Alanco Awarded Colorado Prison Project; TSI PRISM(TM) System to Facilitate Operating Cost Reductions Through Innovative Inmate Reclassification Program.

SCOTTSDALE, Ariz. -- Alanco Technologies Inc. (Nasdaq: ALAN), developer of the TSI PRISM RFID inmate tracking system for the corrections industry, announced today that it has been awarded a contract by the Colorado Department of Corrections for final design of a TSI PRISM system to be deployed at the Centennial Correctional Facility in Canon City, Colo. Project installation is expected to commence in fall 2005 at a projected cost of approximately $750,000.

Responding to a chronic shortage of prison space, Colorado will construct a new 948-bed maximum security level prison (Colorado State Prison II) to be built adjacent to the Centennial facility. Centennial will be utilized as a transition facility for maximum security inmates under consideration for custody level reclassification with the objective of significant operating cost reductions through relocation of inmates to lower security level facilities. The TSI PRISM system will be used to closely monitor inmates for compliance with prison rules and program participation. Those inmates who demonstrate progress toward rehabilitation can earn placement in prisons with lower security classifications.

The Colorado State Prison II project has been delayed nearly two years by litigation challenging the use of bonds to finance construction of the new prison. Lower courts have ruled in favor of the state proceeding with construction, and resolution of final issues on appeal is anticipated by early fall.

Alanco's chief executive officer and chairman, Robert Kauffman, commented, "The operating cost difference to house prisoners in maximum versus medium security facilities is in the range of $10,000 to $12,000 annually per inmate. Inmates that can be safely relocated into less expensive facilities provide significant cost reduction opportunities for the prison system. The Centennial project is an excellent example of how a TSI PRISM system can provide a significant ROI contribution while simultaneously enhancing facility security and officer safety."

Alanco Technologies Inc., headquartered in Scottsdale, Ariz., is the developer of the TSI PRISM RFID continuous tracking system for the corrections industry, which tracks the location and movement of inmates and officers, resulting in significant prison operating cost reductions and enhanced officer safety and facility security. Utilizing RFID (Radio Frequency Identification) tracking technology with proprietary software and patented hardware components, TSI PRISM provides real-time inmate and officer identification, location and tracking capabilities both indoors and out. TSI PRISM is currently utilized in prisons in Michigan, California, Illinois and Ohio. The company also participates in the data storage industry through two subsidiary companies: 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 (NAS) systems.

Except for historical information, the statements contained in this press release are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are subject to, and are qualified by, risks and uncertainties that could cause actual results to differ materially from those expressed or implied by those statements. These risks and uncertainties include, but are not limited to, reduced demand for information technology equipment; competitive pricing and difficulty managing product costs; development of new technologies which make the company's products obsolete; rapid industry changes; failure of an acquired business to further the company's strategies; the ability to maintain satisfactory relationships with lenders and to remain in compliance with financial loan covenants and other requirements under current banking agreements; and the ability to secure and maintain key contracts and relationships.