SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange act of 1934
For the quarter ended September 30, 1998
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 W. Mission Ave.
Suite 30
Spokane, WA 99201
- -------------------------------- ----------------------------
(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 and 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. Yes X No
--- ---
As of November 5, 1998, the registrant had outstanding 1,805,969 shares of
common stock. The registrant has authorized 10,000,000 preferred shares, but
has no preferred shares outstanding.<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Financial Statements follow on the next page.<PAGE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION AS OF SEPTEMBER 30, 1998 AND
DECEMBER 31, 1997
(UNAUDITED)
<S> <C> <C>
SEPTEMBER DECEMBER
30, 1998 31, 1997
----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equilavents $615,568 $2,010,596
Receivables, net of allowance for doubtful accounts 2,398,691 603,925
Costs and estimated earnings in excess of billings 949,260 445,205
Inventories 606,235 718,434
Other current assets 113,973 28,814
----------- -----------
Total current assets 4,683,727 3,806,974
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land and buildings 203,005 203,005
Mining property 54,047 54,047
Equipment and machinery 719,973 539,413
Software 8,428 3,258
----------- -----------
Total property, plant and equipment 985,453 799,723
Less accumulated depreciation 506,945 470,450
----------- -----------
Net property, plant and equipment 478,508 329,273
----------- -----------
OTHER ASSETS
Goodwill, net of $9,507 accumulated amortization 751,025 -
Deposits 19,525 -
Deferred exploration and development costs 1,195,465 1,195,465
Investment 1,200,000 1,200,000
Notes receivable 275,000 275,000
Licenses, net of accumulated amortization of $6,349
and $5,598, respectively 27,739 28,490
Advance minimum royalties 50,750 50,750
----------- -----------
Total other assets 3,519,504 2,749,705
----------- -----------
TOTAL ASSETS $8,681,739 $6,885,952
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION AS OF SEPTEMBER 30, 1998 AND
DECEMBER 31, 1997
(UNAUDITED)
<S> <C> <C>
SEPTEMBER DECEMBER
30, 1998 31, 1997
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $1,301,467 $419,625
Accounts payable - related party 55,116 55,116
Accrued expenses 259,087 273,959
Billings in excess of costs and estimated earnings 1,732,283 760,224
Interest payable 54,410 43,601
Interest payable - related parties 133,614 129,997
Advance from officer 210,000 200,000
Notes payable 208,805 282,369
Notes payable - related parties 314,765 314,765
Customer deposits - 27,000
Long-term debt - current portion 20,590 67,634
Other current liabilities - 8,692
----------- -----------
Total current liabilities 4,290,137 2,582,982
----------- -----------
LONG-TERM DEBT, net of current portion 583,961 583,961
----------- -----------
MINORITY INTEREST IN CONSOLIDATED ENTITIES (780,164) (753,748)
----------- -----------
PREFERRED STOCK SUBSCRIBED 375,000 -
----------- -----------
COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 10,000,000 shares
authorized, no shares issued
Common stock, $.001 par value, 100,000,000 shares
authorized, 1,809,969 and 1,831,156 shares issued
at September 30, 1998 and December 31, 1997, respectively 1,812 1,831
Additional paid-in capital 9,306,154 9,374,398
Accumulated deficit (5,095,161) (4,903,472)
----------- -----------
Total stockholders' equity 4,212,805 4,472,757
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 8,681,739 6,885,952
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
Quarter Ended Nine Months Ended
September 30, September 30,
<S> <C> <C> <C> <C>
1998 1997 1998 1997
----------- ----------- ----------- -----------
REVENUES $3,691,118 $1,465,286 $7,079,491 $4,359,620
COSTS OF REVENUES 2,732,231 1,010,688 5,382,934 3,417,306
----------- ----------- ----------- -----------
GROSS PROFIT 958,887 454,598 1,696,557 942,314
OPERATING EXPENSES
Marketing 272,040 189,022 610,952 392,782
Operating overhead 539,562 237,732 1,009,239 338,468
Depreciation and amortization 27,603 11,069 46,753 58,416
Other operating expenses 69,120 1,372 211,972 207,388
----------- ----------- ----------- -----------
Total operating expenses 908,325 439,195 1,878,916 997,054
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE NON-OPERATING ITEMS 50,562 15,403 (182,359) (54,740)
----------- ----------- ----------- -----------
NON-OPERATING INCOME (EXPENSE)
Forgiveness of debt - - - 4,098
Interest income 4,390 15,318 33,755 18,035
Interest expense (22,403) (12,960) (69,503) (40,527)
----------- ----------- ----------- -----------
Total non-operating income (expense) (18,013) 2,358 (35,748) (18,394)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE MINORITY INTEREST 32,549 17,761 (218,107) (73,134)
MINORITY INTEREST IN SUBSIDIARY LOSS 7,628 6,779 26,418 23,706
----------- ----------- ----------- -----------
NET INCOME (LOSS) $40,177 $24,540 ($191,689) ($49,428)
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE - PRIMARY $0.02 $0.01 ($0.10) ($0.03)
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE - FULLY DILUTED $0.02 $0.01 ($0.10) ($0.03)
=========== =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<S> <C> <C>
1998 1997
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (191,689) (49,428)
Add items not requiring the use of cash:
Depreciation and amortization 46,753 58,417
Forgiveness of debt - (4,098)
Minority interest in subsidiary loss (26,416) (23,706)
(Increase) decrease in receivables (1,794,766) 1,121,912
(Increase) in costs and estimated earnings in excess of (474,869) (128,536)
billings
Decrease (increase) in inventory 112,199 (131,484)
(Increase) in other assets (104,684) (18,703)
Increase in accounts payable 782,357 206,860
(Decrease) increase in accrued expenses (30,623) 30,145
Increase (decrease) in billings in excess of costs and 424,311 (128,519)
estimated earnings
(Decrease) in customer deposits (27,000) -
Increase (decrease) in interest payable 14,426 (5,750)
Increase in other current liabilities 1,308 0
----------- ----------
NET CASH FLOWS (USED IN) PROVIDED BY OPERATING ACTIVITIES (1,268,693) 927,110
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for acquisition of subsidiary (216,273) -
Purchase of equipment and machinery (96,191) (116,284)
----------- ----------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (312,464) (116,284)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable (120,608) (53,789)
Preferred stock subscribed 375,000 -
Purchase of outstanding shares (68,263) -
Issuance of common stock - 2,060
Contributed capital - 87,057
----------- ----------
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 186,129 35,328
----------- ----------
NET (DECREASE) INCREASE IN CASH (1,395,028) 846,154
CASH AT BEGINNING OF PERIOD 2,010,596 40,566
----------- ----------
CASH AT END OF PERIOD $615,568 $886,720
=========== ==========
<CAPTION>
Supplemental disclosure of cash flow information and non cash financing activities
Cash paid for interest: $ 26,266
During the nine monts ended September 30, 1998, the Company issued 5,556 shares of its common stock under
the terms of an agreement with an unrelated entity.
During the nine months ended September 30, 1997, the Company issued 146,667 shares of its common stock in
connection with the purchase of certain of the assets of U.S. Filter Corporation. The Company also transferred
equipment with a book amount of approximately $292,890 from proerty and equipment to inventory.
</TABLE>
<PAGE>
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - UNAUDITED 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, 1997. 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, 1997. 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 recurring nature. Results of operations
for the period ended September 30, 1998 should not necessarily be taken as
indicative of the results of operations that may be expected for the entire
year 1998. All common stock information has been adjusted to reflect a one for
nine reverse stock split which was effected on June 12, 1998.
MPM Technologies, Inc. ("the Company") acquired certain of the assets and
assumed certain of the liabilities of a part of a division of United States
Filter Corporation on April 1, 1997. In connection with this acquisition, the
Company formed a wholly-owned subsidiary, Huntington Environmental Systems,
Inc. ("HES") which assumed the assets and liabilities acquired. United States
Filter Corporation had acquired HES as part of a large group of divisions known
collectively as "Wheelabrator Clean Air Systems" from Waste Management in
November 1996. Because of this, and the fact that HES was also a part of a
division when it was owned by Waste Management, the Company was unable to
obtain sufficient historical data to determine the pro forma results for prior
periods to make the required disclosures assuming the purchase of HES had been
consummated as of January 1, 1997. As a result, these disclosures have been
omitted.
Similarly, the Company acquired certain of the assets and assumed certain of
the liabilities of a part of a division of FLS miljo, Inc. on July 1, 1998 for
approximately $150,000 in cash and $300,000 (96,884 shares) of the Company's
common stock. It should be noted that this stock has not been issued pending
registration. In connection with this acquisition, the Company formed another
wholly-owned subsidiary, AirPol Environmental, Inc. operating as AirPol, Inc.
("AirPol") which assumed the assets and liabilities acquired. Since AirPol was
a part of a division, the Company was again unable to obtain sufficient
historical financial data to determine the pro forma results for prior periods
to make the required disclosures assuming AirPol had been acquired as of
January 1, 1997. These disclosures were also omitted.
The preceding financial statements include the results of operations of HES
beginning April 1, 1997, and the results of operations of AirPol beginning July
1, 1998. Due to the Company's inability to obtain historical financial data,
there can be no comparative results.
Certain reclassifications have been made to the December 1997 amounts to
conform to the September 1998 presentation.<PAGE>
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Huntington Environmental Systems, Inc.
HES designs, engineers, supplies and services air pollution control systems for
Fortune 500 and other environmental and industrial companies worldwide.
Through the technologies and employees acquired by the Company, HES has over 25
years of experience and over 300 installations across the globe. HES is a
leader in the design, fabrication, installation, start-up and maintenance of
high temperature pollution control equipment.
HES has increased its sales and marketing efforts with the addition of a
regional sales manager in September. Requests for quotations have been flat,
but at relatively high levels, both for firm quotations and for budget
quotations. Numerous quality opportunities are being pursued. HES currently
has a backlog amounting to approximately $5,400,000.
Market conditions continued to be highly competitive during the quarter. While
this is expected to continue for the upcoming quarters, management believes
that its sales and marketing efforts will prove successful in improving its
revenues and profits in subsequent quarters. HES is currently in negotiations
with a major customer in Taiwan for an exclusive arrangement to provide HES
technology to a wide variety of Taiwan companies. Management believes this
arrangement will enable HES to enter the Chinese market with a strong presence
in 1999.
AirPol Environmental, Inc.
AirPol Environmental, Inc. operates under the name AirPol, Inc. ("AirPol") and
is also is in the air pollution control business. Its customers are similar to
HES serving Fortune 500 and other environmental and industrial companies
worldwide. AirPol designs, engineers, supplies and services wet and dry
scrubbers, wet electrostatic precipitators and venturi absorber to control air
pollution. AirPol brings over 30 years experience through its technologies and
employees to the Company. AirPol is an industry leader in its segment of the
air pollution control field.
At the time of the acquisition, AirPol had a backlog of approximately
$3,000,000. In only three months since the acquisition, AirPol has added
orders aggregating to approximately $11,700,000, and has a backlog at September
30 of approximately $12,000,000.
Nupower, Inc. (Skygas process)
The Company continues to work on the engineering, which will lead to the
construction of a prototype commercial demonstration Skygas facility in the
United States. The Company is working with the assistance of the Institute of
Gas Technology ("IGT") on the project. IGT will also be doing the testing of
the unit. The Company is also working with other interested parties to build a
commercial unit for operation. Once negotiations have been finalized,
timetables will be established to determine when either or both of these
facilities will be ready.
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. Interests in the
Skygas process are Nupower (which the Company owns 58.21%) - 70%; USF Smogless
- - 15%; MPM Technologies, Inc. - 15%.<PAGE>
Mining
On March 11, 1998, the Company's Board of Directors mandated the sale of the
Company's mining property, equipment and mill in accordance with its continuing
restructuring plans. It is anticipated that this sale will be concluded during
the current fiscal year. The Company owns or controls 32 patented and
unpatented lode claims amounting to approximately 750 acres of land in the
Emery mining district of Montana. The Company has expended over $1.3 million
on exploration and development, lease payments and claims. Approximately
$532,000 has been expended on buildings, machinery and equipment.
Nine and three months ended 9/30/98 compared to nine and three months ended
9/30/97
For the nine months ended 9/30/98, the Company had a net loss of $191,689, or
$.10 per share compared to a net loss of $49,428, or $.03 per share for the
nine months ended 9/30/97. For the three months ended 9/30/98, the Company had
net income of $40,177, or $.02 per share compared to net income of $24,540, or
$.01 per share for the three months ended 9/30/97. Revenues were $7,079,491
for the nine months ended 9/30/98 compared to $4,359,620 for the nine months
ended 9/30/97. For the three months ended 9/30/98, revenues were $3,691,118
compared to $1,465,286 for the three months ended 9/30/97. Operating expenses
were $1,878,916 and $908,325 for the nine and three months ended 9/30/98,
respectively, compared to $997,054 and $439,195 for the nine and three months
ended 9/30/97, respectively. Working capital at 9/30/98 was $393,590 compared
to $1,223,992 at 12/31/97. It should be noted that the results include the
operations of the Company's wholly-owned subsidiary, Huntington Environmental
Systems, Inc. beginning April 1, 1997, and the operations of the Company's
other wholly-owned subsidiary, AirPol, Inc. beginning July 1, 1998.
PART II
ITEM 1. LEGAL PROCEEDINGS
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
The Annual Meeting of Stockholders held on September 14, 1998. Following are
the results of the voting at the meeting:
Item 1. Election of Directors:
Glen Hjort For: 957,829 Withheld: 6,169
Anthony L. Lee For: 958,465 Withheld: 5,533
Michael J. Luciano For: 957,718 Withheld: 6,280
Item 2. To approve the Amendment to the 1989 Stock Option Plan:
For: 950,146 Against: 10,230 Abstain: 3,622<PAGE>
The total shares voted of 963,998 represents 52.50% of the common shares
outstanding as of the record date July 18, 1998. A total of 1,836,069 shares
were outstanding on that date.
ITEM 5. OTHER INFORMATION
The Company created a series of preferred stock designated as the Series A
Convertible Preferred Stock in connection with obtaining financing for current
working capital needs and future acquisitions. The holders of this preferred
stock will be entitled to receive a 6% annual dividend beginning July 1, 1999.
The Company may pay this dividend in cash or in common stock at its option.
The preferred stock will be convertible into common stock at the option of its
holder. The conversion rate will depend on the market price of the common
stock at the time of conversion. None of the preferred stock can be converted
until 30 days after the effective date of the registration statement to be
filed on Form S-3. The Company is in the process of preparing the registration
statement.<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MPM Technologies, Inc.
November 20, 1998 /s/ Robert D. Little
- ------------------------ ---------------------------
(date) Robert D. Little
Corporate Secretary<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 615568
<SECURITIES> 0
<RECEIVABLES> 2448691
<ALLOWANCES> 50000
<INVENTORY> 606235
<CURRENT-ASSETS> 4683727
<PP&E> 985453
<DEPRECIATION> 506945
<TOTAL-ASSETS> 8681739
<CURRENT-LIABILITIES> 4290137
<BONDS> 0
0
0
<COMMON> 1812
<OTHER-SE> 4210993
<TOTAL-LIABILITY-AND-EQUITY> 8681739
<SALES> 3691118
<TOTAL-REVENUES> 3691118
<CGS> 2732231
<TOTAL-COSTS> 2732231
<OTHER-EXPENSES> 908325
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22403
<INCOME-PRETAX> 32549
<INCOME-TAX> 0
<INCOME-CONTINUING> 32549
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40177
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
