UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange act of 1934
For the quarterly period ended June 30, 2009
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)
199 Pomeroy Road.
Parsippany, NJ 07054
- ------------------------------- --------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: 973-428-5009
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 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. X Yes No
--- ---
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer ___ Accelerated filer ___
Non-accelerated filer ___ Smaller reporting company X
---
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes X No
--- ---
As of August 10, 2009, the registrant had outstanding 6,707,796 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
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2009 December 31, 2008
---------------- -----------------
(UNAUDITED) (AUDITED)
Current assets:
Cash and cash equivalents $ 12,830 $ 16,290
Accounts receivable, net of allowance for
doubtful accounts
of $-0- 63,576 57,101
Other current assets 12,132 8,250
---------------- -----------------
Total current assets 88,538 81,641
---------------- -----------------
Property, plant and equipment, net 3,567 5,013
Mineral properties held for sale 1,070,368 1,070,368
Other assets, net 136,375 136,375
---------------- -----------------
$ 1,298,848 $ 1,293,397
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 187,627 $ 350,741
Accrued expenses 258,519 395,841
Billings in excess of costs and estimated
earnings - 49,498
Notes payable 5,600,573 5,457,565
Related party debt 7,787,054 7,216,660
---------------- -----------------
Total current liabilities 13,833,773 13,470,305
---------------- -----------------
Commitments and contingencies - -
Stockholders' equity (impairment):
Preferred stock, no stated value, 10,000,000
shares authorized, no shares issued or
outstanding - -
Common stock, $.001 par value, 100,000,000
shares authorized, 6,607,796 and 6,307,510
shares issued and outstanding, respectively 6,608 6,308
Additional paid-in capital 12,675,875 12,279,698
Accumulated deficit (25,217,408) (24,462,914)
---------------- -----------------
Total stockholders' equity (impairment) (12,534,925) (12,176,908)
---------------- -----------------
$ 1,298,848 $ 1,293,397
================ =================
The accompanying notes are an integral part of these financial statements.
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended Three Months Ended
June 30, June 30,
----------------------- -----------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Revenues - Projects $ 102,998 $ 35,430 $ - $ -
Revenues - Parts and service 257,641 192,086 176,566 120,122
----------- ----------- ----------- -----------
Total Revenues 360,639 227,516 176,566 120,122
----------- ----------- ----------- -----------
Cost of sales - Projects 58,757 13,367 - -
Cost of sales - Parts and service 130,247 100,019 87,901 70,977
----------- ----------- ----------- -----------
Total Cost of Sales 189,004 113,386 87,901 70,977
----------- ----------- ----------- -----------
Gross margin 171,635 114,130 88,665 49,145
Selling, general and administrative
expenses 464,696 547,268 232,862 293,148
Stock-based compensation 210,300 - 210,300 -
----------- ----------- ----------- -----------
Total Operating Expenses 674,996 547,268 443,162 293,148
----------- ----------- ----------- -----------
Loss from operations (503,361) (433,138) (354,497) (244,003)
----------- ----------- ----------- -----------
Other income (expense):
Interest expense (440,133) (377,679) (226,475) (197,261)
Gain from patent expirations 189,000 - 189,000 -
----------- ----------- ----------- -----------
Net other income (expense) (251,133) (377,679) (37,475) (197,261)
----------- ----------- ----------- -----------
Net loss ($754,494) ($810,817) ($391,972) ($441,264)
=========== =========== =========== ===========
Income per share - basic and diluted:
Net loss ($0.12) ($0.13) ($0.06) ($0.07)
=========== =========== =========== ===========
Weighted average shares of common stock
outstanding -
basic and diluted 6,320,782 6,263,064 6,333,909 6,263,064
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
--------------------------
2009 2008
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($754,494) ($810,817)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 1,446 1,445
Stock-based compensation 210,300 -
Accrued interest and expenses on notes payable 143,008 136,120
Accrued interest and deferred expenses on related party
debt 367,394 338,832
Change in assets and liabilities:
Accounts receivable (6,475) 9,254
Costs and estimated earnings in excess of billings - -
Customer deposits - (67,500)
Other assets (3,882) (599)
Accounts payable and accrued expenses (114,259) (30,467)
Deferred revenue - 102,960
Billings in excess of costs and estimated earnings (49,498) -
----------- -----------
Net cash used in operating activities (206,460) (320,772)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party debt 254,000 298,500
Payments on related party debt (51,000) -
----------- -----------
Net cash provided by financing activities 203,000 298,500
----------- -----------
Net increase (decrease) in cash and cash equivalents (3,460) (22,272)
Cash and cash equivalents, beginning of period 16,290 47,243
----------- -----------
Cash and cash equivalents, end of period $ 12,830 $ 24,971
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ - $ -
----------- -----------
Income taxes $ - $ -
----------- -----------
In June 2009, accrued deferred compensation of $186,177 was converted to 300,286
shares of common stock.
Due to the expiration of certain patents and related agreements in April 2009,
the Company realized a net gain of $189,000 from the reversal of amounts accrued
against estimated future income from such patents. No revenues were realized
from the patents.
The accompanying notes are an integral part of these financial statements.
MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. Unaudited Financial Statements
These consolidated financial statements should be read in conjunction with the
audited financial statements included in the Annual Report on Form 10-K for the
year ended December 31, 2008. 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-Q 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, 2008. In
the opinion of management, these unaudited interim consolidated financial
statements reflect all adjustments and disclosures necessary for a fair
statement of the financial position and results of operations and cash flows of
the Company for the interim period presented. Such adjustments consisted only of
those of a normal recurring nature. Results of operations for the period ended
June 30, 2009 should not necessarily be taken as indicative of the results of
operations that may be expected for the entire year 2009.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in the notes to the
Consolidated Financial Statements of December 31, 2008, the Company has not been
able to generate any significant revenues and has a working capital deficiency
of $13,745,235 at June 30, 2009. These conditions raise substantial doubt about
the Company's ability to continue as a going concern without the raising of
additional debt and/or equity financing to fund operations. Management's plans
in regard to these matters are described in the notes to the Consolidated
Financial Statements of December 31, 2008. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
2. Earnings Per Share
Earnings per share ("EPS") is computed by dividing net loss by the weighted
average number of common shares outstanding in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". Diluted net loss
per common share adjusts basic net loss per common share for the effects of
outstanding common stock equivalents, only in the periods in which such effect
is dilutive under the treasury stock method.
For the three and six months ended June 30, 2009 and 2008, the effect of common
stock equivalents were anti-dilutive. As of June 30, 2009, common stock
equivalents consisted of 2,065,084 common stock options.
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".
3. Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to a concentration
of credit risk, consist of cash and cash equivalents. The Company places its
cash and cash equivalents with various high quality financial institutions;
these deposits may exceed federally insured limits at various times throughout
the year. The Company provides credit in the normal course of business. The
Company performs ongoing credit evaluations of its customers and maintains
allowances for doubtful accounts based on factors surrounding the credit risk of
specific customers, historical trends, and other information.
4. Note Payable
In December 2002, the Company entered into a revolving credit agreement with an
insurance company. Under the terms of its agreement, the Company may borrow up
to $500,000 at 5.25% per annum, which was increased to $3,000,000 in 2003. The
note is secured by stock and mineral property held for investment and matured on
January 2, 2008. As of June 30, 2009, the Company has $4,326,499 of principal
advances and accrued interest and expenses of $1,274,074. As of December 31,
2008, the Company had $4,326,499 of principal advances and accrued interest and
expenses of $1,131,066. During the six months ended June 30, 2009 and 2008, the
Company recorded interest expense of $143,008 and $136,119, respectively. This
note payable was not paid at maturity. The lender has informally agreed to not
pursue collection while revised terms are being negotiated. As of the date of
this report, negotiations continue, but no revised agreement has been reached.
5. Related Party Debt
Related party debt consists of advances received from and deferred expenses and
reimbursements to various directors and related parties. At June 30, 2009 and
December 31, 2008, amounts owed these related parties totaled $7,787,054 and
$7,216,660, respectively, due on demand. For the six months and three months
ended June 30, 2009, the Company recorded $254,000 and $128,000 in advances,
repayments of $51,000 and $51,000, and an additional $367,394 and $189,194 in
interest expense and deferred expenses and reimbursements, respectively. For the
six and three months ended June 30, 2008, the Company recorded $325,500 and
$117,500 in advances, and $311,832 and $163,682 in interest and deferred
expenses and reimbursements, respectively.
6. Patent Pending
In February 2009, the Company filed a provisional new patent for a significantly
improved Skygas process. There can be no guarantee that the new patent will be
approved at this time. There was also a Canadian patent on the Skygas process
that expired in April 2009.
As a result of the patent expirations, and the related agreements, the Company
recognized a gain of $189,000. This gain represents the net amounts accrued
against unpaid advances on future income from the former patented technology. No
income was recognized from the patents, and accordingly, no accrued amounts are
due or owing from the patent agreements.
7. Stock Conversion
On June 22, 2009, the Company issued 300,286 shares of common stock to an
officer/director in conversion of $186,177 of accrued deferred compensation. The
share price used for the conversion was $0.62.
8. Stock-Based Compensation
On April 15, 2009, the Board of Directors authorized a five year extension of
the expiration dates for 847,667 options outstanding that were due to expire in
April and May, 2009. In accordance with FAS 123 (R), the Company recorded
incremental compensation for the amended stock options based on the excess of
the fair value of the amended option agreements over the fair value of the
original options immediately before the amendment. Fair value was determined
using a Black-Scholes Pricing Model, using the following assumptions: Dividend
yield $0; Expected volatility range of 1% (pre-amendment) to 258% (post
amendment); Risk-free interest rate of 1.71%; Expected lives of 4 or 34 days
(pre-amendment) to 5 years (post-amendment). The Company recorded stock-based
compensation in the second quarter of 2009 of $210,300 related to the amended
option agreements.
9. Subsequent Event
On July 14, 2009, the Company issued 100,000 shares of common stock to an
officer/director in conversion of $100,000 of related party notes payable. The
share price used for the conversion was $1.00.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
- ---------------------
This Quarterly Report on Form 10-Q, 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-Q,
other than statements of historical fact, should be considered forward looking
statements, including, but not limited to, those concerning the Company's
strategies, ability to generate sufficient cash flow or secure additional
sources of financing, collectability of project payments, future customer
revenue, variability of quarterly operating results, completion of remaining
contracts, attraction and retention of employees and key management personnel,
political and economic uncertainty and other competitive factors. Additionally,
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-K. 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.
MPM holds a 58.21% interest in NuPower Partnership through its ownership of
NuPower, Inc. No other operations were conducted through NuPower. NuPower
Partnership is engaged in the development and commercialization of a
waste-to-energy process. This 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. NuPower Partnership owns 85% of the Skygas
Venture. In addition to its partnership interest, MPM owns 15% of the Venture.
Due to the expiration of the patents related to the original Skygas technology,
the related agreements with the NuPower partnership have also expired. It is
expected that new agreements will be negotiated over the next two quarters to
recognize the newer technologies, and possibly raise some capital. There can be
no guarantee that new capital will be raised, however.
In 2008, a new company was incorporated named Skygas Energy Ontario Limited.
NuPower, Inc. owns all 100 of the issued and outstanding shares of the new
company. It is anticipated that this company will be part of a business venture
in Canada to commercialize the Skygas process. Management is currently in
negotiations with unrelated third parties with regard to this venture. It is
unclear at this time what form this venture will take.
The United States patent on the Skygas process expired in November 2008. The
Company filed a provisional new patent for a significantly improved Skygas
process in February 2009. There can be no guarantee that the new patent will be
approved at this time. There was also a Canadian patent on the Skygas process
that expired in April 2009.
Mining controls 15 claims on approximately 300 acres in the historical Emery
Mining District in Montana. It also owns a 200-ton per day floatation mill on
site. Extensive exploration has been conducted in the area by companies such as
Exxon-Mobil Corporation, Freeport McMoran Gold Company and Hecla Mining Company
in addition to the efforts of MPM Mining.
MPM management believes that resuming mining operations is a way to generate
positive cash flows and mitigate the continuing losses from other operations
given the current market prices and conditions for precious metals. Accordingly,
management will investigate its needs to make this happen.
AirPol is an active continuing concern. 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 months ended June
30, 2009 and 2008 include the operations of AirPol, Skygas and MPM.
MPM's consolidated net loss from operations for the six months ended June 30,
2009 was $754,494 or $0.12 per share compared to a net loss of $810,817, or
$0.13 per share for the six months ended June 30, 2008.
Six and three months ended June 30, 2009 compared to six and three months ended
- -------------------------------------------------------------------------------
June 30, 2008
- -------------
For the six months ended June 30, 2009, MPM had a net loss of $754,494, or $0.12
per share compared to net loss of $810,817, or $0.13 per share for the six
months ended June 30, 2008. Revenues increased 59% to $360,639 for the six
months ended June 30, 2009 compared to $227,516 for the six months ended June
30, 2008. The revenue increase was due to the completion of a project in the
first quarter, and improved revenues from sales of parts and service. Costs of
sales increased 67% to $189,004 for the six months ended June 30, 2009 compared
to $113,386 for the six months ended June 30, 2008. This was due to the
completion of a project in the first quarter and increases in sales of parts and
service. Operating expenses increased 23% to $674,996 for the six months ended
June 30, 2009 compared to $547,268 for the six months ended June 30, 2008,
primarily due to stock-based compensation expense in 2009 related to option
agreement amendments.
For the three months ended June 30, 2009, MPM had a net loss of $391,972, or
$0.06 per share compared to a net loss of $441,264, or $0.07 per share for the
three months ended June 30, 2008. Revenues increased 47% to $176,566 for the
three months ended June 30, 2009 compared to $120,122 for the three months ended
June 30, 2008. This was due to improved parts and service sales in the second
quarter of 2009. Costs of sales increased 24% to $87,901 for the three months
ended June 30, 2009 compared to $70,977 for the three months ended June 30,
2008. This was due to the increased sales of parts and service. Operating
expenses increased 51% to $443,162 for the three months ended June 30, 2009
compared to $293,148 for the three months ended June 30, 2008, primarily due to
stock-based compensation expense in 2009 related to option agreement amendments.
The Company currently has no backlog of project work.
Financial Condition and Liquidity
- ---------------------------------
For the six months ended June 30, 2009, the Company relied principally on cash
from operations and loans from an officer/director to fund its activities.
Working capital deficit at June 30, 2009 was $13,745,235 compared to $13,388,664
at December 31, 2008. The Company continues to work to narrow its losses and get
to a cash flow neutral position. There can be no assurances that management will
be successful in attaining this goal. Accordingly, management is continuing to
seek alternative sources of capital such as private placements, stock offerings
and other financing alternatives.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
This item is not applicable because we are a "smaller reporting company," as
defined by applicable SEC regulations.
Item 4. Controls and Procedures.
Management's Report on Disclosure Controls and Procedures.
- -----------------------------------------------------------------
We maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our Securities Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including our CEO and CFO, as appropriate, to
allow timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, we recognized that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives, as ours
are designed to do, and we were required to apply our judgment in evaluating the
cost-benefit relationship of possible changes or additions to our controls and
procedures.
As of June 30 2009, we carried out an evaluation, under the supervision and with
the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934. Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures had a material weakness because it did not have a
sufficient number of personnel with adequate knowledge, experience and training
in U.S. generally accepted accounting policies commensurate with MPM's reporting
requirements. This material weakness required the identification of adjustments
during the financial statement close process that have been recorded in MPM's
consolidated financial statements. As a result of this material weakness,
management has concluded that internal controls over disclosure controls and
procedures and financial reporting were not effective at June 30, 2009, in
enabling us to record, process, summarize and report information required to be
included in our periodic SEC filings within the required time period.
Changes in Internal Control Over Financial Reporting.
- -----------------------------------------------------
There have been no changes in our internal control over financial reporting that
occurred during the period covered by this report that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
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 Stockholders was held on June 29, 2009. Following are
the results of the stockholder voting:
Proposal 1 - Election of Directors
Name For Withheld
- ---- --- --------
Richard E. Appleby 5,237,181 47,105
Richard Kao 5,237,181 47,105
Each director was re-elected for a three-year term.
Total shares represented by proxy and in person: 5,284,286
Percentage of the outstanding votable shares: 83.03%
Outstanding votable shares: 6,307,510
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
- ----------- -----------
31.1 Chief Executive Officer's Certificate, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Chief Financial Officer's Certificate, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
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 14, 2009 /s/ Michael J. Luciano
- --------------- ---------------------------
(date) Michael J. Luciano
Chairman & CEO