MAGELLAN TECHNOLOGY INC, 10KSB, 2000-03-30

MAGELLAN TECHNOLOGY INC
10KSB, 2000-03-30
SURGICAL & MEDICAL INSTRUMENTS & APPARATUS

Previous: TRI COUNTY FINANCIAL CORP /MD/, 10-K405, 2000-03-30

Next: PROCYTE CORP /WA/, 10-K, 2000-03-30

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

Annual Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended December 31, 1999.

Transition report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the transition period from to .
------------------

Commission File No. 0-18271

MAGELLAN TECHNOLOGY, INC.
-----------------------------------------
(Name of small business issuer in its charter)

Utah 87-0467614
- - --------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)

12411 South 265 West, Suite F
Draper, Utah 84020
- - --------------------------------------- -----
(Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code: (801) 501-7517

Securities registered under Section 12(b) of the Act: None

Securities registered under Section 12(g) of the Act:

Common Stock
Par Value $.0002 per Share
--------------------------
(Title of Class)

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 _____

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
issuer's knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this form 10-KSB or any amendment to this form
10-KSB.

The issuer's revenues for its most recent fiscal year totaled $7,601,404.

The aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold, or the average bid and
ask prices of such stock as of December 31, 1999 was $5,989,549.

27,474,997 shares of the issuer's common stock were issued and outstanding as of
December 31, 1999.

Transitional Small Business Disclosure Format (Check one):
Yes No - X -
----- -----

<PAGE>

TABLE OF CONTENTS

PART I

Item 1. Description of Business . . . . . . . . . . . . . . . 1

Item 2. Description of Property . . . . . . . . . . . . . . . 4

Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . 5

Item 4. Submission of Matters to a Vote of Security Holders . 5

PART II

Item 5. Market for Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . 6

Item 6. Management's Discussion and Analysis or
Plan of Operation . . . . . . . . . . . . . . 8

Item 7. Financial Statements. . . . . . . . . . . . . . . . . 13

Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . .13

PART III

Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16a of the
Exchange Act. . . . . . . . . . . . . . . . .14

Item 10. Executive Compensation . . . . . . . . . . . . . . . 16

Item 11. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . .18

Item 12 Certain Relationships and Related Transactions . . . 19

PART IV

Item 13 Exhibits and Reports on Form 8-K . . . . . . . . . . 21

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

<PAGE>

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Business Development

Magellan Technology, Inc. (the "Company" or "Magellan") was incorporated under
the laws of the State of Utah on June 16, 1989. Its founders organized the
Company for the purpose of raising capital and seeking profitable business
opportunities.

In February 1992, the Company completed the acquisition of Satellite Image
Systems, Inc. ("SIS"), a Utah corporation engaged in providing image-based data
entry services utilizing licensed and proprietary data entry and communications
software. The acquisition was accomplished by merging SIS with and into the
Company's wholly owned subsidiary, SIS International, Inc. with SIS being the
surviving corporation. Through the merger, SIS became a wholly owned subsidiary
of the Company. In August 1996, the Company announced the formation of a joint
venture with United Insurance Companies, Inc. ("UICI") of Dallas, Texas to
expand UICI's presence in the medical claims processing business. SIS
contributed its technology, operations and management to a newly-formed entity,
SIS, LLC. UICI contributed $3 million in cash and a $2 million line of credit
for working capital. The Company retained a 46.5% interest in SIS, LLC. Darwin
D. Millet, formerly President of SIS, became the Chief Executive Officer of the
newly-formed limited liability company. UICI is a financial company with
interest in life and health insurance and related services, including the
administration and delivery of managed health care programs to selected markets.

In October 1996, the Company completed the acquisition of SkyHook
Technologies, Inc., a Utah Corporation ("SkyHook") organized in 1995 and engaged
in development of proprietary, cargo-management systems for use with
helicopters. SkyHook's initial cargo-management product is the SkyHook External
Cargo Management System ("ECMS") which is a computer-controlled, multiple-hook
cargo carrying device that attaches to a long line beneath the helicopter. The
acquisition was accomplished with the exchange of 4,874,936 shares of Magellan
Common Stock for all issued and outstanding shares of SkyHook Common Stock.
SkyHook then became a wholly owned subsidiary of the Company.

In April 1997, the Company organized Magellan Service Company ("MSC")
as a wholly owned subsidiary to pursue avionics integration contract
opportunities.

In October 1997, the Company completed the acquisition of BioSource
Inc. ("BioSource"), a Utah corporation organized in 1983 and engaged in the
development and sales of the "LISTEN" biofeedback information system which is
marketed and sold to healthcare practitioners in the complementary healthcare
marketplace. The acquisition was ultimately accomplished through the exchange of
$190,000 in cash and 225,000 shares of Magellan Common Stock in exchange for all
issued and outstanding shares of BioSource Common Stock. BioMeridian
International, Inc. ("BioMeridian") was formed as the surviving entity.

In May 1998, the Company completed the sale of its 46.5% interest in
SIS, LLC to UICI of Dallas, Texas resulting in the complete divestiture of the
Company's involvement in image-based data entry services. The company completed
the sale primarily for the purpose of raising funds for the acquisition of
additional entities deemed strategically beneficial to the Company. The sale was
completed for $1,500,000 and resulted in a gain on sale of $180,023.

In May 1998, the Company completed the acquisition of certain licenses
and technology of Digital Health, LLC, a Utah limited liability company engaged
in a business similar to that of BioMeridian. This acquisition was completed in
an effort to improve the market share and market position of BioMeridian with
its technology based Meridian Stress Assessment ("MSA") equipment in the
complementary healthcare marketplace through the immediate acquisition of FDA
registration of the technology. The acquisition was accomplished through the
exchange of 1,375,000 shares of common stock and $250,000 in cash payable in
monthly installments of $15,000. The operations of Digital Health, LLC were then
combined with BioMeridian.

In September 1999 the Company completed the acquisition of Biological
Technologies International, Inc. (BTI) which the Company acquired effective
September 17, 1999 through its wholly-owned subsidiary BTI Acquisition Corp. The
acquisition of BTI included the issuance of 3,024,024 shares of Magellan common
stock for all of the outstanding shares of BTI common stock. The acquisition was
accounted for as a "pooling of interests" transaction.

In December 1999, the Company completed the disposition and sale of
SkyHook to Envirofoam Technologies, Inc. (EFT). The sale was completed in
exchange for $3,000,000. Of this sale amount, a note payable was issued by EFT
in the amount of $2,500,000 and a management fee for services rendered in the
amount of $500,000 will be paid to Magellan. On the closing date of this sale
transaction, $500,000 was paid and received against the note payable and the
remaining $2,000,000 will be paid in four consecutive payments of $500,000 over
the next four months, with the first payment due on or before January 31, 2000.
On March 9, 2000, the terms of repayment of the note were amended. The January
31, 2000 payment was received in the amount of $500,000 and the remaining
balance will now be received over 3 monthly payments in the amounts of $100,000,
$500,000 and $900,000, respectively, beginning March 31, 2000. The management
fee of $500,000 remains due and payable on or before May 31, 2000.

Due to difficulty EFT has had raising investment capital, the Company
is currently in discussion with EFT regarding the possibility of restructuring
the timing and form of the remaining payments on the note payable. The Board has
tentatively approved a proposal by EFT which would provide for the conversion of
a portion of the remaining balance on the note payable to common stock of EFT if
certain conditions are met. A cash payment will be made for the remaining
portion on the note payable not converted to common stock. There can, however,
be no assurance that such discussions will result in a formal agreement or that
such agreement will be reached on terms favorable to the Company.

Business of the Company

BioMeridian

PRODUCTS: BioMeridian manufactures and sells the MSA/IMAG and BEST
systems to healthcare practitioners throughout the world. This equipment is used
to assess stress and assist healthcare practitioners in the analysis and
treatment of certain conditions. If stress or imbalance is detected in a
patient, the systems assist the practitioner in recommending a course of
treatment or therapy to alleviate the stress or to restore balance to the body's
meridian systems. BioMeridian also provides training classes and support
services for health care practitioners that utilize these systems. The MSA/IMAG
system is registered with the U.S. Food and Drug Administration as a
stress-monitoring device.

MARKETS: The emerging market for Meridian Stress Assessment equipment
is worldwide, crossing the boundaries of health care disciplines. The MSA/IMAG
and BEST systems are useful in the practice of medicine, osteopathy, homeopathy,
naturopathy, acupuncture, and other complementary disciplines.

COMPETITION: There are at least nine other devices sold throughout the
world that are somewhat similar to the MSA/IMAG and BEST systems. These products
are grouped into two general categories: 1) Simple electronic measurement
devices, which demonstrate older and less dynamic technology and 2) computerized
devices, which are similar in approach to the MSA/IMAG and BEST systems.

MANUFACTURING: BioMeridian currently contracts with a third party for
the assembly of the MSA/IMAG and BEST systems in a facility located in Orem,
Utah. Other subassemblies of the product are also currently subcontracted with
other various vendors.

INTELLECTUAL PROPERTY: BioMeridian is presently pursuing various
copyrights and other protection for the MSA/IMAG and BEST software and other
device design property.

GOVERNMENT REGULATION: In the United States, the MSA/IMAG system has
current FDA registration. Use of the BEST system internationally is subject to
various regulatory requirements on a country by country basis. The product has
received various forms of regulatory compliance for use in Canada, Australia,
South Africa and Germany.

EMPLOYEES: BioMeridian currently employs thirty (30) persons. Eight (8)
employees are in administration and finance, ten (10) in sales and marketing,
three (3) in training and education, four (4) in customer support and five (5)
in operations and engineering. BioMeridian has established independent
representatives in outlying geographical locations domestically. The Company has
current contracts with 17 domestic independent representatives in various
geographical locations across the United States. The Company has also
established relationships with 12 independent international distributors.

Biological Technologies International, Inc. (BTI)

PRODUCTS: BTI is the leader in the field of biological terrain
assessment, and, to the knowledge of the Company, the only company in the United
States that produces a biological terrain assessment device. The principal
product of BTI is the BTA S-2000. This product tests blood, saliva, and urine
for the factors of pH (acid-alkaline balance), rH2 (oxidative stress), and r
(gross mineral concentration) and provides the practitioner with an immediate,
objective assessment of a patient's individual biochemistry.

MARKETS: The emerging market for Biological Terrain Assessment
equipment is worldwide, crossing the boundaries of health care disciplines. The
BTA S-2000 is useful in the practice of medicine, osteopathy, homeopathy,
naturopathy, acupuncture, and other complementary disciplines.

COMPETITION: To the best of our knowledge there is currently no
competing device available in the United States at this time.

MANUFACTURING: BTI currently contracts with a third party for the
assembly of the BTA S-2000 in a facility located in Denver, Colorado.
Subassemblies of the product are also currently subcontracted with other various
vendors.

INTELLECTUAL PROPERTY: A patent is pending and trademarks and
copyrights already exist on the BTA S-2000 and its technology.

GOVERNMENT REGULATION: The BTA S-2000 has FDA registration and
manufacturing compliance status. The BTA also holds CE and CSA marks of
registration to allow for sales into the foreign market place.

EMPLOYEES: BTI currently employs five (5) persons. Two (2) employees
are in administration and finance, two (2) in sales and marketing and one (1) in
customer support. BTI also utilizes the established independent representatives
and independent international distributors relationships of BioMeridian.

Company Information

The Company will not be sending annual reports to its shareholders. The Company
does file annual reports on Form 10-KSB and quarterly reports on Form 10-QSB
with the Securities and Exchange Commission. The public may read and copy any
materials filed with the SEC at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an Internet site that contains reports, proxy and information
statements regarding the Company. The Internet address of such site is
http://www.sec.gov.

ITEM 2. DESCRIPTION OF PROPERTY

BioMeridian

BioMeridian currently leases one facility in Draper, Utah. This
facility is the headquarters for Magellan, BioMeridian and Biological
Technologies International, Inc. It consists of 5,563 square-feet office and
2,741 square-feet high-bay shop. The initial lease term is for 15 months
beginning the 21st day of March 1999 and ending on the 30th day of June 2000.
There is an option to extend this lease for three years until the 30th day of
June 2003.

BTI

BTI currently leases one facility located in Payson, Arizona. This
facility has a month-to-month lease arrangement.

Investment policy with Respect to Real Estate Related Investments

The Company currently does not make investments in real estate, real
estate mortgages or securities of or interests in persons primarily engaged in
real estate activities.

ITEM 3. LEGAL PROCEEDINGS

The Company is party to one proceeding, which is considered by
Management to be routine litigation incidental to the business, and which is not
product related.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

<PAGE>

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION: The Company's common stock is traded in the
over-the-counter market. The following table sets forth the range of quotations
for the Company's common stock for the quarters indicated. Such quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions.

- - ------------------------------------------- ------------------ -----------------
Fiscal Year Ended December 31, 1999 High Bid Low Bid
- - ------------------------------------------- ------------------ -----------------
First Quarter $ 1.00 $.31
Second Quarter .94 .44
Third Quarter 1.03 .38
Fourth Quarter .50 .19
- - ------------------------------------------- ------------------ -----------------

- - ------------------------------------------- ------------------ -----------------
Fiscal Year Ended December 31, 1998 High Bid Low Bid
- - ------------------------------------------- ------------------ -----------------
First Quarter $ 1.50 $.87
Second Quarter 1.56 .69
Third Quarter 1.69 .81
Fourth Quarter 1.28 .37
- - ------------------------------------------- ------------------ -----------------

SHAREHOLDERS: The approximate number of shareholders of record of the
Company's common stock as of March 31, 2000 was two hundred (200). This number
does not include shareholders whose shares are held in securities position
listings.

DIVIDENDS: The Company has not paid any cash dividends on its common
stock and does not anticipate paying dividends in the foreseeable future. The
Company presently intends to retain future earnings for financing the growth and
expansion of the Company.

UNREGISTERED SALE OF SECURITIES: The Company sold 20,000 and 9,334
shares of common stock for 37 cents and 37.5 cents per share respectively during
the year ended December 31, 1999. These sales were to two individuals pursuant
to the Company's stock incentive plan.

The Company sold 428,572 shares of common stock for 35 cents per share
to unrelated parties during the year ended December 31, 1999.

The Company issued 100,000 shares of common stock in settlement of a
contract disagreement with a shareholder during the year ended December 31,
1999.

In February 1999, the Company acquired certain assets known as the
P.I.C.E. technology from an individual in exchange for 250,000 shares of common
stock.

In March 1999, the Company converted various notes payable due William
A. Fresh or entities controlled by him to common stock. The total amount of the
notes payable prior to conversion was $1,200,000 and the number of shares of
common stock exchanged by the Company was 3,428,571 at 35 cents per share.

In March 1999, the Company converted two separate convertible note
payable agreements from unrelated parties to common stock at 35 cents per common
share. The amounts of the notes payable prior to conversion were $350,000 and
$200,000. The number of shares of common stock exchanged by the Company was
1,000,000 and 571,429 respectively.

The Company converted one note payable due Ballard Investments during
the year ended December 31, 1999. The amount of the note payable prior to
conversion was $100,000 and the number of shares of common stock exchanged by
the Company was 285,714 at 35 cents per share. In addition, accrued interest
payable of $11,033 to Ballard Investments was also converted to common stock
through the exercise of stock warrants. Warrants for 31,523 shares of common
stock were issued at 35 cents per share.

In April 1999, the Company converted a note payable from an unrelated
party to common stock at 35 cents per common share. The total amount of the note
payable prior to conversion was $100,000 and the number of shares of common
stock exchanged by the Company was 285,714.

In April 1999, the Company converted a note payable from an unrelated
party to common stock at 30 cents per common share. The total amount of the note
payable prior to conversion was $25,000 and the number of shares of common stock
exchanged by the Company was 82,679. In addition, stock warrants were exercised
by the same unrelated party for 3,750 shares of common stock at an exercise
price of 25 cents per share.

In April 1999, the Company converted a note payable from an unrelated
party to common stock at 35 cents per common share. The total amount of the note
payable prior to conversion was $50,000 and the number of shares of common stock
exchanged by the Company was 142,857.

In September 1999 the Company completed the acquisition of Biological
Technologies International, Inc. (BTI) through the issuance of 3,024,024 shares
in exchange for all the issued and outstanding common stock of BTI. This
transaction was accounted for using the "Pooling of Interests" method of
accounting.

The Company converted two separate accounts payable balances due
vendors to common stock at 35 cents and 50 cents per common share during the
year ended December 31, 1999. The amounts of the accounts payable balances prior
to conversion were $25,000 and $7,567 and the number of shares of common stock
exchanged by the Company was 71,429 and 15,135 respectively.

In June 1998 the Company completed the acquisition of Digital Health,
LLC through the issuance of 1,375,000 shares in exchange for all the outstanding
common stock of Digital Health, LLC. The shares were issued at 87.5 cents per
share.

The Company converted various notes payable due William A. Fresh or
entities controlled by him to common stock during the year ended December 31,
1998. The total amount of the notes payable prior to conversion was $1,150,000
and the number of shares of common stock exchanged by the Company was 1,533,333
at 75 cents per share. Accrued interest payable of $37,906 to William A. Fresh
or entities controlled by him was also converted to common stock through the
exercise of stock warrants. Warrants for 108,338 shares of common stock were
issued at 30 cents per share and 14,608 shares of common stock were issued at 37
cents per share.

The Company converted one note payable due Richard I. Winwood to common
stock during the year ended December 31, 1998. The amount of the note payable
prior to conversion was $250,000 and the number of shares of common stock
exchanged by the Company was 333,333 at 75 cents per share. Accrued interest
payable of $8,645 to Richard I. Winwood or entities controlled by him was also
converted to common stock through the exercise of stock warrants. Warrants for
28,816 shares of common stock were issued at 30 cents per share.

The Company converted one note payable due Judith Edwards to common
stock during the year ended December 31, 1998. The amount of the note payable
prior to conversion was $250,000 and the number of shares of common stock
exchanged by the Company was 333,333 at 75 cents per share.

The Company sold 125,000 shares of stock for 81 cents per share to one
individual pursuant to the Company's stock incentive plan during the year ended
December 31, 1998.

The preceding issuance of shares of common stock of the Company to
individuals or entities pursuant to such share exchange was made in reliance
upon the exemption provided by section 4 (2) of the Securities Act of 1933.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Due to difficulty EFT has had raising investment capital, the Company is
currently in discussion with EFT regarding the possibility of restructuring the
timing and form of the remaining payments on the note payable. The Board has
tentatively approved a proposal by EFT which would provide for the conversion of
a portion of the remaining balance on the note payable to common stock of EFT if
certain conditions are met. A cash payment will be made for the remaining
portion on the note payable not converted to common stock. There can, however,
be no assurance that such discussions will result in a formal agreement or that
such agreement will be reached on terms favorable to the Company.

In May 1998 the Company completed the acquisition of certain licenses
and technology of Digital Health, LLC, a Utah limited liability company engaged
in a business similar to that of BioMeridian. This acquisition was completed in
an effort to improve the market share and market position of BioMeridian with
its technology based meridian stress assessment equipment in the complementary
healthcare marketplace through the immediate acquisition of FDA registration of
the technology. The acquisition was accomplished through the exchange of
1,375,000 shares of common stock and $250,000 in cash payable in monthly
installments of $15,000. The operations of Digital Health, LLC were then
combined with BioMeridian. As part of the transaction, the Company recorded an
asset for the Licenses & Technology of Digital Health, LLC in the amount of
$1,453,125. The acquisition and combination of these licenses and technology
into the Magellan family of companies has effectively positioned BioMeridian to
compete in the emerging "Complementary Health Care" marketplace.

Results of Operations

BioMeridian

BioMeridian manufactures and sells the MSA/IMAG and BEST systems to
healthcare practitioners throughout the world. This equipment is used to assess
stress and assist healthcare practitioners in the analysis and treatment of
certain conditions. If stress or imbalance is detected in a patient, the systems
assist the practitioner in recommending a course of treatment or therapy to
alleviate the stress or to restore balance to the body's meridian systems.
BioMeridian also provides training classes and support services for health care
practitioners that utilize these systems. The MSA/IMAG system is registered with
the U.S. Food and Drug Administration as a stress-monitoring device.

For the year ended December 31, 1999, BioMeridian achieved sales
revenues of $6,243,142 that resulted in an operating loss of $165,912 compared
with sales revenues of $2,605,952 that resulted in an operating loss of
$1,001,063 for the year ended December 31, 1998. The 1998 results reflect the
operations of BioMeridian for the entire year with the resulting effect of the
acquisition of the licenses and technology of Digital Health, LLC from May 1998
through December 31, 1998.

The significant increase in sales is the result of the synergies of the
acquired assets and technology of BioSource and Digital Health and the expanded
user base along with improved sales techniques and performance of independent
and in-house sales representatives. The continued operating loss is primarily
due to unusually high selling expenses and operating overhead costs. The
increased overhead costs are the result of improved marketing strategies and
improved customer support and training personnel.

Although BioMeridian has experienced an operating loss during the year
ended December 31, 1999, significant improvement is evident and the Company now
believes that BioMeridian has reached a sustainable revenue level and is poised
to achieve profitable operating results during the year 2000.

BTI

BTI is the leader in the field of biological terrain assessment, and
the only company in the United States that produces a biological terrain
assessment device. The principal product of BTI is the BTA S-2000. This product
tests blood, saliva, and urine for the factors of pH (acid-alkaline balance),
rH2 (oxidative stress), and r (gross mineral concentration) and provides the
practitioner with an immediate, objective assessment of a patient's individual
biochemistry.

For the year ended December 31, 1999, BTI achieved sales revenues of
$1,358,262 that resulted in an operating loss of $98,870 compared with sales
revenues of $1,748,416 that resulted in an operating loss of $409,559 for the
year ended December 31, 1998. The decrease in sales and the reduction in the
operating loss are both primarily the result of closing the eastern U.S. sales
office located in Manchester, MA.

Although BTI has experienced an operating loss during the year ended
December 31, 1999, significant improvement is evident and the Company now
believes that BTI, by means of utilization of BioMeridian's sales force and
other efficiencies, is poised to achieve profitable operating results during the
year 2000.

SkyHook

For the year ended December 31, 1999, SkyHook achieved sales revenues
of $288,763 that resulted in an operating loss of $1,545,079 compared with no
sales revenues that resulted in an operating loss of $3,102,484 for the year
ended December 31, 1998. Therefore, due to continued substantial SkyHook losses
and DoD procurement delays, the Company's board of directors elected to divest
SkyHook and focus exclusively on healthcare in the complementary healthcare
marketplace. The divestiture of SkyHook was completed in December 1999 resulting
in a gain on sale of $3,083,055.

Liquidity and Capital Resources

The Company's sources of liquidity have historically been cash from
operations, working capital lines of credit and debt and equity financing.
BioMeridian has generated an increased amount of revenues and has achieved
profitable operations during the last two quarters of 1999. However, the
operations of SkyHook required significant amounts of cash for operations during
1999. As a result, the Company has accumulated a considerable amount of debt.
Therefore, the Company must rely on profitable operations and continue to seek
additional debt and/or equity financing opportunities.

During 1999 and 1998 the Company entered into several agreements to
borrow necessary funds.

On May 19, 1998 the company entered into a $3,000,000 revolving line of
credit agreement. During the year ended December 31, 1999, the Company made no
additional borrowings under this revolving line of credit. This revolving line
of credit matures on May 31, 2000 and is secured by the Company's inventory and
receivables and by the personal guarantees of the Company's Chief Executive
Officer, a Director, and a major shareholder. As of December 31, 1999 the
Company had an outstanding balance of $2,496,158 under this revolving line of
credit.

During the year ended December 31, 1999 the Company borrowed a net
amount of $295,000 from the Company's Chief Executive Officer, or from entities
controlled by this individual, under two separate $100,000 unsecured note
payable agreements, one $50,000 unsecured note payable agreement, one $30,000
unsecured note payable agreement, and one $15,000 unsecured note payable
agreement. Each note payable bears interest at 12% and is payable upon demand.
In addition, the Company borrowed $50,000 under an unsecured convertible note
payable agreement and $25,000 under an unsecured note payable agreement from
stockholders. Each note payable bears interest at 12% and is payable upon
demand. The Company also borrowed $50,000 from an entity under an unsecured note
payable agreement that bears interest at 10%. The Company has since acquired
this entity.

During the year ended December 31, 1999, the Company also borrowed
$350,000, $200,000, $100,000, $25,000 and $50,000 from unrelated parties under
separate convertible note payable agreements. Each convertible note payable
bears interest at 12% and contains a provision for the conversion of the
principal amount to common stock at a specified price. In March and April of
1999, these convertible note payable agreements were converted to common stock
at $.35 and $.30 per common share. In addition, the Company borrowed $200,000,
$100,000, $25,000 and $25,000 from unrelated parties under separate convertible
note payable agreements. Each bears interest at 12% and contains a provision for
the conversion of the principal amount to common stock at a specified price. The
funds from these transactions were used to finance operations. In addition, the
Company converted certain accounts payable to a vendor into a note payable in
the amount of $39,313. This note payable bears interest at 9% and is payable at
the end of six months from the date of issuance.

The Company borrowed a total amount of $367,407 from EFT prior to the
disposition and sale of SkyHook under several individual note payable
agreements. Each bears interest at 12%. These borrowings were primarily used to
fund continuing operations of SkyHook.

The Company also entered into one capital lease in the amount of
$18,798 to acquire and install a financial accounting system used for all
Magellan companies. The terms of this lease include monthly payments in the
amount of $585 for four (4) years.

Effective March 31, 1999, $1,300,000 of related party notes payable
were converted to common stock of the Company. In addition, accrued interest
payable on related party notes payable of $11,033 was used by one related party
to exercise warrants to purchase common stock.

The Company has made significant investment and effort over the last
five years into the establishment of a sound framework for operating entities
that are well positioned in their respective marketplaces. With the sale of
SkyHook, the Company will now focus its full management attention on its
profitable Complementary Health Care initiatives. Management anticipates
continued profitable growth and feels that BioMeridian and BTI are poised for
success and future profitable operations. However, there can be no assurance
that the Company will be able to maintain profitable operations or obtain
desired debt or equity capital 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 its products and services through its
operating subsidiaries and its financial condition are dependent upon continued
profitability and could be materially adversely affected.

During 1998, a Director/Shareholder who also serves as the Chairman of
the Board loaned $2,590,000 to the Company through either himself or entities in
which he held a controlling interest. The notes bear interest at 12% and are
payable upon demand. During 1998, $1,150,000 of these notes payable were
converted to common stock of the Company. In addition, the interest payable of
$37,906 was used by the Director/Shareholder to exercise warrants to purchase
common stock.

During 1998, a Director/Shareholder converted $250,000 of notes payable
to common stock of the Company. In addition, the interest payable of $8,645 was
used by the Director/Shareholder to exercise warrants to purchase common stock.
Also, an additional note payable held by an individual of $250,000 was converted
to common stock.

Factors Affecting Future Results

The Company had a deficit in working capital as of December 31, 1999 of
$2,078,921 as compared to a deficit in working capital of $5,463,018 as of
December 31, 1998. As indicated above, the Company is in need of additional
equity and/or debt financing in order to meet it obligations. There can be no
assurance, however, that such financing will be available on terms favorable to
the Company, if at all. If the Company is unable to raise additional capital,
the ability of the Company to successfully market and distribute its products
and services through its operating subsidiaries and its financial condition are
dependent upon continued profitability and could be materially adversely
affected.

The Company's future operations and liquidity will be affected by the
ability of BioMeridian and BTI to continue to sell and market their respective
products, compete with existing competitors, and satisfy the needs of current
and future customers to the extent that profitability will be maintained.

ITEM 7. FINANCIAL STATEMENTS

The consolidated financial statements of the Company and its wholly
owned subsidiaries can be found on pages F-1 through F-21 of this Form 10-KSB.

<PAGE>

MAGELLAN TECHNOLOGY, INC.
Index to Consolidated Financial Statements

- - --------------------------------------------------------------------------------

Page
----

Independent auditors' report F-2

Consolidated balance sheet F-3

Consolidated statement of operations F-4

Consolidated statement of stockholders' equity
(deficit) F-5

Consolidated statement of cash flows F-6

Notes to consolidated financial statements F-7

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
of Magellan Technology, Inc.

We have audited the consolidated balance sheet of Magellan Technology, Inc. (the
Company) as of December 31, 1999, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the years ended
December 31, 1999 and 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Magellan Technology,
Inc. as of December 31, 1999, and the results of their operations and their cash
flows for the years ended December 31, 1999 and 1998, in conformity with
generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 3 to the
consolidated financial statements, there is substantial doubt about the ability
of the Company to continue as a going concern. Management's plans in regard to
that matter are also described in note 3. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

TANNER+Co.

Salt Lake City, Utah
February 18, 2000

F-2

MAGELLAN TECHNOLOGY, INC.

Consolidated Balance Sheet

December 31, 1999
- - ----------------------------------------------------------------------------------------------------------

Assets
------

<S> <C>
Current assets:
Cash $ 280,199
Receivables, net 1,095,484
Inventories, net 135,731
Note receivable 2,500,000
Other current assets 45,674
------------------

Total current assets 4,057,088

Long-term accounts receivable 28,491
Property and equipment, net 205,838
Goodwill, net 598,673
Licenses and technology, net 1,408,984
------------------

Total assets $ 6,299,074
------------------

- - ----------------------------------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
------------------------------------

Current liabilities:
Accounts payable $ 816,613
Accrued expenses 655,452
Related party notes payable 835,000
Note payable 2,496,158
Current portion of long-term debt 1,332,786
------------------

Total current liabilities 6,136,009

Long-term debt 155,850
------------------

Total liabilities 6,291,859
------------------

Commitments -

Stockholders' equity:
Common stock, par value $.0002 per share, 50,000,000 shares
authorized, 27,474,997 shares issued and outstanding 5,495
Additional paid-in capital 14,197,225
Accumulated deficit (14,195,505)
------------------

Total stockholders' equity 7,215
------------------

Total liabilities and stockholders' equity $ 6,299,074
------------------

- - ----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

MAGELLAN TECHNOLOGY, INC.

Consolidated Statement of Operations

Years Ended December 31,
- - ----------------------------------------------------------------------------------------------------------

1999 1998
-----------------------------------

<S> <C> <C>
Net sales $ 7,601,404 $ 4,095,784
-----------------------------------

Costs and expenses:
Costs of sales 1,292,015 952,472
General and administrative 6,786,805 5,161,225
Compensation expense - stock options 130,868 206,382
-----------------------------------

8,209,688 6,320,079
-----------------------------------

Loss from operations (608,284) (2,224,295)
-----------------------------------

Other income (expense):
Gain on settlement 451,111 -
Interest expense (941,667) (459,070)
Gain on sale of investment - 180,023
Equity in loss of joint venture - (5,050)
Other, net 11,087 271,908
-----------------------------------

(479,469) (12,189)
-----------------------------------

Loss before benefit for income taxes (1,087,753) (2,236,484)
and discontinued operations

Benefit for income taxes - -
-----------------------------------

Net loss from continuing operations (1,087,753) (2,236,484)
-----------------------------------

Results from discontinued operations, net of tax:
Loss from operations of discontinued segment (1,545,079) (3,102,485)
Gain on disposal of segment 3,083,055 -
-----------------------------------

Income (loss) from discontinued operations 1,537,976 (3,102,485)
-----------------------------------

Net income (loss) $ 450,223 $ (5,338,969)
-----------------------------------

Net income (loss) per common share - basic and diluted:
Continuing operations $ (.04) $ (.11)
Discontinued operations .06 (.16)
-----------------------------------

Net income (loss) per common share -
basic and diluted $ .02 (.27)
-----------------------------------

Weighted average common shares - basic and diluted 25,693,000 19,768,000
-----------------------------------

- - ----------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>

MAGELLAN TECHNOLOGY, INC.

Consolidated Statement of Stockholders' Equity (Deficit)

Years Ended December 31, 1999 and 1998
- - ----------------------------------------------------------------------------------------------------------

Common Stock Additional Unearned
------------------------ Paid-In Compen- Accumulated
Shares Amount Capital sation Deficit Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>

Balance at January 1, 1998:
Magellan Technology, Inc.
(as previously reported) 13,872,505 $ 2,774 $ 6,890,419 $ (236,000) $ (8,380,223) $ (1,723,030)
Biological Technologies
International, Inc.
(as previously reported) 1,142,725 991,537 - - (926,536) 65,001

Restatement for pooling
acquisition of Biological
Technologies International, Inc.
by Magellan Technology, Inc. 1,511,051 (991,006) 991,006 - - -

Issuance of common stock for:
Debt 2,351,761 471 1,696,080 - - 1,696,551
Acquisition of subsidiary 1,375,000 275 1,202,850 - - 1,203,125
Services 125,000 25 101,225 - - 101,250
Cash 370,248 74 579,926 - - 580,000

Amortization of unearned
compensation - - - 105,132 - 105,132

Net loss - - - - (5,338,969) (5,338,969)
-----------------------------------------------------------------------------

Balance at December 31,1998 20,748,290 4,150 11,461,506 (130,868) (14,645,728) (3,310,940)

Issuance of common stock for:
Debt and interest 5,828,487 1,166 2,034,867 - - 2,036,033
Licenses and technology 250,000 50 140,575 - - 140,625
Cash 461,656 92 161,746 - - 161,838
Services 186,564 37 67,531 - - 67,568

Issuance of warrants for
interest expense - - 331,000 - - 331,000

Amortization of unearned
compensation - - - 130,868 - 130,868

Net loss - - - - 450,223 450,223
-----------------------------------------------------------------------------

Balance at December 31, 1999 27,474,997 $ 5,495 $14,197,225 $ - $(14,195,505) $ 7,215
-----------------------------------------------------------------------------

- - ----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-5
</TABLE>

MAGELLAN TECHNOLOGY, INC.

Consolidated Statement of Cash Flows

Years Ended December 31,
- - ----------------------------------------------------------------------------------------------------------

1999 1998
-----------------------------------

<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 450,223 $ (5,338,969)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization 677,451 516,385
Equity in loss from joint venture - 5,050
Issuance of warrants for interest 331,000 -
Stock compensation 130,868 206,382
Stock issued for services 67,568 -
Gain on sale of interest in joint venture - (180,023)
(Gain) loss on disposal of property and equipment (1,013) 2,359
Gain on sale of discontinued operations (3,083,055) -
Gain on settlement (451,111) -
Provision and reserves for losses on assets 111,100 206,800
Net assets of discontinued operations 851,080 (1,271,778)
(Increase) decrease in:
Receivables (760,200) (680,961)
Inventories 150,142 (210,252)
Other current assets (38,056) 5,921
Increase (decrease) in:
Accounts payable (64,330) 761,369
Accrued expenses 432,437 229,743
-----------------------------------
Net cash used in
operating activities (1,195,896) (5,747,974)
-----------------------------------

Cash flows from investing activities:
Purchase of property and equipment (48,678) (167,208)
Proceeds from sale of property and equipment 4,007 -
Proceeds from sale of discontinued operation 500,000 -
Proceeds from sale of investment in joint venture - 1,500,000
Net cash paid in acquisition - (500,000)
-----------------------------------
Net cash provided by
investing activities 455,329 832,792
-----------------------------------

Cash flows from financing activities:
Increase in notes payable (500,000) 1,531,136
Proceeds from related party notes payable 640,000 2,940,000
Payments on related party notes payable (345,000) (220,141)
Proceeds from long-term debt 1,182,641 790,000
Payments on long-term debt (274,331) (701,220)
Proceeds from issuance of common stock 161,838 580,000
-----------------------------------
Net cash provided by
financing activities 865,148 4,919,775
-----------------------------------

Net increase in cash 124,581 4,593

Cash, beginning of year 155,618 151,025
-----------------------------------

Cash, end of year $ 280,199 $ 155,618
-----------------------------------

- - ----------------------------------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
F-6

</TABLE>

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements

December 31, 1999 and 1998
- - --------------------------------------------------------------------------------

1. Organization and Business Activity

Organization

The consolidated financial statements consist of Magellan Technology, Inc. (the
Company) and its wholly owned subsidiaries, BioMeridian Corporation (BioMeridian
Corp.) (formerly ProHealth, Inc.), BioMeridian International, Inc. (BioMeridian
Intl.) (formerly BioSource, Inc.), and Biological Technologies International,
Inc. (BTI).

The Company acquired all of the outstanding stock of BTI on September 16, 1999
in exchange for 3,024,024 shares of the Company's common stock. The consolidated
financial statements at December 31, 1999 and 1998 assume the acquisition of BTI
by the Company, as of January 1, 1998 because the shares issued in the
acquisition of BTI represent control of the total shares of BTI's common stock
issued and outstanding immediately following the acquisition. The business
combination has been accounted for as a pooling of interests of the Company
giving effect to the acquisition of 100% of the outstanding common shares of
BTI, therefore, the assets and liabilities have been reflected at their
historical cost.

On December 31, 1999 the Company sold all of the common stock of SkyHook
Technology, Inc. (SkyHook) to Enviro Foam Technologies, Inc. (Enviro Foam) an
unrelated entity, in exchange for $500,000 cash and a $2,500,000 note receivable
(see note 5). The net assets of SkyHook at December 31, 1999 and its operations
for the years ended December 31, 1999 and 1998 are presented as discontinued
operations.

On June 15, 1998, the Company acquired licenses and technology from Digital
Health, LLC (Digital). The acquisition included the issuance of 1,375,000 shares
of the Company's common stock and debt of $250,000. The Company recorded an
intangible asset in the amount of $1,453,125 related to this transaction.

Business Activity

The Company's continuing operations consist of manufacturing and distribution of
a medical devices used by health care practitioners.
(conducted by BioMeridian Intl.).

- - --------------------------------------------------------------------------------
F-7

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the financial statements of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated.

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.

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. Accordingly, the
Company performs ongoing credit evaluations of its customers and maintains
allowances for possible losses which, when realized, have been within the range
of management's expectations.

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 accounts and believes it is not exposed to any significant credit risk on
cash and cash equivalents.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly
liquid investments with a maturity of three months or less to be cash
equivalents.

Inventories

Inventories are recorded at the lower of cost or market, cost being determined
on a first-in, first-out (FIFO) method.

- - --------------------------------------------------------------------------------
F-8

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

2. Summary of Significant Accounting Policies Continued

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.
Depreciation and amortization is determined using the straight-line method over
the estimated useful lives of the assets. Expenditures for maintenance and
repairs are expensed when incurred and betterments are capitalized. Gains and
losses on sale of property and equipment are reflected in operations.

Goodwill

Goodwill reflects the excess of the costs of purchasing BioMeridian Intl.
(formerly BioSource, Inc.) over the fair value of the related net assets at the
date of acquisition, and is being amortized on the straight-line basis over five
years.

Licenses and Technology

Licenses and technology reflect the costs of certain intangible assets, and are
being amortized on the straight-line basis over five years.

Revenue Recognition

Revenue is recognized upon performance of services. Revenue from medical devices
and equipment sales is recognized when the medical devices and equipment are
shipped and installed.

Income Taxes

Deferred income taxes are provided in amounts sufficient to give effect to
temporary differences between financial and tax reporting, principally related
to net operating loss carryforwards and amortization of intangibles.

Earnings Per Common and Common Equivalent Share

The computation of basic earnings per common share is computed using the
weighted average number of common shares outstanding during the year.

The computation of diluted earnings per common share is based on the weighted
average number of shares outstanding during the year plus common stock
equivalents which would arise from the exercise of stock options and warrants
outstanding using the treasury stock method and the average market price per
share during the year. Common stock equivalents are not included in the diluted
earnings per share calculation when their effect is antidilutive.

- - --------------------------------------------------------------------------------
F-9

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

3. Going Concern

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As of December 31, 1999, the
Company had a deficit in working capital and an accumulated deficit. These
conditions raise substantial doubt about the ability of the Company to continue
as a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

The Company's ability to continue as a going concern is subject to the Company's
ability to maintain profitable operations or to obtain necessary funding from
outside sources. Management anticipates that operations of BioMeridian will
provide positive cash flow during 2000. However, there can be no assurance they
will be successful.

4. Detail of Certain Balance Sheet Accounts

Accounts receivable:
Trade receivables $ 1,189,594
Receivable from SkyHook 223,790
Less allowance for doubtful accounts (317,900)
-----------------

$ 1,095,484
-----------------

Inventories:
Finished goods $ 148,231
Less allowance for obsolescence (12,500)
-----------------

$ 135,731
-----------------

- - --------------------------------------------------------------------------------
F-10

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

4. Detail of Certain Balance Sheet Accounts Continued

December 31
-----------------------------------
1999 1998
-----------------------------------

Licenses and technology:
Accumulated amortization $ 684,765 $ 269,532
Amortization expense $ 415,233 $ 269,532

Goodwill:
Accumulated amortization $ 429,032 $ 223,491
Amortization expense $ 205,541 $ 208,532

5. Note Receivable

The Company has a note receivable from Enviro Foam related to the SkyHook sale
(see note 1). The note matures in May 2000 and is secured by all of the assets
of SkyHook. The note is non interest bearing and is reserved to extinguish the
company's line-of-credit (see note 8). The amount oustanding at December 31,
1999 is $2,500,000.

6. Property and Equipment

Property and equipment consist of the following:

Equipment $ 280,116
Leasehold improvements 3,154
Software 45,816
-----------------

329,086

Accumulated depreciation and
amortization (123,248)
-----------------

$ 205,838
-----------------

- - --------------------------------------------------------------------------------
F-11

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

7. Related Party Notes Payable

At December 31, 1999, the Company had unsecured notes payable due to an officer,
shareholders and entities owned by shareholders totaling $835,000. Each note has
a stated interest rate of 12% and is payable on demand. As of December 31, 1999
accrued interest payable on these notes totaled approximately $131,000. During
1999 and 1998, interest expense of approximately, $379,000 and $81,000,
respectively, was recognized on obligations due to shareholders of the Company.

8. Notes Payable

The Company has a revolving line-of-credit agreement with a bank. The agreement
allows the Company to borrow up to $3,000,000 at an interest rate equal to the
bank's prime rate plus 1% (9.5% at December 31, 1999). The balance, including
all unpaid interest, is due May 31, 2000. The line-of-credit is secured by a
note receivable (see note 5) and guaranteed by certain shareholders. At December
31, 1999 the balance outstanding on the line-of-credit totaled $2,496,158.

9. Long-term Debt

Long-term debt is comprised of the following:

Note payable to an individual, due in three
installments which include interest at 10%. The
installments are: $257,314 due on demand,
$348,409 and $144,277 due on September 30,
2000, and 2001, respectively $ 750,000

Unsecured notes payable to a company, due on
demand, with interest at the prime rate plus 2% 218,981

Note payable to an individual due on demand with
interest at 12%, secured by inventory 200,000

Convertible unsecured notes payable to
individuals due on demand with interest at 12%.
The notes are convertible into three shares of the
Company's common stock for each dollar owed. 150,000

Convertible unsecured notes payable to
individuals due on demand with interest at 12%.
The notes are convertible into two shares of the
Company's common stock for each dollar owed. 75,000

- - --------------------------------------------------------------------------------
F-12

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

9. Long-term Debt Continued

Unsecured, non-interest bearing note payable to
a company, due in monthly installments of
$15,000 39,460

Unsecured note payable to an entity due in
monthly installments of $5,000 including interest
at 12%, maturing in April 2000 39,313

Capital lease obligation (see note 10) 15,882
-----------------

1,488,636

Less current portion (1,332,786)
-----------------

$ 155,850
-----------------

Future maturities of long-term debt are as follows:

Year Ended December 31: Amount
----------------------- ------

2000 $ 1,332,786
2001 149,384
2002 6,008
2003 458
------------------

$ 1,488,638
------------------

10. Capital Lease Obligation

The Company leases equipment under a noncancellable lease agreement. The lease
provides the Company the option to purchase the equipment at the end of the
initial lease term. The equipment under capital lease is included in property
and equipment at a cost of approximately $19,000 and accumulated amortization of
approximately $4,000.

Amortization expense for the equipment under capital lease for the years ended
December 31, 1999 and 1998 was approximately $4,000 annually.

- - --------------------------------------------------------------------------------
F-13

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

10. Capital Lease Obligation Continued

The capital lease obligation has an imputed interest rate of 19% and is payable
in monthly installments through January 2003. Future minimum payments on the
capital lease obligation are as follows:

Years Ending December: Amount
- - ---------------------- ------

2000 6,600
2001 6,600
2002 6,600
2003 550
------------------

20,350

Less amount representing interest (4,468)
------------------

Present value of future minimum capital lease $ 15,882
------------------

11. Income Taxes

The benefit for income taxes is different than amounts which would be provided
by applying the statutory federal income tax rate to loss before benefit for
income taxes for the following reasons:

Years Ended
December 31,
-----------------------------------
1999 1998
-----------------------------------

Federal income tax benefit
at statutory rate $ 370,000 $ 760,000
Meals and entertainment (14,000) (13,000)
Change in valuation allowance (356,000) (747,000)
-----------------------------------

$ - $ -
-----------------------------------

The results from discontinued operations are presented in the consolidated
statement of operations net of tax of $0, due to the Company's net operating
loss carryforwards.

- - --------------------------------------------------------------------------------
F-14

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

11. Income Taxes Continued

Deferred tax assets (liabilities) are comprised of the following:

Net operating loss carryforwards $ 1,360,000
Allowance for doubtful accounts 108,000
Stock options and warrants 166,000
Amortization of intangibles 315,000
Valuation allowance (1,949,000)
-----------------

$ -
-----------------

At December 31, 1999, the Company has net operating loss carryforwards available
to offset future taxable income of approximately $4,000,000, which will begin to
expire in 2008. The utilization of the net operating loss carryforwards is
dependent upon the tax laws in effect at the time the net operating loss
carryforwards can be utilized. The Tax Reform Act of 1986 significantly limits
the annual amount that can be utilized for certain of these carryforwards as a
result of the change in ownership.

12. Discontinued Operations

Condensed discontinued operations of SkyHook are as follows for the years ended
December 31, 1999 and 1998 are as follows:

Year Ended December 31,
--------------------------------
1999 1998
--------------------------------

Revenues $ 290,468 $ 260,555
Costs and expenses 1,835,547 3,363,040
--------------------------------

Net loss before income taxes (1,545,079) (3,102,485)
Income taxes - -
--------------------------------

Net loss $ (1,545,079) $ (3,102,485)
--------------------------------

- - --------------------------------------------------------------------------------
F-15

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

13. Supplemental Cash Flow Information

During the year ended December 31, 1999:

o The Company issued common stock in exchange for a reduction of notes
payable and accrued interest of $2,036,033.

o The Company acquired licenses and technology in exchange for the issuance
of common stock of $140,625.

o The Company satisfied accrued expenses in exchange for inventory of
$70,540.

During the year ended December 31, 1998:

o The Company purchased licenses and technology totaling $1,453,125 in
exchange for a $250,000 note payable and common stock of $1,203,125.

o Notes payable to certain shareholders totaling $1,650,000 were converted to
common stock. In addition, accrued interest payable to shareholders
totaling $46,551 was exchanged by the shareholders to exercise warrants for
common stock.

During the year ended December 31, 1998:

BTI purchased all of the assets of the Greenberg Asset Management Corporation in
a purchase transaction. BTI paid cash and issued a note payable and recorded the
assets from the acquisition as follows:

Fair value of assets acquired $ 1,500,000
Less amount financed with long-term debt (750,000)
Less cash received (250,000)
-----------------

Net cash paid $ 500,000
-----------------

- - --------------------------------------------------------------------------------
F-16

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

13. Supplemental Cash Flow Information Continued

Actual amounts paid for:

Years Ended
December 31,
-----------------------------------
1999 1998
-----------------------------------

Interest $ 451,000 $ 495,000
-----------------------------------

Income taxes $ - $ -
-----------------------------------

14. Stock Options and Warrants

The Company has a stock option plan (the Option Plan), which allows a maximum of
4,500,000 options to be granted to purchase common stock at prices generally not
less than the fair market value of common stock at the date of grant. Under the
Option Plan, grants of options may be made to selected officers and key
employees without regard to any performance measures. The options may be
immediately exercisable or may vest over time as determined by the Board of
Directors. However, the maximum term of an option may not exceed five years.

Information regarding the stock options and warrants is summarized below:

Number of
-------------------------------- Price Per
Options Warrants Share
------------------------------------------------
Outstanding at
January 1, 1998 2,023,336 645,842 $ .20 to 1.20
Granted 1,493,788 441,000 .20 to 3.00
Exercised (125,000) - .20
Forfeited (309,669) (151,762) .30 to .37
------------------------------------------------

Outstanding at
December 31, 1998 3,082,455 935,080 .20 to 3.00
Granted 1,612,000 458,750 .25 to .50
Exercised (19,334) - .37
Forfeited (486,277) - .37 to 3.00
------------------------------------------------

Outstanding at
December 31, 1999 4,188,894 1,393,830 $ .20 to 3.00
------------------------------------------------

- - --------------------------------------------------------------------------------
F-17

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

15. Stock-Based Compensation

The Company has adopted the disclosure only provisions of Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation expense has been recognized for stock options
granted to employees. Had compensation expense for the Company's stock options
been determined based on the fair value at the grant date consistent with the
provisions of SFAS No. 123, the Company's results of operations would have been
reduced to the pro forma amounts indicated below :

Years Ended
December 31,
------------------------------------
1999 1998
------------------------------------

Net income (loss) - as reported $ 450,223 $ (5,338,969)
Net loss - pro forma $ (1,611,640 $ (6,462,860)
Diluted income (loss) per share -
as reported $ .02 $ (.27)
Diluted loss per share - pro forma $ (.06) $ (.33)
------------------------------------

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:

December 31,
-----------------------------------
1999 1998
-----------------------------------

Expected dividend yield $ - $ -
Expected stock price volatility 232% 188%
Risk-free interest rate 6% 5%
Expected life of options 5 to 10 years 2 to 10 years
-----------------------------------

The weighted average fair value of each option granted during 1999 and 1998 are
$.53 and $.82, respectively.

- - --------------------------------------------------------------------------------
F-18

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

15. Stock-Based Compensation Continued

The following table summarizes information about stock options and warrants
outstanding at December 31, 1999:

Outstanding Exercisable
------------------------------------------------------------------
Weighted
Average
Remaining Weighted Weighted
Range of Contractual Average Average
Exercise Number Life Exercise Number Exercise
Prices Outstanding (Years) Price Exercisable Price
- - --------------------------------------------------------------------------------

$ .20 to .30 786,938 5.43 $ 0.25 786,938 $ 0.25
.35 to .50 3,369,892 5.60 0.40 2,673,225 0.37
.75 to 1.00 1,149,000 3.99 0.91 500,000 0.93
1.19 to 1.20 162,000 5.57 1.19 2,000 1.20
3.00 114,894 0.64 1.30 114,894 1.30
- - --------------------------------------------------------------------------------

$ .20 to 3.00 5,582,724 5.14 $ 0.58 4,077,057 $ 0.52
- - --------------------------------------------------------------------------------

16. Fair Value of Financial Instruments

The Company's financial instruments consist of cash, receivables, payables, and
notes payable. The carrying amount of cash, receivables and payables
approximates fair value because of the short-term nature of these items. The
aggregate carrying amount of the notes payable approximates fair value as the
individual borrowings bear interest at market interest rates.

- - --------------------------------------------------------------------------------
F-19

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

17. Commitments

Operating Leases

The Company is obligated under certain non-cancelable operating leases for
rental of office and manufacturing space. Total lease expense for the years
ended December 31, 1999 and 1998, was approximately $267,000 and $58,000,
respectively. Future minimum lease payments under noncancellable operating
leases with initial terms of one year or more are as follows at December 31,
1999:

Years Ended December 31, Amount
- - ------------------------ ------

2000 $ 44,700
2001 1,800
-----------------

$ 46,500
-----------------

Royalty Agreement

During 1998, the Company entered into a license agreement which grants the
Company the right to include certain software in its medical device product.
Under the agreement, the Company is obligated to pay $28 for each unit produced.
During the years ended December 31, 1999 and 1998 royalties expense related to
this agreement totaled approximately $20,000 and $16,000, respectively.

Employment Agreement

The Company has an employment agreement with one of its employees which requires
annual payments of $75,000 and a bonus based on earnings of the Company. The
agreement expires on September 30, 2000.

Litigation

The Company may become or is subject to investigations, claims or lawsuits
ensuing out of the conduct of its business, including those related to
environmental safety and health, product liability, commercial transactions,
etc. The Company is currently not aware of any such items which it believes
could have a material effect on its financial position.

- - --------------------------------------------------------------------------------
F-20

<PAGE>

MAGELLAN TECHNOLOGY, INC.

Notes to Consolidated Financial Statements
Continued

- - --------------------------------------------------------------------------------

18. Recent Accounting Pronouncements

In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective date of FASB
Statement No. 133." SFAS 133 establishes accounting and reporting standards for
derivative instruments and requires recognition of all derivatives as assets or
liabilities in the statement of financial position and measurement of those
instruments at fair value. SFAS 133 is now effective for fiscal years beginning
after June 15, 2000. The Company believes that the adoption of SFAS 133 will not
have any material effect on the financial statements of the Company.

- - --------------------------------------------------------------------------------
F-21

<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None

<PAGE>

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS:

The table below sets forth the name, age and positions or offices of
each director and executive officer of Magellan Technology, Inc. (MTI) and its
subsidiaries, BioMeridian Corporation (BC), BioMeridian International, Inc.
(BII), Biological Technologies International, Inc. (BTI), and Magellan Service
Company (MSC). The Board of Directors of MTI also serves as the Board of
Directors of BC, BII, BTI and MSC. Each Director of the Company will serve until
the next annual meeting of the shareholders.

Name Age Position
- - ------------------------- ------ -----------------------------------------------
William A. Fresh 71 Chairman of the Board, MTI, BC, BII, BTI & MSC
Reginald Hughes 55 Director, Vice President, BII
Darwin D. Millet 47 Director, President, BC
Richard I. Winwood 57 Director
Irving Monclova 68 Director
Dr. Robert C. Greenberg 41 Senior Vice President, BC, BII, BTI
Stephen William Fresh 47 Vice President, BII
Joe Galloway 60 Vice President, BII

William A. Fresh co-founded Magellan Technology, Inc. and has served as
Chairman of the Board and Chief Executive Officer of Magellan since its
incorporation in June of 1989. He was co-founder, Chairman of the Board and CEO
for Fresh Test Technology Corporation, a designer and manufacturer of probe
cards in interface test technology for the semiconductor industry. The company
was acquired by Cerprobe Corporation in April 1995. Since the acquisition, he
has served as a director of Cerprobe. Mr. Fresh served as Chairman of the Board
and CEO of Satellite Image System, LLC, a former subsidiary of Magellan
Technology, Inc. and served as Chairman of the Board for Fresh Technology, a
PC-based software company. Between 1996 and 1998, Mr. Fresh served on the Board
of Directors of Sento Technical Innovation Corporation, a publicly held software
company. He is a past director of EFI Electronics Corporation, a publicly traded
manufacturer and marketer of surge suppression equipment for computer,
industrial, medical and communication devices. Mr. Fresh founded EFI in 1981 and
subsequently served as its chairman and president until 1986. Mr. Fresh is
currently chairman, president and owner of Orem Tek Development Corporation, a
consulting and business park development corporation. He is currently Chairman
of the Board and a senior consultant to BrowZ.com.

Reginald Hughes was elected to the Board of Directors in 1996. He is a
Vice President for BioMeridian International, Inc., and a director of Magellan
Technology, Inc. He co-founded SkyHook in 1995. From 1981 to 1994, he served in
various capacities with Eyring Corporation, a high tech firm in Provo, Utah,
specializing in defense contracting. While with Eyring, Mr. Hughes was promoted
to the positions of Director and Vice President of Finance. Prior to joining
Eyring Corporation, Mr. Hughes had a successful career as a Hospital
Administrator.

Darwin D. Millet has been a member of the Board since 1994. He is the
past President and Chief Operating Officer of SIS, LLC. Prior to coming to SIS,
Mr. Millet served as Executive Vice President of Layton Construction Company,
Inc. (LCC) from 1992 to 1993, and as Chief Financial Officer from 1986 to 1991.
He now serves the Company as President of BioMeridian Corporation.

Richard I. Winwood joined the Board of Directors of the Company in
1995. Mr. Winwood is involved in several aviation business concerns. In 1983,
Mr. Winwood co-founded Franklin Covey Co. and subsequently served as its
Executive Vice President and Chief Operating officer. Franklin Covey is a
multinational time management training and products company traded on the New
York Stock Exchange. Prior to co-founding Franklin Covey, Mr. Winwood had a
successful career in the computer services industry, working with General
Electric Co., Automatic Data Processing, Inc. and Computer Sciences Corporation.

Irving Monclova has served on the Board of Directors since August 1998.
He joined Magellan in late 1996. Mr. Monclova began his career in the military.
He had tours in Europe, Korea, Republic of Vietnam, Panama and Puerto Rico. He
culminated his military career as Commander of readiness programs of the reserve
forces. In 1982, he joined Serv-Air, Inc. In 1989, he was promoted to Vice
President of Operations and Maintenance and transferred to Headquarters,
Serv-Air, Inc., Greenville, Texas. In January 1993, he was promoted to the
position of Vice President and Chief of Special Operations Programs.

Robert C. Greenberg joined the Company as a result of the acquisition
of BTI in September 1999. He has a Ph.D. in Biochemistry, Doctorate of
Chiropractic, Diplomat in Acupuncture and advanced degrees in both chemistry and
biology. He is the inventor of the BTA S-2000 and the founder of BTI. He now
serves as Senior Vice President of Research and Development.

Stephen William Fresh, the son of William A. Fresh, joined the Company
in November 1997 as the Managing Director of International Sales. Prior to that
time, he served as the Director of Worldwide Marketing for Sento Corporation. He
has more than 20 years of sales and marketing management experience with hi-tech
companies and he now serves as Vice President of Marketing.

Joe Galloway now serves as Vice President of Business Relations &
Compliance. He was a cofounder of BioSource. Prior to that, he served as a
member of the Artificial Heart Research team, Salt Lake City, Utah as a senior
technician specialist. He also served as the supervisor of the test department
at Evans and Sutherland. Mr. Galloway has a degree in electronic technology.

COMMITTEES AND MEETINGS:

The Board of Directors met seven (7) times during the 1999 fiscal year.
Each of the directors attended at least 75% of the meetings of the Board of
Directors and of the committees on which he served.

The Board of Directors maintains standing Audit and Compensation
Committees. The members of the Audit Committee are William A. Fresh and Darwin
Millet. The Committee met one (1) time during the fiscal year ended December 31,
1999. Its functions are 1) to review and approve the selection of, and all
services performed by, the Company's independent auditor; 2) to review the
Company's internal controls; and 3) to review accounting and financial controls
of the Company.

The members of the Compensation Committee are William A. Fresh and
Irving Monclova. The Committee met four (4) times during the fiscal year ended
December 31, 1999. Its functions are to determine and approve compensation
arrangements for executive officers of the Company and to oversee any stock
option, stock award or other employee benefit plan or arrangement established by
the Board of Directors for the benefit of executive officers, management and
employees of the Company.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING:

Section 16(a) of the Exchange Act requires the Company's executive
officers and directors and persons who own more than 10% of the Common Stock, to
file with the U.S. Securities and Exchange Commission (the "Commission") initial
reports of ownership and reports of changes in ownership of the Common Stock and
other securities from which shares of the Common Stock may be derived. Such
directors, officers and 10% owners are required by Commission regulations to
furnish the Company with copies of all Section 16(a) reports they file. Based
solely on a review of the copies of such reports received by the Company, the
Company believes that the following reports were not filed on a timely basis:
Form 3 for William Crouch due 2/6/99 was filed on 2/10/99; Form 3 for Irving
Monclova due in April 1998 was filed on 10/4/99; Form 5 for William A. Fresh due
2/14/99 was filed on 2/2/00; Form 5 for Reva Luana Fresh due 2/14/99 was filed
on 2/2/00; Form 5 for WAF Investment Company due 2/14/99 was filed on 2/2/00.

ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE:

The following table sets forth the compensation paid to the Company's
Chief Executive Officer and President of BioMeridian Corporation (BC) for the
three fiscal years ended December 31, 1999. No executive officer of the Company
received salary and bonus compensation in excess of $100,000 for the year ended
December 31, 1999. The Chairman and CEO of the Company has agreed to serve
without salary compensation. In April 1998, the Board granted a stock option to
the Company's CEO for 150,000 shares of common stock. In April 1997 the Board
granted a stock option to the Company's CEO for 250,000 shares of common stock.
In December 1999, the Board granted a stock option to the President of BC for
300,000 shares of common stock which are exercisable based on the accomplishment
of certain measures during the year 2000.

- - -------------------------------------- ------------------------------------------------------- ---------------------
Long-term
Annual Compensation Compensation
- - -------------------------------------- ------------------------------------------------------- ---------------------
Other
Annual Securities
Name & Principal Position Year Salary Bonus Compensation Underlying Options
- - -------------------------------------- ------------- ------------- ------------- ------------- ---------------------
<S> <C> <C> <C> <C> <C>
William A. Fresh, CEO 1999 0 0 0 0
1998 0 0 0 150,000
1997 0 0 0 250,000
Darwin D. Millet 1 1999 120,000 0 0 300,000
1998 0 0 0
1997 0 0 0
- - -------------------------------------- ------------- ------------- ------------- ------------- ---------------------
</TABLE>

Option Grants in Last Fiscal Year

The following table sets forth the options granted by the Company to executive
officers in the last fiscal year.

<TABLE>
<CAPTION>
- - -------------------------------------- ----------------- -------------------- ----------------- --------------------
Percent of Options
Granted to
Number of Employees in Exercise Price
Name & Principal Position Options Granted Fiscal Year per share Expiration Date
- - -------------------------------------- ----------------- -------------------- ----------------- --------------------
<S> <C> <C> <C> <C>
Darwin D. Millet 300,000 16.2% $ .50 Dec 2006
President

Reginald Hughes 150,000 8.1% $ .50 Dec 2006
Vice President

Joe Galloway 75,000 4.0% $ .50 Dec 2006
Vice President

Blair K. Blacker 2 300,000 16.2% $ .50 Jan 2006
Vice President

Douglas M. Angus 2 200,000 10.8% $ .50 Jan 2006
Vice President
- - -------------------------------------- ----------------- -------------------- ----------------- --------------------
</TABLE>

Aggregated Option Exercises in Last Fiscal Year and Year End Option Values

The following table sets forth the aggregate value of options to acquire shares
of the Common Stock held by the Chief Executive Officer on December 31, 1999.

<TABLE>
<CAPTION>
- - ------------------------------------ ----------------------------------------- ----------------------------------------
Value of Unexercised In-the-Money
Name & Principal Position Number of Unexercised Options @ FYE 1999 Options @ FYE 1999 3
- - ------------------------------------ ----------------------------------------- ----------------------------------------
Unexercisable Exercisable Unexercisable Exercisable
- - ------------------------------------ --------------------- ------------------- --------------------- ------------------

<S> <C> <C> <C> <C>
William A. Fresh 0 400,500 $0 $0
Darwin D. Millet 300,000 50,500 $0 $0
Reginald Hughes 150,000 0 $0 $0
Stephen William Fresh 0 125,000 $0 $0
- - ------------------------------------ --------------------- ------------------- --------------------- ------------------
</TABLE>

1 This individual began employment with the Company in July 1999 and currently
receives the annual salary indicated.

2 Individual has terminated employment with the Company as a result of the
disposition and sale of SkyHook and no longer serves as an executive officer of
the Company.

3 Calculated based on the difference between the exercise price and the price of
a share of the Company's Common Stock on December 31, 1999.

DIRECTOR COMPENSATION: Directors of the Company are currently paid no
fee for their service on the Board of Directors. Directors are also not
currently paid a fee for, or reimbursed for expenses incurred with respect to,
attendance at board or committee meetings.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table lists the number of shares of Common Stock
beneficially owned as of December 31, 1999 by each person known by the Company
to be the beneficial owner of more than five percent (5%) of the Common Stock,
by each director of the Company, by the Chief Executive Officer, and by all
officers and directors of the Company as a group. Unless noted otherwise, each
person named has sole voting and investment power with respect to the shares
indicated. The percentages set forth have been computed based on 29,386,490
shares, which is the number of shares of the Common Stock outstanding plus
exercisable warrants and options held by officers and directors, excluding
treasury shares held by the Company, outstanding as of December 31, 1999.

<TABLE>
<CAPTION>
- - -------------------------------------------------------------- ----------------------------------------------------
Beneficial Ownership as of December 31, 1999
- - -------------------------------------------------------------- ----------------------- ----------------------------
Number of shares Percentage of class
Name & Address of Beneficial Owner outstanding
- - -------------------------------------------------------------- ----------------------- ----------------------------
<S> <C> <C>
William A. Fresh 9,616,172 4 32.7%
176 Emeraud Drive
St. George, Utah 84770
</TABLE>

4 Includes 4,450,560 shares held by WAF Investment Company, a Utah limited
partnership, of which Mr. Fresh is a general partner; 1,133,332 shares held by
Reva Luana Fresh, spouse; 50,000 shares held by the William A. and Reva Luana
Fresh Family Living Trust; 645,237 shares held by William A. & Reva Luana Fresh
Charitable Remainder Trust, 60,000 shares held in trusts in which Reva Luana
Fresh is the custodian; 75,000 shares held in trust in which Mr. Fresh is the
custodian; 316,667 shares held by Orem Tek Development, a Utah limited
partnership, of which Mr. Fresh is a general partner; 808,892 shares issuable
upon the exercise of currently exercisable warrants and 400,500 shares issuable
upon presently exercisable options.

<PAGE>

<TABLE>

- - ------------------------------------------------------------ ----------------------- ----------------------------
<S> <C> <C>
Reginald Hughes 408,750 5 1.4%
1482 East 920 South
Provo, Utah 84606

Darwin D. Millet 258,834 6 .9%
12090 South Woodridge Road
Sandy, Utah 84124

Richard I. Winwood 3,647,715 7 12.4%

Irving Monclova 298,500 8 1.0%

Dr. Robert C. Greenberg 1,359,748 4.6%

Stephen William Fresh 183,333 9 .6%

Joe Galloway 275,000 10 .9%

Ballard Investments 1,874,956 11 6.4%

All officers and directors as a group (8 persons) 16,048,052 54.6%
- - ------------------------------------------------------------ ----------------------- ----------------------------
</TABLE>

5 This amount includes 3,750 shares issuable upon the exercise of currently
exercisable warrants. The shares are held by a Utah limited liability
partnership of which Mr. Hughes is a general partner.

6 Includes 67,167 shares issuable upon currently exercisable warrants or
options.

7 The Richard I. Winwood Revocable Living Trust holds 3,501,531 shares. This
amount also includes 146,184 shares issuable upon the exercise of currently
exercisable warrants.

8 Includes 285,000 shares issuable upon currently exercisable options.

9 Includes 125,000 shares issuable upon currently exercisable options.

10 Includes 75,000 shares issuable upon currently exercisable options.

11 This amount includes 185,837 shares issuable upon the exercise of currently
exercisable warrants. Craig Ballard, a general partner of Ballard Investments,
has the power to vote the shares and to make investment decisions with respect
to the shares on behalf of Ballard Investment.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

REVOLVING LINE OF CREDIT GUARANTEES:

The Company has entered into a revolving line-of-credit agreement. This
agreement is for a $3,000,000 line of credit. This line of credit bears interest
at a variable rate of prime plus 1.0% and matures on May 31, 2000. Inventory and
the personal guarantee of three individuals, including the Company's Chairman of
the Board, a director, and a major shareholder, jointly and severally personally
guarantee this line of credit. As of December 31, 1999 the line of credit had an
outstanding balance $2,496,158. This line of credit has been used to fund the
operations of the Company.

NOTES PAYABLE TO SHAREHOLDERS:

During 1998 a Director/Shareholder who also serves as the Chairman of
the Board loaned $2,590,000 to the Company through either himself or entities in
which he held a controlling interest. The notes bear interest at 12% and are
payable upon demand. During 1998, $1,150,000 of these notes payable was
converted to common stock of the Company. In addition, the interest payable of
$37,906 was used by the Director/Shareholder to exercise warrants to purchase
common stock. As of December 31, 1998, a total of $1,740,000 of notes payable
was outstanding and payable to this shareholder.

During 1998 another Director/Shareholder converted $250,000 of notes
payable to common stock of the Company. In addition, the interest payable of
$8,645 was used by the Director/Shareholder to exercise warrants to purchase
common stock.

NOTES PAYABLE:

As of December 31, 1998, the Company owed $27,693 to a government
entity. Terms of the note include interest at 8%, monthly installments of
$2,507. The note is secured by inventory and personal guarantees from a Director
and two individuals. The two individuals are former SkyHook officers; the
director is also an officer of one of the Company's subsidiaries.

<PAGE>

PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>

(a) EXHIBITS: The following documents are furnished as exhibits to this Form 10-KSB.

- - ---------------- ------------------------------------------------------- -------------------- --------------------
S-B Item Number Number of Options Granted Incorporated by Filed Herewith
Reference
- - ---------------- ------------------------------------------------------- -------------------- --------------------
<S> <C> <C>
3-1 Articles of Incorporation of the Company X 12
3-2 Bylaws of the Company X 13
3-3 Amendment to Articles of Incorporation approved March X 14
3-4 Amendment to Articles of Incorporation approved June X
21-1 Subsidiaries of the Company X
27-1 Financial Data X
- - ---------------- ------------------------------------------------------- -------------------- --------------------
</TABLE>

12 This exhibit was filed with the Commission as an exhibit to the Company's
Registration Statement on Form S-18, filed on September 20, 1989, and is
incorporated herein by reference.

13 This exhibit was filed previously with the Commission as an exhibit to the
Company's Annual Report on Form 10-KSB for the fiscal year ending December 31,
1992, filed on October 15, 1993.

14 This was incorporated with the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1995 filed on March 29, 1996.

(b) REPORTS ON FORM 8-K:

The Company filed a report on Form 8-K dated September 17, 1999 on
October 1, 1999 reporting the acquisition of and merger with Biological
Technologies International, Inc. and Magellan Technology, Inc. The entire
Agreement and Plan of Merger was filed as part of the report.

The Company filed a report on Form 8-K dated June 30, 1998 and a Report
on Form 8-K/A dated August 14, 1998 reporting the acquisition and financial
position of Digital Health, LLC. The financial statements of Digital Health, LLC
were filed as part of the report.

<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

MAGELLAN TECHNOLOGY, INC.

By: /s/ William A. Fresh
--------------------
William A. Fresh, Chairman & C.E.O.

Date: March 30, 2000

In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

Name Position Date

/s/ William A. Fresh Chairman of the Board and March 30, 2000
- - --------------------------- Chief Executive Officer
William A. Fresh (Principal Executive
and Financial Officer)

/s/ Reginald Hughes Director March 30, 2000
- - ---------------------------
Reginal Hughes

/s/ Darwin D. Millet Director March 30, 2000
- - ---------------------------
Darwin D. Millet

/s/ Richard I. Winwood Director March 30, 2000
- - ---------------------------
Richard I. Winwood

/s/ Irving Monclova Director March 30, 2000
- - ---------------------------
Irving Monclova

EXHIBIT 3-4

AMENDMENT TO ARTICLES OF INCORPORATION APPROVED JUNE 6, 1998.

ARTICLES OF AMENDMENT

OF THE

ARTICLES OF INCORPORATION

MAGELLAN TECHNOLOGY, INC.

Pursuant to the provisions of the Utah Revised Business Corporation
Act, the undersigned corporation does hereby adopt the following Articles of
Amendment to its Articles of Incorporation:

1. The name of the corporation is Magellan Technology, Inc.

2. The text of each amendment adopted is as follows:

(a) The existing Article IV of the Articles of Incorporation
is hereby deleted and replaced in its entirety as follows:

ARTICLE IV - SHARES

The total number of shares the Company has authority
to issue is fifty million (50,000,000) shares of Common Stock.
All shares of the Company are of the same class, have the same
rights and preferences and have a par value of $0.0002. All
shares issued by the Company shall be fully paid when issued
and not subject to further calls or assessments. The
authorized shares of the Company, including treasury shares,
may be issued at such time, upon such terms and conditions and
for such consideration as the board of directors may
determine. The Company may purchase its own shares to the
extent of unreserved and unrestricted capital surplus
available therefor.

3. The foregoing amendment to the Articles of Incorporation was adopted
by the Board of Directors of the Company on June 6, 1998, and by the
shareholders of the Company on August 25, 1998.

4. The foregoing amendment to the Articles of Incorporation was not
adopted by the Board of Directors without shareholder action.

<PAGE>

5. The foregoing amendment to the Articles of Incorporation was
approved by the shareholders as follows:

a) the designation of the voting group which voted on
the amendment was Common Stock; the number of shares
of Common Stock outstanding and the number of votes
entitled to be cast at the meeting by the Common
Stock voting group was 17,533,537; the number of
votes of the Common Stock voting group indisputably
represented at the meeting was 12,912.441; and

b) the total number of votes cast for the amendment by
the Common Stock voting group was 12,844,607, and no
votes were cast against the amendment by the Common
Stock voting group.

DATED the 6th day of July, 1999.

MAGELLAN TECHNOLOGY, INC.,
a Utah corporation

By: /s/ Douglas M. Angus
--------------------------------------------
Douglas M. Angus, Secretary

EXHIBIT 21

LIST OF SUBSIDIARIES

1. BioMeridian Corporation, a Utah corporation (previously ProHealth, Inc.)

3. BioMeridian International, Inc., a Utah corporation

4. BTI Acquisition Corporation, a Utah corporation

5. Magellan Service Company, a Utah corporation

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
MAGELLAN TECHNOLOGY, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 280,199
<SECURITIES> 0
<RECEIVABLES> 1,441,875
<ALLOWANCES> 317,900
<INVENTORY> 135,731
<CURRENT-ASSETS> 4,057,088
<PP&E> 329,085
<DEPRECIATION> 123,247
<TOTAL-ASSETS> 6,299,074
<CURRENT-LIABILITIES> 6,136,009
<BONDS> 155,850
0
0
<COMMON> 5,495
<OTHER-SE> 1,720
<TOTAL-LIABILITY-AND-EQUITY> 6,299,074
<SALES> 7,601,404
<TOTAL-REVENUES> 7,601,404
<CGS> 1,292,015
<TOTAL-COSTS> 6,917,673
<OTHER-EXPENSES> (462,198)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 941,667
<INCOME-PRETAX> (1,087,753)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,087,753)
<DISCONTINUED> 1,537,976
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 450,223
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02

</TABLE>