-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DYohJIMtkQxjcqZoWeLS6xgV4NDBG67wqCt2yDC+9r/KKkkBl5eNsbjomGi2rTmq LMQwUAupR2MeGJ03oPbLQA== 0001157523-09-002681.txt : 20090415 0001157523-09-002681.hdr.sgml : 20090415 20090414180757 ACCESSION NUMBER: 0001157523-09-002681 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20081231 FILED AS OF DATE: 20090415 DATE AS OF CHANGE: 20090414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MPM TECHNOLOGIES INC CENTRAL INDEX KEY: 0000799268 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 810436060 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14910 FILM NUMBER: 09749524 BUSINESS ADDRESS: STREET 1: 222 W MISSION AVE STREET 2: STE 30 CITY: SPOKANE STATE: WA ZIP: 99201 BUSINESS PHONE: 5093263443 MAIL ADDRESS: STREET 1: 908 N HOWARD SUITE 100 STREET 2: 908 N HOWARD SUITE 100 CITY: SPOKANE STATE: WA ZIP: 99201 FORMER COMPANY: FORMER CONFORMED NAME: MONTANA PRECISION MINING LTD DATE OF NAME CHANGE: 19920703 10-K 1 a5939580.txt MPM TECHNOLOGIES, INC. 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Form 10-K [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 Identification Number) incorporation or organization) 199 POMEROY ROAD, PARSIPPANY, NEW JERSEY 07054 (Address of principal executive offices) Registrant's telephone number, including area code: 973-428-5009 SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT: None SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT: None COMMON STOCK, PAR VALUE OF $0.001 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [_] Yes [X] No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [_] Yes [X] No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 has submitted electronically and posted on it corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes __No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule12b-2 of the Exchange Act. (Check one.) 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 The aggregate market value of the voting and non-voting equity held by non-affiliates computed by reference to the closing price of $0.25 at which the common equity was sold as of April 13, 2009 was $1,576,878. The number of shares outstanding of the registrant's common stock as of April 13, 2009 was 6,307,510. PART I Item 1. Business Incorporated in 1983, MPM Technologies, Inc. ("MPM" or "the Company") as of year ended December 31, 2008, had three wholly owned subsidiaries: AirPol, Inc. ("AirPol"), NuPower, Inc. ("NuPower") and MPM Mining Inc. ("Mining"). For the year ended December 31, 2008, AirPol was the only revenue generating entity. AirPol operates in the air pollution control industry. It sells air pollution control systems to Fortune 500 and other large industrial companies in the U.S and worldwide. The Company, through its wholly-owned subsidiary, NuPower, Inc., is engaged in the development and commercialization of a waste-to-energy process known as Skygas(TM). These efforts are largely through NuPower's participation in NuPower Partnership in which MPM has a 58.21% partnership interest. NuPower Partnership owns 85% of the Skygas Venture. In addition to its partnership interest through NuPower Inc, MPM also owns 15% of the Venture. Mining operations were discontinued several years ago. Due to the extremely high precious metals prices, MPM management is exploring restarting the mining operations. The Company may either restart mining operations using its own resources and personnel or partner with a joint-venture partner. Accordingly, management is actively seeking a joint-venture partner with the necessary financial abilities to further explore and develop the properties. There can be no guarantee that management will be successful in its initiatives. AIRPOL, INC. Effective July 1, 1998, the Company acquired certain of the assets and assumed certain of the liabilities of part of a division of FLS miljo, Inc. The agreement called for the Company to pay $300,000 stock and $234,610 in cash. The transaction was accounted for as a purchase. AirPol designs, engineers, supplies and services air pollution control systems for Fortune 500 and other environmental and industrial companies. The technologies of AirPol utilize wet and dry scrubbers, wet electrostatic precipitators and venturi absorbers to control air pollution. AirPol brings over 30 years experience through its technologies and employees. A typical air pollution control system consists of the following components: 1. A gas duct from the polluting process equipment that can be a boiler, kiln, incinerator or dry; 2. A scrubber, or a wet electrostatic precipitator for dust removal purposes; 3. An acid gas absorber for the removal of acid gas from the flue gas; 4. An induced draft fan to provide suction to draw the flue gas through the air pollution control system; and 5. A stack for the discharge of cleaned flue gas into the atmosphere. In building the systems, AirPol personnel conduct engineering design work, and produce design drawings for the fabrication of steel or plastic vessels, steel supports and access facilities. AirPol personnel also prepare equipment specifications for needed equipment such as spray nozzles, pumps, fans, instrumentation and controls. AirPol personnel then retain a fabricator for the fabrication of the system's components. AirPol personnel arrange for delivery of these to the customer's location. Normally, AirPol is not responsible for the installation of the systems. In this case, AirPol personnel will arrange for an erection supervisor to make sure the installation meets AirPol quality standards. If AirPol is responsible for the installation, they will hire mechanical and electrical contractors to perform the installation. NUPOWER, INC. The Company holds a 58.21% interest in NuPower Partnership through its ownership of NuPower, Inc. 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 partnership interest, MPM owns 15% of the Venture. In 2008 a new company was incorporated named Skygas Energy Ontario Limited. NuPower, Inc. owns all 100 of the issued and outstanding shares of the new company. It is anticipated that this company will be part of a business venture in Canada to commercialize the Skygas process. Management is currently in negotiations with unrelated third parties with regard to this venture. It is unclear at this time what form this venture will take. The United States patent on the Skygas process expired in November 2008. The Company filed a provisional new patent for a significantly improved Skygas process in February 2009. There can be no guarantee that the new patent will be approved at this time. There is also a Canadian patent on the Skygas process that is due to expire in April 2009. MPM MINING, INC. The company owns 7.5 patented claims and 2 unpatented claims and leases 7 patented claims with options to purchase on approximately 300 acres in Montana's historical Emery Mining District. It also owns a 200-ton per day onsite floatation mill. Companies such as Exxon Corporation, Freeport McMoran Gold Company and Hecla Mining Company in addition to MPM Mining have conducted extensive exploration in the area. MPM management believes that resuming mining operations is a way to generate positive cash flows and mitigate the continuing losses from other operations given the current market prices and conditions for precious metals. Accordingly, management will investigate its needs to make this happen. Following several geologist reports, assays and recommendations, the company built a 200 ton per day ball mill using floatation tanks to process screened and crushed ore. It took two years to build, equip and test the mill at a cost of approximately $800,000. The mill is in operable condition with all equipment in good repair. The company has Rake classifier ship, Wilfley Concentrate table, Marcy ball mill 5'x4', flotation machines and equipment, Denver water pumps, 3 deck concentrate table, Hardinge ball mill and Elmco filter press. There is an office trailer and living quarters for personnel including a deep well and septic system. There are two storage ponds and a creek running through the property. MPM has spent over $1.3 million on exploration and drilling programs including work done by Exxon, Freeport McMoran, and most recently Hecla Mining Company. Hecla's drilling results were extremely encouraging in that some drill holes confirmed the possibility of open pit mining and that certain mineral deposits might be enlarged and improved in grade by further drilling. Additionally, there is considerable evidence of significant mineralized materials awaiting drilling programs. The company has utilized reverse circulation and diamond core drilling techniques in five different programs the total of which are 182 drilled holes averaging 90' in depth. Additionally, 15 trenches 18' deep and 6' wide were dug. All were assayed with all showing mineralization. There have been 5 exploration programs to date: MPM Mining 6 drill holes 1983-84. MPM Mining 13 drill holes and 15 trenches 1986 Freeport McMoran Gold Co. 78 drill holes 1988-89 Pegasus Gold Corp 3 drill holes 1990 Hecla Mining Co. 82 drill holes 1991-92 MPM MINING INC EMERY DISTRICT MINERALIZED MATERIAL ----------------------------------- Tons Ounces Per Ton --------- ------------------------ Location Gold Silver - ---------------- ------- ------- Emery Mine 57,941 0.372 15.39 Emery Stockpiles 38,859 0.120 4.28 Bonanza 218,579 0.132 2.06 Hidden Hand 208,619 0.123 -- The properties are in mineralized zones containing gold, silver, lead and zinc. Located on the properties are former mine shafts, tunnels, mineral stockpiles and stopes (in tunnels) with valuable low-grade mineralization. All areas have been trenched, core drilled and assayed to prove mineralization. The properties contain both underground and near surface minerals. Additionally there are 8 stockpiles with good assayed results of mineralization. The old time miners were after high-grade ore and not interested in lower grade mineral surrounding the vein. The mineral taken from shafts, tunnels and around the high-grade vein was transported to these stockpiles. The total cost of purchasing the properties, leasing properties, building and equipping the ball mill, infrastructures and bringing power line to replace generators is estimated at $4,000,000. Current expenses that include lease payments and taxes are under $10,000 per year. In the past, power was supplied by two large capacity generators. At a time the mill is reopened, power lines will be brought in from Deer Lodge, Montana at an estimated cost of $200,000. A deep well and Sterret Creek supplies all water needs. FACTORS MANAGEMENT USED TO IDENTIFY REPORTABLE SEGMENTS Management considers MPM's reportable segments to be business units that offer different products. The business segments may be reportable because they are each managed separately, or they design and engineer distinct products with different applications in the air pollution control field. Airpol operates in the air pollution control field. MPM's other segments are essentially non-operational at the present time, and, accordingly have been aggregated for reporting purposes. Accordingly, for the years ended December 31, 2008 and 2007, the Company operated in one segment, and there is no separate segment reporting required. BACKLOG MPM had a backlog of orders or work in progress at AirPol of approximately $100,000 at December 31, 2008. It is expected that this backlog will be consumed during the first quarter 2009. There is currently no other backlog of orders for any of MPM's other businesses. WASTE-TO-ENERGY MPM's waste-to-energy process consists of an innovative technology known as "Skygas". The process is used in the disposal and gasification of various forms of non-metallic wastes. MPM continues to negotiate with interested entities for the manufacture and operation of Skygas units. These negotiations are ongoing, and MPM management is hopeful that there will be formal agreements in place during 2009. COMPETITIVE CONDITIONS AirPol operates in extremely competitive environments. There are a number of potential competitors for every job the companies bid on. The number of bidders ranges from two or three to as many as seven or eight depending on the potential customer and the work to be performed. The parts and service side of the business tends to be somewhat less competitive since the parts and service work are generally for units that have previously been sold and/or installed by the companies. There are a significant number of persons and companies developing or have developed any number of waste-to-energy systems. Management of MPM believes that its development of Skygas(TM) as a non-polluting and energy efficient system will give it the necessary competitive edge in this area. Due to the large number of persons and companies engaged in exploration for and production of mineralized material, there is a great degree of competition in the mining part of the business. SEASONAL VARIATIONS The impact of seasonal changes is minimal on the air pollution control business of AirPol. There may be some limitations on the installation of the air pollution control units when the weather is more severe in the winter months in those areas of the world where the weather is significantly colder in that season. There have been, however, no discernible variations to date to indicate that the business is subject to seasonal variations. There are currently no seasonal influences on the ongoing development of the Skygas(TM) process. It is also not expected that there will be any seasonal variations when the Skygas(TM) units are produced. EMPLOYEES At December 31, 2008, MPM had three employees and there were two employees at AirPol. MPM believes that its relations with its employees are good. Item 2. Properties AirPol leases its office space under a lease that expires in August of 2010. MPM has no property related to its waste-to-energy operations. MPM believes that its existing facilities are adequate for the current level of operations. The MPM Mining property is located in the Emery Mining District of Powell County, Montana approximately seven miles northeast of Deer Lodge, Montana. A road maintained by the county runs though or nearby company properties, mill and infrastructures. All titles to the company's properties are secured. All leased claims are up to date and paid in full. The company owns 7.5 patented claims, 2 unpatented claims and leases 7 patented claims. Each leased claim contains an option to purchase. The properties are in mineralized zones containing gold, silver, lead and zinc. Located on the properties are former mine shafts, tunnels, mineral stockpiles and stopes (in tunnels) with valuable low-grade mineralization. All areas have been trenched, core drilled and assayed to prove mineralization. These claims amount to approximately 300 acres of land in the Emery Mining District, Powell County Montana. MPM controls eighteen former mine sites that have been inactive since 1930. Each of these has old adits, tunnels and mineral stockpiles of known mineralized material. All testing and metallurgical work has been completed. [GRAPHIC OMITTED][GRAPHIC OMITTED] Item 3. Legal Proceedings None Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of the shareholders during the fourth quarter of 2008. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters a) Market Information On February 18, 2003 MPM common stock began trading on the OTC Bulletin Board under the trading symbol MPML. The following table shows quarterly high and low bid prices for 2008 and 2007 as reported by the National Quotations Bureau Incorporated. These prices reflect interdealer quotations without adjustments for retail markup, markdown or commission and do not necessarily represent actual transactions. 2008 High Bid Low Bid - ---- -------- ------- First Quarter $ 0.51 $ 0.25 Second Quarter 0.95 0.10 Third Quarter 1.01 0.40 Fourth Quarter 0.80 0.25 2007 - ---- First Quarter $ 1.00 $ 0.50 Second Quarter 1.15 0.50 Third Quarter 1.10 0.50 Fourth Quarter 0.95 0.27 b) Holders As of April 13, 2009, there were approximately 1,500 holders of record of the Registrant's common stock. c) Dividends MPM has not paid dividends in the past. It is not anticipated that MPM will distribute dividends for the foreseeable future. Earnings of MPM are expected to be retained to enhance its capital and expand its operations. d) Recent Sales of Unregistered Securities None Item 6. Selected Financial Data Selected Financial Data (Unaudited)
2008 2007 2006 2005 2004 --------------- --------------- --------------- ------------------------------ Statement of Operations Data Revenue $567,343 $2,715,205 $1,729,257 $1,959,353 $1,849,948 Gross margin $318,201 $829,038 $673,489 $787,852 $818,846 Operating loss ($941,871) ($804,341) ($417,034) ($299,161) ($1,209,370) Net income (loss) ($1,717,511) ($2,301,682) ($1,092,896) $1,898,498 ($1,905,446) Net income (loss) per share basic ($0.27) ($0.37) ($0.33) $0.60 ($0.60) Net income (loss) per share diluted ($0.27) ($0.37) ($0.33) $0.40 ($0.60) Weighted average shares outstanding - basic 6,257,025 6,263,064 3,318,078 3,183,064 3,183,064 Weighted average shares outstanding - diluted 6,257,025 6,263,064 3,318,078 5,067,599 3,183,064 Balance Sheet Data Total assets $1,293,397 $1,255,550 $2,082,397 $1,739,992 $2,125,323 Total liabilities $13,470,305 $11,726,059 $9,881,008 $9,215,707 $11,499,536 Stockholders' impairment ($12,176,908) ($10,470,509) ($7,798,611) ($7,475,715) ($9,374,213) Other Information Net cash provided by (used in) operating activities ($545,190) ($1,660,781) $134,828 ($311,483) ($1,053,410) Working capital deficit ($13,388,664) ($11,630,782) ($5,889,394) ($5,822,003) ($8,111,209) Return on average stockholders' impairment -15.2% -24.7% -14.3% 22.5% -22.6% Stock price at year end $0.25 $0.30 $0.50 $0.22 $0.25 Number of employees 5 7 7 8 8 Number of stockholders 1,500 1,600 1,800 1,800 1,800
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In addition to reading this section, you should read the consolidated financial statements that begin on page F-1. That section contains all detailed financial information including our results of operations. a) Results of Operations 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 to run this air pollution control business. The results of operations for the years ended December 31, 2008 and 2007 include the operations of AirPol. For the year ended December 31, 2008, MPM had consolidated revenues of $567,343. Consolidated revenues for 2007 were $2,715,205. MPM had a net loss for the year 2008 of $1,717,511, or $0.27 per share. MPM's net loss for 2007 was $2,301,682, or $0.37 per share. Revenues were again hurt by the lack of enforcement of clean air laws. Air pollution control companies depend heavily on the enforcement of clean air laws. MPM's management continues to work to bring the Company to profitability. Other businesses are being evaluated to consider moving the Company's business toward other more profitable ventures. There have been significant consolidations in the air pollution control industry in the past few years. MPM management's short- term goal is to operate a lean, profitable company. 2008 COMPARED TO 2007 Revenues decreased $2,147,862 (or 79%) from $2,715,205 in 2007 to $567,343 in 2008. This included a decrease in project revenues of $1,861,638, while revenues from parts and service decreased by $286,224. The decrease in project revenues was due primarily to there being virtually no projects for the 2008 year. A small project was completed at the beginning of the year, and another small project was started in December 2008. The net loss for 2008 was $1,717,511 or $0.27 per share compared to $2,301,682 or $0.37 per share in 2007. Selling, general and administrative expenses decreased $373,307 from $1,633,379 in 2007 to $1,260,072 in 2008. This decrease is due primarily to decreases in payroll and related costs. Loss on settlements went from $867,992 in 2007 to $0 in 2008. During the first quarter 2007, MPM incurred a one-time settlement expense of $1,050,000, related to a project for which AirPol was a subcontractor, and whose general contractor's systems were found to be faulty. The disputes went through mediation and AirPol management decided to settle the disputes rather than incur the costs of arbitration. Additional costs were also attributable to this settlement loss in 2007. The net loss in 2008 includes interest expense of $775,210 as compared to $653,569 in 2007. This is a result of increased borrowings and no debt repayments. LIQUIDITY AND CAPITAL RESOURCES During 2008, funds for operations were provided primarily by loans from an officer/director. Current cash reserves and continuing operations of AirPol are not believed to be adequate to fund MPM and its subsidiaries' operations for the foreseeable future. MPM management is considering alternative sources of capital such as private placements, other stock offerings and loans from shareholders and officers to fund its current business and expand in other related areas through more acquisitions. Following is a summary from MPM's consolidated statements of cash flows: Year ended December 31, 2008 2007 ---- ---- Net cash used in operating activities $ (545,190) $ (1,660,781) Net cash used in investing activities $ (54,375) $ (32,000) Net cash provided by financing activities $ 568,612 $ 1,296,801 Net decrease in cash and cash equivalents $ ( 30,953) $ (395,980) Net cash used in operating activities in 2008 was due to the net loss of the Company. The net cash used in operating activities in 2007 was due to the net loss of the Company and decreases in billings in excess of costs and estimated earnings. The net cash provided by financing activities in 2008 of $568,612 was due to loans from related parties. The net cash provided by financing activities in 2007 of $1,296,801 were due to loans from an insurance company and related parties. The Company has a working capital deficiency of $13,388,664 at December 31, 2008. Current liabilities include $7,216,660 of related party debt which management believes can be deferred beyond twelve months. Also included in current liabilities is $5,457,565 of a note payable which management is currently renegotiating. Management is optimistic that the lender will agree to terms that will extend the payment and allow the Company to meet its obligations and continue business for the next twelve months. There is no guarantee of the outcome of these plans. MPM may need to raise additional capital in the future to expand its business and develop mineral properties. MPM cannot be certain that additional financing will be available when and to the extent required or that, if available, it will be on acceptable terms. If adequate funds are not available on acceptable terms, MPM may not be able to fund its operations, develop or enhance its products or services or respond to competitive pressures. APPLICATION OF CRITICAL ACCOUNTING POLICIES In preparing our financial statements we are required to formulate working policies regarding valuation of our assets and liabilities and to develop estimates of those values. In our preparation of the financial statements for 2008, there were at least two estimates made which were (a) subject to a high degree of uncertainty and (b) material to our results. These estimates were our determination, detailed in the footnotes to the financial statements on our Mineral Properties and Income Taxes, and our valuation allowances, if any, on them. We have not reserved our mineral properties but we have recorded a valuation allowance for the full value of the deferred tax asset created by our net operating loss carry forward. The primary reason for our determination of our mineral properties is our knowledge of increasing market prices for precious metals, our expectation that such precious metals are contained within these properties, and our current cost and carrying value of the properties are less than the undiscounted cash flows expected to result from the use and eventual disposition of the properties. We have reserved an allowance against our deferred tax assets from our net operating loss carryforwards due to the lack of certainty as to whether MPM will carry on profitable operations in the future in order to utilize such tax benefits before they expire. We made no material changes to our critical accounting policies in connection with the preparation of financial statements for 2008. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In December 2007, the FASB issued SFAS 141(R), "Business Combinations". SFAS 141(R) establishes principles and requirements for an acquirer, which improves the relevance, representational faithfulness and comparability of information provided by a reporting entity in its financial reports about business combinations and its effects. SFAS 141(R) is effective prospectively to business combinations with an acquisition date on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We do not expect the effect of adopting SFAS 141(R) will have a material effect on our financial statements. In December 2007, the FASB issued SFAS 160, "Noncontrolling Interests in Consolidated Financial Statements (an amendment of ARB No. 51)". SFAS 160 establishes accounting and reporting standards designed to improve the relevance, comparability and transparency of the financial information provided in a reporting entity's consolidated financial statements. SFAS 160 requires that ownership interests in subsidiaries held by parties, other than the parent, to be clearly identified, labeled and presented in the consolidated balance sheet within the equity, but separate from the parent's equity; net income attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of operations; changes in the parent's ownership interest to be accounted for as equity transactions, if a subsidiary is deconsolidated and any retained noncontrolling equity investment to be measured at fair value; and that entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and noncontrolling owners. FAS 160 is effective for fiscal years and interim periods beginning on or after December 15, 2008. We do not expect the impact of SFAS 160 to have a material effect on our financial statements. In February 2008, the FASB issued FASB Staff Position FAS 157-2, "Effective Date of FASB Statement No. 157", which delays the effective date of Statement No. 157 for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. We do not believe the effect of adopting FASB Staff Position FAS 157-2 will have a material impact on our consolidated financial statements. In April 2008, the FASB issued FASB Staff Position FAS 142-3, "Determination of the Useful Life of Intangible Assets". FASB Staff Position FAS 142-3 requires that in developing assumptions about renewal or extension used to determine the useful life of a recognized intangible asset, an entity shall consider its own historical experience in renewing or extending similar arrangements; however, these assumptions should be adjusted for entity-specific factors. In the absence of that experience, an entity shall consider the assumptions that market participants would use about renewal or extension (consistent with the highest and best use of the asset by market participants), adjusted for the entity-specific factors. For a recognized intangible asset, an entity shall disclose information that enables users of financial statements to assess the extent to which the expected future cash flows associated with the asset are affected by the entity's intent and/or ability to renew or extend the arrangement. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The guidance for determining the useful life of a recognized intangible asset shall be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. We do not believe the effect of adopting Staff Position FAS 142-3 will have a material impact on our consolidated financial statements. In May 2008, the FASB issued FASB Statement No. 162, "The Hierarchy of Generally Accepted Accounting Principles". Statement No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. Statement No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles". We adopted Statement No. 162 in the fourth quarter of 2008. The adoption of Statement No. 162 did not have a material impact on our consolidated financial statements. In June 2008, the FASB issued EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities". EITF 03-6-1 requires that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period earnings per share data presented shall be adjusted retrospectively to conform to the provisions of this EITF. Early application is not permitted. We do not believe the effect of adopting EITF 03-6-1 will have a material impact on our consolidated financial statements. In June 2008, the FASB issued EITF 08-3, "Accounting by Lessees for Nonrefundable Maintenance Deposits". EITF 08-3 requires that all nonrefundable maintenance deposits should be accounted for as deposits. When the underlying maintenance is performed, the deposit is expensed or capitalized in accordance with the lessee's maintenance accounting policy. Once it is determined that an amount on deposit is not probable of being used to fund future maintenance expense, it is recognized as additional expense at the time such determination is made. EITF 08-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Earlier application is not permitted. We do not believe adopting EITF 08-3 will have a material impact on our consolidated financial statements. In September 2008, the FASB issued FASB Staff Position FIN 45-4, "Amendment to Disclosure Requirements of Interpretation 45-Guarantor's Accounting and Disclosure Requirements for Guarantees". FIN 45-4 requires disclosures of the current status of the payment/performance risk of the guarantee. For example, the current status of the payment performance risk of a credit-risk-related guarantee could be based on either recently issued external credit ratings or current internal groupings used by the guarantor to manage its risk. An entity that uses internal groupings shall disclose how those groupings are determined and used for management risk. FIN 45-4 is effective for reporting periods ending after November 15, 2008. The adoption of FIN 45-4 did not have a material impact on our consolidated financial statements. In October 2008, the FASB issued FASB Staff Position FAS 157-3, "Determining the Fair Value of a Financial Asset when the Market for that Asset is not Active". FASB Staff Position FAS 157-3 clarifies the application of FASB Statement No. 157, "Fair Value Measurements", in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. This pronouncement was effective upon issuance, including prior periods for which financial statements have not been issued. The adoption of FASB Staff Position FAS 157-3 did not have a material impact on our consolidated financial statements. In December 2008, the FASB issued FASB Staff Position FAS 132(R)-1, "Employer's Disclosures about Postretirement Benefit Plan Assets", which amends FASB Statement No. 132 (Revised 2003), "Employer's Disclosures abut Pensions and Other Postretirement Benefits", to provide guidance on an employer's disclosures about plan assets of a defined benefit pension or other postretirement plan. This pronouncement is effective for fiscal years ending after December 15, 2009. Upon initial application, the provisions of this FASB Staff Position are not required for earlier periods that are presented for comparative purposes. Earlier application of the provision is permitted. We do not believe Staff Position FAS 132(R)-1 will have a material impact on our consolidated financial statements. IMPACT OF INFLATION Although inflation has been low in recent years, it is still a factor in our economy and MPM continually seeks ways to mitigate its impact. To the extent permitted by competition, AirPol passes increased costs on to its customers by increasing prices over time. Management estimates that the impact of inflation on the revenues for 2008 was negligible. Since MPM did not engage in any mining operations, sales of metals or metal bearing ores, and was in the development stage of the waste-to-energy process, inflation did not materially impact the financial performance of those segments of the MPM's business. Management estimates that the operations of MPM were only nominally impacted by inflation. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Forward-looking statements in this report, including without limitation, statements relating to MPM's plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) MPM's loans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of MPM's management; (ii) MPM's plans and results of operations will be affected by its ability to manage its growth and (iii) other risks and uncertainties indicated from time to time in MPM's filings with the Securities and Exchange Commission. Item 8. Financial Statements The financial statements follow on the next page. MPM TECHNOLOGIES, INC. AND SUBSIDIARIES --------------------------------------- CONSOLIDATED FINANCIAL STATEMENTS --------------------------------- DECEMBER 31, 2008 AND 2007 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES --------------------------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm ....................F-2 Consolidated Balance Sheets as of December 31, 2008 and 2007 ...............F-3 Consolidated Statements of Operations for the years ended December 31, 2008 and 2007 ............................................F-4 Consolidated Statement of Stockholders' Equity for the years ended December 31, 2008 and 2007 ............................................F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2008 and 2007 ............................................F-6 Notes to Consolidated Financial Statements...........................F-7 to F-17 Report of the Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of MPM Technologies, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of MPM Technologies, Inc. and Subsidiaries as of December 31, 2008 and 2007 and the related consolidated statements of operations, stockholders' equity (impairment) and cash flows for each of the two years in the two-year period ended December 31, 2008. MPM Technologies, Inc. and Subsidiaries' management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MPM Technologies, Inc. and Subsidiaries as of December 31, 2008 and 2007, and the consolidated results of its operations and cash flows for each of the two years in the two-year period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. 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, the Company has not been able to generate any significant revenues and has a working capital deficiency of $13,388,664 at December 31, 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. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Rosenberg Rich Baker Berman & Company Bridgewater, New Jersey April 13, 2009 F-2
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ASSETS December 31, ------------------------------------------- 2008 2007 ------------------- ----------------- Current assets: Cash and cash equivalents $ 16,290 $ 47,243 Accounts receivable, net of allowance for doubtful accounts of $-0- and $10,000, respectively 57,101 23,916 Other current assets 8,250 24,118 ------------------- ----------------- Total current assets 81,641 95,277 ------------------- ----------------- Property, plant and equipment, net (note 4) 5,013 7,905 Mineral properties held for sale (note 11) 1,070,368 1,070,368 Other assets, net (note 15) 136,375 82,000 ------------------- ----------------- 1,293,397 1,255,550 =================== ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 350,741 257,883 Accrued expenses 395,841 299,369 Billings in excess of costs and estimated earnings 49,498 - Notes payable (note 5) 5,457,565 5,180,203 Related party debt (note 6) 7,216,660 5,988,604 ------------------- ----------------- Total current liabilities 13,470,305 11,726,059 ------------------- ----------------- Commitments and contingencies - - Stockholders' equity (impairment): 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 (24,462,914) (22,745,403) ------------------- ----------------- Total stockholders' equity (impairment) (12,176,908) (10,470,509) ------------------- ----------------- $ 1,293,397 $ 1,255,550 =================== ================= See accompanying summary of accounting policies and notes to the consolidated financial statements.
F-3
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, -------------------------------------------- 2008 2007 -------------------- ------------------- Revenues - Projects (Note 3)......................................... $ 39,432 $ 1,901,070 Revenues - Parts and service (Note 3)................................ 527,911 814,135 -------------------- ------------------- Total Revenues...................................................... 567,343 2,715,205 -------------------- ------------------- Cost of sales - Projects............................................. 7,821 1,498,675 Cost of sales - Parts and service.................................... 241,321 387,492 -------------------- ------------------- Total cost of sales.................................................. 249,142 1,886,167 -------------------- ------------------- Gross margin......................................................... 318,201 829,038 Selling, general and administrative expenses......................... 1,260,072 1,633,379 -------------------- ------------------- Loss from operations................................................. (941,871) (804,341) -------------------- ------------------- Other income (expense): Loss on settlements (Note 17 ).................................... - (867,992) Interest expense (Note 5and 6).................................... (775,800) (653,569) Other income (expense), net....................................... 160 (24,220) -------------------- ------------------- Net other expense.................................................... (775,640) (1,497,341) -------------------- ------------------- Net (loss) .......................................................... $ (1,717,511) $ (2,301,682) ==================== ==================== Loss per share - basic and diluted................................... $ (0.27) $ (0.37) ==================== ==================== Weighted average shares of common stock outstanding - basic and diluted................................................ 6,257,025 6,263,064 ==================== ==================== See accompanying summary of accounting policies and notes to the consolidated financial statements.
F-4
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Total Common Stock Additional Stockholders' --------------------------- Paid-In Accumulated Equity Shares Amount Capital Deficit (Impairment) ------------ ---------- ------------ -------------- -------------- Balance, January 1, 2007......................... 6,263,064 $ 6,263 $ 12,233,939 $ (20,443,721) $ (8,203,519) Stock based compensation......................... - - 34,692 - 34,692 Net loss......................................... - - - (2,301,682) (2,301,682) ------------ ---------- ------------ -------------- -------------- Balance, December 31, 2007............... 6,263,064 6,263 12,268,631 (22,745,403) (10,470,509) Stock issued for options exercised 44,446 45 11,067 - 11,112 Net loss....................................... - - - (1,717,511) (1,717,511) ------------ ---------- ------------ -------------- -------------- Balance, December 31, 2008............... 6,307,510 $ 6,308 $ 12,279,698 $ (24,462,914) $ (12,176,908) ============ ========== ============ ============== ============== See accompanying summary of accounting policies and notes to the consolidated financial statements.
F-5
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2008 2007 ------------- ------------ Cash flows from operating activities: Net loss $ (1,717,511) $(2,301,682) Adjustments to reconcile net (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 2,892 90,139 Stock based compensation - 34,692 Allowance for doubtful accounts (10,000) - Accrued interest and expenses on note payable 277,362 197,865 Accrued interest and deferred expenses on related party debt 670,556 597,503 Changes in assets and liabilities: Accounts receivable (23,185) 377 Costs and estimated earnings in excess of billings - 74,215 Other current assets 15,868 136 Accounts payable and accrued expenses 189,330 98,408 Billings in excess of costs and estimated earnings 49,498 (452,434) ------------- ------------ Net cash used in operating activities (545,190) (1,660,781) ------------- ------------ Cash flows from investing activities: Cash paid for patent (54,375) (32,000) ------------- ------------ Net cash used in investing activities (54,375) (32,000) ------------- ------------ Cash flows from financing activities: Borrowings from related parties 557,500 145,000 Borrowings on note payable - 1,151,801 ------------- ------------ Cash proceeds from stock options exercised 11,112 - ------------- ------------ Net cash provided by financing activities 568,612 1,296,801 ------------- ------------ Net increase (decrease) in cash and cash equivalents (30,953) (395,980) Cash and cash equivalents, beginning of year 47,243 443,223 ------------- ------------ Cash and cash equivalents, end of year $ 16,290 $ 47,243 ============= ============ Supplemental Disclosures Of Cash Flow Information Cash paid during the year for: Interest $ 598 $ 1,089 Income taxes $ 3,680 $ 4,260 See accompanying summary of accounting policies and notes to the consolidated financial statements.
F-6 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of Operations, Principles of Consolidation and Basis of Presentation Nature of Operations MPM Technologies, Inc. (the Company) was incorporated as Okanogan Development, Inc. on July 18, 1983, under the laws of the State of Washington. It was formed primarily for the purpose of investing in real estate and interests in real estate. On April 25, 1985, the Company combined with MADD Exploration (MADD), a Montana partnership, and changed its name to Montana Precision Mining, Ltd. In August 1995, the Company changed its name to MPM Technologies, Inc. As a result of the combination with MADD, the Company acquired mining properties located in Powell County, Montana. The Company is not currently engaged in exploration or developmental mining activities in regard to these properties. AirPol, Inc. (AirPol), a wholly owned subsidiary, was acquired on July 2, 1998. AirPol designs, engineers, supplies and services air pollution control systems. AirPol's systems utilize wet and dry scrubbers, wet electrostatic precipitators and venturi absorbers to control air pollution. The Company holds a 58.21% interest in NuPower Partnership through its ownership of NuPower, Inc. (NuPower), its wholly-owned subsidiary. 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 partnership interest, MPM owns 15% of the Venture. In 2008 a new company was incorporated named Skygas Energy Ontario Limited. NuPower owns all 100 of the issued and outstanding shares of the new company. It is anticipated that this company will be part of a business venture in Canada to commercialize the Skygas process. Management is currently in negotiations with unrelated third parties with regard to this venture. It is unclear at this time what form this venture will take. The United States patent on the Skygas process expired in November 2008. The Company filed a provisional new patent for a significantly improved Skygas process in February 2009. There can be no guarantee that the new patent will be approved at this time. There is also a Canadian patent on the Skygas process that is due to expire in April 2009. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and the following subsidiaries and other entities controlled by the Company: AirPol, Inc. (AirPol), MPM Mining, Inc., NuPower, Inc. (NuPower), NuPower Partnership (a General Partnership) and Skygas Venture (Skygas). Intercompany accounts and transactions among the companies have been eliminated. Segment Reporting Management considers MPM's reportable segments to be business units that offer different products. The business segments may be reportable because they are each managed separately, or they design and engineer distinct products with different applications in the air pollution control field. AirPol operates in the air pollution control field. MPM's other segments are essentially non-operational at the present time, and, accordingly have been aggregated for reporting purposes. Accordingly, for the years ended December 31, 2008 and 2007, the Company operated in one segment, and there is no separate segment reporting required. F-7 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of December 31, 2008, the Company has a working capital deficiency, an accumulated deficit, and has not been able to generate any significant revenues. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. The Company plans to raise additional capital in the future. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company has a working capital deficiency of $13,388,664. Current liabilities include $7,216,660 of related party debt which management believes can be deferred beyond twelve months. Also included in current liabilities is $5,457,565 of a note payable which management is currently renegotiating. Management is optimistic that the lender will agree to terms that will extend the payment and allow the Company to meet its obligations and continue business for the next twelve months. There is no guarantee of the outcome of these plans. 3. Summary of Significant Accounting Policies Revenue Recognition Contract revenue is recognized on the percentage-of-completion method in the ratio that costs incurred bear to estimated costs at completion. Costs include all direct material and labor costs, and indirect costs, such as supplies, tools, repairs and depreciation. Selling, general and administrative costs are charged to expense as incurred. Other revenue is recorded on the basis of shipment or performance of services or shipment of products. Provision for estimated contract losses, if any, is made in the period that such losses are determined. During 2008 and 2007, no amounts were recognized for estimated contract losses. The asset "costs and estimated earnings in excess of billings" represents revenues recognized in excess of amounts invoiced. The liability "billings in excess of costs and estimated earnings" represents invoices in excess of revenues recognized. Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation. For financial reporting purposes, the costs of plant and equipment are depreciated over the estimated useful lives of the assets, which range from three to fifteen years, using the straight-line method. Purchased Intangible Purchased intangible represents the excess of the purchase price over the fair value of net assets acquired and is being amortized on a straight-line basis over its estimated period of future benefit of ten years. The Company periodically evaluates the recoverability of purchased intangible. The measurement of possible impairment is based primarily on the Company's ability to recover the unamortized balance of the purchased intangible from expected future operating cash flows on an undiscounted basis. Asset Impairment The Company evaluates its long-lived assets for financial impairment, and continues to evaluate them as events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. The Company evaluates the recoverability of long-lived assets by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with them. At the time such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. F-8 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income Taxes The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". SFAS No. 109 uses the asset and liability method so that deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws and tax rates. Deferred income tax expense or benefit is based on the changes in the financial statement basis versus the tax bases in the Company's assets or liabilities from period to period. Research and Development Costs Research and development costs are charged to expense as incurred. Advertising Costs Advertising costs are charged to operations when incurred. Advertising expense was $3,167 and $3,675 for the years ended December 31, 2008 and 2007, respectively. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. Those estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Stock Based Compensation The Company accounts for stock, stock options and stock warrants issued for services and compensation by employees under the fair value method. For non-employees, the fair market value of the Company's stock is measured on the date of stock issuance or the date an option/warrant is granted. The Company determined the fair market value of the warrants/options issued under the Black-Scholes Pricing Model. Effective January 1, 2006, the Company adopted the provisions of SFAS 123(R), SHARE-BASED PAYMENT, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of SFAS 123(R), share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity grant). 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. Fair Value of Financial Instruments The carrying amounts reported in the balance sheet as of December 31, 2008 for cash equivalents, investments, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of notes payable and long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect recent market conditions. F-9 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Cash and Cash Equivalents For purposes of balance sheet classification and the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Warranty Reserve The Company warranties its pollution control units for defects in design, materials, and workmanship generally for a period of 18 months from date sold or 12 months from date placed in service. Provision for estimated warranty costs is recorded upon completion of the project and periodically adjusted to reflect actual experience. Earnings Per Share SFAS No. 128 requires dual presentation of basic earnings per share and diluted earnings per share on the face of all income statements issued after December 15, 1997 for all entities with complex capital structures. Basic earnings per share includes no dilution and is calculated by dividing income available to common shareholders by the weighted average number of shares actually outstanding during the period. Diluted earnings per share reflect the potential dilution of securities (such as stock options, warrants and securities convertible into common stock) that could share in the earnings of an entity. At December 31, 2008 and 2007, outstanding options to purchase 2,085,084 and 2,186,675, respectively, shares of the Company's common stock were not included in the computation of diluted earnings per share as their effect would have been antidilutive. 4. Property, Plant and Equipment Property, plant and equipment consist of the following at: December 31, ------------------------------- 2008 2007 -------------- -------------- Equipment.............................$ 271,437 $ 271,437 Furniture and fixtures................ 31,008 31,008 Leasehold improvements................ 8,321 8,321 -------------- -------------- 310,766 310,766 Less accumulated depreciation......... 305,753 302,861 -------------- -------------- $ 5,013 $ 7,905 ============== ============== Depreciation expense charged to operations was $2,892 and $2,500 in 2008 and 2007, respectively. F-10 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. 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 could borrow up to $500,000 at 5.25% per annum, which was increased to $3,000,000 in 2003. As of December 31, 2008 and 2007, the Company had $4,326,499 and $4,326,499, respectively, of principal advances and accrued interest of $1,131,066 and $853,704, respectively, outstanding under the agreement. During the years ended December 31, 2008 and 2007, the Company recorded interest expense of $277,362 and $197,865, respectively. The note is secured by stock and mineral property held for investment and matured on January 2, 2008. This note payable has not been paid at maturity and management is currently renegotiating its terms with the lender. Through the date of this report, no revised terms have been arranged on this defaulted debt. 6. Related Party Debt Related party debt consists of the following at:
December 31, ------------------------------- 2008 2007 -------------- -------------- Due to an officer/director..........................................$ 4,138,449 $ 3,512,854 Due to a trust for which an officer/director is trustee............. 2,239,525 1,721,560 Due to a partnership for which the above trust and another officer/director are partners....................................... 388,453 354,253 Due to another officer/director..................................... 450,133 399,937 -------------- -------------- $ 7,216,660 $ 5,988,604 ============== ==============
The related party debt consists of advances received from and deferred expenses and reimbursements to the parties shown above. Interest expense accrued on this related party debt for the years ended December 31, 2008 and 2007 was $670,556 and $455,925, respectively. The debt is unsecured, bears interest at 12% per annum, and is due on demand. 7. Commitments and Contingencies The Company leases office space and mineral properties under operating leases that expire at various dates through 2010. Future minimum rental payments required under operating leases that have initial and remaining non-cancellable terms in excess of one year are as follows: $82,968 for the year ending December 31, 2009, and $50,023 for the year ending December 31, 2010. Rent expense for the years ended December 31, 2008 and 2007 was $87,341 and $87,356, respectively. The Company has entered into an exclusive license rights agreement for technology to be utilized in its SkyGas venture. Pursuant to the terms of the agreement, the Company agreed to pay $72,000 annually through April, 2009. The agreement may be terminated by the Company at any time. In December 2007, the Company entered an agreement with an officer/director regarding payroll reductions in 2003. Under the terms of the agreement, the Company will retroactively reimburse the officer/director for salary reductions from April 2003 if certain conditions are met. These include the profitability of the Company and its ability to repay the amounts due. Additionally, under the terms of the agreement, unpaid accrued amounts will bear interest at 8% per annum beginning January 1, 2008. For the years ended December 31, 2008 and 2007, amounts accrued and charged to expense were $40,238 and $133,494, respectively, which includes accrued interest of $12,134 and $-0-, respectively. F-11 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company has a contract with R.D. Little Co. to provide shareholder and investor relations services. During 2008, the Company renewed this contract for five more years. Robert D. Little, Secretary of the company, owns R.D. Little Co. For the years ended December 31, 2008 and 2007, MPM paid $74,400 and $55,000, respectively, for these services. 8. Income Taxes The significant components of the Company's net deferred tax asset is as follows as of December 31:
2008 2007 -------------- -------------- Net operating loss carryforward....................$ 4,200,000 $ 5,000,000 Differences between book and tax depreciation...... 20,000 20,000 Goodwill and purchase asset adjustments............ - 10,000 Write-down of mineral properties................... 136,000 136,000 Other.............................................. 40,000 40,000 -------------- -------------- 4,396,000 5,206,000 Less: valuation allowance.......................... 4,396,000 5,206,000 -------------- -------------- $ - $ - ============== ==============
As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established at December 31, 2008 and 2007. The valuation allowance decreased $810,000 since December 31, 2007. At December 31, 2008, the Company had net operating loss carryforwards for federal income tax purposes totaling approximately $10.5 million that expire in the years 2009 through 2028. MPM files income tax returns in various states. At December 2008, the Company has net operating loss carryforwards for state income tax purposes totaling ranging from approximately $2.7 to approximately $5.1 million, depending on the state, that expire in the years 2009 through 2028. 9. Stockholders' Equity Stock Option Plan On May 22, 1989, the shareholders of the Company voted to approve a stock option plan (the Plan) for selected key employees, officers and directors of the Company. The Plan is administered by a Compensation Committee of the Board of Directors (the "Committee") consisting of those directors of the Company and individuals who are elected annually by the Board of Directors to the Committee. The Board of Directors has chosen one of the Company's directors and one outside individual to serve on the Committee. No director eligible to receive options under the Plan may vote upon the granting of an option or Stock Appreciation Rights (SAR) to himself or herself or upon any decision of the Board of Directors or the Committee relating to the Plan. Under the Plan, a maximum of 236,667 shares were approved to be granted, which in 2003 was increased by 300,000. During the 2008 shareholders' meeting, the shareholders voted to increase the number of shares authorized to be granted under the plan by 500,000 shares. Generally, the Plan provides that the terms under which options may be granted are to be determined by a Committee subject to certain requirements as follows: (1) the exercise price will not be less than 100% of the market price per share of the common stock of the Company at the time an Incentive Stock Option is granted, or as established by the Committee for Non-qualified Stock Options or Stock Appreciation Rights; and (2) the option purchase price will be paid in full on the date of purchase. F-12 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Qualified stock option activity under the Plan and non-qualified stock option activity outside the Plan are summarized as follows: Weighted Average Option Options Price -------------- -------------- Outstanding at January 1, 2007 1,906,675 $ 0.90 Granted 280,000 0.30 Exercised - - Expired - - -------------- -------------- Outstanding at January 1, 2008 2,186,675 $ 0.90 Granted - $ - Exercised 44,446 0.25 Expired (57,145) - -------------- -------------- Outstanding at December 31, 2008 2,085,084 $ 0.78 ============== ============== The Company accounts for stock and stock options issued for services and compensation by employees under the fair value method. For non-employees, the fair market value of the Company's stock on the date of stock issuance or option/grant is used. The Company determined the fair market value of the options issued under the Black-Scholes Pricing Model. The Company adopted the provisions of Statement of Financial Accounting Standards SFAS) 123R SHARE-BASED PAYMENT, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of SFAS 123(R), share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee's requisite service period (generally the vesting period of the equity grant). The Company used the following assumptions in its calculation: Dividend yield-$0; Expected volatility 23%; Risk-free interest rate 3.49%; Expected life 5 years. The Company recorded expenses of $34,692 in 2007 related to the 280,000 options that were issued. No options were issued in 2008. The following table summarizes information about stock options outstanding at December 31, 2008: Options Number Weighted Outstanding and Range of Outstanding Average Exercisable Weighted Exercise and Exercisable Exercise Average Remaining Prices at 12/31/08 Price Contractual Life (Years) -------------- ---------------- ---------- ------------------------ $ 0.10 85,000 $ 0.10 6.8 $ 0.22 370,750 $ 0.22 4.7 $ 0.30 130,000 $ 0.30 8.8 $ 0.31 100,000 $ 0.31 8.1 $ 0.50 437,000 $ 0.50 1.2 $ 0.75 450,000 $ 0.75 2.7 $ 1.00 141,667 $ 1.00 1.5 $ 2.00 334,000 $ 2.00 0.3 $ 3.00 36,667 $ 3.00 0.4 --------------- ------------------------- $ 0.10 - $3.00 2,085,084 $ 0.78 3.0 =============== ========================= F-13 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. Valuation and Qualifying Accounts Allowance for doubtful account activity was as follows at December 31: December 31, ------------------------------- 2008 2007 ------------- -------------- Balance, beginning of year $ 10,000 $ 165,000 Charged to (deducted from) expense (10,000) (155,000) ------------- -------------- Balance, end of year $ - $ 10,000 ============= ============== 11. Mineral Properties In accordance with guidelines established by the American Institute of Certified Public Accountants, we conducted impairment testing on these assets. Factors evaluated included whether there was a significant decrease in the market prices of the assets. Impairment testing was necessary because of the Company's current period operating and cash flow losses, and its history of operating and cash flow losses. Impairment is defined in the accounting literature as the condition that exists when the carrying amount of a long-lived asset exceeds its fair value. An impairment loss shall be recognized only if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The mineral property and related equipment is carried on the balance sheet at at December 31, 2008 in the amount of $1,070,368. In performing impairment testing, we based our assessment on the carrying amount of the assets as of the date of the impairment testing for recoverability. As part of our testing, we made certain assumptions about the use of the assets and assigned probability levels based on assumptions of activity levels involved in the use of the assets. The result of our testing was that there was no impairment in the carrying amount of the mineral property. 12. Prepaid Royalty During 1994, the Company entered into an agreement to sell certain equipment related to the SkyGas technology to the inventor of this technology in exchange for a $275,000 note receivable. The note was collateralized by the equipment sold. Under the agreement, the note was due in a balloon payment of $275,000 on December 1, 1995 or at such time the Skygas process is placed into sustainable commercial production. Additional renewals have not been negotiated and the Company has re-characterized this former note receivable as prepaid royalties, recoverable from future revenues resulting from the operation of the equipment. The balance at December 31, 2008 of $273,000 has been offset against royalties payable to the estate of the inventor. 13. Related Party Transactions At December 31, 2008 and 2007, the Company owed $7,216,660 and $5,988,604, respectively, to an officer/director, a trust for which an officer/director is trustee, a partnership for which the trust and another officer/director are partners, and another officer/director. During 2008 and 2007, an officer/director loaned $217,500 and $65,000, respectively, to the Company. A trust for which an officer/director is trustee loaned $340,000 and $80,000 for 2008 and 2007, respectively. These loans are unsecured, bear interest at 12% per annum, and are due on demand. The Company contracts for its shareholder relations services with an officer of the Company. The Company incurred expenses to this related party for services in 2008 and 2007 of $74,400 and $55,000, respectively. F-14 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. Purchased Intangible In 1996, the Company issued 133,333 shares of its common stock to acquire an additional 15% interest in the SkyGas venture. The transaction was recorded at $675,000 based on the then-fair value of the shares issued. In accordance with FASB Technical Bulletin No. 84-1, the Company recorded an intangible asset representing the additional interest purchased in SkyGas's patent and licensing rights. This amount was fully amortized at December 31, 2007. 15. Other Assets, net Other Assets, net consist of the following at: December 31, ------------------------------- 2008 2007 ------------- -------------- Security deposit......................$ 50,000 $ 50,000 Patent................................ 86,375 32,000 ------------- -------------- $ 136,375 $ 82,000 ============= ============== 16. 401(k) Plan The Company (Airpol) maintains a 401(k) employee retirement plan for its eligible full-time employees with at least one year of service. The Company makes matching contributions equal to 50% up to a maximum 4% deferral. Contributions to the plan for the years ended December 31, 2008 and 2007 were $5,369 and $5,302, respectively. 17. Loss on Settlements In 2008, MPM recorded no gain or loss on settlements. During 2007, MPM recorded settlement expenses of $867,992. Settlements resulted primarily from the payment of $1,050,000 a project for which AirPol was a subcontractor. The general contractor's systems were found to be faulty, and ultimately were removed. The customer made claims against the general contractor. The general contractor then made claims against its subcontractors. The disputes went through mediation and were about to go to arbitration. AirPol management decided to settle the disputes rather than incur the costs of arbitration. AirPol is attempting to recover the losses through its insurance carrier. There can, however, be no assurances that AirPol will be successful in its recovery attempts. 18. New Accounting Pronouncements In December 2007, the FASB issued SFAS 141(R), "Business Combinations". SFAS 141(R) establishes principles and requirements for an acquirer, which improves the relevance, representational faithfulness and comparability of information provided by a reporting entity in its financial reports about business combinations and its effects. SFAS 141(R) is effective prospectively to business combinations with an acquisition date on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We do not expect the effect of adopting SFAS 141(R) will have a material effect on our financial statements. In December 2007, the FASB issued SFAS 160, "Noncontrolling Interests in Consolidated Financial Statements (an amendment of ARB No. 51)". SFAS 160 establishes accounting and reporting standards designed to improve the relevance, comparability and transparency of the financial information provided in a reporting entity's consolidated financial statements. SFAS 160 requires that ownership interests in subsidiaries held by parties, other than the parent, to be clearly identified, labeled and presented in the consolidated balance sheet within the equity, but separate from the parent's equity; net income attributable to the parent and the noncontrolling interest to be clearly identified and presented F-15 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS on the face of the consolidated statement of operations; changes in the parent's ownership interest to be accounted for as equity transactions, if a subsidiary is deconsolidated and any retained noncontrolling equity investment to be measured at fair value; and that entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and noncontrolling owners. SFAS 160 is effective for fiscal years and interim periods beginning on or after December 15, 2008. We do not expect the impact of SFAS 160 to have a material effect on our financial statements. In February 2008, the FASB issued FASB Staff Position FAS 157-2, "Effective Date of FASB Statement No. 157", which delays the effective date of Statement No. 157 for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. We do not believe the effect of adopting FASB Staff Position FAS 157-2 will have a material impact on our consolidated financial statements. In April 2008, the FASB issued FASB Staff Position FAS 142-3, "Determination of the Useful Life of Intangible Assets". FASB Staff Position FAS 142-3 requires that in developing assumptions about renewal or extension used to determine the useful life of a recognized intangible asset, an entity shall consider its own historical experience in renewing or extending similar arrangements; however, these assumptions should be adjusted for entity-specific factors. In the absence of that experience, an entity shall consider the assumptions that market participants would use about renewal or extension (consistent with the highest and best use of the asset by market participants), adjusted for the entity-specific factors. For a recognized intangible asset, an entity shall disclose information that enables users of financial statements to assess the extent to which the expected future cash flows associated with the asset are affected by the entity's intent and/or ability to renew or extend the arrangement. This guidance is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The guidance for determining the useful life of a recognized intangible asset shall be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. We do not believe the effect of adopting Staff Position FAS 142-3 will have a material impact on our consolidated financial statements. In May 2008, the FASB issued FASB Statement No. 162, "The Hierarchy of Generally Accepted Accounting Principles". Statement No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles for nongovernmental entities. Statement No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles". We adopted Statement No. 162 in the fourth quarter of 2008. The adoption of Statement No. 162 did not have a material impact on our consolidated financial statements. In June 2008, the FASB issued EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities". EITF 03-6-1 requires that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period earnings per share data presented shall be adjusted retrospectively to conform to the provisions of this EITF. Early application is not permitted. We do not believe the effect of adopting EITF 03-6-1 will have a material impact on our consolidated financial statements. In June 2008, the FASB issued EITF 08-3, "Accounting by Lessees for Nonrefundable Maintenance Deposits". EITF 08-3 requires that all nonrefundable maintenance deposits should be accounted for as deposits. When the underlying maintenance is performed, the deposit is expensed or capitalized in accordance with the lessee's maintenance accounting policy. Once it is determined that an amount on deposit is not probable of being used to fund future maintenance expense, F-16 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS it is recognized as additional expense at the time such determination is made. EITF 08-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Earlier application is not permitted. We do not believe adopting EITF 08-3 will have a material impact on our consolidated financial statements. In September 2008, the FASB issued FASB Staff Position FIN 45-4, "Amendment to Disclosure Requirements of Interpretation 45-Guarantor's Accounting and Disclosure Requirements for Guarantees". FIN 45-4 requires disclosures of the current status of the payment/performance risk of the guarantee. For example, the current status of the payment performance risk of a credit-risk-related guarantee could be based on either recently issued external credit ratings or current internal groupings used by the guarantor to manage its risk. An entity that uses internal groupings shall disclose how those groupings are determined and used for management risk. FIN 45-4 is effective for reporting periods ending after November 15, 2008. The adoption of FIN 45-4 did not have a material impact on our consolidated financial statements. In October 2008, the FASB issued FASB Staff Position FAS 157-3, "Determining the Fair Value of a Financial Asset when the Market for that Asset is not Active". FASB Staff Position FAS 157-3 clarifies the application of FASB Statement No. 157, "Fair Value Measurements", in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. This pronouncement was effective upon issuance, including prior periods for which financial statements have not been issued. The adoption of FASB Staff Position FAS 157-3 did not have a material impact on our consolidated financial statements. In December 2008, the FASB issued FASB Staff Position FAS 132(R)-1, "Employer's Disclosures about Postretirement Benefit Plan Assets", which amends FASB Statement No. 132 (Revised 2003), "Employer's Disclosures abut Pensions and Other Postretirement Benefits", to provide guidance on an employer's disclosures about plan assets of a defined benefit pension or other postretirement plan. This pronouncement is effective for fiscal years ending after December 15, 2009. Upon initial application, the provisions of this FASB Staff Position are not required for earlier periods that are presented for comparative purposes. Earlier application of the provision is permitted. We do not believe Staff Position FAS 132(R)-1 will have a material impact on our consolidated financial statements. F-17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures The management of MPM Technologies, Inc. is responsible for establishing and maintaining adequate internal control over disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)) MPM's internal control over disclosure controls and procedures and over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial disclosure and reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over disclosure controls and procedures and financial reporting includes those written policies and procedures that: pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of MPM; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America; provide reasonable assurance that receipts and expenditures of MPM are being made only in accordance with authorization of management and directors of MPM; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements. Internal control over disclosure controls and procedures and financial reporting includes the controls themselves, monitoring and internal auditing practices and actions taken to correct deficiencies as identified. Because of its inherent limitations, internal control over disclosure controls and procedures and financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of MPM's internal control over disclosure controls and procedures and financial reporting as of December 31, 2008. Management based this assessment on criteria for effective internal control over financial reporting described in "Internal Control - Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included an evaluation of the design of MPM's internal control over disclosure controls and procedures and financial reporting and testing of the operational effectiveness of its internal controls. Based on this assessment, management determined that, as of December 31, 2008, MPM had a material weakness because it did not have a sufficient number of personnel with adequate knowledge, experience and training in U.S. generally accepted accounting policies commensurate with MPM's reporting requirements. This material weakness required the identification of adjustments during the financial statement close process that have been recorded in MPM's consolidated financial statements. Because of this material weakness, management has concluded that internal controls over disclosure controls and procedures and financial reporting were not effective at December 31, 2008. Changes in Internal Control over Financial Reporting There have been no changes in the Company's internal control over disclosure controls and procedures and financial reporting that occurred during the fiscal year ended December 31, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART III Item 10. Directors, Executive Officers and Corporate Governance a) Identification of Directors FIRST ELECTED NAME AGE POSITION DIRECTOR - -------------------------------------------------------------------------------- Richard E. Appleby 69 Director 4/25/1985 Glen Hjort 56 Director 2/16/1998 Frank E. Hsu 63 Director 6/24/2002 Richard Kao 68 Director 6/28/1999 Michael J. Luciano 55 Director 2/16/1998 L. Craig Cary Smith 59 Director 4/25/1985 The directors will serve until the next meeting of shareholders or until their successors are elected and qualified. Effective February 9, 2007, Daniel Smozanek resigned as a Director. No actions have yet been taken regarding a potential replacement for him. b) Identification of Executive Officers. NAME AGE POSITION OFFICER SINCE - --------------------------------------------------------------------------- Richard E. Appleby 69 Vice President/Treasurer 4/25/1985 Glen Hjort 56 Chief Financial Officer 6/28/1999 Frank E. Hsu 63 Chief Operating Officer 6/24/2002 Robert D. Little 59 Secretary 1/03/1991 Michael J. Luciano 55 Chairman & CEO 2/16/1998 The officers will serve until the next meeting of shareholders or until their successors are elected and qualified. Effective February 9, 2007, Daniel D. Smozanek resigned as an officer of the Company. No actions have yet been taken regarding a potential replacement for him. c) Identification of Certain Significant Employees. As of December 31, 2008, MPM was dependent upon the services of its principal officers and directors. In the event that one of these persons should leave the Company, there is no assurance that the Company can employ a suitable replacement. d) Family Relations Michael J. Luciano, Chairman of the Board of Directors and Chief Executive Officer is the nephew of Richard E. Appleby, Vice President and Director. There are no other family relationships, whether by blood, marriage, or adoption, between any executives and/or directors. e) Business Experience Background Michael J. Luciano was elected Chairman and Chief Executive Officer in 1999. In 1998, he was named Senior Vice President and elected a director. His continuing responsibilities in addition to overall company management include negotiating ventures and business opportunities in the U.S., Europe, Asia, and Africa. Mr. Luciano was a co-owner of Morris County Sanitation Services, Inc. in East Hanover, New Jersey where he was responsible for acquisitions, governmental regulatory permitting and compliance. He is also the owner of MJL & associates involved in consulting services specializing in solid waste facilities, permitting, construction and operations. Mr. Luciano resides in Mt. Arlington, New Jersey. Glen Hjort was elected Chief Financial Officer in 1999 and has been a Director since 1998. Mr. Hjort is a certified public accountant with over thirty years experience providing services to numerous corporate clients in a wide variety of industries. Mr. Hjort resides in Palatine, Illinois. Frank E. Hsu is Chief Operating Officer and was elected Director in 2002. Mr. Hsu is a registered professional engineer with over thirty years of experience in design, manufacturing and construction of air pollution control equipment and solid waste disposal systems. He holds a B.S. Degree in Civil engineering from Taiwan Chen Kung University, an M.S. Degree in Environmental Engineering from New Jersey Institute of Technology and an MBA Degree from Fairleigh Dickinson University. Prior to joining AirPol in 1990, Mr. Hsu was Engineering Director of Belco Pollution Control Corp. In addition to his engineering and business management background, he also has extensive experience in international sales, marketing and project execution. Mr. Hsu resides in Warren, New Jersey. Richard E. Appleby is Vice President and a Director since 1985. He attended postgraduate courses at Rutgers in Landscape Design, Landscape Maintenance and Landscape Construction. From 1957 to 1973, Mr. Appleby was Superintendent and Manager of A-L Services and for Farm Harvesting Co., constructing all types of site development and landscape construction projects. From 1973 to 1980, he was Vice President of A-L Services and since 1980, has been President of that company. Mr. Appleby resides in Mendham, New Jersey. Robert D. Little is Secretary of the Company. He is a graduate of Central Washington University with a Bachelor of Arts Degree in Sociology; graduate studies at the University of Washington in Education and earned his Teacher Certification at Seattle University. From 1985 to the present, Mr. Little has been Manager for MPM and became Secretary of MPM in 1991. Mr. Little is the owner of R.D. Little Company which specializes in assisting small public companies with shareholder and investor relations from 1985 to the present. Mr. Little resides in Spokane, Washington. L. Craig Cary Smith has been a Director since 1985. Mr. Smith graduated from Gonzaga Law School in 1981 and was admitted to the Washington State Bar that same year. From 1981 to the present, Mr. Smith has been a partner in general practice at Smith Hemingway Anderson P.S. in Spokane, Washington. Mr. Smith resides in Spokane, Washington. Dr. Richard Kao has been a Director since 1998. Dr. Kao has PhD and Master of Science degrees in chemical engineering from the Illinois Institute of Technology in Chicago, and a Bachelor of Science degree in chemical engineering from Tunghai University in Taiwan. He presently serves as senior vice president of Unitel Technologies, Inc., and is responsible for the research, development, economic evaluation, assessment and upgrade of new technologies for commercial application for chemical, petroleum, solid/semi-solid/liquid waste, synthetic fuel, food, pulp, and paper industries. Prior to joining Unitel, he was Director of Technologies for the Gas Technology Institute (1967-1982). Prior to joining Unitel, he was Director of Technologies for Xytel Corporation (1988-1996). He is a registered professional engineer in Illinois and a member of Sigma Xi and the National Society of Professional Engineers. Dr. Kao resides in Northbrook, Illinois. (2) Directorships None of the directors of the Company are directors of other companies with securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such act or any company registered under the Investment Company Act of 1940. f) Involvement in Certain Legal Proceedings. Not Applicable g) Promoter and Control Persons. Not Applicable Item 11. Executive Compensation The following table shows the remuneration of officers and directors in excess of $100,000 in 2008 and 2007. Summary Compensation Table - --------------------------
Annual Compensation Name and Principal Position Year Salary Bonus(s) Compensation Awards(s)($)SARs($)Payout(s)($) Compensation - -------- ----------- -------- ------------ -------------------------------------------- Michael J. Luciano, 2008 $ 120,000 CEO 2007 $ 120,000 Frank E. Hsu 2008 $ 124,000 President 2007 $ 124,000
Option Grants In 2007 Fiscal Year Individual Grants Individual Grants
Market % of Total Price on Options Options Granted Exercise or Date of Expiration Name Granted In Fiscal Year Base Price Grant Date - ---- ------- ------------------ ---------------- ----------- ------------- Glen Hjort 50,000 18% $.30 $.30 4/4/17 Frank E Hsu 50,000 18% $.31 $.31 1/26/17 Frank E Hsu 50,000 18% $.30 $.30 10/4/17 Robert D Little 50,000 18% $.31 $.31 1/26/17 Robert D Little 50,000 18% $.30 $.30 10/4/17 Other Employees 30,000 11% $.30 $.30 10/9/17
Aggregated Option/SAR Exercises in Last Fiscal Year and FYE 2007 Option/SAR Values - ---------------------------------------------------------------------------------- Number of Securities Value of Underlying Unexercised Unexercised In-The-Money Options/SARs Options/SARs Shares At FY-End (#) At FY-End Acquired Value Exercisable/ Exercisable/ Name On Exercise Realized ($) Unexercisable Unexercisable - --------------------------------------------------------------------------------------------------------- Michael J. Luciano None 631,890 $-0- Exercisable Robert D. Little None 370,223 $-0- Exercisable L. Craig Cary Smith None 255,389 $-0- Exercisable Frank E. Hsu None 250,000 $-0- Exercisable Glen Hjort None 145,000 $-0- Exercisable Richard E. Appleby None 38,000 $-0- Exercisable
a) Current Remuneration. Except as noted above, none of the officers or directors is compensated for their services as an officer or director. Each is reimbursed for out-of-pocket expenses incurred on MPM business. b) Proposed Remuneration. It is not contemplated that any other salaries will be paid unless, and until such time as, MPM may require full time commitments from any officer or director. MPM's officers and directors are committed to the long-term success of the Company, and have, accordingly, weighted heavily any benefits received in the form of stock and stock options. c) Incentive and Compensation Plans and Arrangements. MPM has no incentive plans covering its officers and directors. No advances have been made, nor are any contemplated, by MPM to any of its officers or directors. The shareholders of MPM, at the Annual Shareholders Meeting on May 22, 1989, voted to approve a stock option plan for selected employees, officers and directors of MPM. The purpose of the option plan is to promote the interests of MPM and its stockholders by attracting, retaining and stimulating the performance of selected employees, officers and directors and giving such employees the opportunity to acquire a proprietary interest in MPM's business and an increased personal interest in this continued success and progress. At the 2008 annual shareholders' meeting, the shareholders voted to increase the number of shares authorized to be granted under the plan by 500,000 shares. Item 12. Security Ownership of Certain Beneficial Owners and Management a) Security Ownership of Certain Beneficial Owners. Except as noted in part b. below, no person or group was known by the Registrant except as noted below to own more than five percent (5%) of its common stock at December 31, 2008. b) Security Ownership of Management as of April 13, 2009. The following table sets forth, as of April 13, 2009 the amount and percentage of the Common Stock of MPM, which according to the information supplied to MPM, is beneficially owned by management, including officers and directors of MPM. Except as otherwise specified, the persons named in the table have sole voting power and investment power with respect to all shares of Common Stock beneficially owned by them.
Title of Name of Amount and Nature of Percent Class Beneficial Owner Beneficial Ownership [1] of Class - ----- ---------------- -------------------- -------- Common Michael J. Luciano 4,063,910 [2] 50.60 Common Robert D. Little 387,966 4.83 Common L. Craig Cary Smith 266,724 3.32 Common Richard E. Appleby 221,155 2.75 Common Frank E. Hsu 286,404 3.57 Common Glen Hjort 161,833 2.01 Common Richard Kao 64,222 0.80 Common As A Group 5,693,136 70.88
[1] Includes options available for exercise aggregating 1,724,056 shares for the entire group. [2] Does not include 396,509 shares (6.33%) of the Company's outstanding shares including options available for exercise owned by a trust for which Mr. Luciano is the Trustee. c.) Changes in Control. There are no contractual arrangements of any kind, known to MPM, which may at a subsequent date result in a change in control of MPM. Item 13. Certain Relationships and Related Transactions, and Director Independence a.) Transactions with Management and Others. No Officers or Directors of MPM, or nominees for election as Director, or beneficial owners of more than five percent of MPM's voting stock, or members of their immediate families had any material transactions with MPM other than as set forth in part b. of this item. b.) Certain Business Relationships. During 2008, Michael J. Luciano, Chairman and Chief Executive Officer, loaned the Company $217,500. Additionally, a trust for which Mr. Luciano is the trustee loaned the Company $340,000. At December 31, 2008, Mr. Luciano was owed $4,138,449 including accrued interest pursuant to unsecured demand notes. A trust for which Mr. Luciano is the trustee was owed $2,239,525 at December 31, 2008. A partnership, for which the trust and Richard E. Appleby, vice-president and director, are partners, was owed $388, 453 at December 31, 2008. Richard E. Appleby, Vice-President and director, was owed $450,133 by the Company at December 31, 2008. In September 2001, Michael J. Luciano, Chairman and Chief Executive Officer loaned the Company $600,000 evidenced by a convertible promissory note. Under the terms of the promissory note, the principal and any unpaid accrued interest may be converted to common stock at the option of the note holder. At December 31, 2008, Richard Appleby was owed $450,133 including accrued interest pursuant to unsecured demand notes. MPM has a contract with R.D. Little Co. to provide shareholder and investor relations services. During 2008, MPM renewed this contract for five more years. Robert D. Little, Secretary of the company, owns R.D. Little Co. For the years ended December 31, 2008 and 2007, MPM expensed $74,400 and $55,000, respectively, for these services. c) Other Information None Item 14. Principal Accountant Fees and Services Audit Fees Rosenberg Rich Baker Berman & Co. billed $41,325 and $38,300 to the Company for professional services rendered for the audits and reviews of the financial statements included in our Forms 10-KSB, Forms 10-QSB and Forms10-Q filings in 2008 and 2007, respectively. Audit-Related Fees Rosenberg Rich Baker Berman & Co. billed $-0- and $-0- to the Company in 2008 and 2007 for assurance and related services that are reasonably related to the performance of the 2008 and 2007 audit or review of the quarterly financial statements. Tax Fees Rosenberg Rich Baker Berman & Co. billed $4,908 and $5,000 to the Company in 2008 and 2007 for professional services rendered for tax compliance, tax advice and tax planning, respectively. All Other Fees Rosenberg Rich Baker Berman & Co. billed $0.00 to the Company in each year 2008 and 2007 for services not described above. It is the policy of the Company's Board of Directors that all services other than audit, review or attest services, must be pre-approved by the Board of Directors. All of the services described above were approved by the Board of Directors. Part IV Item 15. Exhibits and Financial Statement Schedules (A) Exhibits and Financial Statements have been previously reported or are being shown as an exhibit in this Form 10-K. Exhibit No. Description of Document - ----------- ----------------------- 31.1 Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e). 31.2 Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e). 32.1 Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities 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. By: /s/ Michael J. Luciano ---------------------- Title: Chairman and Chief Executive Officer Date: April 13, 2009 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Michael J. Luciano /s/ Glen Hjort - ----------------------- ------------------- Michael J. Luciano Glen Hjort Chairman & Chief Executive Officer Chief Financial Officer & Director Dated: April 13, 2009 Dated: April 13, 2009 /s/ Frank E. Hsu /s/ Richard E. Appleby - ------------------ -------------------------- Frank E. Hsu Richard E. Appleby Chief Operating Officer & Director Vice President & Director Dated: April 13, 2009 Dated: April 13, 2009 /s/ Richard Kao /s/ L. Craig Cary Smith - ------------------- --------------------------- Richard Kao L. Craig Cary Smith Director Director Dated: April 13, 2009 Dated: April 13, 2009 EX-31.1 2 a5939580ex31-1.txt EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION OF ANNUAL REPORT I, Michael J. Luciano, certify that: 1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2008 of MPM Technologies, Inc. (the "Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) ) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the Registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions abut the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any changes in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonable likely to materially affect the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; 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 over financial reporting. Date: April 13, 2009 /s Michael J. Luciano - -------------------- --------------------- Chief Executive Officer EX-31.2 3 a5939580ex31-2.txt EXHIBIT 31.2 Exhibit 31.2 CERTIFICATION OF ANNUAL REPORT I, Glen Hjort, certify that: 1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2008 of MPM Technologies, Inc. (the "Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the Registrant and we have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions abut the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any changes in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonable likely to materially affect the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; 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 over financial reporting. Date: April 13, 2009 /s Glen Hjort - -------------------- ------------- Chief Executive Officer EX-32.1 4 a5939580ex32-1.txt EXHIBIT 32.1 Exhibit 32.1 CERTIFICATION OF PERIODIC REPORT Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of MPM Technologies, Inc., (the "Company"), certifies that: 1. The Annual Report on Form 10-K of the Company for the year ended December 31, 2008 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: April 13, 2009 /s Michael J. Luciano /s Glen Hjort --------------------- ------------- Chief Executive Officer Chief Financial Officer This certification is made solely for the purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose. -----END PRIVACY-ENHANCED MESSAGE-----