10QSB 1 a4458695.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 June 30, 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 August 19, 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. 1 PART I - FINANCIAL INFORMATION Item 1. Financial Statements
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 2003 (UNAUDITED) ------------- Current assets: Cash and cash equivalents 4,191 Accounts receivable, net of allowance for doubtful accounts of $1,486,000 1,758,485 Inventories 37,859 Costs and estimated earnings in excess of billings 569,739 Other current assets 113,216 ------------------ Total current assets 2,483,490 ------------------ Property, plant and equipment, net 1,354,124 Mineral properties held for sale 1,070,368 Note receivable 273,000 Purchased intangible, net of accumulated amortization of $360,000 and $337,500 315,000 Investments - at equity 173,053 Other assets, net 62,844 ------------------ Total Assets 5,731,879 ================== Current liabilities: Accounts payable 3,901,170 Accrued expenses 684,543 Billings in excess of costs and estimated earnings 174,937 Notes payable 150,000 Related party debt 2,033,704 Current portion of long-term debt 464,201 ------------------ Total current liabilities 7,408,555 ------------------ Long-term debt, less current portion 2,769,791 ------------------ Total liabilities 10,178,346 ------------------ Stockholders' 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 -15,715,637 ------------------ Total stockholders' (deficit) equity -4,446,467 ------------------ Total stockholders' deficit and liabilities 5,731,879 ==================
2
PART I - FINANCIAL INFORMATION MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Quarter Ended Six Months Ended June 30, June 30, ----------------------------------- ----------------------------------- 2003 2002 2003 2002 -------------- -------------- -------------- -------------- Revenues $2,239,722 $1,987,107 $2,907,803 $3,557,001 Cost of sales 1,245,066 1,153,208 2,034,413 2,327,401 -------------- -------------- -------------- -------------- Gross margin 994,656 833,899 873,390 1,229,600 Selling, general and administrative expenses 1,169,511 1,106,228 1,826,826 1,899,634 -------------- -------------- -------------- -------------- (Loss) income from operations (173,732) (272,329) (953,436) (670,034) -------------- -------------- -------------- -------------- Other income (expense): Interest expense (90,976) (24,331) (227,224) (55,771) Other income, net 0 288,675 3,580 269,399 -------------- -------------- -------------- -------------- Net other income (expense) 178,603 (24,331) 61,451 (52,191) -------------- -------------- -------------- -------------- Net (loss) income $3,747 ($296,660) ($891,986) ($722,225) ============== ============== ============== ============== Basic earnings per share: Net (loss) income $0.00 ($0.10) ($0.30) ($0.24) ============== ============== ============== ============== Diluted earnings per share: Net (loss) income $0.00 ($0.07) ($0.30) ($0.17) ============== ============== ============== ============== Weighted average shares of common stock outstanding - basic 3,021,917 3,021,917 3,021,917 3,003,555 ============== ============== ============== ============== Weighted average shares of common stock outstanding - diluted 3,021,917 4,186,105 3,021,917 4,163,104 ============== ============== ============== ==============
During 2003, the Company adopted the provisions of SFAS 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." This statement rescinds SFAS 4, "Reporting Gains and Losses from Extinguishment of Debt" wherein the FASB determined that gains and losses from debt extinguishments were to be recorded as extraordinary items. Accordingly, other income for the six months ended June 30, 2003 includes $269,399 of gain related to settlement of old accounts payable. 3
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, ---------------------------------------- 2003 2002 ---------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) ($891,986) ($722,225) Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 92,941 116,446 Interest imputed on related party debt 0 2,219 Change in assets and liabilities: Accounts receivable (358,532) 205,711 Costs and estimated earnings in excess of billings (78,848) 732,118 Inventories (8,255) Other assets (7,154) 56,774 Accounts payable and accrued expenses (991,956) (646,486) Billings in excess of costs and estimated earnings 114,674 (364,410) ---------------- ----------------- Net cash used in operating activities (2,129,116) (619,853) ---------------- ----------------- Cash flows from investing activities: Acquisition of property, plant and equipment 0 (55,999) ---------------- ----------------- Net cash used in investing activities 0 (55,999) ---------------- ----------------- Cash flows from financing activities: Proceeds from stock issues 0 9,000 Proceeds from related party debt 0 316,165 Proceeds from notes payable 2,377,668 Repayment of related party debt (257,253) ---------------- ----------------- Net cash provided by (used in) financing activities 2,120,415 325,165 ---------------- ----------------- Net decrease in cash and cash equivalents (8,701) (350,687) Cash and cash equivalents, beginning of period 12,892 601,131 ---------------- ----------------- Cash and cash equivalents, end of period $4,191 $250,444 ================ ================= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $99,610 $39,000 Income taxes $ - $ - Liabilities assumed in connection with fixed asset acquisitions 0 $285,162
4 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS 1. Unaudited Financial Statements These financial statements should be read in conjunction with the audited financial statements included in the Annual Report on Form 10-KSB for the year ended December 31, 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 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 financial statements reflect all adjustments necessary for a fair presentation of the financial position and results of operations and cash flows of the Company. Such adjustments consisted only of those of a normal recurring nature. Results of operations for the period ended June 30, 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". The following table reconciles the number of common shares used in the basic and diluted EPS calculations:
For the Six Months Ended June 30, 2003 -------------------------------------- Weighted- Net Average Per-Share Income Shares Amount -------- -------- --------- Basic EPS (Loss) available to common stockholders $(891,786) 3,021,917 $(0.30) Effect of Dilutive Securities Common stock options - - - --------- --------- --------- Diluted EPS Loss available to common stockholders - assumed conversions $(891,786) 3,021,917 $ (0.30) ========== ========= =======
5
For the Three Months Ended June 30, 2003 ---------------------------------------- Weighted- Net Average Per-Share Income Shares Amount -------- -------- --------- Basic EPS Income available to common stockholders $ 3,747 3,021,917 $0.00 Effect of Dilutive Securities Common stock options - - --------- --------- --------- Diluted EPS Income available to common stockholders - assumed conversions $ 3,747 3,021,917 $0.00 ========== ========= ===== For the Six Months Ended June 30, 2002 -------------------------------------- Weighted- Net Average Per-Share Income Shares Amount -------- -------- --------- Basic EPS Income available to common stockholders ($722,225) 3,003,555 ($0.24) Effect of Dilutive Securities Common stock options - 1,159,549 --------- --------- Diluted EPS Loss available to common stockholders - assumed conversions ($722,225) 4,163,104 ($0.17) =========== ========= ========= For the Three Months Ended June 30, 2002 ---------------------------------------- Weighted- Net Average Per-Share Income Shares Amount -------- -------- --------- Basic EPS Income available to common stockholders ($296,660) 3,021,917 ($0.10) Effect of Dilutive Securities Common stock options - 1,164,188 - --------- --------- --------- Diluted EPS Income available to common stockholders - assumed conversions ($296,660) 4,186,105 ($0.07) =========== ========= =========
6 3. Segment Information The Company's consolidated financial statements include certain reportable segment information. These segments include Huntington Environmental Systems, Inc., a wholly owned subsidiary engaged in designing, engineering, supplying and servicing air pollution control systems which primarily utilize heat and chemicals to control air pollution, and AirPol, Inc., a wholly owned subsidiary engaged in designing, engineering, supplying and servicing air pollution control systems which utilize wet and dry scrubbers, wet electrostatic precipitators and venturi absorbers to control air pollution. The Company evaluates the performance of these segments based upon multiple variables including revenues and profit or loss. The segments' profit and loss components and schedule of assets as of June 30, 2003 are as follows:
Air Air Pollution Pollution Control Control All (Heat) (Scrubbers) Others Total ------------ ------------ ----------- -------- Revenue external............. $ 466,021 $ 2,441,782 $ - $ 2,907,803 Revenue internal.............. - - - - Segment profit (loss)......... (352,146) 368,170 (908,010) (891,986) Segment assets................ 1,433,312 2,503,360 1,795,207 5,731,879
Reconciliation of segment revenues, net income, total assets and other significant items for the six and three months ended June 30, 2003 are as follows:
Six Months Three Months Ended Ended June 30, 2003 June 30, 2003 ------------ ----------- Revenues -------- Total revenues for reportable segments......... $ 2,907,803 $ 2,239,772 Other revenues - - ------------ ----------- Total consolidated revenues....................... $ 2,907,803 $ 2,239,772 ============ ============ Profit or loss Total profit or (loss) for reportable segment..... $ (891,986) $ 3,747 Other profit or (loss)............................ 0 0 ------------ ----------- Total consolidated profit or loss................. $ (891,986) $ 103,747 ============ ===========
At June 30, 2003 ---------------- Assets Total assets for reportable segments................. $ 3,936,672 Other assets......................................... 1,795,207 Total consolidated assets............................ $ 5,731,879 7 The segments' profit and loss components and schedule of assets as of June 30, 2002 are as follows:
Air Air Pollution Pollution Control Control All (Heat) (Scrubbers) Others Total ------------ ------------ ----------- -------- Revenue external............. $ 548,794 $ 3,008,207 $ - $3,557,001 Revenue internal............. - - - - Segment profit (loss)........ (214,554) (200,863) (306,808) (722,225)
Reconciliation of segment revenues, net income, total assets and other significant items for the six and three months ended June 30, 2002 are as follows:
Six Months Three Months Ended Ended June 30, 2002 June 30, 2002 ------------- ------------- Revenues Total revenues for reportable segments............ $ 3,557,001 $ 1,987,107 Other revenues - - ----------- ------------ Total consolidated revenues....................... $ 3,557,001 $ 1,987,107 =========== ============ Profit or loss Total profit or loss for reportable segments...... $ (415,417) $ (292,408) Other profit or loss.............................. (306,808) ( 4,252) ----------- ------------ Total consolidated profit or loss................. $ (722,225) $ (296,660) =========== ============
4. Subsequent Events Not Applicable 8 PART I Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations This Quarterly Report on Form 10-QSB, including the information incorporated by reference herein, includes "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All of the statements contained in this Quarterly Report on Form 10-QSB, other than statements of historical fact, should be considered forward looking statements, including, but not limited to, those concerning the Company's strategies, objectives and plans for expansion of its operations, products and services and growth in demand for the Company's services. There can be no assurance that these expectations will prove to have been correct. Certain important factors that could cause actual results to differ materially from the Company's expectations (the Cautionary Statements") are disclosed in the annual report filed on Form 10-KSB. All subsequent written and oral forward looking statements by or attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by such Cautionary Statements. Investors are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof and are not intended to give any assurance as to future results. The Company undertakes no obligation to publicly release any revisions to these forward looking statements to reflect events or reflect the occurrence of unanticipated events. MPM Technologies, Inc. ("MPM") acquired certain of the assets and assumed certain of the liabilities of a part of a division of FLS Miljo, Inc. as of July 1, 1998. MPM formed AirPol, Inc. ("AirPol") to run this air pollution control business. AirPol designs, engineers, supplies and services air pollution control systems for Fortune 500 and other industrial and environmental companies. The technologies of AirPol utilize wet and dry scrubbers, wet electrostatic precipitators and venturi absorbers to control air pollution. AirPol brought over 30 years experience to MPM through its technologies and employees. As of April 1, 1997, MPM acquired certain of the assets and assumed certain of the liabilities of a portion of a division of United States Filter Corporation, and formed Huntington Environmental Systems, Inc. ("HES") to operate this air pollution control business. HES designs, engineers, supplies and services high temperature and chemical air pollution control systems for Fortune 500 and other industrial and environmental companies. HES brought has over 25 years of experience and over 300 installations across the globe to MPM through its technologies and employees. Both HES's and AirPol's engineering staffs are uniquely prepared to address the full scope of customers' process problems. Their policies of handling clients' individual concerns include in-depth analysis and evaluation, followed by complete engineering and design services leading to application-specific engineered solutions. 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. 9 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 six and three months ended June 30, 2003 and 2002 include the operations of HES, AirPol, Skygas and MPM. MPM's consolidated net loss for the six months ended June 30, 2003 was $891,986 or $0.30 per share compared to net loss of $722,225, or $0.24 per share for the six months ended June 30, 2002. MPM is in negotiations on the sale of a Skygas unit in the Pacific Northwest. This unit is expected to be the first sale in North America. MPM continues to negotiate with other interested entities with the goal of selling other Skygas units. These negotiations are also ongoing, and include entities in the United States, Europe and Asia. Six and three months ended 6/30/03 compared to six and three months ended 6/30/02 For the six months ended 6/30/03, MPM had a net loss of $891,986, or $0.30 per share compared to a net loss of $722,225, or $0.24 per share for the six months ended 6/30/02. Revenues decreased 18.2% to $2,907,803 for the six months ended 6/30/03 compared to $3,557,001 for the six months ended 6/30/02. Revenues decreased at AirPol by approximately $566,425, or 18.8%. Revenues at HES were down approximately $82,774, or 15.1%. Revenue decreases were due to the aftermath of the September 11 disasters, restructuring and down sizing at HES, and dramatically slower sales activity. Costs of sales decreased 12.6% to $2,034,413 for the six months ended 6/30/03 compared to $2,327,401for the six months ended 6/30/02. This was comparable to the decrease in revenues. Operating expenses decreased 3.8% to $1,826,826 for the six months ended 6/30/03 compared to $1,899,634 for the six months ended 6/30/02. Operating expense decreases were due primarily to staff reductions and the related costs. For the three months ended 6/30/03, MPM had a net profit of $3,747, or $0.00 per share compared to net loss of $296,660, or $0.10 per share for the three months ended 6/30/02. Revenues increased 12.7% to $2,239,722 for the three months ended 6/30/03 compared to $1,987,107 for the three months ended 6/30/02. Costs of sales increased 8.0% to $1,245,066 for the three months ended 6/30/03 compared to $1,106,228 for the three months ended 6/30/02 due to the increase in revenues. Operating expenses increased 5.7% to $1,169,511 for the three months ended 6/30/03 compared to $1,106,228 for the three months ended 6/30/02. These increases were due to increased staffing requirements due to the increase in sales, 10 Financial Condition and Liquidity For the six months ended 6/30/03, the Company relied principally on cash from loans from an insurance company to fund the operations of HES and AirPol. Current cash position, cash from continuing operations and the Company's borrowing power are believed to be adequate to fund MPM's and its subsidiaries' operations for the foreseeable future. Working capital at 6/30/03 was negative $4,925,065. Accordingly, MPM is continuing to seek alternative sources of capital such as private placements, stock offerings and other financing alternatives. 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. 11 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS MPM's Annual Meeting of Shareholders was held on June 27, 2003. Following are the results of the shareholders' voting: Proposal 1 - Election of Directors Name For Withhold ---- --- -------- Richard E. Appleby 1,803,526 46,747 Richard Kao 1,803,526 46,747 L. Craig Cary Smith 1,803,526 46,747 Each director was re-elected for a three-year term. Proposal 2 - Approval of Amendment to the 1989 Stock Option Plan For Against Abstain --------- ------- ------- 1,630,869 67,835 151,569 Total shares represented by proxy: 1,850,273 Percentage of the outstanding voting shares: 60.05% Outstanding voting shares: 3,081,074 ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None 12 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MPM Technologies, Inc. August 19, 2003 /s/ Michael J. Luciano --------------- ------------------------- (date) Michael J. Luciano Chairman & CEO 13 CERTIFICATION I, Michael J. Luciano, CHIEF EXECUTIVE OFFICER of MPM TECHNOLOGIES, INC. certify that: 1. I have reviewed this Form 10-QSB of MPM Technologies, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of the date within 45 days prior to the filing date of this report (the Evaluation Date"); and c) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls: and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. 6. The registrant's other certifying officer and I have indicated in this report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 19, 2003 /s Michael J. Luciano ---------------------- --------------------------------- Chief Executive Officer --------------------------------- 14 CERTIFICATION I, Glen Hjort, CHIEF FINANCIAL OFFICER of MPM TECHNOLOGIES, INC. certify that: 1. I have reviewed this Form 10-QSB of MPM Technologies, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of the date within 45 days prior to the filing date of this report (the Evaluation Date"); and c) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls: and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. 6. The registrant's other certifying officer and I have indicated in this report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 19, 2003 /s Glen Hjort ---------------------- ------------------------ Chief Financial Officer ------------------------ 15