10-Q 1 a5831945.txt MPM TECHNOLOGIES, INC. 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Form 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange act of 1934 For the quarterly period ended September 30, 2008 Commission File Number 0-14910 MPM TECHNOLOGIES, INC. (Exact Name of registrant 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 executive offices) (Zip Code) Registrant's telephone number, including area code: 973-428-5009 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. _X_Yes ___No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Large accelerated filer ___ Accelerated filer ___ Non-accelerated filer ___ Smaller reporting company _X_ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ___ Yes _X_No As of November 5, 2008, the registrant had outstanding 6,307,510 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, December 31, 2008 2007 ---------------- ---------------- (UNAUDITED) Current assets: Cash and cash equivalents $ 2,536 $ 47,243 Accounts receivable, net of allowance for doubtful accounts of $-0- and $10,000 30,621 23,916 Other current assets 17,423 24,118 ---------------- ---------------- Total current assets 50,580 95,277 ---------------- ---------------- Property, plant and equipment, net 5,736 7,905 Mineral properties held for sale 1,070,368 1,070,368 Other assets, net 82,000 82,000 ---------------- ---------------- $ 1,208,684 $ 1,255,550 ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 289,552 $ 257,883 Accrued expenses 251,139 299,369 Notes payable 5,386,481 5,180,203 Related party debt 6,957,249 5,988,604 ---------------- ---------------- Total current liabilities 12,884,421 11,726,059 ---------------- ---------------- 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, 6,307,510 and 6,263,064 shares issued and outstanding, respectively 6,308 6,263 Additional paid-in capital 12,279,698 12,268,631 Accumulated deficit (23,961,743) (22,745,403) ---------------- ---------------- Total stockholders' equity (deficiency) (11,675,737) (10,470,509) ---------------- ---------------- $ 1,208,684 $ 1,255,550 ================ ================ See accompanying notes to the consolidated financial statements.
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Nine Months Ended Three Months Ended September 30, September 30, ------------------------------------ ------------------------------------ 2008 2007 2008 2007 ---------------- ---------------- ---------------- ---------------- Revenues - Projects $ 35,430 $ 1,245,136 $ - $ 251,484 Revenues - Parts and service 438,437 510,344 246,351 239,721 ---------------- ---------------- ---------------- ---------------- Total Revenues 473,867 1,755,480 246,351 491,205 ---------------- ---------------- ---------------- ---------------- Cost of sales - Projects 13,367 1,012,206 - 284,768 Cost of sales - Parts and service 206,827 368,456 106,808 179,937 ---------------- ---------------- ---------------- ---------------- 220,194 1,380,662 106,808 464,705 ---------------- ---------------- ---------------- ---------------- Gross margin 253,673 374,818 139,543 26,500 Selling, general and administrative expenses 879,075 834,674 331,807 255,829 ---------------- ---------------- ---------------- ---------------- (Loss) income from operations (625,402) (459,856) (192,264) (229,329) ---------------- ---------------- ---------------- ---------------- Other income (expense): Interest expense (590,938) (533,197) (213,259) (181,433) Settlements - (1,150,000) - - Miscellaneous - 226,228 - (4,175) ---------------- ---------------- ---------------- ---------------- Net other income (expense) (590,938) (1,456,969) (213,259) (185,608) ---------------- ---------------- ---------------- ---------------- Net loss ($1,216,340) ($1,916,825) ($405,523) ($414,937) ================ ================ ================ ================ Net loss per share - basic and diluted: ($0.19) ($0.31) ($0.06) ($0.07) ================ ================ ================ ================ Weighted average shares of common stock outstanding - basic and diluted 6,266,795 6,263,064 6,274,176 6,263,064 ================ ================ ================ ================ See accompanying notes to the consolidated financial statements.
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, ------------------------------------ 2008 2007 ---------------- ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss ($1,216,340) ($1,916.825) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,169 52,864 Accrued interest and expenses on notes payable 206,278 187,188 Accrued interest and deferred expenses on related party debt 485,145 441,727 Change in assets and liabilities: Accounts receivable (6,705) (47,148) Costs and estimated earnings in excess of billings - 24,315 Other assets 6,695 (68,166) Accounts payable and accrued expenses (16,561) (67,297) Billings in excess of costs and estimated earnings - (103,548) ---------------- ---------------- Cash used in operating activities (539,319) (1,496,890) ---------------- ---------------- Cash flows from financing activities: Proceeds from related party debt 483,500 22,000 Cash proceeds from stock options exercised 11,112 - Proceeds from debt financing - 1,050,000 ---------------- ---------------- Net cash provided by financing activities 494,612 1,072,000 ---------------- ---------------- Net decrease in cash and cash equivalents (44,707) (424,890) Cash and cash equivalents, beginning of period 47,243 443,223 ---------------- ---------------- Cash and cash equivalents, end of period $ 2,536 $ 18,333 ================ ================ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ - $ 878 ---------------- ---------------- Income taxes $ - $ - ---------------- ---------------- See accompanying notes to the consolidated financial statements.
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, 2007. 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-Q 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, 2007. 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, 2008 should not necessarily be taken as indicative of the results of operations that may be expected for the entire year 2008. 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, 2007, the Company has not been able to generate any significant revenues and has a working capital deficiency of $12,833,841 at September 30, 2008. 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, 2007. 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 loss by the weighted average number of common shares outstanding in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share". Diluted net loss per common share adjusts basic net loss per common share for the effects of outstanding common stock equivalents, only in the periods in which such effect is dilutive under the treasury stock method. The following table reconciles the number of common shares used in the basic and diluted EPS calculations:
For the Nine Months Ended September 30, 2008 -------------------------------------------- Weighted- Net Average Per-Share Loss Shares Amount ------------- ------------- ------------- Basic EPS Income available to common stockholders $ (1,216,340) 6,266,795 $ (0.19) Effect of Dilutive Securities * Common stock options - 2,161,944 - ------------- ------------- ------------- Diluted EPS Income available to common stockholders - assumed conversions $ (1,216,340) 8,428,739 $ (0.19) ============= ============= =============
For the Three Months Ended September 30, 2008 --------------------------------------------- Weighted- Net Average Per-Share Loss Shares Amount ------------- ------------- ------------- Basic EPS Income available to common stockholders $ (405,523) 6,274,176 $ (0.06) Effect of Dilutive Securities * Common stock options - 2,154,563 - ------------- ------------- ------------- Diluted EPS Income available to common stockholders - assumed conversions $ (405,523) 8,428,739 $ (0.06) ============= ============= ============= For the Nine Months Ended September 30, 2007 -------------------------------------------- Weighted- Net Average Per-Share 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) ============= ============= =============
* Effect of common stock options is antidilutive. Accordingly they have no effect on diluted earnings per share. 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 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 matured on January 2, 2008. As of September 30, 2008, the Company has $4,326,499 of principal advances and accrued interest and expenses of $1,059,982. During the nine and three months ended September 30, 2008, the Company recorded interest expense of $206,278 and $70,159, respectively. This note was not paid at maturity. The lender has informally agreed to not pursue collection until August 2008 while revised terms are being negotiated. As of the date of this report, negotiations continue, but no revised agreement has been reached. 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, 2008, amounts owed these related parties totaled $6,957,249, due on demand. For the nine and three months ended September 30, 2008, the Company recorded $483,500 and $158,000 in advances, respectively, and $485,145 and $173,313, respectively, in interest and deferred expenses and reimbursements. 6. 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. On April 28, 2008, MPM notified Losonoco, Inc. of its intent to terminate its relationship with Losonoco effective immediately. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations --------------------- This Quarterly Report on Form 10-Q, 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-Q, 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, 2008 and 2007 include the operations of AirPol, Skygas and MPM. MPM's consolidated net loss from operations for the nine months ended September 30, 2008 was $1,216,340 or $0.19 per share compared to a net loss of $1,916,825, or $0.31 per share for the nine months ended September 30, 2007. Nine and three months ended September 30, 2008 compared to nine and three months -------------------------------------------------------------------------------- ended September 30, 2007 ------------------------ For the nine months ended September 30, 2008, MPM had a net loss of $1,216,340, or $0.19 per share compared to net loss of $1,916,825, or $0.31 per share for the nine months ended September 30, 2007. Revenues decreased 73% to $473,867 for the nine months ended September 30, 2008 compared to $1,755,480 for the nine months ended September 30, 2007. The revenue decrease was due to the lack of project work, and backlog for projects in 2008. Costs of sales decreased 84% to $220,194 for the nine months ended September 30, 2008 compared to $1,380,662 for the nine months ended September 30, 2007. This was again due to the decreases in project revenues. Operating expenses increased 5% to $879,075 for the nine months ended September 30, 2008 compared to $834,674 for the nine months ended September 30, 2007. For the three months ended September 30, 2008, MPM had a net loss $405,523, or $0.06 per share compared to a net loss of $414,937, or $0.07 per share for the three months ended September 30, 2007. Revenues decreased 50% to $246,351 for the three months ended September 30, 2008 compared to $491,205 for the three months ended September 30, 2007. This was due to the lack of project work in 2008. Costs of sales decreased 77% to $106,808 for the three months ended September 30, 2008 compared to $464,705 for the three months ended September 30, 2007. This was due to the lack of project work. Operating expenses increased 30% to $331,807 for the three months ended September 30, 2008 compared to $255,829 for the three months ended September 30, 2007. Financial Condition and Liquidity --------------------------------- For the nine months ended September 30, 2008, the Company relied principally on cash from loans from related parties to fund its activities. Working capital deficit at September 30, 2008 was $12,833,841 compared to $11,630,782 at December 31, 2007. 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. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Management of MPM does not invest in marketable securities in the normal course of business. Financial instruments consisting of cash and cash equivalents can potentially subject the Company to a concentration of credit risk. 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. Item 4. Controls and Procedures MPM management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2008. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective. There were no changes during the period covered by this Form 10-Q in the internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting. 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, 2008 /s/ Michael J. Luciano ----------------- ------------------------------------ (date) Michael J. Luciano Chairman & CEO