10QSB 1 y52746e10qsb.txt MPM TECHNOLOGIES, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Form 10-QSB Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange act of 1934 For the quarter ended June 30, 2001 Commission File Number 0-14910 MPM TECHNOLOGIES, INC. (Exact Name of Small Business Issuer as specified in its Charter) Washington 81-0436060 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 222 W. Mission Ave. Suite 30 Spokane, WA 99201 (Address of principal (Zip Code) executive offices) Issuers's telephone number, including area code: 509-326-3443 As of August 15, 2001, the registrant had outstanding 2,948,795 shares of common stock and no outstanding shares of preferred stock, which are the registrant's only classes of stock. 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Financial Statements follow on the next page. 3 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JUNE DECEMBER 30, 2001 31, 2000 ------------ ------------ (UNAUDITED) Current assets: Cash and cash equivalents $ 214,418 $ 573,974 Accounts receivable, net of allowance for doubtful accounts of $25,000 3,348,999 4,297,089 Inventories 1,368,446 530,730 Costs and estimated earnings in excess of billings 1,391,257 669,249 Prepaid expenses 279,476 244,559 Other current assets 995,760 471,144 ------------ ------------ Total current assets 7,598,356 6,786,745 ------------ ------------ Property, plant and equipment, net 250,678 240,201 Mineral properties held for sale 1,086,346 1,086,346 Note receivable 273,000 273,000 Purchased intangible, net of accumulated amortization of $236,250 and $202,500 371,250 405,000 Other assets, net 640,698 825,123 ------------ ------------ $ 10,220,328 $ 9,616,415 ============ ============ Current liabilities: Accounts payable $ 4,146,462 $ 2,506,121 Accrued expenses 1,141,516 1,452,255 Billings in excess of costs and estimated earnings 1,557,966 2,376,387 Related party debt 217,180 190,000 Current portion of long-term debt 300,000 300,000 ------------ ------------ Total current liabilities 7,363,124 6,824,763 ------------ ------------ Long-term debt, less current portion 510,389 510,389 Negative goodwill, net 10,941 20,158 ------------ ------------ Total liabilities 7,884,454 7,355,310 ------------ ------------ Commitments and contingencies Stockholders' equity: Common stock, $.001 par value, 100,000,000 shares authorized, 2,948,795 and 2,933,291 shares issued and outstanding 2,949 2,933 Additional paid-in capital 11,181,315 11,163,122 Accumulated deficit (8,848,390) (8,904,950) ------------ ------------ Total stockholders' equity 2,335,874 2,261,105 ------------ ------------ $ 10,220,328 $ 9,616,415 ============ ============
4 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Quarter Ended Six Months Ended June 30, June 30, ------------------------------ ------------------------------- 2001 2000 2001 2000 ----------- ----------- ------------ ----------- Revenues $ 5,725,517 $ 3,410,618 $ 10,586,735 $ 7,671,238 Cost of sales 4,503,500 3,083,711 8,494,587 6,132,444 ----------- ----------- ------------ ----------- Gross margin 1,222,017 326,907 2,092,148 1,538,794 Selling, general and administrative expenses 1,179,325 1,228,889 2,001,853 2,380,286 ----------- ----------- ------------ ----------- Income from operations 42,692 (901,982) 90,295 (841,492) ----------- ----------- ------------ ----------- Other income (expense): Interest expense (16,994) (39,663) (36,270) (69,023) Other income, net 152 226 2,535 1,241 ----------- ----------- ------------ ----------- Net other income (expense) (16,842) (39,437) (33,735) (67,782) ----------- ----------- ------------ ----------- Net (loss) income $ 25,850 ($ 941,419) $ 56,560 ($ 909,274) =========== =========== ============ =========== Basic earnings per share: Net (loss) income $ 0.01 ($ 0.35) $ 0.02 ($ 0.34) =========== =========== ============ =========== Diluted earnings per share: Net (loss) income $ 0.01 ($ 0.35) $ 0.01 ($ 0.34) =========== =========== ============ =========== Weighted average shares of common stock outstanding - basic 2,948,345 2,664,834 2,927,259 2,654,168 =========== =========== ============ =========== Weighted average shares of common stock outstanding - diluted 3,936,105 2,664,834 3,914,478 2,654,168 =========== =========== ============ ===========
5 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, --------------------------------- 2001 2000 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 56,560 ($ 909,274) Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 62,477 64,085 Interest imputed on related party debt 4,462 5,727 Change in assets and liabilities: Accounts receivable 948,090 (723,763) Costs and estimated earnings in excess of billings (722,008) (462,924) Inventories (837,716) (20,918) Other assets (375,108) (138,982) Accounts payable and accrued expenses 1,329,602 1,154,581 Billings in excess of costs and estimated earnings (818,421) 934,218 ----------- ----------- Net cash used in operating activities (352,062) (97,250) ----------- ----------- Cash flows from investing activities: Acquisition of property, plant and equipment (48,421) (11,653) ----------- ----------- Net cash used in investing activities (48,421) (11,653) ----------- ----------- Cash flows from financing activities: Repayment of related party debt -- (50,000) Repayment of note receivable -- 2,000 Proceeds from stock issues 13,747 25,200 Proceeds from related party debt 27,180 -- ----------- ----------- Net cash provided by (used in) financing activities 40,927 (22,800) ----------- ----------- Net decrease in cash and cash equivalents (359,556) (131,703) Cash and cash equivalents, beginning of period 573,974 194,399 ----------- ----------- Cash and cash equivalents, end of period $ 214,418 $ 62,696 =========== =========== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 31,909 $ 31,909 Income taxes $ -- $ -- Supplemental disclosure of non cash financing activities: Common stock exchanged for amounts due to related parties $ 488,115 $ 488,115
6 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS 1. UNAUDITED FINANCIAL STATEMENTS These financial statements should be read in conjunction with the audited financial statements included in the Annual Report on Form 10-KSB for the year ended December 31, 2000. Since certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting standards have been omitted pursuant to the instructions to Form 10-QSB of Regulation S-X as promulgated by the Securities and Exchange Commission, these financial statements specifically refer to the footnotes to the consolidated financial statements of the Company as of December 31, 2000. In the opinion of management, these unaudited interim financial statements reflect all adjustments necessary for a fair presentation of the financial position and results of operations and cash flows of the Company. Such adjustments consisted only of those of a normal recurring nature. Results of operations for the period ended June 30, 2001 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year 2001. 2. EARNINGS PER SHARE Earnings per share ("EPS") is computed by dividing net income by the weighted average number of common shares outstanding in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share". The following table reconciles the number of common shares used in the basic and diluted EPS calculations:
FOR THE SIX MONTHS ENDED JUNE 30, 2001 ------------------------------------------ WEIGHTED- NET AVERAGE PER-SHARE INCOME SHARES AMOUNT ------ ------ ------ BASIC EPS Income available to common stockholders $56,560 2,927,259 $0.02 EFFECT OF DILUTIVE SECURITIES Common stock options -- 987,219 (0.01) ------- ---------- ----- DILUTED EPS Loss available to common stockholders - assumed conversions $56,560 $3,936,105 $0.01 ======= ========== =====
7 FOR THE THREE MONTHS ENDED JUNE 30, 2001
WEIGHTED- NET AVERAGE PER-SHARE INCOME SHARES AMOUNT BASIC EPS Income available to common stockholders $56,560 2,948,345 $0.01 EFFECT OF DILUTIVE SECURITIES Common stock options -- 987,760 -- ------- --------- ----- DILUTED EPS Income available to common stockholders - assumed conversions $56,560 3,936,105 $0.01 ======= ========= =====
FOR THE SIX MONTHS ENDED JUNE 30, 2000
WEIGHTED- NET AVERAGE PER-SHARE (LOSS) SHARES AMOUNT ------ ------ ------ BASIC EPS Loss available to common stockholders ($909,274) 2,654,168 ($0.34) EFFECT OF DILUTIVE SECURITIES Common stock options -- -- -- --------- --------- ------ DILUTED EPS Loss available to common stockholders - assumed conversions ($909,274) 2,654,168 ($0.34) ========= ========= ======
FOR THE THREE MONTHS ENDED JUNE 30, 2000
WEIGHTED- NET AVERAGE PER-SHARE (LOSS) SHARES AMOUNT BASIC EPS Income available to common stockholders ($941,419) 2,664,834 ($0.35) EFFECT OF DILUTIVE SECURITIES Common stock options -- -- -- --------- --------- -----
8 DILUTED EPS Income available to common stockholders - assumed conversions $(941,419) 2,664,834 ($ 0.35) ========== ========== =========
3. SEGMENT INFORMATION The Company's consolidated financial statements include certain reportable segment information. These segments include Huntington Environmental Systems, Inc., a wholly owned subsidiary engaged in designing, engineering, supplying and servicing air pollution control systems which primarily utilize heat and chemicals to control air pollution, and AirPol, Inc., a wholly owned subsidiary engaged in designing, engineering, supplying and servicing air pollution control systems which utilize wet and dry scrubbers, wet electrostatic precipitators and venturi absorbers to control air pollution. The Company evaluates the performance of these segments based upon multiple variables including revenues and profit or loss. The segments' profit and loss components and schedule of assets as of June 30, 2001 are as follows:
AIR AIR POLLUTION POLLUTION CONTROL CONTROL ALL (HEAT) (SCRUBBERS) OTHERS TOTAL Revenue external ............. $ 4,343,951 $ 6,242,784 $ -- $10,586,735 Revenue internal ............. -- -- -- -- Segment profit (loss) ........ (295,942) 801,304 (448,802) 56,560 Segment assets ............... 3,981,793 5,619,544 618,991 10,220,328
Reconciliation of segment revenues, net income, total assets and other significant items for the six and three months ended June 30, 2000 are as follows:
SIX MONTHS THREE MONTHS ENDED ENDED JUNE 30, 2001 JUNE 30, 2001 REVENUES Total revenues for reportable segments ........... $ 10,586,735 $ 5,725,517 Other revenues ................................... -- -- ------------ ------------ Total consolidated revenues ...................... $ 10,586,735 $ 5,725,517 ============ ============ PROFIT OR LOSS Total profit or loss for reportable segments ..... $ 505,362 $ 262,169 Other profit or loss ............................. (448,802) (236,319) ------------ ------------ Total consolidated profit or loss ................ $ 56,560 $ 25,850 ============ ============
9
AT JUNE 30, 2001 ASSETS Total assets for reportable segments ... $ 9,601,337 Other assets ........................... 4,775,485 Assets of discontinued operation ....... 1,086,346 Elimination of intersegment assets ..... (5,242,840) ------------ Total consolidated assets .............. $ 10,220,328 ============
The segments' profit and loss components and schedule of assets as of June 30, 2000 are as follows:
AIR AIR POLLUTION POLLUTION CONTROL CONTROL ALL (HEAT) (SCRUBBERS) OTHERS TOTAL Revenue external ............. $ 5,129,402 $ 2,541,836 $ -- $ 7,671,238 Revenue internal ............. -- -- -- -- Segment profit (loss) ........ (72,049) (536,540) (300,685) (909,274) Segment assets ............... 4,176,640 2,124,188 331,616 6,632,444
Reconciliation of segment revenues, net income, total assets and other significant items for the six and three months ended June 30, 2000 are as follows:
SIX MONTHS THREE MONTHS ENDED ENDED JUNE 30, 2000 JUNE 30, 2000 REVENUES Total revenues for reportable segments ........... $ 7,671,238 $ 3,410,618 Other revenues ................................... -- -- ----------- ----------- Total consolidated revenues ...................... $ 7,671,238 $ 3,410,618 =========== =========== PROFIT OR LOSS Total profit or loss for reportable segments ..... $ (608,589) $ (791,332) Other profit or loss ............................. (300,685) (150,087) ----------- ----------- Total consolidated profit or loss ................ $ (909,274) $ (941,419) =========== ===========
AT JUNE 30, 2000 ASSETS Total assets for reportable segments ..... $ 6,300,828 Other assets ............................. 3,602,463 Assets of discontinued operation ......... 1,086,346 Elimination of intersegment assets ....... (4,357,193) ----------- Total consolidated assets ................ $ 6,632,444 ===========
10 PART I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations This Quarterly Report on Form 10-QSB, including the information incorporated by reference herein, includes "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All of the statements contained in this Quarterly Report on Form 10-QSB, other than statements of historical fact, should be considered forward looking statements, including, but not limited to, those concerning the Company's strategies, objectives and plans for expansion of its operations, products and services and growth in demand for the Company's services. There can be no assurance that these expectations will prove to have been correct. Certain important factors that could cause actual results to differ materially from the Company's expectations (the Cautionary Statements") are disclosed in the annual report filed on Form 10-KSB. All subsequent written and oral forward looking statements by or attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by such Cautionary Statements. Investors are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof and are not intended to give any assurance as to future results. The Company undertakes no obligation to publicly release any revisions to these forward looking statements to reflect events or reflect the occurrence of unanticipated events. MPM Technologies, Inc. ("MPM") acquired certain of the assets and assumed certain of the liabilities of a part of a division of FLS miljo, Inc. as of July 1, 1998. MPM formed AirPol, Inc. ("AirPol") to run this air pollution control business. AirPol designs, engineers, supplies and services air pollution control systems for Fortune 500 and other industrial and environmental companies. The technologies of AirPol utilize wet and dry scrubbers, wet electrostatic precipitators and venturi absorbers to control air pollution. AirPol brought over 30 years experience to MPM through its technologies and employees. As of April 1, 1997, MPM acquired certain of the assets and assumed certain of the liabilities of a portion of a division of United States Filter Corporation, and formed Huntington Environmental Systems, Inc. ("HES") to operate this air pollution control business. HES designs, engineers, supplies and services high temperature and chemical air pollution control systems for Fortune 500 and other industrial and environmental companies. HES brought has over 25 years of experience and over 300 installations across the globe to MPM through its technologies and employees. Both HES's and AirPol's engineering staffs are uniquely prepared to address the full scope of customers' process problems. Their policies of handling clients' individual concerns include in-depth analysis and evaluation, followed by complete engineering and design services leading to application-specific engineered solutions. MPM holds a 58.21% interest in Nupower Partnership through its wholly-owned subsidiary, Nupower, Inc. Nupower Partnership is engaged in the development and commercialization of a waste-to-energy process which has been named "Skygas". 11 Skygas is an innovative technology for the disposal and gasification of carbonaceous wastes such as municipal solid waste, municipal sewage sludge, pulp and paper mill sludge, auto fluff, medical waste and used tires. The process converts solid and semi-solid wastes into a clean-burning medium BTU gas that can be used for steam production for electric power generation. The gas may also be a useful building block for downstream conversion into valuable chemicals. MPM controls 32 claims on approximately 1,000 acres in the historical Emery Mining District in Montana through its wholly-owned subsidiary, MPM Mining, Inc. In accordance with the Board of Directors' mandates, MPM's management is actively seeking out mining and other businesses to purchase its mining properties and equipment. HES and AirPol are active continuing concerns. The development of the Skygas process through Nupower Partnership is also an ongoing process. No other operations were conducted. Accordingly, the financial statements for the six and three months ended June 30, 2000 and 1999 include the operations of HES, AirPol, Skygas and MPM. MPM's consolidated net income for the six months ended June 30, 2001 was $56,560 or $0.02 per share compared to a net loss of $909,274, or $0.34 per share for the six months ended June 30, 2000. MPM recently announced an agreement with BOC Group (NYSE: BOX) to collaborate in marketing and selling BOC's innovative low temperature oxidation (LoTox(TM)) NOx control technology. Under the terms of the agreement, AirPol will gain the use of BOC's patented LoTox(TM) system technology for sales in the industrial market. BOC will gain the benefit of AirPol's unique expertise and experience in delivering wet scrubbing technology which is an integral part of the BOC LoTox(TM) technology. LoTox(TM) is a patented end-of-pipe treatment system that uses ozone to selectively oxidize relatively insoluble NOx to highly soluble nitrogen oxide species. The nitrogen oxides are easily removed in a wet scrubber and results in a greater than 90 percent removal from flue gases. This is a significant collaboration since, according to the report "U.S. NOx Control Market" by the McIlvaine Company, the U.S. market for equipment and materials to reduce NOx is increasing by a billion dollars per year. In 2001 orders are expected to exceed $2.2 billion, up from $1.1 billion in 2000. In 2002 orders are expected to increase to $3.3 billion. The market in the rest of the world is estimated to be twice the size of the U.S. market. The BOC Group is one of the largest and most global of the world's leading gases companies. It serves approximately two million customers in more than 50 countries, and employs about 43,000 people. Sales for the year 2000 were approximately $5.8 billion. In June, MPM announced that AirPol had entered into a license agreement with Shinko Pantec Company, Ltd. ("SPC") of Kobe, Japan. Under the terms of the agreement, AirPol transferred its proprietary wet electrostatic precipitator technology and experience to SPC for sales and supply of wet scrubbers to Japan's hazardous waste incinerator market. SPC had conducted an extensive evaluation of all available U.S. wet electrostatic precipitator technologies, and they selected AirPol on the basis of the superiority of their technology and experience in hazardous waste incinerator applications. 12 SPC has a strong presence in the industrial air pollution control sector and provides AirPol an excellent entry into Japan's emerging hazardous waste incinerator market. SPC's stock is publicly traded and is listed on the Osaka Securities Exchange. With 900 employees and annual sales of $350 million, SPC is a leader in the Japanese pollution control industry. MPM also announced in May the formation of a new subsidiary, MPM Project Solutions, Inc. ("MPMPS"). MPMPS will provide project management, facility operations and maintenance, staffing support, consulting and technology services. It is management's opinion that MPMPS will complement the company's core businesses and present new opportunities to improve profitability. MPMPS is currently negotiating with several prospective customers. It is expected that MPMPS will begin operations in the third or fourth quarter of this year. MPM continues to negotiate with interested entities with the goal of building Skygas units. These negotiations are also ongoing, and include entities in the United States, Europe and Asia. Management is hopeful there will be some type of formal agreement in place and that construction of a unit can begin before the end of the year. There can, however, be no assurances that MPM will be successful in its negotiations. Six and three months ended 6/30/01 compared to six and three months ended 6/30/00 For the six months ended 6/30/01, MPM had net income of $56,560, or $0.02 per share compared to a net loss of $909,274, or $0.34 per share for the six months ended 6/30/00. Revenues increased 38.0% to $10,586,735 for the six months ended 6/30/01 compared to $7,671,238 for the six months ended 6/30/00. Revenues increased at AirPol by approximately $3,721,000, or 146.4%. Revenues at HES were down approximately 785,000, or 15.3%. Revenues at AirPol improved due to continuing work on its $6.4 million job in Utah, and to improved overall sales. Decreased revenues at HES were due to delays in the awarding of a couple of new contracts, and slower sales in general. Costs of sales increased 38.5% to $8,494,587 for the six months ended June 30, 2001 compared to $6,132,444 for the six months ended June 30, 2000. This was comparable to the increase in revenues. Operating expenses decreased 15.9% to $2,001,855 for the six months ended June 30, 2001 compared to $2,380,286 for the six months ended 6/30/00. Operating expense decreases were due primarily to staff reductions and the related costs. For the three months ended 6/30/01, MPM had net income of $25,849, or $0.01 per share compared to a net loss of $941,419, or $0.35 per share for the three months ended 6/30/00. Revenues increased 67.9% to $5,725,517 for the three months ended 6/30/01 compared to $3,410,618 for the three months ended 6/30/00. This was largely due to the aforementioned improvements in sales at AirPol. Costs of sales increased 46.0% to $4,503,500 for the three months ended June 30, 2001 compared to $3,083,711 for the three months ended June 30, 2000 due to the increase in revenues, and to the addition of some lower margin contracts to improve sales. Operating expenses decreased 4.0% to $1,179,327 for the three months ended June 30, 2001 compared to $1,228,889 for the three months ended 6/30/00. These decreases were due to reduced staffing and related costs, but were offset by increases in other operating costs. The Company currently has a backlog of approximately $8,500,000. This includes $5.8 million at AirPol and $2.7 million at HES. 13 Financial Condition and Liquidity For the six months ended June 30, 2001, the Company relied principally on cash from continuing operations to fund the operations of HES and AirPol. Current cash reserves and cash from continuing operations are believed to be adequate to fund MPM's and its subsidiaries' operations for the foreseeable future. Management is actively investigating alternative sources of capital such as private placements, stock offerings and loans from shareholders and officers to fund its current business and expand in other related areas through more acquisitions. Working capital at 6/30/01 was $235,232 compared to $73,846 at 12/31/00. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company knows of no litigation present, threatened or contemplated or unsatisfied judgment against the Company, its officers or directors or any proceedings in which the Company, its officers or directors are a party. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS The rights of the holders of the Company's securities have not been modified nor have the rights evidenced by the securities been limited or qualified by the issuance or modification of any other class of securities. ITEM 3. DEFAULTS UPON SENIOR SECURITIES There are no senior securities issued by the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS MPM's Annual Meeting of Shareholders was held on June 11, 2001. Following are the results of the shareholders' voting: Proposal 1 - Election of Directors
Name For Withheld Michael J. Luciano 2,421,146 53,522 Glen Hjort 2,295,700 178,968 Anthony Lee 2,420,153 54,515
Each director was re-elected for a three-year term. 14 Proposal 2 - Approval of Amendment to the 1989 Stock Option Plan
For Against Abstain Not Voted 1,819,709 88,812 24,893 541,254
The proposal passed. Total shares represented by proxy: 2,474,668 Percentage of the outstanding voting shares: 83.9% Outstanding voting shares: 2,948,795 ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K No reports on Form 8-K were filed for the quarter ended June 30, 2001. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MPM Technologies, Inc. August 17, 2001 /s/ Robert D. Little --------------------------- ------------------------------------- (date) Robert D. Little Corporate Secretary