_______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISION
Washington D.C. 20549
___________________________________
FORM 8-K/A
CURRENT REPORT
___________________________________
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): June 15, 1998
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AMENDMENT NO. 1
Magellan Technology, Inc.
___________________________________
(Exact name of registrant as specified in its charter)
UTAH 0-18271 87-0284979
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(State or other jurisdiction (Commission File No.) (IRS Employer
incorporation) Identification No.)
13526 South 110 West
Draper, Utah 84020
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(Address of principal executive officers, including zip code)
(801) 495-2211
___________________________________
(Registrant's telephone number, including area code)
_______________________________________________________________________________
_______________________________________________________________________________
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TABLE OF CONTENTS
This amendment to the current report in form 8-K dated June 26, 1998 is
being filed by Magellan Technology, Inc. to provide the audited financial
statements.
Item 7. AUDITED FINANCIAL STATEMENTS
(a) Financial Statements of business acquired: Page
Report of Independent Public Accountants 3
Balance Sheets as of December 31, 1996 and 1997 4
Statement of Operations and Net Assets for the years
Ended December 31, 1996 and 1997 5
Statements of Cash Flows for the years ended
December 31, 1996 and 1997 6
Notes to the Financial Statements 7
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INDEPENDENT AUDITORS' REPORT
To the Trustee of Digital Health We have audited the accompanying balance
sheet of Digital Health (a Trust) as of December 31, 1997 and 1996, and the
related statements of income and net assets, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
trustee. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial
position of Digital Health as of December 31, 1997 and 1996, and the results of
its operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/S/ Tanner @ Co.
___________________________________
Tanner & Co.
Salt Lake City, Utah
May 19, 1998, except for note 9
which is dated June 15, 1998
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DIGITAL HEALTH
Balance Sheet
December 31,
- ------------------------------------------------------------------------------
1997 1996
------------------------------
Assets
Current assets:
Cash $ 20,186 $ 37
Trade receivables, current portion 59,248 40,444
Inventories 10,146 10,629
------------------------------
Total current assets 89,580 51,110
Equipment, net of accumulated amortization
of $8,734 34,938 -
Trade receivables 12,889 4,898
------------------------------
$ 137,407 $ 56,008
------------------------------
- -------------------------------------------------------------------------------
Liabilities and Net Deficit
Cash overdraft $ 15,901 $ 1,079
Accounts payable 60,230 64,359
Accrued expenses 79,047 61,285
Notes payable - 39,670
Current potion of long-term debt 26,089 -
------------------------------
Total current liabilities 181,267 166,393
------------------------------
Long-term debt 39,997 -
------------------------------
Commitments and contingencies - -
Net deficit (83,857) (110,385)
------------------------------
$ 137,407 $ 56,008
------------------------------
- -------------------------------------------------------------------------------
See accompanying notes to financial statements.
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DIGITAL HEALTH
Statement of Operations and Net Assets (Deficit)
Years Ended December 31,
- --------------------------------------------------------------------------------
1997 1996
-----------------------------
Net sales $ 1,104,220$ 509,115
-----------------------------
Costs and expenses:
Cost of sales 348,295 120,070
General and administrative 575,508 391,692
Research and development 40,179 66,287
Interest 13,075 8,346
----------------------------
977,057 586,395
------------------------------
Net income (loss) 127,163 (77,280)
Net assets (deficit):
Beginning of year (110,385) 25,525
Distributions (100,635) (58,630)
-----------------------------
End of year $ (83,857) $ (110,385)
------------------------------
- -----------------------------------------------------------------------------
See accompanying notes to financial statements.
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DIGITAL HEALTH
Statement of Cash Flows
Years Ended December 31,
- -------------------------------------------------------------------------------
1997 1996
-----------------------------
Cash flows from operating activities:
Net income (loss) $ 127,163 $ (77,280)
Adjustments to reconcile net income
(loss) to net cash
provided by operating activities:
Amortization expense 8,734 -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (26,795) 26,926
Decrease (increase) in inventories 483 (4,396)
(Decrease) increase in accounts payable (4,129) 21,447
Increase in accrued expenses 17,762 54,450
Increase (decrease) in cash overdraft 14,822 (2,150)
-------------------------------
Net cash provided by
operating activities 138,040 18,997
------------------------------
Cash flows from investing activities- - -
------------------------------
Cash flows from financing activities:
(Decrease) increase in notes payable (39,670) 39,670
Proceeds from long-term debt 36,062 -
Payments on long-term debt (13,648) -
Distributions (100,635) (58,630)
------------------------------
Net cash used in
financing activities (117,891) (18,960)
-----------------------------
Net increase in cash 20,149 37
Cash, beginning of year 37 -
------------------------------
Cash, end of year $ 20,186 $ 37
-------------------------------
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
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DIGITAL HEALTH
Notes to Financial Statements
December 31, 1997 and 1996
- -------------------------------------------------------------------------------
1. Summary of
Business
and
Significant
Accounting
Policies
Organization
Digital Health (the Company) is a trust organized in the state of Utah.
Vaughn R. Cook is the Trustee, and the VRC & KCC Family Trust is the
beneficiary.
The Company has developed and markets a comprehensive stress
management system called the Omega Acubase System. This system
is computer-based and measures sensitive points on the skin in order to
determine the best means to providing relief. The Company operates
within the medical industry.
Cash Equivalents
For purposes of the statement of cash flows, cash includes all cash and
investments with original maturities to the Company of three months or
less.
Receivables
The Company provides credit terms to customers, which may require
installment payments, including interest, over a period greater than one
year. Accordingly, all receivables due within one year are recorded as
current assets and those not due within one year are reflected as long-
term.
Inventories
Inventories consist primarily of finished goods and are recorded at the
lower of cost or market, cost being determined on a first-in, first-out
(FIFO) method.
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Equipment
Equipment is recorded at cost, less accumulated amortization.
Amortization on capital leases is determined using the straight-line
method over the estimated useful lives of the assets or terms of the
lease. Expenditures for maintenance and repairs are expensed when
incurred and betterments are capitalized.
Revenue Recognition
Revenue is recognized upon shipment of the product.
- -------------------------------------------------------------------------------
DIGITAL HEALTH
Notes to Financial Statements
Continued
- -------------------------------------------------------------------------------
1. Summary of
Business
and
Significant
Accounting
Policies
Continued
Trust - Income Tax Status
In lieu of income taxes, the beneficiaries of the Trust are taxed on the
Company's taxable income. Therefore, no provision or liability for
federal income taxes has been included in the financial statements.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of trade receivables. In the
normal course of business, the Company provides credit terms to its
customers.
The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such account and believes it is not exposed
to any significant credit risk on cash and cash equivalents.
The Company's customer base consists primarily of medical doctors.
Although the Company is directly affected by the well-being of the
medical industry, management does not believe significant credit risk
exists at December 31, 1997.
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Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
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DIGITAL HEALTH
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
2. Notes
Payable
Notes payable consist of the following:
December 31,
------------------------------------
1997 1996
------------------------------------
Note payable to an individual,
including interest at 75%, due on
demand, secured by inventory $ - $ 30,000
Non-interest bearing note payable to
an entity controlled by the trustee of
the Company, due on demand - 9,670
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$ - $ 39,670
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3. Long-Term
Debt
December 31,
------------------------------------
1997 1996
------------------------------------
Note payable to a financing company
in monthly installments of $742,
including interest at 16%,secured by
inventory $ 21,015 $ -
Note payable to a financing company
in monthly installments of $340,
including interest at 13%, secured by
inventory 15,047 -
Capital lease obligation (see note 4) 30,024 -
------------------------------------
66,086 -
Less current portion (26,089) -
------------------------------------
Long-term debt $ 39,997 $ -
------------------------------------
- -------------------------------------------------------------------------------
DIGITAL HEALTH
Notes to Financial Statements
Continued
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3. Long-Term
Debt
Continued
Future maturities of long-term debt are as follows:
Year Ending December 31: Amount
-----------------
1998 $ 26,089
1999 21,306
2000 11,053
2001 4,127
2002 3,511
-----------------
$ 66,086
-----------------
4. Lease
Obligations
Operating Lease Obligations
During 1997, the Company entered into an operating lease for office
equipment. Total lease rentals charged to operations was approximately
$1,670 for the year ended December 31, 1997. Minimum future rental
payments under the non-cancelable operating lease are as follows:
Year Ending December 31: Amount
-----------------
1998 $ 4,009
1999 4,009
2000 2,672
-----------------
$ 10,690
-----------------
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DIGITAL HEALTH
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
4. Lease
Obligations
Continued
Capital Lease Obligations
During 1997, the Company entered into a capital lease agreement for
certain equipment. The assets under capital lease have been capitalized
at a cost of $43,672 and accumulated amortization totaled $8,734 at
December 31, 1997. Future maturities and minimum lease payments on
capital lease obligations as of December 31, 1997 are as follows:
Year Ending December 31: Amount
-----------------
1998 $ 20,846
1999 12,289
-----------------
Total minimum lease payments 33,135
Less amount representing interest (3,111)
-----------------
Present value of net minimum lease payments $ 30,024
-----------------
Amortization expense for assets under capital lease during the year
ended December 31, 1997 was $8,734.
5. Related
Party
Transactions
An entity owned by the trustee member of the Company performs
research and development services for the Company. Total research
and development fees paid to the related entity for the years ended
December 31, 1997 and 1996, was $40,179 and $66,287, respectively.
At December 31, 1996, the Company had a note payable to an entity
controlled by the Company s trustee (see note 2).
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DIGITAL HEALTH
Notes to Financial Statements
Continued
- -------------------------------------------------------------------------------
6. Fair Value of
Financial
Instruments
None of the Company's financial instruments are held for trading
purposes. The Company estimates that the fair value of all financial
instruments at December 31, 1997, does not differ materially from the
aggregate carrying values of its financial instruments recorded in the
accompanying balance sheet. The estimated fair value amounts have
been determined by the company using available market information and
appropriate valuation methodologies. Considerable judgement is
necessarily required in interpreting market data to develop the estimates
of fair value, and, accordingly, the estimates are not necessarily
indicative of the amounts that the Company could realize in a current
market exchange.
7. Supplemental
Cash Flow
Information
During the year ended December 31, 1997, the Company purchased
equipment of $43,672 in exchange for long-term debt.
Actual amounts paid for interest during the years ended December 31,
1997 and 1996 was $12,900 and $-0-, respectively.
8. Export Sales
Export sales to unaffiliated customers were approximately $201,000 and
$-0- in 1997 and 1996, respectively.
9. Subsequent
Event
On June 15, 1998, the Company sold its license and technology to the
stress management system, which has been the Company s primary
source of revenue.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report on Form 8-K/A to be signed on
its behalf by the undersigned thereto duly authorized.
Magellan Technology, Inc.
\s\ Douglas M. Angus
-------------------------------------
Douglas M. Angus
Vice President of Finance, Chief Financial Officer
