FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: September 30, 1997 Commission File Number: 0-14910
------------------- ---------
MPM TECHNOLOGIES, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Washington 81-0436060
- --------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
222 West Mission, Ste 30
Spokane, WA 99201-2347
------------------------- -----------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (509) 326-3443
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(X) Yes ( ) No
As of November 3, 1997, the registrant had outstanding 16,459,404 shares of
common stock which is the registrant's only class of stock.<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Financial Statements follow on the next page.<PAGE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
Spokane, Washington
Financial Statements
September 30, 1997, and December 31, 1996<PAGE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC. Consolidated Statement of Financial
AND SUBSIDIARIES Position as of September 30, 1997,
and December 31, 1996
- -------------------------------------------------------------------------------------------------
UNAUDITED
ASSETS
<S> <C> <C>
September December
30, 1997 31, 1996
-------------- --------------
CURRENT ASSETS
Cash (Note 2) $ 886,720 $ 40,566
Receivables, net of allowance for doubtful
accounts of $180,902 2,305,245 37,017
Inventory 650,056
Other current assets 20,141 1,438
-------------- --------------
Total current assets 3,862,162 79,021
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT (NOTE 2)
Land 70,000 70,000
Mining claims (Note 3) 48,600 48,600
Mining leases (Notes 3 and 7) 5,437 5,437
Buildings 133,005 133,005
Mill machinery 289,063 289,063
Vehicles and equipment 253,740 117,630
Software 3,258 3,258
-------------- --------------
Total property, plant and equipment 803,103 666,993
Less accumulated depreciation 479,831 422,167
-------------- --------------
Net property, plant and equipment 323,272 244,826
-------------- --------------
OTHER ASSETS
Deferred exploration and development costs (Note 1) 1,195,466 1,195,466
Investment (Note 1) 1,200,000 1,200,000
Notes receivable 275,000 275,000
Licenses, net of accumulated amortization of $5,347
and $4,595, respectively (Note 2) 28,741 29,494
Advance minimum royalties (Note 2) 50,750 50,750
Mineralized material in place (Note 3) 10 10
-------------- --------------
Total other assets 2,749,967 2,750,720
-------------- --------------
TOTAL ASSETS $ 6,935,401 $ 3,074,567
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4 of 12
<PAGE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC. Consolidated Statement of Financial
AND SUBSIDIARIES Position as of September 30, 1997
and December 31, 1996
- -----------------------------------------------------------------------------------------------------
UNAUDITED
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
September December
30, 1997 31, 1996
-------------- --------------
CURRENT LIABILITIES
Accounts payable $ 1,147,045 $ 963
Interest payable - other 109 5,859
Interest payable - related parties (Note 4) 129,997 129,997
Notes payable - other (Note 4) 512,347 570,234
Notes payable - related parties (Note 4) 314,765 314,765
-------------- --------------
Total current liabilities 2,104,263 1,021,818
-------------- --------------
OTHER LIABILITIES
Deferred credit 1,200,000 0
-------------- --------------
MINORITY INTEREST (NOTES 2 and 6)
Minority interest in consolidated entities (742,594) (718,888)
-------------- --------------
COMMITMENTS (NOTE 7)
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 50,000,000 shares authorized,
16,459,404 shares and 14,399,773 shares outstanding
September 30, 1997, and December 31, 1996, respectively
(Notes 1, 6 and 8) 16,459 14,399
Additional paid-in capital 9,067,459 7,417,996
Accumulated deficit (4,710,186) (4,660,758)
-------------- --------------
Total stockholders' equity 4,373,732 2,771,637
-------------- --------------
TOTAL LIABILITIES, MINORITY INTEREST AND
STOCKHOLDERS' EQUITY $ 6,935,401 $ 3,074,567
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5 of 12
<PAGE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC. Consolidated Statement of Operations for the Quarters
AND SUBSIDIARIES Ended September 30, 1996 and 1997, the Nine Month
Periods Ended September 30, 1996 and 1997
- -----------------------------------------------------------------------------------------------------------------
UNAUDITED
Quarter Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Management fees - related party $ 35,451 $ -0- $ 48,000 $ -0-
Sales of product and services 1,429,835 4,311,620
Sales of equipment
----------- ----------- ----------- -----------
Total revenues 1,465,286 0 4,359,620 0
----------- ----------- ----------- -----------
COST OF REVENUES
Cost of Sales 1,010,688 3,417,306
----------- ----------- ----------- -----------
Gross profit 454,598 0 942,314 0
----------- ----------- ----------- -----------
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
Bank service fees 10 10 20 37
Contract labor 1,930 (18,605) 1,930 4,190
Depreciation and amortization 11,069 3,983 58,416 10,023
Dues and subscriptions 131 55 788 343
Equipment rental
Freight
Insurance 3,439 4,399 9,954 10,322
Professional services (29,393) 71,270 92,553 122,820
Licenses, taxes and other fees 10,910 18,273 71,201 58,933
Office 15,954 11,898 24,015 19,555
Public relations
Rent - office 1,900 1,875 5,420 5,015
Repairs and maintenance 1,895 1,895
Research and development
Selling 189,022 392,782
Telephone and utilities (347) 584 1,456 1,431
Transfer and registration fees 422 769 1,272 1,588
Travel and entertainment (2,830) 7,039 5,335 23,290
Watchman 100 1,375 700 2,755
Miscellaneous, general and administrative 237,732 3,765 338,468 7,615
Reimbursed expenses (2,749) (9,733) (9,151) (30,454)
----------- ----------- ----------- -----------
Total expenses 439,195 96,957 997,054 237,463
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE NON-OPERATING ITEMS 15,403 (96,957) (54,740) (237,463)
----------- ----------- ----------- -----------
NON-OPERATING INCOME (EXPENSE)
Interest income 15,318 925 18,035 2,419
Interest expense (12,960) (13,962) (40,527) (40,829)
Forgiveness of debt 4,098
Gain on sale of securities
Other income
----------- ----------- ----------- -----------
Total non-operating income (expense) 2,358 (13,037) (18,394) (38,410)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES
AND SUBSIDIARY LOSS (INCOME) 17,761 (109,994) (73,134) (275,873)
----------- ----------- ----------- -----------
INCOME TAXES AND SUBSIDIARY LOSS (INCOME)
Income taxes
Minority interest in subsidiary loss (income) 6,779 7,015 23,706 25,197
----------- ----------- ----------- -----------
Total income taxes and subsidiary loss (income) 6,779 7,015 23,706 25,197
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 24,540 $ (102,979) $ (49,428) $ (250,676)
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE (NOTE 2) $ NIL $ (0.01) $ (0.01) $ (0.02)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 6 of 12
<PAGE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC. Consolidated Statement of Cash
AND SUBSIDIARIES for the Nine Month Period Ended
September 30, 1997 and 1996
- --------------------------------------------------------------------------------------
UNAUDITED
Nine Months Ended
September 30,
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (49,428) $ (250,676)
Add items not requiring the use of cash:
Depreciation and amortization 58,416 9,120
Forgiveness of debt (4,098)
Minority interest (23,706) (25,197)
Loss (gain) on sale of equipment
Stock granted for operating expenses
Stock options issued for services
Accrued interest payable converted to debt 1,014
Net (increase)/decrease in:
Accounts receivable 922,493 (6,154)
Other Current Assets (18,703) 4,571
Inventory (131,484)
Net increase/(decrease) in:
Accounts payable 108,486
Interest payable (1,028) 3,063
------------- -------------
NET CASH FLOWS PROVIDED FROM
OPERATING ACTIVITIES 860,948 (264,259)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
(Additions)/reductions:
Mining claims
Deferred exploration and development costs
Property, plant and equipment (116,284) (3,518)
Mining leases
Leasehold improvements
Patents and licenses 904
Advance minimum royalties
Partnership investment
Organization costs
Proceeds from:
Sale of equipment
Redemption of bonds and deposits
Loans made
Less repayments
------------- -------------
NET CASH FLOWS PROVIDED (USED)
FROM INVESTING ACTIVITIES (116,284) (2,614)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of short term debt 200,000 275,000
Payments to settle debt (98,510) (108,973)
Deferred Credit
Sale of treasury stock
Contributed capital 83,442
Issuance of common stock 84
------------- -------------
NET CASH FLOWS PROVIDED
FROM FINANCING ACTIVITIES 101,490 249,553
------------- -------------
NET INCREASE (DECREASE) IN CASH 846,154 (17,320)
CASH AT BEGINNING OF PERIOD 40,566 138,675
------------- -------------
CASH AT END OF PERIOD $ 886,720 $ 121,355
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 7 of 12
<PAGE>
MPM TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS
AND SUBSIDIARIES
Spokane, Washington
NOTE 1 - UNAUDITIED FINANCIAL STATEMENTS
These financial statements should be read in conjunction with the audited
financial statements included in the Annual Report on Form 10-KSB for the
year ended December 31, 1996. Since certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting standards have been omitted pursuant to
the rules and regulations of the Securities and Exchange Commission, these
financial statements specifically incorporate by reference the footnotes to
the consolidated financial statements of the Company as of December 31, 1996.
In the opinion of management, these unaudited interim financial statements
reflect all adjustments necessary for a fair presentation of the financial
position and results of operations and cash flows of the Company. Such
adjustments consisted only of those of a normal nature. Results of
operations for the period ended September 30, 1997, should not necessarily be
taken as indicative of the results of operations that my be expected for the
entire year 1997.
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
HUNTINGTON ENVIRONMENTAL SYSTEMS, INC.
Effective April 1, 1997, MPM Technologies, Inc. acquired certain of the
assets and assumed certain of the liabilities of part of a division of United
States Filter Corporation in exchange for 1.32 million shares of common
stock. In connection with the acquisition, the Company formed a wholly-owned
subsidiary, Huntington Environmental Systems, Inc. ("HES") which assumed the
assets and liabilities acquired. HES designs, engineers, supplies and
services air pollution control systems for Fortune 500 and other
environmental and industrial companies worldwide.
Since the acquisition, HES has strategically pursued the consolidation of its
operations through a reduction in both its overhead and operating costs while
increasing its emphasis on sales and marketing. Steps to improve market
share included the creation of the new position of Vice President of Sales
and Marketing during the quarter ended September 30, 1997. The position was
filled with a highly experienced individual in the pollution control
industry. Additional steps have included the preparation of new product
literature, presentation of technical papers and the continuation of
attendance at strategic industry trade shows.
Results of these efforts have shown in a number of areas. Requests for
quotation have increased to an eighteen month high, both for firm quotations
and for budget quotations. Budget quotations allow our customers to plan for
1998 expenditures. Quotations issued to repeat customers are numerous for
both new and replacement equipment. Quotations for new projects abroad
include installations in Canada, the United Kingdom and Australia. HES has<PAGE>
received a contract for its first commercial two-chamber unit which will be
started in February 1998. Two-chamber units will comprise an increasing
percentage of the total VOC control market in the coming years. Fourth
quarter 1997 results are expected to be flat as marketing efforts continue to
take affect. Management anticipates that more positive results will be
reflected in the form of improved revenues and profits in the second and
third quarters of 1998.
This acquisition was the first step in the Company's plan, instituted by the
Board of Directors in 1996, to build a core business around air pollution
control systems and related environmental remediation technologies. The
Company's acquisition strategy is to acquire cash-positive, profitable
companies to build an earnings base which would allow further expansion while
the Skygas technology come to fruition.
The acquisition of Huntington Environmental Systems, Inc., was specifically
positive in that not only has the Company achieved revenues, but it also
secured the services of one of the leading engineer firms in the United
States to assist it with the Skygas technology evaluation. This allows the
Company to work in conjunction with USF Smogless on particular issues and
develop its own specific technological application for the Skygas process.
NUPOWER, INC. (SKYGAS PROCESS)
Skygas Venture partner USF Smogless moved forward with permitting issues
pursuant to the agreement entered into with a consortium of European
companies during 1996. The agreement calls for utilization of the Skygas
technology along with USF Smogless' proprietary Flotherm technology for the
destruction of selected wastes and the creation of fuel gas. The project is
estimated to be in excess of $10 million of capital investment. Management
expects to obtain all necessary permits during the fourth quarter of 1997.
The Company is continuing with on-going negotiations for Skygas installations
in Taiwan, South Korea, Thailand, China, Europe and North America.
The Company has entered into a working agreement with the Institute of Gas
Technology, Des Plaines, Illinois, to construct, de-bug and test the Skygas
process. By building a Skygas plant at their fully permitted facility, the
Company will use IGT to accelerate completion of the technology and help
locate potential customers. Upon completion management expects to receive
EPA approval for Skygas and fast-track entrance into the extensive North
American market while running parallel with USF Smogless' efforts in Europe.
The Company intends to attract and end user to finance the construction of
this plant.
Skygas is a patented process for converting carbonaceous materials into
clean-burning medium BTU fuel gas which can be used for electrical power
generation or for conversion into a variety of valuable chemicals. In March
of 1990, NuPower, a Montana general partnership, in which NuPower, Inc., a
wholly owned subsidiary of MPM Technologies, Inc., owns a 58.21% interest,
entered into an agreement with Smogless S.p.A., Milan, Italy, and Unitel
Technologies, Inc., Mt. Prospect, IL, for the purpose of commercializing the
Skygas process. Smogless agreed to finance, engineer, build, test and
operate a commercial demonstration facility. Unitel agreed to handle all
promotional work, public relations, advertising and marketing of the process.
In 1994, Smogless S.p.A. was purchased by United States Filter Corp. (NYSE:
USF), Palm Desert, CA, and renamed USF Smogless. In December of 1996, MPM<PAGE>
announced it had purchased Unitel's 15% interest in the Venture for 1.2
million shares of common stock. Management believes that by acquiring this
interest the Company has better positioned itself financially regarding
future sales of the technology. Percentage of interest in the Skygas Venture
is as follows: NuPower (of which the Company owns 58.21%) - 70%; USF
Smogless - 15%; and MPM Technologies, Inc. - 15%.
MINING
The Company owns or controls 32 patented and unpatented lode claims amounting
to approximately 750 acres in the heart of the historical Emery Mining
District, Powell County, Montana. The 32 claims include eight patented
claims and sixteen unpatented claims owned by the Company and eight patented
claims leased by the Company. During the Second Quarter of 1997, the Company
did not renew leases on thirteen unpatented claims to better consolidate its
holdings and cut expenses. To date, the Company has expended over $1.3
million on exploration and development, lease payments and claims. Over
$532,000 has been expended by the Company on buildings, mill machinery,
vehicles and equipment. Management is seeking a joint venture partner to
further explore and develop the properties.
QUARTER ENDED 9/30/97 COMPARED TO QUARTER ENDED 9/30/96
Results of Operations
1997 1996 Inc/(Dec) % of Change
Working Capital (Deficit) 1,757,899 (1,008,700) 2,766,599 274
Total Operating Expenses 439,195 96,957 342,238 352
Interest Expenses 12,960 13,962 ( 1,002) ( 7)
Contract Services 1,930 ( 18,605) 20,535 110
Insurance 3,439 4,399 ( 960) ( 21)
Professional Services ( 29,393) 44,205 ( 73,598) (166)
Office and Postage 15,954 11,898 4,056 34
Reimbursed Expenses 2,749 9,733 ( 6,984) ( 71)
Travel and Entertainment ( 2,830) 7,039 ( 9,869) (140)
Net Income (Loss) 24,540 ( 102,979) 127,519 123
Changes from the Third Quarter 1996 to the Third Quarter 1997 reflect the
Company's acquisition and financial consolidation with Huntington Environmental
Systems, Inc.<PAGE>
PART II
Item 1. Legal Proceeding
The Company knows of no litigation present, threatened or contemplated or
unsatisfied judgment against the Company, its officers or directors or any
proceedings in which the Company, its officers or directors are a party.
Item 2. Changes in Securities
The rights of the holders of the Company's securities have not been modified
nor have the rights evidenced by the securities been limited or qualified by
the issuance or modification of any other class of securities.
Item 3. Defaults upon Senior Securities
There are no senior securities issued by the Company.
Item 4. Submission of Matters to a Vote of Security Holders
On September 15, 1997, at the Annual Meeting of Stockholders of the
Corporation, the following items were brought to a vote:
Election of Directors:
L. Craig Cary Smith For: 11,734,068 Withhold: 52,590
To approve the selection of Terrence J. Dunne, CPA, PS, as independent
auditors of the Corporation for the fiscal year ending December 31, 1997:
For: 11,690,253 Against: 50,020 Abstain: 46,385
To amend the 1989 Stock Option Plan:
For: 11,219,845 Against: 308,622 Abstain: 114,460
The total voted shares of 11,786,658 represented 71.6% of the common stock
outstanding. At record date July 18, 1997, the common stock outstanding was
16,463,404.
Item 5. Other Information
There is no other information to report under this item.<PAGE>
SIGNATURES
Pursuant to the requirements 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.
11/13/97 /s/Robert D. Little
------------------- ----------------------
(Date) Robert D. Little
Secretary<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 886720
<SECURITIES> 0
<RECEIVABLES> 2486147
<ALLOWANCES> 180902
<INVENTORY> 650056
<CURRENT-ASSETS> 3862162
<PP&E> 803103
<DEPRECIATION> 479831
<TOTAL-ASSETS> 6935401
<CURRENT-LIABILITIES> 2104263
<BONDS> 0
0
0
<COMMON> 16459
<OTHER-SE> 4357273
<TOTAL-LIABILITY-AND-EQUITY> 6935401
<SALES> 4311620
<TOTAL-REVENUES> 4359620
<CGS> 3417306
<TOTAL-COSTS> 4414360
<OTHER-EXPENSES> 997054
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40527
<INCOME-PRETAX> (49428)
<INCOME-TAX> 0
<INCOME-CONTINUING> (49428)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49428)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
