in this Warrant shall be construed as
conferring upon Holder any rights as a stockholder of the Company.
3. Payment of Warrant Exercise Price.
The Exercise Price shall equal $0.50 per share of Common Stock
("Exercise Price"), subject to adjustment in accordance with Section 6 hereof.
Payment of the Exercise Price shall be made by cash, cashiers check or wire
transfer.
4. Redemption.
This Warrant shall be redeemable at the option of the Company
at a price equal to: (i) $.01, multiplied by (ii) the number of Shares issuable
upon the exercise of this Warrant upon occurance of the following described
event. The Company may redeem the warrant upon 10 days' written notice to the
Holder hereof, so long as the closing price quoted on the Nasdaq Small Cap
Market, or if the Common Stock is not traded on the Nasdaq Small Cap Market, on
any exchange or trading system on which the Common Stock is trading, is $1.50 or
greater (as equitably adjusted for stock splits, dividends, combinations,
mergers or other events as contemplated in Section 6 below) for ten (10)
consecutive trading days prior to the date of the notice of redemption. If the
Common Stock is/was not traded during the ten (10) trading days prior to the
date of such notice, then the closing price for the last publicly traded day
shall be deemed to be the closing price for any and all (if applicable) days
during such ten (10) trading day period.
2
5. Transfer and Registration.
(a) Transfer Rights. Subject to the provisions of Section 9 of
this Warrant, this Warrant may be transferred on the books of the Company, in
whole or in part, in person or by attorney, upon surrender of this Warrant
properly completed and endorsed. This Warrant shall be canceled upon such
surrender and, as soon as practicable thereafter, the person to whom such
transfer is made shall be entitled to receive a new Warrant or Warrants as to
the portion of this Warrant transferred, and Holder shall be entitled to receive
a new Warrant as to the portion hereof retained.
(b) Registrable Securities. The Common Stock issuable upon the
exercise of this Warrant constitutes "Registrable Securities" under the
Registration Rights Agreement and, accordingly, has the benefit of the
registration rights pursuant to that agreement.
6. Adjustments to Exercise Price.
(a) Adjustment to Exercise Price Due to Stock Split, Stock
Dividend, Etc. If, prior to the exercise in full of this Warrant the number of
outstanding shares of Common Stock is increased by a stock split, stock
dividend, or other similar event, the Exercise Price shall be proportionately
reduced, or if the number of outstanding shares of Common Stock is decreased by
a combination or reclassification of shares, or other similar event, the
Exercise Price shall be proportionately increased.
(b) Adjustment Due to Merger, Consolidation, Etc. If, prior to
the exercise in full of this Warrant, there shall be any merger, consolidation,
exchange of shares, recapitalization, reorganization, or other similar event, as
a result of which shares of Common Stock of the Company shall be changed into
the same or a different number of shares of the same or another class or classes
of stock or securities of the Company or another entity, then the Holders of
this Warrant shall thereafter have the right to receive upon exercise of this
Warrant, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore issuable upon
exercise, such stock, securities or other assets which the Holder would have
been entitled to receive in such transaction had the Warrant been exercised
immediately prior to such transaction, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the Holder
to the end that the provisions hereof (including, without limitation, provisions
for the adjustment of the Exercise Price) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities thereafter
deliverable upon the exercise hereof.
(c) No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 6 and in the taking of all such action as may be necessary or
appropriate in order to protect the exercise rights of the Holder.
(d) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Exercise Price pursuant to this Section 6, the
Company at its expense shall promptly compute such adjustment or readjustment in
3
accordance with these terms and furnish to the Holder a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of the Holder, furnish or cause to be furnished a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Exercise Price at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the exercise of this Warrant.
(e) Notices of Record Date. In the event of (i) any taking by
the Company of a record date of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, or (ii) any capital reorganization of
the Company, any reclassification or recapitalization of the capital stock of
the Company, any merger or consolidation of the Company, and any transfer of all
or substantially all of the assets of the Company to any other Company, or any
other entity or person, or any voluntary or involuntary dissolution, liquidation
or winding up of the Company, the Company shall mail to the Holder at least 10
days prior to the record date specified therein, a notice specifying (A) the
date on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (C) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange their shares
of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.
7. Fractional Interests.
No fractional shares or scrip representing fractional shares
shall be issuable upon the Exercise of this Warrant, but on Exercise of this
Warrant, Holder may purchase only a whole number of shares of Common Stock. If,
on Exercise of this Warrant, Holder would be entitled to a fractional share of
Common Stock or a right to acquire a fractional share of Common Stock, such
fractional share shall be disregarded and the number of shares issuable upon
shall be the next higher number of shares.
8. Reservation of Shares.
The Company shall at all times reserve for issuance such
number of authorized and unissued shares of Common Stock (or other securities
substituted therefor as herein above provided) as shall be sufficient for the
Exercise of this Warrant and payment of the Exercise Price. The Company
covenants and agrees that upon the Exercise of this Warrant, all shares of
Common Stock issuable upon such exercise shall be duly and validly issued, fully
paid, nonassessable and not subject to preemptive rights, rights of first
refusal or similar rights of any person or entity.
4
9. Restrictions on Transfer.
(a) Registration or Exemption Required. This Warrant has been
issued in a transaction exempt from the registration requirements of the
Securities Act by virtue of Regulation D and exempt from state registration
under applicable state laws. The Warrant and the Common Stock issuable upon the
Exercise of this Warrant may not be pledged, transferred, sold or assigned
except pursuant to an effective registration statement or an exemption to the
registration requirements of the Securities Act and applicable state laws.
(b) Assignment. If Holder can provide the Company with
reasonably satisfactory evidence that the conditions of (a) above regarding
registration or exemption have been satisfied, Holder may sell, transfer,
assign, pledge or otherwise dispose of this Warrant, in whole or in part. Holder
shall deliver a written notice to the Company, substantially in the form of the
Assignment attached hereto as Exhibit B, indicating the person or persons to
whom the Warrant shall be assigned and the respective number of warrants to be
assigned to each assignee. The Company shall effect the assignment within ten
days and shall deliver to the assignee(s) designated by Holder, a Warrant or
Warrants of like tenor and terms for the appropriate number of shares.
10. Benefit of this Warrant.
Nothing in this Warrant shall be construed to confer upon any person
other than the Company and Holder any legal or equitable right, remedy or claim
under this Warrant, and this Warrant shall be for the sole and exclusive benefit
of the Company and Holder.
11. Applicable Law.
This Warrant is issued under and shall for all purposes be
governed by and construed in accordance with the laws of the State of Arizona,
without giving effect to the conflict of law provisions thereof.
12. Loss of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity or security reasonably satisfactory to the Company,
and upon surrender and cancellation of this Warrant, if mutilated, the Company
shall execute and deliver a new Warrant of like tenor and date.
13. Notices or Demands.
All notices or other communications required or permitted
pursuant to this Warrant shall be in writing and shall be deemed given to a
party when (a) delivered by hand or by nationally recognized overnight courier
service (costs prepaid); or (b) received or rejected by the addressee, if sent
by certified mail, return receipt requested. Such notice or other communication
shall be sent to the Company, Attention: Chief Financial Officer, 15575 North
83rd Way, Suite 3, Scottsdale, AZ 85260, or to the Holder at the address set
forth in the Company's records (or to such other address as either party may
designate by notice to the other party).
5
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of
the ____ day of _________________, 2003.
ALANCO TECHNOLOGIES, INC.
By:
--------------------------------
Name:
-----------------------------
Title:
----------------------------
6
EXHIBIT A
EXERCISE FORM
The undersigned hereby irrevocably exercises the right to purchase
________________ shares of common stock, no par value (the "Common Stock") of
Alanco Technologies, Inc., an Arizona corporation (the "Company"), evidenced by
the attached warrant (the "Warrant") and herewith makes payment of the exercise
price with respect to such shares in full, all in accordance with the conditions
and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any of the Common Stock obtained on exercise of the Warrant, except in
accordance with the provisions of Section 9(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued
free of any restrictive legend, if appropriate, and a warrant representing any
unexercised portion hereof be issued, pursuant to the Warrant in the name of the
undersigned and delivered to the undersigned at the address set forth below:
Dated:----------------
-----------------------------------------------------------------------------
Signature
-----------------------------------------------------------------------------
Print Name
-----------------------------------------------------------------------------
Address
NOTICE: The signature to the foregoing Exercise Form must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
7
EXHIBIT B
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the
"Warrant") hereby sells, assigns and transfers unto the person or persons below
named the right to purchase shares of the Common Stock of
-----------------------
Alanco Technologies, Inc., evidenced by the attached Warrant and does hereby
irrevocably constitute and appoint as attorney-in-fact
-----------------------
to transfer the said Warrant on the books of the Company, with full power of
substitution in the premises.
-------------------------
Dated: Signature
-----------------
Fill in for new registration of Warrant:
---------------------------------------
Name
---------------------------------------
Address
---------------------------------------
Please print name and address of assignee
(including zip code) above.
NOTICE: The signature to the foregoing Exercise Form must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
8
Exhibit 4.5
DECLARATION OF
REGISTRATION RIGHTS
THIS DECLARATION OF REGISTRATION RIGHTS ("Declaration") is made as of
, 2003, by ALANCO TECHNOLOGIES, INC., a corporation duly
-------------------
incorporated and existing under the laws of the State of Arizona (the
"Company"), for the benefit of the subscribers (hereinafter referred to as
"Subscribers") to the Company's offering (the "Offering") of up to three million
(3,000,000) Units (the "Units") pursuant to each of the Subscription Agreements
between the Company and each of the Subscribers (the "Subscription Agreement").
1. Definitions. For purposes of this Agreement:
(a) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933 (the "Act"), and
pursuant to Rule 415 under the Act or any successor rule, and the declaration or
ordering of effectiveness of such registration statement or document;
(b) For purposes hereof, the term "Registrable Securities" means the
shares of the Company's Class A Common Stock, together with any capital stock
issued in replacement of, in exchange for or otherwise in respect of such Class
A Common Stock (the "Common Stock"), issuable or issued in connection with the
conversion of the Series A Convertible Preferred Stock described in the
Subscription Agreement including upon exercise of the warrants to purchase
Common Stock to be issued to the Subscribers in connection therewith (the
"Warrants").
Notwithstanding the above:
1. Common Stock which would otherwise be deemed to be
Registrable Securities shall not constitute Registrable
Securities if those shares of Common Stock may be resold in a
public transaction without registration under the Act,
including without limitation, pursuant to Rule 144 under the
Act; and
2. any Registrable Securities resold in a public transaction
shall cease to constitute Registrable Securities.
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock which have been
issued or are issuable upon conversion of the Series A Convertible Preferred
Stock or exercise of the then outstanding Warrants at the time of such
determination; and
(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any permitted assignee thereof.
2. Required Registration.
The Company agrees to file a registration statement on Form S-3 (or other
suitable form) or a post-effective amendment to an effective registration
statement (collectively, a "Registration Statement") at the Company's
1
discretion, covering the resale of all shares of Registrable Securities then
outstanding or issuable upon exercise of the Warrants. The Company shall use
commercially reasonable efforts to have the Registration Statement declared
effective on or before October 31, 2003. In the event the Registration Statement
is not declared effective by the Securities and Exchange Commission (SEC) on or
before October 31, 2003, then the dividend rate with respect to the Series A
Convertible Preferred Stock shall be doubled to 24% until the Registration
Statement is declared effective by the SEC.
(a) The Registration Statement shall be prepared as a "shelf"
registration statement under Rule 415, and shall be maintained effective until
all Registrable Securities cease to exist.
(b) The Company represents that it is presently eligible to effect the
registration contemplated hereby on Form S-3 and will use its best efforts to
continue to take such actions as are necessary to maintain such eligibility.
3. Limitation on Obligations to Register. If the Company believes that
shares sought to be registered under Section 2 by Holders do not constitute
"Registrable Securities" by virtue of Section 1(b) of this Agreement, and the
status of those shares as Registrable Securities is disputed, the Company shall
provide, at its expense, an opinion of counsel, reasonably acceptable to the
Holders of the securities at issue (and satisfactory to the Company's transfer
agent to permit the sale and transfer) that those securities may be sold
immediately, without volume limitation, without registration under the Act, by
virtue of Rule 144 or similar provisions.
4. Obligations of the Company. Whenever required under this Agreement,
or a post-effective amendment to an effective registration statement, to effect
the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the Securities and Exchange Commission
("SEC") a registration statement, or such a post-effective amendment, with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement, or such a post-effective amendment, and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
2
(e) As promptly as practicable after becoming aware of such event,
notify each Holder of Registrable Securities of the happening of any event of
which the Company has knowledge, as a result of which the prospectus included in
the registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and subject to Section 5 use its best
efforts promptly to prepare a supplement or amendment to the registration
statement to correct such untrue statement or omission, and deliver a number of
copies of such supplement or amendment to each Holder as such Holder may
reasonably request.
(f) Provide Holders with written notice of the date that a
registration statement registering the resale of the Registrable Securities is
declared effective by the SEC and the date or dates when the Registration
Statement is no longer effective.
(g) Provide Holders and their representatives the opportunity to
conduct a reasonable due diligence inquiry of Company's pertinent financial and
other records and make available its officers, directors and employees for
questions regarding such information as it relates to information contained in
the registration statement.
(h) Provide Holders and their representatives the opportunity to
review the registration statement and all amendments thereto a reasonable period
of time prior to their filing with the SEC if so requested by Holder in writing.
5. Black Out. In the event that, during the time that the Registration
Statement is effective, the Company reasonably determines, based upon advice of
counsel, that due to the existence of material non-public information,
disclosure of such material non-public information would be required to make the
statements contained in the Registration Statement not misleading, and the
Company has a bona fide business purpose for preserving as confidential such
material non-public information, the Company shall have the right to suspend the
effectiveness of the Registration Statement, and no Holder shall be permitted to
sell any Registrable Securities pursuant thereto, until such time as such
suspension is no longer advisable; provided, however, that such time shall not
exceed a period of sixty (60) days. As soon as such suspension is no longer
advisable, the Company shall, if required, promptly, but in no event later than
the date the Company files any documents with the SEC referencing such material
information, file with the SEC an amendment to the Registration Statement
disclosing such information and use its best efforts to have such amendment
declared effective as soon as possible.
If the effectiveness of the Registration Statement is
suspended by the Company pursuant hereto, the Company shall promptly notify all
Holders whose securities are covered by the Registration Statement of such
suspension, and shall promptly notify each such Holder as soon as the
effectiveness of the Registration Statement has been resumed. The Company shall
be entitled to effect no more than two such suspensions during the one (1) year
period following the Last Closing.
3
6. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement with
regard to each selling Holder that such selling Holder shall furnish to the
Company such information regarding Holder, the Registrable Securities held by it
and the intended method of disposition of such securities as shall be required
to effect the registration of its Registrable Securities or to determine that
registration is not required pursuant to Rule 144 or other applicable provision
of the Act.
7. Expenses. All expenses other than underwriting discounts and
commissions incurred in connection with registrations, filings or qualifications
pursuant hereto, including (without limitation) all registration, filing and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company shall be borne by the Company.
8. Indemnification. If any Registrable Securities are included in a
Registration Statement or a post-effective amendment to an effective
registration statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the officers and directors of each Holder, any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements or
omissions: (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, and the Company will promptly reimburse, as such
expenses are incurred and payable, each such Holder, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 8(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, officer, director, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder, severally and
not jointly, will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the Act, any
underwriter and any other Holder selling securities in such registration
statement or any of its directors or officers or any person who controls such
Holder, against any losses, claims, damages, or liabilities (joint or several)
to which the Company or any such director, officer, controlling person, or
4
underwriter or controlling person, or other such Holder or director, officer or
controlling person may become subject, under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon (i) any statement
or omission in each case to the extent (and only to the extent) that such
statement or omission is made in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration statement, or (ii) any sale by a Holder after the Company has given
notice to the Holder under Section 4(f) or 5 herein and prior to the filing by
the Company of a supplement or the effectiveness of a post-effective amendment
as necessary in connection with such notice; and each such Holder will reimburse
any legal or other expenses reasonably incurred by the Company and any such
director, officer, controlling person, underwriter or controlling person, other
Holder, officer, director, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 8, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the reasonably incurred fees and
expenses of one such counsel to he paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential conflicting
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
8, but the omission so to deliver written notice to the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 8.
(d) If the indemnity provided in paragraph (a) or (b) of this Section
8 is unavailable to or insufficient to hold harmless an indemnified party for
any reason, the Company and each Holder agree to contribute to the aggregate
claims, losses, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
(collectively "Losses") to which the Company and one or more of the Holder may
be subject in such proportion as is appropriate to reflect the relative fault of
the Company and the Holders in connection with the statements or omissions which
resulted in such Losses. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information provided
by the Company or by the Holders. The Company and the Holders agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or any other method of allocation which does not take account of the
equitable considerations referred to above. Notwithstanding the provisions of
this paragraph (d), no person guilty of fraudulent misrepresentation (within the
5
meaning of Section 10(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls a
Holder of Registrable Securities within the meaning of either the Securities Act
or the Exchange Act and each director, officer, partner, employee and agent of a
Holder shall have the same rights to contribution as such holder, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act and each director of the Company, and each officer of the Company
who has signed the registration statement, shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this paragraph (d).
(e) The obligations of the Company and Holders under this Section 8
shall survive the redemption and conversion, if any, of the Preferred Stock, any
exercise of the Warrants, the completion of any offering of Registrable
Securities in a Registration Statement under this Agreement, and otherwise.
9. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration, the
Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144; and
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act.
10. Amendment of Registration Rights. Any provision of this Agreement
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of a majority of the Registrable
Securities provided that the amendment treats all Holders equally. Any amendment
or waiver effected in accordance with this paragraph shall be binding upon each
Holder, each future Holder, and the Company.
11. Notices. All notices or other communications required or permitted
pursuant to this Agreement shall be in writing and shall be deemed given to a
party when (a) delivered by hand or by nationally recognized overnight courier
service (costs prepaid); or (b) received or rejected by the addressee, if sent
by certified mail, return receipt requested. Such notice or other communication
shall be sent to the Company, Attention: Chief Financial Officer, 15575 North
83rd Way, Suite 3, Scottsdale, AZ 85260 or to the Holder at the address set
forth in the Company's records (or to such other address as either party may
designate by notice to the other party).
12. Termination. This Agreement shall terminate on the date all
Registrable Securities cease to exist; but without prejudice to (1) the parties'
rights and obligations arising from breaches of this Agreement occurring prior
to such termination (ii) other indemnification obligations under this Agreement.
6
13. Assignment. No assignment, transfer or delegation, whether by
operation of law or otherwise, of any rights or obligations under this Agreement
by the Company or any Holder, respectively, shall be made without the prior
written consent of the majority in interest of the Holders or the Company,
respectively; provided that the rights of a Holder may be transferred to a
subsequent holder of the Holder's Registrable Securities (provided such
transferee shall provide to the Company, a writing executed by such transferee
agreeing to be bound as a Holder by the terms of this Agreement); and provided
further that the Company may transfer its rights and obligations under this
Agreement to a purchaser of all or a substantial portion of its business if the
obligations of the Company under this Agreement are assumed in connection with
such transfer, either by merger or other operation of law (which may include
without limitation a transaction whereby the Registrable Securities are
converted into securities of the successor in interest) or by specific
assumption executed by the transferee.
14. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Arizona applicable to agreements
made in and wholly to be performed in that jurisdiction, except for matters
arising under the Act or the Securities Exchange Act of 1934, which matters
shall be construed and interpreted in accordance with such laws.
IN WITNESS WHEREOF, the undersigned has executed this Declaration as of
the date first above written.
ALANCO TECHNOLOGIES, INC.,
an Arizona corporation
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
7
Exhibit 4.6
ALANCO TECHNOLOGIES, INC.
(the "Company")
SUBSCRIPTION AGREEMENT
GENERAL INSTRUCTIONS
1. Read carefully and completely.
2. Complete all questions. Write N/A in the blank for each question "not
applicable."
3. Complete and execute the applicable Subscription Agreement
Signature Page.
4. Verify that all blanks, dates and signatures are properly
completed.
5. Return:
a) The entire Subscription Agreement; and
b) A check, bank draft or wire transfer for the subscription
amount made payable to Alanco Technologies, Inc.
6. Deliver or mail to (or if you have any questions, please direct them to):
Alanco Technologies, Inc.
15575 North 83rd Way, Suite 3
Scottsdale, AZ 85260
Attn: John A. Carlson, Chief Financial Officer
Phone: (480) 607-1010 x 869
Facsimile: (480) 607-1515
E-Mail: john@alanco.com
The undersigned hereby subscribes for and agrees to purchase
units ("Units"), each consisting of one (1) share of the
---------------------
Company's Series A Convertible Preferred Stock (the "Shares") and one (1)
warrant to purchase one share of the Company*s Class A Common Stock at $0.50 per
share ("Warrants"), as described in the Company*s Confidential Private Placement
Memorandum dated June 16, 2003 ("Memorandum"). The undersigned agrees to pay a
purchase price of comprised of the following for each Unit purchased:
$0.50 plus two (20) shares of the Company's Class A Common Stock
currently registered in the name of the undersigned,
and herewith tenders to the Company the entire cash amount of such purchase
price by check, bank draft or wire transfer made payable to the order of "Alanco
Technologies, Inc," together with certificates for the Class A Common Shares to
be tendered, duly endorsed in blank with signature medallion guaranteed, or
appropriate brokerage account instructions transferring the shares to the
Company.
The undersigned acknowledges that the Units have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or the
securities laws of any state, in reliance upon exemptions from registration
contained in the Securities Act and any such state laws and that the Company*s
reliance upon such exemption is based in part upon the undersigned*s
representations, warranties and agreements contained in this Subscription
Agreement.
A. Suitability Standards
All questions must be answered. If the appropriate answer is "None"
or "Not Applicable," please so state. Please print or type your answers to all
questions and attach additional sheets if necessary to complete your answer to
any item.
1
1. Name(s):
----------------------------------------------------------
2. Social Security Number or Taxpayer Identification Number:
Subscriber:
-------------------------------------------------------------------
Co-Subscriber:
----------------------------------------------------------------
3. Home Address:
-------------------------------------------------------
4. Business Address:
---------------------------------------------------
5. Home Telephone:
-----------------------------------------------------
6. Business Telephone:
-------------------------------------------------
7. Occupation/Business:
------------------------------------------------
8. If the subscriber is an entity, place and date of formation:
-----------------------------------------------
9. If the subscriber is an individual, please CHECK whichever of
the following statements (a)-(c) below, is applicable to you:
-------- (a) The undersigned has had an individual income in
excess of $200,000 in each of the two most recent
calendar years and reasonably expects to have an
individual income in excess of $200,000 in the
current calendar year;
-------- (b) The undersigned has had joint income with his or
her spouse in excess of $300,000 in each of the two
most recent calendar years and reasonably expects to
have joint income with his or her spouse in excess of
$300,000 in the current calendar year; or
-------- (c) The undersigned has an individual net worth, or joint net worth
with his or her spouse, in excess of $1,000,000.
For purposes of the above, the following definitions apply:
"Individual income" means "adjusted gross income" as reported for
federal income tax purposes, less any income attributable to a spouse or to
property owned by a spouse, increased by the following amounts (but not
including any amounts attributable to a spouse or to property owned by a
spouse): (i) the amount of any interest income received which is tax-exempt
under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"),
(ii) the amount of any losses claimed as a limited partner in a limited
partnership (as reported on Schedule E of Form 1040) and (iii) any deduction
claimed for depletion under Section 611 et seq. of the Code.
"Joint income" means "adjusted gross income" of you and your spouse
as reported for federal income tax purposes, increased by the following amounts:
(i) the amount of any interest income received which is tax-exempt under Section
103 of the Code, (ii) the amount of losses claimed as a limited partner in a
limited partnership (as reported on Schedule F of Form 1040) and (iii) any
deduction claimed for depletion under Section 611 et seq. of the Code.
"Net Worth" means the excess of the total assets of an individual
over the total liabilities of such individual.
2
10. If the subscriber is a corporation, partnership, limited liability company,
employee benefit plan, individual retirement account or trust and is an
"accredited investor", please CHECK whichever of the following statements
(a)-(l) is applicable:
-------- (a) The undersigned is a "bank" as defined in Section
3(a)(2) of the Securities Act or a "savings and loan
association" or other institution as defined in
Section 3(a)(5)(A) of the Securities Act, whether
acting in an individual or fiduciary capacity;
-------- (b) The undersigned is a "broker* or "dealer"
registered pursuant to Section 15 of the
Securities Exchange Act of 1934;
-------- (c) The undersigned is an "insurance company as defined in
Section 2(13) of the Securities Act;
-------- (d) The undersigned is an "investment company" registered
under the Investment Company Act of 1940 (the
"Investment Company Act");
-------- (e) The undersigned is a "business development company"
as defined in Section 2(a)(48) of the investment
Company Act;
-------- (f) The undersigned is a "small business investment
company" licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958;
-------- (g) The undersigned is a "plan" established and
maintained by a state, its political subdivisions, or
any agency or instrumentality of a state or its
political subdivisions, for the benefit of its
employees that has total assets in excess of
$5,000,000;
-------- (h) The undersigned is an "employee benefit plan"
within the meaning of the Employee Retirement Income
Security Act of 1974, (i) whose investment decisions
are made by a plan fiduciary, as defined in Section
3(21) of such act, and such plan fiduciary is either
a bank, savings and loan association, insurance
company or registered investment adviser, or (ii)
that has total assets in excess of $5,000,000 or,
(iii) if a self-directed plan, whose investment
decisions are made solely by persons that are
accredited investors;
-------- (i) The undersigned is a "private business development
company" as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940;
-------- (j) The undersigned is an organization described in
Section 501(c)(3) of the Code, a corporation, a
Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of
acquiring the Shares, with total assets in excess of
$5,000,000;
-------- (k) The undersigned is a trust with total assets in
excess of $5,000,000, not formed for the specific
purpose of acquiring the Shares, whose purchase is
directed by a sophisticated person as described in
Rule 506(b)(2)(ii) under the Securities Act;
-------- (l) The undersigned is an entity formed for the
purpose of acquiring the Shares, each of whose
stockholders, partners or beneficiaries meets at
least one of the conditions set forth under 9(a)-(c)
above.
-------- (m) An entity in which all of the equity owners are
accredited investors.
3
IF YOU CHECK STATEMENT 10(l) ABOVE AND DO NOT CHECK ANY OTHER STATEMENT, A
COMPLETED SUBSCRIPTION AGREEMENT FOR EACH STOCKHOLDER OF THE SUBSCRIBING
CORPORATION, EACH PARTNER OF THE SUBSCRIBING PARTNERSHIP OR EACH BENEFICIARY OF
THE SUBSCRIBING EMPLOYEE BENEFIT PLAN MUST ACCOMPANY THIS SUITABILITY LETTER.
B. Representations and Warranties
The undersigned represents, warrants and agrees as follows:
1. The undersigned has received and reviewed the Memorandum and the
exhibits thereto and understands the information contained therein, including
the risks of, and other considerations relating to the purchase of the Units,
Shares and Warrants, specifically including the risks set forth in the
Memorandum under "RISK FACTORS."
2. The undersigned acknowledges that this Subscription Agreement may be
accepted or rejected in whole or in part in the sole and absolute discretion of
the Company.
3. The undersigned agrees that this Subscription Agreement is and shall
be irrevocable (subject to state law), except that the undersigned shall have no
obligations hereunder in the event that the Subscription Agreement is for any
reason rejected by the Company.
4. The undersigned has carefully read this Subscription Agreement. The
undersigned has had the opportunity to discuss the representations, warranties
and agreements which the undersigned makes by signing this Subscription
Agreement, the applicable limitations upon the undersigned*s resale of the
Units, Shares and Warrants and any of other legal matters concerning the Company
or this investment with its counsel as deemed necessary. The undersigned has had
the opportunity to discuss the tax consequences of holding the Shares and
Warrants with its tax advisor as deemed necessary.
5. The undersigned understands that no federal or state agency has made
any finding or determination regarding the fairness of the offering of the Units
for investment, or any recommendation or endorsement of the offering of the
Units, and the undersigned must forego the security, if any, such a review would
provide.
6. The undersigned is purchasing the Units for the undersigned*s own
account, with the intention of holding the Shares and Warrants for investment,
with no present intention of dividing or allowing others to participate in this
investment or of reselling or otherwise participating directly or indirectly, in
a distribution of the Shares or Warrants; and shall not make any sale, transfer
or other disposition of the Shares or Warrants without registration under any
applicable securities laws of any state or unless an exemption from registration
is available under those laws.
7. The undersigned represents that the undersigned*s overall commitment
to investments which are comparable in risk to the Units is not disproportionate
to the undersigned*s net worth, and the undersigned*s investment in the Units
will not cause such overall commitment to become excessive.
8. The undersigned represents that the undersigned, if an individual,
has adequate means of providing for his current needs and personal and family
contingencies, has no need for liquidity in this investment in the Units, and at
the present time could afford a complete loss of such investment.
9. The undersigned has accurately set forth the information in Section
A above.
4
10. The address shown in Section A above is the undersigned*s principal
residence if he is an individual or its principal business address if a
corporation or other entity.
11. The undersigned has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of an
investment in the Units.
12. The undersigned has been given the opportunity to ask questions of,
and receive answers from, the Company concerning the terms and conditions of the
offering and to obtain such information as the undersigned desired in order to
evaluate the investment. The undersigned acknowledges that all information
requested has been provided.
13. The undersigned has made an independent evaluation of the merits of
the investment and acknowledges the high risk of the investment.
14. The undersigned understands and agrees that the Company will
prohibit a transfer of the Shares (until registered by the Company) and Warrants
unless it is established to the satisfaction of the Company that such transfer
is in compliance with applicable state and federal securities laws. The
undersigned acknowledges that the Company will place a legend on the
certificates representing the Shares and Warrants stating that the transfer of
these securities is restricted. The undersigned understands and agrees that the
Company may refuse to permit the transfer of the Shares or Warrants, and that
the undersigned may be required to hold the Shares indefinitely.
15. The undersigned understands that the provisions of Rule 144
promulgated under the Securities Act are not available for at least one year to
permit resale of the Shares or Warrants. The undersigned further understands
that in connection with sales of Shares or Warrants for which Rule 144 is not
available, registration or compliance with some other registration exemption
will be required.
16. The undersigned represents, if any individual, that the
undersigned is at least 21 years of age.
17. Notwithstanding the place where this Subscription Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed in accordance with and governed
by the laws of the State of Arizona, without giving effect to its conflict of
law principles. The parties hereby agree that any dispute which may arise
between them arising out of or in connection with this Subscription Agreement
(other than disputes relating solely to securities law matters) shall be
adjudicated before a court located in Maricopa County, Arizona and the hereby
submit to the exclusive jurisdiction of the courts of the State of Arizona in
Maricopa County, Arizona and of the federal courts in the District of Arizona
with respect to any action or legal proceeding commenced by any party, and
irrevocably waive any objection they now or hereafter may have respecting the
venue of any such action or proceeding brought in such a court or respecting the
fact that such court is an inconvenient forum, relating to or arising out of
this Subscription Agreement or any acts or omissions relating to the sale of the
Units hereunder, and consent to the service of process in any such action or
legal proceeding by means of registered or certified mail, return receipt
requested, in care of the address set forth below or such other address as the
undersigned shall furnish in writing to the Company.
5
18. The undersigned is not subscribing for the Units as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, or presented at any seminar or meeting, or any solicitation
of a subscription by a person not previously known to the undersigned in
connection with investments in Shares generally.
19. This Subscription Agreement is not transferable or assignable by
the undersigned.
C. Indemnification
The undersigned understands the meaning of the representations and
warranties contained herein and acknowledges that the Company is relying on such
representations and warranties in determining whether the offering is exempt
from registration under the Securities Act and applicable state law and in
determining whether to accept the subscription tendered hereby. The undersigned
agrees to indemnify and hold harmless the Company and its officers, directors,
agents and shareholders and any other person who may be deemed to control the
Company from any loss, liability, claim, damage or expense, arising out of the
inaccuracy of any of the above representations, warranties or statements or the
breach of the agreements contained herein.
D. Power of Attorney. The undersigned, by executing this Subscription Agreement
shall be bound by and in accordance with all of the terms and conditions herein.
The undersigned hereby irrevocably constitutes and appoints Placement Agent as
the undersigned*s true and lawful attorney-in-fact with full power of authority
for the undersigned and in the undersigned*s name to execute any documents
related to the purchase of the Units, on the undersigned*s behalf. The foregoing
grant of authority is a special power of attorney, is irrevocable and shall
survive the death or the incapacity of the undersigned.
E. Miscellaneous
1. The undersigned agrees that the undersigned may not transfer, assign, cancel,
terminate or revoke this Subscription Agreement or any agreement of the
undersigned made hereunder (except as otherwise specifically provided herein)
and that this Subscription Agreement shall survive the death or disability of
the undersigned and shall be binding upon the undersigned*s heirs, executors,
administrators, successors and assigns.
2. Except as otherwise expressly provided herein, this Subscription Agreement
contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and may be amended only by a writing
executed by the parties hereto. This Subscription Agreement supersedes all prior
arrangements or understandings with respect thereto, written or oral. The terms
and conditions of this Subscription Agreement shall inure to the benefit of and
be binding upon the parties and their respective successors.
3. This Subscription Agreement shall be enforced governed and construed in all
respects in accordance with the laws of the State of Arizona.
4. In the event that the Company requests additional representations by the
undersigned, or documentation of the representations herein set forth, in order
better to evaluate the undersigned*s suitability for investment in the Company,
the undersigned will promptly furnish such additional representations or
documentation or, in the alternative, if the undersigned considers such
additional request to be unreasonable, the undersigned will request that its
subscription for the Units be withdrawn.
5. The representations and warranties of the undersigned set forth herein shall
survive the sale of the Units pursuant to this Subscription Agreement.
6
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
(FOR SUBSCRIBER WHO IS A NATURAL PERSON)
x $0.50 Per Unit = Total Cash Portion $
--------------------- -----------------
(Units Subscribed For) (Purchase Price)
Number of Class A Common Shares Tendered:
--------------------------------------
-------------------------------------------------------------------------------
Exact Name in Which Title is to be Held
Manner in which title is to be held (Please Check One):
1. ------ Individual
2. ------ Joint Tenants With Right of Survivorship
3. ------ Community Property (Community Property States Only)
4. ------ Community Property With Right of Survivorship (Community Property
States Where Applicable)
5. ------ Tenants in Common
6. ------ As a Custodian for Under the Uniform
--------------------------
Gift to Minors Act of the State of
-------------------------
7. ------ Married, but as sole and Separate Property
IN WITNESS WHEREOF, the undersigned has executed this Subscription
Agreement on this day of ,2003
--------- -------------------------
understands that this subscription is not binding upon the Company until
accepted below and acknowledges that the undersigned has received and reviewed
and is bound by the terms and conditions of the summary offering description
distributed herewith and that this subscription may be accepted in whole or part
by the Company.
---------------------------------------
Signature
---------------------------------------
Signature
ACCEPTED this day of , 2003, for a total
------ -------------------
of Units on behalf of the Company.
--------------
ALANCO TECHNOLOGIES, INC.
By:
-----------------------------------------------
Title:
---------------------------------------------
7
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
(FOR SUBSCRIBER WHO IS AN ENTITY)
x $0.50 Per Unit = Total Cash Portion $
-------------------------- ---------------
(Units Subscribed For) (Purchase Price)
Number of Class A Common Shares Tendered:
-------------------------------------
Manner in which title is to be held (Please check one):
1. Corporation/Partnership/Limited Liability Company
------
2. IRA
------
3. Trust/Estate/Pension or Profit Sharing Plan
------
Date Opened:
------------------------------
4. Keogh
------
5. Other:
------ -----------------------------------------------
IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement on
this day of ,2003 understands that this subscription
------ ------------------
is not binding upon the Company until accepted below and acknowledges that the
undersigned has received and reviewed and is bound by the terms and conditions
of the summary offering description distributed herewith and that this
subscription may be accepted in whole or part by the Company.
-------------------------------------------------------------------------------
Name of Entity (Please Print)
Attest: By:
------------------------------- -------------------------------------
Title: Title:
------------------------------- ----------------------------------
Attest: By:
------------------------------- -------------------------------------
Title: Title:
------------------------------- ----------------------------------
ACCEPTED this day of , 2003 for a total of
------- --------------
Units on behalf of the Company
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ALANCO TECHNOLOGIES, INC.
By:
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Title:
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8
Law Offices
STEVEN P. OMAN, P.C.
Gold Dust Corporate Center
10446 N. 74th Street, Suite 130
Scottsdale, Arizona 85258
Telephone: (480) 348-1470
Facsimile: (480) 348-1471
e-mail: soman@omanlaw.net
November 19, 2003
Alanco Technologies, Inc.
15575 N. 83rd Way, Suite 3
Scottsdale, Arizona 85260
Re: Registration Statement on Form S-3
Gentlemen:
We have acted as counsel to Alanco Technologies, Inc. (the "Company") in
connection with the registration by the Company of 10,037,704 shares of its
Class A Common Stock (the "Shares") that may be offered and sold by certain
stockholders of the Company from time to time. We have assisted the Company in
the preparation of a Registration Statement on Form S-3 (the "Registration
Statement") filed on the date hereof by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Act of 1933,
as amended (the "Securities Act"). This opinion is provided pursuant to the
requirements of Item 16 of Form S-3 and Item 601(b)(5) of Regulation S-B.
In connection with the foregoing, we have examined, among other things, the
Registration Statement and certified copies of the Company's Second Restated
Articles of Incorporation, the Company's Bylaws, as amended, Resolutions of the
Company's Board of Directors, and such other documents, including copies of the
description of the rights, privileges and liabilities of the Series A
Convertible Preferred Stock, warrant agreements, subscription agreements, and
the Company's Private Offering Memorandum pursuant to which shares of the
Company's Series A Convertible Preferred Stock and Class A Common Stock were or
may be issued.
In connection with our review, we have assumed: (i) the genuineness of all
signatures; (ii) the authenticity of all documents submitted to us as originals
and the conformity to original documents of all documents submitted to us as
certified or photostatic copies; and (iii) the proper issuance and accuracy of
certificates of officers and agents of the Company and public officials.
Based on the foregoing, we are of the opinion that (i) the Shares issued were
validly issued, fully paid and nonassessable at the time of their issuance, and
(ii) when Shares are issued out of the Company's duly authorized Class A Common
Stock upon conversion of Series A Convertible Preferred Stock, or upon exercise
of, and pursuant to the provisions of, the existing warrant agreements and the
Company has received the consideration therefor in accordance with the terms of
the warrant agreements, the Shares so issued will be validly issued, fully paid
and non-assessable.
This opinion is limited to the corporate laws of the State of Arizona, and we
are expressing no opinion as to the effect of the laws of any other
jurisdiction. This opinion is rendered as of the date hereof to be effective as
of the effective date of the Registration Statement, and we undertake no
obligation to advise you of any changes in applicable law or other matters that
may come to our attention after said effective date.
We hereby consent to be named in the Registration Statement under the heading
"Legal Matters" as attorneys who passed upon the validity of the Shares and to
the filing of a copy of this opinion as Exhibit 5 to the Registration Statement.
Very truly yours,
LAW OFFICE OF STEVEN P. OMAN, P.C.
By: /s/ Steven P. Oman
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Steven P. Oman
Consent of Independent Certified Public Accountants
Alanco Technologies, Inc.
Scottsdale, Arizona
As independent public accountants, we hereby consent to the incorporation by
reference in the S-3 registration statement of our report dated September 19,
2003, included in the Company's Form 10-KSB for the year ended June 30, 2003,
and to all references to our firm included in this registration statement.
/S/ SEMPLE & COOPER, LLP
Phoenix, Arizona
October 6, 2003