10QSB 1 y60943e10qsb.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 March 31, 2002 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) 339 Jefferson Road. PARSIPPANY, NJ 07054 ------------------------------------ -------------------------- (Address of principal (Zip Code) executive offices) Issuers's telephone number, including area code: 973-428-5009 As of May 8, 2002, the registrant had outstanding 3,426,679 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 ASSETS
MARCH DECEMBER 31, 2002 31, 2001 ------------ ----------- (UNAUDITED) Current assets: Cash and cash equivalents $211,606 $601,131 Accounts receivable, net of allowance for doubtful accounts of $833,000 and $1,013,000 1,547,869 2,075,399 Inventories 37,859 37,859 Costs and estimated earnings in excess of billings 718,312 895,437 Other current assets 204,361 232,784 ------------- ------------- Total current assets 2,720,007 3,842,610 ------------- ------------- Property, plant and equipment, net 1,262,400 1,298,522 Mineral properties held for investment 1,086,346 1,086,346 Prepaid royalty 273,000 273,000 Purchased intangible, net of accumulated amortization of $354,375 and $337,500 320,625 337,500 Investments - at equity 151,856 151,856 Other assets, net 758,239 710,575 ------------- ------------- $6,572,473 $7,700,409 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $3,409,520 $3,661,428 Accrued expenses 914,994 1,426,652 Billings in excess of costs and estimated earnings 419,662 641,435 Related party debt 165,000 190,000 Current portion of long-term debt 375,000 375,000 ------------- ------------- Total current liabilities 5,284,176 6,294,515 ------------- ------------- Related party debt 89,093 592,343 Long-term debt, less current portion 481,324 481,324 ------------- ------------- Total liabilities 5,854,593 7,368,182 ------------- ------------- Commitments and contingencies Stockholders' equity: Preferred stock, no stated value, 10,000,000 shares authorized, no shares issued or outstanding Common stock, $.001 par value, 100,000,000 shares authorized, 3,426,679 and 3,011,917shares issued and outstanding 3,427 3,012 Additional paid-in capital 12,065,742 11,254,939 Accumulated deficit (11,351,289) (10,925,724) ------------- ------------- Total stockholders' equity 717,880 332,227 ------------- ------------- $6,572,473 $7,700,409 ============= =============
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended March 31, ---------------------------------- 2002 2001 ------------- ------------- Revenues $1,569,894 $4,861,218 Cost of sales 1,174,193 3,991,087 ------------- ------------- Gross margin 395,701 870,131 Selling, general and administrative expenses 793,406 822,528 ------------- ------------- (Loss) income from operations (397,705) 47,603 ------------- ------------- Other income (expense): Interest expense (31,440) (19,276) Miscellaneous 3,580 2,383 ------------- ------------- Net other expense (27,860) (16,893) ------------- ------------- Net income ($425,565) $30,710 ============= ============= Income per share - basic and diluted: Net (loss) income ($0.14) $0.01 ============= ============= Weighted average shares of common stock outstanding - basic 3,139,790 2,937,857 ============= ============= Weighted average shares of common stock outstanding - diluted 4,307,534 3,936,105 ============= =============
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, --------------------------- 2002 2001 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net (Loss) income ($425,565) $30,710 Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 52,997 31,645 Interest imputed on related party debt 2,219 2,219 Change in assets and liabilities: Accounts receivable 527,530 (161,617) Costs and estimated earnings in excess of billings 177,125 (477,406) Inventories - (69,299) Other assets (19,241) (16,825) Accounts payable and accrued expenses (763,567) 533,205 Billings in excess of costs and estimated earnings (221,773) (113,865) ----------- ----------- Net cash used in operating activities (670,275) (241,233) ----------- ----------- Cash flows from financing activities: Proceeds from related party debt 271,750 82,180 Proceeds from stock issues 9,000 13,747 ----------- ----------- Net cash provided by financing activities 280,750 95,927 ----------- ----------- Net decrease in cash and cash equivalents (389,525) (145,306) Cash and cash equivalents, beginning of period 601,131 573,974 ----------- ----------- Cash and cash equivalents, end of period $211,606 $428,668 =========== =========== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $1,443 $2,317 Income taxes $ - $ - Supplemental disclosure of non cash financing activities: Common stock exchanged for amounts due to related party $800,000 $ -
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, 2001. 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 incorporate by reference the footnotes to the consolidated financial statements of the Company as of December 31, 2001. 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 March 31, 2002 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year 2002. 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 THREE MONTHS ENDED MARCH 31, 2002 ----------------------------------------- WEIGHTED- NET AVERAGE PER-SHARE (LOSS) SHARES AMOUNT ------ ------ ------ BASIC EPS Income available to common stockholders ($425,565) 3,139,790 ($ 0.14) EFFECT OF DILUTIVE SECURITIES Common stock options - 1,167,744 - --------- --------- -------- DILUTED EPS Income available to common stockholders - assumed conversions ($425,565) 4,307,534 ($ 0.14) ========= ========= ======== FOR THE THREE MONTHS ENDED MARCH 31, 2001 ----------------------------------------- WEIGHTED- NET AVERAGE PER-SHARE INCOME SHARES AMOUNT ------ ------ ------ BASIC EPS Income available to common stockholders $ 30,710 2,937,857 $ 0.01 EFFECT OF DILUTIVE SECURITIES Common stock options -- 998,248 -- --------- --------- -------- DILUTED EPS Income available to common stockholders - assumed conversions $ 30,710 3,936,105 $ 0.01 ========= ========= ======== 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 March 31, 2002 are as follows:
AIR AIR POLLUTION POLLUTION CONTROL CONTROL ALL (HEAT) (SCRUBBERS) OTHERS TOTAL Revenue external ....... $ 85,924 $ 1,483,970 $ -- $ 1,569,894 Revenue internal ....... -- -- -- -- Segment profit (loss)... (96,742) (26,267) (302,556) ($ 425,565) Segment assets ......... 1,650,753 4,853,104 2,741,953 9,245,810
Reconciliation of segment revenues, net income, total assets and other significant items for the three months ended March 31, 2002 are as follows: REVENUES AMOUNT -------- ---------- Total revenues for reportable segments ....... $1,569,894 ---------- Total consolidated revenues................... $1,569,894 ========== PROFIT OR LOSS -------------- Total profit or (loss) for reportable segments $ (123,009) Other profit or (loss) ....................... (302,556) ----------- Total consolidated profit or (loss) .......... $ (425,565) =========== ASSETS ------ Total assets for reportable segments ......... $ 6,613,857 Other assets ................................. 2,741,953 Elimination of intersegment assets ........... (2,783,337) ----------- Total consolidated assets .................... $ 6,572,473 =========== The segments' profit and loss components and schedule of assets as of March 31, 2001 are as follows:
AIR AIR POLLUTION POLLUTION CONTROL CONTROL ALL (HEAT) (SCRUBBERS) OTHERS TOTAL Revenue external ....... $ 2,665,216 $ 2,196,002 $ -- $ 4,861,218 Revenue internal ....... -- -- -- -- Segment profit (loss)... 124,913 118,280 (212,483) 30,710 Segment assets ......... 4,560,046 4,783,052 5,901,276 15,244,374
Reconciliation of segment revenues, net income, total assets and other significant items for the three months ended March 31, 2001 are as follows: REVENUES AMOUNT -------- ------------ Total revenues for reportable segments ..... $ 4,861,218 ------------ Total consolidated revenues ................ $ 4,861,218 ============ PROFIT OR LOSS -------------- Total profit or loss for reportable segments $ 243,193 Other profit or loss ....................... (212,483) ------------ Total consolidated profit or loss .......... $ 30,710 ============ ASSETS ------ Total assets for reportable segments ....... $ 9,343,098 Other assets ............................... 5,901,277 Elimination of intersegment assets ......... (5,178,930) ------------ Total consolidated assets .................. $ 10,065,445 ============ 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". 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. 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 three months ended March 31, 2002 and 2001 include the operations of HES, AirPol, Skygas and MPM. MPM's consolidated net loss for the quarter ended March 31, 2002 was $425,565, or $0.14 per share compared to net income of $30,710, or $0.01 per share for the quarter ended March 31, 2001. This was due to slow downs in the activity at AirPol, and to a lack of activity at HES. Management expects that it will take some months for its restructuring plan to translate into better revenues at HES. AirPol is expecting improved revenues beginning in the second quarter. 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, South America 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. THREE MONTHS ENDED 3/31/02 COMPARED TO THREE MONTHS ENDED 3/31/01 ------------------------------------------------------------------ For the three months ended 3/31/02, MPM had a net loss of $425,565, or $0.14 per share compared to net income of $30,710, or $0.01 per share for the quarter ended 3/31/01. Revenues decreased 67.7% to $1,569,894 for the three months ended 3/31/02 compared to $4,861,218 for the three months ended 3/31/01. This was due to slow downs in activities at AirPol, and to a lack of activity at HES. Revenues at AirPol were down 32.4%, but at HES, revenues decreased 96.8%. Management is still in the process of restructuring at HES, and anticipates that it will be some months before revenues can be restored to previous levels. Cost cutting continues to be a priority at HES. Revenues and sales activities in the air pollution control industry are dependent largely on the regulatory environment. Manufacturers for the most part do not want to spend the money on air pollution control equipment unless they are forced to by the Environmental Protection Agency or other relevant legislation. In the wake of the September 11 attacks, many potential customers of HES and AirPol put their planned purchases of this type of equipment on hold. They were waiting to see how the regulatory environment would evolve after the disaster. This had the effect of drastically reducing sales and revenues for both AirPol and HES. Costs of sales decreased 70.6% to $1,174,193 for the three months ended March 31, 2002 compared to $3,991,087 for the three months ended March 31, 2001. This was due to the decreased levels of activity at both AirPol and HES. Operating expenses were down 3.5% to $793,406 for the three months ended March 31, 2002 compared to $822,528 for the three months ended 3/31/01. This was due to some personnel changes, and charges related to the restructuring at HES. Backlog at March 31, 2002 was approximately $7,950,000. This includes $6,080,000 at AirPol and $1,870,000 at HES. While it is unclear how recent rulings and future enforcement by the Environmental Protection Agency will impact the industry, it is evident that there is a great deal of activity and interest in the products of both HES and AirPol. FINANCIAL CONDITION AND LIQUIDITY --------------------------------- For the three months ended March 31, 2002, the Company relied partly on related party advances to fund the operations of HES and AirPol. Current cash reserves, loans from shareholders and officers, and continuing operations are believed to be adequate to fund MPM's and its subsidiaries' operations for the foreseeable future. Working capital at March 31, 2002 was negative $2,564,169. Accordingly, MPM is actively seeking 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 During the first quarter, the Company knew 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. Subsequent to the end of the first quarter, the Company received information that it may become involved in a legal action. The Company is currently evaluating the information to consider its options and course of action. The Company does not expect any adverse financial effects from this action. 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 first quarter of 2002. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 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. MAY 17, 2002 /s/ Robert D. Little ----------------------------- --------------------------------- (date) Robert D. Little Corporate Secretary