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, 2000
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)
Issuers's telephone number, including area code: 509-326-3443
As of August 18, 2000, the registrant had outstanding 2,787,493 shares of
common stock and no outstanding shares of preferred stock, which are the
registrant's only classes 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
<S> <C> <C>
JUNE DECEMBER
30, 2000 31, 1999
(UNAUDITED)
------------- --------------
Current assets:
Cash and cash equivalents $62,696 $194,399
Accounts receivable, net of allowance for doubtful accounts
of $25,000 2,717,555 1,993,792
Inventories 334,216 313,298
Costs and estimated earnings in excess of billings 998,176 535,252
Other current assets 299,171 168,516
------------- --------------
Total current assets 4,411,814 3,205,257
------------- --------------
Property, plant and equipment, net 275,521 302,150
Mineral properties held for sale 1,086,346 1,086,346
Note receivable 273,000 275,000
Purchased intangible, net of accumulated amortization of $236,250
and $202,500 438,750 472,500
Other assets, net 147,013 139,957
------------- --------------
$6,632,444 $5,481,210
------------- --------------
Current liabilities:
Accounts payable $2,539,301 $1,412,097
Accrued expenses 203,885 239,624
Billings in excess of costs and estimated earnings 1,179,782 245,564
Related party debt 190,000 665,000
Current portion of long-term debt 225,000 225,000
------------- --------------
Total current liabilities 4,337,968 2,787,285
------------- --------------
Long-term debt, less current portion 537,054 537,054
Negative goodwill, net 29,375 38,593
------------- --------------
Total liabilities 4,904,397 3,362,932
------------- --------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value, 100,000,000 shares authorized,
2,787,493 and 2,641,961 shares issued and outstanding 2,787 2,642
Additional paid-in capital 10,469,046 9,950,148
Accumulated deficit (8,743,786) (7,834,512)
------------- --------------
Total stockholders' equity 1,728,047 2,118,278
------------- --------------
$6,632,444 $5,481,210
------------- --------------
</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>
2000 1999 2000 1999
------------ ------------ ------------ -------------
Revenues $3,410,618 $6,647,177 $7,671,238 $10,724,089
Cost of sales 3,083,711 5,348,764 6,132,444 8,460,614
------------ ------------ ------------ -------------
Gross margin 326,907 1,298,413 1,538,794 2,263,475
Selling, general and administrative expenses 1,228,889 975,388 2,380,286 1,902,962
------------ ------------ ------------ -------------
Income from operations (901,982) 323,025 (841,492) 360,513
------------ ------------ ------------ -------------
Other income (expense):
Interest expense (39,663) (318,151) (69,023) (350,834)
Other income, net 226 12,643 1,241 49,414
------------ ------------ ------------ -------------
Net other income (expense) (39,437) (305,508) (67,782) (301,420)
------------ ------------ ------------ -------------
Net (loss) income ($941,419) $17,517 ($909,274) $59,093
------------ ------------ ------------ -------------
Basic earnings per share:
Net (loss) income ($0.35) $0.01 ($0.34) $0.03
------------ ------------ ------------ -------------
Diluted earnings per share:
Net (loss) income ($0.35) $0.00 ($0.34) $0.02
------------ ------------ ------------ -------------
Weighted average shares of common stock
outstanding - basic 2,664,834 2,537,668 2,654,168 2,342,883
------------ ------------ ------------ -------------
Weighted average shares of common stock
outstanding - diluted 2,664,834 3,516,282 2,654,168 3,321,497
------------ ------------ ------------ -------------
</TABLE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
<S> <C> <C>
2000 1999
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income ($909,274) $59,093
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Depreciation and amortization 64,085 66,062
Interest imputed on related party debt 5,727 7,408
Interest imputed on issue of stock - 266,666
Change in assets and liabilities:
Accounts receivable (723,763) (2,570,358)
Costs and estimated earnings in excess of billings (462,924) (1,577,748)
Inventories (20,918) 157,553
Other assets (138,982) (74,151)
Accounts payable and accrued expenses 1,154,581 2,109,913
Billings in excess of costs and estimated earnings 934,218 (1,608,083)
----------- ------------
Net cash used in operating activities (97,250) (3,163,645)
----------- ------------
Cash flows from investing activities:
Acquisition of property, plant and equipment (11,653) (28,883)
----------- ------------
Net cash used in investing activities (11,653) (28,883)
----------- ------------
Cash flows from financing activities:
Repayment of related party debt (50,000) (40,000)
Repayment of note receivable 2,000 -
Repurchase and retirement of common stock - (4,348)
Proceeds from stock issues 25,200 700,000
Proceeds from related party debt - 400,000
----------- ------------
Net cash provided by (used in) financing activities (22,800) 1,055,652
----------- ------------
Net decrease in cash and cash equivalents (131,703) (2,136,876)
Cash and cash equivalents, beginning of period 194,399 2,634,570
----------- ------------
Cash and cash equivalents, end of period $62,696 $497,694
----------- ------------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $31,909 $28,304
Income taxes $ - $ -
Supplemental disclosure of non cash financing activities:
Common stock exchanged for amounts due to related parties $488,115 $ -
</TABLE>
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, 1999. 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 refer to the footnotes to
the consolidated financial statements of the Company as of December 31, 1999.
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, 2000 should not necessarily be taken
as indicative of the results of operations that may be expected for the entire
year 2000.
2. Earnings Per Share
Earnings per share ("EPS") is computed by dividing net income 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, 2000
Weighted-
Net Average Per-Share
(Loss) Shares Amount
---------- ----------- ------------
Basic EPS
Loss available to common
stockholders ($909,274) 2,654,168 ($ 0.34)
Effect of Dilutive Securities
Common stock options - - -
---------- ----------- ------------
Diluted EPS
Loss available to common
stockholders - assumed
conversions ($909,274) 2,654,168 ($ 0.34)
---------- ----------- ------------
For the Three Months Ended June 30, 2000
Weighted-
Net Average Per-Share
(Loss) Shares Amount
---------- ----------- ------------
Basic EPS
Income available to common
stockholders ($941,419) 2,664,834 ($ 0.35)
Effect of Dilutive Securities
Common stock options - - -
---------- ----------- ------------
Diluted EPS
Income available to common
stockholders - assumed
conversions ($941,419) 2,664,834 ($ 0.35)
---------- ----------- ------------
For the Six Months Ended June 30, 1999
Weighted-
Net Average Per-Share
(Loss) 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
(Loss) 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 ( 0.01 )
---------- ----------- ------------
Diluted EPS
Income available to common
stockholders - assumed
conversions $ 17,517 3,516,282 $ -
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,
2000 are as follows:
Air Air
Pollution Pollution
Control Control All
(Heat) (Scrubbers) Others Total
-------------- ------------- --------- -------------
Revenue external $ 5,129,402 $ 2,541,836 $ - $ 7,671,238
Revenue internal - - - -
Segment profit (loss) (72,049) (536,540) (300,685) ( 909,274)
Segment assets 4,176,640 2,124,188 331,616 6,632,444
Reconciliation of segment revenues, net income, total assets and other
significant items for the six and three months ended June 30, 2000 are as
follows:
Six Months Three Months
Ended Ended
June 30, 2000 June 30, 2000
Revenues
Total revenues for reportable segments $ 7,671,238 $ 3,410,618
Other revenues - -
------------- --------------
Total consolidated revenues $ 7,671,238 $ 3,410,618
------------- --------------
Profit or loss
Total profit or loss for reportable
segments $ (608,589) $ (791,332)
Other profit or loss (300,685) (150,087)
------------- --------------
Total consolidated profit or loss $ (909,274) $ (941,419)
------------- --------------
At June 30, 2000
Assets
Total assets for reportable segments $ 6,300,828
Other assets 3,602,463
Assets of discontinued operation 1,086,346
Elimination of intersegment assets (4,357,193)
-------------
Total consolidated assets $ 6,632,444
-------------
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 and three months ended June 30, 1999 are as
follows:
Six Months Three Months
Ended Ended
June 30, 1999 June 30, 1999
Revenues
Total revenues for reportable segments $10,724,089 $ 6,647,177
Other revenues 66,000 33,000
Elimination of intersegment revenues (66,000) (33,000)
------------ ------------
Total consolidated revenues $10,724,089 $ 6,647,177
------------ ------------
Profit or loss
Total profit or loss for reportable
segments $ 521,932 $ 384,610
Other profit or loss (462,839) (367,093)
------------ ------------
Total consolidated profit or loss $ 59,093 $ 17,517
------------ ------------
At June 30, 1999
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
-------------
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
This Quarterly Report on Form 10-QSB, including the information incorporated by
reference herein, includes "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All of the statements contained in this Quarterly Report on
Form 10-QSB, other than statements of historical fact, should be considered
forward looking statements, including, but not limited to, those concerning the
Company's strategies, objectives and plans for expansion of its operations,
products and services and growth in demand for the Company's services. There
can be no assurance that these expectations will prove to have been correct.
Certain important factors that could cause actual results to differ materially
from the Company's expectations (the Cautionary Statements") are disclosed in
the annual report filed on Form 10-KSB. All subsequent written and oral forward
looking statements by or attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by such Cautionary Statements.
Investors are cautioned not to place undue reliance on these forward looking
statements, which speak only as of the date hereof and are not intended to give
any assurance as to future results. The Company undertakes no obligation to
publicly release any revisions to these forward looking statements to reflect
events or reflect the occurrence of unanticipated events.
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 six
and three months ended June 30, 2000 and 1999 include the operations of HES,
AirPol, Skygas and MPM.
MPM's consolidated net loss for the six months ended June 30, 2000 was $909,274
or $0.34 per share compared to net income of $59,093, or $0.03 per share for
the six months ended June 30, 1999.
In June 2000, MPM entered into an agreement with Alumex Minerals Corporation to
form a joint venture for the development of a commercial Skygas unit. Under
the terms of the agreement, Alumex would own 15% and MPM would own 85% of the
venture. MPM contributes its Skygas technology and related experience, and
Alumex contributes cash. Alumex is to pay MPM $1,000,000 cash as a license fee
for the initial Skygas unit, and place an additional $10,000,000 in escrow to
pay for engineering, fabrication and construction costs associated with
building a Skygas unit. Construction of the first plant to be located in
Pennsylvania is expected to begin in the third quarter. The companies are
currently in the process of getting the permits and other needed details to
proceed with the construction of this unit. MPM will recognize the $1,000,000
in revenues in the period it is earned. When the joint venture is funded, MPM
will also recognize its 85% interest in the capital of the venture. This is
expected to occur in the third quarter 2000.
MPM has also entered into a Memorandum of Understanding with ONYX P.M., Inc.,
an environmental engineering and technology development company, for the
purpose of establishing joint venture companies in China to produce and market
synthetic wood made from organic waste and plastic. MPM and an investment
group headed by ONYX will jointly fund the new operation. ONYX will also
provide the proprietary processes and technologies for the manufacturing
machinery and production.
MPM has not yet closed its acquisition of Environmental Consulting and
Characterization, Inc. ("EC&C"). Negotiations are continuing and are expected
to be finalized in the next two to three weeks. EC&C has patented processes
for concentrating large volumes of air required to evacuate solvent laden air,
and convert them to a smaller volume stream with a higher volatile organic
compound content. This allows for treating these streams in a more efficient
and cost effective manner.
MPM has also not completed the sale of its mining properties as the potential
buyer has not completed its due diligence reviews.
MPM continues to negotiate with interested entities with the goal of building
Skygas units. These negotiations are also ongoing, and include entities in the
United States, Europe and Asia. Management is hopeful there will be some type
of formal agreement in place 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.
Six and three months ended 6/30/00 compared to six and three months ended
6/30/99
For the six months ended 6/30/00, MPM had a net loss of $909,274, or $0.34 per
share compared to net income of $59,093, or $0.03 per share for the six months
ended 6/30/99. Revenues decreased 28.5% to $7,671,238 for the six months ended
6/30/00 compared to $10,724,089 for the six months ended 6/30/99. Revenues
increased at HES by approximately 16%, but revenues at AirPol were down
approximately 60%. Revenues at AirPol are expected to recover as work
continues on the $6.4 million job in Utah. Increased revenues at HES were due
to the continued improvements in sales from the increased sales staff.
Decreases at AirPol were due largely to the postponement of the enforcement of
some clean air legislation by the Environmental Protection Agency. Costs of
sales decreased 23.4% to $6,132,444 for the six months ended June 30, 2000
compared to $8,460,614 for the six months ended June 30, 1999. This was due to
the decreases in revenues. Operating expenses increased 6.7% to $2,380,286 for
the six months ended June 30, 2000 compared to $1,902,962 for the six months
ended 6/30/99. Operating expense increases were due primarily to the addition
of four employees and the related costs, and to increases in rent and occupancy
costs at AirPol.
For the three months ended 6/30/00, MPM had a net loss of $941,419, or $0.35
per share compared to net income of $17,517, or $0.01 per share for the three
months ended 6/30/99. Revenues decreased 48.7% to $3,410,618 for the three
months ended 6/30/00 compared to $6,647,177 for the three months ended 6/30/99.
This was largely due to the postponement of the enforcement of some clean air
legislation by the Environmental Protection Agency. Costs of sales decreased
42.3% to $3,083,711 for the three months ended June 30, 2000 compared to
$5,348,764 for the three months ended June 30, 1999 due to the decrease in
revenues. Operating expenses increased 26.0% to $1,228,889 for the three
months ended June 30, 2000 compared to $975,388 for the three months ended
6/30/99. These increases were due to additional staffing and related costs,
and to increases in rent and occupancy costs at AirPol.
The Company currently has a backlog of approximately $15,500,000. This
includes $10.5 million at AirPol and $5 million at HES.
Financial Condition and Liquidity
For the six months ended June 30, 2000, the Company relied partly on related
party advances to fund the operations of HES and AirPol. Current cash reserves
and cash from continuing operations are believed to be adequate to fund MPM's
and its subsidiaries' operations for the foreseeable future. Working capital
at 6/30/00 was $73,846 compared to $417,972 at 12/31/99. AirPol recently
received a progress payment of approximately $700,000 on its large contract in
Utah.
MPM is actively investigating 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.
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
MPM's Annual Meeting of Shareholders was held on June 12, 2000. Following are
the results of the shareholders' voting:
Proposal 1 - Election of Directors
Name For Withheld
Richard E. Appleby 2,089,686 7,587
Richard Kao 2,092,440 4,587
L. Craig Cary Smith 2,092,468 4,805
Proposal 2 - Approval of Amendment to the 1989 Stock Option Plan
For Against Abstain Not Voted
1,629,087 50,147 8,276 409,763
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 June 30, 2000.
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 18, 2000 /s/ Robert D. Little
--------------------- ------------------------
(date) Robert D. Little
Corporate Secretary
