-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DIUv1xjDRPVIIBG7tYnCmv3kPA+bJkjgS1ZC0J5SbWpqnmun9x5N0YahOOr2dMID PGGwQnLFOBolFS345RdjCg== 0001004522-98-000012.txt : 19980416 0001004522-98-000012.hdr.sgml : 19980416 ACCESSION NUMBER: 0001004522-98-000012 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980415 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MPM TECHNOLOGIES INC CENTRAL INDEX KEY: 0000799268 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 810436060 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-14910 FILM NUMBER: 98594032 BUSINESS ADDRESS: STREET 1: 222 W MISSION AVE STREET 2: STE 30 CITY: SPOKANE STATE: WA ZIP: 99201 BUSINESS PHONE: 5093263443 MAIL ADDRESS: STREET 1: 908 N HOWARD SUITE 100 STREET 2: 908 N HOWARD SUITE 100 CITY: SPOKANE STATE: WA ZIP: 99201 FORMER COMPANY: FORMER CONFORMED NAME: MONTANA PRECISION MINING LTD DATE OF NAME CHANGE: 19920703 10KSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Form 10-KSB Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange act of 1934 For the fiscal year ended December 31, 1997 Commission File Number 0-14910 MPM TECHNOLOGIES, INC. (Exact Name of Registrant 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) Registrant's telephone number, including area code: 509-326-3443 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 Par Value Nasdaq - ---------------------------------- ------------------------ Title of Each Class Name of Exchange on Which Registered Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Aggregate market value of the registrant's common stock held by non-affiliates as of April 5, 1998 was $14,420,354. As of April 5, 1998, the registrant had outstanding 16,480,404 shares of common stock which is the registrant's only class of stock. DOCUMENTS INCORPORATED BY REFERENCE The following document is incorporated by reference into Part IV of this report: (1) Form 10, effective October 21, 1986, Commission File No. 0-14910 Part I Item 1. Business MPM Technologies, Inc. (the "Company") has three wholly-owned subsidiaries including Huntington Environmental Systems, Inc. ("HES"), Nupower, Inc. ("Nupower") and MPM Mining ("Mining"). For the year ended December 31, 1997, HES was the only completely operational entity. The Company continues its efforts in the research and development of a waste-to-energy process known as "Skygas". These efforts are largely through the Company's participation in Nupower Partnership in which the Company has approximately a 58% interest through its ownership of Nupower. HUNTINGTON ENVIRONMENTAL SYSTEMS, INC. Effective April 1, 1997, the Company acquired certain of the assets and assumed certain of the liabilities of part of a division of United States Filter Corporation in exchange for 1.32 million shares of the Company's common stock. The transaction was accounted for as a purchase. In connection with the acquisition, the Company formed a wholly-owned subsidiary, Huntington Environmental Systems, Inc. ("HES") which assumed the assets and liabilities acquired. HES designs, engineers, supplies, and services air pollution control systems for Fortune 500 and other environmental and industrial companies around the world. Through the technologies and employees acquired, HES is a leader in the design, fabrication, installation, start-up and maintenance of high temperature pollution control equipment. With over 25 years experience and over 300 installations worldwide, HES's engineering staff is uniquely prepared to address the full scope of customers' process problems. HES's policy of handling clients' individual concerns includes in-depth analysis and evaluation, followed by complete engineering and design services leading to application-specific engineered solutions. HES is the first acquisition in the Company's revised plans to change its focus and direction toward environmental concerns in general, and pollution issues specifically. As stated above, HES was a part of a division of U.S. Filter. U.S. Filter had acquired it and a large group of other divisions known collectively as "Wheelabrator Clean Air Systems" from Waste Management in November 1996. Because of this, and the fact that HES was also a part of a division when it was owned by Waste Management, the Company was unable to obtain sufficient historical data to determine the pro forma results for prior periods to make the required disclosures assuming the purchase of HES had been consummated as of January 1, 1996. As a result, these disclosures have been omitted. NUPOWER, INC. The Company holds a 58.21% interest in Nupower Partnership through its ownership of Nupower. No other operations were conducted through Nupower. Nupower partnership is engaged in the development and commercialization of a waste-to-energy process. This 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. Nupower Partnership owns 70% of the Skygas Venture. MPM separately owns 15% of the venture and USF Smogless, Milan, Italy (a subsidiary of United States Filter Corp.) owns 15% of the venture. MPM MINING, INC. Mining controls 32 claims on approximately 1,000 acres in the historical Emery Mining District in Montana. It also owns a 200 ton per day floatation mill on site. Extensive exploration has been conducted in the area by companies such as Exxon Corporation, Freeport McMoran Gold Company and Hecla Mining Company in addition to the efforts of Mining. In accordance with the Board of Directors mandates, the Company's management is actively seeking out mining companies and other businesses to purchase the Company's mining properties and equipment. INDUSTRY SEGMENT DATA The Company's operations for 1997 include air pollution control, waste-to- energy and mining. Only the air pollution control operations had revenue for the year ended December 31, 1997. Air pollution Waste-to- Corporate 1997 control energy Mining and other Total - ----------------- ------------- ----------- -------- ---------- ------------ Net sales $ 6,076,936 - - - $ 6,076,936 Depreciation & Amortization 21,091 1,003 26,548 644 49,286 Research & Development - - - - - Income (loss) from operations 82,677 (83,414) (48,389) (169,011) (218,137) Net income (loss) 76,751 (83,414) (48,389) (187,662) (242,714) EMPLOYEES Except for HES, the Company and its subsidiaries have no employees. HES has twenty-two full time employees, the majority of whom are licensed, degreed engineers. The Company's officers do not expect to devote full time to the Company. Since HES is the only fully operating company, and is fully staffed, it is not expected that the Company's officers will need to spend a substantial amount of time for the other entities. NO DIVIDENDS The Company has not paid dividends in the past, and expects to continue its policy of not paying dividends in the future. The Company plans to retain any future earnings to enhance its capital and expand its operations. FINANCING Through HES, the Company is currently negotiating with a large bank in Chicago for a $500,000 line-of-credit. This is expected to be in place in the second quarter of 1998 subject to successful completion of negotiations. Due to its favorable cash position, the Company expects that its current working capital needs will be met with the available funds, and with the ongoing HES business. The line-of-credit will be used if needed to fund the Company's growth and expansion. BACKLOG HES has a backlog of orders and work in progress aggregating approximately $3,000,000 at December 31, 1997. There is currently no other backlog of orders for any of the Company's other businesses. WASTE-TO-ENERGY The Company's waste-to-energy process consists of an innovative technology known as "Skygas". The Company is currently working with the Institute of Gas Technology ("IGT") on the development and construction of a prototype Skygas unit. This unit will be built on the property of IGT. IGT will supervise the initial operation, and will handle the initial testing of the unit. The Company intends to attract an end-user to finance construction of this plant. COMPETITIVE CONDITIONS HES operates in an extremely competitive environment. There are a number of potential competitors for every job that HES bids on. The number of bidders ranges from two or three to as many as seven or eight depending on the potential customer and the work to be performed. The parts and service side of the business tends to be somewhat less competitive since the parts and service work are generally for units that have previously been sold and/or installed by HES. There are a significant number of persons and companies developing or have developed any number of waste-to-energy systems. Management of the Company believes that its development of Skygas as a superior system will give it the necessary competitive edge in this area. Due to the large number of persons and companies engaged in exploration for and production of mineralized material, there is a great degree of competition in the mining part of the business. Since management has decided to sell its mining holdings and equipment, it will no longer need to compete in this area. SEASONAL VARIATIONS The impact of seasonal changes is minimal on the air pollution control business of HES. There may be some limitations on the installation of the air pollution control units when the weather is more severe in the winter months in those areas of the world where the weather is significantly colder in that season. There have been, however, no discernible variations to date to indicate that the business is subject to seasonal variations. There are currently no seasonal influences on the ongoing development of the Skygas process. It is also not expected that there will be any seasonal variations when the Skygas units are produced. Item 2. Properties HES presently owns no property related to its air pollution control business. It leases space from its former owner on a month-to-month basis. The Company also currently has no property related to its waste-to-energy operations. The principal properties of the Company's mining interests consist of the following claims under control: Owned by the Company: Eight Patented Claims Sixteen Unpatented Claims Leased by the Company: Eight Patented Claims These claims amount to approximately 1,000 acres of land in Montana. MPM Ltd. controls eighteen former mine sites that have been inactive since 1930. Each of these have old adits, tunnels and dump piles of known mineralized material. All testing and metallurgical work has been completed. Management has directed the Company to sell these interests as previously discussed. Item 3. Legal Proceedings The Company knows of no litigation present, threatened, or contemplated, or unsatisfied judgments against the Company or its officers or directors, or any proceedings in which the Company or its officers or directors are a party. Item 4. Submission of Matters to a Vote of Security Holders There have been no matters submitted to a vote of the security holders since those reported in the Company's third quarter report. Part II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters a) Market Information The Company's common stock trades on The Nasdaq SmallCap Market under the symbol MPML. High Bid Low Bid 1997 - -------------- --------- --------- First Quarter $ 0.50 $ 0.25 Second Quarter 1.25 0.38 Third Quarter 0.93 0.56 Fourth Quarter 0.88 0.50 1996 - -------------- First Quarter 1.75 0.62 Second Quarter 2.00 1.00 Third Quarter 1.50 0.93 Fourth Quarter 0.68 0.43 1995 - -------------- First Quarter 2.00 1.18 Second Quarter 2.18 1.25 Third Quarter 1.75 1.25 Fourth Quarter 1.87 0.75 b) Holders As of April 5, 1998, there were approximately 2,300 holder of record of the Registrant's common stock. c) Dividends The Company has not paid dividends in the past. It is not anticipated that the Company will distribute dividends for the foreseeable future. Earnings of the Company are expected to be retained to enhance the Company's capital and expand its operations. Item 6. Selected Financial Data 1997 1996 1995 1994 1993 Results of Operations - --------------------- ------------ --------- --------- ------------ --------- Operating revenues $6,076,936 $ -0- $ -0- $ 200,147 $ -0- Interest expense 96,068 54,773 68,257 79,125 127,871 Net (loss) ( 277,573) (394,607) (271,052) (227,991) (495,513) Financial Position Working Capital 1,170,091 (942,947) (822,860) (1,047,464) (1,111,925) Total Assets 6,885,952 3,074,567 2,051,541 2,015,304 2,074,009 Long-term Debt 530,060 -0- -0- -0- -0- Accumulated Deficit 4,903,473 4,660,759 4,266,152 3,995,000 3,767,109 Stockholders' Equity 4,472,756 2,771,637 1,745,657 1,617,394 1,449,368 Per Common Share Net (loss) (0.02) (0.03) (0.02) (0.02) (0.03) Book value 0.27 0.19 0.14 0.14 0.12 Average shares Outstanding 15,440,089 13,339,445 12,534,158 12,107,813 11,857,255 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations a) Review of Operations The Company acquired certain of the assets and assumed certain of the liabilities of a portion of a division of U.S. Filter Corporation as of April 1, 1997. The Company formed HES to operate this air pollution control business. The results of operations for the year ended December 31, 1997 include the operations of HES for the nine months from April 1, 1997 through December 31, 1997. For the nine months ended December 31, 1997, HES had revenues of $6,076,936. Since the portion of the division the Company acquired was owned by U.S. Filter only since November 1996, and was formerly a part of a division of Waste Management prior to that, comparative sufficient detailed data was not available to determine prior comparative balances. Since the April acquisition, HES has strategically pursued the consolidation of its operations, and effected a reduction in both its overhead and operating costs. At the same time, HES has increased its efforts in sales and marketing. Steps to improve market share included the creation of the new position of Vice President of Sales and Marketing. This position has been filled with a highly experienced individual. Other steps to improve market share have included preparation of new product literature, presentations of technical papers and continued participation and attendance at strategic industry trade shows. The results of these efforts have included high levels of requests for quotations, both for firm quotations and for budget quotations. Quotations for repeat customers are high for both new and replacement equipment. Quotations for new projects abroad include installations in Canada, the United Kingdom, Australia and India. HES has also developed its first two chamber unit which was recently started. Management believes that two chamber units will comprise an increasing percentage of the total VOC control market in the upcoming years. HES is anticipating improvements in all areas in 1998. Management is projecting a 20% increase in revenues, and an improvement in its pre-tax margin percentage. These projections are based in part on the year end backlog of work to be completed which has increased 34% since the acquisition on April 1, 1997. The Company is currently in the final stages of negotiations which will lead to the building of a prototype Skygas unit. This unit will be built with the assistance of the Institute of Gas Technology, and will be located on their property. IGT will conduct the testing of the unit once it is completed. Management anticipates that the unit will be operational in the late third quarter or early fourth quarter. Once the unit is operational, and testing has been completed, it is expected that sales of similar units will begin immediately based on the amount of interest in the technology, and the customers that have already contacted the Company. The Company intends to find an end-user to finance the construction of this plant. The Company has expended over $1,300,000 on mining exploration and development, lease payments and claims. Over $550,000 of additional funds have been expended on mining equipment. The Company is currently actively marketing its mining properties and equipment for sale. Management has decided to get out of the mining business, and focus on its air pollution control and waste-to-energy businesses. Year Ended 12/31/97 Compared to Year Ended 12/31/96 The net loss for 1997 was $242,714, or $0.02 per share, compared with a loss of $394,606, or $0.03 per share for 1996. The Company shed its development stage status in 1997 through the acquisition of HES. As a result, the Company had revenue in 1997 of $6,076,936 compared to no revenues in the prior period. Operating expenses increased $981,343 to $1,355,911 in 1997 compared to $374,568 in 1996. This increase was due primarily to the acquisition of HES and its operations. Due to the fact that prior to April 1, 1997, HES was a part of a division of U.S. Filter, and that U.S. Filter had purchased it along with a number of other divisions from Waste Management in November 1996, sufficient data was not available to determine comparable amounts for earlier periods. Year Ended 12/31/96 Compared to Year Ended 12/31/95 The net loss for 1996 was $394,606, or $0.03 per share, compared to $271,052, or $0.02 per share for 1995. Operating expenses increased $142,640 to $374,568 in 1996 compared to $231,928 in 1995. This increase was due primarily to management's increased efforts to identify and investigate acquisitions. The Company was still a development stage company in 1996, and, accordingly, had no revenue. Year Ended 12/31/95 Compared to Year Ended 12/31/94 The net loss for 1995 was $271,052, or $0.02 per share, compared to $227,911, or $0.02 per share for 1994. Operating expenses decreased $105,245 to $231,928 in 1995 compared to $337,173 in 1994. This decrease was due primarily to decrease activity in the Company's development. Again, the Company was still in a development stage, but managed to have revenue of $200,147 related to its agreements involved with its Skygas technology. Liquidity and Capital Resources During 1997, funds for operations were provided principally by cash generated subsequent to the acquisition of HES and its continuing operations. Current cash reserves and continuing operations of HES are believed to be adequate to fund the Company's operations for the foreseeable future. The Company is also negotiating with a large Chicago bank for a $500,000 line-of-credit. While its working capital and operating needs are expected to be met by continued operations of HES, the line-of-credit is expected to give the Company more latitude in its efforts to grow its current business and expand in other related areas. Management has oral agreements from banks and major shareholders that will enable the Company to extend the payment terms of the loans payable to major stockholders and to renew short-term bank loans. Certain of the Company's officers have orally agreed to personally secure all notes of the Company. Management believes its present sources of working capital are sufficient for both its short and long-term purposes. The Company should also realize cash receipts from the sale of its mining holdings and equipment. The proceeds from these sales will be used to reduce debt and fund participation costs associated with the Skygas venture. IMPACT OF INFLATION Although inflation has slowed in recent years, it is still a factor in our economy and the Company continually seeks ways to mitigate its impact. To the extent permitted by competition, HES passes increased costs on to its customers by increasing prices over time. Management estimates that the impact of inflation on the revenues for 1997 was negligible. Since the Company did not engage in any mining operations, sales of metals or metal bearing ores, and was in the development stage of the waste-to-energy process, inflation did not materially impact the financial performance of those segments of the Company's business. Management estimates that the operations of the Company were only nominally impacted by inflation. COMPENSATED ABSENCES For HES employees, it is the policy of the Company that employees take paid vacation time each year as determined by his or her length of continuous service. Vacation time is accrued for each employee, and any unused accrued vacation time at the time of an employee's termination of employment is paid to the employee. These costs are accrued and accounted for in the HES financial statements. HES employees also are compensated for sick time to the extent they have accrued sick leave credit. Sick leave credit accrues at the rate of five days per year for hourly employees, to a maximum of twenty days. Salaried employees are allotted twenty days of salary continuation per year. Unused salary continuation days do not carry over from year to year. The Company does not pay for any unused sick days or salary continuation days upon termination of employment. Item 8. Financial Statements and Supplemental Data The financial statements follow on the next page. MPM TECHNOLOGIES, INC. CONSOLIDATED FINANCIAL STATEMENTS To The Board of Directors of MPM Technologies, Inc. INDEPENDENT AUDITOR'S REPORT I have audited the consolidated statement of financial position of MPM Technologies, Inc. (a Washington corporation) and its subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years ended December 31, 1997, 1996 and 1995. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these consolidated financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentations. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of MPM Technologies, Inc. and its subsidiaries as of December 31, 1997 and 1996, and the results of its operations, changes in stockholders' equity and cash flows for the years ended December 31, 1997, 1996 and 1995, in conformity with generally accepted accounting principles. /s/Terrence J. Dunne Terrence J. Dunne Certified Public Accountant Spokane, Washington April 13, 1998
Consolidated Statement of Financial MPM TECHNOLOGIES, INC. Position as of December 31, 1997 AND SUBSIDIARIES and 1996 ASSETS 1997 1996 ------------- ------------- CURRENT ASSETS Cash and cash equivalents (Notes 1 and 15) $ 2,010,596 $ 40,566 Receivables, net of allowance for doubtful accounts 603,925 37,017 Costs and estimated earnings in excess of billings (Note 3) 445,205 Inventory (Notes 1 and 4) 718,434 Other current assets 28,814 1,438 ------------- ------------- Total Current Assets 3,806,974 79,021 ------------- ------------- PROPERTY, PLANT AND EQUIPMENT (Notes 1 and 5) Land and buildings 203,005 203,005 Mining property 54,047 54,047 Equipment and machinery 539,413 406,694 Software 3,258 3,258 ------------- ------------- Total Property, Plant and Equipment 799,723 667,004 Less accumulated depreciation 470,450 422,167 ------------- ------------- Net Property, Plant and Equipment 329,273 244,837 ------------- ------------- OTHER ASSETS Deferred exploration and development costs (Note 2) 1,195,465 1,195,465 Investment (Note 1) 1,200,000 1,200,000 Notes receivable 275,000 275,000 Licenses, net of accumulated amortization of $5,598 and $4,595, respectively (Note 2) 28,490 29,494 Advance minimum royalties (Note 2) 50,750 50,750 ------------- ------------- Total Other Assets 2,749,705 2,750,709 ------------- ------------- TOTAL ASSETS $ 6,885,952 $ 3,074,567 ============= ============= The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Financial MPM TECHNOLOGIES, INC. Position as of December 31, 1997 AND SUBSIDIARIES and 1996 LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996 ------------- ------------- CURRENT LIABILITIES Accounts payable $ 419,625 $ 963 Accounts payable - Related party (Note 6) 55,116 Accrued expenses 273,959 Billings in excess of costs and estimated earnings (Note 3 ) 760,224 Interest payable 737 5,859 Interest payable - Related parties (Note 8 ) 129,997 129,997 Advance from officer (Note 7 ) 200,000 Notes payable (Note 8) 282,369 570,234 Notes payable - Related parties (Note 8) 314,765 314,765 Customer deposits 27,000 Long term debt - Current portion (Note 9 ) 164,399 Other current liabilities 8,692 ------------- ------------- Total Current Liabilities 2,636,883 1,021,818 ------------- ------------- LONG - TERM DEBT (Note 9) 530,060 ------------- MINORITY INTEREST IN CONSOLIDATED ENTITIES (Note 10 ) (753,748) (718,888) ------------- ------------- COMMITMENTS (Note 11 ) STOCKHOLDERS' EQUITY Common stock; $.001 par value; 50,000,000 shares authorized; 16,480,404 shares and 14,399,773 shares issued and outstanding as of December 31, 1997 and 1996 respectively 16,481 14,400 Additional paid-in capital 9,359,748 7,417,995 Accumulated deficit (4,903,472) (4,660,758) ------------- ------------- Total Stockholders' Equity 4,472,757 2,771,637 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,885,952 $ 3,074,567 ============= ============= The accompanying notes are an integral part of these financial statements.
MPM TECHNOLOGIES, INC. Consolidated Statement of Operations For the AND SUBSIDIARIES Years Ended December 31, 1997, 1996 and 1995 1997 1996 1995 ----------------- ------------- ---------------- REVENUE $ 6,076,936 $ -0- $ -0- COST OF SALES 4,939,162 ----------------- GROSS PROFIT 1,137,774 ----------------- OPERATING EXPENSES Marketing 566,163 Operating overhead 400,452 Depreciation and amortization 49,286 89,302 12,399 Other operating expenses 340,010 285,266 219,529 ----------------- ------------- ---------------- Total Operating Expenses 1,355,911 374,568 231,928 ----------------- ------------- ---------------- (LOSS) BEFORE NON-OPERATING ITEMS (218,137) (374,568) (231,928) ----------------- ------------- ---------------- NON-OPERATING INCOME (EXPENSE) Interest income 36,632 3,032 1,887 Interest expense (96,068) (54,773) (68,257) Miscellaneous expense (4,367) ----------------- ------------- ---------------- Total Non-Operating Income (Expense) (59,436) (51,741) (70,737) ----------------- ------------- ---------------- (LOSS) BEFORE SUBSIDIARY LOSS (277,573) (426,309) (302,665) ----------------- ------------- ---------------- SUBSIDIARY LOSS Minority interest in subsidiary loss 34,859 31,703 31,613 ----------------- ------------- ---------------- NET (LOSS) $ (242,714) $ (394,606) $ (271,052) ================= ============= ================ NET (LOSS) PER SHARE $ (0.02) $ (0.03) $ (0.02) ================= ============= ================ WEIGHTED AVERAGE NUMBER OF SHARES 15,977,573 13,339,445 12,534,158 ================= ============= ================ The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Changes in MPM TECHNOLOGIES, INC. Stockholders' Equity For the Years Ended AND SUBSIDIARIES December 31, 1997, 1996 and 1995 Additional Common Stock Paid-In Accumulated Shares Amount Capital Deficit Totals ----------- --------- ------------ ---------------- ----------------- Balances as of December 31, 1994 12,385,259 $ 12,386 $ 5,600,108 $ (3,995,100) $ 1,617,394 Contributed capital from directors 190,752 190,752 Common stock issued for cash at $.97 per share 82,580 83 79,917 80,000 Common stock issued for cash at $.87 per share 115,077 115 99,885 100,000 Common stock issued for cash at $.95 per share 159,260 159 151,804 151,963 Investment in NuPower 100,000 100 (119,349) (119,249) Common stock registration fees (4,151) (4,151) Net (loss) (271,052) (271,052) ----------- --------- ------------ ---------------- ----------------- Balances as of December 31, 1995 12,842,176 12,843 5,998,966 (4,266,152) 1,745,657 Common stock issued for services at $.375 per share 34,000 34 20,026 20,060 Cash contributed to additional paid-in capital 55,528 55,528 Continued on next page The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Changes in MPM TECHNOLOGIES, INC. Stockholders' Equity For the Years Ended AND SUBSIDIARIES December 31, 1997, 1996 and 1995 Continued from previous page Additional Common Stock Paid-In Accumulated Shares Amount Capital Deficit Totals ----------- --------- ------------ ---------------- ----------------- Notes payables converted to common stock at $.729 per share 34,305 34 24,964 24,998 Common stock options exercised for cash at $.10 per share 50,000 50 4,950 5,000 Notes payables converted to common stock at $.646 per share 61,895 62 39,938 40,000 Notes payables converted to common stock at $.454 per share 110,193 110 49,890 50,000 Notes payables converted to common stock at $.372 per share 67,204 67 24,933 25,000 Common stock issued for 15% of a development stage joint venture 1,200,000 1,200 1,198,800 1,200,000 Net (loss) (394,606) (394,606) ----------- --------- ------------ ---------------- ----------------- Balances at December 31, 1996 14,399,773 14,400 7,417,995 (4,660,758) 2,771,637 Common stock issued for debt conversion at $.24 per share 105,764 106 24,894 25,000 Continued on next page The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Changes in
MPM TECHNOLOGIES, INC. Stockholders' Equity For the Years Ended AND SUBSIDIARIES December 31, 1997, 1996 and 1995 Continued from previous page Additional Common Stock Paid-In Accumulated Shares Amount Capital Deficit Totals ----------- --------- ------------ ---------------- ----------------- Common stock issued for debt conversion at $.22 per share 346,087 346 74,654 75,000 Common stock issued for debt conversion at $.25 per share 115,207 115 28,983 29,098 Common stock issued for acquisition of subsidiary at $1.13 per share 1,320,000 1,320 1,761,088 1,762,408 Consulting fees paid by corporate officer as contributed capital 7,920 7,920 Common stock issued for debt conversion at $.20 per share 172,573 173 34,827 35,000 Common stock issued to employees for com- pensation at $.45 per share 21,000 21 9,387 9,408 Net (loss) (242,714) (242,714) ----------- --------- ------------ ---------------- ----------------- Balances at December 31, 1997 16,480,404 $ 16,481 $ 9,359,748 $ (4,903,472) $ 4,472,757 =========== ========= ============ ================ ================= The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Cash Flows MPM TECHNOLOGIES, INC. For the Years Ended December 31, 1997 AND SUBSIDIARIES 1996 and 1995 CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996 1995 -------------- ----------- ----------- Net (loss) $ (242,714) $ (394,606) $ (271,052) Add items not requiring the use of cash: Depreciation and amortization 49,286 89,301 12,399 Expenses paid by officer 7,920 Common stock issued for compensation 9,408 20,060 Minority interest in subsidiary loss (34,859) (31,703) (31,612) Forgiveness of debt 4,367 Decrease (increase) in receivables 1,609,831 (11,577) (10,430) Decrease in costs and estimated earnings in excess of billings 362,144 (Increase) in inventory (492,753) Decrease (increase) in other current assets (27,378) 4,656 (Decrease) in accounts payable (11,805) (13,393) (6,001) Increase in accounts payable - Related party 55,116 Increase in accrued expenses 235,371 (Decrease) in accrued warranties (206,668) Increase in customer deposits 27,000 Increase in billings in excess of costs and estimated earnings 398,351 Increase in other current liabilities 8,692 Increase (decrease) in interest payable 37,741 5,859 (6,571) -------------- ----------- ----------- Net Cash Provided (Used) From Operating Activities 1,784,683 (331,403) (308,900) -------------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of equipment and machinery (3,515) (3,500) Disposal of equipment and machinery 109,115 Payment on licenses (195) Divestment of partnership interest 119,249 -------------- ----------- ----------- Net Cash Provided (Used) From Investing Activities 109,115 (3,515) 115,554 -------------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Advance from officer 200,000 Payments on notes payable (123,768) (123,719) (171,458) Proceeds from notes payable 300,000 Contributed capital from directors 60,478 190,752 Proceeds from sale of common stock 50 208,563 -------------- ----------- ----------- Net Cash Provided From Financing Activities 76,232 236,809 227,857 -------------- ----------- ----------- NET INCREASE (DECREASE) IN CASH 1,970,030 (98,109) 34,511 CASH AT BEGINNING OF YEAR 40,566 138,675 104,164 -------------- ----------- ----------- CASH AT END OF YEAR $ 2,010,596 $ 40,566 $ 138,675 ============== =========== =========== The accompanying notes are an integral part of these financial statements.
Consolidated Statement of Cash Flows MPM TECHNOLOGIES, INC. For the Years Ended December 31, 1997 AND SUBSIDIARIES 1996 and 1995 Continued from previous page SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH FINANCING ACTIVITIES 1997 1996 1995 ------------- ------------ ----------- Interest payments in cash $ 97,092 $ 44,075 $ 74,828 ============= ============ =========== Debt converted to 273,597 shares of common stock $ 139,998 ============ Issuance of 1,200,000 shares of common stock for investment in joint venture $ 1,200,000 ============ Issuance of 100,000 shares of common stock for partnership interest $ 62,500 =========== Issuance of 1,320,000 shares of common stock for investment in subsidiary $ 1,762,408 ============ Debt converted to 739,631 shares of common stock $ 164,098 ============ The accompanying notes are an integral part of these financial statements.
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 1 _ ORGANIZATION The Company was incorporated as Okanogan Development, Inc. on July 18, 1983, under the laws of the State of Washington. It was formed primarily for the purpose of investing in real estate and interests in real estate. On April 25, 1985, the Company combined with MADD Exploration, a Montana partnership, and changed its name to Montana Precision Mining, Ltd. In August, 1995, the Company changed its name to MPM Technologies, Inc. As a result of the combination, the Company acquired mining properties located in Powell County, Montana. As of the end of 1997, the Company is not engaged in exploration or developmental mining activities in regard to these properties. During 1996, the Company purchased Unitel Technologies, Inc.'s 15% interest in the Skygas venture for 1.2 million share of common stock. This investment was recorded at $1,200,000. The Skygas venture was formed in 1990 for the purpose of commercializing the Skygas Technology, which is a disposal/gasification process that converts solid and semi-solid wastes into clean, medium BTU synthesis gas. As of December 31, 1997, participants and interests owned in the Skygas venture included: NuPower Partnership, 70%, MPM Technologies, Inc., 15%, and USF Smogless of Milan, Italy (a subsidiary of United States Filter Corp.), 15%. On March 31, 1997, the Company acquired an operating business from United States Filter Corporation under the terms of an "asset purchase agreement"; and subsequently formed a new Illinois corporation (Huntington Environmental Systems, Inc. or "HES") into which the acquired assets and related liabilities were transferred. MPM Technologies, Inc. issued 1,320,000 shares of common stock to United States Filter Corporation for this operating division, which designs engineers, supplies and services air pollution control systems for Fortune 500 and other environmental and industrial companies worldwide. This transaction was accounted for as a purchase and valued at $1,762,408. Major installations are generally done under fixed price contracts, the duration of which may vary significantly. The average length of a typical installation contract is the range of four to six months. This would include approximately five to seven weeks of on-site work. HES typically has the pollution control units built to specification by its suppliers. Service work is generally performed at agreed upon rates for labor, and "cost-plus" for parts and supplies. Spare parts sales are also on a "cost-plus" basis. NOTE 2 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation The accompanying consolidated financial statements include the accounts of MPM Technologies, Inc. and its subsidiaries: Huntington Environmental Systems, Inc., MPM Mining, Inc. NuPower, Inc. and NuPower (a General Partnership). Intercompany items and transactions among the companies have been eliminated. Huntington Environmental Systems, Inc., a wholly owned subsidiary, was acquired on March 31, 1997. MPM Mining, Inc., a wholly owned subsidiary, was formed in 1987 in order to conduct the Company's mining operations. As of December 31, 1997, MPM Mining, Inc. had not yet begun operations. MPM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 2 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) NuPower, Inc. a wholly owned subsidiary, was formed during 1986 in order to conduct the Company's waste-to-energy operations. As of December 31, 1997, NuPower, Inc. has not yet begun operations. NuPower, a 58.21% owned partnership, is engaged in the research and development of an electrothermal gasification process which would be utilized primarily in the waste-to-energy field, although the process is expected to have applications in other areas. This partnership was formed in 1986. Equipment and Other Depreciable Property Equipment and other depreciable property are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets. Major additions and betterment's are capitalized. Upon retirement or disposal, the cost and related accumulated depreciation are removed from the accounts, and any gain or loss is reflected in operations. Deferred Exploration and Development Costs The Company capitalizes exploration and development costs on its mining properties. If commercial ore production commences, these costs will be amortized utilizing the units-of-production method. If any of the mining properties are abandoned, the related portion of these costs will be charged to operations. In accordance with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-lived assets and for Long-lived assets to be Disposed of," management of the Company reviews the carrying value of these costs on a regular basis, and accordingly, these costs do not exceed their net realizable value. Cash Equivalents For financial statement purposes, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be a cash equivalent. Financial instruments which potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. Cash and cash equivalents consist of funds deposited with various high credit quality financial institutions. Income Taxes Income taxes are provided based on the liability method of accounting pursuant to Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Under this approach, deferred income taxes are recorded to reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year end. A valuation allowance is recorded against deferred tax assets if management does not believe the Company has met the "more likely than not" standard imposed by SFAS 109 in order to allow recognition of such an asset. Inventories Inventories are priced at the lower of cost or market using the first-in, first-out (FIFO) method. MPM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 2 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue Recognition Contract revenue is recognized principally on the percentage-of-completion method in the ratio that costs incurred bears to estimated costs at completion. Costs include all direct material and labor costs, and indirect costs, such as supplies, tools, repair and depreciation. Selling, general and administrative costs are charged to expense as incurred. Other revenue is recorded on the basis of shipment or performance of services or shipment of products. Provision for estimated contract losses, if any, is made in the period that such losses are determined. Earnings (Losses) Per Share In February, 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, Earnings per share ("EPS"). SFAS No. 128 requires dual presentation of basic EPS and diluted EPS on all statements of operations issued after December 15, 1997 for all entities with complex capital structures. Adoption of SFAS No. 128 had no effect on the Company's financial statements. Basic EPS is computed as net income divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities. As the Company's stock options (see Note 13) are antidilutive, only basic earnings (loss) per share is presented. Contracts in Progress The asset "costs and estimated earnings in excess of billings" represents revenues recognized in excess of amounts invoiced. The liability "billings in excess of costs and estimated earnings" represents invoices in excess of revenues recognized. Financial Instruments The carrying amounts reported in the consolidated statement of financial position as of December 31, 1997 and December 31, 1996 for cash equivalents, receivables, and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of long-term debt and notes payable approximates its carrying value as the stated or discounted rates of the debt reflect recent market conditions. Licenses The Company has a license from A.C. Lewis, the inventor of the "Skygas" process, for the manufacture and construction of units. Using the straight- line method, capitalized license costs are amortized over 408 months. MPM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 2 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Advance Minimum Royalties Advance minimum royalties are amounts paid to property owners for the right to explore and extract commercial mineralization. The amounts paid will be offset against the Company's lease agreement, which provides for a royalty on the minerals extracted. These payments in advance of production are part of the underlying lease and are set at a minimum level to the property owner. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Reclassification Certain items in the 1995 and 1996 financial statements have been reclassified in order to conform to current year classifications. Such reclassifications had no effect on previously reported total assets, total liabilities and net loss. NOTE 3 _ COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS Following is a summary of costs, billings, and estimated earnings on contracts in progress: Costs incurred on contracts in progress $ 3,918,585 Estimated earnings 1,246,410 ------------ 5,164,995 Less: billings to date 5,480,014 ------------ $ (315,019) ============ The following accounts are shown in the accompanying consolidated statement of financial position under these captions: Costs and estimated earnings in excess of billings $ 445,205 Billings in excess of costs and estimated earnings 760,224 ------------ $ (315,019) ============ MPM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 4 - INVENTORY Inventories consist of construction parts, supplies and partially fabricated materials that have not been charged to specific contracts. As of December 31, 1997, these inventories are summarized as follows: Parts and supplies $ 201,884 Other materials 516,550 ------------- Total $ 718,434 ============= NOTE 5 - MINING PROPERTY Following is a schedule of the components of the Company's mining property, which is located in Powell County, Montana: Description Number of Claims ------------------------------ ---------------- Patented mining claims 8 Unpatented mining claims 16 Leased patented mining claims 8 Included in the cost of mining property is a nominal amount allocated for mineralized material which is a mineralized underground area that has been intersected by sufficient closely-spaced drill holes and/or underground sampling to support sufficient tonnage and average grade of metals in order to warrant further exploration and/or development work. This deposit does not qualify as a commercially mineable ore body (reserves) until a final and comprehensive economic, technical and legal feasibility study based upon the test results is completed. NOTE 6 - ACCOUNTS PAYABLE - RELATED PARTY The president of MPM Technologies, Inc. is also the president of another company which provided various administration and office expenses for MPM Technologies. As of December 31, 1997, MPM Technologies owed $55,116 to this related party company, and it has been agreed that MPM Technologies will satisfy this obligation through the issuance of 137,789 shares of common stock. NOTE 7 - ADVANCE FROM OFFICER An officer of the Company loaned $200,000 to the Company on a non-interest bearing, unsecured, due-upon-demand basis. MPM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 8 - NOTES PAYABLE Related Parties Description 1997 1996 --------------------------------- -------------- ------------- Alfred Luciano (Director of the Company), unsecured, interest at 11%, due on demand $ 6,827 $ 6,827 Rudolph Bottiglione (Partner in NuPower), unsecured, interest at 11%, due on demand 25,000 25,000 Richard Appleby (Director of the Company), unsecured, interest at 11%, due on demand 129,682 129,682 Michael Luciano (Partner in NuPower), unsecured, interest at 11%, due on demand 35,000 35,000 Myron Katz (Director of the Company), unsecured, interest at 11%, due on demand 52,139 52,139 Daniel D. Smozanek (Director of the Company), unsecured, interest at 11%, due on demand 66,117 66,117 ---------- ---------- Notes Payable - Related Parties $ 314,765 $ 314,765 ========== ========== The related party creditors voluntarily agreed to terminate their current and future right to accrued interest as of December 31, 1995, and on August 13, 1987, the related party creditors also agreed to subordinate their loans to claims of outside creditors. Other Notes Payable Description 1997 1996 ------------------------------ ------------ ------------ Note payable to First Morris Bank of New Jersey, with interest at prime plus 1%, payable on demand $ 231,300 $ 328,800 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 8 - NOTES PAYABLE (Continued) Note payable to Chesterton Trading, Ltd. of London, England, with interest at 5%, payable on April 1, 1999; convertible into common stock of the Company 5,461 88,406 Note payable to First National Bank of Libby, Montana, with interest at prime plus 1%, payable on demand 45,607 76,596 Note payable to Sage Capital Investment, Limited, of Nassau, Bahamas, interest unstated, payable on September 17, 1997; convertible into common stock of the Company -0- 76,432 ----------- ----------- Notes Payable - Others $ 282,368 $ 570,234 =========== =========== NOTE 9 - LONG-TERM DEBT In conjunction with the Company's asset purchase agreement with United States Filter Corporation (see Note 1), the Company assumed a long-term debt of $1,200,000, which is payable at the rate of $75,000 per year (without interest) and due on September 22nd of each year for the next fifteen years. Since an interest rate was not stated, an inputed interest rate of 9% was utilized. The $75,000 payment due on September 22, 1997 has not been made. As of December 31, 1997, the current portion (including past due amount) of this long-term debt was $164,399, and the long-term portion was $530,060. Following is a schedule of the principle payments due over the next five years: Year Amount ---- ----------- 1998 $ 20,590 1999 22,443 2000 24,463 2001 26,665 2002 29,065 ------------ $ 123,226 ============ MPM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 10 - MINORITY INTEREST IN CONSOLIDATED ENTITY The Company owns a 58.21% interest in NuPower, a general partnership. Since the Company owns the controlling interest in the partnership, and it exerts significant control over operations, the partnership is consolidated for financial statement purposes. The minority partners in this partnership are liable for the accumulated deficit balances in their respective partnership equity accounts pursuant to the general partnership rules, as well as specific agreements. Under these guidelines, the Company has recorded in its financial statements the accumulated deficit in the "Minority Interest in Consolidated Entity" line item. NOTE 11 - COMMITMENTS Mining Leases The Company entered into certain mining lease agreements. Following is a schedule of future minimum lease payments required under lease agreements that have initial or remaining noncancelable lease terms in excess of one year for the five years ending after December 31, 1997: Year Amount ---- ---------- 1998 $ 4,800 1999 4,800 2000 4,800 2001 4,800 2002 4,800 ---------- $ 24,000 ========== Skygas Technology The Company, through NuPower, entered into an exclusive license rights agreement with Skygas Inventor, A.C. Lewis, whereby the Company agreed to pay Lewis the sum of $72,000 annually through April 1, 2007. Following is a schedule of payments for the five years ending after December 31, 1997: Year Amount ---- ------------ 1998 $ 72,000 1999 72,000 2000 72,000 2001 72,000 2002 72,000 ----------- $ 360,000 =========== The Company also must pay the U.S. Bureau of Land Management $100 per year for each of the sixteen unpatented mining claims that it maintains. MPM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 12 - RELATED PARTY TRANSACTIONS The Company contracts for its shareholder relations services with an officer of the Company. Fees paid to this related party for services in 1995, 1996 and 1997 were $41,350; $45,600 and $45,600, respectively. The Company owes a related party $55,116 for reimbursable expenses (see Note 6). An officer advanced the Company $200,000 in 1997 (see Note 7). Various directors of the Company have outstanding notes payable from the Company totaling $314,765 as of December 31, 1997 (see Note 8). NOTE 13 - STOCK OPTION PLAN On May 22, 1990, the shareholders of the Company voted to approve a stock option plan for selected key employees, officers and directors of the Company. The plan is administered by a Compensation Committee of the Board of Directors (the "Committee") consisting of those directors of the Company and individuals who are elected annually by the Board of Directors to the Committee. The Board of Directors has chosen one of the Company's directors and one outside individual to service on the Committee. No director eligible to receive options under the plan may vote upon the granting of an option or Stock Appreciation Rights (SAR) to himself or herself or upon any decision of the Board of Directors or the Committee relating to the plan. Generally, the plan provides that the terms under which options may be granted are to be determined by a Committee subject to certain requirements as follows: (1) the exercise price will not be less than 100% of the market price per share of the common stock of the Company at the time an Incentive Stock Option is granted, or as established by the Committee for Non-qualified Stock Options or Stock Appreciation Rights; and (2) the option purchase price will be paid in full on the date of purchase. The plan provides that options may be transferred only by will or by laws of descent and distribution and may be exercised during the optionee's lifetime only by the optionee or by the optionee's guardian or legal representative. Under the plan, a maximum of 2,130,000 shares were approved to be granted, and in 1997 the shareholders of the Company increased the available shares by 500,000 to 2,630,000. As of December 31, 1997, of the 2,630,000 stock options available in the plan, 1,421,000 options remained available for granting. Of the 1,209,000 stock options granted, 300,000 options had been exercised as of December 31, 1997. Therefore, there are currently 909,000 shares under option that are available to be exercised at $.10 per share. The 909,000 shares under option will expire in 2002. MPM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 14 - SEGMENT FINANCIAL DATA The Company's operations are classified into three principal industry segments: environmental and waste-to-energy; mining; and corporate and other. Following is a summary of segment information for 1997, 1996 and 1995: Year Ended December 31, 1997 Air Waste- Pollution Corporate Mining to-Energy Control and other Total ---------- ---------- ---------- ---------- ---------- Net sales $ -0- $ -0- $6,076,936 $ -0- $6,076,936 Depreciation and amortization 26,548 1,003 21,091 644 49,286 Operating income (loss) (48,389) (83,414) 82,677 (169,011) (218,137) Net income (loss) (48,389) (83,414) 76,751 (187,662) (242,714) Year Ended December 31, 1996 Environmental and Waste- Corporate Mining to-Energy and other Total ---------- ------------ ----------- ---------- Net sales $ -0- $ -0- $ -0- $ -0- Depreciation and amortization 90,050 (748) 89,302 Operating (loss) (110,107) (75,862) (188,599) (374,568) Net (loss) (110,107) (75,863) (208,736) (394,606) Year Ended December 31, 1995 Environmental and Waste- Corporate Mining to-Energy and other Total -------- -------------- ---------- ----------- Net sales $ -0- $ -0- $ -0- $ -0- Depreciation and amortization 10,668 4,731 15,399 Operating (loss) (65,191) (68,826) (97,911) (231,928) Net (loss) (63,304) (68,826) (138,922) (271,052) MPM TECHNOLOGIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 15 - CONCENTRATION OF CREDIT RISK The Company maintains deposits in excess of federally insured limits. Statement of Financial Accounting Standards No. 105 identifies these items as a concentration of credit risk requiring disclosure, regardless of the degree of risk. The risk is managed by maintaining all deposits in high quality financial institutions. NOTE 16 - INCOME TAXES As of December 31, 1997 and 1996, the Company had deferred tax assets of approximately $1,283,842 and $1,201,319, principally arising from net operating loss carryforwards for income tax purposes. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax asset, a valuation allowance equal to the deferred tax asset has been established at both December 31, 1997 and 1996. As of December 31, 1997, the Company has net operating loss carryforwards totaling approximately $3,930,858, which will commence to expire in 2001. Item 9. Changes in and disagreements with accountants on Accounting and Financial Disclosure There were no disagreements on accounting and financial disclosures during 1995, nor has there been a change in accountants. PART III Item 10. Directors and Executive Officers of the Registrant a) Identification of Directors FIRST ELECTED NAME AGE POSITION DIRECTOR - ---------------------- ------- ----------------------------- --------------- Charles A. Romberg 49 President/Director 4/25/1985 Richard E. Appleby 58 Vice President/Director 4/25/1985 Myron Katz 67 Vice President/Director 4/25/1985 Daniel D. Smozanek 72 Treasurer/Director 4/25/1985 L. Craig Cary Smith 48 Director 4/25/1985 Alfred J. Luciano 67 Director 6/19/1992 The directors will serve until the next meeting of shareholders or until their successors are elected and qualified. b) Identification of Executive Officers. NAME AGE POSITION OFFICER SINCE - -------------------- ------ ---------------------------- ---------------- Charles A. Romberg 49 President/Director 4/25/1985 Richard E. Appleby 58 Vice President/Director 4/25/1985 Myron Katz 67 Vice President/Director 4/25/1985 Daniel D. Smozanek 72 Treasurer/Director 4/25/1985 Robert D. Little 48 Secretary 1/03/1991 The officers will serve until the next meeting of shareholders or until their successors are elected and qualified. c) Identification of Certain Significant Employees. As of December 31, 1997, was dependent upon the services of its principal officers and directors. In the event that one of these persons should leave the Company, there is no assurance that the Company can employ a suitable replacement. d) Family Relations There are no family relationships, whether by blood, marriage, or adoption, between any executives and directors. e) Business Experience Background Alfred J. Luciano, is Chairman of the Board of the Company. Mr. Luciano was Founder and President of Farm Harvesting Company from 1950 to 1978. From 1960 to 1979, he was Founder and President of A-L Services maintaining corporate sites. He is past President of the Associated Independent Contractors of the State of New Jersey and Co-Founder and Director of First Morris Bank in Morristown, New Jersey. From 1973 to the present, Mr. Luciano has been engaged in ranching, contracting and sub-dividing property in Lincoln County, Montana. From 1978 to 1980, he was engaged in developing a copper and silver deposit in Hungry Horse, Montana. From 1981 to 1986, he was engaged in developing the Emory Mine property in Powell County, Montana. From 1985 to until his resignation in 1990 Mr. Luciano was President and director of Montana Precision Mining, Ltd. From 1990 to the present he has been involved in the research, development and commercialization of the Skygas Process. Mr. Luciano resides in Eureka, Montana. Charles A. Romberg, is President and Director of the Company. Mr. Romberg is a graduate of Linfield College where he received a Bachelor of Science Degree in Economics and Business Administration. He was elected President of MPM Technologies Inc. in 1990. Mr. Romberg has been the President of Andre-Romberg Insurance Brokerage since 1980. Over the past 20 years, Mr. Romberg has worked with numerous clients restructuring existing businesses and organizing and launching new ventures. Mr. Romberg resides in Spokane, Washington. Richard E. Appleby, is Vice President and Director of the Company. He attended post graduate courses at Rutger in Landscape Design, Landscape Maintenance, Landscape Construction and Pesticide Application. From 1957 to 1973, Mr. Appleby was Superintendent and Manager of A-L Services and for Farm Harvesting Co., constructing all types of site development and landscape construction projects. From 1973 to 1980, he was Vice President of A-L Services and since 1980, has been President of that company. Mr. Appleby resides in Mendham, New Jersey. Myron Katz, is Vice President and Director of the Company. He received his Bachelor of Science Degree in Merchandising from Fairleigh Dickinson University in 1952 and graduated from Lewis Hotel School in 1953. Mr. Katz has over 30 years diversified administrative and managerial experience. He is the past President of Central Credit Clearing Bureau in Newark and East Orange, New Jersey. Mr. Katz is currently a private consultant facilitating various business ventures. Mr. Katz resides in Lake Hopatcong, New Jersey. Daniel D. Smozanek, is Treasurer and Director of the Company. From 1947 to 1972, Mr. Smozanek was owner and President of Spring House Tree Service in Summit, New Jersey. He has been involved in extensive real estate and land development in New Jersey, Montana and Florida. From 1972 to 1980, he was a partner in land development and real estate sales in the Eureka, Montana area. During this time, he was also a partner in the exploration of 29 silver and copper mining claims in the Flathead National Forest. Mr. Smozanek resides in Port St. Lucie, Florida. Robert D. Little, is Secretary of the Company. He is a graduate of Central Washington University with a Bachelor of Arts Degree in Sociology; graduate studies at the University of Washington in Education and he completed Teacher Certification at Seattle University. From 1975 to 1985, he was the founder and Director of Education of the Meridian School in Seattle, Washington. From 1985 to the present, Mr. Little as been Operations Manager for the Company and became Secretary of the Company in 1991. Mr. Little has been the owner of R.D. Little Company which specializes in assisting small public companies with shareholder and investor relations from 1985 to the present. Mr. Little resides in Spokane, Washington. L. Craig Cary Smith, is a Director of the Company. Mr. Smith graduated from Gonzaga Law School in 1981 and was admitted to the Washington State Bar that same year. From 1981 to the present, Mr. Smith has been a partner in general practice at Smith and Hemingway in Spokane, Washington. Mr. Smith resides in Spokane, Washington. (2) Directorships None of the directors of the Company are directors of other companies with securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such act or any company registered under the Investment Company Act of 1940. f) Involvement in Certain Legal Proceedings. Not Applicable g) Promoter and Control Persons. Not Applicable The Remainder This Page Left Intentionally Blank Item 11. Executive Compensation The following table shows the remuneration of officers and directors in excess of $100,000 in 1997,1996 and 1995.
SUMMARY COMPENSATION TABLE Long Term Compensation Annual Compensation Awards Payouts Name and Principal Other Stock Options LTIP All Other Position Year Salary Bonus(s)Compensation Awards(s)($) SARs($) Payout(s)($) Compensation($) - --------- --------- --------- -------- ----------- ------------ -------- ------------ ---------------- NONE
Option Grants In 1997 Fiscal Year Individual Grants % of Total Options/SARs Options/ Granted to Employees Exercise or Market Price on Expiration Name SARs Granted in Fiscal Year 1997 Base Price ($/Sh)Date of Grant Date - ------- ------------- ---------------------- ------------ -------------------- ------------- NONE
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values Unexercised in-the-Money Options/SARs at FYE ($) Number of UnExercise Options/SARs Shares Acquired # of Unexercised Options/SARs Exercisable/ Name on Exercise Value Realized FYE 1997 Exercisable/Unexercisable Unexercisable - ------------------- ---------------- --------------- ----------------------------------- -------------- Charles A. Romberg 313,000 Exercisable $ 205,406 President/Director Robert D. Little 243,000 Exercisable $ 159,469 Secretary Exercisable L. Craig Cary Smith 353,000 Exercisable $ 231,656 Director Exercisable
a) Current Remuneration. None of the officers or directors is compensated for their services as an officer or director. Each is reimbursed for out-of-pocket expenses incurred on Company business. b) Proposed Remuneration. It is not contemplated that any salaries will be paid unless, and until such time as, the Company may require full time commitments from any officer or director. c) Incentive and Compensation Plans and Arrangements. MPM Technologies Inc. has no retirement, profit sharing, pension, or insurance plans covering its officers and directors. No advances have been made, nor are any contemplated, by the Company to any of its officers or directors. The shareholders of the Company, at the Annual Shareholders Meeting on May 22, 1989, voted to approve a stock option plan for selected employees, officers and directors of the Company. The purpose of the option plan is to promote the interests of the Company and its stockholders by attracting, retaining and stimulating the performance of selected employees, officers and directors and giving such employees the opportunity to acquire a proprietary interest in the Company's business and an increased personal interest in this continued success and progress. At the Annual Meeting of Shareholders held on September 15, 1997, the shareholders approved an amendment to the stock option plan therefore increasing the number of shares in the plan by 500,000. Item 12. Security Ownership of Certain Beneficial Owners and Management a) Security Ownership of Certain Beneficial Owners. In addition as set forth in Part b. of this Item, Security Ownership of Management, United States Filter Corporation owns 1,320,000 or 8.0% of the Company's outstanding shares. Unitel Technologies, Inc. owns 1,200,000 or 7.28% of the Company's outstanding common stock. No other person or group was known by the Registrant to own more than five percent of the Company's common stock at December 31, 1997. b) Security Ownership of Management as of April 1, 1997. The following table sets forth, as of February 15, 1996 the amount and percentage of the Common Stock of the Company, which according to the information supplied to the Company, is beneficially owned by management, including officers and directors of the Company. Except as otherwise specified, the persons named in the table have sole voting power and investment power with respect to all shares of Common Stock beneficially owned by them. Title of Name of Amount and Nature of Percent Class Beneficial Owner Beneficial Ownership of Class -------- ----------------------- --------------------- ---------- Common Charles A. Romberg 62,000 [1] 0.38 Common Richard E. Appleby 1,333,820 8.09 Common Myron Katz 756,856 4.59 Common Robert D. Little 48,000 [1] 0.29 Common Daniel D. Smozanek 1,020,597 6.19 Common L. Craig Cary Smith 14,000 [1] 0.08 Common Alfred J. Luciano 182,808 [2] 1.10 Common As A Group 3,418,081 20.74 [1] Does not include options for the purchase of shares of the Company's common stock. Options available for exercise as of December 31, 1996 for Charles A. Romberg, L. Craig Cary Smith and Robert D. Little are 313,000; 353,000; and 243,000, respectively. [2] Does not include 837,500 shares (5.08%) of the Company's outstanding common stock owned by a Trust for which Mr. Luciano is the Executor. c.) Changes in Control. There are no contractual arrangements of any kind, known to the Company, which may at a subsequent date result in a change in control of the Company. Item 13. Certain Relationships and Related Transactions a.) Transactions with Management and Others. No Officers or Directors of the Company, or nominees for election as Director, or beneficial owners of more than five percent of the Company's voting stock, or members of their immediate families had any material transactions with the Company other than as set forth in part b. of this item. b.) Certain Business Relationships. The Company entered into several transactions with MADD Exploration, a Montana partnership. Certain officers and directors of the Company, were the partners in MADD Exploration namely Richard Appleby, Vice President and Director; Myron Katz, Vice President and Director; Daniel Smozanek, Treasurer and Director and Alfred J. Luciano, Director. On April 25, 1985, the shareholders of the Company approved the acquisition of 50% of the interest owned by the partners of MADD Exploration in certain mining claims and leases located in the Emory Mining District of Powell County, Montana, by the issuance of 4,616,252 shares of the Company's previously unissued common stock. At that time, the Company also granted the partners an option to transfer an additional 42% of their interest in those claims and leases to the Company in exchange for 2,800,000 additional shares of the Company's previously unissued common stock. On January 20, 1986, the partners exercised their option. The properties and their basis are as follows: Patented Mining Claims The Company acquired 92% of the mineral interests in five (5) patented claims, referred to as the Emory Group, owned by the partners of MADD Exploration. The Company's interest is recorded at cost to the partners of MADD Exploration. Mining Leases The Company acquired interests ranging from 48% to 92% of the total mineral interest in seventeen (17) leases from MADD Exploration; these leases were recorded at a nominal value of $10 per lease. Additionally, the Company has had to rely on the resources and abilities of the four principal shareholders, who are also Officers and Directors of the Company, to make loans to the Company. These loans have enabled the Company to continue its location and staking of claims as well as geological work on a limited basis. These individuals are: Richard Appleby, Vice President/Director; Myron Katz, Vice President/Director; Daniel Smozanek, Treasurer/Director; and Alfred Luciano, Director. Between 1991 and 1996 the aforementioned Officers and Directors provided approximately $1.9 million in contributed capital to the Company to fund operations. The Company has a contract with R.D. Little Co. to provide shareholder and investor relations services. R.D. Little Co. is owned by Robert D. Little, Secretary of the Company. During the period from January 1, 1997 through December 31, 1997, total costs for services was $45,600. It is the opinion of management of the Company that the amount and terms for leases and services from affiliates are comparable to those which might be obtained from unaffiliated parties. Effective April 1, 1997, the Company acquired certain of the assets and assumed certain of the liabilities of part of a division of United States Filter Corporation in exchange for 1,320,000 shares of the Company's common stock. In connection with the acquisition, the Company formed a wholly-owned subsidiary Huntington Environmental Systems, Inc., which assumed the assets and liabilities acquired. In December of 1996, the Company announced it had purchased Unitel Technologies, Inc.'s 15% interest in the Skygas venture for 1,200,000 shares of common stock. The shares have not been registered under the Securities Act of 1933 and are _restricted securities_ as that term is defined in Rule 144 under the Act. The shares may not be offered for sale, sold, traded or transferred except pursuant to an effective registration statement under the Act, or pursuant to an exemption from registration under the Act, the availability of which is to be established to the satisfaction of the Company. c) Other Information None PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K Exhibits, Financial Statement Schedules and Reports on form 8-K have been previously reported or are being shown as an exhibit in this form 10-KSB. Exhibit 23 - Consent of Terrence J. Dunne, CPA Exhibit 27 - Financial Data Schedule SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities 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. By: /s/ Charles A. Romberg ----------------------- Title: President --------------------- Date: April 13, 1998 --------------------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. /s/ Alfred J. Luciano /s/ Myron Katz - ---------------------- ---------------------------- Alfred J. Luciano Myron Katz Chairman of the Board Vice President & Director Dated: April 13 1998 Dated: April 13, 1998 --------------- --------------------- /s/ Charles A. Romberg /s/ Daniel D. Smozanek - ---------------------- ---------------------------- Charles A. Romberg Daniel D. Smozanek President & Director Treasurer & Director Dated: April 13, 1998 Dated: April 13, 1998 --------------- --------------------- /s/ Richard E. Appleby /s/ L. Craig Cary Smith - ---------------------- ---------------------------- Richard E. Appleby L. Craig Cary Smith Vice President & Director Dated: April 13, 1998 Dated: April 13, 1998 --------------------- --------------------- EX-23 2 CONSENT OF CERTIFIED PUBLIC ACCOUNTANT Board of Directors MPM Technologies, Inc. I consent to the use of my name in regard to the audited financial statements which are included in the 10-KSB Report for MPM Technologies, Inc. for the year ended December 31, 1997. /s/Terrence J. Dunne Terrence J. Dunne Certified Public Accountant EX-27 3
5 YEAR DEC-31-1997 DEC-31-1997 2010596 0 624378 50000 718434 28814 799723 470450 6885952 2636883 0 0 0 16481 4456276 6885952 6076936 6076936 4939162 1055097 300814 0 96068 (277573) 0 (242714) 0 0 0 (242714) (.02) (.02)
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