SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange act of 1934
For the fiscal year ended December 31, 1997
Commission File Number 0-14910
MPM TECHNOLOGIES, INC.
(Exact Name of Registrant as specified in its Charter)
Washington 81-0436060
- -------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
222 W. Mission Ave.
Suite 30
Spokane, WA 99201
- -------------------------------- -------------------------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: 509-326-3443
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 Par Value Nasdaq
- ---------------------------------- ------------------------
Title of Each Class Name of Exchange on
Which Registered
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Aggregate market value of the registrant's common stock held by non-affiliates
as of April 5, 1998 was $14,420,354.
As of April 5, 1998, the registrant had outstanding 16,480,404 shares of
common stock which is the registrant's only class of stock.
DOCUMENTS INCORPORATED BY REFERENCE
The following document is incorporated by reference into Part IV of this
report: (1) Form 10, effective October 21, 1986, Commission File No. 0-14910<PAGE>
Part I
Item 1. Business
MPM Technologies, Inc. (the "Company") has three wholly-owned subsidiaries
including Huntington Environmental Systems, Inc. ("HES"), Nupower, Inc.
("Nupower") and MPM Mining ("Mining"). For the year ended December 31, 1997,
HES was the only completely operational entity. The Company continues its
efforts in the research and development of a waste-to-energy process known as
"Skygas". These efforts are largely through the Company's participation in
Nupower Partnership in which the Company has approximately a 58% interest
through its ownership of Nupower.
HUNTINGTON ENVIRONMENTAL SYSTEMS, INC.
Effective April 1, 1997, the Company acquired certain of the assets and assumed
certain of the liabilities of part of a division of United States Filter
Corporation in exchange for 1.32 million shares of the Company's common stock.
The transaction was accounted for as a purchase. In connection with the
acquisition, the Company formed a wholly-owned subsidiary, Huntington
Environmental Systems, Inc. ("HES") which assumed the assets and liabilities
acquired. HES designs, engineers, supplies, and services air pollution control
systems for Fortune 500 and other environmental and industrial companies around
the world.
Through the technologies and employees acquired, HES is a leader in the design,
fabrication, installation, start-up and maintenance of high temperature
pollution control equipment. With over 25 years experience and over 300
installations worldwide, HES's engineering staff is uniquely prepared to
address the full scope of customers' process problems. HES's policy of
handling clients' individual concerns includes in-depth analysis and
evaluation, followed by complete engineering and design services leading to
application-specific engineered solutions.
HES is the first acquisition in the Company's revised plans to change its focus
and direction toward environmental concerns in general, and pollution issues
specifically.
As stated above, HES was a part of a division of U.S. Filter. U.S. Filter had
acquired it and a large group of other divisions known collectively as
"Wheelabrator Clean Air Systems" from Waste Management in November 1996.
Because of this, and the fact that HES was also a part of a division when it
was owned by Waste Management, the Company was unable to obtain sufficient
historical data to determine the pro forma results for prior periods to make
the required disclosures assuming the purchase of HES had been consummated as
of January 1, 1996. As a result, these disclosures have been omitted.
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 70% of the Skygas
Venture. MPM separately owns 15% of the venture and USF Smogless, Milan,
Italy (a subsidiary of United States Filter Corp.) owns 15% of the venture.<PAGE>
MPM MINING, INC.
Mining controls 32 claims on approximately 1,000 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 Corporation, Freeport McMoran Gold Company and Hecla Mining Company in
addition to the efforts of Mining. In accordance with the Board of Directors
mandates, the Company's management is actively seeking out mining companies and
other businesses to purchase the Company's mining properties and equipment.
INDUSTRY SEGMENT DATA
The Company's operations for 1997 include air pollution control, waste-to-
energy and mining. Only the air pollution control operations had revenue for
the year ended December 31, 1997.
Air pollution Waste-to- Corporate
1997 control energy Mining and other Total
- ----------------- ------------- ----------- -------- ---------- ------------
Net sales $ 6,076,936 - - - $ 6,076,936
Depreciation &
Amortization 21,091 1,003 26,548 644 49,286
Research &
Development - - - - -
Income (loss)
from operations 82,677 (83,414) (48,389) (169,011) (218,137)
Net income (loss) 76,751 (83,414) (48,389) (187,662) (242,714)
EMPLOYEES
Except for HES, the Company and its subsidiaries have no employees. HES has
twenty-two full time employees, the majority of whom are licensed, degreed
engineers.
The Company's officers do not expect to devote full time to the Company. Since
HES is the only fully operating company, and is fully staffed, it is not
expected that the Company's officers will need to spend a substantial amount of
time for the other entities.
NO DIVIDENDS
The Company has not paid dividends in the past, and expects to continue its
policy of not paying dividends in the future. The Company plans to retain any
future earnings to enhance its capital and expand its operations.
FINANCING
Through HES, the Company is currently negotiating with a large bank in Chicago
for a $500,000 line-of-credit. This is expected to be in place in the second
quarter of 1998 subject to successful completion of negotiations. Due to its
favorable cash position, the Company expects that its current working capital
needs will be met with the available funds, and with the ongoing HES business.
The line-of-credit will be used if needed to fund the Company's growth and
expansion.
BACKLOG
HES has a backlog of orders and work in progress aggregating approximately
$3,000,000 at December 31, 1997. There is currently no other backlog of orders
for any of the Company's other businesses.<PAGE>
WASTE-TO-ENERGY
The Company's waste-to-energy process consists of an innovative technology
known as "Skygas". The Company is currently working with the Institute of Gas
Technology ("IGT") on the development and construction of a prototype Skygas
unit. This unit will be built on the property of IGT. IGT will supervise the
initial operation, and will handle the initial testing of the unit. The Company
intends to attract an end-user to finance construction of this plant.
COMPETITIVE CONDITIONS
HES operates in an extremely competitive environment. There are a number of
potential competitors for every job that HES bids 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
HES.
There are a significant number of persons and companies developing or have
developed any number of waste-to-energy systems. Management of the Company
believes that its development of Skygas as a superior 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. Since management has decided to sell its
mining holdings and equipment, it will no longer need to compete in this area.
SEASONAL VARIATIONS
The impact of seasonal changes is minimal on the air pollution control business
of HES. 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 process. It is also not expected that there will be any seasonal
variations when the Skygas units are produced.
Item 2. Properties
HES presently owns no property related to its air pollution control business.
It leases space from its former owner on a month-to-month basis. The Company
also currently has no property related to its waste-to-energy operations.
The principal properties of the Company's mining interests consist of the
following claims under control:
Owned by the Company:
Eight Patented Claims
Sixteen Unpatented Claims
Leased by the Company:
Eight Patented Claims
These claims amount to approximately 1,000 acres of land in Montana. MPM Ltd.
controls eighteen former mine sites that have been inactive since 1930. Each<PAGE>
of these have old adits, tunnels and dump piles of known mineralized material.
All testing and metallurgical work has been completed. Management has
directed the Company to sell these interests as previously discussed.
Item 3. Legal Proceedings
The Company knows of no litigation present, threatened, or contemplated, or
unsatisfied judgments against the Company or its officers or directors, or any
proceedings in which the Company or its officers or directors are a party.
Item 4. Submission of Matters to a Vote of Security Holders
There have been no matters submitted to a vote of the security holders since
those reported in the Company's third quarter report.<PAGE>
Part II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
a) Market Information
The Company's common stock trades on The Nasdaq SmallCap Market under the
symbol MPML.
High Bid Low Bid
1997
- -------------- --------- ---------
First Quarter $ 0.50 $ 0.25
Second Quarter 1.25 0.38
Third Quarter 0.93 0.56
Fourth Quarter 0.88 0.50
1996
- --------------
First Quarter 1.75 0.62
Second Quarter 2.00 1.00
Third Quarter 1.50 0.93
Fourth Quarter 0.68 0.43
1995
- --------------
First Quarter 2.00 1.18
Second Quarter 2.18 1.25
Third Quarter 1.75 1.25
Fourth Quarter 1.87 0.75
b) Holders
As of April 5, 1998, there were approximately 2,300 holder of record of the
Registrant's common stock.
c) Dividends
The Company has not paid dividends in the past. It is not anticipated that the
Company will distribute dividends for the foreseeable future. Earnings of the
Company are expected to be retained to enhance the Company's capital and expand
its operations.
Item 6. Selected Financial Data
1997 1996 1995 1994 1993
Results of Operations
- --------------------- ------------ --------- --------- ------------ ---------
Operating revenues $6,076,936 $ -0- $ -0- $ 200,147 $ -0-
Interest expense 96,068 54,773 68,257 79,125 127,871
Net (loss) ( 277,573) (394,607) (271,052) (227,991) (495,513)
Financial Position
Working Capital 1,170,091 (942,947) (822,860) (1,047,464) (1,111,925)
Total Assets 6,885,952 3,074,567 2,051,541 2,015,304 2,074,009
Long-term Debt 530,060 -0- -0- -0- -0-
Accumulated Deficit 4,903,473 4,660,759 4,266,152 3,995,000 3,767,109
Stockholders' Equity 4,472,756 2,771,637 1,745,657 1,617,394 1,449,368
<PAGE>
Per Common Share
Net (loss) (0.02) (0.03) (0.02) (0.02) (0.03)
Book value 0.27 0.19 0.14 0.14 0.12
Average shares
Outstanding 15,440,089 13,339,445 12,534,158 12,107,813 11,857,255
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
a) Review of Operations
The Company acquired certain of the assets and assumed certain of the
liabilities of a portion of a division of U.S. Filter Corporation as of April
1, 1997. The Company formed HES to operate this air pollution control
business. The results of operations for the year ended December 31, 1997
include the operations of HES for the nine months from April 1, 1997 through
December 31, 1997.
For the nine months ended December 31, 1997, HES had revenues of $6,076,936.
Since the portion of the division the Company acquired was owned by U.S. Filter
only since November 1996, and was formerly a part of a division of Waste
Management prior to that, comparative sufficient detailed data was not
available to determine prior comparative balances.
Since the April acquisition, HES has strategically pursued the consolidation of
its operations, and effected a reduction in both its overhead and operating
costs. At the same time, HES has increased its efforts in sales and marketing.
Steps to improve market share included the creation of the new position of Vice
President of Sales and Marketing. This position has been filled with a highly
experienced individual. Other steps to improve market share have included
preparation of new product literature, presentations of technical papers and
continued participation and attendance at strategic industry trade shows.
The results of these efforts have included high levels of requests for
quotations, both for firm quotations and for budget quotations. Quotations for
repeat customers are high for both new and replacement equipment. Quotations
for new projects abroad include installations in Canada, the United Kingdom,
Australia and India. HES has also developed its first two chamber unit which
was recently started. Management believes that two chamber units will comprise
an increasing percentage of the total VOC control market in the upcoming years.
HES is anticipating improvements in all areas in 1998. Management is
projecting a 20% increase in revenues, and an improvement in its pre-tax margin
percentage. These projections are based in part on the year end backlog of
work to be completed which has increased 34% since the acquisition on April 1,
1997.
The Company is currently in the final stages of negotiations which will lead to
the building of a prototype Skygas unit. This unit will be built with the
assistance of the Institute of Gas Technology, and will be located on their
property. IGT will conduct the testing of the unit once it is completed.
Management anticipates that the unit will be operational in the late third
quarter or early fourth quarter. Once the unit is operational, and testing has
been completed, it is expected that sales of similar units will begin
immediately based on the amount of interest in the technology, and the
customers that have already contacted the Company. The Company intends to find
an end-user to finance the construction of this plant.
The Company has expended over $1,300,000 on mining exploration and development,
lease payments and claims. Over $550,000 of additional funds have been
expended on mining equipment. The Company is currently actively marketing its
mining properties and equipment for sale. Management has decided to get out of
the mining business, and focus on its air pollution control and waste-to-energy
businesses.<PAGE>
Year Ended 12/31/97 Compared to Year Ended 12/31/96
The net loss for 1997 was $242,714, or $0.02 per share, compared with a loss of
$394,606, or $0.03 per share for 1996. The Company shed its development stage
status in 1997 through the acquisition of HES. As a result, the Company had
revenue in 1997 of $6,076,936 compared to no revenues in the prior period.
Operating expenses increased $981,343 to $1,355,911 in 1997 compared to
$374,568 in 1996. This increase was due primarily to the acquisition of HES
and its operations.
Due to the fact that prior to April 1, 1997, HES was a part of a division of
U.S. Filter, and that U.S. Filter had purchased it along with a number of other
divisions from Waste Management in November 1996, sufficient data was not
available to determine comparable amounts for earlier periods.
Year Ended 12/31/96 Compared to Year Ended 12/31/95
The net loss for 1996 was $394,606, or $0.03 per share, compared to $271,052,
or $0.02 per share for 1995. Operating expenses increased $142,640 to $374,568
in 1996 compared to $231,928 in 1995. This increase was due primarily to
management's increased efforts to identify and investigate acquisitions. The
Company was still a development stage company in 1996, and, accordingly, had no
revenue.
Year Ended 12/31/95 Compared to Year Ended 12/31/94
The net loss for 1995 was $271,052, or $0.02 per share, compared to $227,911,
or $0.02 per share for 1994. Operating expenses decreased $105,245 to $231,928
in 1995 compared to $337,173 in 1994. This decrease was due primarily to
decrease activity in the Company's development. Again, the Company was still
in a development stage, but managed to have revenue of $200,147 related to its
agreements involved with its Skygas technology.
Liquidity and Capital Resources
During 1997, funds for operations were provided principally by cash generated
subsequent to the acquisition of HES and its continuing operations. Current
cash reserves and continuing operations of HES are believed to be adequate to
fund the Company's operations for the foreseeable future. The Company is also
negotiating with a large Chicago bank for a $500,000 line-of-credit. While its
working capital and operating needs are expected to be met by continued
operations of HES, the line-of-credit is expected to give the Company more
latitude in its efforts to grow its current business and expand in other
related areas.
Management has oral agreements from banks and major shareholders that will
enable the Company to extend the payment terms of the loans payable to major
stockholders and to renew short-term bank loans. Certain of the Company's
officers have orally agreed to personally secure all notes of the Company.
Management believes its present sources of working capital are sufficient for
both its short and long-term purposes.
The Company should also realize cash receipts from the sale of its mining
holdings and equipment. The proceeds from these sales will be used to reduce
debt and fund participation costs associated with the Skygas venture.
IMPACT OF INFLATION
Although inflation has slowed in recent years, it is still a factor in our
economy and the Company continually seeks ways to mitigate its impact. To the
extent permitted by competition, HES passes increased costs on to its customers
by increasing prices over time. Management estimates that the impact of
inflation on the revenues for 1997 was negligible.<PAGE>
Since the Company 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 Company's business. Management estimates that the operations
of the Company were only nominally impacted by inflation.
COMPENSATED ABSENCES
For HES employees, it is the policy of the Company that employees take paid
vacation time each year as determined by his or her length of continuous
service. Vacation time is accrued for each employee, and any unused accrued
vacation time at the time of an employee's termination of employment is paid to
the employee. These costs are accrued and accounted for in the HES financial
statements.
HES employees also are compensated for sick time to the extent they have
accrued sick leave credit. Sick leave credit accrues at the rate of five days
per year for hourly employees, to a maximum of twenty days. Salaried employees
are allotted twenty days of salary continuation per year. Unused salary
continuation days do not carry over from year to year. The Company does not
pay for any unused sick days or salary continuation days upon termination of
employment.
Item 8. Financial Statements and Supplemental Data
The financial statements follow on the next page.<PAGE>
MPM TECHNOLOGIES, INC.
CONSOLIDATED
FINANCIAL STATEMENTS<PAGE>
To The Board of Directors of
MPM Technologies, Inc.
INDEPENDENT AUDITOR'S REPORT
I have audited the consolidated statement of financial position of MPM
Technologies, Inc. (a Washington corporation) and its subsidiaries as of
December 31, 1997 and 1996, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the years ended
December 31, 1997, 1996 and 1995. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these consolidated financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit 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 presentations. I believe that my audit provides a reasonable basis
for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of MPM
Technologies, Inc. and its subsidiaries as of December 31, 1997 and 1996, and
the results of its operations, changes in stockholders' equity and cash flows
for the years ended December 31, 1997, 1996 and 1995, in conformity with
generally accepted accounting principles.
/s/Terrence J. Dunne
Terrence J. Dunne
Certified Public Accountant
Spokane, Washington
April 13, 1998<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Financial
MPM TECHNOLOGIES, INC. Position as of December 31, 1997
AND SUBSIDIARIES and 1996
ASSETS
<S> <C> <C>
1997 1996
------------- -------------
CURRENT ASSETS
Cash and cash equivalents (Notes 1 and 15) $ 2,010,596 $ 40,566
Receivables, net of allowance for doubtful accounts 603,925 37,017
Costs and estimated earnings in excess of billings (Note 3) 445,205
Inventory (Notes 1 and 4) 718,434
Other current assets 28,814 1,438
------------- -------------
Total Current Assets 3,806,974 79,021
------------- -------------
PROPERTY, PLANT AND EQUIPMENT (Notes 1 and 5)
Land and buildings 203,005 203,005
Mining property 54,047 54,047
Equipment and machinery 539,413 406,694
Software 3,258 3,258
------------- -------------
Total Property, Plant and Equipment 799,723 667,004
Less accumulated depreciation 470,450 422,167
------------- -------------
Net Property, Plant and Equipment 329,273 244,837
------------- -------------
OTHER ASSETS
Deferred exploration and development costs (Note 2) 1,195,465 1,195,465
Investment (Note 1) 1,200,000 1,200,000
Notes receivable 275,000 275,000
Licenses, net of accumulated amortization of $5,598
and $4,595, respectively (Note 2) 28,490 29,494
Advance minimum royalties (Note 2) 50,750 50,750
------------- -------------
Total Other Assets 2,749,705 2,750,709
------------- -------------
TOTAL ASSETS $ 6,885,952 $ 3,074,567
============= =============
<CAPTION>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Financial
MPM TECHNOLOGIES, INC. Position as of December 31, 1997
AND SUBSIDIARIES and 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
<S> <C> <C>
------------- -------------
CURRENT LIABILITIES
Accounts payable $ 419,625 $ 963
Accounts payable - Related party (Note 6) 55,116
Accrued expenses 273,959
Billings in excess of costs and estimated earnings (Note 3 ) 760,224
Interest payable 737 5,859
Interest payable - Related parties (Note 8 ) 129,997 129,997
Advance from officer (Note 7 ) 200,000
Notes payable (Note 8) 282,369 570,234
Notes payable - Related parties (Note 8) 314,765 314,765
Customer deposits 27,000
Long term debt - Current portion (Note 9 ) 164,399
Other current liabilities 8,692
------------- -------------
Total Current Liabilities 2,636,883 1,021,818
------------- -------------
LONG - TERM DEBT (Note 9) 530,060
-------------
MINORITY INTEREST IN CONSOLIDATED
ENTITIES (Note 10 ) (753,748) (718,888)
------------- -------------
COMMITMENTS (Note 11 )
STOCKHOLDERS' EQUITY
Common stock; $.001 par value; 50,000,000 shares
authorized; 16,480,404 shares and 14,399,773
shares issued and outstanding as of December 31,
1997 and 1996 respectively 16,481 14,400
Additional paid-in capital 9,359,748 7,417,995
Accumulated deficit (4,903,472) (4,660,758)
------------- -------------
Total Stockholders' Equity 4,472,757 2,771,637
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,885,952 $ 3,074,567
============= =============
<CAPTION>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MPM TECHNOLOGIES, INC. Consolidated Statement of Operations For the
AND SUBSIDIARIES Years Ended December 31, 1997, 1996 and 1995
<S> <C> <C> <C>
1997 1996 1995
----------------- ------------- ----------------
REVENUE $ 6,076,936 $ -0- $ -0-
COST OF SALES 4,939,162
-----------------
GROSS PROFIT 1,137,774
-----------------
OPERATING EXPENSES
Marketing 566,163
Operating overhead 400,452
Depreciation and amortization 49,286 89,302 12,399
Other operating expenses 340,010 285,266 219,529
----------------- ------------- ----------------
Total Operating Expenses 1,355,911 374,568 231,928
----------------- ------------- ----------------
(LOSS) BEFORE NON-OPERATING ITEMS (218,137) (374,568) (231,928)
----------------- ------------- ----------------
NON-OPERATING INCOME (EXPENSE)
Interest income 36,632 3,032 1,887
Interest expense (96,068) (54,773) (68,257)
Miscellaneous expense (4,367)
----------------- ------------- ----------------
Total Non-Operating Income (Expense) (59,436) (51,741) (70,737)
----------------- ------------- ----------------
(LOSS) BEFORE SUBSIDIARY LOSS (277,573) (426,309) (302,665)
----------------- ------------- ----------------
SUBSIDIARY LOSS
Minority interest in subsidiary loss 34,859 31,703 31,613
----------------- ------------- ----------------
NET (LOSS) $ (242,714) $ (394,606) $ (271,052)
================= ============= ================
NET (LOSS) PER SHARE $ (0.02) $ (0.03) $ (0.02)
================= ============= ================
WEIGHTED AVERAGE NUMBER
OF SHARES 15,977,573 13,339,445 12,534,158
================= ============= ================
<CAPTION>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Changes in
MPM TECHNOLOGIES, INC. Stockholders' Equity For the Years Ended
AND SUBSIDIARIES December 31, 1997, 1996 and 1995
<S> <C> <C> <C> <C> <C>
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit Totals
----------- --------- ------------ ---------------- -----------------
Balances as of
December 31, 1994 12,385,259 $ 12,386 $ 5,600,108 $ (3,995,100) $ 1,617,394
Contributed capital from
directors 190,752 190,752
Common stock issued for
cash at $.97 per share 82,580 83 79,917 80,000
Common stock issued for
cash at $.87 per share 115,077 115 99,885 100,000
Common stock issued for
cash at $.95 per share 159,260 159 151,804 151,963
Investment in NuPower 100,000 100 (119,349) (119,249)
Common stock registration
fees (4,151) (4,151)
Net (loss) (271,052) (271,052)
----------- --------- ------------ ---------------- -----------------
Balances as of
December 31, 1995 12,842,176 12,843 5,998,966 (4,266,152) 1,745,657
Common stock issued for
services at $.375 per
share 34,000 34 20,026 20,060
Cash contributed to
additional paid-in capital 55,528 55,528
<CAPTION>
Continued on next page
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Changes in
MPM TECHNOLOGIES, INC. Stockholders' Equity For the Years Ended
AND SUBSIDIARIES December 31, 1997, 1996 and 1995
Continued from previous page
<S> <C> <C> <C> <C> <C>
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit Totals
----------- --------- ------------ ---------------- -----------------
Notes payables converted to
common stock at $.729
per share 34,305 34 24,964 24,998
Common stock options
exercised for cash at
$.10 per share 50,000 50 4,950 5,000
Notes payables converted to
common stock at $.646
per share 61,895 62 39,938 40,000
Notes payables converted to
common stock at $.454
per share 110,193 110 49,890 50,000
Notes payables converted to
common stock at $.372
per share 67,204 67 24,933 25,000
Common stock issued for
15% of a development
stage joint venture 1,200,000 1,200 1,198,800 1,200,000
Net (loss) (394,606) (394,606)
----------- --------- ------------ ---------------- -----------------
Balances at
December 31, 1996 14,399,773 14,400 7,417,995 (4,660,758) 2,771,637
Common stock issued for
debt conversion at $.24
per share 105,764 106 24,894 25,000
<CAPTION>
Continued on next page
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE> Consolidated Statement of Changes in
<CAPTION>
MPM TECHNOLOGIES, INC. Stockholders' Equity For the Years Ended
AND SUBSIDIARIES December 31, 1997, 1996 and 1995
Continued from previous page
<S> <C> <C> <C> <C> <C>
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital Deficit Totals
----------- --------- ------------ ---------------- -----------------
Common stock issued for
debt conversion at $.22
per share 346,087 346 74,654 75,000
Common stock issued for
debt conversion at $.25
per share 115,207 115 28,983 29,098
Common stock issued for
acquisition of subsidiary
at $1.13 per share 1,320,000 1,320 1,761,088 1,762,408
Consulting fees paid by
corporate officer as
contributed capital 7,920 7,920
Common stock issued for
debt conversion at $.20
per share 172,573 173 34,827 35,000
Common stock issued to
employees for com-
pensation at $.45 per
share 21,000 21 9,387 9,408
Net (loss) (242,714) (242,714)
----------- --------- ------------ ---------------- -----------------
Balances at
December 31, 1997 16,480,404 $ 16,481 $ 9,359,748 $ (4,903,472) $ 4,472,757
=========== ========= ============ ================ =================
<CAPTION>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
MPM TECHNOLOGIES, INC. For the Years Ended December 31, 1997
AND SUBSIDIARIES 1996 and 1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
1997 1996 1995
-------------- ----------- -----------
Net (loss) $ (242,714) $ (394,606) $ (271,052)
Add items not requiring the use of cash:
Depreciation and amortization 49,286 89,301 12,399
Expenses paid by officer 7,920
Common stock issued for compensation 9,408 20,060
Minority interest in subsidiary loss (34,859) (31,703) (31,612)
Forgiveness of debt 4,367
Decrease (increase) in receivables 1,609,831 (11,577) (10,430)
Decrease in costs and estimated earnings
in excess of billings 362,144
(Increase) in inventory (492,753)
Decrease (increase) in other current assets (27,378) 4,656
(Decrease) in accounts payable (11,805) (13,393) (6,001)
Increase in accounts payable - Related party 55,116
Increase in accrued expenses 235,371
(Decrease) in accrued warranties (206,668)
Increase in customer deposits 27,000
Increase in billings in excess of costs
and estimated earnings 398,351
Increase in other current liabilities 8,692
Increase (decrease) in interest payable 37,741 5,859 (6,571)
-------------- ----------- -----------
Net Cash Provided (Used) From Operating
Activities 1,784,683 (331,403) (308,900)
-------------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment and machinery (3,515) (3,500)
Disposal of equipment and machinery 109,115
Payment on licenses (195)
Divestment of partnership interest 119,249
-------------- ----------- -----------
Net Cash Provided (Used) From Investing
Activities 109,115 (3,515) 115,554
-------------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advance from officer 200,000
Payments on notes payable (123,768) (123,719) (171,458)
Proceeds from notes payable 300,000
Contributed capital from directors 60,478 190,752
Proceeds from sale of common stock 50 208,563
-------------- ----------- -----------
Net Cash Provided From Financing Activities 76,232 236,809 227,857
-------------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 1,970,030 (98,109) 34,511
CASH AT BEGINNING OF YEAR 40,566 138,675 104,164
-------------- ----------- -----------
CASH AT END OF YEAR $ 2,010,596 $ 40,566 $ 138,675
============== =========== ===========
<CAPTION>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
MPM TECHNOLOGIES, INC. For the Years Ended December 31, 1997
AND SUBSIDIARIES 1996 and 1995
Continued from previous page
SUPPLEMENTAL CASH FLOW INFORMATION
AND NON-CASH FINANCING ACTIVITIES
<S> <C> <C> <C>
1997 1996 1995
------------- ------------ -----------
Interest payments in cash $ 97,092 $ 44,075 $ 74,828
============= ============ ===========
Debt converted to 273,597 shares of common stock $ 139,998
============
Issuance of 1,200,000 shares of common stock for
investment in joint venture $ 1,200,000
============
Issuance of 100,000 shares of common stock for
partnership interest $ 62,500
===========
Issuance of 1,320,000 shares of common stock for
investment in subsidiary $ 1,762,408
============
Debt converted to 739,631 shares of common stock $ 164,098
============
<CAPTION>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES Notes to Consolidated Financial Statements
NOTE 1 _ ORGANIZATION
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, 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, the Company acquired mining properties located in Powell County,
Montana. As of the end of 1997, the Company is not engaged in exploration or
developmental mining activities in regard to these properties. During 1996,
the Company purchased Unitel Technologies, Inc.'s 15% interest in the Skygas
venture for 1.2 million share of common stock. This investment was recorded at
$1,200,000. The Skygas 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 synthesis gas.
As of December 31, 1997, participants and interests owned in the Skygas venture
included: NuPower Partnership, 70%, MPM Technologies, Inc., 15%, and USF
Smogless of Milan, Italy (a subsidiary of United States Filter Corp.), 15%.
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 a new Illinois corporation (Huntington Environmental
Systems, Inc. or "HES") into which the acquired assets and related liabilities
were transferred. MPM Technologies, Inc. issued 1,320,000 shares of common
stock to United States Filter Corporation for this operating division, which
designs engineers, supplies and services air pollution control systems for
Fortune 500 and other environmental and industrial companies worldwide. This
transaction was accounted for as a purchase and valued at $1,762,408. Major
installations are generally done under fixed price contracts, the duration of
which may vary significantly. The average length of a typical installation
contract is the range of four to six months. This would include approximately
five to seven weeks of on-site work. HES typically has the pollution control
units built to specification by its suppliers. Service work is generally
performed at agreed upon rates for labor, and "cost-plus" for parts and
supplies. Spare parts sales are also on a "cost-plus" basis.
NOTE 2 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The accompanying consolidated financial statements include the accounts of MPM
Technologies, Inc. and its subsidiaries: Huntington Environmental Systems,
Inc., MPM Mining, Inc. NuPower, Inc. and NuPower (a General Partnership).
Intercompany items and transactions among the companies have been eliminated.
Huntington Environmental Systems, Inc., a wholly owned subsidiary, was acquired
on March 31, 1997.
MPM Mining, Inc., a wholly owned subsidiary, was formed in 1987 in order to
conduct the Company's mining operations. As of December 31, 1997, MPM Mining,
Inc. had not yet begun operations.<PAGE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES Notes to Consolidated Financial Statements
NOTE 2 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
NuPower, Inc. a wholly owned subsidiary, was formed during 1986 in order to
conduct the Company's waste-to-energy operations. As of December 31, 1997,
NuPower, Inc. has not yet begun operations.
NuPower, a 58.21% owned partnership, is engaged in the research and development
of an electrothermal gasification process which would 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.
Equipment and Other Depreciable Property
Equipment and other depreciable property are recorded at cost. Depreciation is
provided using the straight-line method over the estimated useful lives of the
respective assets. Major additions and betterment's are capitalized. Upon
retirement or disposal, the cost and related accumulated depreciation are
removed from the accounts, and any gain or loss is reflected in operations.
Deferred Exploration and Development Costs
The Company capitalizes exploration and development costs on its mining
properties. If commercial ore production commences, these costs will be
amortized utilizing the units-of-production method. If any of the mining
properties are abandoned, the related portion of these costs will be charged to
operations. In accordance with the provisions of SFAS No. 121, "Accounting for
the Impairment of Long-lived assets and for Long-lived assets to be Disposed
of," management of the Company reviews the carrying value of these costs on a
regular basis, and accordingly, these costs do not exceed their net realizable
value.
Cash Equivalents
For financial statement purposes, the Company considers all highly liquid
investments purchased with an original maturity of three months or less to be a
cash equivalent. Financial instruments which potentially subject the Company
to a concentration of credit risk consist of cash and cash equivalents. Cash
and cash equivalents consist of funds deposited with various high credit
quality financial institutions.
Income Taxes
Income taxes are provided based on the liability method of accounting pursuant
to Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes." Under this approach, deferred income taxes are recorded to
reflect the tax consequences on future years of differences between the tax
basis of assets and liabilities and their financial reporting amounts at each
year end. A valuation allowance is recorded against deferred tax assets if
management does not believe the Company has met the "more likely than not"
standard imposed by SFAS 109 in order to allow recognition of such an asset.
Inventories
Inventories are priced at the lower of cost or market using the first-in,
first-out (FIFO) method.<PAGE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES Notes to Consolidated Financial Statements
NOTE 2 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
Contract revenue is recognized principally on the percentage-of-completion
method in the ratio that costs incurred bears to estimated costs at completion.
Costs include all direct material and labor costs, and indirect costs, such as
supplies, tools, repair 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.
Earnings (Losses) Per Share
In February, 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, Earnings per share ("EPS"). SFAS No. 128 requires dual
presentation of basic EPS and diluted EPS on all statements of operations
issued after December 15, 1997 for all entities with complex capital
structures. Adoption of SFAS No. 128 had no effect on the Company's financial
statements. Basic EPS is computed as net income divided by the weighted
average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur from common shares issuable
through stock options, warrants and other convertible securities. As the
Company's stock options (see Note 13) are antidilutive, only basic earnings
(loss) per share is presented.
Contracts in Progress
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.
Financial Instruments
The carrying amounts reported in the consolidated statement of financial
position as of December 31, 1997 and December 31, 1996 for cash equivalents,
receivables, and accounts payable approximate fair value because of the
immediate or short-term maturity of these financial instruments. The fair
value of long-term debt and notes payable approximates its carrying value as
the stated or discounted rates of the debt reflect recent market conditions.
Licenses
The Company has a license from A.C. Lewis, the inventor of the "Skygas"
process, for the manufacture and construction of units. Using the straight-
line method, capitalized license costs are amortized over 408 months.<PAGE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES Notes to Consolidated Financial Statements
NOTE 2 _ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Advance Minimum Royalties
Advance minimum royalties are amounts paid to property owners for the right to
explore and extract commercial mineralization. The amounts paid will be offset
against the Company's lease agreement, which provides for a royalty on the
minerals extracted. These payments in advance of production are part of the
underlying lease and are set at a minimum level to the property owner.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the dates of the financial statements and
the reported amount of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Reclassification
Certain items in the 1995 and 1996 financial statements have been reclassified
in order to conform to current year classifications. Such reclassifications
had no effect on previously reported total assets, total liabilities and net
loss.
NOTE 3 _ COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS
Following is a summary of costs, billings, and estimated earnings on contracts
in progress:
Costs incurred on contracts in progress $ 3,918,585
Estimated earnings 1,246,410
------------
5,164,995
Less: billings to date 5,480,014
------------
$ (315,019)
============
The following accounts are shown in the accompanying
consolidated statement of financial position under these
captions:
Costs and estimated earnings in excess
of billings $ 445,205
Billings in excess of costs and estimated
earnings 760,224
------------
$ (315,019)
============<PAGE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES Notes to Consolidated Financial Statements
NOTE 4 - INVENTORY
Inventories consist of construction parts, supplies and partially fabricated
materials that have not been charged to specific contracts. As of December 31,
1997, these inventories are summarized as follows:
Parts and supplies $ 201,884
Other materials 516,550
-------------
Total $ 718,434
=============
NOTE 5 - MINING PROPERTY
Following is a schedule of the components of the Company's mining property,
which is located in Powell County, Montana:
Description Number of Claims
------------------------------ ----------------
Patented mining claims 8
Unpatented mining claims 16
Leased patented mining claims 8
Included in the cost of mining property is a nominal amount allocated for
mineralized material which is a mineralized underground area that has been
intersected by sufficient closely-spaced drill holes and/or underground
sampling to support sufficient tonnage and average grade of metals in order to
warrant further exploration and/or development work. This deposit does not
qualify as a commercially mineable ore body (reserves) until a final and
comprehensive economic, technical and legal feasibility study based upon the
test results is completed.
NOTE 6 - ACCOUNTS PAYABLE - RELATED PARTY
The president of MPM Technologies, Inc. is also the president of another
company which provided various administration and office expenses for MPM
Technologies. As of December 31, 1997, MPM Technologies owed $55,116 to this
related party company, and it has been agreed that MPM Technologies will
satisfy this obligation through the issuance of 137,789 shares of common stock.
NOTE 7 - ADVANCE FROM OFFICER
An officer of the Company loaned $200,000 to the Company on a non-interest
bearing, unsecured, due-upon-demand basis.<PAGE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES Notes to Consolidated Financial Statements
NOTE 8 - NOTES PAYABLE
Related Parties
Description 1997 1996
--------------------------------- -------------- -------------
Alfred Luciano (Director of the
Company), unsecured, interest
at 11%, due on demand $ 6,827 $ 6,827
Rudolph Bottiglione (Partner in
NuPower), unsecured, interest
at 11%, due on demand 25,000 25,000
Richard Appleby (Director of the
Company), unsecured, interest at
11%, due on demand 129,682 129,682
Michael Luciano (Partner in
NuPower), unsecured, interest
at 11%, due on demand 35,000 35,000
Myron Katz (Director of the
Company), unsecured, interest
at 11%, due on demand 52,139 52,139
Daniel D. Smozanek (Director of
the Company), unsecured, interest
at 11%, due on demand 66,117 66,117
---------- ----------
Notes Payable - Related Parties $ 314,765 $ 314,765
========== ==========
The related party creditors voluntarily agreed to terminate their current and
future right to accrued interest as of December 31, 1995, and on August 13,
1987, the related party creditors also agreed to subordinate their loans to
claims of outside creditors.
Other Notes Payable
Description 1997 1996
------------------------------ ------------ ------------
Note payable to First Morris
Bank of New Jersey, with
interest at prime plus 1%,
payable on demand $ 231,300 $ 328,800<PAGE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES Notes to Consolidated Financial Statements
NOTE 8 - NOTES PAYABLE (Continued)
Note payable to Chesterton
Trading, Ltd. of London, England,
with interest at 5%, payable on
April 1, 1999; convertible into
common stock of the Company 5,461 88,406
Note payable to First National
Bank of Libby, Montana, with
interest at prime plus 1%,
payable on demand 45,607 76,596
Note payable to Sage Capital
Investment, Limited, of Nassau,
Bahamas, interest unstated, payable
on September 17, 1997; convertible
into common stock of the Company -0- 76,432
----------- -----------
Notes Payable - Others $ 282,368 $ 570,234
=========== ===========
NOTE 9 - LONG-TERM DEBT
In conjunction with the Company's asset purchase agreement with United States
Filter Corporation (see Note 1), the Company assumed a long-term debt of
$1,200,000, which is payable at the rate of $75,000 per year (without interest)
and due on September 22nd of each year for the next fifteen years. Since an
interest rate was not stated, an inputed interest rate of 9% was utilized. The
$75,000 payment due on September 22, 1997 has not been made. As of December
31, 1997, the current portion (including past due amount) of this long-term
debt was $164,399, and the long-term portion was $530,060. Following is a
schedule of the principle payments due over the next five years:
Year Amount
---- -----------
1998 $ 20,590
1999 22,443
2000 24,463
2001 26,665
2002 29,065
------------
$ 123,226
============<PAGE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES Notes to Consolidated Financial Statements
NOTE 10 - MINORITY INTEREST IN CONSOLIDATED ENTITY
The Company owns a 58.21% interest in NuPower, a general partnership. Since
the Company owns the controlling interest in the partnership, and it exerts
significant control over operations, the partnership is consolidated for
financial statement purposes. The minority partners in this partnership are
liable for the accumulated deficit balances in their respective partnership
equity accounts pursuant to the general partnership rules, as well as specific
agreements. Under these guidelines, the Company has recorded in its financial
statements the accumulated deficit in the "Minority Interest in Consolidated
Entity" line item.
NOTE 11 - COMMITMENTS
Mining Leases
The Company entered into certain mining lease agreements. Following is a
schedule of future minimum lease payments required under lease agreements that
have initial or remaining noncancelable lease terms in excess of one year for
the five years ending after December 31, 1997:
Year Amount
---- ----------
1998 $ 4,800
1999 4,800
2000 4,800
2001 4,800
2002 4,800
----------
$ 24,000
==========
Skygas Technology
The Company, through NuPower, entered into an exclusive license rights
agreement with Skygas Inventor, A.C. Lewis, whereby the Company agreed to pay
Lewis the sum of $72,000 annually through April 1, 2007. Following is a
schedule of payments for the five years ending after December 31, 1997:
Year Amount
---- ------------
1998 $ 72,000
1999 72,000
2000 72,000
2001 72,000
2002 72,000
-----------
$ 360,000
===========
The Company also must pay the U.S. Bureau of Land Management $100 per year for
each of the sixteen unpatented mining claims that it maintains.<PAGE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES Notes to Consolidated Financial Statements
NOTE 12 - RELATED PARTY TRANSACTIONS
The Company contracts for its shareholder relations services with an officer of
the Company. Fees paid to this related party for services in 1995, 1996 and
1997 were $41,350; $45,600 and $45,600, respectively.
The Company owes a related party $55,116 for reimbursable expenses (see Note
6).
An officer advanced the Company $200,000 in 1997 (see Note 7).
Various directors of the Company have outstanding notes payable from the
Company totaling $314,765 as of December 31, 1997 (see Note 8).
NOTE 13 - STOCK OPTION PLAN
On May 22, 1990, the shareholders of the Company voted to approve a stock
option 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 service 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. 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. The plan provides that options may be transferred only
by will or by laws of descent and distribution and may be exercised during the
optionee's lifetime only by the optionee or by the optionee's guardian or legal
representative.
Under the plan, a maximum of 2,130,000 shares were approved to be granted, and
in 1997 the shareholders of the Company increased the available shares by
500,000 to 2,630,000. As of December 31, 1997, of the 2,630,000 stock options
available in the plan, 1,421,000 options remained available for granting. Of
the 1,209,000 stock options granted, 300,000 options had been exercised as of
December 31, 1997. Therefore, there are currently 909,000 shares under option
that are available to be exercised at $.10 per share. The 909,000 shares under
option will expire in 2002.<PAGE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES Notes to Consolidated Financial Statements
NOTE 14 - SEGMENT FINANCIAL DATA
The Company's operations are classified into three principal industry segments:
environmental and waste-to-energy; mining; and corporate and other. Following
is a summary of segment information for 1997, 1996 and 1995:
Year Ended December 31, 1997
Air
Waste- Pollution Corporate
Mining to-Energy Control and other Total
---------- ---------- ---------- ---------- ----------
Net sales $ -0- $ -0- $6,076,936 $ -0- $6,076,936
Depreciation and
amortization 26,548 1,003 21,091 644 49,286
Operating income (loss) (48,389) (83,414) 82,677 (169,011) (218,137)
Net income (loss) (48,389) (83,414) 76,751 (187,662) (242,714)
Year Ended December 31, 1996
Environmental
and Waste- Corporate
Mining to-Energy and other Total
---------- ------------ ----------- ----------
Net sales $ -0- $ -0- $ -0- $ -0-
Depreciation and
amortization 90,050 (748) 89,302
Operating (loss) (110,107) (75,862) (188,599) (374,568)
Net (loss) (110,107) (75,863) (208,736) (394,606)
Year Ended December 31, 1995
Environmental
and Waste- Corporate
Mining to-Energy and other Total
-------- -------------- ---------- -----------
Net sales $ -0- $ -0- $ -0- $ -0-
Depreciation and
amortization 10,668 4,731 15,399
Operating (loss) (65,191) (68,826) (97,911) (231,928)
Net (loss) (63,304) (68,826) (138,922) (271,052)<PAGE>
MPM TECHNOLOGIES, INC.
AND SUBSIDIARIES Notes to Consolidated Financial Statements
NOTE 15 - CONCENTRATION OF CREDIT RISK
The Company maintains deposits in excess of federally insured limits.
Statement of Financial Accounting Standards No. 105 identifies these items as a
concentration of credit risk requiring disclosure, regardless of the degree of
risk. The risk is managed by maintaining all deposits in high quality
financial institutions.
NOTE 16 - INCOME TAXES
As of December 31, 1997 and 1996, the Company had deferred tax assets of
approximately $1,283,842 and $1,201,319, principally arising from net operating
loss carryforwards for income tax purposes. As management of the Company
cannot determine that it is more likely than not that the Company will realize
the benefit of the deferred tax asset, a valuation allowance equal to the
deferred tax asset has been established at both December 31, 1997 and 1996.
As of December 31, 1997, the Company has net operating loss carryforwards
totaling approximately $3,930,858, which will commence to expire in 2001.<PAGE>
Item 9. Changes in and disagreements with accountants on Accounting and
Financial Disclosure
There were no disagreements on accounting and financial disclosures
during 1995, nor has there been a change in accountants.
PART III
Item 10. Directors and Executive Officers of the Registrant
a) Identification of Directors
FIRST ELECTED
NAME AGE POSITION DIRECTOR
- ---------------------- ------- ----------------------------- ---------------
Charles A. Romberg 49 President/Director 4/25/1985
Richard E. Appleby 58 Vice President/Director 4/25/1985
Myron Katz 67 Vice President/Director 4/25/1985
Daniel D. Smozanek 72 Treasurer/Director 4/25/1985
L. Craig Cary Smith 48 Director 4/25/1985
Alfred J. Luciano 67 Director 6/19/1992
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
- -------------------- ------ ---------------------------- ----------------
Charles A. Romberg 49 President/Director 4/25/1985
Richard E. Appleby 58 Vice President/Director 4/25/1985
Myron Katz 67 Vice President/Director 4/25/1985
Daniel D. Smozanek 72 Treasurer/Director 4/25/1985
Robert D. Little 48 Secretary 1/03/1991
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, 1997, 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
There are no family relationships, whether by blood, marriage, or adoption,
between any executives and directors.
<PAGE>
e) Business Experience
Background
Alfred J. Luciano, is Chairman of the Board of the Company. Mr. Luciano was
Founder and President of Farm Harvesting Company from 1950 to 1978. From 1960
to 1979, he was Founder and President of A-L Services maintaining corporate
sites. He is past President of the Associated Independent Contractors of the
State of New Jersey and Co-Founder and Director of First Morris Bank in
Morristown, New Jersey. From 1973 to the present, Mr. Luciano has been engaged
in ranching, contracting and sub-dividing property in Lincoln County, Montana.
From 1978 to 1980, he was engaged in developing a copper and silver deposit in
Hungry Horse, Montana. From 1981 to 1986, he was engaged in developing the
Emory Mine property in Powell County, Montana. From 1985 to until his
resignation in 1990 Mr. Luciano was President and director of Montana Precision
Mining, Ltd. From 1990 to the present he has been involved in the research,
development and commercialization of the Skygas Process. Mr. Luciano resides
in Eureka, Montana.
Charles A. Romberg, is President and Director of the Company. Mr. Romberg is a
graduate of Linfield College where he received a Bachelor of Science Degree in
Economics and Business Administration. He was elected President of MPM
Technologies Inc. in 1990. Mr. Romberg has been the President of Andre-Romberg
Insurance Brokerage since 1980. Over the past 20 years, Mr. Romberg has worked
with numerous clients restructuring existing businesses and organizing and
launching new ventures. Mr. Romberg resides in Spokane, Washington.
Richard E. Appleby, is Vice President and Director of the Company. He attended
post graduate courses at Rutger in Landscape Design, Landscape Maintenance,
Landscape Construction and Pesticide Application. 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.
Myron Katz, is Vice President and Director of the Company. He received his
Bachelor of Science Degree in Merchandising from Fairleigh Dickinson University
in 1952 and graduated from Lewis Hotel School in 1953. Mr. Katz has over 30
years diversified administrative and managerial experience. He is the past
President of Central Credit Clearing Bureau in Newark and East Orange, New
Jersey. Mr. Katz is currently a private consultant facilitating various
business ventures. Mr. Katz resides in Lake Hopatcong, New Jersey.
Daniel D. Smozanek, is Treasurer and Director of the Company. 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
<PAGE>
Washington University with a Bachelor of Arts Degree in Sociology; graduate
studies at the University of Washington in Education and he completed Teacher
Certification at Seattle University. From 1975 to 1985, he was the founder and
Director of Education of the Meridian School in Seattle, Washington. From 1985
to the present, Mr. Little as been Operations Manager for the Company and
became Secretary of the Company in 1991. Mr. Little has been 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, is a Director of the Company. 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 and Hemingway in Spokane, Washington. Mr. Smith resides in
Spokane, Washington.
(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
The Remainder This Page Left Intentionally Blank
<PAGE>
Item 11. Executive Compensation
The following table shows the remuneration of officers and directors in excess
of $100,000 in 1997,1996 and 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Name and
Principal Other Stock Options LTIP All Other
Position Year Salary Bonus(s)Compensation Awards(s)($) SARs($) Payout(s)($) Compensation($)
- --------- --------- --------- -------- ----------- ------------ -------- ------------ ----------------
NONE
</TABLE>
<TABLE>
<CAPTION>
Option Grants In 1997 Fiscal Year
Individual Grants
<C> <C> <C> <C> <C> <C>
% of Total Options/SARs
Options/ Granted to Employees Exercise or Market Price on Expiration
Name SARs Granted in Fiscal Year 1997 Base Price ($/Sh)Date of Grant Date
- ------- ------------- ---------------------- ------------ -------------------- -------------
NONE
</TABLE>
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<S> <C> <C> <C> <C>
Unexercised
in-the-Money
Options/SARs
at FYE ($)
Number of
UnExercise
Options/SARs
Shares Acquired # of Unexercised Options/SARs Exercisable/
Name on Exercise Value Realized FYE 1997 Exercisable/Unexercisable Unexercisable
- ------------------- ---------------- --------------- ----------------------------------- --------------
Charles A. Romberg 313,000 Exercisable $ 205,406
President/Director
Robert D. Little 243,000 Exercisable $ 159,469
Secretary Exercisable
L. Craig Cary
Smith 353,000 Exercisable $ 231,656
Director Exercisable
</TABLE>
<PAGE>
a) Current Remuneration.
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
Company business.
b) Proposed Remuneration.
It is not contemplated that any salaries will be paid unless, and until such
time as, the Company may require full time commitments from any officer or
director.
c) Incentive and Compensation Plans and Arrangements.
MPM Technologies Inc. has no retirement, profit sharing, pension, or insurance
plans covering its officers and directors. No advances have been made, nor are
any contemplated, by the Company to any of its officers or directors.
The shareholders of the Company, at the Annual Shareholders Meeting on May 22,
1989, voted to approve a stock option plan for selected employees, officers and
directors of the Company. The purpose of the option plan is to promote the
interests of the Company 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 the
Company's business and an increased personal interest in this continued success
and progress. At the Annual Meeting of Shareholders held on September 15,
1997, the shareholders approved an amendment to the stock option plan therefore
increasing the number of shares in the plan by 500,000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
a) Security Ownership of Certain Beneficial Owners.
In addition as set forth in Part b. of this Item, Security Ownership of
Management, United States Filter Corporation owns 1,320,000 or 8.0% of the
Company's outstanding shares. Unitel Technologies, Inc. owns 1,200,000 or 7.28%
of the Company's outstanding common stock. No other person or group was known
by the Registrant to own more than five percent of the Company's common stock
at December 31, 1997.
b) Security Ownership of Management as of April 1, 1997.
The following table sets forth, as of February 15, 1996 the amount and
percentage of the Common Stock of the Company, which according to the
information supplied to the Company, is beneficially owned by management,
including officers and directors of the Company. 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.
<PAGE>
Title of Name of Amount and Nature of Percent
Class Beneficial Owner Beneficial Ownership of Class
-------- ----------------------- --------------------- ----------
Common Charles A. Romberg 62,000 [1] 0.38
Common Richard E. Appleby 1,333,820 8.09
Common Myron Katz 756,856 4.59
Common Robert D. Little 48,000 [1] 0.29
Common Daniel D. Smozanek 1,020,597 6.19
Common L. Craig Cary Smith 14,000 [1] 0.08
Common Alfred J. Luciano 182,808 [2] 1.10
Common As A Group 3,418,081 20.74
[1] Does not include options for the purchase of shares of the Company's common
stock. Options available for exercise as of December 31, 1996 for Charles A.
Romberg, L. Craig Cary Smith and Robert D. Little are 313,000; 353,000; and
243,000, respectively.
[2] Does not include 837,500 shares (5.08%) of the Company's outstanding common
stock owned by a Trust for which Mr. Luciano is the Executor.
c.) Changes in Control.
There are no contractual arrangements of any kind, known to the Company, which
may at a subsequent date result in a change in control of the Company.
Item 13. Certain Relationships and Related Transactions
a.) Transactions with Management and Others.
No Officers or Directors of the Company, or nominees for election as Director,
or beneficial owners of more than five percent of the Company's voting stock,
or members of their immediate families had any material transactions with the
Company other than as set forth in part b. of this item.
b.) Certain Business Relationships.
The Company entered into several transactions with MADD Exploration, a Montana
partnership. Certain officers and directors of the Company, were the partners
in MADD Exploration namely Richard Appleby, Vice President and Director; Myron
Katz, Vice President and Director; Daniel Smozanek, Treasurer and Director and
Alfred J. Luciano, Director. On April 25, 1985, the shareholders of the
Company approved the acquisition of 50% of the interest owned by the partners
of MADD Exploration in certain mining claims and leases located in the Emory
Mining District of Powell County, Montana, by the issuance of 4,616,252 shares
of the Company's previously unissued common stock. At that time, the Company
also granted the partners an option to transfer an additional 42% of their
interest in those claims and leases to the Company in exchange for 2,800,000
additional shares of the Company's previously unissued common stock. On
January 20, 1986, the partners exercised their option. The properties and
their basis are as follows:
Patented Mining Claims
The Company acquired 92% of the mineral interests in five (5) patented claims,
<PAGE>
referred to as the Emory Group, owned by the partners of MADD Exploration. The
Company's interest is recorded at cost to the partners of MADD Exploration.
Mining Leases
The Company acquired interests ranging from 48% to 92% of the total mineral
interest in seventeen (17) leases from MADD Exploration; these leases were
recorded at a nominal value of $10 per lease.
Additionally, the Company has had to rely on the resources and abilities of the
four principal shareholders, who are also Officers and Directors of the
Company, to make loans to the Company. These loans have enabled the Company to
continue its location and staking of claims as well as geological work on a
limited basis. These individuals are: Richard Appleby, Vice
President/Director; Myron Katz, Vice President/Director; Daniel Smozanek,
Treasurer/Director; and Alfred Luciano, Director.
Between 1991 and 1996 the aforementioned Officers and Directors provided
approximately $1.9 million in contributed capital to the Company to fund
operations.
The Company has a contract with R.D. Little Co. to provide shareholder and
investor relations services. R.D. Little Co. is owned by Robert D. Little,
Secretary of the Company. During the period from January 1, 1997 through
December 31, 1997, total costs for services was $45,600.
It is the opinion of management of the Company that the amount and terms for
leases and services from affiliates are comparable to those which might be
obtained from unaffiliated parties.
Effective April 1, 1997, the Company acquired certain of the assets and assumed
certain of the liabilities of part of a division of United States Filter
Corporation in exchange for 1,320,000 shares of the Company's common stock. In
connection with the acquisition, the Company formed a wholly-owned subsidiary
Huntington Environmental Systems, Inc., which assumed the assets and
liabilities acquired.
In December of 1996, the Company announced it had purchased Unitel
Technologies, Inc.'s 15% interest in the Skygas venture for 1,200,000 shares of
common stock. The shares have not been registered under the Securities Act of
1933 and are _restricted securities_ as that term is defined in Rule 144 under
the Act. The shares may not be offered for sale, sold, traded or transferred
except pursuant to an effective registration statement under the Act, or
pursuant to an exemption from registration under the Act, the availability of
which is to be established to the satisfaction of the Company.
c) Other Information
None
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Exhibits, Financial Statement Schedules and Reports on form 8-K have been
previously reported or are being shown as an exhibit in this form 10-KSB.
Exhibit 23 - Consent of Terrence J. Dunne, CPA
Exhibit 27 - Financial Data Schedule
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.
By: /s/ Charles A. Romberg
-----------------------
Title: President
---------------------
Date: April 13, 1998
---------------------
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/ Alfred J. Luciano /s/ Myron Katz
- ---------------------- ----------------------------
Alfred J. Luciano Myron Katz
Chairman of the Board Vice President & Director
Dated: April 13 1998 Dated: April 13, 1998
--------------- ---------------------
/s/ Charles A. Romberg /s/ Daniel D. Smozanek
- ---------------------- ----------------------------
Charles A. Romberg Daniel D. Smozanek
President & Director Treasurer & Director
Dated: April 13, 1998 Dated: April 13, 1998
--------------- ---------------------
/s/ Richard E. Appleby /s/ L. Craig Cary Smith
- ---------------------- ----------------------------
Richard E. Appleby L. Craig Cary Smith
Vice President & Director
Dated: April 13, 1998
Dated: April 13, 1998 ---------------------
---------------------
<PAGE>
CONSENT OF CERTIFIED PUBLIC ACCOUNTANT
Board of Directors
MPM Technologies, Inc.
I consent to the use of my name in regard to the audited financial statements
which are included in the
10-KSB Report for MPM Technologies, Inc. for the year ended December 31, 1997.
/s/Terrence J. Dunne
Terrence J. Dunne
Certified Public Accountant<PAGE>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 2010596
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<RECEIVABLES> 624378
<ALLOWANCES> 50000
<INVENTORY> 718434
<CURRENT-ASSETS> 28814
<PP&E> 799723
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<TOTAL-ASSETS> 6885952
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<CGS> 4939162
<TOTAL-COSTS> 1055097
<OTHER-EXPENSES> 300814
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