UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended February 28, 2010
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____ to _______
Commission File Number: 0-11050
Mammatech Corporation
(Exact Name of Registrant as Specified in its Charter)
| Florida | | 59-2181303 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
930 NW 8th Ave Gainesville, Florida 32601
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (352) 375-0607
| N/A |
| Former name, former address, and former fiscal year, if changed since last report |
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
| | | | | |
| Larger accelerated filer | o | | Accelerated filer | o |
| Non-accelerated filer | o | | Smaller reporting company | x |
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 5,427,625 shares of common stock, par value $0.0001, outstanding as of April 14, 2010.
MAMMATECH CORPORATION
Index
| | Page |
| Part I - FINANCIAL INFORMATION | |
| | |
| Item 1. | Financial Statements | |
| | | |
| | Balance Sheets at February 28, 2010 (unaudited) and August 31, 2009 | 1 |
| | | |
| | Statements of Operations for the three and six months ended February 28, 2010 and 2009 (unaudited) | 3 |
| | | |
| | Statements of Cash Flows for the six months ended February 28, 2010 and 2009 (unaudited) | 4 |
| | | |
| | Notes to Financial Statements (unaudited) | 5 |
| | | |
| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operation | 6 |
| | | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 10 |
| | | |
| Item 4. | Controls and Procedures | 10 |
| | | |
| Part II - OTHER INFORMATION | |
| | |
| Item 1. | Legal Proceedings | 11 |
| | | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 11 |
| | | |
| Item 3. | Defaults upon Senior Securities | 11 |
| | | |
| Item 4. | Submission of Matters to a Vote of Security Holders | 11 |
| | | |
| Item 5. | Other Information | 11 |
| | | |
| Item 6. | Exhibits | 11 |
| | | |
| SIGNATURES | 12 |
PART I - FINANCIAL INFORMATION
|
| Balance Sheets | |
| | | | | | | |
| | | | | | | |
| | | February 28, | | | August 31, | |
| | | 2010 | | | 2009 | |
| | | (Unaudited) | | | | |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash | | $ | 114,290 | | | $ | 50,313 | |
| Accounts receivable – trade | | | 30,104 | | | | 20,162 | |
| Inventory | | | 45,068 | | | | 36,684 | |
| Total current assets | | | 189,462 | | | | 107,159 | |
| | | | | | | | | |
| Property and equipment, at cost, net of accumulated depreciation of $211,796 and $203,854, respectively | | | 227,258 | | | | 235,200 | |
| | | | | | | | | |
| Available for sale securities | | | 393,123 | | | | 422,204 | |
| Other assets | | | 762 | | | | 5,153 | |
| | | | 393,885 | | | | 427,357 | |
| TOTAL ASSETS | | $ | 810,605 | | | $ | 769,716 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' (DEFICIT) | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable and accrued expenses | | $ | 36,856 | | | $ | 19,693 | |
| Accounts payable and accrued salaries - officers | | | 1,352,038 | | | | 1,288,446 | |
| Total current liabilities | | | 1,388,894 | | | | 1,1308,139 | |
| | | | | | | | | |
| Stockholders' (deficit): | | | | | | | | |
| Common stock, $.0001 par value, | | | | | | | | |
| 200,000,000 shares authorized, 5,427,625 issued | | | | | | | | |
| and 5,123,700 outstanding | | | 543 | | | | 543 | |
| Additional paid-in capital | | | 2,896,186 | | | | 2,896,186 | |
| Accumulated (deficit) | | | (3,288,148 | ) | | | (3,230,231 | ) |
| | | | (391,419 | ) | | | (333,502 | ) |
| Treasury stock, at cost, 303,925 shares | | | (148,051 | ) | | | (148,051 | ) |
| | | | (539,470 | ) | | | (481,553 | ) |
| Other comprehensive income: | | | | | | | | |
| Unrealized gain (loss) on marketable securities | | | (38,819 | ) | | | (56,870 | ) |
| | | | (578,289 | ) | | | (538,423 | ) |
| TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) | | $ | 810,605 | | | $ | 769,716 | |
| | | | | | | | | |
| | | | | | | | | |
| See accompanying notes to financial statements. | | | | | |
|
| Statements of Comprehensive Operations |
| Three and Six Months Ended February 28, 2010 and 2009 |
| (Unaudited) |
| |
| | | Three months | | | | | | Six Months | | | | |
| | | 2010 | | | 2009 | | | 2010 | | | 2009 | |
| | | | | | | | | | | | | |
| Sales, net | | $ | 104,770 | | | $ | 50,766 | | | $ | 179,487 | | | $ | 141,735 | |
| Cost of sales | | | 24,593 | | | | 50,728 | | | | 48,717 | | | | 99,527 | |
| Gross profit | | | 80,177 | | | | 38 | | | | 130,770 | | | | 42,208 | |
| | | | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | 108,934 | | | | 124,109 | | | | 213,351 | | | | 240,254 | |
| (Loss) from operations | | | (28,757 | ) | | | (124,071 | ) | | | (82,581 | ) | | | (198,046 | ) |
| | | | | | | | | | | | | | | | | |
| Other income and (expense): | | | | | | | | | | | | | | | | |
| Gain (loss) on sale of investment securities | | | 1,948 | | | | - | | | | 9,783 | | | | - | |
| Interest and dividend income | | | 7,536 | | | | 8,664 | | | | 14,881 | | | | 11,883 | |
| | | | 9,484 | | | | 8,664 | | | | 24,664 | | | | 11,883 | |
| | | | | | | | | | | | | | | | | |
| (Loss) before income taxes | | | (19,273 | ) | | | (115,407 | ) | | | (57,917 | ) | | | (186,163 | ) |
| Provision for income taxes | | | - | | | | - | | | | - | | | | - | |
| Net (loss) | | $ | (19,273 | ) | | $ | (115,407 | ) | | $ | (57,917 | ) | | $ | (186,163 | ) |
| | | | | | | | | | | | | | | | | |
| Basic and fully diluted earnings per share: | | | | | | | | | | | | | | | | |
| Net (loss) | | $ | (0.00 | ) | | $ | (0.02 | ) | | $ | (0.01 | ) | | $ | (0.03 | ) |
| Weighted average shares | | | 5,427,625 | | | | 5,427,625 | | | | 5,427,625 | | | | 5,427,625 | |
| | | | | | | | | | | | | | | | | |
| Net (loss) | | $ | (19,273 | ) | | $ | (115,407 | ) | | $ | (57,917 | ) | | $ | (186,163 | ) |
| Unrealized gain (loss) from investments, net income taxes | | | 4,434 | | | | (11,640 | ) | | | 18,051 | | | | (86,897 | ) |
| Comprehensive (loss) | | $ | (14,839 | ) | | $ | (127,047 | ) | | $ | (39,866 | ) | | $ | (273,060 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| See accompanying notes to financial statements. | | | | | | | | | | | | | | | | |
Mammatech Corporation Statements of Cash Flows |
| Six Months Ended February 28, 2010 and 2009 |
| (Unaudited) |
| | | | |
| | | | 2010 | | | 2009 | | |
| Net (loss) | | $ | (57,917 | ) | $ | (186,163 | ) | |
| Adjustments to reconcile net (loss) to net | | | | | | | | |
| cash provided by (used in) operating activities: | | | | | | | | |
| Depreciation and amortization | | | 11,833 | | | 10,000 | | |
| Realized gain on marketable securities | | | (9,783 | ) | | - | | |
| Changes in assets and liabilities: | | | | | | | | |
| (Increase) decrease in accounts receivable, trade | | | (9,942 | ) | | 49,783 | | |
| (Increase) in inventory | | | (8,384 | ) | | (437 | ) | |
| Decrease in other assets | | | 500 | | | - | | |
| Increase in accounts payable and accrued salaries - officers | | | 63,592 | | | 52,810 | | |
| Increase in accounts payable and accrued expenses | | | 17,163 | | | 14,595 | | |
| Net cash provided by (used in) operating activities | | | 7,062 | | | (59,412 | ) | |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Purchase of available for sale securities | | | (121,165 | ) | | (152,022 | ) | |
| Proceeds from the sale of available for sale securities | | | 178,080 | | | 152,023 | | |
| Purchase of fixed assets | | | - | | | (400 | ) | |
| Net cash (used in) investing activities | | | (56,915 | ) | | (399 | ) | |
| | | | | | | | | |
| Increase (decrease) in cash | | | 63,977 | | | (59,811 | ) | |
| | | | | | | | | |
| Cash and cash equivalents, beginning of period | | | 50,313 | | | 335,427 | | |
| | | | | | | | | |
| Cash and cash equivalents, end of period | | $ | 114,290 | | $ | 275,616 | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
The accompanying notes are an integral part of these financial statements
MAMMATECH CORPORATION
NOTES TO FINANCIAL STATEMENTSFEBRUARY 28, 2010
(UNAUDITED)
(1) Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and Article 8 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included.
The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. For further information, refer to the financial statements of the Company as of August 31, 2009, and for the two years then ended, including notes thereto included in the Company’s Form 10-K.
(2) Use of 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.
(3) Reclassifications
Certain reclassifications have been made to the prior year financial statements in order to conform to current year presentation.
(4) Earnings (Loss) 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 when anti-dilutive, common stock equivalents are not cons idered in the computation.
(5) Inventory
Inventory is stated at the lower of cost, determined on a first in, first out basis, or market value. Inventory consists principally of finished goods and packaging materials.
(6) Available For Sale Securities
At February 28, 2010 and August 31, 2009, marketable securities consisted of mutual funds and equity securities with a fair market value of $393,123 and $422,204, respectively. The cost basis of these securities was $431,942 and $479,074, respectively.
The unrealized holding losses on available-for-sale securities included in accumulated other comprehensive income as a component of stockholders' equity decreased by $18,051 during the six months ended February 28, 2010, and increased by $86,897 for the six months ended February 28, 2009.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The following discussion should be read in conjunction with the accompanying financial statements and notes thereto included within this Quarterly Report on Form 10-Q. 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, incl uding 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 Quarterly Report, including the risk factors accompanying th is Quarterly 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.
Company Background
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 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 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 of step-by-step exercises, first on the models, then on her own bre ast 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 three months ended February 28, 2010, the Company trained and certified 4 MammaCare Specialists, 9 MammaCare Clinical Breast Examiners (CBE) and 9 MammaCare Breast Self Exam (BSE) Instructors and re-certified 6 MammaCare Associates. Seven of the 9 new BSE certifications were produced by the Company's German affiliate.
The Company is continuing to pursue its strategy of establishing additional training sites both in the United States and abroad.
The Company continues to expend resources to complete development of its patented tactile computer technology tentatively termed the Palpation Assessment Device (PAD). The PAD is the first computer-based system that teaches and evaluates manual breast examination skills. Currently, the PAD continues to undergo testing as part of the MammaCare training programs. MammaCare PAD technology has been included in a number of academic institutions. Its first operational deployment is at the Florida State University Medical School in Tallahassee where it is being used to train first- and second-year medical students. As of this date, research and development of the PAD is nearly complete and the first sale has been made. The Company is exploring the possibility of deploying the PAD to selected training centers for the purpose of expediting the recertification process of its certified providers. However, there can be no assurances that significant income will result from these programs or that additional training institutions will acquire the service.
The Company made its MammaCare Personal Learning System available to the public on Amazon.com. To date, sales have been modest but steady.
The Company continues to seek a larger partner in the healthcare industry to increase the distribution of its products.
Results of Operations
Comparison of Three Months Ended February 28, 2010 and 2009
The Company’s net sales were $104,770 for the three months ended February 28, 2010 compared to $50,766 during the three months ended February 28, 2009, an increase of approximately 106.4% from the prior period. This is primarily due to one large order totaling $28,500 that included items with a lower cost of goods. There was also an increase in the volume of trainings. Gross profit for the three months ended February 28, 2010 and 2009 was $80,177 and $38, respectively, an increase of approximately 2,109% from the prior period. Gross profit margin for the three months ended February 28, 2010 and 2009 was 76.6% and 0.0%, respectively.
Selling, general and administrative expenses decreased from $124,109 for the three months ended February 28, 2009 to $108,934 for the three months ended February 28, 2010, a decrease of 12.2%. This is due to lower payroll cost resulting from lower salaries of key employees. Loss from operations for the three months ended February 28, 2010 and 2009 was ($28,757) and ($124,071), respectively, a decrease of approximately 76.8% from the prior period.
The Company had a net loss of ($19,273) for the three months ended February 28, 2010 compared to a net loss of ($115,407) for the three months ended February 28, 2009. This represents a reduction of 83.3%.
Comparison of Six Months Ended February 28, 2010 and 2009
The Company’s net sales were $179,487 for the six months ended February 28, 2010 compared to $141,735 during the six months ended February 28, 2009, an increase of approximately 26.6% from the prior period. This is due primarily to increases in both product and training sales. Product sales increased because of an increase in advertising and training sales increased due to the purchase of a mailing list and contacting potential trainees. Gross profit for the six months ended February 28, 2010 and 2009 was $130,770 and $42,208, respectively, an increase of approximately 209.8% from the prior period. Gross profit margin for the six months ended February 28, 2010 and 2009 was 72.8% and 29.8%, respectively.
Selling, general and administrative expenses decreased from $240,254 for the six months ended February 28, 2009 to $213,355 for the six months ended February 28, 2010 due to a reduction of key employees’ salaries. Loss from operations for the six months ended February 28, 2010 and 2009 was ($82,581) and ($198,046), respectively, a decrease of approximately 58.3% from the prior period.
The Company had a net loss of ($57,917) for the six months ended February 28, 2010 compared to a net loss of ($186,163) for the six months ended February 28, 2009, a reduction of 68.9%.
Liquidity and Capital Resources
The Company has no immediate liquidity problems. At February 28, 2010, the Company had cash on hand of $114,290 and marketable securities of $393,123. Although the Company has $1,388,894 of current liabilities, $1,352,038 of this balance is owed to officers. During the three months ended February 28, 2010, the Company had net loss of $19,273 and an unrealized gain from investments of $4,434. During the six months ended February 28, 2010, the Company had net loss of $57,917 and an unrealized gain from investments of $18,051.
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.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
N/A
ITEM 4. Controls and Procedures
(a) During the fiscal period covered by this report, our management, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and re ported within the required time periods and are designed to ensure that information required to be disclosed in our reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) There was no change in our internal control over financial reporting (as defined in Rule 13(a)-15(e)) that occurred during the quarter ended February 28, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
No legal proceedings are pending or threatened to the best of our knowledge.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS
The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.
| | 31 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | 32 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
SIGNATURES
In accordance with the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | |
| | MAMMATECH CORPORATION | | |
| | | | |
| | | | |
| | By: /s/Henry Pennypacker | | |
| Dated: April 12, 2010 | | | |
| | Henry Pennypacker, | | |
| | Chief Executive Officer | | |
| | | | |
| | By: /s/Mary B. Sellers | | |
| Dated: April 12, 2010 | | | |
| | Mary B. Sellers | | |
| | Chief Financial Officer | | |
