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 March 31, 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
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12411 South 265 West, Suite F, Draper, Utah 84020
---------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(801) 495-2211
---------------
(Registrant's telephone number, including area code)
-------------------------------------------------
(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 March 31, 2000: 27,474,997 shares
Class: Common Stock, $.0002 par value
<PAGE>
FORM 10-QSB
Financial Statements and Schedules
Magellan Technology, Inc.
For the Quarter Ended March 31, 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
March 31, 2000 and year-end for
December 31, 1999 3
Condensed consolidated statement of operations
for the three months ended March 31, 2000 and
1999 4
Condensed statement of cash flows for the three
months ended March 31, 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
<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 March 31, 2000 and the results of
operations for the three months ended March 31, 2000 and 1999 and cash
flows for the three months ended March 31, 2000 and 1999. The results
of operations for the three months ended March 31, 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 March 31, 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
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
7
<PAGE>
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. 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. This balance due will be converted to EFT preferred stock.
(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 three months ended March
31, 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. As of
March 31, 2000 the Company had an outstanding balance of $1,796,158
under this revolving line of credit.
(6) During the three months ended March 31, 2000, the Company borrowed a
net amount of $490,000 from the Company's Chief Executive Officer, or
from entities controlled by this individual, under two separate
$100,000 unsecured notes payable agreements, one $40,000 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
Three-month period ended March 31, 2000 compared to the three-month period ended
March 31, 1999.
Results of 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.
Beginning January 1, 2000, the operations of BioMeridian and BTI were combined
and integrated into BioMeridian. For the three months ended March 31, 2000,
BioMeridian achieved sales revenues of $1,793,945 which resulted in operating
income of $211,618 compared with sales revenues of $1,673,368 which resulted in
an operating loss of $497,379 for the three months ended March 31, 1999. The
increase in sales is the result of a refined sales approach and persistent
effort to cultivate new markets. The increase in operating profit is primarily
due to management's focus on the healthcare industry and commitment to efficient
operations.
Results of SkyHook
As discussed in note 4, the Company completed the disposition and sale of
SkyHook to EFT effective December 31, 1999, and, therefore, there are no
operating results for the three months ended March 31, 2000. However, for the
three months ended March 31, 1999, SkyHook incurred an operating loss of
$202,506.
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 three months ended March 31, 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. As of
9
<PAGE>
March 31, 2000 the Company had an outstanding balance of $1,796,158 under this
revolving line of credit.
During the three months ended March 31, 2000, the Company borrowed a net amount
of $490,000 from the Company's Chief Executive Officer, or from entities
controlled by this individual, under two separate $100,000 unsecured notes
payable agreements, one $40,000 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>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
Mar 31, 2000
ASSETS (Unaudited)
-------------
<S> <C>
Current Assets:
Cash $ 32,585
Accounts Receivable 1,264,951
Note Receivable 1,948,869
Inventories 90,375
Prepaid Expenses 43,058
Other Current Assets 33,267
--------------
Current Assets 3,413,105
--------------
Property and Equipment, net 207,529
Goodwill, net 547,288
Licenses & Technology, net 1,304,297
--------------
Total Assets $ 5,472,219
==============
LIABILITIES
Current Liabilities:
Accounts Payable $ 592,266
Accrued Personnel Costs 108,501
Accrued Liabilities 279,274
Accrued Interest Payable 195,609
Line of Credit 1,796,158
Related Party Notes Payable 1,961,048
Notes Payable 477,604
Current Portion of long-term debt 4,234
--------------
Current Liabilities 5,414,694
Long-Term Debt 10,722
--------------
Total Liabilities 5,425,416
--------------
STOCKHOLDERS' EQUITY
Common Stock, par value $.0002 per share;
50,000,000 shares authorized, 27,474,997 shares
issued and outstanding as of March 31, 2000. 5,495
Additional Paid-in Capital 14,197,225
Accumulated Deficit (14,195,505)
Current Earnings/(Loss) 39,588
--------------
Total Stockholders' equity 46,803
--------------
Total Liabilities and Stockholders' Equity $ 5,472,219
==============
</TABLE>
3
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
Mar 31, 2000 Mar 31, 1999
-------------- ---------------
<S> <C> <C>
Net Sales $ 1,793,945 $ 1,689,869
Cost of Sales 268,855 394,922
-------------- ---------------
Gross Margin 1,525,090 1,294,947
Variable Selling Costs 243,232 261,227
-------------- ---------------
Contribution Margin 1,281,858 1,033,720
Operating Expenses:
Administration & Finance 344,979 362,745
Customer Support 37,235 35,162
Marketing 10,518
Operations & Engineering 108,689 173,721
Sales - Domestic 263,700 832,909
Sales - International 67,326
Training & Education 128,950 148,686
Depreciation Expense 15,274 51,269
Amortization of Licenses & Goodwill 156,073 152,557
-------------- ---------------
Total Operating Expenses 1,132,744 1,757,049
-------------- ---------------
Income/(Loss) from Operations 149,114 (723,329)
Other (Income)/Expense:
Other (Income)/Expense (13,866) (330)
Interest Expense 123,392 184,260
-------------- ---------------
Net Income/(Loss) before Taxes 39,588 (907,259)
Provision for Income Taxes
-------------- ---------------
Net Income/(Loss) $ 39,588 $ (907,259)
============== ===============
Net Income/(Loss) per share 0.00 (0.04)
============== ===============
Weighted average shares outstanding 27,474,997 20,779,797
============== ===============
</TABLE>
4
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
Mar 31, 2000 Mar 31, 1999
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income/(Loss) $ 39,588 (907,259)
Adjustments to Reconcile Net Income/(Loss)
to Net Cash used in Operating Activities:
Provision for Bad Debt 10,000
Depreciation Expense 15,274 51,269
Amortization of Licenses & Goodwill 156,073 152,557
Stock Compensation 15,120
(Increase)/Decrease in:
Accounts Receivable (375,365) (303,911)
Notes Receivable 774,921
Inventory 45,355 3,180
Prepaid Expenses (16,752)
Other Current Assets (13,300) (37,379)
Increase/(Decrease) in:
Accounts Payable (224,346) 156
Accrued Personnel Costs 23,115
Accrued Liabilities 27,797 123,025
Accrued Interest Payable (24,933) 78,990
------------- -------------
Net Cash Used in Operating Activities 437,427 (824,252)
------------- -------------
Cash Flows from Investing Activities:
Purchase of Property & Equipment (16,965) (21,518)
------------- -------------
Net Cash Provided by/(Used in) Investing Activities (16,965) (21,518)
------------- -------------
Cash Flows from Financing Activities:
Issuance of Common Stock 3,700
Proceeds from Related Party Notes 490,000 1,125,000
Principal Payments on Related Party Notes (212,000) (325,000)
Principal Payments on Notes Payable (245,150) 13,843
Principal Payments on Line of Credit (700,000) (46,430)
Proceeds from Long-term Debt 18,798
Principal Payments on Long-term Debt (926) (47,782)
------------- -------------
Net Cash Provided by/(Used in) Financing Activities: (668,076) 742,129
------------- -------------
Net Decrease in cash (247,614) (103,641)
Cash, Beginning of Period 280,199 217,428
------------- -------------
Cash, End of Period $ 32,585 $ 113,787
</TABLE>
5
<PAGE>
MAGELLAN TECHNOLOGY, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
Mar 31, 2000 Mar 31,1999
Cash paid during the period for: ------------- -------------
<S> <C> <C>
Interest $ 148,325 105,270
========= =======
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 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 of certain technology known as the
P.I.C.E. Technology. The value of this transaction was $140,625.
6
<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 May 15, 2000
- ------------------------ -----------------
William A. Fresh Date
Chairman and Chief Executive Officer
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MAGELLAN
TECHNOLOGIES, INC. AND SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 32,585
<SECURITIES> 0
<RECEIVABLES> 1,572,111
<ALLOWANCES> 307,160
<INVENTORY> 90,375
<CURRENT-ASSETS> 3,413,105
<PP&E> 346,050
<DEPRECIATION> 138,521
<TOTAL-ASSETS> 5,472,219
<CURRENT-LIABILITIES> 5,414,694
<BONDS> 10,722
0
0
<COMMON> 5,495
<OTHER-SE> 41,308
<TOTAL-LIABILITY-AND-EQUITY> 5,472,219
<SALES> 1,793,945
<TOTAL-REVENUES> 1,807,811
<CGS> 268,855
<TOTAL-COSTS> 1,067,274
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123,392
<INCOME-PRETAX> 39,588
<INCOME-TAX> 0
<INCOME-CONTINUING> 39,588
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,588
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
