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 March 31, 1999
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 May 5, 1999, the registrant had outstanding 2,146,148 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
(UNAUDITED)
ASSETS
<S> <C> <C>
MARCH DECEMBER
31, 1999 31, 1998
--------------- -------------
Current assets:
Cash and cash equilavents $1,799,767 $2,634,570
Accounts receivable, net of allowance for doubtful accounts
of $90,000 3,011,763 1,630,630
Inventories 465,941 496,964
Costs and estimated earnings in excess of billings 1,856,314 1,571,833
Other current assets 65,475 66,999
--------------- -------------
Total current assets 7,199,260 6,400,996
--------------- -------------
Property, plant and equipment, net 315,389 320,026
Mineral properties held for sale 1,086,346 1,086,346
Goodwill, net of accumulated amortization of $57,040 and $38,027 703,492 722,505
Note receivable 275,000 275,000
Purchased intangible, net of accumulated amortization of $151,875
and $135,000 523,125 540,000
Other assets, net 71,762 123,420
--------------- -------------
$10,174,374 $9,468,293
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,707,492 $821,600
Accrued expenses 438,859 386,869
Billings in excess of costs and estimated earnings 3,299,158 3,819,204
Accrued expenses - related party 63,116 63,116
Notes payable 5,461 5,461
Related party debt 245,000 270,000
Current portion of long-term debt 43,034 43,034
Preferred stock deposit 1,051,400 760,035
--------------- -------------
Total current liabilities 6,853,520 6,169,319
--------------- -------------
Long-term debt, less current portion 561,518 561,518
Negative goodwill, net of accumulated amortization of $188,978
and $165,356 755,911 779,533
--------------- -------------
Total liabilities 8,170,949 7,510,370
--------------- -------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value, 100,000,000 shares
authorized, 2,146,128 shares issued and outstanding 2,146 2,146
Additional paid-in capital 8,848,809 8,844,883
Accumulated deficit (6,847,530) (6,889,106)
--------------- -------------
Total stockholders' equity 2,003,425 1,957,923
--------------- -------------
$10,174,374 $9,468,293
=============== =============
</TABLE>
<TABLE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31,
<C> <C>
1999 1998
(Restated)
------------- -------------
Revenues $4,076,912 $1,769,598
Cost of sales 3,111,850 1,565,418
------------- -------------
Gross margin 965,062 204,180
Selling, general and administrative expenses 922,485 511,724
------------- -------------
Income (loss) from operations 42,577 (307,544)
------------- -------------
Other income (expense):
Interest expense (24,845) (21,826)
Other income, net 28,933 17,574
------------- -------------
Net other income (expense) 4,088 (4,252)
------------- -------------
Income (loss) from continuing operations 46,665 (311,796)
------------- -------------
Discontinued operations:
Loss from operations of discontinued mining operations (5,089) (3,146)
------------- -------------
Net income (loss) $41,576 ($314,942)
============= =============
Basic earnings per share:
Income (loss) from continuing operations $0.02 ($0.17)
(Loss) from discontinued operations - -
------------- -------------
Net income (loss) $0.02 ($0.17)
============= =============
Diluted earnings per share:
Income (loss) from continuing operations $0.02 ($0.16)
(Loss) from discontinued operations - -
------------- -------------
Net income (loss) $0.02 ($0.16)
============= =============
Weighted average shares of common stock outstanding -
basic 2,146,128 1,832,724
============= =============
Weighted average shares of common stock outstanding -
diluted 2,393,741 1,933,724
============= =============
</TABLE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
<C> <C>
1999 1998
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES ------------- -------------
Net income (loss) $41,576 ($314,942)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 34,121 2,197
Interest imputed on related party debt 3,926 6,797
Change in assets and liabilities:
Accounts receivable (1,381,133) (1,011,979)
Costs and estimated earnings in excess of billings (284,481) 370,128
Inventories 31,023 174,320
Other assets 53,182 (44,507)
Accounts payable and accrued expenses 937,882 (330,079)
Billings in excess of costs and estimated earnings (520,046) 74,700
------------- -------------
Net cash used in operating activities (1,083,950) (1,073,365)
------------- -------------
Cash flows from investing activities:
Acquisition of property, plant and equipment (17,218) (9,649)
------------- -------------
Net cash used in investing activities (17,218) (9,649)
------------- -------------
Cash flows from financing activities:
Repayment of related party debt (25,000) -
Repayment of notes payable - (22,852)
Proceeds from preferred stock deposit 291,365 -
------------- -------------
Net cash provided by (used in) financing activities 266,365 (22,852)
------------- -------------
Net decrease increase in cash and cash equivalents (834,803) (1,105,866)
Cash and cash equivalents, beginning of period 2,634,570 2,010,596
------------- -------------
Cash and cash equivalents, end of period $1,799,767 $904,730
============= =============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $2,236 $ -
Income taxes $ $ -
</TABLE>
Supplemental disclosure of non cash financing activities:
During the quarter ended March 31, 1998, the Company issued 5,556 shares of its
common stock under the terms 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 March 31, 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 Three Months Ended March 31, 1999
Weighted-
Net Average Per-Share
Income Shares Amount
Basic EPS ---------- ----------- -------------
Income available to common
stockholders $ 41,576 2,146,128 $ 0.02
Effect of Dilutive Securities
Common stock options - 247,613 -
---------- ----------- -------------
Diluted EPS
Income available to common
stockholders _ assumed
conversions $ 41,576 2,393,741 $ 0.02
========== =========== =============
At March 31, 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 months ended March 31, 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
incouding revenues and profit or loss.
The segments' profit and loss components and schedule of assets as of March 31,
1999 are as follows:
Air Air
Pollution Pollution
Control Control All
(Heat) (Scrubbers) Others Total
------------ ------------ ------------ ------------
Revenue external......$ 1,471,014 $ 2,605,898 $ - $ 4,076,912
Revenue internal...... - - 33,000 33,000
Segment profit (loss). (66,545) 203,867 (95,746) 41,576
Segment assets........ 4,629,944 3,868,669 4,981,568 13,480,181
Reconciliation of segment revenues, net income, total assets and other
significant items for the three months ended March 31, 1999 are as follows:
Revenues Amount
-------------
Total revenues for reportable segments ................... $ 4,076,912
Other revenues............................................ 33,000
Elimination of intersegment revenues...................... (33,000)
-------------
Total cosolidated revenues................................ $ 4,076,912
=============
Profit or loss
Total profit or loss for reportable segments.............. $ 137,322
Other profit or loss...................................... (90,657)
Discontinued operations................................... ( 5,089)
-------------
Total consolidated profit or loss......................... $ 41,576
=============
Assets
Total assets for reportable segments...................... $ 8,498,613
Other assets.............................................. 3,922,500
Assets of discontinued operation.......................... 1,086,346
Elimination of intersegment assets........................ (3,333,085)
-------------
Total consolidated assets................................. $ 10,174,374
=============
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 an ongoing process. No other
operations were conducted. Accordingly, the financial statements for the three
months ended March 31, 1999 include the operations of HES, AirPol, Skygas and
MPM, and for the three months ended March 31, 1998, include HES, Skygas and
MPM, but not AirPol since it was acquired July 1, 1998.
MPM's consolidated net income for the quarter ended March 31, 1999 was $41,576,
or $0.02 per share compared to a loss of $314,942, or $0.16 per share for the
quarter ended March 31, 1998. This was due to the performance of AirPol for
the first quarter of 1999. Management expects that MPM's performance will
improve during the upcoming quarters. This is supported by its backlog of work
at March 31, 1999 of approximately $13,500,000, and steady sales activity in
April 1999.
MPM continues to negotiate with interested entities with the goal of building
Skygas units. Management is hopeful there will be some type of formal
agreement in place during the second quarter of 1999, and that construction of
a unit can begin before the end of the year. There can, however, be no
assurances that MPM will be successful in its negotiations.
Three months ended 3/31/99 compared to three months ended 3/31/98
For the three months ended 3/31/99, MPM had net income of $41,576, or $0.02 per
share compared to a net loss of $314,942, or $0.16 per share for the quarter
ended 3/31/98. Revenues increased 130.4% to $4,076,912 for the three months
ended 3/31/99 compared to $1,769,598 for the three months ended 3/31/98. This
was due to the addition of AirPol's operations in the 1999 three months. Costs
of sales increased 98.8% to $3,111,850 for the three months ended March 31,
1999 compared to $1,565,418 for the three months ended March 31, 1998. This
was due to the increased revenues through the addition of AirPol's operations
in 1999. Operating expenses were up 80.3% to $922,485 for the three months
ended March 31, 1999 compared to $511,724 for the three months ended 3/31/98.
This was also due to the inclusion of the AirPol results in 1999 and not in
1998. Working capital at 3/31/99 was $345,740 compared to $231,677 at 3/31/98.
Financial Condition and Liquidity
For the three months ended March 31, 1999, funds for operations continue to be
provided by cash generated from the continuing operations of HES and AirPol.
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.
Subsequent to March 31, 1999, MPM returned the preferred stock deposit of
$1,051,400 using money contributed by a related party. MPM will issue a
combination of restricted stock and debt to the related party, the amounts of
which are currently being negotiated.
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 three months ended March 31, 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
There were no matters presented to the shareholders for vote during the first
quarter of 1999.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed for the quarter ended March 31, 1999.
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.
May 17, 1999 /s/ Robert D. Little
- ------------------------- ----------------------------
(date) Robert D. Little
Corporate Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1799767
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<RECEIVABLES> 3101763
<ALLOWANCES> 90000
<INVENTORY> 465941
<CURRENT-ASSETS> 7199260
<PP&E> 765878
<DEPRECIATION> 450489
<TOTAL-ASSETS> 10174374
<CURRENT-LIABILITIES> 6853520
<BONDS> 0
0
0
<COMMON> 2146
<OTHER-SE> 2001279
<TOTAL-LIABILITY-AND-EQUITY> 10174374
<SALES> 4076912
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<CGS> 3111850
<TOTAL-COSTS> 922485
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 4088
<INCOME-PRETAX> 46665
<INCOME-TAX> 0
<INCOME-CONTINUING> 46665
<DISCONTINUED> (5089)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41576
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
