================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended November 30, 2009
[ ] 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 (I.R.S. Employer
incorporation or organization) 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 [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes [ ] No [ ]
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 [ ] Accelerated filer [ ]
Non-accelerated filer [ ] 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 [ ] 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 January 14, 2010.
================================================================================
MAMMATECH CORPORATION
Index
Page
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets at November 30, 2009 (unaudited) and August 31, 2009 1
Statements of Consolidated Operations for the three months ended November 30, 2009 2
and 2008 (unaudited)
Statements of Cash Flows for the three months ended November 30, 2009 and 2008 3
(unaudited)
Notes to Financial Statements (unaudited) 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 5
Operation
Item 3. Quantitative and Qualitative Disclosures About Market Risk 9
Item 4T. Controls and Procedures 9
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits 10
SIGNATURES 11
i
PART I - FINANCIAL INFORMATION
Mammatech Corporation
Balance Sheets
November 30, 2009 August 31, 2009
----------------- ---------------
(Unaudited)
ASSETS
Current assets:
Cash $ 48,579 $ 50,313
Accounts receivable - trade 30,537 20,162
Inventory 36,720 36,684
----------- -----------
Total current assets 115,836 107,159
----------- -----------
Property and equipment, at cost, net of accumulated depreciation 229,858 235,200
----------- -----------
Available for sale securities 430,600 422,204
Other assets 2,579 5,153
----------- -----------
433,179 427,357
----------- -----------
TOTAL ASSETS $ 778,873 $ 769,716
=========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 28,915 $ 19,693
Accounts payable and accrued salaries - officers 1,313,404 1,288,446
----------- -----------
Total current liabilities 1,342,319 1,308,139
----------- -----------
Stockholders' (deficit):
Common stock, $.0001 par value,
200,000,000 shares authorized, 5,427,625 issued
and outstanding 543 543
Additional paid-in capital 2,896,186 2,896,186
Accumulated (deficit) (3,268,871) (3,223,535)
----------- -----------
(372,142) (326,806)
Treasury stock, at cost, 303,925 shares (148,051) (148,051)
----------- -----------
(520,193) (474,857)
Other comprehensive income:
Unrealized (loss) on marketable securities (43,253) (63,566)
----------- -----------
(563,446) (538,423)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 778,873 $ 769,716
=========== ===========
The accompanying notes are an integral part of these financial statements.
1
Mammatech Corporation
Statements of Comprehensive Operations
Three Months Ended November 30,
(Unaudited)
2008 2009
----------- -----------
Sales, net $ 90,969 $ 74,717
----------- -----------
Cost of sales 15,210 14,927
Cost of trainings 33,589 9,198
----------- -----------
Gross profit 42,170 50,592
----------- -----------
Selling, general and administrative expenses 116,144 104,417
----------- -----------
(Loss) from operations (73,974) (53,825)
----------- -----------
Other income
Gain on sale of investment securities -- 7,836
Interest and dividend income 3,219 7,345
----------- -----------
3,219 15,181
----------- -----------
(Loss) before income taxes (70,755) (38,644)
Provision for income taxes -- --
----------- -----------
Net (loss) $ (70,755) $ (38,644)
=========== ===========
Basic and fully diluted earnings per share:
Net (loss) $ (0.01) $ (0.01)
=========== ===========
Weighted average shares 5,427,625 5,427,625
=========== ===========
Net (loss) $ (70,755) (38,644)
Unrealized gain (loss) from investments, net of
income taxes (75,257) 13,617
----------- -----------
Comprehensive (loss) $ (146,012) $ (25,027)
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
Mammatech Corporation
Statements of Cash Flows
Three Months Ended November 30, 2008 and 2009
(Unaudited)
2008 2009
--------- ---------
Cash flows from operating activities:
Net (loss) $ (70,755) $ (38,644)
Adjustments to reconcile net (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 4,600 7,416
Unrealized (gain) loss on available for sale securities 75,257 (7,836)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, trade 69,997 (10,375)
(Increase) in inventory (17,219) (36)
Decrease in other assets -- 500
Increase in accounts payable and accrued salaries - officers 26,405 24,958
Increase (decrease) in accounts payable and accrued expenses (6,015) 9,222
--------- ---------
Net cash provided by (used in) operating activities 82,270 (14,795)
--------- ---------
Cash flows from investing activities:
Purchase of available for sale securities (224,058) (61,941)
Proceeds from the sale of available for sale securities 149,950 75,000
--------- ---------
Net cash provided by (used in) investing activities (74,108) 32,230
--------- ---------
Cash flows from financing activities: -- --
--------- ---------
Increase (decrease) in cash 8,162 (1,736)
Cash and cash equivalents,
beginning of period 19,025 50,313
--------- ---------
Cash and cash equivalents,
end of period $ 27,187 $ 48,579
========= =========
The accompanying notes are an integral part of these financial statements
3
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2009
(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 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
considered 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
Available for sale securities at November 30, 2009 consist of mutual funds and
equity securities with a fair market value of $430,600. The cost basis of these
securities is $473,852. At August 31, 2009, available for sale securities had a
fair market value of $422,204 and a cost of $485,770.
The unrealized holding losses on available-for-sale securities included in
accumulated other comprehensive income as a component of stockholders' equity
increased by $13,617 during the three months ended November 30, 2009, and
increased by $75,257 during the three months ended November 30, 2008.
(7) Subsequent Events
The Company evaluated all events subsequent to the balance sheet date of
November 30, 2009 through the date of issuances of these financial statements
and has determined that there are no subsequent events that require disclosure.
4
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, including statements regarding the Company's capital needs,
business strategy and expectations. Any statements contained herein that are not
statements of historical facts may be deemed to be forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such
as "may", "will", "should", "expect", "plan", "Intend", "anticipate", "believe",
estimate", "predict", "potential" or "continue", the negative of such terms or
other comparable terminology. Actual events or results may differ materially. In
evaluating these statements, you should consider various factors described in
this Quarterly Report, including the risk factors accompanying this 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 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.
5
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 November 30, 2009, the Company trained and
certified 1 MammaCare Specialist, 7 MammaCare Clinical Breast Examiners and 19
MammaCare Breast Self Exam (BSE) Instructors. These new certifications were
generated primarily by the Company's German affiliate and the Company's
relationship with Alexian Brothers Hospital Network.
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. One unit has
been sold to a training facility; however, there can be no assurances that there
will be a substantial number of future sales or that significant income will
result.
The Company continues to seek a larger partner in the healthcare industry to
increase the distribution of its products.
6
Results of Operations
Comparison of Three Months Ended November 30, 2009 and 2008
- -----------------------------------------------------------
The Company's net sales were $74,717 for the three months ended November 30,
2009 compared to $90,969 during the three months ended November 30, 2008, a
decrease of approximately 17.9% from the prior period. Gross profit for the
three months ended November 30, 2009 and 2008 was $50,592 and $42,170,
respectively, an increase of approximately 20.0% from the prior period. This was
due primarily to a reduction in cost of sales resulting from a reduction in
manufacturing costs. Gross profit margin for the three months ended November 30,
2009 and 2008 was 67.7% and 46.4%, respectively.
In the three months ended November 30, 2009, net sales were $74,717, of which
$52,117 was product sales and $22,600 was training revenues. The cost of
products was $14,927, which was 28.6% of product sales. The cost of trainings
was $9,198, representing 40.7% of training revenues. In the three months ended
November 30, 2008, net sales were $90,969, of which $42,919 was product sales
and $48,050 was training revenues. The cost of products was $15,210, which was
35.4% of product sales. The cost of trainings was $33,589, representing 69.9% of
training revenues. The cost of products between the periods ended November 30,
2009 and 2008 decreased by $283 or 1.9% The cost of trainings between the
periods ended November 30, 2009 and 2008 decreased by $24,391 or 72.6% due to a
52.9% year over year reduction in training revenues.
Selling, general and administrative expenses decreased from $116,144, for the
three months ended November 30, 2008 to $104,417 for the three months ended
November 30, 2009. The decrease in the three months period ended November 30,
2009 was due to cost reductions in both salaries and research and development.
The Company had a net loss of ($70,755) for the three months ended November 30,
2008 and net loss of ($38,644) for the three months ended November 30, 2009.
This change was primarily from a decrease in operating costs described above.
Costs associated with development of the company's Palpation Assessment Device
were correspondingly reduced. As of this date, research and development of the
PAD is nearly complete and the first sale has been made.
7
Liquidity and Capital Resources
The Company has no immediate liquidity problems. At November 30, 2009 the
Company had cash on hand of $48,579 and available for sale securities of
$430,600. At November 30, 2009, the Company has accounts payable and accrued
salaries owing to its officers of $1,342,319. During the three months ended
November 30, 2009, the Company had net loss of $38,644 and an unrealized gain
from investments of $13,617.
The Company intends to use its capital resources to fund its product development
and to expand distribution. The Company believes these capital resources are
sufficient to allow the Company to attract potential interest from a strategic
partner and to make it an attractive candidate for grant funding from public and
private sources. However, there can be no assurance these capital resources will
be sufficient to allow the Company to implement its marketing strategies or to
become profitable.
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
8
ITEM 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 has 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 reported
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
that occurred during the quarter ended November 30, 2009 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
9
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.
10
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
Dated: January 14, 2010 By: /s/ Henry Pennypacker
----------------------------------
Henry Pennypacker,
Chief Executive Officer
Dated: January 14, 2010 By: /s/ Mary B. Sellers
----------------------------------
Mary B. Sellers
Chief Financial Officer
11