-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V3FdOVk/Qqu52uiJaOd5VL1GwaNGZFceHR9eCax6YI4vj9aQT5zIA7fFYxclvFoM fgkUJZqu9dP+i1TMDfBsIw== 0001157523-06-003641.txt : 20060417 0001157523-06-003641.hdr.sgml : 20060417 20060417103803 ACCESSION NUMBER: 0001157523-06-003641 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20060417 DATE AS OF CHANGE: 20060417 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MPM TECHNOLOGIES INC CENTRAL INDEX KEY: 0000799268 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 810436060 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14910 FILM NUMBER: 06761461 BUSINESS ADDRESS: STREET 1: 222 W MISSION AVE STREET 2: STE 30 CITY: SPOKANE STATE: WA ZIP: 99201 BUSINESS PHONE: 5093263443 MAIL ADDRESS: STREET 1: 908 N HOWARD SUITE 100 STREET 2: 908 N HOWARD SUITE 100 CITY: SPOKANE STATE: WA ZIP: 99201 FORMER COMPANY: FORMER CONFORMED NAME: MONTANA PRECISION MINING LTD DATE OF NAME CHANGE: 19920703 10KSB 1 a5124834.txt MPM TECHNOLOGIES, INC. 10-KSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Form 10-KSB [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005 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, NEW JERSEY 07054 (Address of principal executive offices) Registrant's telephone number, including area code: 973-428-5009 SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT: None SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT: COMMON STOCK, PAR VALUE OF $0.001 --------------------------------- Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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___ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for the most recent fiscal year: $ 1,959,353 The aggregate market value of the voting and non-voting equity held by non-affiliates computed by reference to the closing price of $0.49 at which the common equity was sold as of April 13, 2006 was $1,559,701. The number of shares outstanding of the registrant's common stock as of April 13, 2006 was 3,183,064. Transitional Small Business Disclosure Format Yes ___ No _X_ PART I Item 1. Business Incorporated in 1983, MPM Technologies, Inc. ("MPM" or "the Company") as of year ended December 31, 2005, had three wholly owned subsidiaries: AirPol, Inc. ("AirPol"), Nupower, Inc. ("Nupower") and MPM Mining Inc. ("Mining"). For the year ended December 31, 2005, AirPol was the only revenue generating entity. On March 9, 2004, MPM management filed a petition for subsidiary Huntington Environmental Systems Inc. ("Huntington") in federal court under Chapter 7 of the U.S. Bankruptcy Code. There were no operations of Huntington in 2005 or 2004. On July 20, 2005, the bankruptcy trustee filed a report with the U.S. Bankruptcy Court Northern District of Illinois under bankruptcy petition number 04-09160 stating that the trustee had examined the debtor in accordance with Section 341(d) of the Bankruptcy Code and that he believed that there were no assets to be administered for the benefit of creditors. AirPol continues to operate in the air pollution control industry. It sells air pollution control systems to Fortune 500 and other large industrial companies in the U.S and worldwide. The Company through wholly owed subsidiary NuPower Inc is engaged in the development and commercialization of a waste-to-energy process known as Skygas(TM). These efforts are largely through NuPower's participation in Nupower Partnership in which MPM has a 58.21% partnership interest. Nupower Partnership owns 85% of the Skygas Venture. In addition to its partnership interest through Nupower Inc, MPM also owns 15% of the Venture. Mining operations were discontinued several years ago. In 1998, MPM's Board of Directors decided to sell the mining properties and the related buildings and equipment. In early 2002 the Board of Directors, based upon the increase in precious metal prices, decided to hold the properties as an investment. Management is actively seeking a joint venture partner with the necessary financial abilities to further explore and develop the properties thereby greatly enhancing the company's investment. AIRPOL, INC. Effective July 1, 1998, the Company acquired certain of the assets and assumed certain of the liabilities of part of a division of FLS miljo, Inc. The agreement called for the Company to pay $300,000 stock and $234,610 in cash. The transaction was accounted for as a purchase. AirPol designs, engineers, supplies and services air pollution control systems for Fortune 500 and other environmental and industrial companies. The technologies used by AirPol differ from those used by HES, and the companies are in no way competitors. The technologies of AirPol utilize wet and dry scrubbers, wet electrostatic precipitators and venturi absorbers to control air pollution. AirPol brings over 30 years experience through its technologies and employees. AirPol also owns a 40.1% interest in Sunic AirPol ("Sunic"), a joint venture company located in Mainland China. During 2005, the Company determined this investment to be impaired and wrote off the full carrying value of its investment. Sunic's results were recorded on AirPol's books using the equity method. Sunic was in the same business as AirPol. NUPOWER, INC. The Company holds a 58.21% interest in Nupower Partnership through its ownership of Nupower. 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. MPM MINING, INC. The company owns 7.5 patented claims and 2 unpatented claims and leases 7 patented claims with options to purchase on approximately 300 acres in Montana's historical Emery Mining District. It also owns a 200-ton per day onsite floatation mill. Companies such as Exxon Corporation, Freeport McMoran Gold Company and Hecla Mining Company in addition to MPM Mining have conducted extensive exploration in the area. In 1998, the Board of Directors decided to dispose of the mining properties but later rescinding that decision in early 2002 deciding to hold the properties as an investment. Management believes that the investment would greatly increase with the addition of a joint venture partner. To that end management is actively seeking a joint venture partner with the necessary financial abilities to further explore and develop the properties. Following several geologist reports, assays and recommendations, the company built a 200 ton per day ball mill using floatation tanks to process screened and crushed ore. It took two years to build, equip and test the mill at a cost of approximately $800,000. The mill is in operable condition with all equipment in good repair. The company has Rake classifier ship, Wilfley Concentrate table, Marcy ball mill 5'x4', flotation machines and equipment, Denver water pumps, 3 deck concentrate table, Hardinge ball mill and Elmco filter press. There is an office trailer and living quarters for personnel including a deep well and septic system. There are two storage ponds and a creek running through the property. MPM has spent over $1.3 million on exploration and drilling programs including work done by Exxon, Freeport McMoran, and most recently Hecla Mining Company. Hecla's drilling results were extremely encouraging in that some drill holes confirmed the possibility of open pit mining and that certain mineral deposits might be enlarged and improved in grade by further drilling. Additionally, there is considerable evidence of significant mineralized materials awaiting drilling programs. The company has utilized reverse circulation and diamond core drilling techniques in five different programs the total of which are 182 drilled holes averaging 90' in depth. Additionally, 15 trenches 18' deep and 6' wide were dug. All were assayed with all showing mineralization. There have been 5 exploration programs to date: MPM Mining 6 drill holes 1983-84. MPM Mining 13 drill holes and 15 trenches 1986 Freeport McMoran Gold Co. 78 drill holes 1988-89 Pegasus Gold Corp 3 drill holes 1990 Hecla Mining Co. 82 drill holes 1991-92 - -------------------------------------------------------------------------------- MPM MINING INC EMERY DISTRICT MINERALIZED MATERIAL ----------------------------------- Tons Ounces Per Ton ------ ------------------ Location Gold Silver - -------- ---- ------ Emery Mine 57,941 0.372 15.39 Emery Stockpiles 38,859 0.120 4.28 Bonanza 218,579 0.132 2.06 Hidden Hand 208,619 0.123 -- - -------------------------------------------------------------------------------- The properties are in mineralized zones containing gold, silver, lead and zinc. Located on the properties are former mine shafts, tunnels, mineral stockpiles and stopes (in tunnels) with valuable low-grade mineralization. All areas have been trenched, core drilled and assayed to prove mineralization. The properties contain both underground and near surface minerals. Additionally there are 8 stockpiles with good assayed results of mineralization. The old time miners were after high-grade ore and not interested in lower grade mineral surrounding the vein. The mineral taken from shafts, tunnels and around the high-grade vein was transported to these stockpiles. The total cost of purchasing the properties, leasing properties, building and equipping the ball mill, infrastructures and bringing power line to replace generators is estimated at $4,000,000. Current expenses that include lease payments and taxes are under $10,000 per year. In the past power was supplied by two large capacity generators. At a time the mill is reopened power lines will be brought in from Deer Lodge, Montana at an estimated cost of $200,000. A deep well and Sterret Creek supplies all water needs. FACTORS MANAGEMENT USED TO IDENTIFY REPORTABLE SEGMENTS Management considers MPM's reportable segments to be business units that offer different products. The business segments may be reportable because they are each managed separately, or they design and engineer distinct products with different applications in the air pollution control field. Airpol operates in the air pollution control field. MPM's other segments are essentially non-operational at the present time, and, accordingly have been aggregated for reporting purposes. Accordingly, for the years ended December 31, 2005 and 2004, the Company operated in one segment, and there is no separate segment reporting required. BACKLOG MPM had a backlog of orders and work in progress at AirPol aggregating approximately $365,000 at December 31, 2005. It is anticipated that operations will consume these backorders during 2006. There is currently no other backlog of orders for any of MPM's other businesses. WASTE-TO-ENERGY MPM's waste-to-energy process consists of an innovative technology known as "Skygas". The process is used in the disposal and gasification of various forms of non-metallic wastes. MPM continues to negotiate with interested entities for the manufacture and operation of Skygas units. These negotiations are ongoing, and MPM management is hopeful that there will be formal agreements in place during 2006. COMPETITIVE CONDITIONS AirPol operates in extremely competitive environments. There are a number of potential competitors for every job the companies bid on. The number of bidders ranges from two or three to as many as seven or eight depending on the potential customer and the work to be performed. The parts and service side of the business tends to be somewhat less competitive since the parts and service work are generally for units that have previously been sold and/or installed by the companies. There are a significant number of persons and companies developing or have developed any number of waste-to-energy systems. Management of MPM believes that its development of Skygas(TM) as a non-polluting and energy efficient system will give it the necessary competitive edge in this area. Due to the large number of persons and companies engaged in exploration for and production of mineralized material, there is a great degree of competition in the mining part of the business. SEASONAL VARIATIONS The impact of seasonal changes is minimal on the air pollution control business of AirPol. There may be some limitations on the installation of the air pollution control units when the weather is more severe in the winter months in those areas of the world where the weather is significantly colder in that season. There have been, however, no discernible variations to date to indicate that the business is subject to seasonal variations. There are currently no seasonal influences on the ongoing development of the Skygas(TM) process. It is also not expected that there will be any seasonal variations when the Skygas(TM) units are produced. EMPLOYEES At December 31, 2005, MPM had three employees and there were five employees at AirPol. MPM believes that its relations with its employees are good. Item 2. Properties AirPol leases its office space that expires in August of 2007. MPM has no property related to its waste-to-energy operations. MPM believes that its existing facilities are adequate for the current level of operations. The MPM Mining property is located in the Emery Mining District of Powell County, Montana approximately seven miles northeast of Deer Lodge, Montana. A road maintained by the county runs though or nearby company properties, mill and infrastructures. All titles to the company's properties are secured. All leased claims are up to date and paid in full. The company owns 7.5 patented claims, 2 unpatented claims and leases 7 patented claims. Each leased claim contains an option to purchase. The properties are in mineralized zones containing gold, silver, lead and zinc. Located on the properties are former mine shafts, tunnels, mineral stockpiles and stopes (in tunnels) with valuable low-grade mineralization. All areas have been trenched, core drilled and assayed to prove mineralization. These claims amount to approximately 300 acres of land in the Emery Mining District, Powell County Montana. MPM controls eighteen former mine sites that have been inactive since 1930. Each of these has old adits, tunnels and mineral stockpiles of known mineralized material. All testing and metallurgical work has been completed. As noted above, the Board of Directors has instructed management to hold these properties as an investment. Management believes there is interest in the mining properties and is currently investigating various joint venture options. [GRAPHIC OMITTED/SEE SUPPLEMENTAL IMAGE] Item 3. Legal Proceedings None Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of the shareholders during the fourth quarter of 2005. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters a) Market Information On February 18, 2003 MPM common stock began trading on the OTC Bulletin Board under the trading symbol MPML. The following table shows quarterly high and low bid prices for 2005 and 2004 as reported by the National Quotations Bureau Incorporated. These prices reflect interdealer quotations without adjustments for retail markup, markdown or commission and do not necessarily represent actual transactions. High Bid Low Bid -------- ------- 2005 First Quarter $ .25 $ .18 Second Quarter .20 .06 Third Quarter .27 .06 Fourth Quarter .25 .10 2004 First Quarter $ .25 $ .18 Second Quarter .25 .15 Third Quarter .35 .21 Fourth Quarter .65 .22 b) Holders As of April 13, 2006, there were approximately 1,800 holders of record of the Registrant's common stock. c) Dividends MPM has not paid dividends in the past. It is not anticipated that MPM will distribute dividends for the foreseeable future. Earnings of MPM are expected to be retained to enhance its capital and expand its operations. d) Recent Sales of Unregistered Securities None Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations In addition to reading this section, you should read the consolidated financial statements that begin on page F-1. That section contains all detailed financial information including our results of operations. a) Results of Operations 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 to run this air pollution control business. The results of operations for the years ended December 31, 2005 and 2004 include the operations AirPol. For the year ended December 31, 2005, MPM had consolidated revenues of $1,959,353. Consolidated revenues for 2004 were $1,849,948. MPM's net income for the year was $1,898,498, or $0.60 per share ($0.40 per share on a fully diluted basis). The net income was due to the liquidation of the assets and liabilities of Huntington. The Company realized a gain on liquidation of $2,611,922, or $0.82 per share. Not including the gain from the liquidation, MPM had a net loss of $713,424, or $0.22 per share. There were a number of significant adjustments made by the Company that contributed to the loss. Revenues were again hurt by the lack of enforcement of clean air laws. Air pollution control companies depend heavily on the enforcement of clean air laws. MPM's management continues to work to restructure the Company. Management is considering further reductions in personnel, office space, and other cost saving changes. Other businesses are being evaluated to consider moving the Company's business toward other more profitable ventures. There have been significant consolidations in the air pollution control industry in the past few years. MPM management's short term goal is to operate a lean, profitable company. 2005 COMPARED TO 2004 Revenues increased $109,405 (6%) from $1,849,948 in 2004 to $1,959,353 in 2005. The net loss from continuing operations for 2005 was $713,424 or $0.22 per share compared to $1,905,446 or $0.60 per share in 2004. Selling, general and administrative expenses decreased $941,203 (46%) from $2,028,216 in 2004 to $1,087,013 in 2005. This was due largely to cost savings related to personnel reductions. LIQUIDITY AND CAPITAL RESOURCES During 2005, funds for operations were provided principally by loans from an officer/director. Current cash reserves and continuing operations of HES and AirPol are not believed to be adequate to fund MPM's and its subsidiaries' operations for the foreseeable future. MPM management is also considering alternative sources of capital such as private placements, other stock offerings and loans from stockholders and officers to fund its current business and expand in other related areas through more acquisitions. Following is a summary from MPM's consolidated statements of cash flows: Year ended December 31, ------------ 2005 2004 ---- ---- Net cash used in operating activities $(311,483) $(1,053,410) Net cash provided by financing activities 309,500 1,051,345 Net decrease in cash and cash equivalents $ (1,983) $ (2,065) The net cash used in operating activities in 2005 and 2004 was due primarily to net losses. This was due mainly to the decreased activity levels at AirPol during 2005 and 2004. The net cash provided by financing activities in 2005 of $309,500 was from loans from a related party. Management believes its present sources of working capital are sufficient for both its short and long-term purposes. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In December 2004, the FASB revised Statement No. 123, Accounting for Stock-Based Compensation. This Statement supercedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. This Statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. This Statement does not change the accounting guidance for share-based payment transactions with parties other than employees provided in Statement 123 as originally issued and EITF Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services." This Statement does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, Employers' Accounting for Employee Stock Ownership Plans. This Statement is effective for the year ending December 31, 2005. It is not expected to have a significant impact on the Company's results of operations or financial position. In November 2004 the FASB issued Statement No. 151, Inventory Costs - An Amendment of ARB No. 43, Chapter 4. This Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that "... under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges..." This Statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal". In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This Statement if effective for inventory costs incurred during fiscal years beginning after June 15, 2005. This Statement is not expected to have a significant impact on the Company's results of operations or financial position. The FASB has issued Statement No. 152, Accounting for Real Estate Time-Sharing Transactions. This Statement amends FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-02, Accounting for Real Estate Time-Sharing Transactions. This Statement also amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-02. This Statement is effective for fiscal years beginning after June 15, 2005 and is not expected to have a significant impact on the Company's results of operations or financial position. The FASB issued Statement No. 153, Exchanges of Nonmonetary Assets. The guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in the Opinion, however, included certain exceptions to that principle. This Statement amends Opinion No. 29 to eliminate the exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This Statement is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005 and is not expected to have a significant impact on the Company's results of operations or financial position. IMPACT OF INFLATION Although inflation has slowed in recent years, it is still a factor in our economy and MPM continually seeks ways to mitigate its impact. To the extent permitted by competition, AirPol passes increased costs on to its customers by increasing prices over time. Management estimates that the impact of inflation on the revenues for 2005 was negligible. Since MPM did not engage in any mining operations, sales of metals or metal bearing ores, and was in the development stage of the waste-to-energy process, inflation did not materially impact the financial performance of those segments of the MPM's business. Management estimates that the operations of MPM were only nominally impacted by inflation. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Forward-looking statements in this report, including without limitation, statements relating to MPM's plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) MPM's loans, strategies, objectives, expectations and intentions are subject to change at any time at the discretion of MPM's management; (ii) MPM's plans and results of operations will be affected by its ability to manage its growth and (iii) other risks and uncertainties indicated from time to time in MPM's filings with the Securities and Exchange Commission. Item 7. Financial Statements The financial statements follow on the next page. MPM TECHNOLOGIES, INC. AND SUBSIDIARIES --------------------------------------- FINANCIAL STATEMENTS -------------------- DECEMBER 31, 2005 AND 2004 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES --------------------------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm ........... F-2 Consolidated Balance Sheet as of December 31, 2005 ................ F-3 Consolidated Statements of Operations for the years ended December 31, 2005 and 2004 ........................................ F-4 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2005 and 2004 .................................. F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2005 and 2004 ........................................ F-6 to F-7 Summary of Accounting Policies .................................... F-8 to F-10 Notes to Consolidated Financial Statements ........................ F-11 to F-17 Report of the Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of MPM Technologies, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheet of MPM Technologies, Inc. and Subsidiaries as of December 31, 2005 and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 2005 and 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MPM Technologies, Inc. and Subsidiaries as of December 31, 2005, and the consolidated results of their operations and cash flows for the years ended December 31, 2005 and 2004 in conformity with accounting principles generally accepted in the United States of America. 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, the Company has not been able to generate any significant revenues and has a working capital deficiency of $5,822,003 at December 31, 2005. 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. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Rosenberg Rich Baker Berman & Co. Bridgewater, New Jersey April 10, 2006 F-2

See accompanying summary of accounting policies and notes to the consolidated financial statements. F-3

See accompanying summary of accounting policies and notes to the consolidated financial statements. F-4

See accompanying summary of accounting policies and notes to the consolidated financial statements. F-5

See accompanying summary of accounting policies and notes to the consolidated financial statements. F-6 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES --------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, --------------------------- 2005 2004 ------------ ------------ Supplemental Disclosures Of Cash Flow Information Cash paid during the year for: Interest $ 4,063 $ 4,227 Income taxes $ - $ - See accompanying summary of accounting policies and notes to the consolidated financial statements. F-7 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES --------------------------------------- SUMMARY OF ACCOUNTING POLICIES Operations, Principles of Consolidation and Basis of Presentation MPM Technologies, Inc. (the Company) was incorporated as Okanogan Development, Inc. on July 18, 1983, under the laws of the State of Washington. It was formed primarily for the purpose of investing in real estate and interests in real estate. On April 25, 1985, the Company combined with MADD Exploration (MADD), a Montana partnership, and changed its name to Montana Precision Mining, Ltd. In August 1995, the Company changed its name to MPM Technologies, Inc. As a result of the combination with MADD, the Company acquired mining properties located in Powell County, Montana. The Company is not currently engaged in exploration or developmental mining activities in regard to these properties. The accompanying consolidated financial statements include the accounts of the Company and the following subsidiaries and other entities controlled by the Company: Huntington Environmental Systems, Inc. (HES), AirPol, Inc. (AirPol), MPM Mining, Inc., NuPower, Inc., NuPower (a General Partnership) and Skygas. Intercompany accounts and transactions among the companies have been eliminated. HES, a wholly owned subsidiary, was acquired on March 31, 1997 (See Note 1). On March 9, 2004, management filed a petition in federal court under Chapter 7 of the United States Bankruptcy Code. On July 20, 2005, the bankruptcy trustee filed a report with the U.S. Bankruptcy Court Northern District of Illinois under bankruptcy petition number 04-09160 stating that the trustee had examined the debtor in accordance with Section 341(d) of the Bankruptcy Code and that he believed that there were no assets to be administered for the benefit of creditors. Accordingly, HES was accounted for as a discontinued operation, and its assets and liabilities were liquidated during 2005. AirPol, a wholly owned subsidiary, was acquired on July 2, 1998 (See Note 1). AirPol designs, engineers, supplies and services air pollution control systems. AirPol's systems utilize wet and dry scrubbers, wet electrostatic precipitators and venturi absorbers to control air pollution. NuPower, a 58.21% owned partnership, is engaged in the research and development of an electrothermal gasification process which will be utilized primarily in the waste-to-energy field, although the process is expected to have applications in other areas. This partnership was formed in 1986. Skygas, an 85% directly and indirectly owned joint venture, was formed in 1990 for the purpose of commercializing the Skygas technology, which is a disposal/gasification process that converts solid and semi-solid wastes into clean, medium BTU syntheses gas. As of December 31, 2005 and 2004, participants and interests owned in the Skygas venture included: NuPower (a 58.2% owned subsidiary of the Company), 70%, MPM Technologies, Inc., 15%, and USF Smogless of Milan, Italy (a subsidiary of United States Filter Corporation which also owns shares of the Company totaling 6.83% of the common stock outstanding), 15%. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of December 31, 2005, the Company has a working capital deficiency, an accumulated deficit, and has not been able to generate any significant revenues. These conditions raise substantial doubt about the ability of the Company to continue as a going concern. The Company plans to raise additional capital in the future. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Revenue Recognition Contract revenue is recognized on the percentage-of-completion method in the ratio that costs incurred bear to estimated costs at completion. Costs include all direct material and labor costs, and indirect costs, such as supplies, tools, repairs and depreciation. Selling, general and administrative costs are charged to expense as incurred. Other revenue is recorded on the basis of shipment or performance of services or shipment of products. Provision for estimated contract losses, if any, is made in the period that such losses are determined. During 2005 and 2004, no amounts were recognized for estimated contract losses. F-8 The asset "costs and estimated earnings in excess of billings" represents revenues recognized in excess of amounts invoiced. The liability "billings in excess of costs and estimated earnings" represents invoices in excess of revenues recognized. Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation. For financial reporting purposes, the costs of plant and equipment are depreciated over the estimated useful lives of the assets, which range from three to fifteen years, using the straight-line method. Purchased Intangible Purchased intangible represents the excess of the purchase price over the fair value of net assets acquired and is being amortized on a straight-line basis over its estimated period of future benefit of ten years. The Company periodically evaluates the recoverability of purchased intangible. The measurement of possible impairment is based primarily on the Company's ability to recover the unamortized balance of the purchased intangible from expected future operating cash flows on an undiscounted basis. Asset Impairment The Company evaluates its long-lived assets for financial impairment, and continues to evaluate them as events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. The Company evaluates the recoverability of long-lived assets by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with them. At the time such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. Income Taxes The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". SFAS No. 109 uses the asset and liability method so that deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws and tax rates. Deferred income tax expense or benefit is based on the changes in the financial statement basis versus the tax bases in the Company's assets or liabilities from period to period. Research and Development Costs Research and development costs are charged to expense as incurred. Advertising Costs Advertising costs are charged to operations when incurred. Advertising expense was $3,616 and $1,287 for the years ended December 31, 2005 and 2004, respectively. Reclassification Certain amounts from 2004 have been reclassified to conform to 2005 presentation. F-9 Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. Those estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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. Fair Value of Financial Instruments The carrying amounts reported in the balance sheet as of December 31, 2005 for cash equivalents, investments, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The fair value of notes payable and long-term debt approximates their carrying value as the stated or discounted rates of the debt reflect recent market conditions. Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Cash and Cash Equivalents For purposes of balance sheet classification and the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Warranty Reserve The Company warranties its pollution control units for defects in design, materials, and workmanship generally for a period of 18 months from date sold or 12 months from date placed in service. Provision for estimated warranty costs is recorded upon completion of the project and periodically adjusted to reflect actual experience. Earnings Per Share SFAS No. 128 requires dual presentation of basic earnings per share and diluted earnings per share on the face of all income statements issued after December 15, 1997 for all entities with complex capital structures. Basic earnings per share includes no dilution and is calculated by dividing income available to common shareholders by the weighted average number of shares actually outstanding during the period. Diluted earnings per share reflect the potential dilution of securities (such as stock options, warrants and securities convertible into common stock) that could share in the earnings of an entity. At December 31, 2004, outstanding options to purchase 1,445,919 shares of the Company's common stock were not included in the computation of diluted earnings per share as their effect would have been antidilutive. F-10 MPM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Business Acquisitions On March 31, 1997, the Company acquired an operating business from United States Filter Corporation under the terms of an asset purchase agreement and subsequently formed an Illinois corporation, Huntington Environmental Systems, Inc., into which the acquired assets and liabilities were transferred. The acquisition of HES was recorded under the purchase method of accounting; accordingly, the results of operations of HES are included in the consolidated statements of operations from the date of acquisition. The purchase price consisted of the issuance of 146,667 shares of the Company's common stock valued at $990,000. The excess of the fair value of the net assets acquired over the purchase price was $944,889, which has been established as negative goodwill and was being amortized over ten years. On July 2, 1998, the Company acquired an operating business from FLS miljo, Inc. under the terms of an asset purchase agreement and subsequently formed a New Jersey corporation, AirPol, Inc., into which the acquired assets and liabilities were transferred. The acquisition of AirPol was recorded under the purchase method of accounting; accordingly, the results of operations of AirPol are included in the consolidated statements of operations from the date of acquisition. The total purchase price of AirPol was $534,610 and consisted of $234,610 of cash and 96,884 shares of common stock of the Company valued at $300,000. The excess of the purchase price over the fair value of the net assets acquired was $760,532 and was being amortized over ten years. As of July 2, 1998, the fair values of assets acquired and liabilities assumed were as follows: Costs and estimated earnings in excess of billings........ $ 248,038 Plant, property and equipment............................. 89,539 Goodwill.................................................. 760,532 Accrued expenses.......................................... (15,751) Billings in excess of costs and estimated earnings........ (547,748) ------------ $ 534,610 ============ As of December 31, 2001, the Company wrote off the net balances of the goodwill and negative goodwill. The effect of these write-offs was not material. In September 2000, the Company entered into an agreement to acquire substantially all of the stock of New Monitor Builders, Inc. Since the only assets of New Monitor Builders were patents, the agreement was changed, and the Company acquired only the patents. The Company issued 89,300 shares of its common stock, and recorded the patents acquired at the market value of the stock on its date of issue, $588,244. The patents were being carried at cost on the accompanying financial statements. The patents were being amortized over the life of the patents. During 2002, management took a charge to income for the impairment of the New Monitor investment, based on the estimated fair market value of the asset. This charge amounted to $514,000 and is included on the consolidated statements of operations. 2. Costs and Estimated Earnings on Contracts in Progress Following is a summary of costs, billings, and estimated earnings on contracts in progress as of December 31, 2005. Costs incurred on contracts in progress............ $ 354,096 Estimated earnings................................. 97,869 ------------- 451,965 Less billings to date.............................. 458,628 ------------- ------------- $ (6,663) ============= F-11 The above accounts are shown in the accompanying consolidated balance sheet under these captions at December 31, 2005. Costs and estimated earnings in excess of billings ............................ $ 15,901 Billings in excess of costs and estimated earnings ..................... (22,564) ---------- $ (6,663) ========== 3. Investments at Equity Investments in unconsolidated jointly owned companies in which the company has a 20% to 50% interest or otherwise exercises significant influence are carried at cost, adjusted for the company's proportionate share of their undistributed earnings or losses. At December 31, 2004 the Company's investment accounted for using the equity method consisted of a 40% ownership in Sunic AirPol, Inc. As a result of this investment, the Company recognized $12,795 of income for the year ended December 31, 2004. In 2005, MPM management determined that this investment had been permanently impaired. Accordingly, the investment in the amount of $119,577 was written off in 2005 and charged against income for the year. 4. Property, Plant and Equipment Property, plant and equipment consists of the following at December 31, 2005: Equipment......................................... $ 243,027 Furniture and fixtures............................ 31,008 ------------- ------------- 274,035 Less accumulated depreciation..................... 255,548 ------------- $ 18,487 ============= Depreciation expense charged to operations was $51,144 and $152,165 in 2005 and 2004, respectively. In 2004, equipment was impaired in the amount of $708,080. 5. Note Payable and Long-Term Debt 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 matures on January 2, 2008. As of December 31, 2005, the Company has $2,769,790 of principal advances and accrued interest of $477,251 outstanding under the agreement. During the year ended December 31, 2005, the Company recorded interest expense of $161,966. 6. Related Party Debt Related party debt consists of advances received from and deferred expenses and reimbursements to various directors and related parties. At December 31, 2005, amounts owed these related parties totaled $5,108,606. These amounts are due on demand and accrue interest at 13%. Interest expense accrued on these related party advances were $451,040 and $382,180 for the years ended December 31, 2005 and 2004. F-12 7. Commitments and Contingencies The Company leases office space and mineral properties under operating leases that expire at various dates through 2008. Future minimum rental payments required under operating leases that have initial and remaining noncancelable terms in excess of one year are as follows: Year Ending December 31, ------------------------------------ 2006 .......................... 169,776 2007 .......................... 169,776 2008 .......................... 28,296 ------------ $ 367,848 ============ Rent expense for the years ended December 31, 2005 and 2004 was $141,679 and $131,108, respectively. The Company has entered into an exclusive license rights agreement for technology to be utilized in its SkyGas venture. Pursuant to the terms of the agreement, the Company has agreed to pay $72,000 annually through April 2007. The agreement may be terminated by the Company at any time. 8. Income Taxes As of December 31, 2005 the significant components of the Company's net deferred tax asset is as follows: Net operating loss carryforward................... $ 3,868,000 Differences between book and tax depreciation..... 20,000 Goodwill and purchase asset adjustments........... 10,000 Writedown of mineral properties................... 136,000 Other............................................. 40,000 -------------- 4,074,000 Less: valuation allowance......................... 4,074,000 -------------- $ - ============== As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established at December 31, 2005. The valuation allowance decreased by $1,036,000 during the year ended December 31, 2005. At December 31, 2005, the Company has net operating loss carryforwards for federal income tax purposes totaling approximately $11.1 million that expire in the years 2006 through 2024. At December 2005, the Company has net operating loss carryforwards for state income tax purposes totaling approximately $7.7 million that expire in the years 2006 through 2024. F-13 9. Stockholders' Equity Stock Option Plan On May 22, 1989, the shareholders of the Company voted to approve a stock option plan (the Plan) for selected key employees, officers and directors of the Company. The Plan is administered by a Compensation Committee of the Board of Directors (the "Committee") consisting of those directors of the Company and individuals who are elected annually by the Board of Directors to the Committee. The Board of Directors has chosen one of the Company's directors and one outside individual to serve on the Committee. No director eligible to receive options under the Plan may vote upon the granting of an option or Stock Appreciation Rights (SAR) to himself or herself or upon any decision of the Board of Directors or the Committee relating to the Plan. Under the Plan, a maximum of 236,667 shares were approved to be granted, which in 2003 was increased by 300,000. Generally, the Plan provides that the terms under which options may be granted are to be determined by a Committee subject to certain requirements as follows: (1) the exercise price will not be less than 100% of the market price per share of the common stock of the Company at the time an Incentive Stock Option is granted, or as established by the Committee for Non-qualified Stock Options or Stock Appreciation Rights; and (2) the option purchase price will be paid in full on the date of purchase. Qualified stock option activity under the Plan and non-qualified stock option activity outside the Plan are summarized as follows: Weighted Average Option Options Price ------------ ------------ Outstanding at January 1, 2004............ 1,864,508 $ 1.83 Granted................................... - - Exercised................................. - - Expired................................... - - ------------ ------------ Outstanding at December 31, 2004.......... 1,864,508 $ 1.83 ============ ============ Granted................................... 85,000 $ 0.10 Exercised................................. - - Expired................................... - - ------------ ------------ Outstanding at December 31, 2005.......... 1,949,508 $ 1.83 ============ ============ Proforma Information SFAS No. 123 requires the Company to provide pro forma information regarding net loss and loss per share as if compensation cost for the Company's stock option plan had been determined in accordance with the fair value based method prescribed by SFAS No. 123. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model with the following weighted-average assumptions used: dividend yield of zero percent; expected volatility of 23 percent; risk-free interest rate of 4.35 percent for 2005; and expected lives of ten years for 2005. The weighted average fair value at date of grant for options granted to employees was $0.10 per option for 2005. No options were granted in 2004. Under the accounting provisions of SFAS No. 123, the Company's net income and income per share for the year ended December 31, 2005 would have been adjusted to the pro forma amount indicated below: F-14 Year Ended December 31, 2005 2004 ---------- ----------- Net income (loss) As reported .............................. $1,898,498 (1,905,446) Pro forma ................................ $1,834,632 (1,905,446) Income (loss) per share As reported .............................. $ 0.60 (0.60) Pro forma ................................ $ 0.58 (0.60) The following table summarizes information about stock options outstanding at December 31, 2005: Options Outstanding and Number Weighted Exercisable Weighted Range of Outstanding and Average Average Remaining Exercise Exercisable at Excercise Contractual Life Prices 12/31/05 Price (Years) ----------------- ----------------- ----------- ----------------------- $ 0.10 85,000 $ 0.10 9.8 $ 0.22 413,250 $ 0.22 7.8 $ 0.88 - $0.90 164,591 $ 0.89 2.6 $ 2.00 710,000 $ 2.00 5.4 $ 2.70 450,000 $ 2.70 6.8 $ 3.00 126,667 $ 3.00 5.5 ---------------- ---------------------- $ 0.22 - $3.00 1,949,508 $ 1.67 6.2 ================ ====================== 10. Valuation and Qualifying Accounts Allowance for doubtful account activity was as follows at December 31, 2005. Balance, beginning of year ..................... $ 154,047 Charged to (deducted from) expense ............. - Write-offs, net of recoveries .................. - ---------------- Balance, end of year ........................... $ 154,047 ================ 11. Mineral Properties During 1998, the Board of Directors authorized a plan to dispose of the Company's mineral properties and related mining assets. In 2001, the Board of Directors changed this plan to hold the mineral properties as an investment. Accordingly, the Company has classified these assets as mineral properties held for investment in its balance sheet at December 31, 2005. 12. Prepaid Royalty During 1994, the Company entered into an agreement to sell certain equipment related to the Skygas technology to the inventor of this technology in exchange for a $275,000 note receivable. The note was collateralized by the equipment sold. Under the agreement, the note was due in a balloon payment of $275,000 on December 1, 1995 or at such time the Skygas process is placed into sustainable commercial production. Additional renewals have not been negotiated and the Company has recharacterized this former note receivable as prepaid royalties, recoverable from future revenues resulting from the operation of the equipment. The balance at December 31, 2005 was $273,000. F-15 13. Related Party Transactions At December 31, 2005, the Company owed $5,108,606 to an officer/director and another director. The loans consist of cash advances, deferred compensation and interest. During 2005, an officer/director loaned $350,500 to the Company, and was repaid $41,000. These loans are unsecured and are due on demand. The Company contracts for its shareholder relations services with an officer of the Company. The Company incurred expenses to this related party for services in 2005 and 2004 of $55,000 and $57,200, respectively. As of December 31, 2005 and 2004, a business owned by the Company's President owed the Company $19,614 from the sale of certain equipment. This amount is included in accounts receivable. 14. Purchased Intangible In 1996, the Company issued 133,333 shares of its common stock to acquire an additional 15% interest in the SkyGas venture. The transaction was recorded at $675,000 based on the then-fair value of the shares issued. In accordance with FASB Technical Bulletin No. 84-1, the Company recorded an intangible asset representing the additional interest purchased in SkyGas's patent and licensing rights. 15. New Accounting Pronouncements In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123(R) ("Share-Based Payment" SFAS 123(R) revises SFAS No. 123 and eliminates the alternative to use the intrinsic method of accounting under APB No. 25. SFAS 123(R) requires all public companies accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments to account for these types of transactions using a fair value-based method. The Company currently accounts for share-based payments to employees using the intrinsic value method as set forth in APB No. 25 "Accounting for Stock Issued to Employees". As such, the Company generally recognizes no compensation cost for employee stock options. SFAS No. 123(R) eliminates the alternative to use APB No. 25's intrinsic value method of accounting. Accordingly, the adoption of SFAS No. 123(R)'s fair value method will have an impact on our results of operations, although it will have no impact on our overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. This statement will be effective for the Company with the quarter beginning January 1, 2006. The FASB issued Statement No. 153, Exchanges of Nonmonetary Assets. The guidance in APB Opinion No. 29, Accounting for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in the Opinion, however, included certain exceptions to that principle. This Statement amends Opinion No. 29 to eliminate the exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This Statement is effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005 and is not expected to have a significant impact on the Company's results of operations or financial position. 16. Concentrations of Business 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 on factors surrounding the credit risk of specific customers, historical trends, and other information. For the years ended December 31, 2005 and 2004, approximately 39% and 52% of the Company's sales were derived two and three customers, respectively. F-16 17. Discontinued Operations On March 7, 2004, management filed a petition in federal bankruptcy court on behalf of HES under Chapter 7 of the Bankruptcy Code. HES was inactive for the periods presented, therefore no income or loss has been reflected in the 2004 Statement of Operations. On July 20, 2005, the bankruptcy trustee filed a report with the U.S. Bankruptcy Court Northern District of Illinois under bankruptcy petition number 04-09160 stating that the trustee had examined the debtor in accordance with Section 341(d) of the Bankruptcy Code, and that he believed there were no assets to be administered for the benefit of creditors. Accordingly, the assets and liabilities of HES were liquidated, and resulted in recognition of gain of $2,611,922 in 2005. F-17 Item 8. Changes in and disagreements with accountants on Accounting and Financial Disclosure. Not applicable PART III Item 9. Directors and Executive Officers of the Registrant a) Identification of Directors FIRST ELECTED NAME AGE POSITION DIRECTOR - ----------------------------------------------------------------- Richard E. Appleby 66 Director 4/25/1985 Glen Hjort 53 Director 2/16/1998 Frank E. Hsu 60 Director 6/24/2002 Richard Kao 65 Director 6/28/1999 Michael J. Luciano 52 Director 2/16/1998 L. Craig Cary Smith 56 Director 4/25/1985 Daniel D. Smozanek 80 Director 4/25/1985 The directors will serve until the next meeting of shareholders or until their successors are elected and qualified. b) Identification of Executive Officers. NAME AGE POSITION OFFICER SINCE - --------------------------------------------------------------------------- Richard E. Appleby 66 Vice President 4/25/1985 Glen Hjort 53 Chief Financial Officer 6/28/1999 Frank E. Hsu 60 Chief Operating Officer 6/24/2002 Robert D. Little 56 Secretary 1/03/1991 Michael J. Luciano 52 Chairman & CEO 2/16/1998 Daniel D. Smozanek 80 Treasurer 4/25/1985 The officers will serve until the next meeting of shareholders or until their successors are elected and qualified. c) Identification of Certain Significant Employees. As of December 31, 2005, MPM was dependent upon the services of its principal officers and directors. In the event that one of these persons should leave the Company, there is no assurance that the Company can employ a suitable replacement. d) Family Relations Michael J. Luciano, Chairman of the Board of Directors and Chief Executive Officer is the nephew of Richard E. Appleby, Vice President and Director. There are no other family relationships, whether by blood, marriage, or adoption, between any executives and/or directors. e) Business Experience Background Michael J. Luciano was elected Chairman and Chief Executive Officer in 1999. In 1998, he was named Senior Vice President and elected a director. His continuing responsibilities in addition to overall company management include negotiating ventures and business opportunities in the U.S., Europe, Asia, and Africa. Mr. Luciano was a co-owner of Morris County Sanitation Services, Inc. in East Hanover, New Jersey where he was responsible for acquisitions, governmental regulatory permitting and compliance. He is also the owner of MJL & Associates involved in consulting services specializing in solid waste facilities, permitting, construction and operations. Mr. Luciano resides in Mt. Arlington, New Jersey. Glen Hjort was elected Chief Financial Officer in 1999 and has been a Director since 1998. Mr. Hjort is a certified public accountant with over twenty five years experience providing services to numerous corporate clients in a wide variety of industries. Mr. Hjort resides in Palatine, Illinois. Frank E. Hsu is Chief Operating Officer and was elected Director in 2002. Mr. Hsu is a registered professional engineer with 29 years of experience in design, manufacturing and construction of air pollution control equipment and solid waste disposal systems. He holds a B.S. Degree in Civil engineering from Taiwan Chen Kung University, an M.S. Degree in Environmental Engineering from New Jersey Institute of Technology and an MBA Degree from Fairleigh Dickinson University. Prior to joining AirPol in 1990, Mr. Hsu was Engineering Director of Belco Pollution Control Corp. In addition to his engineering and business management background, he also has extensive experience in international sales, marketing and project execution. Mr. Hsu resides in Warren, New Jersey. Richard E. Appleby is Vice President and a Director since 1985. He attended postgraduate courses at Rutgers in Landscape Design, Landscape Maintenance and Landscape Construction. From 1957 to 1973, Mr. Appleby was Superintendent and Manager of A-L Services and for Farm Harvesting Co., constructing all types of site development and landscape construction projects. From 1973 to 1980, he was Vice President of A-L Services and since 1980, has been President of that company. Mr. Appleby resides in Mendham, New Jersey. Daniel D. Smozanek is Treasurer and a Director since 1985. From 1947 to 1972, Mr. Smozanek was owner and President of Spring House Tree Service in Summit, New Jersey. He has been involved in extensive real estate and land development in New Jersey, Montana and Florida. From 1972 to 1980, he was a partner in land development and real estate sales in the Eureka, Montana area. During this time, he was also a partner in the exploration of 29 silver and copper mining claims in the Flathead National Forest. Mr. Smozanek resides in Port St. Lucie, Florida. Robert D. Little is Secretary of the Company. He is a graduate of Central Washington University with a Bachelor of Arts Degree in Sociology; graduate studies at the University of Washington in Education and earned his Teacher Certification at Seattle University. From 1985 to the present, Mr. Little has been Manager for MPM and became Secretary of MPM in 1991. Mr. Little is the owner of R.D. Little Company which specializes in assisting small public companies with shareholder and investor relations from 1985 to the present. Mr. Little resides in Spokane, Washington. L. Craig Cary Smith has been a Director since 1985. Mr. Smith graduated from Gonzaga Law School in 1981 and was admitted to the Washington State Bar that same year. From 1981 to the present, Mr. Smith has been a partner in general practice at Smith Hemingway Anderson P.S. in Spokane, Washington. Mr. Smith resides in Spokane, Washington. Dr. Richard Kao has been a Director since 1998. Dr. Kao has PhD and Master of Science degrees in chemical engineering from the Illinois Institute of Technology in Chicago, and a Bachelor of Science degree in chemical engineering from Tunghai University in Taiwan. He presently serves as senior vice president of Unitel Technologies, Inc., and is responsible for the research, development, economic evaluation, assessment and upgrade of new technologies for commercial application for chemical, petroleum, solid/semi-solid/liquid waste, synthetic fuel, food, pulp, and paper industries. Prior to joining Unitel, he was Director of Technologies for the Gas Technology Institute (1967-1982). Prior to joining Unitel, he was Director of Technologies for Xytel Corporation (1988-1996). He is a registered professional engineer in Illinois and a member of Sigma Xi and the National Society of Professional Engineers. Dr. Kao resides in Northbrook, Illinois. (2) Directorships None of the directors of the Company are directors of other companies with securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such act or any company registered under the Investment Company Act of 1940. f) Involvement in Certain Legal Proceedings. Not Applicable g) Promoter and Control Persons. Not Applicable Item 10. Executive Compensation The following table shows the remuneration of officers and directors in excess of $100,000 in 2005 and 2004. Summary Compensation Table - -------------------------- Annual Compensation Name and Principal Position Year Salary Bonus(s) Compensation Awards(s)($)SARs($)Payout(s) ($)Compensation Michael J. Luciano 2005 $ 120,000 CEO 2004 $ 120,000 Robert D. (1) Little 2005 $ 55,000 Secretary 2004 $ 57,200 (1) MPM contracts with Mr. Little for its shareholder relations services. Expenses related to this were $55,000 and $57,200 for 2005 and 2004, respectively. Option Grants In 2005 Fiscal Year Individual Grants Individual Grants - ---------------------------------------------------------------------

a) Current Remuneration. Except as noted above, none of the officers or directors is compensated for their services as an officer or director. Each is reimbursed for out-of-pocket expenses incurred on MPM business. b) Proposed Remuneration. It is not contemplated that any other salaries will be paid unless, and until such time as, MPM may require full time commitments from any officer or director. MPM's officers and directors are committed to the long-term success of the Company, and have, accordingly, weighted heavily any benefits received in the form of stock and stock options. c) Incentive and Compensation Plans and Arrangements. MPM has no retirement, profit sharing, pension, or insurance plans covering its officers and directors. No advances have been made, nor are any contemplated, by MPM to any of its officers or directors. The shareholders of MPM, at the Annual Shareholders Meeting on May 22, 1989, voted to approve a stock option plan for selected employees, officers and directors of MPM. The purpose of the option plan is to promote the interests of MPM and its stockholders by attracting, retaining and stimulating the performance of selected employees, officers and directors and giving such employees the opportunity to acquire a proprietary interest in MPM's business and an increased personal interest in this continued success and progress. Item 11. Security Ownership of Certain Beneficial Owners and Management a) Security Ownership of Certain Beneficial Owners. Except as noted in part b. below, no person or group was known by the Registrant except as noted below to own more than five percent (5%) of its common stock at December 31, 2005. b) Security Ownership of Management as of April 13, 2006. The following table sets forth, as of April 13, 2006 the amount and percentage of the Common Stock of MPM, which according to the information supplied to MPM, is beneficially owned by management, including officers and directors of MPM. Except as otherwise specified, the persons named in the table have sole voting power and investment power with respect to all shares of Common Stock beneficially owned by them. Title of Name of Amount and Nature of Percent Class Beneficial Owner Beneficial Ownership[1] of Class ----- ---------------- -------------------- -------- Common Michael J. Luciano 983,910 [2] 21.71 Common Robert D. Little 277,966 5.97 Common L. Craig Cary Smith 256,724 5.50 Common Richard E. Appleby 221,155 4.93 Common Frank E. Hsu 186,404 3.93 Common Daniel D. Smozanek 160,257 3.57 Common Glen Hjort 106,833 2.27 Common Richard Kao 64,222 1.43 Common As A Group 2,296,136 49.30 [1] Includes options available for exercise aggregating 1,488,502 shares for the entire group. [2] Does not include 396,509 shares (8.84%) of the Company's outstanding shares including options available for exercise owned by a trust for which Mr. Luciano is the Trustee. c.) Changes in Control. There are no contractual arrangements of any kind, known to MPM, which may at a subsequent date result in a change in control of MPM. Item 12. Certain Relationships and Related Transactions a.) Transactions with Management and Others. No Officers or Directors of MPM, or nominees for election as Director, or beneficial owners of more than five percent of MPM's voting stock, or members of their immediate families had any material transactions with MPM other than as set forth in part b. of this item. b.) Certain Business Relationships. During 2005, Michael J. Luciano, Chairman and Chief Executive Officer loaned the Company $350,500 and was repaid $41,000. At December 31, 2005, Mr. Luciano was owed $4,797,933 including accrued interest pursuant to unsecured demand notes. At December 31, 2005 Richard Appleby was owed $310,673 including accrued interest pursuant to unsecured demand notes. MPM has a contract with R.D. Little Co. to provide shareholder and investor relations services. Robert D. Little, Secretary of the company, owns R.D. Little Co. For the years ended December 31, 2005 and 2004, MPM paid $55,000 and $57,200, respectively, for these services. c) Other Information None Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (A) Exhibits and Financial Statements have been previously reported or are being shown as an exhibit in this Form 10KSB. (B) Reports on Form 8-K None Exhibit 32.1 CERTIFICATION OF PERIODIC REPORT Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of MPM Technologies Inc. and Subsidiaries (the "Company"), certifies that: The Annual Report on Form 10-KSB of the Company for the year ended December 31, 2005 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. MPM TECHNOLOGIES, INC. AND SUBSIDIARIES /s/ Michael J. Luciano - ---------------------- Michael J. Luciano Chairman and Chief Executive Officer April 13, 2006 This certification is made solely for the purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose. CERTIFICATION I, Michael J. Luciano, CHIEF EXECUTIVE OFFICER of MPM TECHNOLOGIES, INC. AND SUBSIDIARIES, certify that: 1. I have reviewed this Form 10-KSB of MPM Technologies, Inc. and Subsidiaries; 2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of the date within 45 days prior to the filing date of this report (the Evaluation Date"); and c) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls: and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. 6. The registrant's other certifying officer and I have indicated in this report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 13, 2006 /s Michael J. Luciano - -------------------- --------------------- Chief Executive Officer ----------------------- CERTIFICATION I, Glen Hjort, CHIEF FINANCIAL OFFICER of MPM TECHNOLOGIES, INC. AND SUBSIDIARIES, certify that: 1. I have reviewed this Form 10-KSB of MPM Technologies, Inc. and Subsidiaries; 2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this annual report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of the date within 45 days prior to the filing date of this report (the Evaluation Date"); and c) Presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls: and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. 6. The registrant's other certifying officer and I have indicated in this report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 13, 2006 /s Glen Hjort - ----- -------------- ------------- Chief Financial Officer ----------------------- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities 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. and Subsidiaries By: /s/ Michael J. Luciano ---------------------- Title: Chariman and Chief Executive Officer ------------------------------------ Date: April 13, 2006 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. /s/ Michael J. Luciano /s/ Glen Hjort - ----------------------- ------------------- Michael J. Luciano Glen Hjort Chairman & Chief Executive Officer Chief Financial Officer & Director Dated: April 13, 2006 Dated: April 13, 2006 /s/ Frank E. Hsu /s/ Daniel D. Smozanek - ------------------ -------------------------- Frank E. Hsu Daniel D. Smozanek Chief Operating Officer & Director Treasurer & Director Dated: April 13, 2006 Dated: April 13, 2006 /s/ Richard E. Appleby /s/ L. Craig Cary Smith - -------------------------- --------------------------- Richard E. Appleby L. 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