10QSB 1 a4399993.txt MPM TECHNOLOGIES 10QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Form 10-QSB Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange act of 1934 For the quarter ended March 31, 2003 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) 199 Pomeroy Road Parsippany, NJ 07054 --------------------------- --------------------- (Address of principal (Zip Code) executive offices) Issuers's telephone number, including area code: 973-428-5009 As of May 15, 2003, the registrant had outstanding 3,081,074 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 MARCH 31, 2003 ----------- (UNAUDITED) Current assets: Cash and cash equivalents $92,168 Accounts receivable, net of allowance for doubtful accounts of $1,608,000 1,097,728 Inventories 37,859 Costs and estimated earnings in excess of billings 429,235 Other current assets 38,999 ------------ Total current assets 1,695,989 ------------ Property, plant and equipment, net 1,350,082 Mineral properties held for investment 1,086,346 Note receivable 273,000 Purchased intangible, net of accumulated amortization of $337,506 320,625 Investments - at equity 173,054 Other assets, net 89,708 ------------ $4,988,804 ============ Current liabilities: Accounts payable $4,005,968 Accrued expenses 315,124 Billings in excess of costs and estimated earnings 358,482 Related party debt 2,199,670 Current portion of long-term debt 450,000 ------------ Total current liabilities 7,329,244 ------------ Notes Payable 1,703,450 Long-term debt, less current portion 406,324 ------------ Total liabilities 9,439,018 ------------ Commitments and contingencies Stockholders' (deficit) equity: Common stock, $.001 par value, 100,000,000 shares authorized, 3,021,917 shares issued and outstanding 3,022 Additional paid-in capital 11,266,148 Accumulated deficit (15,719,384) ------------ Total stockholders' (deficit) equity (4,450,214) ------------ $4,988,804 ============
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended March 31, ------------------------------------- 2003 2002 ------------- ------------ Revenues $668,081 $1,569,894 Cost of sales 789,347 1,174,193 ------------- ------------ Gross margin (121,266) 395,701 Selling, general and administrative expenses 657,315 793,406 ------------- ------------ (Loss) from operations (778,581) (397,705) ------------- ------------ Other income (expense) Interest expense (136,428) (31,440) Miscellaneous 19,276 3,580 ------------- ------------ Net other expense (117,152) (27,860) ------------- ------------ Net (loss) $(895,733) $(425,565) ============ =========== Loss per share - basic and diluted net (loss) $(.30) $(.14) ============ =========== Weighted average shares of common stock outstanding basic 3,021,917 3,139,790 ============ =========== Weighted average shares of common stock outstanding diluted 3,021,917 3,139,790 ============ ===========
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, ---------------------------------------- 2003 2002 ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income ($895,733) ($425,565) Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 75,380 52,997 Interest imputed on related party debt - 2,219 Change in assets and liabilities: Accounts receivable 30,225 527,530 Costs and estimated earnings in excess of billings 61,656 177,125 Inventories (8,255) - Other assets 40,199 (19,241) Accounts payable and accrued expenses (1,256,576) (763,567) Billings in excess of costs and estimated earnings 298,217 (221,773) ---------------- ---------------- Net cash used in operating activities (1,382,887) (670,275) ---------------- ---------------- Cash flows from financing activities: Repayment of related party debt (91,287) - Proceeds from notes payable 1,553,450 9,000 Proceeds from related party debt - 271,750 ---------------- ---------------- Net cash provided by financing activities 1,462,163 280,750 ---------------- ---------------- Net increase (decrease) in cash and cash equivalents 79,276 (389,525) Cash and cash equivalents, beginning of period 12,892 601,131 ---------------- ---------------- Cash and cash equivalents, end of period $92,168 $211,606 ================ ================ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 136,428 $ 1,443 Income taxes $ - $ - Common stock exchanged for amounts due to related party - 800,000
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS 1. Unaudited Financial Statements These consolidated 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, 2002. 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 consolidated financial statements specifically refer to the footnotes to the consolidated financial statements of the Company as of December 31, 2002. In the opinion of management, these unaudited interim consolidated financial statements reflect all adjustments and disclosures necessary for a fair statement of the financial position and results of operations and cash flows of the Company for the interim period presented. Such adjustments consisted only of those of a normal recurring nature. Results of operations for the three months ended March 31, 2003 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year 2003. 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". Common stock equivalents for the three months ended March 31, 2003 and for the three months ended March 31, 2002 have not been included in the computation of dilutive loss per share as the effect would be anti-dilutive. 3. Segment Information The Company's consolidated financial statements include certain reportable segment information. These segments include Huntington Environmental Systems, Inc., a wholly owned subsidiary engaged in designing, engineering, supplying and servicing air pollution control systems which primarily utilize heat and chemicals to control air pollution, and AirPol, Inc., a wholly owned subsidiary engaged in designing, engineering, supplying and servicing air pollution control systems which utilize wet and dry scrubbers, wet electrostatic precipitators and venturi absorbers to control air pollution. The Company evaluates the performance of these segments based upon multiple variables including revenues and profit or loss.
The segments' profit and loss components and schedule of assets as of March 31, 2003 are as follows: Air Air Pollution Pollution Control Control All (Heat) (Scrubbers) Others Total ----------- ------------ ------------ ----------- Revenue external............. $ 251,217 $ 416,864 $ - 668,081 Revenue internal............. - - - - Segment profit (loss)........ (124,846) (370,776) (400,111) (895,733) Segment assets............... 1,869,120 1,284,756 1,834,928 4,988,804
Reconciliation of segment revenues, net income, total assets and other significant items for the three months ended March 31, 2003 are as follows: Three Months Ended March 31, 2003 Revenues -------- Total revenues for reportable segments...... $ 668,081 Other revenues - ----------- Total consolidated revenues................. $ 668,801 Profit or loss Total profit or loss for reportable segments. $ (495,622) Other profit or loss......................... (400,111) ----------- Total consolidated profit or loss............ $ (895,733) =========== At March 31, 2003 Assets Total assets for reportable segments................. $ 3,153,876 Other assets......................................... 1,834,928 ------------ Total consolidated assets............................ $ 4,988,804 ============ The segments' profit and loss components and schedule of assets as of March 31, 2002 are as follows:
Air Air Pollution Pollution Control Control All (Heat) (Scrubbers) Others Total ----------- ------------ ----------- ------------ Revenue external.............. $ 85,924 $ 1,483,970 $ - $1,569,894 Revenue internal.............. - - - - Segment profit (loss)......... (96,742) (26,267) (302,556) (425,565) Segment assets................ 1,650,753 4,853,104 2,741,953 9,245,810
Reconciliation of segment revenues, net income, total assets and other significant items for the three months ended March 31, 2002 are as follows: Three Months Ended March 31, 2002 Revenues -------- Total revenues for reportable segments...... $ 1,569,894 Other revenues - ----------- Total consolidated revenues................. $ 1,569,894 Profit or loss Total profit or loss for reportable segments $ (123,009) Other profit or loss........................ (302,556) ----------- Total consolidated profit or loss........... $ (425,565) =========== At March 31, 2002 Assets Total assets for reportable segments........... $ 6,613,857 Other assets................................... 2,741,953 Elimination of intersegment assets............. (2,783,337) ------------ Total consolidated assets...................... $ 6,572,473 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, ability to generate sufficient cash flow or secure additional sources of financing, collectability of project payments, future customer revenue, variability of quarterly operating results, completion of remaining contracts, attraction and retention of employees and key management personnel, political and economic uncertainty and other competitive factors. Additionally, 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. 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. 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. 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 85% of the Skygas Venture. In addition to its ownership in the partnership, MPM separately owns 15% of the Venture. Mining controls 15 claims on approximately 300 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 MPM Mining. In 1998, the Board of Directors decided to dispose of the mining properties. In early 2002, the Board of Directors decided to hold the properties as an investment. HES and AirPol are active continuing concerns. The development of the Skygas process through Nupower Partnership is also an ongoing process. No other operations were conducted. Accordingly, the financial statements for the three months ended March 31, 2003 and 2002 include the operations of HES, AirPol, Skygas and MPM. MPM's consolidated net loss for the three months ended March 31, 2003 was $895,733 or $0.30 per share compared to net loss of $425,565, or $0.14 per share for the three months ended March 31, 2002. MPM continues to negotiate with interested entities with the goal of building Skygas units. These negotiations are also ongoing, and include entities in the United States, Europe and Asia. Management is hopeful there will be some type of formal agreement in place and that construction of a unit can begin in the near future. There can, however, be no assurances that MPM will be successful in its negotiations. MPM faces significant challenges, including, without limitation, the ability to generate or raise sufficient operating capital, and a difficult sales environment. Organizations in the United States are obligated to comply with environmental laws that reduce air pollution emissions. In view of the national economic downturn and, in our opinion, a perception of limited enforcement of environmental laws in general, companies that require or benefit from MPM's environmental technology and knowledge are not procuring or replacing equipment, or are delaying purchasing decisions. Despite this, both companies are experiencing a high level of proposal activity. Between the two companies, there is over $66 million in active job proposals that are currently being pursued. This includes 36 proposals for a total of $37 million at AirPol and 34 proposals for $29 million at HES. This should result in many new jobs at both companies. There can, however, be no assurances that the companies will be successful in securing a sufficient amount of new work. Three months ended March 31, 2003 as compared to three months ended March 31, 2002 ------------------------------------------------------------------------------ For the three months ended 3/31/03, MPM had a net loss of $895,733, or $0.30 per share compared to net loss of $425,565, or $0.14 per share for the three months ended 3/31/02. Revenues decreased 58% to $668,081 for the three months ended 3/31/03 compared to $1,569,894 for the three months ended 3/31/02. Revenues were down 90% at AirPol, and were up 192% at HES. Costs of sales decreased 33% to $789,347 for the three months ended March 31, 2003 as compared to $1,174,193 for the three months ended March 31, 2002. Operating expenses decreased 17.0% to $657,315 for the three months ended March 31, 2003 compared to $793,406 three months ended March 31, 2002. The Company currently has a backlog of approximately $4.7 million. This includes $3.4 million at AirPol and $1.3 million at HES. Financial Condition and Liquidity --------------------------------- For the three months ended March 31, 2003, the Company relied on operating revenues and loans from an insurance company to fund its operations. The insurance company has loaned the company approximately $1.7 million from December 2002 through April, 2003 and is in the process of reviewing a new request for an additional $1.0 million in working capital to fund the company. Working capital deficit at 3/31/03 was $5,633,255 compared to $6,366,352 at 12/31/02. Management expects that MPM will continue to incur losses and additional cash outflows for the balance of 2003 as it pursues its significant backlog. The company is in the process of making arrangements with an insurance company to cover the cash needs of the company through the rest of this fiscal year. There is no assurance that management will be successful in securing this additional capital. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company knows of no litigation present, threatened or contemplated or unsatisfied judgment against the Company, its officers or directors or any proceedings in which the Company, its officers or directors are a party. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS The rights of the holders of the Company's securities have not been modified nor have the rights evidenced by the securities been limited or qualified by the issuance or modification of any other class of securities. ITEM 3. DEFAULTS UPON SENIOR SECURITIES There are no senior securities issued by the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K On March 6, 2003, the Company announced that Anthony L. Lee had retired from the Board of Directors. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MPM Technologies, Inc. May 19, 2003 /s/ Michael J. Luciano ------------ ---------------------- (date) Michael J. Luciano Chairman & CEO CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of MPM Technologies, Inc. (the "Company") on Form 10-QSB for the period ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael J. Luciano, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Michael J. Luciano ------------------------------------ Michael J. Luciano Chairman and Chief Executive Officer May 19, 2003