10QSB 1 a4909050.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 March 31, 2005 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) Issuer's telephone number, including area code: 973-428-5009 As of June 3, 2005, the registrant had outstanding 3,183,064 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 ASSETS MARCH 31, DECEMBER 31, 2005 2004 ------------- ------------- (UNAUDITED) Current assets: Cash and cash equivalents $ 55,930 $ 6,778 Accounts receivable, net of allowance for Costs and estimated earnings in excess of billings Costs and estimated earnings in excess of billings 84,246 129,444 Other current assets 45,236 42,385 Assets to be disposed of 2,995 2,995 ------------- ------------- Total current assets 410,574 303,252 ------------- ------------- Property, plant and equipment, net 57,921 67,708 Mineral properties held for sale 1,070,368 1,070,368 Prepaid royalty 273,000 273,000 Purchased intangible, net of accumulated amortization of $489,375 and $472,500 185,625 202,500 Investments at equity 119,577 119,577 Other assets, net 88,918 88,918 ------------- ------------- $ 2,205,983 $ 2,125,323 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,171,899 $ 1,125,978 Accrued expenses 82,153 88,340 Billings in excess of costs and estimated earnings 330,870 334,764 Related party debt 4,421,519 4,200,462 Liabilities to be disposed of 2,664,917 2,664,917 ------------- ------------- Total current liabilities 8,671,358 8,414,461 ------------- ------------- Notes payable 3,085,075 3,085,075 ------------- ------------- Total liabilities 11,756,433 11,499,536 ------------- ------------- Commitments and contingencies Stockholders' equity: Preferred stock, no stated value, 10,000,000 shares authorized, no shares issued or outstanding Common stock, $.001 par value, 100,000,000 shares authorized, 3,183,064 shares issued and outstanding 3,183 3,183 Additional paid-in capital 11,313,019 11,313,019 Accumulated deficit (20,866,652) (20,690,415) ------------- ------------- Total stockholders' equity (9,550,450) (9,374,213) ------------- ------------- $ 2,205,983 $ 2,125,323 ============= ============= MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended March 31, 2005 2004 ------------- ------------- Revenues $ 468,756 $ 471,330 Cost of sales 199,644 142,556 ------------- ------------- Gross margin 269,112 328,774 ------------- ------------- Selling, general and administrative expenses 354,606 607,641 Loss from operations (85,494) (278,867) ------------- ------------- Other income (expense): Gain on payables settlements - 345,568 Interest expense (112,658) (169,356) Miscellaneous 21,915 40,348 ------------- ------------- Net other income (expense) (90,743) 216,560 ------------- ------------- Net loss from continuing operations 176,237 62,307 Net income (loss) from discontinued operations - - ------------- ------------- Net loss ($176,237) ($62,307) ============= ============= Income per share - basic and diluted: Net loss ($0.06) ($0.02) ============= ============= Weighted average shares of common stock outstanding - Basic and diluted 3,183,064 3,183,064 ============= ============= MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31, ----------------------------- 2005 2004 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) ($176,237) ($62,307) Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 26,662 67,622 Change in assets and liabilities: Accounts receivable (100.517) (150,213) Costs and estimated earnings in excess of billings 45,198 5,824 Other current assets (2,851) - Other assets - 31,595 Accounts payable and accrued expenses (29,030) (768,779) Billings in excess of costs and estimated earnings 64,870 10,583 ------------- ------------- Cash used in continuing operations (171,905) (865,675) ----------------------------- Loss from discontinued operations - - Increase (decrease) in net assets of discontinued operations - - ------------- ------------- Cash provided by discontinued operations - - ----------------------------- Net cash (used in) operating activities (171,905) (865,675) ------------- ------------- Cash flows from financing activities: Proceeds from related party debt 221,057 754,286 Proceeds from debt financing - 102,546 ------------- ------------- Net cash provided by financing activities 221,057 856,832 ------------- ------------- Net decrease in cash and cash equivalents 49,152 (8,843) Cash and cash equivalents, beginning of period 6,778 8,843 ------------- ------------- Cash and cash equivalents, end of period $ 55,930 $ 0 ============= ============= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 953 $ - Income taxes $ 3,000 $ - 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, 2004. Since certain information and footnote disclosures normally included int 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 of the Company as of December 31, 2004. In the opinion of management, these unaudited interim consolidated financial statements reflect all adjustements 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 adjusstments consisted only of those of a normal recurring nature. Results of operations for the three months ended March 31, 2005 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year 2005. 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 Three Months Ended March 31, 2005 -------------------------------------------------------------------------------- Weighted- Net Average Per-Share Loss Shares Amount ---------- ----------- --------- Basic EPS Income available to common stockholders ($176,237) 3,183,064 ($0.06) Effect of Dilutive Securities Common stock options - 1,854,008 - ---------- ----------- --------- Diluted EPS Income available to common stockholders - assumed conversions ($176,237) 5,037,072 ($0.06) ========== =========== ========= For the Three Months Ended March 31, 2004 -------------------------------------------------------------------------------- Weighted- Net Average Per-Share Loss Shares Amount ---------- ----------- --------- Basic EPS Income available to common stockholders $(62,307) 3,183,064 $(0.02) Effect of Dilutive Securities Common stock options - 1,854,008 - ---------- ----------- --------- Diluted EPS Income available to common stockholders - assumed conversions $(62,307) 5,037,072 $(0.02) ========== =========== ========= 3. Discontinued Operations On March 7, 2004, management filed a petition in federal court for HES under Chapter 7 of the Bankruptcy Code. HES had been an inactive corporation for some time prior to the filing. Since there were no operations of HES in 2005 or 2004, there was no income or loss from discontinued operations. The disposition of the assets and liabilities of HES will be determined by the Bankruptcy Court. The assets of HES are presented on the accompanying balance sheets as "Assets to be disposed of" and are comprised of the following: Cash $ 482 Fixed assets, net 1,821 Other assets 692 -------- Total $ 2,995 -------- The liabilities of HES are presented on the accompanying balance sheets as "Liabilities to be disposed of" and are comprised of the following: Accounts payable $ 1,192,632 Accrued expenses 478,618 Note payable 993,667 ------------ Total $ 2,664,917 ------------ 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 designed, engineered, supplied and serviced high temperature and chemical air pollution control systems for Fortune 500 and other industrial and environmental companies. As further discussed below, HES management filed a petition under Chapter 7 of the United States Bankruptcy Code in court on March 7, 2004. MPM 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. AirPol is an active continuing concern. As noted above, and discussed below, HES filed a petition in federal Bankruptcy court on March 7,2004 under Chapter 7 of the U.S. Bankruptcy Code. 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, 2005 include the operations of AirPol, Skygas and MPM. MPM's consolidated net loss for the three months ended March 31, 2005 was $176,237 or $0.06 per share compared to net loss of $62,307 or $0.02 per share for the three months ended March 31, 2004. 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, 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. Three months ended March 31, 2005 as compared to three months ended March 31, ----------------------------------------------------------------------------- 2004 ---- For the three months ended 3/31/05, MPM had a net loss of $176,237 or $0.06 per share compared to net loss of $62,307, or $0.02 per share for the three months ended 3/31/04. Revenues decreased 0.5% to $468,756 for the three months ended 3/31/05 compared to $471,330 for the three months ended 3/31/04. Costs of sales increased 40.0% to $199,644 for the three months ended March 31, 2005 as compared to $142,556 for the three months ended March 31, 2004. Operating expenses decreased 41.6% to $354,606 for the three months ended March 31, 2005 compared to $607,641 three months ended March 31, 2004. The Company currently has a backlog of approximately $1.1 million. Management believes that this backlog will be consumed during the rest of fiscal year 2005. Financial Condition and Liquidity --------------------------------- For the three months ended March 31, 2005, the Company relied on loans from an officers/director to fund its operations. Working capital deficit at 3/31/05 was $8,072,123 compared to $7,150,723 at 12/31/04. Management expects that MPM will significantly slow its losses and additional cash outflows for the balance of 2005. Additional restructuring and responsibility reassignments are planned for the second and third quarters. Management plans to be at break even by the end of the third quarter. There is no assurance that management will be successful in attaining thus goal. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Management filed a bankruptcy petition on behalf of HES in federal court under Chapter 7 of the United States Bankruptcy Code on March 7, 2004. The matter is still pending, and the final disposition of the assets and liabilities of HES will be determined by the bankruptcy court. 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 None. 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. June 8, 2005 /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, 2005 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 June 8, 2005 CERTIFICATION I, Michael J. Luciano, CHIEF EXECUTIVE OFFICER of MPM TECHNOLOGIES, INC. certify that: 1. I have reviewed this Form 10QSB of MPM Technologies, Inc. 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 quarterly 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 quarterly report (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: June 8, 2005 /s Michael J. Luciano ------------------ --------------------- Michael J. Luciano Chief Executive Officer CERTIFICATION I, Glen Hjort, CHIEF FINANCIAL OFFICER of MPM TECHNOLOGIES, INC. certify that: 1. I have reviewed this Form 10QSB of MPM Technologies, Inc. 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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: c) 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 quarterly report is being prepared; d) 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 quarterly report (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): 7. 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 8. 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: June 8, 2005 /s/ Glen Hjort ------------------- ----------------------- Glen Hjort Chief Financial Officer