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, 2001
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 29 was $357,274 based on the average bid and asked price. As of
November 29, there were 100,452,500 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
PART I
------
ITEM 1. DESCRIPTION OF BUSINESS
- --------------------------------
INTRODUCTION
- ------------
The Company owns all rights to, subject to certain minor royalties, and is
engaged in the sale of a patented breast tumor detection training system (the
"MammaCare System"). Using life- like models of a human female breast, the
MammaCare System is designed to train individuals to perform effective manual
breast examination. The breast models contain simulated tumors of varying sizes,
ranging from under 5mm. to over 10mm. They also contain material which simulates
the normal nodularity, or "lumpiness", that characterizes most breast tissue.
Although the examiner can never determine by feel alone whether a lump is
benign or malignant, detection of tumors in the size range simulated by the
models is important to early diagnosis of malignancies. Thus, the Company
believes that by training women to palpate the breast model (and their own
breasts) properly, the MammaCare System will lead to early detection of breast
cancer and thus reduce morbidity and mortality due to this disease.
The MammaCare System is sold in several forms, all of which contain at
least one of the Company's patented breast models. Originally, a client was
given private training after which she was provided with a take-home breast
model and other materials. Now, the customer may view a video tape developed by
the Company which teaches her the proper use of the model(s) and an extremely
thorough examination technique. The practice model is designed to permit a woman
to reinforce her lump detection skills periodically and serves as a comparative
standard as she palpates her own breast.
The sale of take-home models, together with training in the Company's
method of B.S.E., was originally accomplished primarily through franchise and
license arrangements (collectively referred to as "Franchises") with healthcare
providers. In addition, the Company owns and operates one MammaCare Center in
Gainesville, Florida. Franchisees sell materials and provide training directly
to women, as does the Company at its own Center. To date, these franchisees have
been medical schools, hospitals, breast centers, and radiology clinics.
2
In recent years, development and marketing through new Franchises has been
de-emphasized because this marketing approach proved overly costly and
cumbersome for the returns it generated. The Company has therefore developed a
different marketing strategy which involves the sale of an integrated training
system known as the MammaCare Learning System (the "Learning System"). The
Learning System is available in two versions, the Professional and the Personal,
and is comprised of one (Personal) or two (Professional) breast models and a
videotaped B.S.E. training program designed to be viewed by women in either
their homes Personal) or in a clinical setting (Professional). In both cases,
the skill learned is subject to ultimate evaluation by a physician. See Item 1,
"New Marketing Approach".
THE PURPOSE OF MANUAL BREAST EXAMINATION
- ----------------------------------------
Manual palpation has been and remains the most widely used method for
detection of breast cancer in all stages of development. The breast is an ideal
organ for physical examination because of the external location, coupled with
the softness of the tissue and its hard backing. The earlier breast cancer is
detected, diagnosed and treated, the greater the chances are for arrest of the
condition. Published studies of breast pathology have shown that 94% of all
cancerous tumors of the breast are potentially discoverable by manual
examination conducted by a properly trained person. Even though women themselves
remain the primary discoverers of breast cancer, several reports show that
B.S.E. is not widely practiced. Consequently, most breast cancers are initially
detected at a relatively advanced stage with metastasis having already occurred.
The average size tumor that women present to their physicians is about 3.5 cm.
(over one inch) in diameter. Treatment often requires a radical mastectomy (an
extensive surgical procedure which includes removal of the breast, underlying
muscle and axillary lymph nodes) followed by a course of radiation treatment
and/or chemotherapy. On the other hand, if the disease is initially detected
while the primary tumor is small (<1.0 cm) and no lymph nodes are involved,
treatment often involves only removal of the tumor and a margin of surrounding
healthy tissue. Thereafter, a course of radiation treatment is often prescribed
as a precautionary measure.
In research conducted at the University of Florida under the direction of
the two principle shareholders of the Company, together with a third individual,
more than 445 women were taught to detect tumors in the model ranging from 2 to
3
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.
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.
4
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
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
5
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.
Under this new marketing approach, health care providers purchase the
MammaCare Professional Learning System directly from the Company for $225 each.
The Company does not generate any revenues from the use of the Learning System
by women; its sole revenues under the new marketing approach come from sales of
System and any accompanying training.
The MammaCare Professional Learning System consists of a teaching model, a
24-minute video cassette, and practice kit. The teaching model is a patented
breast model, designed to teach the difference between the feel of normal,
nodular breast tissue and the feel of small lesions. The video cassette guides
the learner through a series step-by-step exercises, first on the models, then
on her own breast tissue. This is intended to lead to mastery level proficiency
in palpation, search technique and lump detection. The practice kit contains a
"take-home" breast model, a written review manual, a reminder calendar and a
record booklet.
It is suggested that providers make the System available to their patients
to use at a set fee. A patient may purchase the practice kit portion of the
System for continued monthly reinforcement of her skills. Patients may view the
videotape either in their homes or in the provider's facility. In either case, a
patient should have her proficiency reviewed by a physician or certified
MammaCare Specialist.
6
By obtaining the MammaCare Learning System from their own providers,
patients are assured of receiving the full quality of MammaCare without the
inconvenience and expense of a lengthy clinic visit. Further, it is anticipated
that the cost of MammaCare to the public will be lower than historical prices
charged for this service. However, while the Company has made providers aware of
the need to keep the price of MammaCare reasonable, the providers are free to
charge whatever fee they deem appropriate for the use of the System. In light of
the fact that most health insurance policies do not reimburse patients for any
portion of their MammaCare expenses, no assurance can be given that the
physicians will set prices low enough to attract patients.
Providers who are Franchisees or licensees are permitted to purchase Kits
at a substantial discount. The Company's intent is for these providers to act as
distributors to other physicians and health care providers in their respective
geographic regions. Patients ultimately purchasing these systems would then seek
a proficiency evaluation from either their physician or the Franchisee/provider.
Conceivably, if additional treatment were needed, the patient would choose the
physician or health care provider to furnish such treatment since a health care
relationship had already been established.
A direct-to-physicians marketing approach was also developed during the
Summer of 1986 and implemented in late September of the same year. To date,
there are over 1000 physicians, hospitals and diagnostic centers throughout the
United States providing the Learning System to women. Although it is too early
to judge whether it will be more successful than the Company's earlier marketing
strategies, the Company believes that this marketing approach is superior
insofar as it eliminates certain prior deficiencies. No assurances can be given
that this new marketing approach will be successful. In any event, for the
Company to maintain profitability, MammaCare must be provided to an ever
increasing number of women.
Early in 1989, the Company introduced a companion product called the
MammaCare Personal Learning System. It contains a single breast model, a 45-min.
video tape which teaches the same skills as the videotape in the Professional
System but with reference to the single model, and assorted printed matter. This
System is being marketed directly to women and was described in the August 1989
issue of Redbook and the July-August 1991 issue of the East West Journal. The
Company is presently evaluating consumer response to this product and expects to
develop additional marketing strategies for it in the coming year. The MammaCare
7
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
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
8
nationwide audience. This individual was employed by a large health care concern
in Beverly Hills, California until 1996 and is a nationally recognized expert on
BSE. That organization now uses MammaCare in all of its breast centers under a
special agreement negotiated during 1992.
Largely as a result of the efforts of this individual, the California
Division of the American Cancer Society adopted several features of MammaCare
for enhancement of their national Special Touch program. Specifically, the
Company provides its patented training models to Special Touch Facilitators who
have undergone training approved by the Company. These individuals may also
purchase the Company's Home Practice Model for use by participants in California
ACS BSE training programs. In November of 1989, the California Division received
an Honors Citation for its Special Touch Program from the National Office of the
American Cancer Society. To date, the Company has shipped over $100,000 worth of
products to California ACS chapters or affiliated individuals under this
arrangement.
Similar arrangements have been concluded with the Alaska, Alabama, Alaska,
Arkansas, Connecticut, Delaware, Florida, Georgia, Indiana, Kansas, Kentucky,
Maine, Minnesota, New York, Pennsylvania, South Carolina, South Dakota and
Wisconsin Divisions of the American Cancer Society. These organizations are a
major component of the Company's customer base and are a stable source of
revenue. More recently, the Company has developed a web site (www.mammacare.com)
and markets its products and services through that medium.
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.
9
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.
PATENTS
- -------
The Company is the assignee of the following patents and patent
applications directed to the Model and/or the System as indicated:
10
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
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.
11
(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.
12
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
13
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.
14
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 2001, the bid value of the stock ranged from
$0.001 to $0.05.
The following information concerning the National Quotation Bureau price of
the Company's common stock has been received from NASDAQ and the National
Quotation Bureau.
Quarterly Period High Bid (1) Low Bid (1)
---------------- ------------ ------------
November 30, 1988 $ 0.005 $ 0.005
February 28, 1989 $ 0.01 $ 0.0025
May 31, 1989 $ 0.01 $ 0.01
August 31, 1989 $ 0.01 $ 0.004
November 30, 1989 $ 0.01 $ 0.0075
February 28, 1990 $ 0.01 $ 0.005
May 31, 1990 $ 0.01 $ 0.005
August 31, 1990 $ 0.01 $ 0.001
November 30, 1990 $ 0.01 $ 0.001
February 29, 1991 $ 0.01 $ 0.001
May 31, 1991 $ 0.01 $ 0.001
August 31, 1991 $ 0.01 $ 0.001
November 30, 1991 $ 0.01 $ 0.001
February 29, 1992 $ 0.01 $ 0.001
May 31, 1992 $ 0.01 $ 0.001
August 31, 1992 $ 0.01 $ 0.001
August 31, 1996 $ 0.01 $ 0.005
August 31, 1997 $ 0.01 $ 0.001
August 31, 1998 $ 0.24 $ 0.001
August 31, 1999 $ 0.08 $ 0.010
August 31, 2000 $ 0.30 $ 0.010
August 31, 2001 $ 0.05 $ 0.001
(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.
15
B. Holders of Common Stock. As of August 31, 2001, 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.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Summary of Consolidated Statements of Operations
YEAR ENDED Aug.31, Aug.31, Aug.31, Aug.31, Aug.31,
2001 2000 1999 1998 1997
------- ------- ------- ------- -------
Revenues from 539,414 464,153 468,206 541,911 438,755
Operations
Net Income 12,521 4,532 201,934 150,545 143,578
(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,
2001 2000 1999 1998 1997
------- ------- ------- ------- -------
Total Assets 1,242,465 1,147,500 1,065,127 769,143 530,184
Total 525,082 400,235 307,368 233,987 112,825
Liabilities
YEAR ENDED Aug.31, Aug.31, Aug.31, Aug.31, Aug.31,
2001 2000 1999 1998 1997
------- ------- ------- ------- -------
Shareholder's 717,383 747,265 757,759 543,216 417,359
Equity
During these periods, no cash dividends were declared or paid.
- --------------------------------------------------------------
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- -------------------------------------------------------------------------
RESULT OF OPERATIONS
- --------------------
Results of Operations.
----------------------
Sales for 2001 were the highest in the Company's history. The 2001 sales
total of $539,414 represents a increase of 16.2% compared to the previous year
and a increase of 15.2% compared to 1999. Export sales of $41,895 accounted for
7.7% of the total, up from 5.04& the previous year. Figure 1 shows the progress
of sales since 1987, the first year the Company sold its products directly to
the medical profession rather than through its licensed centers.
[GRAPHIC OMITTED]
Figure 1 Sales Revenues for Mammatech:1987-
2001
The Company's operating expense decreased by 7.28% in comparison to 2000
and by 3.09% with respect to the 1999 figure. The resulting operating loss of
$68,718 is reduced by 64% in comparison to last year and by 60.4% compared to
1999. Since 1998, this figure has been elevated due to the need for additional
staff assigned to a three-year NCI SBIR Phase II grant awarded to the Company.
This expense continued during the 2001 but was reimbursed in the amount of
$38,557. The Company's pretax net income for the year was $12,521, up
significantly (176%) from $4,532 in the previous year.
The major focus of the Company's marketing activities during the year was
the expansion of its direct mail program. This was enhanced by the production
and distribution of the Company's first catalogue which has been carefully
coordinated with the web site. Enhanced sales, particularly from new customers,
was the principal result of this activity which is now being expanded.
17
The Company introduced two major new products during the year. The first is
a greatly improved version of its basic patented training model which anchors
the MammaCare Professional Learning System. The second new product is an economy
version of the MammaCare Lump Chart, introduced last year. Demand for the new
lump chart already exceeds that of the earlier version and is expected to remain
brisk.
During the year, a number of research reports appeared in the medical
literature suggesting manual examination of the breast is essentially equivalent
to mammography with respect to effectiveness in detecting early stage breast
cancer. The result has been an upsurge in interest on the part of medical
schools and training programs in the Company's training systems and products.
The Company therefore continued its emphasis on its professional training
program during 2001, producing 40 Certified MammaCare Specialists, down from 52
the previous year. Four of these individuals are employees of the World Bank and
were trained in a satellite training facility at George Washington University.
Additionally, the company provided training for 65 attendees at the annual
meeting of the Nation Consortium of Breast Centers. A number of these
individuals have sought additional training as a result of this exposure and
others are expected to do so as well.
Medical professionals seeking MammaCare Professional Training represent a
variety of health care organizations. Many are associated with the U.S. Centers
for Disease Control, Breast and Cervical Cancer Project (BCCP)and other federal
and state facilities. Others come from military facilities. Professional
training continues to be a significant source of revenue for the Company,
although there can be no assurance that it will continue.
The Company also benefits 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 continues an extensive promotional campaign in both the electronic
and print media. The distributor is now actively marketing and modest sales are
continuing. Discussions concerning formation of a MammaCare training center in
Germany are now in the beginning stages. There can be no assurance that such a
center will materialize or that, even if it does, that there will be substantial
revenue to the Company as a result.
18
The Company continues to participate in a cooperative agreement with
Medical Informatics, a division of Multi-Media Systems, Inc. This arrangement
provides for joint development of an automated version of the Company's clinical
breast examination technology. This work is supported primarily by a NCI 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. The
purpose of this project is to develop versions of MammaCare suitable for use by
women with sensory impairments. The portion of the project devoted to the blind
and visually impaired has been completed and sales are just now beginning. Work
on a companion product for the hearing impaired is nearing completion. The
Company sought and received a one-year no-cost extension of the project in order
to complete data collection and analysis. Data are being collected via the
internet using a site and an interactive technology that may in the future be
used with certain of the Company's other products.
Liquidity
---------
At the close of the 2001 fiscal year, the Company's assets totaled
$1,242,465 compared to $1,147,500 at the close of 2000. The Company has
sufficient liquid assets to meet current and foreseeable obligations.
The Company continues to support its operations solely on the basis of
operating revenues and is debt free but for its note for $6,260 to an
unaffiliated supplier for its manufacturing facility. The Company's principal
goal 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)
- -----------------------------
19
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, 2001 and 2000, 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, 2001 and 2000, 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.
/s/ James E. Scheifley & Associates, P.C.
------------------------------------------
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
September 27, 2001
20
Mammatech Corporation
Balance Sheets
August 31, 2001 and 2000
ASSETS
------
2001 2000
----------- -----------
Current assets:
Cash $ 578,054 $ 541,855
Available for sale securities 217,908 174,074
Accounts receivable - trade, net of allowance for
doubtful accounts of $7,908 and $8,670 128,861 82,436
Accounts receivable - other 0 3,548
Inventory 105,448 141,685
Deferred tax asset - current portion 5,100 3,400
----------- -----------
Total current assets 1,035,371 946,998
Property and equipment, at cost, net of
accumulated depreciation of $215,464 and $204,595 26,488 22,803
Deferred tax asset - non-current portion 161,890 165,800
Patents, trademarks and other intangibles, net of
accumulated amortization of $82,572 and $72,292 18,716 11,899
----------- -----------
$ 1,242,465 $ 1,147,500
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt 6,260 6,736
Accounts payable - trade 24,433 29,438
Accounts payable - officers 6,630 6,630
Accrued salaries 416,189 298,410
Accrued royalties 71,570 59,021
----------- -----------
Total current liabilities 525,082 400,235
Long-term debt 0 0
Stockholders' equity:
Common stock, $.0001 par value,
200,000,000 shares authorized, 100,462,500 and
100,452,500 shares issued and outstanding 10,046 10,046
Additional paid-in capital 2,811,183 2,811,183
Accumulated deficit (1,890,939) (1,903,460)
----------- -----------
930,290 917,769
Valuation allowance for marketable securities (64,856) (22,453)
Treasury stock, at cost, 6,208,500 shares (148,051) (148,051)
----------- -----------
717,383 747,265
----------- -----------
$ 1,242,465 $ 1,147,500
=========== ===========
See accompanying notes to financial statements.
21
Mammatech Corporation
Statements of Income
Years Ended August 31, 2001, 2000 and 1999
2001 2000 1999
------------- ------------- -------------
Sales, net $ 539,414 $ 464,153 $ 468,206
Cost of sales 128,318 130,276 146,878
------------- ------------- -------------
Gross profit 411,096 333,877 321,328
Selling, general and administrative expenses 479,814 517,491 494,593
------------- ------------- -------------
Income (loss) from operations (68,718) (183,614) (173,265)
Other income and (expense):
Interest expense (1,624) 0 (132)
Loss on sale of investment securities 0 0 (10,228)
Other income 38,557 152,243 186,440
Interest and dividend income 46,516 36,703 29,119
------------- ------------- -------------
83,449 188,946 205,199
Income before income taxes 14,731 5,332 31,934
Provision for income taxes (2,210) (800) 170,000
------------- ------------- -------------
Net income $ 12,521 $ 4,532 $ 201,934
============= ============= =============
Basic and fully diluted earnings per share:
Net income $ 0.00 $ 0.00 $ 0.00
============= ============= =============
Weighted average shares outstanding 100,462,500 100,458,333 100,352,500
============= ============= =============
Net income (loss) $ 12,521 $ 4,532 $ 201,934
Unrealized gain (loss) from investments net of
income taxes (27,986) (10,115) 7,464
------------- ------------- -------------
Comprehensive income $ (15,465) $ (5,583) $ 209,398
============= ============= =============
See accompanying notes to financial statements.
22
Statement of Stockholders' Equity
Mammatech Corporation
Additional
Common Paid-in Treasury
Shares Amount Capital Stock
----------- ----------- ----------- -----------
Balance, August 31, 1998 100,352,500 $ 10,035 $ 2,809,594 $ (148,051)
Common stock issued for services 100,000 10 1,290 --
Increase in market value of securities -- -- -- --
Net income for the year 0 0 0 0
----------- ----------- ----------- -----------
Balance, August 31, 1999 100,452,500 10,045 2,810,884 (148,051)
Common stock issued for services 10,000 1 299 --
(Decrease) in market value of
securities -- -- -- --
Net income for the year 0 0 0 0
----------- ----------- ----------- -----------
Balance, August 31, 2000 100,462,500 10,046 2,811,183 (148,051)
(Decrease) in market value of
securities -- -- -- --
Net income for the year 0 0 0 0
----------- ----------- ----------- -----------
Balance, August 31, 2001 100,462,500 $ 10,046 $ 2,811,183 $ (148,051)
=========== =========== =========== ===========
23
Statement of Stockholders' Equity
Mammatech Corporation
(Con't)
Securities
Valuation Accumulated
Reserve Deficit Total
----------- ----------- -----------
Balance, August 31, 1998 $ (18,436) $(2,109,926) $ 543,216
Common stock issued for services 0 -- 1,300
Increase in market value of securities 11,309 -- 11,309
Net income for the year 0 201,934 201,934
----------- ----------- -----------
Balance, August 31, 1999 (7,127) (1,907,992) 757,759
Common stock issued for services 0 -- 300
(Decrease) in market value of
securities (15,326) -- (15,326)
Net income for the year 0 4,532 4,532
----------- ----------- -----------
Balance, August 31, 2000 (22,453) (1,903,460) 747,265
(Decrease) in market value of
securities (42,403) -- (42,403)
Net income for the year 0 12,521 12,521
----------- ----------- -----------
Balance, August 31, 2001 $ (64,856) $(1,890,939) $ 717,383
=========== =========== ===========
23(Con't)
Mammatech Corporation
Statements of Cash Flows
Years Ended August 31, 2001, 2000 and 1999
2001 2000 1999
--------- --------- ---------
Net income (loss) $ 12,521 $ 4,532 $ 201,934
Adjustments to reconcile net income (loss)to
net
cash provided by operating activities:
Depreciation and amortization 16,788 22,454 (21,737)
Common stock issued for services 0 300 1,300
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (42,877) 11,547 (19,358)
(Increase) decrease in available for sale
securities (86,237) (112,894) 29,180
(Increase) decrease in inventory 36,237 42,686 17,203
(Increase) decrease in other assets (3,424) (12,705) 43,054
(Increase) decrease in deferred tax asset 2,210 800 (170,000)
Increase (decrease) in accounts payable (5,005) (6,983) (12,174)
Increase (decrease) in accrued expenses 130,328 99,850 93,615
--------- --------- ---------
Total adjustments 48,020 45,055 (38,917)
--------- --------- ---------
Net cash provided by
operating activities 60,541 49,587 163,017
--------- --------- ---------
Cash flows from investing activities:
Acquisition of property and equipment (23,866) (5,944) (7,545)
--------- --------- ---------
Net cash (used in) investing activities (23,866) (5,944) (7,545)
--------- --------- ---------
Cash flows from financing activities:
Repayment of note payable (476) 0 0
--------- --------- ---------
Net cash (used in)
financing activities (476) 0 0
--------- --------- ---------
Increase (decrease) in cash 36,199 43,643 155,472
Cash and cash equivalents,
beginning of period 541,855 498,212 342,740
--------- --------- ---------
Cash and cash equivalents,
end of period $ 578,054 $ 541,855 $ 498,212
========= ========= =========
See accompanying notes to financial statements.
24
Mammatech Corporation
Statements of Cash Flows
Years Ended August 31, 2001, 2000 and 1999
2001 2000 1999
-------- -------- --------
Supplemental cash flow information:
Cash paid for interest $ 0 $ 132 $ 829
Cash paid for income taxes $ 0.00 $ 0.00 $ 0.00
Non-cash investing and financing acticities:
Increase (decrease) in investment valuation
reserve $(42,403) $(15,326) $ 11,309
See accompanying notes to financial statements.
25
Mammatech Corporation
Notes to Financial Statements
August 31, 2001
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.
26
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.
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
27
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 $6,226, $4,182 and $673 for the years ended August
31, 2001, 2000 and 1999, 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.
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.
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 $15,069, $13,497, and $14,885 for the years ended August 31, 2001,
2000, and 1999, respectively.
28
During prior years two officers of the Company made advances aggregating
$11,830 of which $5,200 had been repaid prior to the year ended August 31,
1998. The balance of the advances was $6,630 at August 31, 2001.
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.
Note 3. Available for Sale Securities
During the year ended August 31, 1999 the Company liquidated certain of its
investment 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.
During the year ended August 31, 2000 the Company increased its investment
in a high-income mutual fund by $112,894. The aggregate market value of the
funds amounted to $174,074 at August 31, 2000. The accumulated amount of
net unrealized holding (losses) applicable to these securities has been
29
included as a separate component of stockholders' equity in the
accompanying balance sheet. This amount was ($22,453) at August 31, 2000
and the change in net unrealized holding (losses) for the year ended August
31, 2000 amounted to $(15,326).
During the year ended August 31, 2001 the Company increased its investment
in a high-income mutual fund by $86,237. The aggregate market value of the
funds amounted to $217,908 at August 31, 2001. 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 ($64,856) at August 31, 2001
and the change in net unrealized holding (losses) for the year ended August
31, 2001 amounted to $(42,403).
Note 4. Property and Equipment
Property and equipment consists of the following, at cost, at August 31:
2001 2000
-------- --------
Furniture and equipment $225,817 $211,263
Leasehold improvements 16,135 16,135
------- -------
241,952 227,398
Less: accumulated depreciation 215,464 204,595
------- -------
$ 26,488 $ 22,803
======= =======
Depreciation charged to operations was $10,869, $17,193 and $17,115 during
the years ended August 31, 2001, 2000, and 1999, respectively.
Note 5. Note Payable
At August 31, 2001 the Company had an unsecured note payable due to a
vendor in the principal amount of $6,260 with interest at 8% per annum. The
Company plans repay the note in full during the year ended August 31, 2002.
30
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 $435,719, $379,154, and
$449,802 for the years ended August 31, 2001, 2000, and 1999, respectively.
The related royalty expense was $12,549, $10,920, and $12,954 for the years
ended August 31, 2001, 2000, and 1999, 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, 2001, 2000 and 1999, the Company had no
single customer that accounted for more than 10% of its total sales.
At August 31, 2001 the Company has $545,447 on deposit in uninsured money
market accounts.
31
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 $41,895 during the year ended August 31, 2001.
Note 8. 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 term. Funds received for services provided under the grant for
the years ended August 31, 2001, 2000 and 1999 amounted to $38,557,
$152,243 and $186,440, respectively.
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 during
the year ended August 31, 1999, 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 $140,000
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 $75,000 from the amount recorded at August 31,
2000 due principally to the expiration or utilization of $228,000 of the
loss carryforward during 2001.
32
At August 31, 2001, the Company had net operating loss carryforward
aggregating approximately $903,000, which expires as follows:
2002: $ 115,000 2007: $ 131,000
2003: $ 54,000 2008: $ 74,000
2004: $ 233,000 2009: $ 16,000
2005: $ 280,000
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,
---------------------
2001 2000 1999
---- ---- ----
Tax at federal statutory rates 34% 34% 34%
Surtax exemption (19) (19) (19)
Operating loss carryforward (15) (15) (15)
--- --- ---
- % - % - %
=== === ===
Item 9. Disagreements on Accounting and Financial Disclosure
------------------------------------------------------------
None
33
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. 63 Chairman of the Board, Vice-
President and Secretary
H. S. Pennypacker, Ph.D. 64 President and Director
Mary Bailey Sellers 53 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
34
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 and was recently elected
Chairman of its newly formed Board of Directors. On August 10, 1990, Dr.
Pennypacker received an award from the California Division of the American
Cancer Society in recognition of his "...pioneering contribution to breast
self-examination education."
Dr. Pennypacker received a B.A. and an M.A. from the University of Montana
in 1958 and 1960, respectively, and a Ph.D. from Duke University in 1962. All
degrees were in Psychology.
Mary Bailey Sellers
- -------------------
Mary Bailey Sellers has been employed as Controller by the Company since
September 1985. She was appointed Treasurer in August 1986. From April 1978
through November 1984, she was employed by Barnett Bank of Alachua County, N.A.,
and a predecessor bank as Vice President-- commercial loans. Mrs. Sellers
devoted her time to her family from December 1984 through August 1985.
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, 2001, to each executive officer
whose total cash compensation exceeded $60,000 and to all executive officers of
the Company as a group.
35
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 $47,187.37
as a group
(three persons) (1)
(1) No executive officer of the Company received more than $37,500.00 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 2001 fiscal year. In addition,$61,797 was accrued in salary for
Dr. Pennypacker and $55,984 was accrued for Dr. Goldstein. Mary Sellers receives
a salary of $37,500.00 per year.
All directors receive reimbursement of expenses but no fees for serving as
directors.
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.
36
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.
37
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 17 to 24
(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, 2001.
(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.
38
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MAMMATECH CORPORATION
By: /s/ H. S. Pennypacker
--------------------------------
H. S. Pennypacker,
President
Date: November 29, 2001
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 November 29, 2001
- ----------------------------------
Mark Kane Goldstein
Chairman of the Board
/s/ H. S. Pennypacker November 29, 2001
- ----------------------------------
H. S. Pennypacker
President and Director
/s/ Mary Bailey Sellers November 29, 2001
- ----------------------------------
Mary Bailey Sellers
Treasurer
39