10QSB 1 y55056e10qsb.txt MPM TECHNOLOGIES, INC. 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 September 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 November 7, 2001, the registrant had outstanding 2,953,295 shares of common stock and no outstanding shares of preferred stock, which are the registrant's only classes of stock. PART I - FINANCIAL INFORMATION Item 1. Financial Statements Financial Statements follow on the next page. MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER DECEMBER 30, 2001 31, 2000 ------------ ------------ (UNAUDITED) Current assets: Cash and cash equivalents $717,931 $573,974 Accounts receivable, net of allowance for doubtful accounts of $100,000 and $25,000 3,579,800 4,297,089 Inventories 1,279,394 530,730 Costs and estimated earnings in excess of billings 1,033,290 669,249 Prepaid expenses 769,901 244,559 Other current assets 589,164 471,144 ------------ ------------ Total current assets 7,969,480 6,786,745 ------------ ------------ Property, plant and equipment, net 244,658 240,201 Mineral properties held for sale 1,086,346 1,086,346 Note receivable 273,000 273,000 Purchased intangible, net of accumulated amortization of $320,625 and $270,000 354,375 405,000 Other assets, net 415,447 825,123 ------------ ------------ $10,343,306 $9,616,415 ============ ============ Current liabilities: Accounts payable $3,871,144 $2,506,121 Accrued expenses 1,153,376 1,452,255 Billings in excess of costs and estimated earnings 1,341,744 2,376,387 Related party debt 750,180 190,000 Current portion of long-term debt 375,000 300,000 ------------ ------------ Total current liabilities 7,491,444 6,824,763 ------------ ------------ Long-term debt, less current portion 481,324 510,389 Negative goodwill, net 6,332 20,158 ------------ ------------ Total liabilities 7,979,100 7,355,310 ------------ ------------ Commitments and contingencies Stockholders' equity: Common stock, $.001 par value, 100,000,000 shares authorized, 2,953,295 and 2,641,961 shares issued and outstanding 2,953 2,933 Additional paid-in capital 11,187,629 11,163,122 Accumulated deficit (8,826,376) (8,904,950) ------------ ------------ Total stockholders' equity 2,364,206 2,261,105 ------------ ------------ $10,343,306 $9,616,415 ============ ============
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Quarter Ended Nine Months Ended September 30, September 30, -------------------------------- -------------------------------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Revenues $4,654,907 $3,994,410 $15,241,642 $11,665,648 Cost of sales 3,188,998 2,543,172 11,683,585 9,025,616 ------------ ------------ ------------ ------------ Gross margin 1,465,909 1,451,238 3,558,057 2,640,032 Selling, general and administrative expenses 1,435,307 1,326,109 3,437,164 3,356,394 ------------ ------------ ------------ ------------ Income from operations 30,602 125,129 120,893 (716,362) ------------ ------------ ------------ ------------ Other income (expense): Interest expense (35,276) (39,981) (71,546) (69,587) Other income, net 26,691 (17,593) 29,226 (16,352) ------------ ------------ ------------ ------------ Net other income (expense) (8,585) (57,574) (42,320) (85,939) ------------ ------------ ------------ ------------ Net income (loss) $22,017 $67,555 $78,573 ($802,301) ============ ============ ============ ============ Basic earnings per share: Net income (loss) $0.01 $0.02 $0.03 ($0.30) ============ ============ ============ ============ Diluted earnings per share: Net income (loss) $0.01 $0.02 $0.02 ($0.30) ============ ============ ============ ============ Weighted average shares of common stock outstanding - basic 2,950,507 2,811,809 2,935,065 2,707,099 ============ ============ ============ ============ Weighted average shares of common stock outstanding - diluted 3,994,801 3,760,000 3,941,448 3,674,089 ============ ============ ============ ============
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, ------------------------------ 2001 2000 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $78,574 ($909,274) Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 90,868 64,085 Interest imputed on related party debt 6,731 5,727 Change in assets and liabilities: Accounts receivable 717,289 (723,763) Costs and estimated earnings in excess of billings (364,041) (462,924) Inventories (748,664) (20,918) Other assets (233,686) (138,982) Accounts payable and accrued expenses 1,112,079 1,154,581 Billings in excess of costs and estimated earnings (1,034,643) 934,218 ----------- ----------- Net cash used in operating activities (375,493) (97,250) ----------- ----------- Cash flows from investing activities: Acquisition of property, plant and equipment (58,526) (11,653) ----------- ----------- Net cash used in investing activities (58,526) (11,653) ----------- ----------- Cash flows from financing activities: Repayment of related party debt - (50,000) Repayment of note receivable - 2,000 Proceeds from stock issues 17,796 25,200 Proceeds from related party debt 560,180 - ----------- ----------- Net cash provided by (used in) financing activities 577,976 (22,800) ----------- ----------- Net increase (decrease) in cash and cash equivalents 143,957 (131,703) Cash and cash equivalents, beginning of period 573,974 194,399 ----------- ----------- Cash and cash equivalents, end of period $717,931 $62,696 =========== =========== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $4,988 $ 5,318 Income taxes $ - $ - Supplemental disclosure of non cash financing activities: Common stock exchanged for amounts due to related parties $ - $488,115
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 September 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 NINE MONTHS ENDED SEPTEMBER 30, 2001 --------------------------------------------- WEIGHTED- NET AVERAGE PER-SHARE INCOME SHARES AMOUNT --------- --------- --------- BASIC EPS Income available to common stockholders $78,573 2,953,065 $0.03 EFFECT OF DILUTIVE SECURITIES Common stock options - 988,383 (0.01) --------- --------- --------- DILUTED EPS Income available to common stockholders - assumed conversions $78,573 3,941,448 $0.02 ========= ========= =========
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
WEIGHTED- NET AVERAGE PER-SHARE INCOME SHARES AMOUNT --------- --------- --------- BASIC EPS Income available to common stockholders $22,017 2,950,507 $0.01 EFFECT OF DILUTIVE SECURITIES Common stock options - 1,044,294 - --------- --------- --------- DILUTED EPS Income available to common stockholders - assumed conversions $22,017 3,994,801 $0.01 ========= ========= =========
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
NET WEIGHTED- INCOME AVERAGE PER-SHARE (LOSS) SHARES AMOUNT --------- --------- --------- BASIC EPS Income available to common stockholders ($802,301) 2,707,099 ($0.30) EFFECT OF DILUTIVE SECURITIES Common stock options - 966,990 - --------- --------- --------- DILUTED EPS Income available to common stockholders - assumed conversions ($802,301) 3,674,089 ($0.30) ========= ========= =========
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
WEIGHTED- NET AVERAGE PER-SHARE INCOME SHARES AMOUNT --------- --------- --------- BASIC EPS Income available to common stockholders $67,555 2,811,809 $0.02 EFFECT OF DILUTIVE SECURITIES Common stock options - 948,191 - --------- --------- --------- DILUTED EPS Income available to common stockholders - assumed conversions $67,555 3,760,000 $0.02 ========= ========= =========
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 September 30, 2001 are as follows:
AIR AIR POLLUTION POLLUTION CONTROL CONTROL ALL (HEAT) (SCRUBBERS) OTHERS TOTAL ----------- ----------- ----------- ----------- Revenue external ......... $ 6,483,112 $ 8,758,530 $ - $15,241,642 Revenue internal ......... - - - - Segment profit (loss) .... (429,746) 1,460,638 (1,027,319) 78,573 Segment assets ........... 3,922,479 5,802,774 618,053 10,343,306
Reconciliation of segment revenues, net income, total assets and other significant items for the nine and three months ended September 30, 2001 are as follows:
NINE MONTHS THREE MONTHS ENDED ENDED SEPTEMBER 30, 2001 SEPTEMBER 30, 2001 ------------------ ------------------ REVENUES -------- Total revenues for reportable segments ........... $ 15,241,642 $ 4,654,907 Other revenues ................................... - - ------------ ------------ Total consolidated revenues ...................... $ 15,241,642 $ 4,654,907 ============ ============ PROFIT OR LOSS -------------- Total profit or loss for reportable segments ..... $ 1,030,892 $ 525,530 Other profit or loss ............................. (952,319) (503,514) Total consolidated profit or loss ................ $ 78,573 $ 22,016 ============ ============
AT SEPTEMBER 30, 2001 ASSETS ------ Total assets for reportable segments ........ $ 9,725,253 Other assets ................................ 6,685,191 Elimination of intersegment assets .......... (6,067,138) ------------ Total consolidated assets ................... $ 10,343,306 ============
The segments' profit and loss components and schedule of assets as of September 30, 2000 are as follows:
AIR AIR POLLUTION POLLUTION CONTROL CONTROL ALL (HEAT) (SCRUBBERS) OTHERS TOTAL ------------ ------------ ------------ ------------ Revenue external ........... $ 7,424,397 $ 4,241,251 $ - $ 11,665,648 Revenue internal ........... - - - - Segment profit (loss) ...... 169,288 (516,500) (455,089) (802,301) Segment assets ............. 5,239,784 3,088,017 1,157,116 9,484,917
Reconciliation of segment revenues, net income, total assets and other significant items for the nine and three months ended September 30, 2000 are as follows:
NINE MONTHS THREE MONTHS ENDED ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 2000 ------------------ ------------------ REVENUES -------- Total revenues for reportable segments ......... $ 11,665,648 $ 3,994,411 Other revenues ................................. - - ------------ ------------ Total consolidated revenues .................... $ 11,665,648 $ 3,994,411 ============ ============ PROFIT OR LOSS -------------- Total profit or loss for reportable segments ... $ (347,212) $ 221,960 Other profit or loss ........................... (455,089) (154,405) ------------ ------------ Total consolidated profit or loss .............. $ (802,301) $ 67,555 ============ ============
AT SEPTEMBER 30, 2000 ASSETS ------ Total assets for reportable segments ........ $ 8,426,220 Other assets ................................ 2,512,375 Elimination of intersegment assets .......... (1,453,678) ----------- Total consolidated assets ................... $ 9,484,917 ===========
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 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". 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 nine and three months ended September 30, 2001 and 2000 include the operations of HES, AirPol, Skygas and MPM. MPM's consolidated net income for the nine months ended September 30, 2001 was $78,573 or $0.01 per share compared to a net loss of $802,301, or $0.30 per share for the nine months ended September 30, 2000. 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 in the near future. There can, however, be no assurances that MPM will be successful in its negotiations. Nine and three months ended 9/30/01 compared to nine and three months ended 9/30/00 For the nine months ended 9/30/01, MPM had net income of $78,573, or $0.01 per share compared to a net loss of $802,301, or $0.30 per share for the nine months ended 9/30/00. Revenues increased 30.7% to $15,241,642 for the nine months ended 9/30/01 compared to $11,665,648 for the nine months ended 9/30/00. Revenues were up 106.5% at AirPol, and were down 12.7% at HES. Increases at AirPol were due largely to the enforcement of some clean air legislation by the Environmental Protection Agency. Decreases at HES were due to the postponement of some large contracts. Costs of sales increased 29.4% to $11,683,585 for the nine months ended September 30, 2001 compared to $9,025,616 for the nine months ended September 30, 2000. This was due to the increases in revenues. Operating expenses increased 2.4% to $3,437,164 for the nine months ended September 30, 2001 compared to $3,356,394 for the nine months ended 9/30/00. Operating expense increases were not significant. For the three months ended 9/30/01, MPM had net income of $22,016, or $0.01 per share compared to net income of $67,555, or $0.02 per share for the three months ended 9/30/00. Revenues increased 16.5% to $4,654,907 for the three months ended 9/30/01 compared to $3,994,410 for the three months ended 9/30/00. This was largely due to the enforcement of some clean air legislation by the Environmental Protection Agency. Costs of sales increased 25.3% to $3,188,988 for the three months ended September 30, 2001 compared to $2,543,172 for the three months ended September 30, 2000 due to the increases in revenues. Operating expenses increased 8.2% to $1,435,307 for the three months ended September 30, 2001 compared to $1,326,109 for the three months ended 9/30/00. These increases were due to additional staffing and related costs, and to increases in travel and related activities. The Company currently has a backlog of approximately $9.5 million. This includes $7.7 million at AirPol and $1.8 million at HES. Financial Condition and Liquidity For the nine months ended September 30, 2001, the Company relied on operating revenues and loans from an officer/director to fund its operations. In September, an officer/director loaned MPM $600,000 which was evidenced by a convertible promissory note. Under the terms of the note, the principal and any unpaid accrued interest may be converted to common stock at the option of the note holder. MPM is actively pursuing other avenues for obtaining capital. The Company has entered into an agreement which has not yet been funded. This funding is expected in the fourth quarter. Current cash reserves, cash from continuing operations and cash from other financing sources are believed to be adequate to fund MPM's and its subsidiaries' operations for the foreseeable future. Working capital at 9/30/01 was $478,036 compared to ($38,009) at 12/31/00. MPM is also 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. 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 There were no matters presented to the shareholders for vote during the third quarter of 2001. 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 September 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. November 13, 2001 /s/ Robert D. Little -------------------------------- -------------------------------- (date) Robert D. Little Corporate Secretary