10QSB 1 y63198e10qsb.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 June 30, 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 August 7, 2002, the registrant had outstanding 3,021,917 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 JUNE DECEMBER 30, 2002 31, 2001 ------------ ------------ (UNAUDITED) Current assets: Cash and cash equivalents $ 250,444 $ 601,131 Accounts receivable, net of allowance for doubtful accounts of $833,000 and $1,013,000 1,869,688 2,075,399 Inventories 37,859 37,859 Costs and estimated earnings in excess of billings 163,319 895,437 Other current assets 246,998 232,784 ------------ ------------ Total current assets 2,568,308 3,842,610 ------------ ------------ Property, plant and equipment, net 1,556,987 1,298,522 Mineral properties held for sale 1,086,346 1,086,346 Note receivable 273,000 273,000 Purchased intangible, net of accumulated amortization of $354,375 and $337,500 303,750 337,500 Investments - at equity 151,856 151,856 Other assets, net 639,587 710,575 ------------ ------------ $ 6,579,834 $ 7,700,409 ============ ============ Current liabilities: Accounts payable $ 3,764,837 $ 3,661,428 Accrued expenses 923,833 1,426,652 Billings in excess of costs and estimated earnings 277,025 641,435 Related party debt 190,000 190,000 Current portion of long-term debt 375,000 375,000 ------------ ------------ Total current liabilities 5,530,695 6,294,515 ------------ ------------ Related party debt 908,508 592,343 Long-term debt, less current portion 481,324 481,324 ------------ ------------ Total liabilities 6,920,527 7,368,182 ------------ ------------ Commitments and contingencies Stockholders' equity: Common stock, $.001 par value, 100,000,000 shares authorized, 2,787,493 and 2,641,961 shares issued and outstanding 3,021 3,012 Additional paid-in capital 11,266,148 11,254,939 Accumulated deficit (11,609,862) (10,925,724) ------------ ------------ Total stockholders' (deficit) equity (340,693) 332,227 ------------ ------------ $ 6,579,834 $ 7,700,409 ============ ============
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Quarter Ended Six Months Ended June 30, June 30, --------------------------------- --------------------------------- 2002 2001 2002 2001 ------------ ------------ ------------ ------------ Revenues $ 1,987,107 $ 5,725,517 $ 3,557,001 $ 10,586,735 Cost of sales 1,153,208 4,503,500 2,327,401 8,494,587 ------------ ------------ ------------ ------------ Gross margin 833,899 1,222,017 1,229,600 2,092,148 Selling, general and administrative expenses 1,106,228 1,179,325 1,899,634 2,001,853 ------------ ------------ ------------ ------------ (Loss) income from operations (272,329) 42,692 (670,034) 90,295 ------------ ------------ ------------ ------------ Other income (expense): Interest expense (24,331) (16,994) (55,771) (36,270) Other income, net -- 152 3,580 2,535 ------------ ------------ ------------ ------------ Net other income (expense) (24,331) (16,842) (52,191) (33,735) ------------ ------------ ------------ ------------ Net (loss) income ($ 296,660) $ 25,850 ($ 722,225) $ 56,560 ============ ============ ============ ============ Basic earnings per share: Net (loss) income ($ 0.10) $ 0.01 ($ 0.24) $ 0.02 ============ ============ ============ ============ Diluted earnings per share: Net (loss) income ($ 0.10) $ 0.01 ($ 0.24) $ 0.01 ============ ============ ============ ============ Weighted average shares of common stock outstanding - basic 3,021,917 2,948,345 3,003,555 2,927,259 ============ ============ ============ ============ Weighted average shares of common stock outstanding - diluted 4,186,105 3,936,105 4,163,104 3,914,478 ============ ============ ============ ============
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, ------------------------------ 2002 2001 ----------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) ($ 722,225) $ 56,560 Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 116,446 62,477 Interest imputed on related party debt 2,219 4,462 Change in assets and liabilities: Accounts receivable 205,711 948,090 Costs and estimated earnings in excess of billings 732,118 (722,008) Inventories -- (837,716) Other assets 56,774 (375,108) Accounts payable and accrued expenses (646,486) 1,329,602 Billings in excess of costs and estimated earnings (364,410) (818,421) ----------- ---------- Net cash used in operating activities (619,853) (352,062) ----------- ---------- Cash flows from investing activities: Acquisition of property, plant and equipment (55,999) (48,421) ----------- ---------- Net cash used in investing activities (55,999) (48,421) ----------- ---------- Cash flows from financing activities: Proceeds from stock issues 9,000 13,747 Proceeds from related party debt 316,165 27,180 ----------- ---------- Net cash provided by (used in) financing activities 325,165 40,927 ----------- ---------- Net decrease in cash and cash equivalents (350,687) (359,556) Cash and cash equivalents, beginning of period 601,131 573,974 ----------- ---------- Cash and cash equivalents, end of period $ 250,444 $ 214,418 =========== ========== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $39,000 $31,909 Income taxes $ -- $ -- Supplemental disclosure of investing activities: Liabilities assumed in connection with fixed asset acquisitions $ 285,162 $ -- 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, 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 refer to 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 June 30, 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 SIX MONTHS ENDED JUNE 30, 2002 -------------------------------------------- WEIGHTED- NET AVERAGE PER-SHARE INCOME SHARES AMOUNT --------- --------- --------- BASIC EPS (Loss) available to common stockholders $(722,225) 3,003,555 $ (0.24) EFFECT OF DILUTIVE SECURITIES Common stock options -- 1,159,549 -- --------- --------- --------- DILUTED EPS Loss available to common stockholders - assumed conversions $(722,225) 4,163,104 $ (0.24) ========= ========= =========
FOR THE THREE MONTHS ENDED JUNE 30, 2002 ---------------------------------------- WEIGHTED- NET AVERAGE PER-SHARE INCOME SHARES AMOUNT --------- --------- --------- BASIC EPS Income available to common stockholders $(296,660) 3,021,917 $ (0.10) EFFECT OF DILUTIVE SECURITIES Common stock options -- 1,164,188 -- --------- --------- --------- DILUTED EPS Income available to common stockholders - assumed conversions $(296,660) 4,186,105 $ (0.10) ========= ========= =========
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 ========== ========= =========
FOR THE THREE MONTHS ENDED JUNE 30, 2001 ---------------------------------------- WEIGHTED- NET AVERAGE PER-SHARE INCOME SHARES AMOUNT --------- --------- --------- BASIC EPS Income available to common stockholders $ 25,850 2,948,345 $ 0.01 EFFECT OF DILUTIVE SECURITIES Common stock options -- 987,760 -- --------- --------- --------- DILUTED EPS Income available to common stockholders - assumed conversions $ 25,850 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 June 30, 2002 are as follows:
AIR AIR POLLUTION POLLUTION CONTROL CONTROL ALL (HEAT) (SCRUBBERS) OTHERS TOTAL ----------- ----------- ----------- ----------- Revenue external .... $ 548,794 $ 3,008,207 $ -- $ 3,557,001 Revenue internal .... -- -- -- -- Segment profit (loss) (214,554) (200,863) (306,808) (722,225) Segment assets ...... 1,761,606 4,587,187 231,041 6,579,834
Reconciliation of segment revenues, net income, total assets and other significant items for the six and three months ended June 30, 2002 are as follows:
SIX MONTHS THREE MONTHS ENDED ENDED JUNE 30, 2002 JUNE 30, 2002 REVENUES -------- Total revenues for reportable segments ..... $ 3,557,001 $ 1,987,107 Other revenues ............................. -- -- ----------- ----------- Total consolidated revenues ................ $ 3,557,001 $ 1,987,107 =========== =========== PROFIT OR LOSS -------------- Total profit or loss for reportable segments $ (415,417) $ (292,408) Other profit or loss ....................... (306,808) (4,252) ----------- ----------- Total consolidated profit or loss .......... $ (722,225) $ (296,660) =========== ===========
AT JUNE 30, 2002 ASSETS ------ Total assets for reportable segments $ 6,648,793 Other assets ....................... 2,738,223 Elimination of intersegment assets . (2,807,182) ----------- Total consolidated assets .......... $ 6,579,834 ===========
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, 2001 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 ============ ============
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 ============
4. SUBSEQUENT EVENTS In June 2002, MPM was notified by Nasdaq that it did not comply with the minimum $2.0 million net tangible assets or the minimum $2.5 million stockholder's equity requirements for continued listing. Marketplace Rule 4310(c)(2)(B) states that for continued listing, the issuer shall maintain (i) stockholders' equity of $2.0 million ($2.5 million as of November 1, 2002); (ii) market capitalization of $35 million; or (iii) net income from continuing operations of $500,000 in the most recently completed fiscal year or two of the last three most recently completed fiscal years. On August 1, 2002, Nasdaq notified MPM that as a result of its presentation before an oral hearing of a Nasdaq Listing Qualification Panel on July 18, 2002, MPM will continue to be listed on the Nasdaq SmallCap Market. In a letter to MPM, Nasdaq wrote, "The Panel was of the opinion that the Company presented a definitive plan that should enable it to evidence compliance with the $2,500,000 shareholders' equity standard within a reasonable period of time and to sustain compliance with that requirement as well as all other requirements for continued listing on The Nasdaq SmallCap Market over the long term." As part of the plan presented to the Panel, MPM intended to purchase a piece of recreational real estate in Montana by issuing $3 million of its common stock. MPM also intended to issue common stock pursuant to the terms of a convertible promissory note held by its Chairman and Chief Executive Officer, and to issue common stock to the same Officer for $300,000 in debt owed to the Officer. These three items were voted upon at a Special Meeting of Shareholders on August 2, 2002. The proposals were approved by the shareholders by an overwhelming margin. In March, MPM had erroneously issued shares to its Chairman. These transactions were rescinded pending the shareholder approval noted above. Following is a condensed balance sheet with pro forma adjustments for the acquisition of the real estate, and the conversion of the convertible notes and other debt. The pro forma balance sheet reflects the June 30, 2002 balance sheet as if these transactions had taken place on June 30, 2002. MPM TECHNOLOGIES, INC. CONDENSED PRO FORMA BALANCE SHEET JUNE 30, 2002
Pro Forma Pro Forma As Reported Adjustments Amounts ------------ ------------ ------------ Assets Current assets $ 2,568,308 $ -- $ 2,568,308 Other assets 4,011,526 3,000,000 7,011,526 ------------ ------------ ------------ Total assets $ 6,579,834 $ 3,000,000 $ 9,579,834 ============ ============ ============ Liabilities and Stockholders' Equity Current liabilities $ 5,530,695 $ -- $ 5,530,695 Other liabilities 1,389,832 (800,000) 589,832 ------------ ------------ ------------ Total liabilities $ 6,920,527 $ (800,000) $ 6,120,527 ------------ ------------ ------------ Stockholders' Equity: Common stock $ 3,021 $ 3,800 $ 6,821 Additional paid-in capital 11,266,148 3,796,200 15,062,348 Accumulated deficit (11,609,862) -- (11,609,862) ------------ ------------ ------------ Total stockholders equity $ (340,693) $ 3,800,000 $ 3,459,307 ------------ ------------ ------------ Total liabilities and stockholders equity $ 6,579,834 $ 3,800,000 $ 9,579,834 ============ ============ ============
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. 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, 2002 and 2001 include the operations of HES, AirPol, Skygas and MPM. MPM's consolidated net loss for the six months ended June 30, 2002 was $722,225 or $0.24 per share compared to net income of $56,560, or $0.02 per share for the six months ended June 30, 2001. During the second quarter, MPM announced that AirPol had finalized a licensing agreement with BOC of Murray Hill, NJ for LoTOx(TM) nitrogen oxide, or NOx control technology. AirPol and BOC will jointly market the technology to the pulp and paper and waste incineration industries. Under the terms of the agreement, AirPol and BOC successfully demonstrated the LoTOx technology in a pilot at Abitibi Consolidated, a paper recycling plant in Sheldon, Texas. Applying the LoTOx technology's ozone injection to Abitibi's ink sludge/mixed waste fuel boiler - which is outfitted with existing AirPol particulate wet scrubbing systems - reduced the boilers' smog-forming NOx emissions by more than 90 percent and provided comprehensive control of sulfur dioxide (SOx) and particulate matter. Results of the demonstration will be presented at the National Council of Air and Stream Improvement, Inc.'s (NCASI) NOx workshop in June. Robert Ferrell, Vice President of LoTOx Business Development for BOC, said, "This agreement will enable pulp and paper and incinerator industry customers to easily and inexpensively add NOx control to their current air emissions control technology. AirPol is a recognized leader in the field of wet scrubbing technology, which is an integral part of our LoTOx technology. Their presence in the pulp and paper and incinerator industry will facilitate the adoption of our LoTOx NOx removal technology." Frank Hsu, President, AirPol, said, "The success of the Abitibi pilot testing is a good example of how BOC and AirPol in cooperation can speed up the commercialisation of the LoTOx technology. Retrofitting the LoTOx system to an existing scrubber system is an efficient and cost effective approach to achieving NOx removal for industrial plants with existing scrubbers. With over 300 AirPol scrubber installations in the pulp and paper and incinerator plants, we are now ready to help our customers to solve their NOx problems by taking full advantage of the scrubbers already existing in their plants." LoTOx is a patented air emissions abatement system that uses ozone to selectively oxidize insoluble NOx to highly soluble species. The LoTOx system can be easily installed as a stand-alone system or can be applied to new or existing SOx and particulate control technology. For example, the LoTOx technology was successfully applied to AirPol's existing scrubber and reactor vessel technology at RSR Corporation's Quemetco Inc.'s smelting furnace in City of Industry, California. BOC also maintains a mobile, trailer-mounted, 250 cubic foot-per-meter (CFM) demonstration unit to confirm and optimize performance prior to installation. BOC offers the technology and equipment under a variety of financial arrangements. "Our objective is to provide the pulp and paper and waste incineration industries with the best available NOx emissions control at the best available commercial terms," Ferrell said. The LoTOx technology is the recipient of Chemical Engineering Magazine's 2001 Kirkpatrick Award, granted every two years to honor outstanding chemical engineering technology successfully developed and commercialized through group effort. As noted above, subsequent to the second quarter, MPM received approval to acquire an interest in a recreational property located in Montana known as Mariner's Haven. The property is to be acquired for $3,000,000 in MPM common stock from two officers/directors pursuant to the approval of the shareholders at a special meeting on August 2. Management decided to diversify into real estate since it has become the investment of choice in the aftermath of the stock market declines. MPM's Chairman and CEO has over 30 years experience in real estate, and will take the lead role in the new venture. MPM is in the process of final negotiations to sell a Skygas unit in Korea. It is expected that this unit will be used both commercially and as a demonstration model for future Skygas sales and applications. MPM management is hopeful that the contracts can be signed before the end of August. with the unit becoming operational in the second quarter 2003. MPM has also started negotiations on the sale of another Skygas unit in the Pacific Northwest. This unit is expected to be the first sale in North America. Management expects to have it operational in 2003. MPM continues to negotiate with other interested entities with the goal of selling other Skygas units. These negotiations are also ongoing, and include entities in the United States, Europe and Asia. Six and three months ended 6/30/02 compared to six and three months ended 6/30/01 For the six months ended 6/30/02, MPM had a net loss of $722,225, or $0.24 per share compared to net income of $56,560, or $0.02 per share for the six months ended 6/30/01. Revenues decreased 66.4% to $3,557,001 for the six months ended 6/30/02 compared to $10,586,735 for the six months ended 6/30/01. Revenues decreased at AirPol by approximately $3,235,000, or 51.8%. Revenues at HES were down approximately 3,795,000, or 87.4%. Revenue decreases were due to the aftermath of the September 11 disasters, restructuring and down sizing at HES, and dramatically slower sales activity. Costs of sales decreased 72.6% to $2,327,401 for the six months ended June 30, 2002 compared to $8,494,587 for the six months ended June 30, 2001. This was comparable to the decrease in revenues. Operating expenses decreased 5.1% to $1,899,634 for the six months ended June 30, 2002 compared to $2,001,853 for the six months ended 6/30/01. Operating expense decreases were due primarily to staff reductions and the related costs. For the three months ended 6/30/02, MPM had a net loss of $296,660, or $0.10 per share compared to net income of $25,850, or $0.01 per share for the three months ended 6/30/01. Revenues decreased 65.3% to $1,987,107 for the three months ended 6/30/02 compared to $5,725,517 for the three months ended 6/30/01. This was largely due to the aforementioned decreases in sales activities. Costs of sales decreased 74.4% to $1,153,208 for the three months ended June 30, 2002 compared to $4,503,500 for the three months ended June 30, 2001 due to the decrease in revenues. Operating expenses decreased 6.2% to $1,106,228 for the three months ended June 30, 2002 compared to $1,179,325 for the three months ended 6/30/01. 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 $6,500,000. This includes $4.9 million at AirPol and $1.6 million at HES. Financial Condition and Liquidity For the six months ended June 30, 2002, the Company relied principally on cash from loans from officers and shareholders to fund the operations of HES and AirPol. Current cash reserves, cash from continuing operations and loans from officers and shareholders are believed to be adequate to fund MPM's and its subsidiaries' operations for the foreseeable future. Working capital at 6/30/02 was negative $2,962,387. Accordingly, MPM is actively seeking alternative sources of capital such as private placements, stock offerings and other financing alternatives. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company was notified during the second quarter that it had been named in a lawsuit that was filed earlier this year. The case was recently dismissed. The Company knows of no other 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 24, 2002. Following are the results of the shareholders' voting: Proposal 1 - Election of Directors
Name For Withheld ---- --- -------- Daniel D. Smozanek 2,056,808 22,035 Frank E. Hsu 2,067,597 11,246
Each director was re-elected for a three-year term. Proposal 2 - Approval of Amendment to the 1989 Stock Option Plan
For Against Abstain Not Voted --- ------- ------- --------- 1,393,925 96,586 5,480 582,852
The proposal passed. Total shares represented by proxy: 2,078,843 Percentage of the outstanding voting shares: 68.8% Outstanding voting shares: 3,021,917 ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K On June 6, 2002 the Company filed a Form 8-K to report the resignation of Myron Katz, Vice President and Director effective June 24, 2002. No other reports on Form 8-K were filed for the quarter ended June 30, 2002. 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 8, 2002 /s/ Michael J. Luciano ----------------------------- ------------------------------- (date) Michael J. Luciano Chairman & CEO