10QSB 1 a4520415.txt MPM TECHNOLOGIES, INC. 10-QSB 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 September 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 November 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. PART I - FINANCIAL INFORMATION Item 1. Financial Statements Financial Statements follow on the next page.
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2003 ----------- (UNAUDITED) Current assets: Cash and cash equivalents $11,097 Accounts receivable, net of allowance for doubtful accounts of $1,586,326 1,351,001 Inventories 27,359 Costs and estimated earnings in excess of billings 459,027 Other current assets 105,269 ----------------- Total current assets 1,953,753 ----------------- Property, plant and equipment, net 1,171,890 Mineral properties held for investment 1,070,368 Note receivable 273,000 Purchased intangible, net of accumulated amortization of 360,000 315,000 Investments - at equity 173,053 Other assets, net 59,620 ----------------- Total Assets $5,016,684 ================= Current liabilities: Accounts payable $3,771,178 Accrued expenses 632,823 Billings in excess of costs and estimated earnings 163,191 Notes payable 150,000 Related party debt 2,033,704 Current portion of long-term debt 465,000 ----------------- Total current liabilities 7,215,896 ----------------- Long-term debt, less current portion 2,917,193 ----------------- Total liabilities 10,133,089 ----------------- Commitments and contingencies Stockholders' deficit: Common stock, $.001 par value, 100,000,000 shares authorized, 3,081,074 shares issued and outstanding 3,022 Additional paid-in capital 11,266,148 Accumulated deficit -16,385,575 ----------------- Total stockholders' deficit -5,116,405 ----------------- Total Liabilities and Stockholders' Deficit $5,016,684 =================
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Quarter Ended Nine Months Ended --------------------- ------------------------ September 30, September 30, --------------------- ------------------------ 2003 2002 2003 2002 --------------------- ------------------------ Revenues $ 919,232 $2,168,879 $ 3,827,035 $ 5,725,880 Cost of Sales $ 941,868 1,680,891 2,976,281 4,458,292 --------------------- ------------------------ Gross Margin $ (22,636) 487,988 850,754 1,267,588 Seling, general and administrative expenses $ 601,014 1,198,225 2,427,840 2,647,859 --------------------- ------------------------ (loss from operations) (623,650) (710,237) (1,577,086) (1,380,271) Other income (expense) Interest Expense (161,130) (40,192) (388,354) (95,963) Miscellaneous 468,647 - 757,322 3,580 --------------------- ------------------------ Net Other Income (Expense) 307,516 (40,192) 368,967 (92,383) --------------------- ------------------------ Net Loss $(316,134) $ (750,429) $(1,208,119) $(1,472,654) ===================== ======================== Loss per share - basic and diluted --------------------- ------------------------ Net loss $ (0.10) $ (0.25) $ (0.40) $ (0.49) ===================== ======================== Weignted average shares of common stock --------------------- ------------------------ outstanding basic 3,021,917 3,021,917 3,021,917 3,020,745 ===================== ======================== Weighted average shares of commonstock --------------------- ------------------------ outstanding diluted 3,021,917 4,189,105 3,021,917 4,186,105 ===================== ========================
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. According, other income for the nine months ended September 30, 2003 includes $757,321 of gain related to settlement of old accounts payable.
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, ---------------------------------------- 2003 2002 ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income ($1,208,119) ($1,472,654) Adjustments to reconcile net (loss) income to net cash used in operating activities: Depreciation and amortization 275,175 180,282 Interest imputed on related party debt - 2,219 Change in assets and liabilities: Accounts receivable 48,952 286,068 Costs and estimated earnings in excess of billings 31,864 202,058 Inventories 2,245 - Other assets 4,017 172,754 Accounts payable and accrued expenses (1,527,471) (972,714) Billings in excess of costs and estimated earnings 102,926 15,160 ---------------- ---------------- Net cash used in operating activities (2,270,411) (1,586,826) ---------------- ---------------- Cash flows from investing activities: Acquisition of property, plant and equipment - (55,999) ---------------- ---------------- Net cash used in investing activities - (55,999) ---------------- ---------------- Cash flows from financing activities: Repayment of related party debt (257,253) - Proceeds from notes payable 2,525,869 - Proceeds from stock issues - 9,000 Proceeds from related party debt - 1,036,776 ---------------- ---------------- Net cash provided by financing activities 2,268,616 1,045,776 ---------------- ---------------- Net (decrease) increase in cash and cash equivalents (1,795) (597,049) Cash and cash equivalents, beginning of period 12,892 601,131 ---------------- ---------------- Cash and cash equivalents, end of period $11,097 $4,082 ================ ================ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $99,610 $73,875 Income taxes $ - $ -
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 and nine months ended September 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 Nine Months Ended September 30, 2003 Weighted Per-Share Net Loss Average Shares Amount Basic EPS Income available to common stockholers $(1,208,119) 3,026,251 $ (0.40) Effect of Dilutive Securities Common Stock Options - - - ---------------- ------------------ ------------- Diluted EPS Income available to common stockholers - assumed conversions $(1,208,119) 3,026,251 $ (0.40) ================ ================== ============= For the Three Months Ended September 30, 2003 Weighted Per-Share Net Loss Average Shares Amount Basic EPS Income available to common stockholers $ (316,134) 3,034,777 $ (0.10) Effect of Dilutive Securities Common Stock Options - - - ---------------- ------------------ ------------- Diluted EPS Income available to common stockholers - assumed conversions $ (316,134) 3,034,777 $ (0.10) ================ ================== ============= For the Nine Months Ended September 30, 2002 Weighted Per-Share Net Loss Average Shares Amount Basic EPS Income available to common stockholers $(1,472,654) 3,020,745 $ (0.49) Effect of Dilutive Securities Common Stock Options - 1,165,360 - ---------------- ------------------ ------------- Diluted EPS Income available to common stockholers - assumed conversions $(1,472,654) 4,186,105 $ (0.49) ================ ================== ============= For the Three Months Ended September 30, 2002 Weighted Per-Share Net Loss Average Shares Amount Basic EPS Income available to common stockholers $ (750,429) 3,021,917 $ (0.25) Effect of Dilutive Securities Common Stock Options - 1,167,188 - ---------------- ------------------ ------------- Diluted EPS Income available to common stockholers - assumed conversions $ (750,429) 4,189,105 $ (0.25) ================ ================== ============= ---------------------------------------------------------------------------------------------------------------------------
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 September 30, 2003 are as follows:
Air Polution Air Polution Control Control (Heat) (Scrubbers) Others Total --------------- --------------- ---------------- ---------------- Revenue external $ 548,794 $3,278,241 $ - $ 3,827,035 Revenue internal $ - $ - $ - $ - Segment profit (loss) $(433,208) $ 497,891 $(1,272,802) $ (1,208,119) Segment assets $ 671,906 $2,539,365 $ 1,805,413 $ 5,016,684
Reconciliation of segment revenues, net income, total assets and other significant items for the nine and three months ended September 30, 2003 are as follows:
9 months ended 3 months ended September 30, September 30, 2003 2003 Revenues Total revenues for reportable segments $ 3,827,035 $ 919,232 Other revenues $ - $ - ---------------------- ------------------- Total consolidated revenues $ 3,827,035 $ 919,232 ====================== =================== Loss Total revenues for reportable segments $ 64,683 $ 38,073 Other Profit or loss $ (1,272,802) $ (354,207) ---------------------- ------------------- Total consolidated loss $ (1,208,119) $ (316,134) ====================== =================== At September 30, 2003 Assets Total assets for reportable segments $ 3,211,272 Other assets $ 1,805,413 ---------------------- Total consolidated assets $ 5,016,684 ======================
The segments' profit and loss components and schedule of assets as of September 30, 2003 are as follows:
Air Polution Air Polution Control Control (Heat) (Scrubbers) Others Total --------------------- ------------------- ---------------- ---------------- Revenue external $ 1,591,172 $ 4,134,708 $ - $ 5,725,880 Revenue internal $ - $ - $ - $ - Segment profit (loss) $ (590,921) $ (319,427) $ (562,306) $ (1,472,654) Segment assets $ 1,902,692 $ 4,261,795 $ 430,091 $ 6,594,578
Reconciliation of segment revenues, net income, total assets and other significant items for the nine and three months ended September 30, 2002 are as follows:
9 months ended 3 months ended September 30, September 30, 2002 2002 Revenues Total revenues for reportable segments $ 5,725,880 $ 2,168,879 Other revenues $ - $ - ---------------------- ------------------- Total consolidated revenues $ 5,725,880 $ 2,168,879 ====================== =================== Loss Total revenues for reportable segments $ (910,348) $ (494,931) Other Profit or loss $ (562,306) $ (255,498) ---------------------- ------------------- Total consolidated loss $ (1,472,654) $ (750,429) ====================== =================== At September 30, 2002 Assets Total assets for reportable segments $ 6,164,487 Other assets $ 866,292 Elimination of intersegment assets $ (436,202) ---------------------- Total consolidated assets $ 6,594,577 ======================
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. Companies such as Exxon Corporation, Freeport McMoran Gold Company and Hecla Mining Company in addition to the efforts of MPM Mining have conducted extensive exploration in the area. 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 nine and three months ended September 30, 2003 and 2002 include the operations of HES, AirPol, Nupower and MPM. MPM's consolidated net loss for the nine months ended September 30, 2003 was $1,208,119 or $0.40 per share compared to net loss of $1,472,654, or $0.49 per share for the nine months ended September 30, 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. Requests for proposals have dramatically increased over the past two quarters. Total active proposals are over $30 million. It is expected that a number of these proposals will close during the first two quarters of 2004. However, there are no assurances that the company will be successful in securing a sufficient amount of new work. Nine and three months ended 9/30/03 compared to nine and three months ended 9/30/02 -------------------------------------------------------------------------------- For the nine months ended 9/30/03, MPM had a net loss of $1,208,119, or $0.40 per share compared to net loss of $1,472,654, or $0.49 per share for the nine months ended 9/30/02. Revenues decreased 33.2% to $3,827,035 for the nine months ended 9/30/03 compared to $5,725,880 for the nine months ended 9/30/02. Costs of sales decreased 33.2% to $2,976,281 for the nine months ended 9/30/03 compared to $4,458,292 for the nine months ended 9/30/02. This corresponded to the decreases in revenues. Operating expenses decreased 8.3% to $2,427,840 for the nine months ended 9/30/03 compared to $2,647,859 for the nine months ended 9/30/02. For the three months ended 9/30/03, MPM had a net loss of $316,134, or $0.10 per share compared to a net loss of $750,429, or $0.25 per share for the three months ended 9/30/02. Revenues decreased 57.6% to $919,232 for the three months ended 9/30/03 compared to $2,168,879 for the three months ended 9/30/02. Costs of sales decreased 44.0% to $941,868 for the three months ended 9/30/03 compared to $1,680,891 for the three months ended 9/30/02 due to the decreases in revenues. Operating expenses decreased 49.8% to $601,014 for the three months ended 9/30/03 compared to $1,198,225 for the three months ended 9/30/02 representing significant expense cuts throughout the company. Financial Condition and Liquidity --------------------------------- For the nine months-ended 9/30/03, the Company relied principally on cash loans from an insurance company to fund the operations. Current cash position, cash from continuing operations and the Company's borrowing power are believed to be adequate to fund MPM's subsidiary operations for the foreseeable future. While Management anticipates securing additional financing from a private financing source, there is no assurance of this or that the Company will achieve profitable operations. Working capital at 9/30/03 was negative $5,262,143. Accordingly, MPM is continuing to seek 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. 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 No reports on Form 8-K were filed for the quarter ended 9/30/03. 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. November 19, 2003 /s/ Michael J. Luciano ----------------- ---------------------- (date) Michael J. Luciano Chairman & CEO