10QSB 1 a5547019.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, 2007 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 November 14, 2007, the registrant had outstanding 6,263,064 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 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
September 30, 2007 December 31, 2006 ----------------------- ---------------------- (UNAUDITED) Current assets: Cash and cash equivalents $ 18,333 $ 443,223 Accounts receivable, net of allowance for doubtful accounts of $15,000 and $165,000 71,441 24,293 Costs and estimated earnings in excess of billings 49,900 74,215 Other current assets 86,172 24,254 ----------------------- ---------------------- Total current assets 225,846 565,985 ----------------------- ---------------------- Property, plant and equipment, net 8,166 10,405 Mineral properties held for sale 1,070,368 1,070,368 Prepaid royalty 273,000 273,000 Purchased intangible, net of accumulated amortization of $658,125 and $607,500 16,875 67,500 Other assets, net 101,387 95,139 ----------------------- ---------------------- $ 1,695,642 $ 2,082,397 ======================= ====================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 521,969 $ 693,677 Accrued expenses 167,578 63,167 Billings in excess of costs and estimated earnings 348,886 452,434 Notes payable 5,067,725 - Related party debt 5,709,828 5,246,101 ----------------------- ---------------------- Total current liabilities 11,815,986 6,455,379 Notes payable - 3,830,537 ----------------------- ---------------------- Total liabilities 11,815,986 10,285,916 ----------------------- ---------------------- Commitments and contingencies - - Stockholders' equity (deficiency): 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, 6,263,064 shares issued and outstanding 6,263 6,263 Additional paid-in capital 12,233,939 12,233,939 Accumulated deficit (22,360,546) (20,443,721) ----------------------- ---------------------- Total stockholders' equity (deficiency) (10,120,344) (8,203,519) ----------------------- ---------------------- $ 1,695,642 $ 2,082,397 ======================= ======================
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Nine Months Ended Three Months Ended September 30, September 30, ---------------------------------- ------------------------------- 2007 2006 2007 2006 ----------------- --------------- -------------- --------------- Revenues - Projects $ 1,245,136 $ 1,062,980 $ 251,484 $ 195,704 Revenues - Parts and service 510.344 435,264 239,721 160,743 ----------------- --------------- -------------- --------------- Total Revenues 1,755,480 1,498,244 491,205 356,447 ----------------- --------------- -------------- --------------- Cost of sales - Projects 1,012,206 656,206 284,768 98,831 Cost of sales - Parts and service 368,456 193,332 179,937 82,527 ----------------- --------------- -------------- --------------- 1,380,662 849,538 464,705 181,358 ----------------- --------------- -------------- --------------- Gross margin 374,818 648,706 26,500 175,089 Selling, general and administrative expenses 834,674 807,341 255,829 278,156 ----------------- --------------- -------------- --------------- (Loss) income from operations (459,856) (158,635) (229,329) (103,067) ----------------- --------------- -------------- --------------- Other income (expense): Interest expense (533,197) (467,910) (181,433) (153,985) Settlements (1,150,000) - - - Miscellaneous 226,228 (27,240) (4,175) 6,967 ----------------- --------------- -------------- --------------- Net other income (expense) (1,456,969) (495,150) (185,608) (147,018) ----------------- --------------- -------------- --------------- Net loss ($1,916,825) ($653,785) ($414,937) ($250,085) ================= =============== ============== =============== Income per share - basic and diluted: Net loss ($0.31) ($0.21) ($0.07) ($0.08) ================= =============== ============== =============== Weighted average shares of common stock outstanding - basic and diluted 6,263,064 3,183,064 6,263,064 3,183,064 ================= =============== ============== ===============
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, ------------------------------------- 2007 2006 ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss ($1,916,825) ($653,785) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 52,864 54,118 Accrued interest and expenses on notes payable 187,188 133,941 Accrued interest and deferred expenses on related party debt 441,727 473,315 Change in assets and liabilities: Accounts receivable (47,148) (84,250) Costs and estimated earnings in excess of billings 24,315 (58,632) Other assets (68,166) (3,540) Accounts payable and accrued expenses (67,297) (180,540) Billings in excess of costs and estimated earnings (103,548) 55,936 ----------------- ----------------- Cash used in operating activities (1,496,890) (263,437) ----------------- ----------------- Cash flows from financing activities: Proceeds from related party debt 22,000 263,600 Proceeds from debt financing 1,050,000 - ----------------- ----------------- Net cash provided by financing activities 1,072,000 263,600 ----------------- ----------------- Net increase (decrease) in cash and cash equivalents (424,890) 163 Cash and cash equivalents, beginning of period 443,223 4,795 ----------------- ----------------- Cash and cash equivalents, end of period $ 18,133 $ 4,958 ================= ================= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 878 $ 916 ----------------- ----------------- Income taxes $ - $ - ----------------- -----------------
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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, 2006. 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, 2006. 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 period ended September 30, 2007 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year 2007. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in the notes to the Consolidated Financial Statements for the year ended December 31, 2006, the Company has not been able to generate any significant revenues and has a working capital deficiency of $11,590,140 at September 30, 2007. These conditions raise substantial doubt about the Company's ability to continue as a going concern without the raising of additional debt and/or equity financing to fund operations. Management's plans in regard to these matters are described in the notes to the Consolidated Financial Statements for the year ended December 31, 2006. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 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, 2007 -------------------------------------------- Weighted - Average Per-Share Net Loss Shares Amount -------------- ------------- --------------- Basic EPS Income available to common stockholders $ (1,916,825) 6,263,064 $ (0.31) Effect of Dilutive Securities Common stock options - 1,885,675 - -------------- ------------- --------------- Diluted EPS Income available to common stockholders - assumed conversions $ (1,916,825) 8,148,739 $ (0.31 ============== ============= =============== For the Three Months Ended September 30, 2007 --------------------------------------------- Weighted- Net Average Per-Share Loss Shares Amount -------------- -------------- ---------------- Basic EPS Income available to common stockholders $ (414,937) 6,263,064 $ (0.07) Effect of Dilutive Securities Common stock options - 1,885,675 - -------------- -------------- ---------------- Diluted EPS Income available to common stockholders - assumed conversions $ (414,937) 8,148,739 $ (0.07) ============== ============== ================ For the Nine Months Ended September 30, 2006 -------------------------------------------- Weighted- Net Average Per-Share Loss Shares Amount -------------- -------------- --------------- Basic EPS Income available to common stockholders $ (653,785) 3,183,064 $ (0.21) Effect of Dilutive Securities Common stock options - 1,949,508 - -------------- -------------- --------------- Diluted EPS Income available to common stockholders - assumed conversions $ (653,785) 5,132,572 $ (0.21) ============== ============== =============== For the Three Months Ended September 30, 2006 --------------------------------------------- Weighted- Net Average Per-Share Loss Shares Amount ------------- ------------ -------------- Basic EPS Income available to common stockholders $ (250,085) 3,183,064 $ (0.08) Effect of Dilutive Securities Common stock options - 1,949,508 - ------------- ------------ -------------- Diluted EPS Income available to common stockholders - assumed conversions $ (250,085) 5,132,572 $ (0.08) ============= ============ ============== 3. Concentrations of Credit Risk Financial instruments, which potentially subject the Company to a concentration of credit risk, consist of cash and cash equivalents. The Company places its cash and cash equivalents with various high quality financial institutions; these deposits may exceed federally insured limits at various times throughout the year. The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. 4. Note Payable and Long-Term Debt In December 2002, the Company entered into a revolving credit agreement with an insurance company. Under the terms of its agreement, the Company may borrow up to $500,000 at 5.25% per annum, which was increased to $3,000,000 in 2003. The note is secured by stock and mineral property held for investment and matures on January 2, 2008. As of September 30, 2007, the Company has $2,769,790 of principal advances and accrued interest and expenses of $2,297,935. During the nine and three months ended September 30, 2007, the Company recorded interest expense of $187,188 and $66,185, respectively. The Company also recorded expenses of $1,050,000 and $0 for the nine and three months ended September 30, 2007, respectively. 5. Related Party Debt Related party debt consists of advances received from and deferred expenses and reimbursements to various directors and related parties. At September 30, 2007, amounts owed these related parties totaled $5,709,828, due on demand. For the nine and three months ended September 30, 2007, the Company recorded $441,727 and $150,037, respectively, in interest and deferred expenses and reimbursements. 6. Settlements The results of operations for the nine months ended September 30, 2007 includes one-time charges of $1,150,000 related to settlements of disputes and back charges related to systems that were designed and installed in previous years. 7. Joint Venture On April 11, 2007, MPM announced that it had agreed with Losonoco, Inc. to form a new joint venture company, Losonoco Skygas, LLC, to develop bio-fuel and chemical manufacturing facilities based on the Skygas technology for waste gasification. Losonoco, Inc. builds, owns and operates manufacturing facilities for ethanol and bio-diesel, and focuses on commercializing technologies that use waste streams as feedstock for the bio-fuels. Losonoco is acquiring and re-commissioning a former corn ethanol facility in Florida, and intends to bring it back into production by building an integrated bio-mass-to-ethanol facility using the Skygas gasification process. The joint venture will further develop the Skygas gasification process through the proposed construction of a 125-ton per day biomass gasifier to be located and integrated with Losonoco's corn ethanol facility in Florida. Initially, the Skygas gasifier will provide syngas to replace natural gas used in the ethanol production process. In the second phase, the syngas will be used to manufacture ethanol through catalytic conversion. MPM is transferring its worldwide licenses for the Skygas gasification technology, and all related engineering, operational data and intellectual property that it owns. Losonoco will fund the further development of the technology and the construction of the 125-ton per day gasification facility in Florida. It was originally reported that the initial membership interests in the joint venture would be 75% MPM and 25% Losonoco, and would change to 50% - 50% ownership after the development work was completed. 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. 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-Mobil Corporation, Freeport McMoran Gold Company and Hecla Mining Company in addition to the efforts of MPM Mining. In early 2002, the Board of Directors decided to hold the properties as an investment. AirPol is an active continuing concern. 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, 2007 and 2006 include the operations of AirPol, Skygas and MPM. MPM's consolidated net loss from continuing operations for the nine months ended September 30, 2007 was $1,916,825 or $0.31 per share compared to a net loss of $653,785, or $0.21 per share for the nine months ended September 30, 2006. Nine and three months ended September 30, 2007 compared to nine and three months -------------------------------------------------------------------------------- ended September 30, 2006 ------------------------ For the nine months ended September 30, 2007, MPM had a net loss of $1,916,825, or $0.31 per share compared to a net loss of $653,785, or $0.21 per share for the nine months ended September 30, 2006. Revenues increased 17% to $1,755,480 for the nine months ended September 30, 2007 compared to $1,498,244 for the nine months ended September 30, 2006. Costs of sales increased 62% to $1,380,662 for the nine months ended September 30, 2007 compared to $849,538 for the nine months ended September 30, 2006. This was due to lower margins for both the projects and parts and service sides of the business. Operating expenses increased 3% to $834,674 for the nine months ended September 30, 2007 compared to $807,341 for the nine months ended September 30, 2006. Other expenses increased 194% to $1,456,969 for the nine months ended September 30, 2007 compared to $495,150 for the nine months ended September 30, 2006. The increase is the result of the settlement of disputes and back charges related to systems that were designed and installed in previous years. For the three months ended September 30, 2007, MPM had a net loss $414,937, or $0.07 per share compared to a net loss of $250,085, or $0.08 per share for the three months ended September 30, 2006. Revenues increased 38% to $491,205 for the three months ended September 30, 2007 compared to $356,447 for the three months ended September 30, 2006. Costs of sales increased 156% to $464,705 for the three months ended September 30, 2007 compared to $181,358 for the three months ended September 30, 2006. This was due cost overruns on AirPol's largest job, and to decreases in margins for parts and service. Operating expenses decreased 8% to $255,829 for the three months ended September 30, 2007 compared to $278,156 for the three months ended September 30, 2006. Other expense increased 26% to $185,608 for the three months ended September 30, 2007 compared to $147,018 for the three months ended September 30, 2006. The increase is due mainly to increased interest expense because of higher levels of debt. The Company currently has a backlog of approximately $492,000. Management believes that this backlog will be consumed during the rest of fiscal year 2007. Financial Condition and Liquidity --------------------------------- For the nine months ended September 30, 2007, the Company relied principally on cash from operations to fund its activities. Working capital deficit at September 30, 2007 was $11,590,140 compared to $5,889,394 at December 31, 2006. The Company is working to narrow its losses and get to a cash flow neutral position. There can be no assurances that management will be successful in attaining this goal. Accordingly, management 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 None 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. November 14, 2007 /s/ Michael J. Luciano ----------------- ----------------------------------------- (date) Michael J. Luciano Chairman & CEO