10KSB/A 1 mammatech805.txt AMENDMENT -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB/A (Mark One) |X| Annual Report Pursuant To Section 13 Or 15(D) Of The Securities Exchange Act Of 1934 For the fiscal year ended August 31, 2005 |_| Transition Report Under Section 13 Or 15(D) Of The Securities Exchange Act Of 1934 For the transition period from _____ to _____ COMMISSION FILE NUMBER 0-11-50 MAMMATECH CORPORATION. ---------------------- (Name of small business issuer in its charter) FLORIDA 59-2181303 ------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 930 NW 8TH Avenue Gainesville, Florida 32601 -------------------- ----- (Address of principal executive offices) (Zip Code) 352-375-0607 ------------ Issuer's telephone number 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: $292,863 State the aggregate market value of the company's common stock held by nonaffiliates as of December 15, 2004, was (See definition of affiliate in Rule 12b-2 of the Exchange Act.) $586,919 as of December 14, 2005 State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date 5,227, 625 Shares of Common Stock as of December 14, 2005 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| -------------------------------------------------------------------------------- 1 MAMMATECH CORPORATION FORM 10-KSB/A INDEX PART I Page Item 1. Description Of Business. 3 Item 2. Description Of Property. 9 Item 3. Legal Proceedings. 10 Item 4. Submission Of Matters To A Vote Of Security Holders. 10 PART II Item 5. Market For Common Equity And Related Stockholder Matters. 11 Item 6. Management's Discussion And Analysis Or Plan Of Operation. 12 Item 7. Financial Statements. 14 Item 8. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure. 24 Item 8A Controls And Procedures 24 Item 8B Other Information 24 PART III Item 9. Directors, Executive Officers, Promoters And Control Persons; Compliance With Section 16(A) Of The Exchange Act 25 Item 10. Executive Compensation 26 Item 11. Security Ownership Of Certain Beneficial Owners And Management 26 Item 12. Certain Relationships And Related Transactions 27 Item 13. Exhibits 27 Item 14. Principal Accountant and Services. 28 Signatures 29 2 PART I ------ ITEM 1. DESCRIPTION OF BUSINESS ------------------------------- INTRODUCTION ------------ The Company owns all rights to, subject to certain minor royalties, and 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 early 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 sale of take-home models, together with training in the Company's method of B.S.E., was originally accomplished primarily through franchise and license arrangements (collectively referred to as "Franchises") with healthcare providers. In addition, the Company owns and operates one MammaCare Center in Gainesville, Florida. Franchisees sell materials and provide training directly to women, as does the Company at its own Center. To date, these franchisees have been medical schools, hospitals, breast centers, and radiology clinics. In recent years, development and marketing through new Franchises has been de-emphasized because this marketing approach proved overly costly and cumbersome for the returns it generated. The Company has therefore developed a different marketing strategy which involves the sale of an integrated training system known as the MammaCare Learning System (the "Learning System"). The Learning System is available in two versions, the Professional and the Personal, and is comprised of one (Personal) or two (Professional) breast models and a videotaped B.S.E. training program designed to be viewed by women in either their homes Personal) or in a clinical setting (Professional). In both cases, the skill learned is subject to ultimate evaluation by a physician. See Item 1, "New Marketing Approach". THE PURPOSE OF 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 94% 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 B.S.E. 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 two principle shareholders of the Company, 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. 3 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 two principle shareholders (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. BASIC TRAINING MODEL AND TRAINING --------------------------------- The Company's basic training model is 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 Products. Finally, this facility serves as a research center permitting the Company to undertake marketing and product development research. As part of the Company's commitment to maintain the quality of its service to both the medical profession and women who need B.S.E., the Company has developed three training programs at the Gainesville Center. The first is a comprehensive, four-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 Method of performing and teaching manual breast examination. The second training program leads to an Associate certificate. It is a three-day training session for health care professionals which enables 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 introduced during the current year and leads to certification of proficiency in the MammaCare Method of Clinical Breast Examination. The course lasts one day and can be offered by MammaCare Specialists who have undergone additional training. MARKETING OF THE COMPANY'S SYSTEM AND MODELS -------------------------------------------- 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 slowly establishing a substantial presence throughout Europe. 4 MARKETING HISTORY ----------------- During the Spring of 1986, the Company concluded that Centers were not providing enough sales volume and not recruiting enough new users of the System. After the end of 1986 fiscal year, the Company implemented a new marketing strategy designed to encourage sales through physicians. Shortcomings with the prior marketing approach included the price of MammaCare (up to $125), which generally was not covered by most health insurance carriers and the inconvenience women found with the training at the Centers. Under this new marketing approach, health care providers purchase the MammaCare Professional Learning System directly from the Company for $225 each. The Company does not generate any revenues from the use of the Learning System by women; its sole revenues under the new marketing approach come from sales of 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. It is suggested that providers make the System available to their patients to use at a set fee. A patient may purchase the practice kit portion of the 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 Learning 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 this service. 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 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. Providers who are Franchisees or licensees are permitted to purchase Kits at a substantial discount. The Company's intent is for these providers to act as distributors to other physicians and health care providers in their respective geographic regions. Patients ultimately purchasing these systems would then seek a proficiency evaluation from either their physician or the Franchisee/provider. Conceivably, if additional treatment were needed, the patient would choose the physician or health care provider to furnish such treatment since a health care relationship had already been established. A direct-to-physicians marketing approach was also developed during the Summer of 1986 and implemented in late September of the same year. To date, there are over 1000 physicians, hospitals and diagnostic centers throughout the United States providing the Learning System to women. Although it is too early to judge whether it will be more successful than the Company's earlier marketing strategies, the Company believes that this marketing approach is superior insofar as it eliminates certain prior deficiencies. No assurances can be given that this new marketing approach will be successful. In any event, for the Company to maintain profitability, MammaCare must be provided to an ever increasing number of women. Early in 1989, the Company introduced a companion product called the MammaCare Personal Learning System. It contains a single breast model, a 45-min. video tape which teaches the same skills as the videotape in the Professional System but with reference to the single model, and assorted printed matter. This System is being marketed directly to women and was described in the August 1989 issue of Redbook and the July-August 1991 issue of the East West Journal. The Company is presently evaluating consumer response to this product and expects to develop additional marketing strategies for it in the coming year. The MammaCare Personal Learning System is sold for $69.50, making it affordable and convenient for working women and others who are unable to schedule and keep appointments with health care providers. It is also discounted to readers of Family Circle and other publications in the lay press that feature MammaCare periodically in the editorial content of their health sections. 5 In 1993, the Company introduced a third version of MammaCare known as the MammaCare Clinical Learning System. This system is used to train physicians and other health care providers to conduct clinical breast examinations using the MammaCare Method. It is being adopted by medical schools, teaching hospitals, and a small number of HMO's who are attempting to control costs by taking advantage of the benefits of competent manual examination of the breast as a means of early cancer detection. It is being used extensively by the Breast and Cervical Cancer Screening Programs in the various states and will be the focus of an expanded training effort by the Company in the near future. OTHER MARKETING APPROACHES -------------------------- It is part of the Company's overall marketing strategy to arrange for the availability of MammaCare wherever women routinely seek health service. To this end, the Company has sought to penetrate the institutional market and medical departments of large corporations. Limited resources have prevented the Company from pursuing this strategy vigorously; however, the General Electric Corporation ("GE") has introduced the Professional Learning System into its Fairfield, Connecticut headquarters facility where it was reportedly well received. GE has purchased three Learning Systems for use in other facilities. Additionally, Pacific Bell has purchased a small number of MammaCare Personal Learning Systems for a trial program aimed at their female employees. Results of that trial were reported in 1991 and were judged favorable by Pacific Bell representatives. The Company has intermittent negotiations ongoing with several other large corporations to make MammaCare available in their health care facilities. The Company believes that the addition of the MammaCare Personal Learning System may offer a more attractive mechanism for providing MammaCare in the workplace. There can be no assurance, however, that either these negotiations, trial programs, or related marketing efforts will result in significant revenue for the Company. Prior to 1988,the Company retained a Southern California nurse practitioner as a marketing consultant for MammaCare. She appeared on the first ABC-TV "Home Show" in February, 1988 where she described the MammaCare Learning System to a nationwide audience. This individual was employed by a large health care concern in Beverly Hills, California until 1996 and is a nationally recognized expert on BSE. That organization now uses MammaCare in all of its breast centers under a special agreement negotiated during 1992. Largely as a result of the efforts of this individual, the California Division of the American Cancer Society adopted several features of MammaCare for enhancement of their national Special Touch program. Specifically, the Company provides its patented training models to Special Touch Facilitators who have undergone training approved by the Company. These individuals may also purchase the Company's Home Practice Model for use by participants in California ACS BSE training programs. In November of 1989, the California Division received an Honors Citation for its Special Touch Program from the National Office of the American Cancer Society. To date, the Company has shipped over $100,000 worth of products to California ACS chapters or affiliated individuals under this arrangement. Similar arrangements have been concluded with the Alaska, Alabama, Alaska, Arkansas, Connecticut, Delaware, Florida, Georgia, Indiana, Kansas, Kentucky, Maine, Minnesota, New York, Pennsylvania, South Carolina, South Dakota and Wisconsin Divisions of the American Cancer Society. These organizations are a major component of the Company's customer base and are a stable source of revenue. More recently, the Company has 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. I cases where trainees meet established standards of proficiency, Certificates signed by the Company and the participating institution are awarded. 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. 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. 6 Recently, 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 to resulted in the introduction of effective products. Current research funded by the National Cancer Institute is aimed at developing special techniques for conducting effective clinical breast examinations on physically disabled women. Such women pose such problems that they rarely receive either clinical breast examinations or screening through other modalities. Basic studies are under way to determine the methods of positioning and palpation that will be effective with this population. 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 the following data are presented for information only as no further royalties are due. The Company's ownership interests in the patents and foreign patent applications were as follows: Total Sale Volume of the System Company's Percentage ------------------------------- -------------------- $ 1 to $ 5,000,000 97.14% $ 5,000,001 to $ 7,500,000 97.71% $ 7,500,001 to $10,000,000 98.29% $ 10,000,001 and over 98.86% The Company's position is that based upon reasonable expectations of the parties, the above figures are for the life of the patent. PATENTS ------- The Company is the assignee of the following patents and patent applications directed to the Model and/or the System as indicated:
---------------------------------------------------------------------------------------------------------------- Patent No. or Issue date or Expiration Date Subject Matter Application No. Filing Date ---------------------------------------------------------------------------------------------------------------- United States 4,134,218 1/16/79 1/16/96 Model and methods and apparatus relating to the system United States 308,914 Filed New model relating to the system 2/9/89 Canada 1,109,252 9/22/81 9/22/98 Model Canada 1,147,951 Filed 6/14/2000 Methods and apparatus relating to 6/14/83 the system United Kingdom 2005894 5/26/82 10/2/98 Model United Kingdom 2077017 10/13/82 10/2/98 Methods and apparatus relating to the system Germany P 2844373.4 11/11/81 10/12/98 Model, as well as certain apparatus elating to the system Germany Pending Application Filed - Division application of the (1) P 2857496.14 2/25/80 application that issued as German Patent No. P 2844373.4 and is directed to methods and apparatus relating to the system Japan 1304322 6/15/85 10/11/98 Methods and apparatus relating to the system Japan(2) Pending 10/26/84 - Model allowed and published for 224,279/84 opposition ---------------------------------------------------------------------------------------------------------------- 7 (1) The German Patent Office has issued a notice of a decision to grant this application. After the application is granted, it will be published for the purpose of opposition, an interested person may oppose the granting of the application within three months of the publication date. (2) This application was allowed by the Japanese Patent Office and published for opposition in September 1985. In November 1985, a Statement of Opposition was filed on the ground that protection sought for this model was overbroad and that the Company's model is not sufficiently novel or inventive compared to other models to support a patent. In November 1986, the Company filed a repose setting forth their position that the patent application defines the model in a manner that is patentable over all of the prior models known. To date, the Japanese Patent Office has not acted on this matter. All of the foreign patents and patent applications have claimed the benefit of the filing date of the application which issued as U.S. Patent No. 4,134,218, namely, October 11, 1977, under the Paris Convention of 1883 for the Protection of Industrial Property. There is no assurance that any of the pending patent applications will be issued as patents. TRADEMARKS ---------- The following chart depicts the trademarks and copyrights owned by the Company: ----------------------------------------------------------------------------- Registration Type of Mark Mark Number Status ----------------------------------------------------------------------------- U.S. Trademark The MammaCare Method & 1,288,296 Issued 7/31/84 Design U.S. trademark The Mammatech Corporation 1,305,388 Issued 11/13/84 U.S. Trademark MammaKit 1,317,844 Issued 2/5/85 U.S. Trademark MammaTrainer & Design 1,310,897 Issued 12/25/84 U.S. Trademark MammaTest & Design 1,303,689 Issued 11/6/84 U.S. Trademark M & Design 1,310,918 Issued 12/25/84 U.S. Trademark Hand Design 1,357,256 Issued 8/27/85 U.S. Trademark MammaCare 1,445,641 Issued 6/30/87 ----------------------------------------------------------------------------- COPYRIGHTS ---------- ------------------------------------------------------------------------------------------ Registration Type Name Number Effective for: ------------------------------------------------------------------------------------------ Advertising Brochure What Am I Supposed to Feel? TX1-199-545 75 years from 9/29/83 Test Form MammaTest TX1-234-492 75 years from 12/14/83 Instructional Manual The MammaCare Method TX1-259-524 75 years from 12/29/83 ------------------------------------------------------------------------------------------ 8
ITEM 2. PROPERTIES The Company's facilities house its executive offices and MammaCare Center. 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 does not anticipate difficulties in obtaining additional office facilities in Gainesville at comparable rates should operations expand sufficiently. The Company owns a completely equipped modular factory unit that is housed within a building owned by RTS Laboratories, Inc. (RTS), a non-affiliated organization located in Alachua, Florida. RTS supplies personnel and manufactures the Company's models under contract, using the Company's modular facility, materials, and equipment. 9 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. 10 PART II ------- ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK EQUITY AND RELATED SHAREHOLDER MATTERS ---------------------------------------------------------------------------- A. Market Information. The Company's common stock is traded in the over-the-counter market. 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 Company's common stock is currently listed in the National Quotation Bureau "pink sheets". Throughout 2002, the bid value of the stock ranged from $0.001 to $0.05. The following information concerning the National Quotation Bureau price of the Company's common stock has been received from NASDAQ and the National Quotation Bureau. -------------------------------------------------------------------------------- Quarterly Period High Bid (1) Low Bid (1) -------------------------------------------------------------------------------- November 30, 1988 $ 0.005 $ 0.005 February 28, 1989 $ 0.01 $ 0.0025 May 31, 1989 $ 0.01 $ 0.01 August 31, 1989 $ 0.01 $ 0.004 November 30, 1989 $ 0.01 $ 0.0075 February 28, 1990 $ 0.01 $ 0.005 May 31, 1990 $ 0.01 $ 0.005 August 31, 1990 $ 0.01 $ 0.001 November 30, 1990 $ 0.01 $ 0.001 February 29, 1991 $ 0.01 $ 0.001 May 31, 1991 $ 0.01 $ 0.001 August 31, 1991 $ 0.01 $ 0.001 November 30, 1991 $ 0.01 $ 0.001 February 29, 1992 $ 0.01 $ 0.001 May 31, 1992 $ 0.01 $ 0.001 August 31, 1992 $ 0.01 $ 0.001 August 31, 1996 $ 0.01 $ 0.005 August 31, 1997 $ 0.01 $ 0.001 August 31, 1998 $ 0.24 $ 0.001 August 31, 1999 $ 0.08 $ 0.010 August 31, 2000 $ 0.30 $ 0.010 August 31, 2001 $ 0.05 $ 0.001 August 31, 2002 $ 0.02 $ 0.01 -------------------------------------------------------------------------------- August 31, 2003 $ 0.01 $ 0.001 -------------------------------------------------------------------------------- August 31, 2004 $ 0.04 $ 0.01 -------------------------------------------------------------------------------- August 31, 2005 $ 0.55 $ 0.23 -------------------------------------------------------------------------------- (1) Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. B. Holders of Common Stock. As of August 31, 2005, there were approximately 3,800 record holders of the Company's common stock with 5,227,625 shares outstanding, of which 310,425 shares are treasury stock. 11 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONS ------------------------------------------------------------------------------- Summary of Consolidated Statements of Operations ------------------------------------------------ YEAR ENDED Aug.31, 2004 Aug.31, 2005 ---------- ------------ ------------ Revenues from Operations 341,078 292,863 Net Income (Loss) (245,350) (139,295) Income (Loss) per Common Share (.05) (.03) Summary of Consolidated Balance Sheet ------------------------------------- YEAR ENDED Aug.31, 2005 ---------- ------------ Total Assets 941,520 Total Liabilities 941,520 Shareholder's Equity 228,193 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 included within this annual report, form 10KSB In addition to historical information, the information in this discussion contains or is based upon forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with a discussion of potential future events, circumstances or future operating or financial performance. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results. Any or all of our forward-looking statements here or in other publications may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many such factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed, and forward-looking statements may be adversely affected by factors, including general market conditions, competitive product development, product availability, current and future branded and generic competition, federal and state regulations and legislation, manufacturing issues, timing of the elimination of trade buying, patent positions, and other factors besides those enumerated. Our actual results may vary materially, and there are no guarantees about the performance of Mammatech Corporation stock. Sales for 2005 decreased by 14% over the previous year even though German sales increased by 5.3%. Foreign sales were $72,086 in 2005 and $74,818 in 2004 and a small market has emerged in Taiwan. The Company's operating expense decreased by 14% compared to 2004. The operating loss of $192,318 is disappointing but is 22.9% smaller than 2004. The Company's net loss for the year is 43% less than last year. These reductions are primarily the result of reductions in personnel costs and increases in investment income. Since September 11, 2001 domestic sales to US government agencies have been declining and formerly growing sales to US military installations have all but disappeared. To build sales in non-government sectors the company recently developed an expanded internet presence on Google's advertising network, Yahoo and MSN. Internet searches for "clinical breast exam" or "breast self-exam" now generate leading placement positions for MammaCare on these and other search engines. MammaCare breast models, clinical breast examination training and other products also enjoy improved placement in major search engines. As a result, the company's web site www.mammacare.com is attracting a growing audience. The Company also continued to market via direct mail and catalogue distribution and will expand that effort to a wider civilian audience. The company's business model is changing as it licenses universities and medical institutions to deliver MammaCare training and certification. The company recently began offering its intensive one-day CBE training program to health providers in New Mexico through the New Mexico Breast and Cervical Cancer Early Detection Program (BCCDP) (see www.mammacare.com ). This program leads to certification in the MammaCare Method of Clinical Breast Examination. It is taught by two New Mexico based MammaCare Specialists who received extensive training at Mammatech National Training Center in Gainesville. At this writing, nine individuals have completed the New Mexico program in the San Juan Regional Medical Center in Farmington, NM. and their evaluations have been excellent. The western MammaCare center at Oregon Health Sciences University (OHSU) is expanding to Salem Oregon and the company is currently negotiating for a new MammaCare Center in a major Midwestern market. The emphasis on clinical breast examination evident in the medical literature continued to grow during the current fiscal year. At the beginning of the fiscal year, two major articles appeared in the November issue of CA: A Journal for Clinicians published by the American Cancer Society. One article presents a detailed series of recommendations for improving training and performance of CBE. The other is a summary of the relevant research in which MammaCare enjoys a conspicuous presence. As a result, the demand for professional training in MammaCare is expected to increase. During the year, the Company trained 20 new MammaCare Specialists of whom 6 were trained in the new center at Oregon Health Sciences University. 12 The Company continues to benefit from its sales and distribution agreement with a German health care products company. This agreement provides 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 37 German MammaCare BSE instructors were trained and certified during the current year. The company is working to launch a patented computer based technology platform that augments clinical breast examination skill. 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. Liquidity --------- At the close of the 2005 fiscal year, the Company's assets totaled $941,520 including cash of $79,578 and marketable securities of $561,386, compared to $980,244 at the close of 2004. The Company has sufficient liquid assets to meet current and foreseeable obligations. The Company expects a substantially increased R&D budget supporting development of an advanced computer assisted training system to make demands on its capital in the coming year. The Company continues to support its operations solely on the basis of operating revenues and is debt free but for its note for $6,260 to an unaffiliated supplier for its manufacturing facility. The Company's principal goal remains to make MammaCare available to all women at risk for breast cancer through affiliations with capable organizations in the health care industry. Capital Resources ----------------- The Company has no material commitment for capital expenditures except for expanding R&D costs and there are no known trends in its capital resources. 13 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, 2005, and the related statements of comprehensive operations, stockholders' equity, and cash flows for the years ended August 31, 2005 and 2004. 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, 2005, and the results of its operations, and its cash flows for the years ended August 31, 2005 and 2004, in conformity with accounting principles generally accepted in the United States of America. Stark Winter Schenkein & Co., LLP Certified Public Accountants Denver, Colorado November 30, 2005 14 Mammatech Corporation Balance Sheet August 31, 2005 ASSETS ------ Current assets: Cash $ 79,758 Accounts receivable - trade 17,681 Inventory 102,287 ----------- Total current assets 199,726 ----------- Property and equipment, at cost, net of accumulated depreciation of $248,824 177,286 ----------- Available for sale securities 561,386 Other assets 3,122 ----------- 564,508 $ 941,520 =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Note payable $ 5,200 Accounts payable and accrued expenses 26,869 Accounts payable - officers 6,630 Accrued salaries - officers 825,110 ----------- Total current liabilities 863,809 ----------- Stockholders' equity: Common stock, $.0001 par value, 200,000,000 shares authorized, 5,227,625 shares issued and outstanding 523 Additional paid-in capital 2,862,206 Accumulated (deficit) (2,634,536) ----------- 228,193 Treasury stock, at cost, 310,425 shares (148,051) ----------- 80,142 Other comprehensive income: Valuation allowance for marketable securities (2,431) ----------- 77,711 $ 941,520 =========== See accompanying notes to financial statements. 15 Mammatech Corporation Statements of Comprehensive Operations Years Ended August 31, 2005 and 2004 2005 2004 ----------- ----------- Sales, net $ 292,863 $ 341,078 Cost of sales 77,774 117,612 ----------- ----------- Gross profit 215,089 223,466 Selling, general and administrative expenses 407,407 472,962 ----------- ----------- (Loss) from operations (192,318) (249,496) ----------- ----------- Other income and (expense): Research and development -- (14,350) Gain (loss) on sale of investment securities 21,623 (15,991) Interest and dividend income 31,400 34,487 ----------- ----------- 53,023 4,146 ----------- ----------- (Loss) before income taxes (139,295) (245,350) Provision for income taxes -- -- ----------- ----------- Net (loss) $ (139,295) $ (245,350) =========== =========== Basic and fully diluted earnings per share: Net (loss) $ (0.03) $ (0.05) =========== =========== Weighted average shares outstanding 5,223,458 5,202,625 =========== =========== Net (loss) $ (139,295) $ (245,350) Unrealized gain from investments net of income taxes 13,537 47,017 ----------- ----------- Comprehensive (loss) $ (125,758) $ (198,333) =========== =========== See accompanying notes to financial statements. 16
Mammatech Corporation Statement of Stockholders' Equity Years Ended August 31, 2005 and 2004 Valuation Additional Allowance Common Paid-in Treasury for Marketable Accumulated Shares Amount Capital Stock Securities (Deficit) Total ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance, August 31, 2003 5,022,625 $ 502 $ 2,820,727 $ (145,081) $ (62,985) $(2,249,891) $ 360,302 Increase in market value of securities -- -- -- -- 47,017 -- 47,017 Issuance of common shares for services 180,000 18 35,982 -- -- -- 36,000 Net (loss) for the year -- -- -- -- -- (245,350) (245,350) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance August 31, 2004 5,202,625 520 2,856,709 (145,081) (15,968) (2,495,241) 197,969 Increase in market value of securities -- -- -- -- 13,537 -- 13,537 Issuance of common shares for services 25,000 3 5,497 -- -- -- 5,500 Net (loss) for the year -- -- -- -- -- (139,295) (139,295) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance August 31, 2005 5,227,625 $ 523 $ 2,862,206 $ (145,081) $ (2,431) $(2,634,536) $ 77,711 =========== =========== =========== =========== =========== =========== =========== See accompanying notes to financial statements. 17 Mammatech Corporation Statements of Cash Flows Years Ended August 31, 2005 and 2004 2005 2004 --------- --------- Net (loss) $(139,295) $(245,350) Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 5,300 12,367 Common stock issued for services 5,500 36,000 Realized (gain) loss on marketable securities (21,623) 15,991 Changes in assets and liabilities: (Increase) decrease in accounts receivable 8,064 (4,747) (Increase) decrease in other receivables -- 12,581 (Increase) decrease in inventory (22,747) (7,969) Decrease in other assets 1,000 -- Increase (decrease) in accounts payable and accrued expenses - officers 95,251 101,764 Increase (decrease) in accounts payable and accrued expenses (13,717) 6,765 --------- --------- Net cash (used in) operating activities (82,267) (72,598) --------- --------- Cash flows from investing activities: Purchase of available for sale securities (344,857) (882,643) Proceeds from the sale of available for sale securities 504,387 903,651 Acquisition of property and equipment (165,349) (3,104) --------- --------- Net cash provided by (used in) investing activities (5,819) 17,904 --------- --------- Cash flows from financing activities: Repayment of note payable -- (1,060) --------- --------- Net cash (used in) financing activities -- (1,060) --------- --------- (Decrease) in cash (88,086) (55,754) Cash and cash equivalents, beginning of year 167,844 223,598 --------- --------- Cash and cash equivalents, end of year $ 79,758 $ 167,844 ========= ========= Supplemental cash flow information: Cash paid for interest $ -- $ -- ========= ========= Cash paid for income taxes $ -- $ -- ========= ========= See accompanying notes to financial statements. 18
Mammatech Corporation Notes to Financial Statements August 31, 2005 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. 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. 19 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. 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, marketable securities, accounts and loans receivable, and payables and accruals. 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, marketable securities and accounts receivable, trade. Stock-based Compensation The Company accounts for equity instruments issued to employees for services based on the fair value of the equity instruments issued and accounts for equity instruments issued to other than employees based on the fair value of the consideration received or the fair value of the equity instruments, whichever is more reliably measurable. The Company accounts for stock based compensation in accordance with SFAS 123, "Accounting for Stock-Based Compensation." The provisions of SFAS 123 allow companies to either expense the estimated fair value of stock options or to continue to follow the intrinsic value method set forth in APB Opinion 25, "Accounting for Stock Issued to Employees" (APB 25) but disclose the pro forma effects on net income (loss) had the fair value of the options been expensed. The Company has elected to continue to apply APB 25 in accounting for its stock option incentive plans. 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. 20 Advertising Advertising expenses are charged to expense upon first showing. Amounts charged to expense were $5,087 and $9,031 for the years ended August 31, 2005 and 2004. Research and Development Research and development is charged to operations as incurred. Recent Accounting Pronouncements In December 2003, the Financial Accounting Standards Board issued FASB Interpretation Number 46-R, Consolidation of Variable Interest Entities (FIN 46-R). FIN 46-R, which modifies certain provisions and effective dates of FIN 46, sets for the criteria to be used in determining whether an investment is a variable interest entity should be consolidated. These provisions are based on the general premise that if a company controls another entity through interests other than voting interests, that company should consolidate the controlled entity. The Company currently has no entities which require the application of FIN 46-R. In November 2004, the FASB issued Statement of Financial Accounting Standards (SFAS) 151, Inventory Costs. SFAS 151 amends the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage) under the guidance in ARB 43, Chapter 4, Inventory Pricing. Paragraph 5 of ARB 43, Chapter 4, previously stated that under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges. This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of so abnormal. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Management does not expect adoption of SFAS 151 to have a material impact on the Company's financial statements. In December 2004, the FASB issued SFAS 153, "Exchanges of Nonmonetary Assets," an amendment to Opinion No. 29, "Accounting for Nonmonetary Transactions." Statement 153 eliminates certain differences in the guidance in Opinion No. 29 as compared to the guidance contained in standards issued by the International Accounting Standards Board. The amendment to Opinion No. 29 eliminates the fair value exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. Such an exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for nonmonetary asset exchanges occurring in periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in periods beginning after December 16, 2004. Management does not expect adoption of SFAS 153 to have a material impact on the Company's financial statements. In December 2004, the FASB issued SFAS 123(R), "Share-Based Payment." SFAS 123(R) amends SFAS 123, "Accounting for Stock-Based Compensation," and APB Opinion 25, "Accounting for Stock Issued to Employees." SFAS 123(R) 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. This statement is effective (1) for public companies qualifying as SEC small business issuers, as of the first interim period or fiscal year beginning after December 15, 2005, or (2) for all other public companies, as of the first interim period or fiscal year beginning after June 15, 2005, or (3) for all nonpublic entities, as of the first fiscal year beginning after December 15, 2005. Management is currently assessing the effect of SFAS No. 123(R) on the Company's financial statements. In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections," which replaces APB Opinion No. 20 "Accounting Changes," and FASB Statement No. 3 "Reporting Accounting Changes in Interim Financial Statements," and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is 21 impracticable to determine either the period-specific effects or the cumulative effect of the change. This Statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date this Statement is issued. We do not believe that adoption of SFAS 154 will have a material impact on our financial statements. Note 2. Related Party Transactions During 2005, the Company purchased its office building from a shareholder at a cost of $165,000, which the Company believed was the fair market value of the building. 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, 2005. Through August 31, 2005, the Company accrued an aggregate of $825,110 in unpaid salaries due to two officers. 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 $563,817 and fair market value of $561,386 at August 31, 2005, and are classified as available for sale as it is the Company's intent to hold them for an indefinite period of time. The gross realized gains (losses) on sales of available-for-sale securities were $21,623 and $(15,991) during the years ended August 31, 2005 and 2004. The adjustment to unrealized holding (losses) on available-for-sale securities included in accumulated other comprehensive income as a component of stockholders' equity decreased by $13,537 and $47,017 during the years ended August 31, 2005 and 2004, and totaled $2,431 at August 31, 2005. Note 4. Property and Equipment Property and equipment consists of the following, at cost, at August 31, 2005: Land and building $165,000 Furniture and equipment 244,722 Leasehold improvements 16,388 -------- 426,110 Less: accumulated depreciation 248,824 -------- $177,286 ======== Depreciation charged to operations was $5,300 and $8,120 during the years ended August 31, 2005 and 2004. Note 5. Note Payable At August 31, 2005, the Company had an unsecured demand note payable due to a vendor in the principal amount of $5,200 with interest at 8% per annum. Note 6. 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. 22 Note 7. Concentration of Credit Risk/Major Customers During the year ended August 31, 2005, the Company sales to a single customer that accounted for approximately 21% of its total sales. This customer was based in a foreign country. At August 31, 2005, the Company has $47,275 on deposit in uninsured money market accounts. 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 $72,086 and $74,818 during the years ended August 31, 2005 and 2004. Note 8. Grants The Company received funds from grants for expense reimbursement aggregating $6,980 for the year ended August 31, 2004. Note 9. 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. At August 31, 2005, the deferred tax asset related to the operating loss carryforwards of approximately $400,000 has been fully reserved. The change in the valuation allowance was approximately $47,000 during the year ended August 31, 2005. At August 31, 2004, the Company had net operating loss carryforwards aggregating approximately $1,200,000, which expire from 2006 through 2025. 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, 2005 2004 ---- ---- Tax at federal statutory rates 34% 34% Operating loss carry forward (34) (34) --- --- - % - % === === Note 10. Stockholders' Equity During September 2003 the Company issued an aggregate of 180,000 shares of common stock to officers and employees for services. These shares were valued at their fair market value of $36,000 and charged to operations during the year ended September 30, 2004. During November 2004 the Company issued 25,000 shares of common stock to a third party for services. These shares were valued at their fair market value of $5,500 and charged to operations during the year ended September 30, 2005. During November 2004 the Company elected to undergo a one for twenty reverse split of its common stock. All share and per share amounts have been restated to give effect to this split. 23 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, 2005, 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, 2005, 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 24 PART III -------- Item 9. Directors and Executive Officers of the Company ------------------------------------------------------- The following persons are the executive officers and directors of the Company. Name Age Position with the Company ---- --- ------------------------- Mark Kane Goldstein, Ph.D. 67 Chairman of the Board, Vice-President and Secretary H. S. Pennypacker, Ph.D. 68 President Mary Bailey Sellers 57 Treasurer 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 and Secretary 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 Sutton Pennypacker, Ph.D. ------------------------------- Henry Sutton Pennypacker, Jr., Ph.D., is President and a 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 Controller by the Company since September 1985. She was appointed Treasurer 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. 25 Mrs. Sellers received a B.A. in English and History in 1970 from Barry College. Item 10. Executive Compensation ------------------------------- The following table sets forth the cash remuneration paid or accrued by the Company during the fiscal year ended August 31, 2005, to all executive officers of the Company as a group. Cash Compensation Table ----------------------- A B C --------------------------------------------------------------- Name of individual Capacities in Cash or number of persons which served Compensation in a group All executive officers All capacities $64,380. as a group (three persons) (1) (1) No executive officer of the Company received more than $40,000 in compensation during the fiscal year ended August 31, 2005 Dr. H. S. Pennypacker, Jr., President of the Company, and Dr. Mark Goldstein received partial compensation associated with their activities on the research grant during the 2004 fiscal year. In addition, $52,814 was accrued in salary for Dr. Pennypacker and $40,616 was accrued for Dr. Goldstein. Mary Sellers receives a salary of $40,000.00 per year. Dr. Pennypacker and Dr. Goldstein received partial compensation associated with their activities on the research grant during the 2005 fiscal year. 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 August 31, 2005, 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. (2) 1,325,800 26.4% 930 N.W. 8th Avenue Gainesville, Florida 32601 H. S. Pennypacker, Ph.D. 1,290,000 25.7% 930 N.W. 8th Avenue (1)(2) Gainesville, Florida 32601 Mary Bailey Sellers 35,000 0.7% 930 N.W. 8th Avenue Gainesville, Florida 32601 All Officers and Directors as a group (1)(2) ---------- (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. 26 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. Item 13. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K --------------------------------------------------------------------------- (a) Exhibits Exhibit Number Description ------ ----------- 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 (a) The following documents are filed as part of this Report on Form 10-K. (1) Filed as an exhibit to this Annual Report on Form 10KSB There were no reports on form 8-K to be disclosed for the year ended August 31, 2005 (b) The following documents are filed as part of this Report of form 8-K Financial Statements Pages 13 to 26 (c) Exhibit Index: None 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 H. S. Pennypacker Assignment* 10.3 Mark Kane Goldstein Assignment* *Contained in the Company's registration statement of Form S-18 filed in October 27, 1982. **Contained in Amendment No. 1 to the Company's registration statement on Form S-18 filed on November 13, 1982. ***Contained in Amendment No. 3 to the Company's registration statement on Form S-18 filed on November 9, 1982. 27 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-QSB will total approximately $12,000 for 2004 and 2005. (b) Audit-Related Fees During fiscal 2004 and 2005 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 fiscal 2004 and 2005 we will pay $750.00. (d) All Other Fees During fiscal 2004 and 2005 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. 28 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/ H. S. Pennypacker ------------------------------------- H. S. Pennypacker, President Date: February 8, 2006 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 February 8, 2006 ------------------------------ Mark Kane Goldstein Chairman of the Board /s/ H. S. Pennypacker February 8, 2006 ------------------------------ H. S. Pennypacker President and Director /s/ Mary Bailey Sellers February 8, 2006 ------------------------------ Mary Bailey Sellers Treasurer 29