UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 0-18271
MAGELLAN TECHNOLOGY, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Utah 87-0467614
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12411 South 265 West, Suite F, Draper, Utah 84020
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(Address of principal executive offices)
(Zip Code)
(801) 501-7517
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(Registrant's telephone number, including area code)
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(Former Name, former address and former fiscal year,
if changed since last report)
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 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 _____
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Number outstanding at June 30, 2000: 27,576,997 shares
Class: Common Stock, $.0002 par value
<PAGE>
FORM 10-QSB
Financial Statements and Schedules
Magellan Technology, Inc.
For the Quarter Ended June 30, 2000
The following financial statements and schedules of the registrant and its
consolidated subsidiaries are submitted herewith:
PART I - FINANCIAL INFORMATION
--------------------------------
Item 1. Financial Statements
Condensed consolidated balance sheet for June 30, 2000 3
Condensed consolidated statement of operations for
the three months and six months ended June 30, 2000
and 1999 4
Condensed statement of cash flows for the six months ended
June 30, 2000 and 1999 5
Notes to condensed consolidated financial statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
-----------------------------
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other information 11
Item 6(a) Exhibits 11
Item 6(b) Reports on Form 8-K 11
2
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
Jun 30, 2000
ASSETS (Unaudited)
--------------
<S> <C>
Current Assets:
Cash $ 73,210
Accounts Receivable 1,363,956
Notes Receivable
Investment in Securities 1,600,000
Inventories 78,884
Prepaid Expenses 23,761
Other Current Assets 36,867
--------------
Current Assets 3,176,678
--------------
Property and Equipment, net 196,001
Goodwill, net 495,903
Licenses & Technology, net 1,199,609
--------------
Total Assets $ 5,068,191
==============
LIABILITIES
Current Liabilities:
Accounts Payable $ 601,831
Accrued Personnel Costs 115,453
Accrued Liabilities 288,214
Accrued Interest Payable 245,179
Line of Credit 1,396,158
Related Party Notes Payable 2,111,048
Notes Payable 377,804
Current Portion of long-term debt 4,463
--------------
Current Liabilities 5,140,150
Long-Term Debt 9,185
--------------
Total Liabilities 5,149,335
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STOCKHOLDERS' EQUITY
Common Stock, par value $.0002 per share;
50,000,000 shares authorized, 27,576,997 shares
issued and outstanding as of June 30, 2000. 5,515
Additional Paid-in Capital 14,248,204
Accumulated Deficit (14,195,505)
Current Earnings/(Loss) (139,358)
--------------
Total Stockholders' equity (81,144)
--------------
Total Liabilities and Stockholders' Equity $ 5,068,191
==============
</TABLE>
3
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 1,538,335 $ 1,999,553 $ 3,332,280 $ 3,672,922
Cost of Sales 228,327 377,638 497,182 675,059
------------- ------------- ------------- -------------
Gross Margin 1,310,008 1,621,915 2,835,098 2,997,863
Variable Selling Costs 194,128 277,668 437,360 573,014
------------- ------------- ------------- -------------
Contribution Margin 1,115,880 1,344,247 2,397,738 2,424,849
Operating Expenses:
Administration & Finance 375,802 295,888 730,780 641,005
Customer Support 36,453 69,457 73,688 104,619
Marketing 73,552 82,935 84,071 82,935
Operations & Engineering 100,528 96,071 209,217 242,172
Sales - Domestic 242,372 437,811 506,072 1,089,146
Sales - International 55,158 86,792 112,484 108,100
Training & Education 122,507 306,515 251,458 552,702
Depreciation Expense 15,782 14,235 31,056 27,573
Amortization of Licenses & Goodwill 156,073 156,073 312,145 308,630
------------- ------------- ------------- -------------
Total Operating Expenses 1,178,227 1,545,777 2,310,971 3,156,882
------------- ------------- ------------- -------------
Income/(Loss) from Operations (62,347) (201,530) 86,767 (732,033)
Other (Income)/Expense:
Other (Income)/Expense (328) (8,254) (14,194) (8,254)
Interest Expense 116,927 143,959 240,319 318,209
------------- ------------- ------------- -------------
Net Income/(Loss) before Discontinued Operations (178,946) (337,235) (139,358) (1,041,988)
Loss from Discontinued Operations 274,670 477,176
------------- ------------- ------------- -------------
Net Income/(Loss) before Income Taxes (178,946) (611,905) (139,358) (1,519,164)
Provision for Income Taxes
------------- ------------- ------------- -------------
Net Income/(Loss) $ (178,946) $ (611,905) $ (139,358) $ (1,519,164)
============= ============= ============= =============
Net Income/(Loss) per share $ (0.01) $ (0.03) $ (0.01) $ (0.07)
============= ============= ============= =============
Weighted average shares outstanding 27,510,459 22,329,973 27,510,459 22,329,973
============= ============= ============= =============
</TABLE>
4
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30
2000 1999
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income/(Loss) s $ (139,358) $ (1,519,164)
Adjustments to Reconcile Net Income/(Loss)
to Net Cash used in Operating Activities:
Provision for Bad Debt 15,000 9,400
Issusance of common stock for services 51,000 30,242
Depreciation Expense 31,056 27,573
Amortization of Licenses & Goodwill 312,145 308,630
(Gain)/Loss on sale of assets (1,013)
Net assets of discontinued operations (209,824)
(Increase)/Decrease in:
Accounts Receivable (255,581) (496,120)
Inventory 56,847 107,122
Prepaid Expenses 2,545 (39,252)
Other Current Assets (16,900) 18,006
Increase/(Decrease) in:
Accounts Payable (214,782) 132,730
Accrued Personnel Costs 30,066 (75,987)
Accrued Liabilities 36,737 127,969
Accrued Interest Payable 24,638 97,886
------------- -------------
Net Cash Provided by/(Used in) Operating Activities (66,587) (1,481,802)
------------- -------------
Cash Flows from Investing Activities:
Purchase of Property & Equipment (21,219) (37,277)
Notes Receivable 900,000
Sale of Property & Equipment 3,804
------------- -------------
Net Cash Provided by/(Used in) Investing Activities 878,781 (33,473)
------------- -------------
Cash Flows from Financing Activities:
Issuance of Common Stock 308,338
Proceeds from Related Party Notes 1,032,899 595,000
Principal Payments on Related Party Notes (604,899) (345,000)
Proceeds from Notes Payable 925,000
Principal Payments on Notes Payable (344,950) (25,000)
Proceeds from Line of Credit 13,843
Principal Payments on Line of Credit (1,100,000) (50,000)
Proceeds from Long-term Debt 18,798
Principal Payments on Long-term Debt (2,233) (59,622)
------------- -------------
Net Cash Provided by/(Used in) Financing Activities: (1,019,183) 1,381,357
------------- -------------
Net Decrease in cash (206,989) (133,918)
Cash, Beginning of Period 280,199 155,617
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Cash, End of Period $ 73,210 $ 21,699
============= =============
</TABLE>
5
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30
2000 1999
------------- -------------
<S> <C> <C>
Cash paid during the period for:
Interest $ 215,682 $ 236,079
============= =============
Income Taxes $ - $ -
============= =============
</TABLE>
Non-cash Financing and Investing Activities:
During the quarter ended March 31, 2000, the company converted accrued
interest payable to a shareholder and director to a note payable in the amount
of $98,048.
During the quarter ended June 30, 2000, the company issued 100,000 and
2,000 shares of common stock for services to individuals.
During the quarter ended March 31, 1999, the Company converted
$1,900,000 of notes payable and $11,033 of accrued interest payable into common
stock.
During the quarter ended March 31, 1999, the Company issued 250,000
shares of common stock in exchange for the rights to certain technology known as
the P.I.C.E. Technology. The value of this transaction was $140,625.
During the quarter ended June 30, 1999, the Company converted certain
accounts payable balances to certain vendors to a note payable. The amount
converted was $23,769.
During the quarter ended June 30, 1999, the Company converted an
accounts payable balance to a certain vendor to common stock and a note payable.
The amount converted was $25,000 and 39,313 respectively.
During the quarter ended June 30, 1999, the Company applied an accounts
receivable balance from a customer in the amount of $47,600 to the outstanding
amount of a note payable to this same individual.
During the quarter ended June 30, 1999, the Company converted a note
receivable balance from a certain entity in the amount of $1,600,000 to an
investment of 290,909 shares of convertible preferred stock in the same entity.
6
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(1) The unaudited condensed consolidated financial statements include the
accounts of Magellan Technology, Inc. ("Magellan") and its wholly owned
subsidiaries, BioMeridian Corporation [formerly known as ProHealth,
Inc. and prior to that known as Satellite Image Systems, Inc. (SIS,
Inc.) and SIS Jamaica, LTD (SIS Jamaica)], BioMeridian International,
Inc. ("BioMeridian") (formerly known as BioSource, Inc.) and BTI
Acquisition Corp ("BTI"). On February 16, 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 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.
(2) The unaudited condensed consolidated financial statements include all
adjustments, consisting of normal recurring items, which are, in the
opinion of management, necessary to present fairly the financial
position of the company as of June 30, 2000 and the results of
operations for the three months and six months ended June 30, 2000 and
1999 and cash flows for the six months ended June 30, 2000 and 1999.
The results of operations for the three months ended June 30, 2000 are
not necessarily indicative of quarterly results to be expected for the
remainder of the year.
(3) The amount of the loss per share is based on the weighted average
number of shares outstanding at June 30, 2000 and 1999, respectively.
(4) 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.
Effective December 31, 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
7
<PAGE>
paid and received against the note payable and the remaining $2,000,000
was originally intended to 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 was intended to 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 remained due and payable on or before May 31, 2000. On
May 5, 2000, the terms of repayment of the note were again amended. The
March 31, 2000 payment was received in the amount of $100,000 and a
payment in the amount of $300,000 was received on April 30, 2000
leaving a total remaining balance due of $1,600,000. Effective June 30,
2000, this remaining balance due was converted to 290,909 shares of EFT
Series B Convertible Preferred Stock. As interest payments, EFT shall
issue to Magellan a specified number of additional shares of Series B
Convertible Preferred Stock at the end of each of the next eleven
months beginning on July 31, 2000 if all of these preferred shares have
not been sold by Magellan.
(5) On May 19, 1998 the company entered into a $3,000,000 revolving line of
credit agreement. Obligations under prior separate line of credit
agreements for $750,000 and $745,000 were retired with proceeds from
the new revolving line of credit. During the six months ended June 30,
1999 the Company made no additional borrowings under this revolving
line of credit. This revolving line of credit 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. On December 15, 1999, this line of credit was converted to
a term loan whereby 5 monthly payments in the amount of $500,000
commencing December 31, 1999 and concluding on April 30, 2000 followed
by a final payment of $496,158 on May 31, 2000 will be made. On
February 29, 2000, a modification agreement was entered into whereby
the monthly payments to be received pursuant to this term loan were
changed. Under the new agreement, monthly payments in the amounts of
$100,000, 100,000, $500,000 and $1,296,158 commencing February 29, 2000
would replace the monthly payments under the previous agreement. On May
22, 2000, a new modification agreement was entered into whereby the
monthly payments to be received pursuant to this term loan were
changed. Under the new agreement, three payments in the amount of
$100,000 each followed by one in the amount of $1,196,158 commencing
May 31, 2000 would replace the monthly payments under the previous
agreement. As of June 30, 2000 the Company had an outstanding balance
of $1,396,158 under this revolving line of credit.
(6) During the six months ended June 30, 2000, the Company borrowed a net
amount of $840,000 from the Company's Chief Executive Officer, or from
entities controlled by this individual, under three separate $100,000
unsecured note payable agreements, one $40,000 unsecured note payable
agreement, two $50,000 unsecured note payable agreements, one $150,000
unsecured note payable agreement, and one $250,000 unsecured note
payable agreement. Each note payable bears interest at 12% and is
payable upon demand.
8
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Six-month period ended June 30, 2000 compared to the six-month period ended June
30, 1999.
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.
Beginning January 1, 2000, the operations of BioMeridian and BTI were combined
and integrated into BioMeridian. For the six months ended June 30, 2000,
BioMeridian achieved sales revenues of $3,332,280 which resulted in operating
income of $86,767 compared with sales revenues of $3,672,922 which resulted in
an operating loss of $732,033 for the six months ended June 30, 1999. The
decrease in sales is the result of the transition process from independent sales
representatives to hiring and training several new sales personnel within the
company. The increase in operating profit is primarily due to management's
continuous focus on the healthcare industry and commitment to efficient
operations.
Three-month period ended June 30, 2000 compared to the three-month period ended
June 30, 1999.
Beginning January 1, 2000, the operations of BioMeridian and BTI were combined
and integrated into BioMeridian. For the three months ended June 30, 2000,
BioMeridian achieved sales revenues of $1,538,335 which resulted in an operating
loss of $62,347 compared with sales revenues of $1,999,553 which resulted in an
operating loss of $201,530 for the three months ended June 30, 1999. The
decrease in sales is the result of the transition process from independent sales
representatives to hiring and training several new sales personnel within the
company. The increase in operating profit is primarily due to management's
continuous focus on the healthcare industry and commitment to efficient
operations.
Liquidity and Capital Resources
On May 19, 1998 the company entered into a $3,000,000 revolving line of credit
agreement. Obligations under prior separate line of credit agreements for
$750,000 and $745,000 were retired with proceeds from the new revolving line of
credit. During the six months ended June 30, 1999 the Company made no additional
borrowings under this revolving line of credit. This revolving line of credit 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. On December 15, 1999, this line of credit was converted to a term
loan whereby 5 monthly payments in the amount of $500,000 commencing December
31, 1999 and concluding on April 30, 2000 followed by a final payment of
$496,158 on May 31, 2000 will be made. On February 29, 2000, a modification
agreement was entered into whereby the monthly payments to be received pursuant
to this term loan were changed. Under the new agreement, monthly payments in the
amounts of $100,000, 100,000, $500,000 and $1,296,158 commencing February 29,
9
<PAGE>
2000 would replace the monthly payments under the previous agreement. On May 22,
2000, a new modification agreement was entered into whereby the monthly payments
to be received pursuant to this term loan were changed. Under the new agreement,
three payments in the amount of $100,000 each followed by one in the amount of
$1,196,158 commencing May 31, 2000 would replace the monthly payments under the
previous agreement. As of June 30, 2000 the Company had an outstanding balance
of $1,396,158 under this revolving line of credit.
During the six months ended June 30, 2000, the Company borrowed a net amount of
$840,000 from the Company's Chief Executive Officer, or from entities controlled
by this individual, under three separate $100,000 unsecured note payable
agreements, one $40,000 unsecured note payable agreement, two $50,000 unsecured
note payable agreements, one $150,000 unsecured note payable agreement, and one
$250,000 unsecured note payable agreement. Each note payable bears interest at
12% and is payable upon demand.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. 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 2. Changes in Securities: None.
Item 3. Defaults upon Senior Securities: None.
Item 4. Submission of Matters to a Vote of Security Holders: None.
Item 5. Other information: None.
Item 6. Exhibits and Reports on Form 8-K
A report on Form 8-K, which reported the sale and disposition of
Magellan's wholly owned subsidiary SkyHook Technologies, Inc., was
filed on January 14, 2000.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MAGELLAN TECHNOLOGY, INC.
-------------------------
(Registrant)
\s\William A. Fresh August 21, 2000
------------------------ -----------------
William A. Fresh Date
Chairman and Chief Executive Office
12
