TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheet as of February 29, 2008 (unaudited) 1 Statements of Operations for the three and six month periods ended February 29, 2008 and February 28, 2007 (unaudited) 2 Statements of Cash Flows for the six month periods ended February 29, 2008 and February 28, 2007 (unaudited) 3 Notes to Financial Statements (unaudited) 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Item 3. Controls and Procedures 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 9 Item 2. Changes in Securities and Use of Proceeds 9 Item 3. Defaults upon Senior Securities 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 5. Other information 9 Item 6. Exhibits and Reports on Form 8-K 9 Signatures 10 Certifications Exhibits 31.1 and 31.2 11-12 Exhibits 32.1 and 32.2 13-14 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Mammatech Corporation Balance Sheet February 29, 2008 (unaudited) ASSETS Current assets: Cash $ 323,804 Accounts receivable - trade 16,551 Inventory 83,375 ----------- Total current assets 423,730 ----------- Property and equipment, at cost, net of accumulated depreciation of $288,824 262,290 ----------- Available for sale securities 207,700 Other assets 4,653 ----------- 212,353 ----------- TOTAL ASSETS $ 898,373 =========== LIABILITIES AND STOCKHOLDERS' (DEFICIT) Current liabilities: Accounts payable and accrued expenses $ 26,689 Accounts payable and accrued salaries - officers 1,095,789 ----------- Total current liabilities 1,122,478 ----------- Stockholders' (deficit): Common stock, $.0001 par value, 200,000,000 shares authorized, 5,427,625 issued and 5,123,700 outstanding 543 Additional paid-in capital 2,896,186 Accumulated (deficit) (2,952,187) ----------- (55,458) Treasury stock, at cost, 303,925 shares (148,051) ----------- (203,509) Other comprehensive income: Unrealized gain (loss) on marketable securities (20,596) ----------- (224,105) ----------- TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 898,373 =========== The accompanying notes are an integral part of these financial statements. 1 <TABLE> <CAPTION> <S> <C> <C> Mammatech Corporation Statements of Comprehensive Operations Three Months and Six Months Ended February 28, 2007 and February 29, 2008 (unaudited) Three Months Six Months -------------------------- -------------------------- 2007 2008 2007 2008 ----------- ----------- ----------- ----------- Sales, net $ 76,647 $ 93,787 $ 181,955 $ 178,267 Cost of sales 12,864 7,345 40,532 30,436 ----------- ----------- ----------- ----------- Gross profit 63,783 86,442 141,423 147,831 ----------- ----------- ----------- ----------- Selling, general and administrative expenses 81,946 98,283 193,307 221,691 ----------- ----------- ----------- ----------- (Loss) from operations (18,163) (11,841) (51,884) (73,860) ----------- ----------- ----------- ----------- Other income and (expense): Gain (loss) on sale of investment securities -- -- (4,228) (279) Interest and dividend income 7,443 8,013 11,831 16,080 ----------- ----------- ----------- ----------- 7,443 8,013 7,603 15,801 ----------- ----------- ----------- ----------- (Loss) before income taxes (10,720) (3,828) (44,281) (58,059) Provision for income taxes -- -- -- -- ----------- ----------- ----------- ----------- Net (loss) $ (10,720) $ (3,828) $ (44,281) $ (58,059) =========== =========== =========== =========== Basic and fully diluted earnings per share: Net (loss) $ (0.00) $ (0.00) $ (0.01) $ (0.01) =========== =========== =========== =========== Weighted average shares 5,427,625 5,427,625 5,427,625 5,427,625 =========== =========== =========== =========== Net (loss) $ (10,720) $ (3,828) $ (44,281) $ (58,059) Unrealized gain (loss) from investments, net of income taxes 4,000 (10,580) 27,354 (15,581) ----------- ----------- ----------- ----------- Comprehensive (loss) $ (6,720) $ (14,408) $ (16,927) $ (73,640) =========== =========== =========== =========== The accompanying notes are an integral part of these financial statements. 2 Mammatech Corporation Statements of Cash Flows Six Months Ended February 28, 2007 and February 29, 2008 (unaudited) 2007 2008 --------- --------- Cash flows from operating activities: Net cash provided by (used in) operating activities $ 24,063 $ 3,630 --------- --------- Cash flows from investing activities: Purchase of available for sale securities (85,275) (15,820) Proceeds from the sale of available for sale securities 116,005 10,190 Net sales (purchases) of fixed assets 7,546 (2,085) --------- --------- Net cash provided by (used in) investing activities 38,276 (7,715) --------- --------- Cash flows from financing activities: Payment of notes payable (5,200) -- --------- --------- Net cash provided by (used in) financing activities (5,200) -- --------- --------- Increase (decrease) in cash 57,139 (4,085) Cash and cash equivalents, beginning of period 23,707 327,889 --------- --------- Cash and cash equivalents, end of period $ 80,846 $ 323,804 ========= ========= The accompanying notes are an integral part of these financial statements. 3 </TABLE> MAMMATECH CORPORATION NOTES TO FINANCIAL STATEMENTS FEBRUARY 29, 2008 (UNAUDITED) (1) Basis Of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and Item 310(b) of Regulation S-B. They do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. For further information, refer to the financial statements of the Company as of August 31, 2007, and for the two years then ended, including notes thereto included in the Company's Form 10-KSB. (2) Earnings Per Share The Company calculates net income (loss) per share as required by Statement of Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods when anti-dilutive commons stock equivalents are not considered in the computation. (3) Inventory Inventory is stated at the lower of cost, determined on a first in, first out basis, or market value. Inventory consists principally of finished goods and packaging materials. (4) Available For Sale Securities Marketable securities consist of the following at February 29, 2008: Mutual funds and equity securities with a fair market value of $207,700. The cost basis of these securities is $228,296. The gross realized losses on sales of available-for-sale securities were $279 during the six months ended February 29, 2008. The unrealized holding losses on available-for-sale securities included in accumulated other comprehensive income as a component of stockholders' equity increased by $15,581 during the six months ended February 29, 2008, and totaled $20,596 at February 29, 2008. During the six months ended February 29, 2008, the Company realized net proceeds from the sale of available for sale securities of $10,190 and purchased securities available for sale at a cost of $15,820. (5) Grants The Company was awarded a Phase I SBIR Grant from the National Cancer Institute in 2006. The specific objective of the Phase I grant is to evaluate the capability of a novel prototype online learning system to teach quality-standard Clinical Breast Examination (CBE) to medical professionals. The Company refers to this as the Palpation Assessment Device (PAD), a computer-based system that teaches and evaluates manual breast examination skills. The original amount of the research grant was approximately $158,400. During the year ended August 31, 2007, the Company received $93,000 in funding under the grant, and during the six months ended February 29, 2008, the Company received $30,510 in funding under the grant. The grant funds are used for equipment, consultants and staff to develop the PAD technology. The Company accounts for funds received under this grant for cost reimbursement as a reduction in general and administrative expenses. 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements The following discussion should be read in conjunction with the accompanying financial statements and notes thereto included within this Quarterly Report on Form 10-QSB. In addition to historical information, the information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties, including statements regarding the Company's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "Intend", "anticipate", "believe", estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors described in this Quarterly Report, including the risk factors accompanying this Quarterly Report, and, from time to time, in other reports the Company files with the Securities and Exchange Commission. These factors may cause the Company's actual results to differ materially from any forward-looking statement. The Company disclaims any obligation to publicly update these statements, or disclose any difference between its actual results and those reflected in these statements. The information constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Company Background The Company is engaged in the sale of a patented breast tumor detection training system (the "MammaCare System"). Using life-like models of a human female breast, the MammaCare System is designed to train individuals to perform effective manual breast examination. The breast models contain simulated tumors of varying sizes, ranging from under 5mm. to over 10mm. They also contain material which simulates the normal nodularity, or "lumpiness," that characterizes most breast tissue. Although the examiner can never determine by feel alone whether a lump is benign or malignant, detection of tumors in the size range simulated by the models is important to early diagnosis of malignancies. Thus, the Company believes that by training women to palpate the breast model (and their own breasts) properly, the MammaCare System will lead to early detection of breast cancer and thus reduce morbidity and mortality due to this disease. The MammaCare System is sold in several forms, all of which contain at least one of the Company's patented breast models. Originally, a client was given private training after which she was provided with a take-home breast model and other materials. Now, the customer may view a video tape developed by the Company which teaches her the proper use of the model(s) and an extremely thorough examination technique. The practice model is designed to permit a woman to reinforce her lump detection skills periodically and serves as a comparative standard as she palpates her own breast. The Company's primary marketing strategy is designed to encourage sales through physicians, hospitals and diagnostic centers. Under this marketing approach, health care providers purchase the MammaCare Professional Learning System directly from the Company. The Company does not generate any revenues from the use of the Learning System by women, and the Company's sole revenues come from sales of MammaCare System and any accompanying training. The MammaCare Professional Learning System consists of a teaching model, a 24-minute video cassette, and practice kit. The teaching model is a patented breast model, designed to teach the difference between the feel of normal, 5 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. A patient may purchase the practice kit portion of the MammaCare System for continued monthly reinforcement of her skills. Patients may view the videotape either in their homes or in the provider's facility. In either case, a patient should have her proficiency reviewed by a physician or certified MammaCare Specialist. By obtaining the MammaCare System from their own providers, patients are assured of receiving the full quality of MammaCare without the inconvenience and expense of a lengthy clinic visit. Further, it is anticipated that the cost of MammaCare to the public will be lower than historical prices charged for clinical services. However, while the Company has made providers aware of the need to keep the price of MammaCare reasonable, the providers are free to charge whatever fee they deem appropriate for the use of the MammaCare System. In light of the fact that most health insurance policies do not reimburse patients for any portion of their MammaCare expenses, no assurance can be given that the physicians will set prices low enough to attract patients. To date, there are over 1,000 physicians, hospitals and diagnostic centers throughout the United States providing the Learning System to women. No assurances can be given that the Company's marketing approach will be successful. For the Company to achieve profitability, MammaCare must be provided to an ever increasing number of women. Recent Developments During the year ended August 31, 2007, the Company trained and certified 19 MammaCare Specialists, 41 MammaCare Clinical Breast Examiners and 136 MammaCare Breast Self Exam (BSE) Instructors. During the six months ended February 29, 2008, the Company trained and certified no MammaCare Specialists, 7 MammaCare Clinical Breast Examiners and 28 MammaCare Breast Self Exam (BSE) Instructors. These new certifications were primarily related to the Company's German affiliate and the Company's new relationship with Alexian Brothers Hospital Network, discussed below. The Company is continuing to pursue its strategy of establishing additional training sites both in the United States and abroad. The Company concluded negotiations with Alexian Brothers Hospital Network in Elk Grove Village, IL, and a MammaCare Training Center was opened in that location in December 2006. There can be no assurance, however, that significant revenues will result from this operation. The Company continues to expend resources to complete development of its patented tactile computer technology tentatively termed the Palpation Assessment Device (PAD). The PAD is the first computer-based system that teaches and evaluates manual breast examination skills. During the year ended August 31, 2006, the Company received a Phase I SBIR grant from the National Cancer Institute to complete development of the PAD and to evaluate its utility in an online learning environment. Currently, the PAD continues to undergo testing as part of MammaCare Specialist training. The Company continues to seek a larger partner in the healthcare industry to increase the distribution of its products. 6 Results of Operations Comparison of Three Months Ended February 29, 2008 and February 28, 2007 ------------------------------------------------------------------------ The Company's net sales were $93,787 for the three months ended February 29, 2008 compared to $76,647 during the three months ended February 28, 2007, an increase of approximately 22% from the prior period. Gross profit was $86,442 for the three months ended February 29, 2008 compared to $63,783 for the three months ended February 28, 2007, an increase of approximately 35% from the prior period. Gross profit margin for the three months ended February 29, 2008 and February 28, 2007 was 92% and 83%, respectively. Selling, general and administrative expenses increased from $81,946 for the three months ended February 28, 2007 to $98,283 for the three months ended February 29, 2008. During the three months ended February 28, 2008, grant funding totaling approximately $25,500 was recorded as a reduction of selling, general and administrative expenses. Loss from operations for the three months ended February 29, 2008 and February 28, 2007 was ($11,841) and ($18,163), respectively, a decrease of approximately 34% from the prior period. The Company had net loss of ($10,720) for the three months ended February 28, 2007 and net loss of ($3,828) for the three months ended February 29, 2008. This change was primarily related to an increase in net sales and gross profit which was partially offset by an increase in selling, general and administrative expenses in the current period. Comparison of Six Months Ended February 29, 2008 and February 28, 2007 ---------------------------------------------------------------------- The Company's net sales were $178,267 for the six months ended February 29, 2008 compared to $181,955 during the six months ended February 28, 2007, a decrease of approximately 2% from the prior period. Gross profit was $147,831 for the six months ended February 29, 2008 compared to $141,423 for the six months ended February 28, 2007, an increase of approximately 5% from the prior period. Gross profit margin for the six months ended February 29, 2008 and February 28, 2007 was 83% and 78%, respectively. Selling, general and administrative expenses increased from $193,307 for the six months ended February 28, 2007 to $221,691 for the six months ended February 29, 2008. During the six months ended February 28, 2008, grant funding totaling approximately $30,500 was recorded as a reduction of selling, general and administrative expenses. Loss from operations for the six months ended February 29, 2008 and February 28, 2007 was ($73,860) and ($51,884), respectively, an increase of approximately 42% from the prior period. The Company had net loss of ($44,281) for the six months ended February 28, 2007 and net loss of ($58,059) for the six months ended February 29, 2008. This change was primarily related to an increase in selling, general and administrative expenses in the current period. 7 Liquidity and Capital Resources The Company has no immediate liquidity problems. At February 29, 2008, the Company had cash on hand of $323,804 and marketable securities of $207,700. During the six months ended February 29, 2008, the Company realized net proceeds from the sale of available for sale securities of $10,190. At February 29, 2008, the Company has accounts payable and accrued salaries owing to its officers of $1,095,789. The Company intends to use its capital resources to fund its product development and to expand distribution. The Company believes these capital resources are sufficient to allow the Company to attract potential interest from a strategic partner and to make it an attractive candidate for grant funding from public and private sources. However, there can be no assurance these capital resources will be sufficient to allow the Company to implement its marketing strategies or to become profitable. Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements. ITEM 3. CONTROLS AND PROCEDURES As of the end of the period covered by this Report, the Company's Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Company's disclosure controls and procedures. Based on the evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective as of the end of the period covered by this Report in that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, has been recorded, processed, summarized and reported within the current fiscal quarter. There were no changes in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (as filed herewith). 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (as filed herewith). 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (as filed herewith). 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (as filed herewith). (b) Reports on Form 8-K None 9 Signatures In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MAMMATECH CORPORATION Date: April 9, 2008 By: /s/ Henry S. Pennypacker ------------------------- Henry S. Pennypacker, CEO Date: April 9, 2008 By: /s/ Mary Sellers ------------------------- Mary Sellers, CFO and Treasurer 10 </TEXT> </DOCUMENT>