10KSB 1 mammatech83108.txt FORM 10-KSB (8/31/08) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB [X] Annual Report Pursuant To Section 13 or 15(D) Of The Securities Exchange Act Of 1934 For the fiscal year ended August 31, 2008 [ ] Transition Report under Section 13 or 15(D) Of The Securities Exchange Act Of 1934 For the transition period from _____ to _____ COMMISSION FILE NUMBER 0-11050 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB [X] Annual Report Pursuant To Section 13 or 15(D) Of The Securities Exchange Act Of 1934 For the fiscal year ended August 31, 2008 [ ] Transition Report under Section 13 or 15(D) Of The Securities Exchange Act Of 1934 For the transition period from _____ to _____ COMMISSION FILE NUMBER 0-11050 MAMMATECH CORPORATION --------------------- (Name of small business issuer in its charter) FLORIDA 59-2181303 ------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 930 NW 8th Avenue Gainesville, Florida 32601 -------------------------- (Address of principal executive offices) (Zip Code) 352-375-0607 ------------ Issuer's telephone number Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [ ] No [X] Securities registered under Section 12(b) of the Exchange Act: NOT APPLICABLE -------------- Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK ------------ Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 is not contained in this form, and no disclosure will be contained, to the best of registrant'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. [ ] State issuer's revenues for its most recent fiscal year: $446,933 State the aggregate market value of the company's common stock held by non-affiliates as of December 15, 2008 (based on a closing bid price of $0.03 per share): $72,536 State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 5,123,700 Shares of Common Stock outstanding as of December 15, 2007. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X] Transitional Small Business Disclosure Format (check one): Yes [ ] No [X] MAMMATECH CORPORATION FORM 10-KSB INDEX PART I Item 1. Description Of Business. 3 Item 2. Description Of Property. 6 Item 3. Legal Proceedings. 6 Item 4. Submission Of Matters To A Vote Of Security Holders. 6 PART II Item 5. Market For Common Equity And Related Stockholder Matters. 6 Item 6. Management's Discussion And Analysis Or Plan Of Operation. 7 Item 7. Financial Statements. 9 Item 8. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure. 18 Item 8A Controls And Procedures 18 Item 8B Other Information 18 PART III Item 9. Directors, Executive Officers, Promoters And Control Persons; Compliance With Section 16(A) Of The Exchange Act 20 Item 10. Executive Compensation 22 Item 11. Security Ownership Of Certain Beneficial Owners And Management 23 Item 12. Certain Relationships And Related Transactions 23 Item 13. Exhibits 24 Item 14. Principal Accountant and Services. 24 Signatures 26 2 PART I ITEM 1. DESCRIPTION OF BUSINESS OVERVIEW The Company is engaged in the sale of a patented breast tumor detection training system (the "MammaCare System"). Using life-like models of a human female breast, the MammaCare System is designed to train individuals to perform effective manual breast examination. The breast models contain simulated tumors of varying sizes, ranging from under 5mm. to over 10mm. They also contain material which simulates the normal nodularity, or "lumpiness," that characterizes most breast tissue. Although the examiner can never determine by feel alone whether a lump is benign or malignant, detection of tumors in the size range simulated by the models is important to early diagnosis of malignancies. Thus, the Company believes that by training women to palpate the breast model (and their own breasts) properly, the MammaCare System will lead to earlier detection of breast cancer and thus reduce morbidity and mortality due to this disease. The MammaCare System is sold in several forms, all of which contain at least one of the Company's patented breast models. Originally, a client was given private training after which she was provided with a take-home breast model and other materials. Now, the customer may view a video tape developed by the Company which teaches her the proper use of the model(s) and an extremely thorough examination technique. The practice model is designed to permit a woman to reinforce her lump detection skills periodically and serves as a comparative standard as she palpates her own breast. The Company's primary marketing strategy is designed to encourage sales through physicians, hospitals and diagnostic centers. Under this marketing approach, health care providers purchase the MammaCare Professional Learning System directly from the Company. The Company does not generate any revenues from the use of the Learning System by women, and the Company's sole revenues come from sales of MammaCare System and any accompanying training. The MammaCare Professional Learning System consists of a teaching model, a 24-minute video cassette, and practice kit. The teaching model is a patented breast model, designed to teach the difference between the feel of normal, nodular breast tissue and the feel of small lesions. The video cassette guides the learner through a series step-by-step exercises, first on the models, then on her own breast tissue. This is intended to lead to mastery level proficiency in palpation, search technique and lump detection. The practice kit contains a "take-home" breast model, a written review manual, a reminder calendar and a record booklet. A patient may purchase the practice kit portion of the MammaCare System for continued monthly reinforcement of her skills. Patients may view the videotape either in their homes or in the provider's facility. In either case, a patient should have her proficiency reviewed by a physician or certified MammaCare Specialist. By obtaining the MammaCare System from their own providers, patients are assured of receiving the full quality of MammaCare without the inconvenience and expense of a lengthy clinic visit. Further, it is anticipated that the cost of MammaCare to the public will be lower than historical prices charged for clinical services. However, while the Company has made providers aware of the need to keep the price of MammaCare reasonable, the providers are free to charge whatever fee they deem appropriate for the use of the MammaCare System. In light of the fact that most health insurance policies do not reimburse patients for any portion of their MammaCare expenses, no assurance can be given that the physicians will set prices low enough to attract patients. To date, there are over 1,000 physicians, hospitals and diagnostic centers throughout the United States providing the Learning System to women. No assurances can be given that the Company's marketing approach will be successful. For the Company to achieve profitability, MammaCare must be provided to an ever increasing number of women. RECENT DEVELOPMENTS During the year ended August 31, 2008, the Company trained and certified 15 MammaCare Specialists, 29 MammaCare Clinical Breast Examiners and 108 MammaCare Breast Self Exam (BSE) Instructors. These new certifications were primarily related to the Company's German affiliate (see below) and the Company's new relationship with Alexian Brothers Hospital Network, also discussed below. The Company is continuing to pursue its strategy of establishing additional training sites both in the United States and abroad. The Company concluded negotiations with Alexian Brothers Hospital Network in Elk Grove Village, IL, and a MammaCare Training Center was opened in that location in December 2006. This facility is responsible for a substantial portion of MammaCare Specialist, Clinical Breast Examiners, and Breast Self Examination Instructors. 3 The Company continues to expend resources to complete development of its patented tactile computer technology known as the Palpation Assessment Device (PAD). The PAD is the first computer-based system that teaches and evaluates manual breast examination skills. During the year ended August 31, 2008, the Company received a Phase I SBIR grant from the National Cancer Institute to complete development of the PAD and to evaluate its utility in an online learning environment. Currently, the PAD continues to undergo testing as part of MammaCare Specialist training. The Company continues to seek a larger partner in the healthcare industry to increase the distribution of its products. MANUAL BREAST EXAMINATION Manual palpation has been and remains the most widely used method for detection of breast cancer in all stages of development. The breast is an ideal organ for physical examination because of the external location, coupled with the softness of the tissue and its hard backing. The earlier breast cancer is detected, diagnosed and treated, the greater the chances are for arrest of the condition. Published studies of breast pathology have shown that more than 50% of all cancerous tumors of the breast are potentially discoverable by manual examination conducted by a properly trained person. Even though women themselves remain the primary discoverers of breast cancer, several reports show that breast self examination is not widely practiced. Consequently, most breast cancers are initially detected at a relatively advanced stage with metastasis having already occurred. The average size tumor that women present to their physicians is about 3.5 cm. (over one inch) in diameter. Treatment often requires a radical mastectomy (an extensive surgical procedure which includes removal of the breast, underlying muscle and axillary lymph nodes) followed by a course of radiation treatment and/or chemotherapy. On the other hand, if the disease is initially detected while the primary tumor is small (<1.0 cm) and no lymph nodes are involved, treatment often involves only removal of the tumor and a margin of surrounding healthy tissue. Thereafter, a course of radiation treatment is often prescribed as a precautionary measure. In research conducted at the University of Florida under the direction of the Company's management, together with a third individual, more than 445 women were taught to detect tumors in the model ranging from 2 to 10 mm. As a result of this training, 33 of these women (7.4%) discovered suspicious masses and were referred to physicians. This percentage is comparable to that expected from screening procedures involving mammography and clinical examination. The research was conducted at the University's Center for Ambulatory Studies. Except for a National Cancer Institute grant made directly to the University in 1977 and one small direct University grant, the research was not directly sponsored by the University; instead, it was concluded at the University's facilities under the supervision of the Company's management(and a third person) as part of their normal faculty research duties. The University released its rights to this research. Based upon its commercial experience with approximately 10,000 women who have had the benefit of MammaCare training, the Company has demonstrated that the MammaCare System can train women to detect masses as small as 0.3 cm. It has been well documented that detection of such small masses often enables the surgeon to provide treatment in the form of lumpectomy (see above) or some other less extensive procedure not requiring total removal of the affected breast and surrounding tissue. TRAINING MODELS AND TRAINING The Company's basic training models are a life-like model of a human female breast. Its covering is a thin silicone membrane which simulates human skin. The interior of the model, also made of silicone, closely simulates that of a mature female breast with respect to granular, glandular, adipose and connective tissue. Implanted within the model are simulated tumors consisting of extruded polymers whose firmness matches that of excised tumors. The model is manufactured in different degrees of firmness and nodularity in order to offer the trainee a model which closely resembles her own breast. A special series of training exercises is used to instruct women in basic palpation techniques required for manual self-examination for breast anomalies. The basic approach is to: (1) teach the distinction between the feel of all varieties of normal breast tissue and that of typical breast tumors, (2) teach a method of palpation that insures contact with all depths of the trainee's own breast tissue, and (3) teach a pattern of examination that insures palpation of all breast tissue. COMPANY CENTER The Company's Center is located in Gainesville, Florida. This Center serves three important functions. It is the national training center established to provide training for all licensees, physicians, nurses, and Company personnel who are engaged in offering MammaCare to the public. Another function of this Center is to package and ship MammaCare Systems. Finally, this facility serves as a research center permitting the Company to undertake marketing and product development research. 4 As part of the Company's commitment to maintain the quality of its service to both the medical profession and women who need breast self examination, the Company has developed three training programs at the Gainesville Center. The first is a comprehensive, three-day training program leading to certification as a MammaCare Specialist. Specialist certification is dependent upon a demonstrated mastery of pertinent selected biological and medical literature as well as the MammaCare System of performing and teaching manual breast examination. The second training program leads to an Breast Self Examination Instructor certificate. It is a two-day training session for health care professionals which enable them to instruct women in the use of the MammaCare technique. These certification procedures are used by the Company to control the quality of its training. It is a matter of resolute Company policy that a woman's mastery of the MammaCare System will only be evaluated by a trained MammaCare Specialist. MammaCare Specialists are empowered to train and certify MammaCare Associates at their own sites. The third training program was recently introduced during 2007 and leads to certification of proficiency in the MammaCare Method of Clinical Breast Examination. The course lasts two days and can be offered by MammaCare Specialists who have undergone additional training. MARKETING MammaCare Systems are each sold as a complete learning program. The Company permits models to be sold separately to customers who have appropriate training, either through the actual training sessions required in connection with the MammaCare System, through the video training contained in either of the Learning Systems, or through training provided by various individuals in accordance with the Company's standards. During the last several fiscal years, the Company has intensified its efforts to offer MammaCare overseas.(See Management Discussion below). The Company has developed an extensive customer base in Canada and anticipates increased activity in that country as the trade barriers continue to be dismantled as a result of NAFTA. The Company has trained a number of MammaCare Specialists who live and work in Canada and maintains close professional ties to these individuals. The Company has also an established relationship with a distributor in Germany who has translated the materials into German and is establishing a presence throughout Europe. The Company continues to benefit from its association with a German medical products development and distribution company. Although German sales slowed this year, the company believes this decline is temporary and expects that German sales will advance in the forthcoming fiscal year. The sales and distribution agreement provides a German health care products organization with exclusive distribution rights for the Company's products throughout Germany and the German-speaking portions of Austria, Switzerland, and Belgium. In return, the distributor has undertaken at its own expense to provide translations of the Company's Personal Learning System DVD and printed materials. The distributor has continued to develop a promotional campaign in both the electronic and print media. The distributor is now training medical professionals in MammaCare and actively marketing MammaCare products. A total of 79 German MammaCare BSE instructors were trained and certified during the year ended August 31, 2008, bringing the total number of trained German MammaCare BSE instructors to 533. The Company has also developed a web site (www.mammacare.com) and markets its products and services through that medium. Finally, the Company has recently begun a program of MammaCare Training Centers at major medical and nursing schools. Training is offered at these institutions and resulting data are shared with the Company. In cases where trainees meet established standards of proficiency, Certificates signed by the Company and the participating institution are awarded. The Company is working to launch a patented computer based technology platform that augments clinical breast examination skill (see PAD above). Prototype development is nearing completion and the Company is actively seeking financing for scale-up manufacturing and marketing of the new technology. There can be no assurance that such financing will be forthcoming or that such financing will be sufficient to insure the success of the technology. RESEARCH The University of North Carolina at Chapel Hill was the first major medical institution to conduct research using MammaCare. The results of that research have been widely disseminated and are available from the Company by request. 5 Other institutions and organizations who have conducted or are conducting research involving MammaCare include Johns Hopkins University, the Fred Hutchinson Cancer Center, the University of California at San Diego, the University of Oregon, the University of Arkansas, the University of Vermont, the State University of New York at Stony Brook, the Harvard Community Health Plan, the University of Cincinnati, the University of Indiana, the Fox Chase Cancer Center, Northwestern University, the University of West Virginia, U.S.Healthcare, and the Mayo Clinic. A small but successful field test of the PAD technology was conducted during the year at an unaffiliated training facility by members of their staff. The research demonstrated improved clinical skills on the part of 12 out of 12 residents who underwent PAD training. The Company completed research under the auspices of the National Cancer Institute. The object of this research was to develop and validate versions of MammaCare that would meet the needs of the blind and visually impaired and the deaf and hard of hearing. This research was completed on schedule and resulted in the introduction of effective products. PATENTS, TRADEMARKS AND COPYRIGHTS The MammaCare System was invented by seven people, including the Company's two principle shareholders, as part of research activities conducted at the University of Florida. Subject to royalties payable to four of the co-inventors over the life of the patent, the Company owns all rights to and is entitled to receive all revenues from the System. The original patents have now expired so no further royalties are due. The Company owns a number of trademarks and copyrights with respect to the name MAMMACARE and its products and services. ITEM 2. DESCRIPTION OF PROPERTIES The Company's executive offices and MammaCare Center are located at 930 NW 8th Avenue, Gainesville, Florida. The Company's offices are approximately 2,700 square feet. These facilities are adequate for the Company's current business operations. The Company purchased this office facilities from a shareholder in May 2005. In April 2006, the Company purchased a facility in Gainesville, Florida in which to house its manufacturing operations, thus ending a relationship of long duration with an unaffiliated supplier. The supplier continues to supply personnel and manufactures the Company's models under contract, using the Company's facility, materials, and equipment. ITEM 3. LEGAL PROCEEDINGS There is no current or pending litigation involving the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not Applicable. PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK EQUITY AND RELATED SHAREHOLDER MATTERS The Company's common stock is quoted in the Over-the-Counter Bulletin Board. From February 1983, through December 1985, there had been an established trading market on NASDAQ for the Company's common stock. However, in mid-December 1985, the Company's common stock was de-listed by NASDAQ. The following information concerning the high and low bid prices of the Company's common stock on the Over-the-Counter Bulletin Board. 6 September 1, 2006 to August 31, 2007 High* Low* -------------------------------------- ----- ---- First Quarter $.130 $.060 Second Quarter $.120 $.075 Third Quarter $.110 $.068 Fourth Quarter $.080 $.070 September 1, 2007 to August 31, 2008 High* Low* ------------------------------------ ----- ---- First Quarter $.080 $.070 Second Quarter $.080 $.070 Third Quarter $.070 $.070 Fourth Quarter $.070 $.010 *The source of the high and low closing sales price information is Yahoo finance.com. As of August 31, 2008, the Company believes there are approximately 3,800 record and beneficial holders of the Company's common stock with 5,427,625 shares issued, of which 303,925 shares are treasury stock. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONS Summary of Statements of Comprehensive Operations YEAR ENDED Aug.31, Aug.31, 2007 2008 ---- ---- Revenues from Operations 408,114 446,933 Net Income (Loss) (74,332) (68,525) Income (Loss) per Common Share (0.01) (0.01) Summary of Comprehensive Balance Sheet YEAR ENDED Aug.31, Aug.31, 2007 2008 ---- ---- Total Assets 929,270 938,232 Total Liabilities 1,079,735 1,187,305 Shareholder's Equity (deficit) (150,465) (249,073) During these periods, no cash dividends were declared or paid. Results of Operations Cautionary factors that may affect future results: The following discussion should be read in conjunction with the accompanying financial statements and notes thereto included within this Annual Report on Form 10-KSB. In addition to historical information, the information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "Intend", "anticipate", "believe", estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors described in this Annual Report, including the risk factors accompanying this Annual Report, and, from time to time, in other reports the Company files with the Securities and Exchange Commission. These factors may cause the Company's actual results to differ materially from any forward-looking statement. The Company disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 7 Comparison of Fiscal Year Ended August 31, 2007 and 2008 The Company's net sales were $446,933 for the year ended August 31, 2008 compared to $408,114 during the year ended August 31, 2007, an increase of approximately 9.51% from the prior period. Increased sales were largely attributed to increased spending by the Company's regular customers, the additional training and product requirements for Alexian Brothers, growing internet interest in the Company's products and sales to its German distributor. Gross profit for the years ended August 31, 2007 and 2008 was $293,934 and $273,575 respectively, a decrease of approximately 6.9% from the prior period. The decrease in gross profit was related primarily to_reallocation of training cost from administrative expense to cost of sales (see below). Gross profit margin for the years ended August 31, 2007 and 2008 were 72% and 61%, respectively. Selling, general and administrative expenses decreased from $428,922 in the year ended August 31, 2007 to $369,518 in the year ended August 31, 2008. Decreased selling, general and administrative expenses for the 2008 year were primarily the result of the reclassification of monies paid to outside service providers and one employee for training to clients. These increases and cost of sales were, however, offset by grant funding totaling approximately $55,304 for year 2008, which was recorded as a reduction of selling, general and administrative expenses. Loss from operations for the years ended August 31, 2007 and 2008 were ($134,988) and ($95,943), respectively, an improvement of approximately 28.9%. Net loss decreased from ($74,332) for the year ended August 31, 2008 to ($68,525) for the year ended August 31, 2008, a decrease of 7.8%. Liquidity and Capital Resources The Company has no immediate liquidity problems. At August 31, 2008, the Company had cash on hand of $335,427 and marketable securities of $193,198. At August 31, 2008, the Company has accounts payable of $38,706 and accounts payable and accrued salaries owing to its officers of $1,148,599. The Company intends to use its capital resources to fund its product development and to expand distribution. The Company believes these capital resources are sufficient to allow the Company to attract potential interest from a strategic partner and to make it an attractive candidate for grant funding from public and private sources. However, there can be no assurance these capital resources will be sufficient to allow the Company to implement its marketing strategies or to become profitable. Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements. 8 ITEM 7. FINANCIAL STATEMENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders Mammatech Corporation We have audited the accompanying balance sheet of Mammatech Corporation as of August 31, 2008, and the related statements of comprehensive operations, stockholders' (deficit), and cash flows for the years ended August 31, 2008 and 2007. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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 by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mammatech Corporation as of August 31, 2008, and the results of its operations, and its cash flows for the years ended August 31, 2008 and 2007, in conformity with accounting principles generally accepted in the United States of America. Stark Winter Schenkein & Co., LLP Certified Public Accountants Denver, Colorado December 15, 2008 9 Mammatech Corporation Balance Sheet August 31, 2008 ASSETS ------ Current assets: Cash $ 335,427 Accounts receivable - trade 88,191 Inventory 63,332 ----------- Total current assets 486,950 ----------- Property and equipment, at cost, net of accumulated depreciation of $283,824 253,432 ----------- Available for sale securities 193,198 Other assets 4,652 ----------- 197,850 ----------- Total Assets $ 938,232 =========== LIABILITIES AND STOCKHOLDERS' (DEFICIT) --------------------------------------- Current liabilities: Accounts payable and accrued expenses $ 38,706 Accrued salaries - officers 1,148,599 ----------- Total current liabilities 1,187,305 ----------- Stockholders' (deficit): Common stock, $.0001 par value, 200,000,000 shares authorized, 5,427,625 issued and 5,123,700 outstanding 543 Additional paid-in capital 2,896,186 Accumulated (deficit) (2,962,653) ----------- (65,924) Treasury stock, at cost, 303,925 shares (148,051) ----------- (213,975) Other comprehensive income: Unrealized (loss) on marketable securities (35,098) ----------- (249,073) Total Liabilities and Stockholders' (Deficit) $ 938,232 =========== See accompanying notes to financial statements. 10 Mammatech Corporation Statements of Comprehensive Operations Years Ended August 31, 2007 and 2008 2008 2007 ---- ---- Sales, net $ 446,933 $ 408,114 Cost of sales 173,358 114,180 ----------- ----------- Gross profit 273,575 293,934 Selling, general and administrative expenses 369,518 428,922 ----------- ----------- (Loss) from operations (95,943) (134,988) ----------- ----------- Other income and (expense): Gain (loss) on sale of investment securities (279) 32,810 Interest and dividend income 27,697 27,846 ----------- ----------- 27,418 60,656 ----------- ----------- (Loss) before income taxes (68,525) (74,332) Provision for income taxes -- -- ----------- ----------- Net (loss) $ (68,525) $ (74,332) =========== =========== Basic and fully diluted earnings per share: Net (loss) $ (0.01) $ (0.01) =========== =========== Weighted average shares outstanding 5,427,625 5,427,625 =========== =========== Net (loss) $ (68,525) $ (74,332) Unrealized loss from investments, net of income taxes (30,083) (25,940) ----------- ----------- Comprehensive (loss) $ (98,608) $ (100,272) =========== =========== See accompanying notes to financial statements. 11
Mammatech Corporation Statement of Stockholders' (Deficit) Years Ended August 31, 2007 and 2008 Unrealized gain Additional (loss) on Common Paid-in Treasury Marketable Accumulated Shares Amount Capital Stock Securities (Deficit) Total ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance, August 31, 2006 5,427,625 $ 543 $ 2,896,186 $ (148,051) $ 20,925 $(2,819,796) $ (50,193) Increase in market value of securities -- -- -- -- (25,940) -- (25,940) Net (loss) for the year -- -- -- -- -- (74,332) (74,332) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance August 31, 2007 5,427,625 543 2,896,186 (148,051) (5,015) (2,894,128) (150,465) Decrease in market value of securities -- -- -- -- (30,083) -- (30,083) Net (loss) for the year -- -- -- -- -- (68,525) (68,525) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance August 31, 2008 5,427,625 $ 543 $ 2,896,186 $ (148,051) $ (35,098) $(2,962,653) $ (249,073) =========== =========== =========== =========== =========== =========== =========== See accompanying notes to financial statements. 12 Mammatech Corporation Statements of Cash Flows Years Ended August 31, 2008 and 2007 2008 2007 ---- ---- Net (loss) $ (68,525) $ (74,332) Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 20,000 20,000 Realized (gain)loss on marketable securities 279 (32,810) Changes in assets and liabilities: (Increase) decrease in accounts receivable, trade (64,694) 37,784 (Increase) decrease in inventory 22,345 1,707 (Increase) decrease in other assets (580) (950) Increase (decrease) in accounts payable and accrued salaries - officers 105,620 105,620 Increase (decrease) in accounts payable and accrued expenses 1,950 (15,785) --------- --------- Net cash provided by (used in) operating activities 16,395 41,234 --------- --------- Cash flows from investing activities: Purchase of available for sale securities (15,820) (151,138) Proceeds from the sale of available for sale securities 10,190 417,122 Acquisition of property and equipment (3,227) 2,164 --------- --------- Net cash provided by investing activities (8,857) 268,148 --------- --------- Cash flows from financing activities: Payment of notes payable -- (5,200) --------- --------- Net cash (used in) financing activities -- (5,200) --------- --------- Increase in cash 7,538 304,182 Cash and cash equivalents, beginning of year 327,889 23,707 --------- --------- Cash and cash equivalents, end of year $ 335,427 $ 327,889 ========= ========= Supplemental cash flow information: Cash paid for interest $ -- $ -- ========= ========= Cash paid for income taxes $ -- $ -- ========= ========= See accompanying notes to financial statements. 13 Mammatech Corporation Notes to Financial Statements August 31, 2008 Note 1. Summary of Significant Accounting Policies Organization and Operations Mammatech Corporation was incorporated in the State of Florida on November 23, 1981, and holds patents on a breast tumor detection training system. The system consists of a breast model and a method of breast self-examination, and is marketed by the Company to individuals and healthcare professionals. Reclassifications Certain amounts presented in previous year's financial statements have been reclassified to conform to current year presentation. Inventories Inventories, which consist principally of finished goods, are stated at the lower of cost or market using the first-in, first-out method. Property and Equipment Property and equipment are carried at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets ranging from 3 to 8 years. When assets are retired or otherwise disposed of, the cost and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in operations for the period. The cost of repairs and maintenance is charged to operations as incurred and significant renewals or betterments are capitalized. Patents, Trademarks, and Copyrights Patents, trademarks, and copyrights are amortized using the straight-line method over their estimated useful economic lives of 10 years. Revenue Recognition Revenues from product sales are recognized when delivery has occurred, persuasive evidence of an agreement exists, the vendor's fee is fixed or determinable, no further obligation exists and collectability is probable. Generally, title for these shipments passes on the date of shipment. Cost of products sold consists of the cost of the purchased goods and labor related to the corresponding sales transaction. When a right of return exists, the Company defers revenues until the right of return expires. The Company recognizes revenue from services at the time the services are completed. 14 Grants The Company accounts for funds received under grants for cost reimbursement as a reduction in the related costs. Accounts Receivable Accounts receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts. In determining collectibility, historical trends are evaluated and specific customer issues are reviewed to arrive at appropriate allowances. Marketable Securities The Company's marketable securities consist primarily of common stock and mutual fund holdings and are classified as available-for-sale and are reported at fair value. Unrealized gains and losses are reported, net of taxes, as a component of stockholders' equity within accumulated other comprehensive income. Unrealized losses are charged against income when a decline in fair value is determined to be other than temporary. The specific identification method is used to determine the cost of securities sold. Earnings Per Share The Company calculates net income (loss) per share as required by Statement of Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which the Company incurs losses common stock equivalents, if any, are not considered, as their effect would be anti-dilutive. Cash and Cash Equivalents Cash and cash equivalents, consist of cash and term deposits with original maturities of less than 90 days. Cash at a single financial institution totaled $331,458 at August 31, 2008. Estimates The preparation of the Company's financial statements requires management to use estimates and assumptions. These estimates and assumptions affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from these estimates. Fair Value of Financial Instruments The Company's short-term financial instruments consist of cash and cash equivalents, available for sale securities, accounts receivable - trade, and accounts payable, and accrued expenses. The carrying amounts of these financial instruments approximate fair value because of their short-term maturities. Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash, available for sale securities and accounts receivable - trade. 15 Stock-based Compensation The Company accounts for stock based compensation in accordance with SFAS 123(R), which requires that the cost of share-based payment transactions (including those with employees and non-employees) be recognized in the financial statements. SFAS 123(R) applies to all share-based payment transactions in which an entity acquires goods or services by issuing (or offering to issue) its shares, share options, or other equity instruments (except for those held by an ESOP) or by incurring liabilities (1) in amounts based (even in part) on the price of the entity's shares or other equity instruments, or (2) that require (or may require) settlement by the issuance of an entity's shares or other equity instruments. Segment Information The Company follows SFAS 131, Disclosures about Segments of an Enterprise and Related Information." Certain information is disclosed, per SFAS 131, based on the way management organizes financial information for making operating decisions and assessing performance. The Company currently operates in a single segment and will evaluate additional segment disclosure requirements as it expands its operations. Income Taxes The Company follows SFAS 109 "Accounting for Income Taxes" for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Advertising Advertising expenses are charged to expense upon first showing. Amounts charged to expense were $8,202 and $4,701 for the years ended August 31, 2008 and 2007. Research and Development Research and development is charged to operations as incurred. 16 Recent Accounting Pronouncements In December 2007 the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141R"). This statement replaces SFAS 141, "Business Combinations". The statement provides guidance for how the acquirer recognizes and measures the identifiable assets acquired, liabilities assumed and any non-controlling interest in the acquiree. SFAS 141R provides for how the acquirer recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase. The statement determines which information to disclose to enable users to be able to evaluate the nature and financial effects of the business combination. The provisions of SFAS 141R will be effective for our fiscal year beginning September 1, 2008 and do not allow early adoption. Management is currently evaluating the impact of adopting this statement. In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements" (SFAS 160), which will be effective for our fiscal year beginning September 1, 2008. This standard establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the non-controlling interest, changes in a parent's ownership interest and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. The Statement also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. Management is currently evaluating the impact of adopting this statement. In February 2008, FASB Staff Position (FSP) FSP No. 157-2, "Effective Date of FASB Statement No. 157" (FSP No. 157-2) was issued. FSP No. 157-2 defers the effective date of SFAS No. 157 to fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Examples of items within the scope of FSP No. 157-2 are non-financial assets and non-financial liabilities initially measured at fair value in a business combination (but not measured at fair value in subsequent periods), and long-lived assets, such as property, plant and equipment and intangible assets measured at fair value for an impairment assessment under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The Company is currently assessing the impact, if any, of adopting this standard. In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an Amendment of FASB Statement No. 133" (SFAS 161), which becomes effective on November 15, 2008. This standard changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. Management is currently evaluating the impact of adopting this statement. 17 In April 2008, the FASB FSP 142-3, "Determination of the Useful Life of Intangible Assets." This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, "Goodwill and Other Intangible Assets." The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under Statement 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141 (Revised 2007), "Business Combinations," and other U.S. generally accepted accounting principles (GAAP). This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company does not expect the adoption of FAS 142-3 to have a material effect on its results of operations and financial condition. In May 2008, the FASB FSP No. APB 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" (FSP APB 14-1). FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis. The Company does not expect the adoption of FSP APB 14-1 to have a material effect on its results of operations and financial condition. In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles (SFAS 162), which becomes effective upon approval by the SEC". This standard sets forth the sources of accounting principles and provides entities with a framework for selecting the principles used in the preparation of financial statements that are presented in conformity with GAAP. It is not expected to change any of our current accounting principles or practices and therefore, is not expected to have a material impact on our financial statements. There were various other accounting standards and interpretations issued during 2008 and 2007, none of which are expected to a have a material impact on the Company's financial position, operations or cash flows. Note 2. Related Party Transactions During prior years, two officers of the Company made advances aggregating $11,830 of which $5,200 had been repaid. The balance of the advances was $6,630 at August 31, 2008. Through August 31, 2008, the Company accrued an aggregate of $1,141,969 in unpaid salaries due to two officers. 18 During February 1989, an officer of the Company filed a patent application for a product representing a variation of the Company's patented models. The product is an important part of the Company's product line. The Company has entered into an agreement with this officer whereby the Company would enjoy exclusive and unrestricted use of the new product for the payment of the patent application fees. The agreement was for a period of one year and is automatically renewable for additional one year periods provided, however, that either party may cancel the agreement upon one months notice after the initial year. Note 3. Available for Sale Securities Marketable securities consist of mutual funds and common stocks with a cost basis of $228,296 and fair market value of $193,198 at August 31, 2008, and are classified as available for sale as it is the Company's intent to hold them for an indefinite period of time. The proceeds from the sale of marketable securities were $10,190 and $417,122 during the years ended August 31, 2008 and 2007. The gross realized gains (losses) on sales of available-for-sale securities were $(278) and $32,810 during the years ended August 31, 2008 and 2007. The adjustment to unrealized holding gains on available-for-sale securities included in accumulated other comprehensive income as a component of stockholders' equity decreased by $30,083 and $25,940 during the years ended August 31, 2008 and 2007, and totaled $(35,098) at August 31, 2008. Note 4. Property and Equipment Property and equipment consists of the following, at cost, at August 31, 2007 and 2008: 2007 2008 ---- ---- Land and building $293,520 $293,520 Furniture and equipment 244,121 247,348 Leasehold improvements 16,388 16,388 -------- -------- 554,029 557,256 Less: accumulated depreciation 283,824 303,824 -------- -------- $270,205 $253,432 ======== ======== Depreciation charged to operations was $20,000 during the years ended August 31, 2008 and 2007. 19 Note 5. Commitments and Contingencies The Company does not maintain product liability insurance related to its product line. It is unable to estimate the risks and possible economic consequences related to its decision not to carry this type of insurance. Note 6. Concentration of Credit Risk/Major Customers At August 31, 2008, three customers represented 58% of the accounts receivable balance. One of these customers represented 13% of sales revenue for the year ended August 31, 2008. During the years ended August 31, 2008 and 2007, the Company had sales to a single customer that accounted for approximately 10% and 19% of its total sales. This customer was based in a foreign country. The Company currently utilizes a single manufacturer for its products. Should this manufacturer be unable to meet the Company's demands it feels that it would be able to locate another suitable manufacturer or manufacturers. The Company made sales to customers located in foreign countries amounting to $71,904 and $97,963 during the years ended August 31, 2008 and 2007. Note 7. Income Taxes Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classifications of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. The principal differences between the net losses for income tax purposes and book purposes results from accrued officer salaries and common shares issued for services. At August 31, 2008, the Company had net operating loss carryforwards aggregating approximately $346,000, which expire from 2022 through 2027. At August 31, 2008, the deferred tax asset related to the net operating loss carryforwards of approximately $118,000 has been fully reserved. The change in the valuation allowance was approximately $18,000 during the year ended August 31, 2008. 20 The amounts shown for income taxes in the statements of operations differ from the amounts computed at federal statutory rates. The following is a reconciliation of those differences. Year Ended August 31, 2008 2007 Tax at federal statutory rates 34% 34% Operating loss carry forward (34) (34) --- --- - % - % === === Note 8. Grants The Company was awarded a Phase I SBIR Grant from the National Cancer Institute in 2006. The specific objective of the Phase I grant is to evaluate the capability of a novel prototype online learning system to teach quality-standard Clinical Breast Examination (CBE) to medical professionals. The Company refers to this as the Palpation Assessment Device (PAD), a computer-based system that teaches and evaluates manual breast examination skills. The original amount of the research grant was approximately $158,400. During the year ended August 31, 2007, the Company received $93,000 in funding under the grant. The grant funds are used for equipment, consultants and staff to develop the PAD technology. The Company accounts for funds received under this grant for cost reimbursement as a reduction in general and administrative expenses. The grant funds were depleted as of March 2008. There are no other grants pending. 21 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. ITEM 8A. CONTROLS AND PROCEDURES. As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the Exchange Act), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures at August 31, 2008, being the date of our most recently completed fiscal year end. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting management to material information relating to us required to be included in our periodic SEC filings. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date we carried out our evaluation. Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. During our most recently completed fiscal year ended August 31, 2008, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to affect, our internal control over financial reporting. The term internal control over financial reporting is defined as a process designed by, or under the supervision of, the registrant's principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant; (2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and (3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant's assets that could have a material effect on the financial statements. ITEM 8 B. OTHER INFORMATION Not Applicable 22 PART III ITEM 9. DIRECTORS, EXUCUTIVE OFFICERS, PROMOTERS AND OCNTROL PEROSNS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT The following persons are the executive officers and directors of the Company. Name Age Position with the Company ---- --- ------------------------- Mark Kane Goldstein, Ph.D. 70 Chairman of the Board, Vice President, Secretary, Director Henry S. Pennypacker, Ph.D. 71 President, Chief Executive Officer, Director Mary Bailey Sellers 60 Treasurer, Chief Financial Officer, Director All directors serve until the next annual meeting of shareholders. There is currently one vacancy on the Board of Directors. Mark Kane Goldstein ------------------- Mark Kane Goldstein, Ph.D., is Chairman of the Board, Vice President, Secretary and Director of the Company. Dr. Goldstein directs and advises the Company on fiscal and policy matters and directs research on product development. From 1971 until July, 1982, Dr. Goldstein was employed by the U.S. Veterans Administration, Gainesville, Florida, as a research scientist. During this same period, Dr. Goldstein also was an Associate Professor/Research Scientist at the University of Florida, Gainesville, Florida, and continues as Co-Director of its Center for Ambulatory Studies. From 1978 through May, 1984, Dr. Goldstein was a member of the City Commission of Gainesville, Florida including 1980-81 when he served a one-year term as Mayor. Dr. Goldstein received a B.A. in 1961 from Muhlenberg College, an M.A. in 1962 from Columbia University and a Ph.D. in 1971 from Cornell University. All Degrees were in Psychology. Henry S. Pennypacker, Ph.D. --------------------------- Henry S. Pennypacker, Jr., Ph.D., is President, Chief Executive Officer and Director of the Company. He is currently employed as President of the Company and as Professor Emeritus of Psychology at the University of Florida. He was the acting Chairman of the Department of Psychology from June 1969 to 1970 and prior thereto was an Associate Professor and Assistant Professor. In May 1998, Dr. Pennypacker retired from the University but continues to teach on a part-time basis. Dr. Pennypacker is the author or co-author of five books and over fifty articles and book chapters dealing with various aspects of behavioral research and behavioral medicine. He is a past President of the International Association for Behavior Analysis, the Society for Advancement of Behavior Analysis, and the Florida Association for Behavior Analysis. He serves as a member of the Board of Trustees of the Cambridge Center for Behavioral Studies and was recently elected Chairman of its newly formed Board of Directors. On August 10, 1990, Dr. Pennypacker received an award from the California Division of the American Cancer Society in recognition of his "...pioneering contribution to breast self-examination education." Dr. Pennypacker received a B.A. and an M.A. from the University of Montana in 1958 and 1960, respectively, and a Ph.D. from Duke University in 1962. All degrees were in Psychology. Mary Bailey Sellers ------------------- Mary Bailey Sellers has been employed as Chief Financial Officer by the Company since September 1985. She was appointed Treasurer and elected Director in August 1986. From April 1978 through November 1984, she was employed by Barnett Bank of Alachua County, N.A., and a predecessor bank as Vice President commercial loans. Mrs. Sellers devoted her time to her family from December 1984 through August 1985. Mrs. Sellers received a B.A. in English and History in 1970 from Barry College. 23 Audit Committee and Audit Committee Financial Expert ---------------------------------------------------- The Company is not a "listed company" under SEC rules and is therefore not required to have an audit committee comprised of independent directors. The Company does not currently have an audit committee, however, for certain purposes of the rules and regulations of the SEC and in accordance with the Sarbanes-Oxley Act of 2002, the Company's board of directors is deemed to be its audit committee and as such functions as an audit committee and performs some of the same functions as an audit committee including: (1) selection and oversight of the Company's independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; and (3) engaging outside advisors. The Company's board of directors has determined that its members do not include a person who is an "audit committee financial expert" within the meaning of the rules and regulations of the SEC. The board of directors has determined that each of its members is able to read and understand fundamental financial statements and has substantial business experience that results in that member's financial sophistication. Accordingly, the board of directors believes that each of its members have the sufficient knowledge and experience necessary to fulfill the duties and obligations that an audit committee would have. Code of Ethics -------------- A code of ethics relates to written standards that are reasonably designed to deter wrongdoing and to promote: - Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - Full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to, the SEC and in other public communications made by an issuer; - Compliance with applicable governmental laws, rules and regulations; - The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and - Accountability for adherence to the code. The Company has not formally has adopted a written Code of Business Conduct and Ethics ("Code") that applies to its officers, directors and employees. Conflicts of Interest --------------------- Certain conflicts of interest exist and may continue to exist between the Company and its officers and directors due to the fact that each has other business interests to which they devote a portion of their attention. Each officer and director may continue to do so notwithstanding the fact that management time should be devoted to the business of the Company. Certain conflicts of interest may exist between the Company and its management, and conflicts may develop in the future. The Company has not established policies or procedures for the resolution of current or potential conflicts of interest between the Company, its officers and directors or affiliated entities. There can be no assurance that management will resolve all conflicts of interest in favor of the Company, and conflicts of interest may arise that can be resolved only through the exercise by management their best judgment as may be consistent with their fiduciary duties. Management will try to resolve conflicts to the best advantage of all concerned. See below for a discussion of Certain Relationships and Related Party Transactions. Board Meetings; Nominating and Compensation Committees ------------------------------------------------------ The Board of Directors held no special meetings of directors during the fiscal year ended August 31, 2008. In addition, the board of directors took no actions by written consent of all of the directors. Such actions by the written consent of all directors are, according to Florida corporate law and the Company's by-laws, as valid and effective as if they had been passed at a meeting of the directors duly called and held. 24 The Company does not have standing nominating or compensation committees, or committees performing similar functions. The Company's board of directors believes that it is not necessary to have a compensation committee at this time because the functions of such committee are adequately performed by the board of directors. The board of directors also is of the view that it is appropriate for the Company not to have a standing nominating committee because the board of directors has performed and will perform adequately the functions of a nominating committee. The Company is not a "listed company" under SEC rules and is therefore not required to have a compensation committee or a nominating committee. Shareholder Communications -------------------------- There has not been any defined policy or procedure requirements for stockholders to submit recommendations or nomination for directors. The board of directors does not believe that a defined policy with regard to the consideration of candidates recommended by stockholders is necessary at this time because it believes that, given the early stages of The Company's development, a specific nominating policy would be premature and of little assistance until The Company's business operations are at a more advanced level. There are no specific, minimum qualifications that the board of directors believes must be met by a candidate recommended by the board of directors. Currently, the entire board of directors decides on nominees, on the recommendation of any member of the board of directors followed by the board's review of the candidates' resumes and interview of candidates. Based on the information gathered, the board of directors then makes a decision on whether to recommend the candidates as nominees for director. The Company does not pay any fee to any third party or parties to identify or evaluate or assist in identifying or evaluating potential nominee. The Company does not have any restrictions on shareholder nominations under its certificate of incorporation or by-laws. The only restrictions are those applicable generally under Florida law and the federal proxy rules. The board of directors will consider suggestions from individual shareholders, subject to evaluation of the person's merits. Stockholders may communicate nominee suggestions directly to the board of directors, accompanied by biographical details and a statement of support for the nominees. The suggested nominee must also provide a statement of consent to being considered for nomination. There are no formal criteria for nominees. Because the management and directors of the Company are the same persons, the Board of Directors has determined not to adopt a formal methodology for communications from shareholders on the belief that any communication would be brought to the board of directors' attention by virtue of the co-extensive capacities served by current executive officers. Indemnification --------------- Neither the Company's Articles of Incorporation nor Bylaws prevent the Company from indemnifying its officers, directors and agents to the extent permitted under the Florida law. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to the Company's officers or directors pursuant to the foregoing provisions, the Company has been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable. Section 16(a) Reporting Compliance ---------------------------------- Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers, and persons who beneficially own more than 10% of a registered class of the Company's equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company's securities with the SEC on Forms 3 (Initial Statement of Beneficial Ownership), 4 (Statement of Changes of Beneficial Ownership of Securities) and 5 (Annual Statement of Beneficial Ownership of Securities). Directors, executive officers and beneficial owners of more than 10% of the Company's common stock are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms that they file. Except as otherwise set forth herein, based solely on review of the copies of such forms furnished to the Company, or written representations that no reports were required, the Company believes that for the fiscal year ended August 31, 2008 beneficial owners complied with the Section 16(a) filing requirements applicable to them in that each officer, director and beneficial owner of 10% or more of the Company's securities filed a Form 3 with the SEC and has had no change of ownership since such filing. 25 ITEM 10. EXECUTIVE COMPENSATION Compensation Discussion and Analysis ------------------------------------ The Company has no formal compensation program for its executive officers, directors or employees. The Company believes the base salaries established for each of its executive officers are competitive with the levels of compensation for similar executive officers with the skills and experience of the Company's officers. The base salary is designed to support the Company's business objectives to retain, reward, motivate and attract employees who possess the required technical and entrepreneurial skills and talent. However, the Company also recognizes that its limited financial resources require it to allocate these limited resources between compensation payments to its executive officers and continued funding of its sales, marketing and research and development. Accordingly, two of the Company's executive officers have agreed to defer the current payment of all or a portion of their salaries so the Company can continue to fund its business operations, as discussed more fully below. The Company is not a "listed company" under SEC rules and is therefore not required to have a compensation committee. Accordingly, the Company has no compensation committee. During the last two fiscal years, except as set forth in this paragraph, the Company has not provided any annual or long-term equity or non-equity based incentive programs, health benefits, life insurance, tax-qualified savings plans, special employee benefits or perquisites, supplemental life insurance benefits, pension or other retirement benefits or any type of nonqualified deferred compensation programs for its executive officers or employees. The Company did pay a bonus to one of its executive officers during 2007 and 2008, and the Company provides health insurance coverage through a third party carrier on Ms. Sellers and her spouse for which the Company pay 50% of the monthly premium of approximately $600. In 2006, the Company also provided one of its executive officers with a stock bonus under which the shares of common stock issued were valued by the Board at the time of issuance and were fully vested and non-forfeitable. The Company has no stock option or equity plan. Summary Compensation Table -------------------------- The following table summarizes the total compensation paid to or earned by each of the Company's named executive officers who served as executive officers during all or a portion of the years ended August 31, 2007 and 2008. ------------------------------------------------------------------------------------------------------------------------------------ (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) ------------------------------------------------------------------------------------------------------------------------------------ Non-equity Non-qualified Incentive Deferred Stock Option Plan Compensation All Other Total Name and Principal Year Salary Bonus Awards Awards Compensation Earnings Compensation Compensation Position ($) ($) ($) ($) ($) ($) ($) ($) ------------------------------------------------------------------------------------------------------------------------------------ Mark K. 2008 $65,000 $0 $0 $0 $0 $0 $0 $65,000 Goldstein(Chairman, Vice 2007 $65,000 $0 $0 $0 $0 $0 $0 $65,000 Pres. and Secretary) (1) ------------------------------------------------------------------------------------------------------------------------------------ Henry S. Pennypacker 2008 $65,000 $0 $0 $0 $0 $0 $0 $65,000 (CEO and Pres.)(2) 2007 $65,000 $0 $0 $0 $0 $0 $0 $65,000 ------------------------------------------------------------------------------------------------------------------------------------ Mary S. Sellers (CFO and 2008 $40,000 $2,000 $0 $0 $0 $0 $3,600 $45,600 Treas.) (3) 2007 $40,000 $5,000 $0 $0 $0 $0 $3,600 $48,600 ------------------------------------------------------------------------------------------------------------------------------------ 26 (1) Mark K. Goldstein had earned unpaid salary for 2007 of $48,736, which is included in the annual salary figure of $65,000 set forth in the above chart. Mark K. Goldstein had earned unpaid salary for 2008 of $48,736, which is included in the annual salary figure of $65,000 set forth in the above. (2) Henry S. Pennypacker had earned unpaid salary for 2007 of $56,876, which is included in the annual salary figure of $65,000 set forth in the above chart. Henry S. Pennypacker had earned unpaid salary for 2008 of $56,876, which is included in the annual salary figure of $65,000 set forth in the above. (3) Ms. Sellers' other compensation is the value of the health insurance program partially paid by the Company (see above CD&A). Except as set forth above, the Company paid no perquisites or other personal benefits for its executive officers during 2007 and 2008, other than expense reimbursements. Employment Agreements --------------------- The Company has no employment agreements with its executive officers, and there are no severance or change of control payments provided under any agreement. Compensation of Directors ------------------------- During 2007 and 2008, the executive officers did not receive separate compensation for their services as a directors. All directors receive reimbursement of expenses but no fees for serving as directors. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of December 12, 2008, the number of shares of common stock owned both of record and beneficially by (i) all persons owning five percent or more of the outstanding common stock of the Company; (ii) all directors, and (iii) all officers and directors as a group: Shares of Percentage of Stock Owned Outstanding Shares ----------- ------------------ Mark Kane Goldstein, Ph.D. 1,225,800 23.9% 930 N.W. 8th Avenue Gainesville, Florida 32601 Henry S. Pennypacker, Ph.D. 1,365,000 26.6% 930 N.W. 8th Avenue (1) Gainesville, Florida 32601 Mary Bailey Sellers 115,000 2.2% 930 N.W. 8th Avenue Gainesville, Florida 32601 All Officers and Directors 2,705,800 52.7% as a group (1) (1) All shares owned by Dr. Pennypacker are owned by himself and his wife as to which Dr. Pennypacker has shared investment and voting power. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On February 9, 1989, Mark Kane Goldstein, an Officer and Director of the Company, filed Patent Application Serial No. 308,914 seeking protection for a new breast model that represents a significant variation on the Company's patented models. The new breast model is an integral part of the Company's new MammaCare Personal Learning System. The Company has entered into a licensing agreement with Dr. Goldstein whereby the Company enjoys exclusive and unrestricted use of the invention in exchange for payment of costs associated with preparation and filing of the patent documents together with whatever foreign patent protection the Company, in consultation with Dr. Goldstein, may seek. 27 ITEM 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Description ------ ----------- 3 Articles of Incorporation* 3.1 Articles of Amendment to Articles of Incorporation* 3.2 By-Laws* 3.3 Amendments to By-Laws* 4 Warrants* 10.1 Patent Assignment Agreements* 10.2 Henry S. Pennypacker Assignment* 10.3 Mark Kane Goldstein Assignment* 31.1 Certification Pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, As adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002** 31.2 Certification Pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange A ct5 of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002** 32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** *Contained in the Company's registration statement of Form S-18 filed in October 27, 1982, as amended. **Filed with this annual report (b) Reports of Form 8-K No Current Reports on Form 8-K were filed by the Company during the fourth quarter of 2006. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees Total audit fees billed for professional services rendered by our principal accountant for the audit of our annual financial statements and review of financial statements included in our Form 10-QSBs will total approximately $21,358 for the year ended August 31, 2008. (b) Audit-Related Fees During fiscal 2007 and 2008 we were not required to incur any additional audit-related fees in preparation of our financial statements or otherwise. (c) Tax Fees We engage our principal accountant to assist with the preparation or review of our annual tax filings. For the year ended August 31, 2008, we will pay approximately $2,000. 28 (d) All Other Fees During fiscal 2007 and 2008 we did not incur any other fees other than assurance and tax consulting fees disclosed in items 14 (a) and 14 (c). (e) Audit Committees Pre-approval Policy The Board of Directors pre-approval policies include annually approving the principal accountants and a detailed review and discussion of the principal accountant's current year audit engagement letter and fees estimate. 29 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. MAMMATECH CORPORATION By: /s/ Henry S. Pennypacker ------------------------ Henry S. Pennypacker, President, Chief Executive Officer, Director Date: December 12, 2008 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Company and in the Capacities and on the dates indicated. Signature Position or Office Date --------- ------------------ ---- /s/ Mark Kane Goldstein Chairman of the Board, December 12, 2008 ----------------------- Vice President, Secretary, Mark Kane Goldstein Director /s/ Henry S. Pennypacker President, Chief Executive December 12, 2008 ------------------------ Officer, Director Henry S. Pennypacker /s/ Mary Bailey Sellers Treasurer, Chief Financial December 12, 2008 ----------------------- Officer, Director Mary Bailey Sellers
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