UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period form ______________ to ______________
Commission file number: 0-18271
MAGELLAN TECHNOLOGY, INC.
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(Exact name of registrant as specified in its charter)
Utah 87-0467614
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization Identification No.)
1216 South 1580 West, Suite B
Orem, Utah 84058
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 765-0040
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes_X_
No___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Outstanding at
Class March 31, 1997
Common Stock, $.0002 par value 13,620,838 shares
<PAGE>
FORM 10-QSB
Financial Statements and Schedules
Magellan Technology, Inc.
For the Quarter Ended March 31, 1997
The following financial statements and schedules of the registrant and
its consolidated subsidiaries are submitted herewith:
Part I - Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheet
for March 31, 1997 and year-end
for December 31, 1996 2
Condensed consolidated statement of
operations for the three months ended
March 31, 1997 and 1996 4
Condensed statement of cash flows for the
three months ended March 31, 1997
and 1996 5
Notes to condensed consolidated
financial statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Part II - Other Information
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to a Vote of
Security Holders 9
Item 5. Other information 9
Item 6(a) Exhibits 9
Item 6(b) Reports on Form 8-K 9
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
ASSETS March 31, 1997 Dec. 31, 1996
(Unaudited) (Audited)
--------------- ---------------
Current Assets:
Cash $ 20,963 $ 88,687
Other Current Assets 82,916 6,125
--------------- ---------------
Current Assets 103,879 94,812
--------------- ---------------
Property and Equipment:
Property and Equipment 82,094 72,384
Accumulated Depreciation (10,133) (6,777)
--------------- ---------------
Net Property and
Equipment 71,961 65,607
--------------- ---------------
Investment in Joint Venture 1,424,246 1,468,933
--------------- ---------------
Total Assets $ 1,600,086 $ 1,629,352
=============== ===============
2
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
LIABILITIES AND STOCKHOLDERS' EQUITY March 31, 1997 Dec. 31, 1996
(Unaudited) (Audited)
--------------- ---------------
Current Liabilities:
Current Portion of
long-term debt $ 38,415 $ 38,516
Line of Credit 375,000 -
Accounts Payable 62,108 43,947
Accrued Liabilities 87,163 75,253
--------------- ---------------
Current Liabilities 562,686 157,716
Long-Term Debt 536,247 542,390
--------------- ---------------
Total Liabilities 1,098,933 700,106
--------------- ---------------
Stockholders' Equity:
Common Stock, par value $.0002
per share; 25,000,000 shares
authorized, 13,620,838 shares
issued and outstanding 2,724 2,724
Additional Paid-in Capital 6,309,353 6,309,353
Retained Deficit (5,810,924) (5,382,831)
--------------- ---------------
Total Stockholders'
equity 501,153 929,246
--------------- ---------------
Total Liabilities and
Stockholder's Equity $ 1,600,086 $ 1,629,352
=============== ===============
3
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
----------------------------------
1997 1996
--------------- ---------------
Revenue from Sales: $ - $ 512,605
Cost of Sales: - 330,785
--------------- ---------------
Gross Margin: - 181,820
Operating Expenses:
Selling, General and
Administrative 226,708 103,014
Depreciation & Amortization 3,356 62,721
R & D Expenses 137,024 -
--------------- ---------------
Total Operating Expenses 367,088 165,735
--------------- ---------------
Income (Loss) from Operations: (367,088) 16,085
Other Income (Expense):
Equity in Loss of Joint Venture (44,687) -
Interest Expense (17,070) (16,279)
Other, net 752 8,435
--------------- ---------------
Net Income (Loss) $ (428,093) $ 8,241
=============== ===============
Net Income (Loss)
per share $ (0.03) $ 0.00
=============== ===============
Weighted average shares outstanding 13,620,838 7,093,076
=============== ===============
4
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
----------------------------------
1997 1996
--------------- ---------------
Cash Flows form Operating Activities:
Net Income (Loss) $ (428,093) $ 8,241
Adjustments to Reconcile Net Income
(Loss) to Net Cash used in Operating
Activities:
Depreciation 3,356 40,303
Equity in Loss of Joint Venture 44,687 -
(Increase) Decrease in:
Accounts Receivable - 2,874
Other Current Assest (76,791) (37,987)
Cash Deposits - (41,648)
Capitalized Software, Net - (21,422)
Increase (Decrease) in:
Accounts Payable 18,161 27,343
Accrued Liabilities 11,910 (22,328)
Deferred Revenue - 973
--------------- ---------------
Net Cash used in Operating
Activities (426,770) (43,651)
Cash Flows from Investing Activities:
Purchase of Machinery and Equipment (9,710) (31,584)
--------------- ---------------
Net Cash used in Investing
Activities (9,710) (31,584)
Cash Flows from Financing Activities:
Proceeds from Notes Payable and
Long-Term Debt 375,000 -
Reduction of Long-Term Debt (6,244) (47,458)
--------------- ---------------
Net Cash Provided by (Used in)
Financing 368,756 (47,458)
--------------- ---------------
Net Decrease in cash (67,724) (122,693)
Cash, Beginning of Period 88,687 149,778
--------------- ---------------
Cash, End of Period $ 20,963 $ 27,085
=============== ===============
5
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
----------------------------------
1997 1996
--------------- ---------------
Cash paid during the period for:
Interest $ 13,806 $ 7,779
=============== ===============
Income Taxes $ - $ -
=============== ===============
Nonmonetary Financing and Investing
Activities
During the first quarter of 1996 the Company acquired $30,060 of
computer equipment, furniture and fixtures with additional debt.
6
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(1) The unaudited condensed consolidated financial statements include the
accounts of Magellan Technology, Inc. (The Company) and its wholly
owned subsidiaries, SkyHook Technologies, Inc. (SkyHook), Satellite
Image Systems, Inc. (SIS, Inc.) and SIS Jamaica, LTD (SIS Jamaica).
The Company acquired SkyHook effective October 15, 1996. The
acquisition of SkyHook included the issuance of 4,874,936 shares of
Magellan common stock and cash for all of the outstanding shares of
SkyHook common stock. The transaction was accounted for as a purchase
transaction. On August 1, 1996 the Company transferred its interest
in the assets, liabilities, and operations conducted by SIS, Inc. to
Satellite Image Systems, LLC (SIS,LLC), a joint venture. The Company
received a 49% interest in SIS, LLC whose assets include those
transferred by the Company as well as $3,000,000 cash transferred by
the other party to the transaction. The financial statements reflect
the investment in SIS, LLC under the equity method of accounting.
(2) The unaudited condensed consolidated financial statements
include all adjustments (consisting of normal recurring items) which
are, in the opinion of management, necessary to present fairly the
financial position as of March 31, 1997 and the results of operations
for the three months ended March 31, 1997 and 1996 and cash flows for
the three months ended March 31, 1997 and 1996. The results of
operations for the three months ended March 31, 1997 are not
necessarily indicative of the results to be expected for the entire
year.
(3) (Loss) per share is based on the weighted average number of shares
outstanding at March 31, 1997 and 1996, respectively. Shares
outstanding for 1996 and 1997 reflect the 2:1 reverse stock split that
occurred on March 8, 1996.
(4) During the three months ended March 31, 1997, the Company borrowed
$375,000 on its line-of-credit agreement. The funds were used to
finance operations. The line-of-credit matures on December 31, 1997
and is secured by inventory and the personal guarantee to the
Company's Chief Executive Officer.
7
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Three month period ended March 31, 1997 compared to the three month period
ended March 31, 1996
Due to the formation of SIS, LLC effective August 1, 1996 and the
acquisition of SkyHook Technologies, Inc. effective October 15, 1996 the
focus of the company for the three month period ended March 31, 1997 has
changed significantly when compared to the activities of the three month
period ended March 31, 1996. Accordingly, no comparison between current
and prior year's operating results is meaningful.
Operations for the three months ended March 31, 1997
The Company continued to aggressively pursue development and marketing of
the SkyHook Cargo Management System (SkyHook CMS). Enhanced engineering
activities have resulted in the completion of the production design. Three
production models have been initiated. Once completed these production
models will be demonstrated to potential customers, and eventually sold.
Pre-production models of the SkyHook CMS were tested and demonstrated
several times with potential customers. The Company hired four additional
full time marketing and sales professionals to further the introduction of
the SkyHook CMS into the marketplace. These sales professionals have
participated in several trade shows and other marketing activities. The
product has also received favorable reviews in industry publications.
Sales and marketing expenses averaged approximately $47,000 per month
during the three months ended March 31, 1997, compared with approximately
$24,000 per month for the three months ended December 31, 1996. Of
particular note, the product was successfully demonstrated during a
prolonged war games exercise with a branch of the United States Military.
Notwithstanding these favorable results, there is no assurance that
marketing of the SkyHook CMS will be successful.
Results of SIS, LLC
Since the formation of SIS, LLC, the Company has accounted for the earnings
and transactions of SIS, LLC under the equity method of accounting. For
the three months ended March 31, 1997 the Company's
books reflect a loss of $44,687, its 49% share of the loss of SIS, LLC for
the Quarter. This loss is the result of new management's intent to pursue
rapid growth in the healthcare industry while aggressively expensing costs
associated with that growth. Revenues for SIS, LLC were $722,172 for the
three months ended March 31, 1997.
Liquidity and Capital Resources
During the three months ended March 31, 1997, the Company borrowed $375,000
on its line-of-credit agreement. The funds were used to finance
operations. The line-of-credit matures on December 31, 1997 and is secured
by inventory and the personal guarantee to the Company's Chief Executive
Officer.
SkyHook Technologies, Inc. is still in the development stage and is not
expected to generate any revenue through sales of products or services
until the fourth quarter of 1997. As a result, the Company must rely
solely on its line-of-credit and its ability to raise additional debt and
equity financing in order to finance the continued product development and
marketing and sales activities for the SkyHook CMS. On-going operations of
the Company are currently consuming approximately $100,000 of cash each
month and the Company expects to continue to incur substantial additional
expenses in connection with the finalization of the development of the
SkyHook CMS and its introduction into the market place. There can be no
assurance that the Company will be able to obtain needed financing on terms
favorable to the Company. If the company is unable to raise additional
capital, the ability of the Company to successfully market and distribute
the SkyHook CMS and its financial condition would be materially adversely
affected.
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal proceedings: None.
Item 2. Changes in Securities: None.
Item 3. Defaults upon Senior Securities: None.
Item 4. Submission of Matters to a Vote of Security Holders: None.
Item 5. Other information: None.
Item 6. Exhibits and Reports on Form 8-K:
Exhibit 27 - Financial Data Schedule
9
<PAGE>
SIGNATURES
In accordance with he requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MAGELLAN TECHNOLOGY, INC.
----------------------------------------
(Registrant)
/s/ Douglas M. Angus May 12, 1997
- -------------------------- -----------------
Douglas M. Angus Date
Vice President - Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MAGELLAN
TECHNOLOGY, INC. MARCH 31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
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<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
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<CURRENT-ASSETS> 103,879
<PP&E> 82,094
<DEPRECIATION> 10,133
<TOTAL-ASSETS> 1,600,086
<CURRENT-LIABILITIES> 562,686
<BONDS> 0
0
0
<COMMON> 2,724
<OTHER-SE> 498,429
<TOTAL-LIABILITY-AND-EQUITY> 1,600,086
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 367,088
<OTHER-EXPENSES> 43,935
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,070
<INCOME-PRETAX> (428,093)
<INCOME-TAX> 0
<INCOME-CONTINUING> (367,088)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (367,088)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
