SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20001
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File No. 0-11-50
August 31, 1999
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 Number)
930 N.W. 8th Avenue, Gainesville, Florida 32601 (352) 375-0607
--------------------------------------------------------------
(Address including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Exchange on Which Registered
------------------- ----------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
------------
(Title of Class)
Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes x No
The aggregate market value of the Company's common stock held by non-affiliates
as of November 30 was $357,274 based on the average bid and asked price. As of
November 30, there were 100,352,500 shares of the Company's common stock
outstanding. Of this sum, 6,208,500 shares are treasury shares.
Total Number of Pages: 38 Exhibit Index is on Page: 37
1
<PAGE>
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 lifelike 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").
2
<PAGE>
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 (less than 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.
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.
3
<PAGE>
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 two training programs at the Gainesville Center. The first is a
comprehensive, four-day training program leading to certification as a MammaCare
4
<PAGE>
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.
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.
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.
5
<PAGE>
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 45-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.
6
<PAGE>
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.
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
7
<PAGE>
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
A.C.S. 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 A.C.S. 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.
8
<PAGE>
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.
Presently, the Company is conducting research under the auspices of the
National Cancer Institute. The object is to develop and validate versions of
MammaCare that will meet the needs of the blind and visually impaired and the
deaf and hard of hearing. This research is progressing on schedule and is
expected to result in effective products.
PATENTS, TRADEMARKS AND COPYRIGHTS
The MammaCare System was invented by seven people, including the Company's
two principle shareholders, as part of research activities conducted at the
University of Florida. Subject to royalties payable to four of the co-inventors,
the Company owns all rights to and is entitled to receive all revenues from the
System. The Company's ownership interest in the patents and foreign patent
applications is 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.
9
<PAGE>
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. Issue date
or Appli- or Filing Expiration Subject
Country cation No. Date Date Matter
------- ---------- ---------- ---------- -------
United 4,134,218 1/16/79 1/16/96 Model and
States Methods and
Apparatus re-
lating to the
System
United 308,914 Filed New model re-
States 2/9/89 lating to the
system.
Canada 1,109,252 9/22/81 9/22/98 Model
Canada 1,147,951 Filed 6/14/2000 Methods and
6/14/83 Apparatus re-
lating to the
System
United 2005894 5/26/82 10/2/98 Model
Kingdom
United 2077017 10/13/82 10/2/98 Methods and
Kingdom Apparatus re-
lating to the
System
Germany P 2844373.4 11/11/81 10/12/98 Model, as well
as certain appa-
ratus relating
to the System
Germany(1) Pending Filed - Division appli-
Application 2/25/80 cation of the
P 2857496.14 application
which issued as
10
<PAGE>
German Patent
No. P 2844373.4
and is directed
to methods and
apparatus rela-
ting to the system
Japan 1304322 6/15/85 10/11/98 Methods and
Apparatus rela-
ting to the System
Japan(2) Pending 10/26/84 - Model allowed
224,279/84 and published
for opposition.
(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 fro 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.
11
<PAGE>
TRADEMARKS
The following chart depicts the trademarks and copyrights owned by the
Company:
Regis-
tration
Type of Mark Mark Number Status
------------ ---- ------- ------
U.S. Trademark The MammaCare 1,288,296 Issued
Method & Design 7/31/84
U.S. trademark The Mammatech 1,305,388 Issued
Corporation 11/13/84
U.S. Trademark MammaKit 1,317,844 Issued
2/5/85
U.S. Trademark MammaTrainer 1,310,897 Issued
& Design 12/25/84
U.S. Trademark MammaTest 1,303,689 Issued
& Design 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
Regis-
tration
Type Name Number Effective for:
---- ---- ------- --------------
Advertising What Am I TX1-199-545 75 years from
Brochure Supposed to 9/29/83
Feel?
Test Form MammaTest TX1-234-492 75 years from
12/14/83
Instructional The MammaCare TX1-259-524 75 years from
Manual Method 12/29/83
12
<PAGE>
ITEM 2. PROPERTIES
------------------
The Company's facilities house its executive offices and MammaCare Center.
Located at 930 N.W. 8th Avenue, Gainesville, Florida, the Company's offices are
approximately 2,700 square feet. Rent is $1295.25 per month plus utilities.
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 rents these facilities from an unrelated party on a
month-to-month basis. 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.
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.
13
<PAGE>
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 1999, the bid value of the stock ranged from
$0.001 to $0.04.
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
(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, 1999, there were approximately
3,460 record holders of the Company's common stock with 100,352,500 shares
outstanding, of which 6,208,500 shares are treasury stock.
14
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
-------------------------------
Summary of Consolidated Statements of Operations
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
YEAR ENDED Aug.31, Aug.31, Aug.31, Aug.31, Aug.31,
1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues from 468,206 541,911 438,755 331,688 301,524
Operations
Net Income 201,934 150,545 143,578 67,715 44,548
(Loss)
Income (Loss) 0 0 0 0 0
per Common Share
-------------------------------------------------------------------------------------------------------
Summary of Consolidated Balance Sheet
-------------------------------------
-------------------------------------------------------------------------------------------------------
YEAR ENDED Aug.31, Aug.31, Aug.31, Aug.31, Aug.31,
1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------
Total Assets 1,065,127 769,143 530,184 365,925 281,691
Total 307,368 233,987 112,825 98,396 81,877
Liabilities
Shareholder's 757,759 543,216 417,359 267,529 199,814
Equity
-------------------------------------------------------------------------------------------------------
</TABLE>
During these periods, no cash dividends were declared or paid.
---------------------------------------------------------------
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULT OF OPERATIONS
--------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Figure 1. Sales Revenues for Mammatech
Corporation: 1987-1999
Results of Operations.
The sales data for 1999 were somewhat disappointing compared to the
previous year but slightly surpassed the data for 1997. Figure 1 shows this
progress since 1987, the first year the Company sold its products directly to
the medical profession rather than through its licensed centers.
The 1999 sales total of $468,206 represents a decrease of 10.2% compared to
the previous year but a 6.7% increase over 1997. Export sales accounted for 4.8%
of the total, almost identical to the proportion the previous year.
The Company's operating expense increased by 19.3% in comparison to 1998
and by 191% over the 1997 figure. This resulted in an operating loss of
$173,265. The elevated 1998 figure was due to the hiring of increased personnel
assigned to an SBIR Phase II grant awarded to the Company during that year. This
expense continued during 1999 but was reimbursed in the amount of $186,440.
Additionally, the Company expanded its professional training program (see below)
by the addition of two employees. These additional expenses left the real net
income for the year at $31.934, down 79% from the previous year. Because of a
change in accounting practices, the Company is allowed to add a portion of its
provision for income tax to this figure, resulting in a net income of $201,934
During the year, the Company augmented its professional training program.
As a result, during the year the Company produced 47 Certified MammaCare
Specialists, nearly doubling the number trained in 1998. These medical
professionals again represent a variety of agencies and organizations, primarily
associated with the Center for Disease Control Breast and Cervical Cancer
Project (BCCP).This continues to be a significant source of revenue for the
Company, although there can be no assurance that it will continue.
16
<PAGE>
The Company also continued to provide specialized training and products to
medical personnel from military facilities along the East coast. There is a
continuing commitment on the part of all three US. Military Service branches to
upgrade their breast cancer screening practices for the benefit of both female
military personnel and dependents. In addition, MammaCare is continues to be
used in military installations in Europe and the Company anticipates continuing
sales to this market. Again, there can be no assurance that such sales will
continue.
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 video tape and printed materials. The
distributor has also launched an extensive promotional campaign in both the
electronic and print media. The distributor is now actively marketing and modest
sales are continuing.
The Company has completed work on a Spanish version of its Personal
Learning System. Preliminary discussions have been held with a prominent
physician from the Yucatan and the Company anticipates opening that market in
the Spring of 2000.
The Company has entered a cooperative agreement with Medical Informatics, a
division of Multi-Media Systems, Inc. which provides for joint development of an
automated version of the Company's clinical breast examination technology. This
work is supported primarily by a Phase II SBIR grant to Multi-Media Systems.
There can be no assurance that a marketable product will result from this
collaboration or that any revenues will accrue to the Company as a result.
Finally, the Company continued during the year to conduct its research
program under a Phase II grant in the amount of $592,000 from the Small Business
Innovative Research (SBIR) Program of the National Institutes of Health.
Adaptive MammaCare(R) systems have now been sent to over 375 visually impaired
women and return data from nearly 350 indicate that they are able to use these
products in their homes with proficiency similar to that of sighted women. Work
on a companion product for the hearing impaired is progressing well. Data are to
be collected via the internet via a research site that is nearing operational
status.
Liquidity
---------
At the close of the 1999 fiscal year, the Company's assets totaled
$1,065,127 compared to $769,143 at the close of 1998. The Company has sufficient
liquid assets to meet current and foreseeable obligations.
17
<PAGE>
The Company continues to support its operations solely on the basis of
operating revenues and is debt free but for its note for $6,736 to an
unaffiliated supplier for its manufacturing facility. The Company's principal
goal continues to be 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 and there
are no known trends in its capital resources.
ITEM 8. FINANCIAL STATEMENTS - (SEE FOLLOWING PAGES)
-----------------------------
18
<PAGE>
<TABLE>
<CAPTION>
Mammatech Corporation
Balance Sheets
August 31, 1999 and 1998
ASSETS
------
1999 1998
---- ----
<S> <C> <C>
Current assets:
Cash $ 498,212 $ 342,740
Available for sale securities 76,506 94,377
Accounts receivable - trade, net of allowance for
doubtful accounts of $6,283 and $6,350 93,983 74,983
Accounts receivable - other 3,548 3,190
Inventory 184,371 201,574
Deferred tax asset - current portion 17,000 0
Total current assets 873,620 716,864
Property and equipment, at cost, net of
accumulated depreciation of $187,402 and $170,288 34,052 43,622
Deferred tax asset - non-current portion 153,000
Patents, trademarks and other intangibles, net of
accumulated amortization of $69,892 and $66,955 4,455 8,657
$ 1,065,127 $ 769,143
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt 6,736 4,796
Accounts payable - trade 36,421 48,595
Accounts payable - officers 6,630 6,630
Accrued salaries 209,479 119,500
Accrued royalties 48,102 44,466
Total current liabilities 307,368 223,987
Long-term debt 0 1,940
Stockholders' equity:
Common stock, $.0001 par value,
200,000,000 shares authorized, 100,452,500 and
100,352,500 shares issued and outstanding 10,045 10,035
Additional paid-in capital 2,810,884 2,809,594
19
<PAGE>
Accumulated deficit (1,907,992) (2,109,926)
912,937 709,703
Valuation allowance for marketable securities (7,127) (18,436)
Treasury stock, at cost, 6,208,500 shares (148,051) (148,051)
757,759 543,216
$ 1,065,127 $ 769,143
See accompanying notes to financial statements.
20
<PAGE>
Mammatech Corporation
Statements of Income
Years Ended August 31, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
Sales, net $ 468,206 $ 541,911 $ 438,755
Cost of sales 146,878 159,604 135,316
Gross profit 321,328 382,307 303,439
Selling, general and administrative expenses 494,593 414,452 169,458
Income (loss) from operations (173,265) (32,145) 133,981
Other income and (expense):
Interest expense (132) (829) (896)
Loss on sale of investment securities (10,228)
Other income 186,440 165,136 0
Interest and dividend income 29,119 18,383 10,493
205,199 182,690 9,597
Income before income taxes 31,934 150,545 143,578
Provision for income taxes 170,000 0 0
Net income $ 201,934 $ 150,545 $ 143,578
Basic and fully diluted earnings per share:
Net income $ 0.00 $ 0.00 $ 0.00
Weighted average shares outstanding 100,352,500 100,352,500 100,352,500
Net income (loss) $ 201,934 $ 150,545 $ 143,578
Unrealized gain (loss) from investments net of
income taxes 7,464 (16,294) 4,126
Comprehensive income $ 209,398 $ 134,251 $ 147,704
See accompanying notes to financial statements.
21
<PAGE>
Mammatech Corporation
Statement of Stockholders' Equity
Years Ended August 31, 1999, 1998 and 1997
Additional Securities
Common Paid-in Treasury Valuation Accumulated
Shares Amount Capital Stock Reserve Deficit Total
------ ------ ------- ----- ------- ------- -----
Balance, August 31, 1996 100,352,500 10,035 $ 2,809,594 $ (148,051) $ 0 $ (2,404,049) $ 267,529
Increase in market
value of securities 6,252 6,252
Net income for the year 0 0 0 0 0 143,578 143,578
Balance, August 31, 1997 100,352,500 10,035 2,809,594 (148,051) 6,252 (2,260,471) 417,359
(Decrease) in market value (24,688) (24,688)
of securities
Net income for the year 0 0 0 0 0 150,545 150,545
Balance, August 31, 1998 100,352,500 10,035 2,809,594 (148,051) (18,436) (2,109,926) 543,216
Common stock issued
for services 100,000 10 1,290 0 1,300
Increase (decrease)
in market value of 11,309 11,309
securities
Net income for the year 0 0 0 0 0 201,934 201,934
Balance, August 31, 1999 100,452,500 $ 10,045 $ 2,810,884 $ (148,051) $ (7,127) $ (1,907,992) $ 757,759
See accompanying notes to financial statements.
22
<PAGE>
Mammatech Corporation
Statements of Cash Flows
Years Ended August 31, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
Net income (loss) $ 201,934 $ 150,545 $ 143,578
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization (21,737) 25,177 7,574
Common stock issued for services 1,300 0 0
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (19,358) (12,192) (28,448)
(Increase) decrease in inventory 17,203 (39,555) (67,116)
(Increase) decrease in other assets 43,054 (9,675) 0
(Increase) in deferred tax asset (170,000) 0 0
Increase (decrease) in accounts payable (12,174) 9,873 17,128
Increase (decrease) in accrued expenses 93,615 105,598 2,744
Total adjustments (68,097) 79,226 (68,118)
Net cash provided by
operating activities 133,837 229,771 75,460
Cash flows from investing activities:
Investment in securities 29,180 (36,313) (76,500)
Acquisition of property and equipment (7,545) (17,437) (4,080)
Acquisition of patents 0 0 0
Net cash (used in) investing activities 21,635 (53,750) (80,580)
Cash flows from financing activities:
Repayment of officer loans 0 0 (2,000)
Repayment of note 0 (2,369) (3,443)
Net cash (used in)
financing activities 0 (2,369) (5,443)
Increase (decrease) in cash 155,472 173,652 (10,563)
Cash and cash equivalents,
beginning of period 342,740 342,740 179,651
Cash and cash equivalents,
end of period $ 498,212 $ 516,392 $ 169,088
See accompanying notes to financial statements.
23
<PAGE>
Mammatech Corporation
Statements of Cash Flows
Years Ended August 31, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
Supplemental cash flow information:
Cash paid for interest $ 132 $ 829 $ 896
Cash paid for income taxes $ 0.00 $ 0.00 $ 0.00
Non-cash investing and financing activities:
Increase (decrease) in investment valuation reserve $ 11,309 $(24,688) $ 6,252
See accompanying notes to financial statements.
24
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Mammatech Corporation
We have audited the accompanying balance sheets of Mammatech Corporation as of
August 31, 1999 and 1998, and the related statements of operations, changes in
stockholders' equity, and cash flows for each of the three years then ended.
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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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, 1999 and 1998, and the results of its operations, and its cash flows
for each of the three years then ended, in conformity with generally accepted
accounting principles.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
September 30, 1999
25
<PAGE>
Mammatech Corporation
Notes to Financial Statements
August 31, 1999
Note 1. Summary of Significant Accounting Policies
A. 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, which consists of a breast
model and a method of breast self-examination, is marketed by the Company
to individuals and healthcare professionals.
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. They are stated at cost
less accumulated amortization.
Revenue recognition:
The Company recognizes revenue on the sales of its products at the time of
shipment.
Earnings per share:
In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 128, "Earnings Per Share." SFAS No. 128 supersedes and simplifies the
existing computational guidelines under Accounting Principles Board ("APB")
Opinion No. 15, "Earnings Per Share."
The statement is effective for financial statements issued for periods ending
after December 15, 1997. Among other changes, SFAS No. 128 eliminates the
presentation of primary earnings per share and replaces it with basic earnings
per share for which common stock equivalents are not considered in the
computation. It also revises the computation of diluted earnings per share.
26
<PAGE>
The Company has adopted SFAS No. 128 and there is no material impact to the
Company's earnings per share, financial condition, or results of operations. The
Company's earnings per share have been restated for all periods presented to be
consistent with SFAS No. 128.
The basic earnings per share are computed by dividing net income for the period
by the weighted average number of common shares outstanding for the period.
Basic income per share is unchanged on a diluted basis.
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.
During the year the Company maintained cash deposits at financial institutions
in excess of the $100,000 limit covered by the Federal Deposit Insurance
Corporation.
Stock-based Compensation
The Company adopted Statement of Financial Accounting Standard No. 123 (FAS
123), Accounting for Stock-Based Compensation beginning with the Company's first
quarter of 1996. Upon adoption of FAS 123 when circumstances requiring its
application arise, the Company will continue to measure compensation expense for
its stock-based employee compensation plans using the intrinsic value method
prescribed by APB No. 25, Accounting for Stock Issued to Employees.
Advertising
Advertising expenses are charged to expense upon first showing. Amounts charged
to expense were $673, $335 and $2,252 for the years ended August 31, 1999, 1998
and 1997, respectively.
New Accounting Pronouncements
SFAS No. 130, 'Reporting Comprehensive Income', establishes guidelines for all
items that are to be recognized under accounting standards as components of
comprehensive income to be reported in the financial statements.
27
<PAGE>
The statement is effective for all periods beginning after December 15, 1997 and
reclassification of financial statements of financial statements for earlier
periods will be required for comparative purposes. The Company has adopted SFAS
No. 130 during the year ended August 31, 1999.
Effective December 31, 1998, the Company adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131
superseded SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise. SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. SFAS 131 also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. The adoption of SFAS 131 has had no impact on the Company.
Effective December 31, 1998, the Company adopted the provisions of SFAS No. 132,
Employers' Disclosures about Pensions and Other Post-retirement Benefits ("SFAS
132"). SFAS 132 supersedes the disclosure requirements in SFAS No. 87,
Employers' Accounting for Pensions, and SFAS No. 106, Employers' Accounting for
Post-retirement Benefits Other Than Pensions. The overall objective of SFAS 132
is to improve and standardize disclosures about pensions and other
post-retirement benefits and to make the required information more
understandable. The adoption of SFAS 132 has had no impact on the Company.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which
is required to be adopted in years beginning after June 15, 1999. SFAS 133 will
require the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of hedged assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings. Management believes that the
adoption of SFAS No. 133 will have no impact on the Company
Note 2. Related Party Transactions
The Company occupies office and clinic space pursuant to a month-to-month lease
entered into with a shareholder at a cost of $1,295 per month plus certain
common costs, which approximates fair market value. Rent expense was $14,885,
$12,791, and $15,755 for the years ended August 31, 1999, 1998, and 1997,
respectively.
During prior years two officers of the Company made advances aggregating
$11,830. During the year ended August 31, 1997, $2,000 of these advances was
repaid. The balance of the advances was $6,630 at August 31, 1999.
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 new
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.
28
<PAGE>
Note 3. Available for Sale Securities
During the year ended August 31, 1997, the Company invested $76,500 (cost basis
using specific identification method) in government securities backed mutual
funds. The market value of the funds amounted to $82,752 at August 31, 1997. The
accumulated amount of net unrealized holding gains applicable to these
securities has been included as a separate component of stockholders' equity in
the accompanying balance sheet. This amount, $6,252, also represents the change
in net unrealized holding gains for the year ended August 31, 1997.
During the year ended August 31, 1998 the Company invested an additional $36,313
in a high-income mutual fund. The aggregate market value of the funds amounted
to $94,377 at August 31, 1998. The accumulated amount of net unrealized holding
(losses) applicable to these securities has been included as a separate
component of stockholders' equity in the accompanying balance sheet. This amount
was $18,436 at August 31, 1998 and the change in net unrealized holding (losses)
for the year ended August 31, 1998 amounted to ($24,688).
During the year ended August 31, 1999 the Company liquidated certain of its
investment in the in a high-income mutual fund. Proceeds from the sale amounted
to $66,277 and a portion thereof were reinvested in other mutual fund
investments. The Company realized a loss from the sale of $10,228 during the
year ended August 31, 1999. The aggregate market value of the funds amounted to
$76,506 at August 31, 1999. The accumulated amount of net unrealized holding
(losses) applicable to these securities has been included as a separate
component of stockholders' equity in the accompanying balance sheet. This amount
was ($7,127) at August 31, 1999 and the change in net unrealized holding
(losses) for the year ended August 31, 1999 amounted to $11,309.
Note 4. Property and Equipment
Property and equipment consists of the following, at cost, at August 31:
1999 1998
-------- --------
Furniture and equipment $205,320 $197,775
Leasehold improvements 16,135 16,135
-------- -------
221,455 213,910
Less: accumulated depreciation 187,403 170,288
-------- --------
$ 34,052 $ 43,622
======== ========
Depreciation charged to operations was $17,115, $22,9897 and $7,274 during the
years ended August 31, 1999, 1998, and 1997, respectively.
Note 5. Note Payable
At August 31, 1997 the Company had an unsecured note payable due to a vendor in
the principal amount of $9,105 with interest at 8% per annum and payable in
installments of $350 per month until paid. Maturity of this note is as follows:
1999: $6,736.
29
<PAGE>
Note 6. Commitments and Contingencies
In connection with the acquisition of the patent rights for the Company's system
of breast self-examination, the Company has paid $11,787 to the University of
Florida for its release of all patent rights. In addition, 7 inventors also held
certain patent rights to the Company's process. Three of these individuals, who
are principal shareholders of the Company, contributed their rights to the
Company at the inception of the Company in 1981 at $0 value.
The remaining four inventors have assigned their rights in certain models to the
Company in exchange for royalty payments to be made based on sales. The related
sales were $449,802, $540,808, and $297,947 for the years ended August 31, 1999,
1998, and 1997, respectively. The related royalty expense was $12,954, $15,575,
and $8,581 for the years ended August 31, 1999, 1998, and 1997, respectively.
The aggregate royalties payable to the inventors is as follows:
Sales Royalty
----- -------
$ 1 - $ 5,000,000 2.86%
$5,000,001 - $ 7,500,000 2.29%
$7,500,001 - $10,000,000 1.71%
Over $10,000,000 1.14%
The Company does not maintain product liability insurance related to its product
line. It is unable to estimate the risks and possible economic consequences
related to its decision not to carry this type of insurance.
Note 7. Concentration of Credit Risk/Major Customers
During the years ended August 31, 1998 and 1997 the Company made sales to the
American Medical Women's Association aggregating $95,950 (18% of total sales)
and $70,957 (16% of total sales), respectively. This customer had a prepaid
balance of $365 at August 31, 1998. Additionally during 1998, the Company made
sales to Irving Burton & Associates aggregating $107,841 (20% of total sales)
and had an amount receivable from this customer of $36,475 at August 31, 1998.
At August 31, 1998 the Company has $295,336 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
$22,621, 25,099 and $32,476 during the years ended August 31, 1999, 1998 and
1997, respectively.
30
<PAGE>
Note 8. Other Income
During 1996 the Company received a federal grant in the amount of $97,846 to
develop and adapt the Company's products for use by women with vision and
hearing impairments. The Company periodically requests reimbursements under the
grant as the services provided for in the grant are performed. The
reimbursements are classified as other income.
During September 1997, the Company received final approval for a research grant
aggregating $592,000 to offset the costs associated with a program to promote
breast self-examination for disabled women. The grant was issued to the Company
by the US Department of Health and Human Services and has a two-year term ending
September 29, 1999 and has been extended for an additional year. Funds received
for services provided under the grant for the years ended August 31, 1999 and
1998 amounted to $186,440 and $165,136.
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. The
Company has recorded a deferred tax asset related to the operating loss
carryforward of $170,000 based upon its estimate of net income before taxes that
it expects to generate during the remaining term of the loss carryforward
($500,000). The Company has provided a reserve of approximately $299,000 for the
asset related to the portion of the loss carryforward that more likely than not
will not be utilized in future years. The reserve has decreased by approximately
$393,000 from the amount recorded at August 31, 1998 due principally to the
expiration of $626,000 of the loss carryforward during 1999 and to the estimated
deferred tax benefit recorded.
At August 31, 1999, the Company had net operating loss carry forward aggregating
approximately $1,379,000, which expires as follows:
2000: $ 202,000 2005: $ 115,000
2001: $ 279,000 2006: $ 74,000
2002: $ 280,000 2007: $ 54,000
2003: $ 228,000 2008: $ 16,000
2004: $ 131,000
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,
1999 1998 1997
---- ---- ----
Tax at federal statutory rates 34% 34% 34%
Surtax exemption (19) ( 6) ( 7)
Operating loss carryforward (15) (28) (27)
--- --- ---
- % - % - %
=== === ===
31
<PAGE>
Item 9. Disagreements on Accounting and Financial Disclosure
------------------------------------------------------------
None
32
<PAGE>
PART III
Item 10. 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. 61 Chairman of the Board, Vice-President and
Secretary
H. S. Pennypacker, Ph.D. 62 President and Director
Mary Bailey Sellers 51 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 four 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. 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.
33
<PAGE>
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.
Mrs. Sellers received a B.A. in English and History in 1970 from Barry
College.
Item 11. Executive Compensation
-------- ----------------------
The following table sets forth the cash remuneration paid or accrued by the
Company during the fiscal year ended August 31, 1998, to each executive officer
whose total cash compensation exceeded $60,000 and 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 $86,532.45
as a group
(three persons) (1)
(1) No executive officer of the Company received more than $37,319.95 in
compensation during the fiscal year ended August 31,1998.
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 1999 fiscal year. In addition,$50,660 was accrued in salary for
Dr. Pennypacker and $33,583.48 was accrued for Dr. Goldstein. Mary Sellers
receives a salary of $37,319.95 per year.
During September, 1992 the Company authorized the issuance of to H.S.
Pennypacker and M.K. Goldstein a total of 20,000,000 shares of common stock. The
Company valued these shares at $20,000. In addition, the Company accrued $30,000
in salary due to Dr. Goldstein. Dr. Goldstein subsequently relinquished claim to
these funds.
During August, 1994, the Company agreed to issue 20,000,000 shares of its
$0.0001 par value common stock to two of its officers for services. The Company
recorded a $20,000 charge to its operations during the year ended August 31,
1994, related to this issuance.
During April, 1994, the Company issued 500,000 shares of treasury stock to
certain employees for services. The value attributed to the services was $500
and was based upon the bid price of the Company's common stock at the time it
was issued ($0.001 per share). The difference between the cost of the treasury
stock ($12,000) and the charge to operations was charged to paid-in capital.
All directors receive reimbursement of expenses but no fees for serving as
directors.
34
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
-----------------------------------------------------------------------
The following table sets forth, as of Nov. 30, 1998, 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) 26,516,000 26.4%
930 N.W. 8th Avenue
Gainesville, Florida 32601
H. S. Pennypacker, Ph.D. 25,800,000 25.7%
930 N.W. 8th Avenue (1)(2)
Gainesville, Florida 32601
Mary Bailey Sellers 400,000 4.0%
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.
Item 13. 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.
35
<PAGE>
PART V
------
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
---------------------------------------------------------------------------
(a) The following documents are filed as part of this Report on Form 10-K.
Financial Statements Pages 19 to 25
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the last
quarter of the fiscal year ended August 31, 1998.
(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.
36
<PAGE>
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, Jr.
-----------------------------------------
H. S. Pennypacker, Jr., President
Date: November 19, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Company and in
the Capacities and on the dates indicated.
Signature Position or Office Date
--------- ------------------ ----
/s/ Mark Kane Goldstein Chairman of the Board November 19, 1999
---------------------------
Mark Kane Goldstein
/s/ H.s. Pennypacker, Jr. President and Director November 19, 1999
---------------------------
H. S. Pennypacker, Jr.
/s/ Mary Bailey Sellers Treasurer November 19, 1999
---------------------------
Mary Bailey Sellers
37
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