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, 1999
Commission File Number 0-14910
MPM TECHNOLOGIES, INC.
------------------------------------------------------------------
(Exact Name of Small Business Issuer 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)
Issuer's telephone number, including area code: 509-326-3443
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the 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, 1999, the registrant had outstanding 2,627,961 shares of common
stock which is the registrant's only class of stock.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Financial Statements follow on the next page.
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<S> <C> <C>
JUNE DECEMBER
30, 1999 31, 1998
(UNAUDITED)
Current assets: -------------- ------------
Cash and cash equilavents $497,694 $2,634,570
Accounts receivable, net of allowance for doubtful accounts
of $90,000 4,200,988 1,630,630
Inventories 339,411 496,964
Costs and estimated earnings in excess of billings 3,149,581 1,571,833
Other current assets 145,394 66,999
-------------- ------------
Total current assets 8,333,068 6,400,996
-------------- ------------
Property, plant and equipment, net 307,379 320,026
Mineral properties held for sale 1,086,346 1,086,346
Goodwill, net of accumulated amortization of $76,053 and $38,027 684,479 722,505
Note receivable 275,000 275,000
Purchased intangible, net of accumulated amortization of $168,750
and $135,000 506,250 540,000
Other assets, net 119,176 123,420
-------------- ------------
$11,311,698 $9,468,293
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $3,912,027 $821,600
Accrued expenses 166,390 386,869
Billings in excess of costs and estimated earnings 2,211,121 3,819,204
Accrued expenses - related party 63,116 63,116
Notes payable 5,461 5,461
Related party debt 230,000 270,000
Current portion of long-term debt 43,034 43,034
Preferred stock deposit - 760,035
-------------- ------------
Total current liabilities 6,631,149 6,169,319
-------------- ------------
Long-term debt, less current portion 961,518 561,518
Negative goodwill, net of accumulated amortization of $212,600
and $165,356 732,289 779,533
-------------- ------------
Total liabilities 8,324,956 7,510,370
-------------- ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value, 100,000,000 shares authorized,
2,627,961 and 2,146,128 shares issued and outstanding 2,628 2,146
Additional paid-in capital 9,814,127 8,844,883
Accumulated deficit (6,830,013) (6,889,106)
-------------- ------------
Total stockholders' equity 2,986,742 1,957,923
-------------- ------------
$11,311,698 $9,468,293
============== ============
</TABLE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Quarter Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
1999 1998 1999 1998
(Restated) (Restated)
----------- ------------ ------------ ------------
Revenues $6,647,177 $2,431,531 $10,724,089 $4,201,129
Cost of sales 5,348,764 1,732,317 8,460,614 3,297,735
----------- ------------ ------------ ------------
Gross margin 1,298,413 699,214 2,263,475 903,394
Selling, general and administrative expenses 975,388 640,690 1,902,962 1,152,414
----------- ------------ ------------ ------------
Income (loss) from operations 323,025 58,524 360,513 (249,020)
----------- ------------ ------------ ------------
Other income (expense):
Interest expense (318,151) (25,274) (350,834) (47,100)
Other income, net 12,643 11,791 49,414 29,365
----------- ------------ ------------ ------------
Net other income (expense) (305,508) (13,483) (301,420) (17,735)
----------- ------------ ------------ ------------
Income (loss) from continuing operations 17,517 45,041 59,093 (266,755)
Discontinued operations:
Loss from discontinued mining operations - (11,312) - (14,458)
----------- ------------ ------------ ------------
Net income (loss) $17,517 $33,729 $59,093 ($281,213)
=========== ============ ============ ============
Basic earnings per share:
Income (loss) from continuing operations $0.01 $0.02 $0.03 ($0.15)
(Loss) from discontinued operations Nil ($0.01) Nil ($0.01)
----------- ------------ ------------ ------------
Net income (loss) $0.01 $0.01 $0.03 ($0.16)
=========== ============ ============ ============
Diluted earnings per share:
Income (loss) from continuing operations $0.00 $0.02 $0.02 ($0.15)
(Loss) from discontinued operations Nil ($0.01) Nil ($0.01)
----------- ------------ ------------ ------------
Net income (loss) $0.00 $0.01 $0.02 ($0.16)
=========== ============ ============ ============
Weighted average shares of common stock
outstanding - basic 2,537,668 1,837,569 2,342,883 1,835,160
=========== ============ ============ ============
Weighted average shares of common stock
outstanding - diluted 3,516,282 1,837,569 3,321,497 1,835,160
=========== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
<S> <C> <C>
1999 1998
(Restated)
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $59,093 ($281,213)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 66,062 15,077
Interest imputed on related party debt 7,408 13,594
Interest imputed on issue of stock 266,666 -
Change in assets and liabilities:
Accounts receivable (2,570,358) (230,794)
Costs and estimated earnings in excess of billings (1,577,748) 59,979
Inventories 157,553 194,604
Other assets (74,151) 501
Accounts payable and accrued expenses 2,109,913 (109,352)
Billings in excess of costs and estimated earnings (1,608,083) (408,192)
------------ ------------
Net cash used in operating activities (3,163,645) (745,796)
------------ ------------
Cash flows from investing activities:
Acquisition of property, plant and equipment (28,883) (9,649)
------------ ------------
Net cash used in investing activities (28,883) (9,649)
------------ ------------
Cash flows from financing activities:
Repayment of related party debt (40,000) -
Repayment of notes payable - (60,605)
Repurchase and retirement of common stock (4,348) (43,783)
Proceeds from stock issue 700,000 -
Proceeds from related party debt 400,000 -
------------ ------------
Net cash provided by (used in) financing activities 1,055,652 (104,388)
------------ ------------
Net decrease increase in cash and cash equivalents (2,136,876) (859,833)
Cash and cash equivalents, beginning of period 2,634,570 2,010,596
------------ ------------
Cash and cash equivalents, end of period $497,694 $1,150,763
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $28,304 $ -
Income taxes $ - $ -
</TABLE>
Supplemental disclosure of non cash financing activities:
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.
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
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, 1998. Since certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting standards have been omitted pursuant to the instructions to
Form 10-QSB of Regulation S-X as promulgated by 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, 1998. 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, 1999 should not
necessarily be taken as indicative of the results of operations that may be
expected for the entire year 1999.
2. Earnings Per Share
Earnings per share ("EPS") is computed by dividing net income (loss) by the
weighted average number of common shares outstanding in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share".
The following table reconciles the number of common shares used in the basic
and diluted EPS calculations:
For the Six Months Ended June 30, 1999
Weighted-
Net Average Per-Share
Income Shares Amount
---------- ------------ --------------
Basic EPS
Income available to common
stockholders $ 59,093 2,342,883 $ 0.03
Effect of Dilutive Securities
Common stock options - 978,614 ( 0.01)
---------- ------------ --------------
Diluted EPS
Income available to common
stockholders - assumed
conversions $ 59,093 3,321,497 $ 0.02
========== ============ ==============
For the Three Months Ended June 30, 1999
Weighted
Net Average Per-Share
Income Shares Amount
---------- ----------- --------------
Basic EPS
Income available to common
stockholders $ 17,517 2,537,668 $ 0.01
Effect of Dilutive Securities
Common stock options - 978,614 -
---------- ----------- --------------
Diluted EPS
Income available to common
stockholders - assumed
conversions $ 17,517 3,516,282 $ 0.01
========== =========== ==============
At June 30, 1998, outstanding options to purchase 101,000 shares of the
Company's common stock were not included in the computation of diluted EPS as
their effect would have been antidilutive. Accordingly, basic and diluted EPS
are the same for the three and six months ended June 30, 1998.
3. Segment Information
The Company's consolidated financial statements include certain reportable
segment information. These segments include Huntington Environmental Systems,
Inc., a wholly owned subsidiary engaged in designing, engineering, supplying
and servicing air pollution control systems which primarily utilize heat and
chemicals to control air pollution, and AirPol, Inc., a wholly owned subsidiary
engaged in designing, engineering, supplying and servicing air pollution
control systems which utilize wet and dry scrubbers, wet electrostatic
precipitators and venturi absorbers to control air pollution. The Company
evaluates the performance of these segments based upon multiple variables
including revenues and profit or loss.
The segments' profit and loss components and schedule of assets as of June 30,
1999 are as follows:
Air Air
Pollution Pollution
Control Control All
(Heat) (Scrubbers) Others Total
------------- ------------ ---------- ------------
Revenue external $ 4,436,328 $ 6,287,761 $ - $10,724,089
Revenue internal - - 66,000 66,000
Segment profit (loss) 133,199 388,733 (462,839) 59,093
Segment assets 4,439,946 5,328,314 4,930,525 14,698,785
Reconciliation of segment revenues, net income, total assets and other
significant items for the six months ended June 30, 1999 are as follows:
Revenues
Amount
--------------
Total revenues for reportable segments $ 10,724,089
Other revenues 66,000
Elimination of intersegment revenues (66,000)
--------------
Total consolidated revenues $ 10,724,089
==============
Profit or loss
Total profit or loss for reportable segments $ 521,932
Other profit or loss (451,310)
Discontinued operations ( 11,529)
--------------
Total consolidated profit or loss $ 59,093
==============
Assets
Total assets for reportable segments $ 9,768,260
Other assets 3,844,179
Assets of discontinued operation 1,086,346
Elimination of intersegment assets (3,387,087)
--------------
Total consolidated assets $ 11,311,698
==============
4. Financing
In December 1998, MPM filed a registration statement with the Securities and
Exchange Commission, and received funds pending the completion of the
registration statement. Pursuant to an agreement in April, an MPM director
invested $1,100,000 in cash which was used to repay the funds received and many
of the related expenses. MPM then formally withdrew its registration
statement. Under the terms of the agreement, MPM issued 150,000 shares of its
common stock at the market price in exchange for $300,000, and issued
convertible debentures aggregating $400,000 which could be converted to MPM
common stock at a discount. The debentures were converted concurrently with
the stock issue resulting in issuing an additional 333,333 shares of common
stock. The amount of the discount is treated as a current period expense with
the offset being credited to additional paid-in capital. The effect on MPM's
results for the three and six months ended June 30, 1999 was to decrease net
income by approximately $267,000. The $400,000 balance of the $1,100,000 was a
note payable with interest only payments at 8% per annum through March 2004
with the balance due April 2004.
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
MPM Technologies, Inc. ("MPM") acquired certain of the assets and assumed
certain of the liabilities of a part of a division of FLS miljo, Inc. as of
July 1, 1998. MPM formed AirPol, Inc. ("AirPol") to run this air pollution
control business. AirPol designs, engineers, supplies and services air
pollution control systems for Fortune 500 and other industrial and
environmental companies. The technologies of AirPol utilize wet and dry
scrubbers, wet electrostatic precipitators and venturi absorbers to control air
pollution. AirPol brought over 30 years experience to MPM through its
technologies and employees.
As of April 1, 1997, MPM acquired certain of the assets and assumed certain of
the liabilities of a portion of a division of United States Filter Corporation,
and formed Huntington Environmental Systems, Inc. ("HES") to operate this air
pollution control business. HES designs, engineers, supplies and services high
temperature and chemical air pollution control systems for Fortune 500 and
other industrial and environmental companies. HES brought has over 25 years of
experience and over 300 installations across the globe to MPM through its
technologies and employees.
Both HES's and AirPol's engineering staffs are uniquely prepared to address the
full scope of customers' process problems. Their policies of handling clients'
individual concerns include in-depth analysis and evaluation, followed by
complete engineering and design services leading to application-specific
engineered solutions.
MPM holds a 58.21% interest in Nupower Partnership through its wholly-owned
subsidiary, Nupower, Inc. Nupower Partnership is engaged in the development and
commercialization of a waste-to-energy process which has been named "Skygas".
Skygas 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.
MPM controls 32 claims on approximately 1,000 acres in the historical Emery
Mining District in Montana through its wholly-owned subsidiary, MPM Mining,
Inc. In accordance with the Board of Directors' mandates, MPM's management is
actively seeking out mining and other businesses to purchase its mining
properties and equipment.
HES and AirPol are active continuing concerns. The development of the Skygas
process through Nupower Partnership is also ongoing. No other operations were
conducted. Accordingly, the financial statements for the six months ended June
30, 1999 include the operations of HES, AirPol, Skygas and MPM, and for the six
months ended June 30, 1998, include HES, Skygas and MPM, but not AirPol since
it was acquired July 1, 1998.
MPM's consolidated net income for the six months ended June 30, 1999 was
$59,093, or $0.03 per share compared to a loss of $281,213, or $0.16 per share
for the six months ended June 30, 1998. This was due to the performance of
AirPol for the first six months of 1999, and improved results for HES for the
same period. MPM's results for the six months included one-time charges related
to its aborted preferred stock offering and registration filing, and subsequent
funding by a director of the Company of approximately $360,000. Without these
charges, MPM's basic earnings per share would have been approximately $0.18.
Management expects that MPM's performance will improve during the upcoming
quarters. This is supported by its backlog of work at June 30, 1999 of
approximately $13,200,000, and steady sales activity in July and early August.
MPM announced that is has agreed in principal with a consortium in Europe to
furnish four to five Skygas units initially, with an additional 11 to 12 units
to follow by 2003. The first of these units will begin construction late in
the third quarter of 1999 with an anticipated completion date in mid 2000.
Total funding to be provided by the consortium for these units is approximately
$125,000,000. It is anticipated that revenues from these units will begin to
enhance MPM's financial results by the end of the calendar year.
Six and three months ended 6/30/99 compared to six and three months ended
6/30/98
For the six months ended 6/30/99, MPM had net income of $59,093, or $0.03 per
share compared to a net loss of $281,213, or $0.16 per share for the six months
ended 6/30/98. Revenues increased 155.3% to $10,724,089 for the six months
ended 6/30/99 compared to $4,201,129 for the six months ended 6/30/98. This
was due to the addition of AirPol's operations in the 1999 six months. Costs
of sales increased 156.6% to $8,460,614 for the six months ended June 30, 1999
compared to $3,297,735 for the six months ended June 30, 1998. This was due to
the increased revenues through the addition of AirPol's operations in 1999.
Operating expenses were up 64.1% to $1,891,433 for the six months ended June
30, 1999 compared to $1,152,414 for the six months ended 6/30/98. This was
also due to the inclusion of the AirPol results in 1999 and not in 1998.
Working capital at 6/30/99 was $1,701,919 compared to $1,137,144 at 6/30/98.
For the three months ended 6/30/99, MPM had net income of $17,517, or $0.01 per
share compared to a net income of $33,729, or $0.01 per share for the three
months ended 6/30/98. Revenues increased 173.4% to $6,647,177 for the three
months ended 6/30/99 compared to $2,431,531 for the three months ended 6/30/98.
This was due to the addition of AirPol's operations in the 1999 three months.
Costs of sales increased 208.8% to $5,348,764 for the three months ended June
30, 1999 compared to $1,732,317 for the three months ended June 30, 1998. This
was due to the increased costs through the addition of AirPol's operations in
1999. Operating expenses were up 52.2% to $975,388 for the three months ended
June 30, 1999 compared to $640,690 for the three months ended 6/30/98. This
was also due to the inclusion of the AirPol results in 1999 and not in 1998.
Financial Condition and Liquidity
For the six months ended June 30, 1999, funds for operations were provided by
cash reserves previously generated from the continuing operations of HES and
AirPol. In December 1998, MPM filed a registration statement with the
Securities and Exchange Commission, and received funds pending the completion
of the registration statement. Pursuant to an agreement in April, a director
invested $1,100,000 in cash which was used to repay the funds received in
anticipation of the registration and many of the related expenses. MPM then
formally withdrew its registration statement. Under the terms of the agreement
with the director, MPM issued 150,000 shares of its common stock at the market
price for $300,000, and convertible debentures for the issue of additional
shares of common stock at a discount for $400,000. The debentures were
converted concurrently with the issue of the original shares, and resulted in
an additional 333,333 shares of common stock being issued. The amount of the
discount is treated as a current period expense with the offset being credited
to additional paid in capital. The effect on MPM's results for the six months
ended June 30, 1999 was to decrease net income by approximately $267,000. The
balance of $400,000 was in the form of an 8% note payable to the director with
interest only payments due monthly through March 2004, and the principal
balance due in April 2004.
Current cash reserves and continuing operations are believed to be adequate to
fund MPM's and its subsidiaries' operations for the foreseeable future. MPM
will consider alternative sources of capital such as private placements, stock
offerings and loans from shareholders and officers to fund its current business
and expand in other related areas through more acquisitions.
Impact of Year 2000
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of MPM's computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than 2000. This could
result in a system failure or miscalculations causing disruptions of
operations.
Based on recent and continuing assessments, MPM management has determined that
its basic computer systems are year 2000 compliant, and will properly utilize
dates beyond December 31, 1999. MPM has also identified other areas where
minor modifications will be required for some of its less critical software to
make it year 2000 compliant, and has taken steps to make sure that these
modifications are completed in a timely manner. Accordingly, management
believes that the Year 2000 Issue will not have a material impact on its
operations.
MPM is also making inquiries of its major suppliers to determine their systems'
compliance with the Year 2000 Issue. Management has determined based on
responses received to date that the majority of its suppliers are in compliance
with the Issue. Accordingly, the effect of a third party's non-compliance is
not expected to have a material impact on the financial condition of MPM.
During the six months ended June 30, 1999, MPM's expenditures on issues related
to its compliance with the Year 2000 Issue were not significant. MPM expects
to spend approximately $2,000 in the balance of 1999 to ensure that its systems
are in compliance with the Year 2000 Issue.
PART II - OTHER INFORMATION
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 AND USE OF PROCEEDS
The rights of the holders of the Company's securities have not been modified
nor have the rights evidenced by the securities been limited or qualified by
the issuance or modification of any other class of securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There are no senior securities issued by the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A meeting of the shareholders was held on June 28, 1999. The following are the
results of the meeting.
Election of Directors:
Name For Withheld
Myron Katz 1,574,250 14,998
Charles A. Romberg 1,582,065 7,183
Daniel D. Smozanek 1,579,842 9,406
To approve the amendment to the 1989 Stock Option Plan:
For Against Abstain
1,057,494 42,802 10,550
To ratify the appointment of BDO Seidman, LLP to serve as independent auditors
for the year ending December 31, 1999:
For Against Abstain
1,572,630 12,680 3,938
The total voted shares of 1,589,248 represented 74.05% of the common stock
outstanding. At record date May 24, 1999, common stock outstanding was
2,146,128 shares.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
On April 5, 1999 MPM filed a Form 8-K announcing that its transfer agent had
been acquired.
On April 12, 1999, the Company announced that it had contacted the Securities
and Exchange Commission and requested that the Registration Statement on Form
S-3 filed with the Commission on December 21, 1998 be withdrawn.
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, 1999 /s/ Robert D. Little
- ------------------------ ---------------------------
(date) Robert D. Little
Corporate Secretary
<TABLE> <S> <C>
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<S> <C>
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<PERIOD-END> JUN-30-1999
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<INVENTORY> 339411
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0
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</TABLE>
