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 June 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 August 5, 1998, the registrant had outstanding 1,837,569 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 JUNE 30, 1998 AND
DECEMBER 31, 1997
(UNAUDITED)
<S> <C> <C>
JUNE DECEMBER
30, 1998 31, 1997
ASSETS ----------- -----------
CURRENT ASSETS
Cash and cash equilavents $1,150,763 $2,010,596
Receivables, net of allowance for doubtful accounts 834,719 603,925
Costs and estimated earnings in excess of billings 385,226 445,205
Inventories 523,830 718,434
Other current assets 94,429 28,814
----------- -----------
Total current assets 2,988,967 3,806,974
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land and buildings 203,005 203,005
Mining property 54,047 54,047
Equipment and machinery 549,062 539,413
Software 3,258 3,258
----------- -----------
Total property, plant and equipment 809,372 799,723
Less accumulated depreciation 490,392 470,450
----------- -----------
Net property, plant and equipment 318,980 329,273
----------- -----------
OTHER ASSETS
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 $6,099
and $5,598, respectively 27,989 28,490
Advance minimum royalties 50,750 50,750
----------- -----------
Total other assets 2,749,204 2,749,705
----------- -----------
TOTAL ASSETS $6,057,151 $6,885,952
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION AS OF JUNE 30, 1998 AND
DECEMBER 31, 1997
(UNAUDITED)
<S> <C> <C>
JUNE DECEMBER
30, 1998 31, 1997
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $333,341 $419,625
Accounts payable - related party 55,116 55,116
Accrued expenses 260,500 273,959
Billings in excess of costs and estimated earnings 352,032 760,224
Interest payable 69,322 43,601
Interest payable - related parties 130,310 129,997
Advance from officer 200,000 200,000
Notes payable 221,764 282,369
Notes payable - related parties 314,765 314,765
Customer deposits - 27,000
Long-term debt - current portion 67,634 67,634
Other current liabilities - 8,692
----------- -----------
Total current liabilities 2,004,784 2,582,982
----------- -----------
LONG-TERM DEBT, net of current portion 583,961 583,961
----------- -----------
MINORITY INTEREST IN CONSOLIDATED ENTITIES (772,537) (753,748)
----------- -----------
COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 10,000,000 shares
authorized, none issued
Common stock, $.001 par value, 100,000,000 shares
authorized, 1,837,569 and 1,831,156 shares issued
at June 30, 1998 and December 31, 1997, respectively 1,838 1,831
Additional paid-in capital 9,374,443 9,374,398
Accumulated deficit (5,135,338) (4,903,472)
----------- -----------
Total stockholders' equity 4,240,943 4,472,757
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 6,057,151 6,885,952
=========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
Quarter Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
------------ ----------- ----------- -----------
REVENUES $2,431,531 $2,894,335 $4,201,129 $2,894,335
COSTS OF REVENUES 1,732,317 2,406,618 3,297,735 2,406,618
------------ ----------- ----------- -----------
GROSS PROFIT 699,214 487,717 903,394 487,717
OPERATING EXPENSES
Marketing 197,568 203,760 338,912 203,760
Operating overhead 317,557 127,031 635,401 206,014
Depreciation and amortization 10,614 36,087 19,150 47,347
Other operating expenses 95,703 93,536 142,852 96,641
------------ ----------- ----------- -----------
Total operating expenses 621,442 460,414 1,136,315 553,762
------------ ----------- ----------- -----------
LOSS BEFORE NON-OPERATING ITEMS 77,772 27,303 (232,921) (66,045)
NON-OPERATING INCOME (EXPENSE)
Interest income 11,791 2,026 29,365 2,717
Interest expense (25,274) (13,930) (47,100) (27,567)
------------ ----------- ----------- -----------
Total non-operating income (expense) (13,483) (11,904) (17,735) (24,850)
------------ ----------- ----------- -----------
INCOME (LOSS) BEFORE MINORITY INTEREST 64,289 15,399 (250,656) (90,895)
MINORITY INTEREST IN SUBSIDIARY LOSS 9,128 7,244 18,790 16,927
------------ ----------- ----------- -----------
NET INCOME (LOSS) $73,417 $22,643 ($231,866) ($73,968)
============ =========== =========== ===========
NET INCOME (LOSS) PER SHARE - PRIMARY $0.04 $0.01 ($0.13) ($0.04)
============ =========== =========== ===========
NET INCOME (LOSS) PER SHARE - FULLY DILUTED $0.04 $0.01 ($0.12) ($0.04)
============ =========== =========== ===========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
Six Months Ended
June 30,
1998 1997
<S> <C> <C>
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (231,866) (73,968)
Add items not requiring the use of cash:
Depreciation and amortization 20,443 47,348
Minority interest in subsidiary loss (18,789) (16,927)
(Increase) decrease in receivables (230,794) 1,252,599
Decrease (Increase) in costs and estimated earnings
in excess of billings 59,979 (257,510)
Decrease (increase) in inventory 194,604 (84,227)
(Increase) in other assets (65,615) (53,409)
(Decrease) increase in accounts payable (86,284) 742,869
(Decrease) increase in accrued expenses (13,407) 25,114
(Increase) decrease in billings in excess of costs and
estimated earnings (408,192) (66,076)
(Decrease) in customer deposits (27,000) 0
Increase (decrease) in interest payable 26,034 (5,819)
(Decrease) in other current liabilities (8,692) 0
---------- ----------
NET CASH FLOWS USED IN OPERATING ACTIVITIES (789,579) 1,509,994
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment and machinery (9,649) (43,173)
---------- ----------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (9,649) (43,173)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on notes payable (60,605) (28,093)
' Issuance of common stock - 2,060
Contributed capital - 157,940
---------- ----------
NET CASH FLOWS (USED IN) PROVIDED
FINANCING ACTIVITIES (60,605) 131,907
---------- ----------
NET (DECREASE) INCREASE IN CASH (859,833) 1,598,728
CASH AT BEGINNING OF PERIOD 2,010,596 40,566
---------- ----------
CASH AT END OF PERIOD 1,150,763 1,639,294
========== ==========
<CAPTION>
Supplemental disclosure of cash flow information and non cash financing activities:
Cash paid for interest: $20,410
During the six months ended June 30, 1998, the Company issued 5,556 shares of its common stock under the terms
of an agreement with a unrelated entity.
During the six months ended June 30, 1997, the Company issued 146,667 shares of its common stock for the
purchase of its wholly-owned subsidiary, Huntington Environmental Systems, Inc.
</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 June 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. 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 the 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.
Certain reclassifications have been made to the December 1997 amounts to
conform to the June 1998 presentation.<PAGE>
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Huntington Environmental Systems, Inc.
- ---------------------------------------
Since Huntington Environmental Systems, Inc. ("HES") was acquired April 1,
1997, the three months ended June 30, 1998 is the first quarter for which
comparative results are available. 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, 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.
For the three months ended June 30, 1998, HES had revenues of $2,431,531,
compared to $2,894,335 for the three months ended June 30, 1997. For the six
months ended June 30, 1998, revenues were $4,151,129 compared to $2,894,335 for
the six months ended June 30, 1997. Since the HES was a portion of a division
and had only been owned by United States Filter Corporation since November
1996, and was formerly a part of a division of Waste Management prior to that,
comparative sufficient detailed data was not available to determine prior
comparative balances.
HES has been working to increase its sales and marketing efforts. Requests for
quotations continue at high levels, both for firm quotations and for budget
quotations. Quotations for repeat customers are high for both new and
replacement equipment. HES was recently awarded a contract in the United
Kingdom amounting to approximately $3.6 million. Quotations for new projects
abroad include installations in Canada, the United Kingdom, Australia and
India.
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.
Nupower, Inc. (Skygas process)
- ------------------------------
Skygas venture partner USF Smogless moved forward with obtaining permits
pursuant to the 1996 agreement with a consortium of European companies. That
agreement includes, among other things, the utilization of the Skygas
technology with USF Smogless' proprietary Flotherm technology for the
destruction of selected wastes and for the creation of fuel gas. The project
is estimated to be in excess of $10 million of capital investment. Management
expects to obtain all the necessary permits by the end of the year.
The Company is working 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.
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. The Company has an
agreement with USF Smogless and Unitel Technologies, Inc. of Mount Prospect,
Illinois for the purpose of commercializing the Skygas process. Under the
terms of the agreements, USF Smogless is to finance, engineer, build, test and
operate a commercial demonstration facility. Unitel Technologies, Inc. has
agreed to handle the promotional, public relations, advertising and marketing<PAGE>
of the process. USF Smogless is owned by United States Filter Corporation
(NYSE-USF) of Palm Desert, California. Interests in the Skygas process are
Nupower (which the Company owns 58.21%) - 70%; USF Smogless - 15%;
MPM Technologies, Inc. - 15%.
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.
Six and three months ended 6/30/98 compared to six and three months ended
6/30/97
- --------------------------------------------------------------------------
For the six months ended 6/30/98, the Company had a net loss of $231,866, or
$.13 per share compared to a net loss of $73,968, or $.04 per share for the six
months ended 6/30/97. For the three months ended 6/30/98, the Company had net
income of $73,417, or $.04 per share compared to net income of $22,643, or $.01
per share for the three months ended 6/30/97. Revenues were $2,431,531 for the
six months ended 6/30/98 compared to $2,894,335 for the six months ended
6/30/97. For the three months ended 6/30/98, revenues were $2,431,531 compared
to $2,894,335 for the three months ended 6/30/97. Operating expenses were
$1,136,315 and $621,442 for the six and three months ended 6/30/98,
respectively, compared to $533,762 and $460,414 for the six and three months
ended 6/30/97, respectively. Working capital at 6/30/98 was $984,183 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.
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
At a special meeting of Shareholders on June 12, 1998, the shareholders of the
Company voted for Amended and Restated Articles of Incorporation which included
authorizing two classes of stock, common stock and preferred stock. The number
of authorized common shares was increased to one hundred million (100,000,000)
from fifty million (50,000,000). The number of preferred shares authorized is
ten million (10,000,000).
Shareholders of the Company will have no preemptive rights to acquire
additional shares issued by the corporation, or any securities convertible
into, or carrying or evidencing any rights or option to purchase, any such
shares.
The holders of any of the Company's capital stock shall have voting power for
the election of directors and for all other purposes, subject to such
limitation as may be imposed by law and by any provision of the Articles of
Incorporation in the exercise of their voting power. Cumulative voting for the<PAGE>
election of directors is hereby expressly prohibited. The holders of Common
Stock shall be entitled to one vote per share held. All of the Common Stock
authorized herein shall have equal voting rights and powers without
restrictions in preference.
Subject to the power of shareholders to amend or repeal, the Board of Directors
of this corporation shall have the power to enact and amend such Bylaws
defining the powers and duties of the officers of the corporation and providing
for such other matters in relation to its affairs as they may deem necessary
and convenient, provided the same are not out of harmony with the laws of the
State of Washington or these Articles of Incorporation.
The Company reserves the right to amend, alter, change or repeal any provision
contained in the Articles of Incorporation in the manner now or hereafter
prescribed by statute, and all rights conferred on the shareholders herein are
granted subject to this reservation.
The affirmative vote of a majority of all of the votes entitled to be cast on
the matter shall be sufficient, valid, and effective, after due consideration
and reconsideration of such action by the Board of Directors, as required by
law, to approve and authorize the following acts of the Company:
a. an amendment to the Articles of Incorporation;
b. the merger of this corporation or the merger of one or more other
corporations into this corporation;
c. the acquisition by another corporation of all of the outstanding
shares of one or more classes or series of this corporation; or
d. the sale, lease, exchange, or other disposition by this corporation
of all, or substantially all, of its property other than in the usual
and regular course of business.
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
A special meeting of shareholders was held on June 12, 1998. Following are the
results of the voting at the meeting:
Item 1. Reverse Split of Common Stock
For: 14,740,671 Against: 397,184 Abstain: 50,665
Item 2. Amended and Restated Articles of Incorporation
For: 11,430,198 Against: 618,356 Abstain: 60,415
The total shares voted of 15,188,520 represents 91.88% of the common shares
outstanding as of the record date May 15, 1998. A total of 16,530,404 shares
were outstanding on that date.
ITEM 5. OTHER INFORMATION
On July 1, 1998 the Company acquired certain of the assets and assumed certain
of the liabilities of AirPol, Inc., a division of FLS miljo of Copenhagen,
Denmark. In connection with the acquisition, the Company will issue stock and
make a cash payment, subject to certain adjustments relating to the financial
position and results of operations of AirPol, Inc.
<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.
August 13, 1998 /s/Robert D. Little
- ----------------------- ------------------------------
(date) Robert D. Little
Corporate Secretary<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1150763
<SECURITIES> 0
<RECEIVABLES> 884719
<ALLOWANCES> 50000
<INVENTORY> 523830
<CURRENT-ASSETS> 2988967
<PP&E> 809372
<DEPRECIATION> 490392
<TOTAL-ASSETS> 6057151
<CURRENT-LIABILITIES> 2004784
<BONDS> 0
0
0
<COMMON> 1838
<OTHER-SE> 4239105
<TOTAL-LIABILITY-AND-EQUITY> 6057151
<SALES> 2431531
<TOTAL-REVENUES> 2431531
<CGS> 1732317
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25274
<INCOME-PRETAX> 73417
<INCOME-TAX> 0
<INCOME-CONTINUING> 73417
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<CHANGES> 0
<NET-INCOME> 73417
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
