<PAGE>   1
                                  UNITED STATES
                       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, 2000
                         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 AVENUE, SUITE 30, SPOKANE, WASHINGTON  99201
                    (Address of principal executive offices)

Registrant's telephone number, including area code: 509-326-3443

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: $13,900,545

The aggregate market value of the voting and non-voting equity held by
non-affiliates computed by reference to the closing price of $5.00 at which the
common equity was sold as of March 20, 2001 was $14,666,455.

The number of shares outstanding of the registrant's common stock as of March
20, 2001 was 2,933,291.

Transitional Small Business Disclosure Format
                  Yes __   No X

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PART  I

Item 1.  Business

MPM Technologies, Inc. ("MPM" or "the Company") has four wholly-owned
subsidiaries: Huntington Environmental Systems, Inc. ("HES"), AirPol, Inc.
("AirPol"), Nupower, Inc. ("Nupower") and MPM Mining ("Mining"). MPM was
incorporated in 1983. For the year ended December 31, 2000, HES and AirPol were
the only revenue generating entities.

HES and AirPol operate in the air pollution control industry. They sell air
pollution control systems to Fortune 500 and other large industrial companies.
MPM continues its efforts in the development of a waste-to-energy process known
as "Skygas". These efforts are largely through MPM's participation in Nupower
Partnership in which MPM has a 58.21% interest through its ownership of Nupower.
Mining operations have been discontinued at the direction of MPM's board of
directors and will be sold.

HUNTINGTON ENVIRONMENTAL SYSTEMS, INC.

Effective April 1, 1997, MPM acquired certain of the assets and assumed certain
of the liabilities of part of a division of United States Filter Corporation in
exchange for 146,666 shares of the Company's common stock. The transaction was
accounted for as a purchase. In connection with the acquisition, MPM formed a
wholly-owned subsidiary, HES, which assumed the assets and liabilities acquired.
HES designs, engineers, supplies, and services high temperature and chemical air
pollution control systems for Fortune 500 and other environmental and industrial
companies around the world.

HES has been in the business for over 25 years, and has 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 was the first acquisition in MPM's revised plans to change its focus and
direction toward environmental concerns generally, and pollution issues
specifically.


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, like HES, 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. On certain specific applications, they
may complement each other in that a customer may require both types of pollution
control systems.

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 to MPM through its technologies and employees.


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<PAGE>   3
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. MPM separately owns 15% of the Venture.

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 Director's
mandates in 1998, MPM's management is actively seeking out mining companies and
other businesses to purchase its mining properties and equipment.

FACTORS MANAGEMENT USED TO IDENTIFY REPORTABLE SEGMENTS

MPM's reportable segments are business units that offer different products. The
reportable segments are each managed separately because they design and engineer
distinct products with different applications 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. For the years
ended December 31, 2000 and 1999, the Company operated in two segments. Data for
segment reporting is shown in the notes to the consolidated financial statements
in Item 7.

BACKLOG

MPM had a backlog of orders and work in progress aggregating approximately
$13,198,000 at December 31, 2000. This is comprised of approximately $8,752,000
at AirPol and approximately $4,446,000 at HES. It is anticipated that operations
will consume these backorders during 2001. There is currently no other backlog
of orders for any of MPM's other businesses. Backlog at December 31, 1999 was
approximately $5,000,000.


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 some
time during 2001.


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<PAGE>   4
COMPETITIVE CONDITIONS

Both HES and AirPol operate 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 that have
developed any number of waste-to-energy systems. Management of MPM believes that
its development of Skygas 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. 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
businesses of HES and 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 process. It is also not expected that there will be any seasonal
variations when the Skygas units are produced.

EMPLOYEES

At December 31, 2000, MPM employed fourteen full-time employees at HES, and
fourteen full-time employees at AirPol. MPM believe that its relations with its
employees are good.


Item 2.  Properties

HES presently owns no property related to its air pollution control business. It
leases its office space under a lease expiring in September of 2003, with an
option for an additional five years. AirPol leases its office space under a
sublease that expires in August of 2002. 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 principal properties of MPM's mining interests consist of the following
claims under control:
           Owned by MPM:
                 Eight Patented Claims
                 Sixteen Unpatented Claims

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                 Leased by MPM:
                 Eight Patented Claims

These claims amount to approximately 1,000 acres of land in Montana. MPM
controls eighteen former mine sites that have been inactive since 1930. Each of
these has old adits, tunnels and dump piles of known mineralized material. All
testing and metallurgical work has been completed. Management has directed MPM
to sell these interests as previously discussed.


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 2000.


PART II

Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters

a)  Market Information

MPM's common stock trades on The Nasdaq SmallCap Market under the symbol MPML.
The following table shows quarterly high and low bid prices for 2000 and 1999 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.

<TABLE>
<CAPTION>
                                                      High Bid           Low Bid
<S>                                                   <C>               <C>
2000
First Quarter                                         $   7.50          $  4.31
Second Quarter                                            8.56             4.25
Third Quarter                                             8.50             4.90
Fourth Quarter                                            8.00             5.00

1999
First Quarter                                         $   4.25          $  2.25
Second Quarter                                            3.50             2.00
Third Quarter                                             9.63             5.13
Fourth Quarter                                            7.25             3.00
</TABLE>

b) Holders

As of March 20, 2001, there were approximately 2,300 holders of record of the
Registrant's common stock.

c)  Dividends

5


<PAGE>   6
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

During 2000, MPM entered into the following transactions involving securities
not registered under the Securities Act:

MPM issued 100,000 shares of its common stock at $4.25 per share in settlement
of a $425,000 debt to a shareholder/officer.


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. As of April 1, 1997, MPM acquired
certain of the assets and assumed certain of the liabilities of a portion of a
division of United States Filter Corporation, and formed HES to operate this air
pollution control business. The results of operations for the years ended
December 31, 2000 and 1999 include the operations of HES and AirPol for the
entire years.

For the year ended December 31, 2000, MPM had consolidated revenues of
$13,900,545. Consolidated revenues for 1999 were $19,414,593.

For 2000 and 1999, MPM included all assets related to its mining and related
properties as being held for sale pursuant to the directive of the Board of
Directors that the properties should be sold. For more information regarding
these matters, see the financial statements included as Item 7 in this filing.

During 2000, HES management was reorganized, and there were personnel reductions
and other cost saving changes. Going into 2001, emphasis is being placed on
combining the resources of HES and AirPol to realize additional cost savings.

Management of HES believes that the current climate for its products is
extremely strong. The recent Supreme Court ruling against businesses that were
trying to tie costs of compliance to enforcement has only served to intensify
the need for air pollution control equipment. While it is unclear how that
ruling and future enforcement by the Environmental Protection Agency will impact
the industry, it is evident that there is a great deal of activity and interest.
Requests for quotations are at unprecedented levels both for firm quotations and
for budget quotations. Firm quotations are requests to quote on projects that
the customer is currently planning to implement, and budget quotations are for
customers who are in the process of doing their capital budgeting, and may be
planning to include an HES unit, upgrade or service.

HES management is anticipating improvements in all areas during 2001. The goal
is to produce at least $1,000,000 in orders booked each month. Sales for 2001
are projected to be in excess of $12,000,000 which

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<PAGE>   7
would be a 25% increase over 2000. This projection is based on the 2000 year end
backlog, and on the levels of sales activity that are currently being
experienced. These increased levels of activity are attributed to the heightened
awareness of EPA legislation due to the Supreme Court decision, and to efforts
by HES personnel to increase market share.

AirPol's sales performance for 2000 was disappointing due largely to the
postponement of some air quality legislation enforcement. AirPol management is
optimistic for the year 2001 because the air quality legislation enforcement
that was postponed will now impact significantly the level of sales activity in
the current year. This is being reflected currently in the increased levels of
activity for both firm quotations and budget quotations. AirPol has also
bolstered its sales force with a key strategic addition.

In December 2000 the United States Environmental Protection Agency promulgated
the long delayed "Pulp and Paper Cluster Rules" based on the Clean Air Act II
legislation. There are 153 pulp and paper mills in the U.S. that will be
affected by the new rules. These mills will have to either upgrade or retrofit
new air pollution control equipment. AirPol has been a supplier of air pollution
control equipment in the pulp and paper industry for over 30 years. It has over
400 equipment installations in pulp and paper mills and is anticipating that
many orders will come from customers who already have AirPol equipment in place.
Many of these customers will be looking to upgrade the old equipment to meet the
new emission standards. Management expects to get approximately 40
upgrade/retrofit projects over the next two years aggregating about $10 million
in sales for this market segment.

The Maximum Achievable Control Technology ("MACT") Rules for Hazardous Waste
Incinerators ("HWI") was promulgated in October 1999. Facilities classified as
HWI have until April 2003 to prove they are in compliance with the new emission
standards. There are approximately 130 of these facilities in the U.S. Many of
these facilities will need to purchase air pollution control equipment during
2001 to meet the 2003 deadline. Management anticipates AirPol will get ten or
more of these types of projects in 2001 and 2002 with an aggregate sales value
of $10 million.

The EPA promulgated the MACT Rules for small municipal solid waste incinerators
and Commercial Industrial Solid Waste Incinerators in December 2000. Over 50
facilities are affected by these rules. To meet the April 2003 compliance
deadline, these facilities will need to start purchasing activities from mid
2001 to early 2002. Over the next 18 months, AirPol expects to have sales in
this market segment of $7 to $10 million.

These activities and other sales are expected to result in total sales for
AirPol for 2001 of $12,000,000. Combined with HES's anticipated sales of
$12,000,000, MPM's consolidated revenues for 2001 are expected to be
$24,000,000. This should translate to a $3 to $4 million net profit in 2001.

During the fourth quarter 2000, MPM announced a proposed transaction with ST2EP,
LLC. In December, the Company announced that it was working with its advisors to
restructure the proposed transaction. On January 30, the Company reiterated that
negotiations were ongoing to restructure the transaction. These negotiations
continue at present and are expected to conclude in the second quarter 2001.

At December 31, 2000, MPM had deferred tax assets of approximately $3,000,000,
and has provided a valuation allowance in an equal amount since, in the opinion
of management, it cannot be determined that it is more likely than not that MPM
will realize the benefits of the assets.

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<PAGE>   8
2000 COMPARED TO 1999

Revenues decreased $5,514,048, or 28.4%, from $19,414,593 in 1999 to $13,900,545
in 2000. This was due to significantly lower sales at AirPol because of the
postponement of enforcement of clean air legislation. The net loss for 2000 was
$1,164,996, or $0.43 per share, compared to $945,406, or $0.41 per share for
1999.

MPM's gross margin for 2000 decreased $1,133,016 to $2,653,710. This was a 29.9%
decrease from 1999's gross margin of $3,786,726. This was due largely to revenue
decreases at AirPol. MPM's gross margin percentage decreased 0.5% from 19.5% in
1999 to 19% in 2000. This was due to aggressively pursuing jobs with lower
margins to improve cash flow.

Selling, general and administrative expenses decreased $641,260, or 14.7%, from
$4,358,529 in 1999 to $3,717,269 in 2000. This was due to costs cuts associated
with the reorganization, and staff reductions.


LIQUIDITY AND CAPITAL RESOURCES

During 2000, funds for operations were provided principally by cash generated by
the continuing operations of HES and AirPol, a capital contribution by a
director (through the conversion of debt) and short-term loans by a director.

Current cash reserves and continuing operations of HES and AirPol are believed
to be adequate to fund MPM's and its subsidiaries operations for the foreseeable
future. MPM is also considering alternative sources of capital such as private
placements, stock offerings and loans from shareholders and officers to fund its
current business and expand in other related areas through more acquisitions.

Following is a summary from MPM's consolidated statements of cash flows:

<TABLE>
<CAPTION>
                                                                            Year ended
                                                                            December 31,
                                                                 --------------------------------
                                                                     2000              1999
                                                                  ----------        ----------

         <S>                                                     <C>                <C>
         Net cash provided by (used in) operating activities     $ 381,554          ($2,714,535)

         Net cash used in investing activities                     (16,062)             (56,254)

         Net cash provided by financing activities                  14,083              330,618

         Net increase  (decrease) in cash and cash equivalents     379,575           (2,440,171)
</TABLE>

The net cash provided by operating activities in 2000 of $381,554 was due
primarily to decreases in billings in excess of costs and estimated earnings,
and increases in accounts payable and accrued expenses. This was due mainly to
the decreased activity level at AirPol. The net cash used in operating
activities in 1999 of $2,714,535 was due primarily to decreases in billings in
excess of costs and estimated earnings on contracts in progress, and increases
in costs and estimated earnings in excess of billings. This was due to a
decrease in orders booked in the fourth quarter, the cancellation of a
significant contract at HES, and decreased levels of activity in the fourth
quarter.

The net cash used in investing activities of $16,062 and $56,254 in 2000 and
1999, respectively, was entirely

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<PAGE>   9
due to acquisitions of property and equipment.

The net cash provided by financing activities in 2000 of $14,083 was due
primarily to cash generated from the issuance of stock through the exercise of
options. The net cash provided by financing activities in 1999 of $330,618 was
due primarily to the capital infusion from an officer/director of $1,100,000 net
of repayment of prior proceeds raised of approximately $760,000. In 1998, the
net cash provided by financing activities was due to approximately $760,000
received from a preferred stock subscription which partly offset offering costs
related to the preferred stock subscription, by repayments of debt and the
repurchase of MPM's common stock. MPM completed its private offering of
preferred stock in early 1999. Net proceeds raised were $975,000. Prior to the
issuance of the preferred shares, the agreement was rescinded and MPM refunded
the monies advanced.

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 June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted in all
fiscal quarters of fiscal years beginning after June 15, 2000. The Statement
requires companies to recognize all derivative contracts as either assets or
liabilities in the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss recognition on the
hedging derivative with the recognition of (i) the changes in the fair value of
the hedged asset or liability that are attributable to the hedged risk or (ii)
the earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized as income in
the period of change. Based on its current and planned future activities
relative to derivative instruments, MPM believes that the adoption of the
Statement on January 1, 2001 will not have a significant effect on its financial
statements.


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, HES and AirPol pass increased costs on to their
customers by increasing prices over time. Management estimates that the impact
of inflation on the revenues for 2000 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

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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.

10
<PAGE>   11
                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES

                              FINANCIAL STATEMENTS

                           DECEMBER 31, 2000 AND 1999
<PAGE>   12
                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




<TABLE>
<CAPTION>

<S>                                                                                <C>
Reports of Independent Certified Public Accountants.......         ................F-1 to F-2

Consolidated Balance Sheets as of December 31, 2000 and 1999.......................F-3

Consolidated Statements of Operations for the years ended December 31, 2000
    and 1999.......................................................................F-4

Consolidated Statements of Stockholders' Equity for the years ended December 31,
    2000 and 1999..................................................................F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2000
    and 1999.......................................................................F-6 to F-7

Summary of Accounting Policies.....................................................F-8 to F-11

Notes to Consolidated Financial Statements.........................................F-12 to F-21
</TABLE>



<PAGE>   13
                          Independent Auditor's Report

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, 2000 and the related
statements of income, retained earnings and cash flows for the year then ended.
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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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 2000 financial statements referred to above present fairly,
in all material respects, the financial position of MPM Technologies, Inc. and
Subsidiaries as of December 31, 2000 and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

Rosenberg Rich Baker Berman & Company

Bridgewater, New Jersey
March 9, 2001
<PAGE>   14
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


Board of Directors and Stockholders
MPM Technologies, Inc. and Subsidiaries


We have audited the accompanying consolidated balance sheet of MPM
Technologies, Inc. and Subsidiaries as of December 31, 1999 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we 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 presentation.
We believe that our audit provides 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, 1999, and the consolidated results of
their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.


BDO Seidman, LLP



Spokane, Washington
February 4, 2000
<PAGE>   15


                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS
                                                                                                DECEMBER 31,
                                                                                   -----------------------------------
                                                                                         2000                1999
                                                                                   -------------       ---------------
Current assets:
<S>                                                                                <C>                 <C>
     Cash and cash equivalents..................................................   $     573,974       $      194,399
     Accounts receivable, less allowance for doubtful accounts of $25,000 for
        2000 and 1999 (Notes 11 and 14).........................................       4,297,089            1,993,792
     Inventories (Note 3).......................................................         530,730              313,298
     Costs and estimated earnings in excess of billings (Notes 1 and 2).........         669,249              535,252
     Other current assets.......................................................         621,145              168,516
                                                                                   -------------       ---------------
              Total current assets..............................................       6,692,187            3,205,257
Property, plant and equipment, net (Notes 1 and 4)..............................         240,201              302,150
Mineral properties held for sale (Note 12)......................................       1,086,346            1,086,346
Prepaid royalty (Note 13).......................................................         273,000              275,000
Purchased intangible, net of accumulated amortization of $202,500 and $135,000
     (Note 15)..................................................................         405,000              472,500
Other assets, net (Note 8)......................................................         825,123              139,957
                                                                                   -------------       ---------------
                                                                                  $    9,521,857       $    5,481,210
                                                                                   =============       ==============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable (Note 1)..................................................  $    2,506,121       $    1,412,097
     Accrued expenses (Note 1)..................................................       1,452,255               72,340
     Billings in excess of costs and estimated earnings (Notes 1 and 2).........       2,376,387              245,564
     Accrued expenses - related party (Note 14).................................              --              167,284
     Related party debt (Note 7)................................................         190,000              665,000
     Current portion of long-term debt (Note 6).................................         300,000              225,000
                                                                                   -------------       ---------------
              Total current liabilities.........................................       6,824,763            2,787,285
     Long-term debt, less current portion (Note 6)..............................         510,389              537,054
     Negative goodwill, net (Note 1)............................................          20,158               38,593
                                                                                   -------------       ---------------
              Total liabilities.................................................       7,355,310            3,362,932
                                                                                   -------------       ---------------
Commitments and contingencies (Notes 8 and 12)
Stockholders' equity (Note 10):
     Common stock, $0.001 par value; 100,000,000 shares authorized;
        2,933,291 and 2,641,961 shares issued and outstanding...................           2,933                2,642
     Additional paid-in capital.................................................      11,163,122            9,950,148
     Accumulated deficit........................................................      (8,999,508)          (7,834,512)
                                                                                   -------------       ---------------
              Total stockholders' equity........................................       2,166,547            2,118,278
                                                                                   -------------       ---------------
                                                                                  $    9,521,857       $    5,481,210
                                                                                   =============       ==============-
</TABLE>


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


                                      F-3
<PAGE>   16
                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                        YEAR ENDED DECEMBER 31,
                                                                                -------------------------------------
                                                                                       2000                 1999
                                                                                ---------------       ---------------
<S>                                                                             <C>                   <C>
Revenues (Notes 2 and 16).......................................................$    13,900,545       $   19,414,593
Cost of sales...................................................................    (11,246,835)         (15,627,867)
                                                                                ---------------       ---------------
Gross margin....................................................................      2,653,710            3,786,726
Selling, general and administrative expenses....................................     (3,717,269)          (4,358,529)
                                                                                ---------------       ---------------
Loss from operations............................................................     (1,063,559)            (571,803)
                                                                                ---------------       ---------------
Other income (expense):
   Interest expense (Note 7)....................................................        (87,628)            (404,390)
   Other income (expense), net..................................................        (13,809)              30,787
                                                                                ---------------       ---------------
Net other expense...............................................................       (101,437)            (373,603)
                                                                                ---------------       ---------------
Net loss........................................................................ $   (1,164,996)          $ (945,406)
                                                                                ===============       ===============
Loss per share - basic and diluted:
   Net loss                                                                      $        (0.43)         $    (0.41)
                                                                                ===============       ===============
Weighted average shares of common stock outstanding -
   basic and diluted............................................................      2,763,627           2,323,412
                                                                                ---------------       ---------------
</TABLE>

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


                                      F-4
<PAGE>   17
                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                              Additional                          Total
                                                      Common Stock             Paid-In        Accumulated       Stockholders'
                                                  Shares        Amount         Capital          Deficit           Equity
                                                 ---------   -----------  -------------    ---------------     ------------
<S>                                              <C>         <C>          <C>              <C>                  <C>
Balance, January 1, 1999.......................  2,146,128   $     2,146  $   8,844,883    $  (6,889,106)       $1,957,923

Common stock issued for cash...................    150,000           150        299,850               --           300,000
Common stock purchased and retired.............     (1,500)          (1)         (4,346)              --            (4,347)

Common stock issued on conversion of debt......    333,333           333        399,667                            400,000

Beneficial conversion feature of debt issued...         --            --        266,666               --           266,666

Common stock issued on cashless exercise of
   stock options...............................     14,000            14         69,986               --            70,000

Interest imputed on related party debt
   (Note 7)....................................         --            --         13,442               --            13,442

Contributed services (Note 14).................         --            --         60,000               --            60,000

Net loss.......................................         --            --             --         (945,406)         (945,406)
                                                ----------   -----------  -------------    ---------------     ------------
Balance, December 31, 1999.....................  2,641,961         2,642      9,950,148       (7,834,512)        2,118,278

Common stock issued on conversion of debt......    117,532           118        487,998               --           488,116

Common stock issued for acquisition of
   patents (Note 1)............................     89,300            89        558,155               --           558,244

Common Stock issued for compensation...........     14,498            14         94,544               --            94,558

Interest imputed on related party debt
   (Note 7)....................................         --            --         10,264               --            10,264

Common stock issued on exercise of stock
   options.....................................     70,000            70         62,013               --            62,083

Net loss.......................................         --            --             --       (1,164,996)       (1,164,996)
                                                ----------   -----------  -------------    ---------------     ------------
Balance, December 31, 2000..................... $2,933,291    $    2,933   $ 11,163,122     $ (8,999,508)      $ 2,166,547
                                                ==========   ===========  =============    ===============     ============
</TABLE>


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


                                      F-5
<PAGE>   18
                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>
                                                                                         YEAR ENDED DECEMBER 31,
                                                                                  ------------------------------------
                                                                                        2000                 1999
                                                                                  --------------           -----------
<S>                                                                               <C>                      <C>
Cash flows from operating activities:
   Net loss.....................................................................  $   (1,164,996)          $ (945,406)
   Adjustments to reconcile net loss to net cash provided by (used in) operating
    activities:
     Depreciation and amortization..............................................         128,164              123,456
     Gain on disposal of assets.................................................              --                  741
     (Recovery) of bad debts....................................................              --              (43,138)
     Finance charge on beneficial conversion....................................              --              266,666
     Cashless option exercise...................................................              --               70,000
     Interest imputed on related party debt.....................................          10,264               13,442
     Contributed services.......................................................              --               60,000

     Change in assets and liabilities:
         Accounts receivable....................................................      (2,303,297)            (320,024)
         Costs and estimated earnings in excess of billings.....................        (133,997)           1,036,581
         Inventories............................................................        (217,432)             183,666
         Other assets...........................................................        (547,187)            (119,056)
         Accounts payable and accrued expenses..................................       2,290,096              532,177
         Billings in excess of costs and estimated earnings.....................       2,130,823           (3,573,640)
                                                                                  --------------           -----------
Net cash provided by (used in) operating activities.............................         381,554           (2,714,535)
                                                                                  --------------           -----------
Cash flows from investing activities:

Acquisition of property, plant and equipment....................................         (16,062)             (56,254)
                                                                                  --------------           -----------
Net cash (used in) investing activities.........................................         (16,062)             (56,254)
                                                                                  --------------           -----------
Cash flows from financing activities:
   Stock issued for cash........................................................          62,083              300,000
   Proceeds from issuance of convertible debt...................................              --              400,000
   Repurchase and retirement of common stock....................................              --               (4,347)
   Repayment of preferred stock deposit.........................................              --             (760,250)
   Advances of related party debt...............................................              --              450,000
   Repayments of related party debt.............................................         (50,000)             (55,000)
   Payment on prepaid royalty...................................................           2,000                   --
                                                                                  --------------           -----------
Net cash provided by financing activities.......................................          14,083              330,618
                                                                                  --------------           -----------
Net increase (decrease) in cash and cash equivalents............................         379,575           (2,440,171)
Cash and cash equivalents, beginning of year....................................         194,399            2,634,570
                                                                                  --------------           -----------
Cash and cash equivalents, end of year..........................................      $  573,974           $  194,399
                                                                                  ==============           ===========
</TABLE>


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


                                      F-6
<PAGE>   19
                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

<TABLE>
<CAPTION>
                                                                                         YEAR ENDED DECEMBER 31,
                                                                                   --------------------------------
                                                                                        2000                 1999
                                                                                   -------------        ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<S>                                                                               <C>                  <C>
Cash paid during the year for:
    Interest....................................................................    $  7,416              $ 27,474

Non-cash investing and financing activities:
    Common stock exchanged for amounts due to related parties...................    $488,116              $    --
     Common stock exchanged for asset...........................................    $558,244              $    --
    Notes payable converted to shares of common stock...........................    $     --              $400,000
    Common stock issued through non-cash exercise of options....................    $     --              $ 70,000
</TABLE>


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


                                      F-7
<PAGE>   20
                     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 no longer engaged in exploration or
developmental mining activities in regard to these properties. (See Note 12.)

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). HES
designs, engineers, supplies and services air pollution control systems for
Fortune 500 and other environmental and industrial companies worldwide. HES's
systems primarily utilize heat and chemicals to control air pollution.

AirPol, a wholly owned subsidiary, was acquired on July 2, 1998 (See Note 1).
AirPol, like HES, designs, engineers, supplies and services air pollution
control systems. AirPol's systems, however, 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, 1999 and 1998, 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 Company currently operates within two reportable segments as disclosed in
Note 16.

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, 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. During 2000 and 1999, no amounts were recognized for estimated
contract losses.


                                      F-8

<PAGE>   21
                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                         SUMMARY OF ACCOUNTING POLICIES


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.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined by the
first-in, first-out method.

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.

MINERAL PROPERTIES HELD FOR SALE

Mineral properties held for sale are stated at estimated net realizable value
determined based on estimated undiscounted future cash flows from the
liquidation of the related asset.

GOODWILL AND PURCHASED INTANGIBLE

Goodwill and purchased intangible represents the excess of the purchase price
over the fair value of net assets acquired and are being amortized on a
straight-line basis over their estimated period of future benefit of ten years.
The Company periodically evaluates the recoverability of goodwill and purchased
intangible. The measurement of possible impairment is based primarily on the
Company's ability to recover the unamortized balance of the goodwill and
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.



                                      F-9
<PAGE>   22

                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                         SUMMARY OF ACCOUNTING POLICIES


ADVERTISING COSTS

Advertising costs are charged to operations when incurred. Advertising expense
was $50,153 and $119,854 for the years ended December 31, 2000 and 1999,
respectively.

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.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the balance sheets as of December 31, 2000 and
1999 for cash equivalents, 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.

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.



                                      F-10
<PAGE>   23
                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                         SUMMARY OF ACCOUNTING POLICIES


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 average number of shares actually outstanding during
the period. Diluted earnings per share reflects 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,
2000 and 1999, outstanding options to purchase 1,014,480 and 1,084,480 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. As the
Company's stock options are antidilutive, basic and diluted earnings per share
are the same for all periods presented.

RECLASSIFICATIONS

Certain amounts in the 1999 consolidated financial statements have been
reclassified to conform to the 2000 consolidated financial statement
presentation.








                                      F-11
<PAGE>   24
                     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
is 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 is being amortized over ten years.

As of July 2, 1998, the fair values of assets acquired and liabilities assumed
were as follows:

<TABLE>
<S>                                                            <C>
        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
                                                               ========
</TABLE>

Included in the December 31, 2000 accounts receivable balance is a total of
$583,000 which is the net outstanding amount from those jobs which were acquired
from FLS Miljo, Inc. at the date of acquisition, and have since been completed.

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.



                                      F-12
<PAGE>   25

                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2. COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN PROGRESS

Following is a summary of costs, billings, and estimated earnings on contracts
in progress:

<TABLE>
<CAPTION>
                                                        DECEMBER 31,
                                               ------------------------------
                                                   2000              1999
                                               ------------      ------------
<S>                                            <C>               <C>
   Costs incurred on contracts in progress     $  5,941,957      $ 13,212,258
   Estimated earnings ....................        1,705,015         2,910,473
                                               ------------      ------------
                                                  7,646,972        16,122,731
   Less billings to date .................        9,354,110        15,833,043
                                               ------------      ------------
                                               $ (1,707,138)     $    289,688
                                               ============      ============
</TABLE>

The above accounts are shown in the accompanying consolidated balance sheets
under these captions:

<TABLE>
<CAPTION>
                                                          DECEMBER 31,
                                                 ----------------------------
                                                    2000             1999
                                                 -----------      -----------
<S>                                              <C>              <C>
   Costs and estimated earnings in excess of
     billings ..............................     $   669,249      $   535,252
   Billings in excess of costs and estimated
     earnings ..............................      (2,376,387)        (245,564)
                                                 -----------      -----------
                                                 $(1,707,138)     $   289,688
                                                 ===========      ===========
</TABLE>

3. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
                                             DECEMBER 31,
                                         ---------------------
                                           2000         1999
                                         --------     --------
<S>                                      <C>          <C>
                  Equipment ........     $420,434     $223,748
                  Chemicals ........       74,811       55,324
                  Parts and supplies       35,485       34,226
                                         --------     --------
                                         $530,730     $313,298
                                         ========     ========
</TABLE>

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
                                                   DECEMBER 31,
                                              ---------------------
                                                2000         1999
                                              --------     --------
<S>                                           <C>          <C>
            Equipment ...................     $385,733     $371,363
            Furniture and fixtures ......      133,500      130,720
            Leasehold improvements ......       14,708       14,708
                                              --------     --------
                                               533,941      516,791
            Less accumulated depreciation      293,740      214,641
                                              --------     --------
                                              $240,201     $302,150
                                              ========     ========
</TABLE>



                                      F-13
<PAGE>   26

                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Depreciation expense charged to operations was $79,282 and $73,390 in 2000 and
1999, respectively.

5. NOTES PAYABLE

During 1999, the Company issued a $400,000 note payable for funds received,
which was immediately converted into shares of the Company's common stock at
$1.20 per share. This conversion rate was at a $0.80 discount from the trading
price of the debt at the date of issuance. The beneficial conversion feature was
therefore ascribed a fair value of $266,666, which has been recorded as a
financing charge associated with the transactions.

6. LONG-TERM DEBT

In conjunction with the Company's acquisition of HES (See Note 1), the Company
assumed a long-term obligation totaling $1,200,000, which is payable in sixteen
annual installments of $75,000. As there was no stated interest rate on the
obligation, an imputed interest rate of 9%, which represented the Company's
estimated borrowing rate, was utilized. The payments due in 2000, 1999 and 1998
have not been made as the Company believes the note holder has breached the
agreement. Under the terms of the agreement, non-payment does not result in the
debt being callable. At December 31, 2000 and 1999, the carrying value of the
obligation, net of discount, was $810,389 plus accrued interest. At December 31,
2000 and 1999, current amounts owed under this obligation are $300,000 and
$225,000, respectively.

7. RELATED PARTY DEBT

Related party debt consists of advances received from various directors and
related parties. At December 31, 2000 and 1999, amounts owed these related
parties totaled $190,000 and $665,000, respectively, and are due on demand.

During 2000, an officer/director converted $425,000 of related party debt into
the Company's common stock at the then current market price. Additionally,
$50,000 of other related party debt was repaid.

Certain of the related party creditors voluntarily agreed to terminate their
current and future right to interest payments. As such, interest expense of
$10,264 and $13,442 has been imputed on this debt at 10% for 2000 and 1999 with
a corresponding offset to additional paid-in capital.


8. COMMITMENTS AND CONTINGENCIES

The Company leases office space and mineral properties under operating leases
that expire at various dates through 2003. Future minimum rental payments
required under operating leases that have initial and remaining noncancelable
terms in excess of one year are as follows:

<TABLE>
<CAPTION>
      YEAR ENDING DECEMBER 31,                 AMOUNT
      -------------------------------------   --------
<S>                                           <C>
              2001.........................    312,000
              2002.........................    244,000
              2003.........................     81,000
                                              --------
                                              $637,000
                                              ========
</TABLE>



                                      F-14
<PAGE>   27

                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Rent expense for the years ended December 31, 2000 and 1999 was $355,000 and
$250,000, 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.

During 1999, AirPol executed a joint venture agreement with another U.S. company
to operate a business involved in environmental protection in China. In
connection therewith, the Company advanced $30,000 to this arrangement and
committed to invest an additional $80,000 through certain technology. This
advance is reported with other assets on the balance sheet.

9. INCOME TAXES

As of December 31, 2000 and 1999, the significant components of the Company's
net deferred tax asset is as follows:

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31,
                                                   ---------------------------
                                                       2000            1999
                                                   -----------     -----------
<S>                                                <C>             <C>
 Net operating loss carryforward .............     $ 2,512,000     $ 2,005,000
 Differences between book and tax depreciation         230,000         264,000
 Goodwill and purchase asset adjustments .....          11,000          12,000
 Writedown of mineral properties .............         136,000         136,000
 Other .......................................          70,000         (11,000)
                                                   -----------     -----------
                                                     2,959,000       2,406,000
 Less: valuation allowance ...................       2,959,000       2,406,000
                                                   -----------     -----------
                                                   $        --     $        --
                                                   ===========     ===========
</TABLE>

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
both December 31, 2000 and 1999.

At December 31, 2000, the Company has net operating loss carryforwards totaling
approximately $7.5 million that expire in the years 2001 through 2020.


10. 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


                                      F-15
<PAGE>   28

                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


to the Plan. Under the Plan, a maximum of 292,222 shares were approved to be
granted, which in 2000 and 1999, was increased by 300,000 and 250,000,
respectively, to 842,222. 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
purchased 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:

<TABLE>
<CAPTION>
                                                                WEIGHTED
                                                                AVERAGE
                                                                OPTION
                                                 OPTIONS         PRICE
                                                ---------      ----------
<S>                                             <C>            <C>
          Outstanding at January 1, 1999 .        247,613      $     0.89
          Granted ........................        857,667            2.15
          Exercised ......................        (20,800)          (2.00)
          Expired ........................             --              --
                                                ---------      ----------
          Outstanding at December 31, 1999      1,084,480            1.86
          Granted ........................             --              --
          Exercised ......................        (70,000)          (0.89)
          Expired ........................             --              --
                                                ---------      ----------
          Outstanding at December 31, 2000      1,014,480      $     1.93
                                                =========      ==========
</TABLE>

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 5.25 percent; and
expected lives of five years. The weighted average fair value at date of grant
for options granted to employees in 1999 was $1.09 per option. Under the
accounting provisions of SFAS No. 123, the Company's net loss and loss per share
for each of the two years in the period ended December 31, 2000 and 1999 would
have been adjusted to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                    YEAR ENDED DECEMBER 31
                                 ----------------------------
                                     2000             1999
                                 -----------      -----------
<S>                              <C>              <C>
              Net loss
                 As reported     $(1,164,996)     $  (945,406)
                 Pro forma .     $(1,657,417)     $(1,532,385)

              Loss per share
                 As reported     $     (0.43)     $     (0.41)
                 Pro forma .     $     (0.60)     $     (0.66)
</TABLE>


                                      F-16
<PAGE>   29

                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The following table summarizes information about stock options outstanding at
December 31, 2000:

<TABLE>
<CAPTION>
                                                                Options
                          Number          Weighted          Outstanding and
       Range of         Outstanding        Average       Exercisable Weighted
       Exercise       and Exercisable     Exercise         Average Remaining
        Prices          at 12/31/00         Price      Contractual Life (Years)
    -------------     ---------------     --------     ------------------------
<S>                   <C>                 <C>          <C>
    $0.88 - $0.90          177,613         $ 0.89                  5.6
    $        2.00          710,200         $ 2.00                  8.4
    $        3.00          126,667         $ 3.00                  8.5
                      ---------------                  ------------------------
    $0.88 - $1.86        1,014,480         $ 1.93                  7.5
                      ===============                  ========================
</TABLE>

11. VALUATION AND QUALIFYING ACCOUNTS

Allowance for doubtful account activity was as follows:

<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                                ---------------------
                                                  2000         1999
                                                --------     --------
<S>                                             <C>          <C>
         Balance, beginning of year .......     $ 25,000     $ 90,000
         Charged to (deducted from) expense           --      (43,138)
         Write-offs, net of recoveries ....           --      (21,862)
                                                --------     --------
         Balance, end of year .............     $ 25,000     $ 25,000
                                                ========     ========
</TABLE>

12. MINERAL PROPERTIES HELD FOR SALE

During 1998, the Board of Directors authorized a plan to dispose of the
Company's mineral properties and related mining assets. Accordingly, the Company
has classified these assets as mineral properties held for sale in its balance
sheet at December 31, 2000 and 1999. The Company is actively seeking buyers for
these assets.

13. 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.
During 2000, a payment of $2,000 was received, and the balance at December 31,
2000 was $273,000.



                                      F-17
<PAGE>   30

                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


14. RELATED PARTY TRANSACTIONS

The former President of the Company is also the president of another company
that provides general insurance coverage and various administrative and office
expenses for the Company. In 2000, the Company issued 17,532 shares of its
common stock in payment of an amount owed of $16,116. In 2000 and 1999, the
Company incurred expenses to this related party company of $66,000 and $119,000,
respectively.

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
2000 and 1999 of $85,688 and $82,196, respectively.

As of December 31, 2000 and 1999, 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 for both periods presented. Additionally, during
the year ended December 31, 1999 the Company's President elected to not receive
a salary for services he performed for the Company. The estimated fair value of
these services of $60,000 has been recognized as compensation expense and
through additional paid-in capital.

15. 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. The intangible asset is being amortized on a straight-line basis over
its estimated period of future benefit of ten years.

16. SEGMENT INFORMATION

The Company's consolidated financial statements include certain reportable
segment information. These segments include HES, a wholly owned subsidiary
engaged in designing, engineering, supplying and servicing air pollution control
systems which primarily utilize heat and chemicals to control air pollution, and
AirPol, a wholly owned subsidiary engaged in designing, engineering, supplying
and servicing air pollution control systems which utilize wet and dry scrubbers,
wet electrostatic precipitators and venturi absorbers to control air pollution.
The Company evaluates the performance of these segments based upon multiple
variables including revenues and profit or loss.



                                      F-18
<PAGE>   31
                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


The segments' profit and loss components and schedule of assets as of December
31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                              AIR            AIR
                                                           POLLUTION      POLLUTION
                                                            CONTROL        CONTROL          ALL
                                                            (HEAT)       (SCRUBBERS)       OTHER          TOTAL
                                                          -----------    -----------    -----------    -----------
<S>                                                       <C>            <C>            <C>            <C>
Revenue external ......................................   $ 9,618,637    $ 4,281,908    $        --    $13,900,545
Interest income .......................................        58,579            837            291         59,707
Interest expense ......................................        52,557          9,700         79,157        141,414
Depreciation and amortization .........................       (45,054)       104,798         68,420        128,164
Segment (loss) ........................................       (22,238)      (484,614)      (658,144)    (1,164,996)
Other significant non-cash items:
     Costs and estimated earnings in excess of billings       215,603        453,646             --        669,249
     Billings in excess of costs and
      estimated earnings ..............................     1,344,298      1,032,089             --      2,376,387

Segment assets ........................................     4,075,110      3,462,283      5,586,762     13,124,155
Expenditures for long-lived assets ....................         9,354          3,351          3,357         16,062
</TABLE>

Reconciliation of net income (loss), total assets, and other significant items
for the year ended December 31, 2000 are as follows:

<TABLE>
<CAPTION>
              PROFIT OR LOSS                             AMOUNT
              --------------                          -----------
<S>                                                   <C>
              Total loss for reportable segments .    $  (506,892)
              Other loss .........................       (658,144)
              Discontinued operations ............             --
                                                      -----------
              Total consolidated profit or loss ..    $(1,164,996)
                                                      ===========

              ASSETS
              ------
              Total assets for reportable segments    $ 7,537,393
              Other assets .......................      4,500,416
              Assets of discontinued operation ...      1,086,346
              Elimination of intersegment assets .     (3,602,298)
                                                      -----------
              Total consolidated assets ..........    $ 9,521,857
                                                      ===========
</TABLE>

Other significant items:

<TABLE>
<CAPTION>
                                                       SEGMENT                    CONSOLIDATED
                                                        TOTALS     ELIMINATIONS      TOTALS
                                                      ----------   ------------   ------------
<S>                                                   <C>           <C>            <C>
Interest income ..................................    $   59,416    $  (53,786)    $    5,630
Interest expense .................................       141,414       (53,786)        87,628
Expenditures for long-lived assets ...............        16,062            --         16,062
Depreciation and amortization ....................       128,164            --        128,164
Costs and estimated earnings in excess of billings       669,249            --        669,249
Billings in excess of costs and estimated earnings     2,376,387            --      2,376,387
</TABLE>



                                      F-19
<PAGE>   32

                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Adjustments to reconcile interest expense and interest income represent total
intercompany amounts. The Company's revenues by geographic region for the year
ended December 31, 2000 are as follows:

<TABLE>
<CAPTION>
      GEOGRAPHIC REGION                                REVENUES
      -----------------                              -----------
<S>                                                  <C>
      United States                                  $13,521,009
      Canada                                             210,326
      Other foreign countries                            169,210
                                                     -----------
      Total consolidated revenues                    $13,900,545
                                                     ===========
</TABLE>

The Company attributes revenues to countries based on the location of the
customer.

The segments' profit and loss components and schedule of assets as of December
31, 1999 are as follows:

<TABLE>
<CAPTION>
                                                                AIR            AIR
                                                             POLLUTION      POLLUTION
                                                              CONTROL        CONTROL          ALL
                                                               (HEAT)      (SCRUBBERS)       OTHER            TOTAL
                                                            -----------    -----------    ------------     -----------
<S>                                                         <C>            <C>            <C>              <C>
Revenue external .......................................    $ 8,201,508    $11,213,085    $         --     $19,414,593

Interest income ........................................         62,555         21,593           4,460          88,608
Interest expense .......................................         53,363         18,316         365,946         437,625
Depreciation and amortization ..........................        (49,507)       103,641          69,322         123,456
Segment profit (loss) ..................................       (298,264)       394,064      (1,041,206)       (945,406)
Other significant non-cash items:
     Costs and estimated earnings in excess of
       billings ........................................        535,252             --              --         535,252
Segment assets .........................................      2,661,018      1,262,116       3,972,794       7,895,928
Expenditures for long-lived assets .....................         35,767         17,821           2,666          56,254
</TABLE>

Reconciliation of net income (loss), total assets, and other significant items
for the year ended December 31, 1999 are as follows:

<TABLE>
<CAPTION>
       PROFIT OR LOSS                                          AMOUNT
       --------------                                          ------
<S>                                                         <C>
       Total loss for reportable segments...............    $   (95,800)
       Other loss.......................................       (849,606)
       Discontinued operations..........................              -
                                                            -----------
       Total consolidated loss..........................    $  (945,406)
                                                            ===========

       ASSETS
       ------
       Total assets for reportable segments.............    $ 3,276,682
       Other assets.....................................      4,658,193
       Assets of discontinued operation.................      1,086,346
       Elimination of intersegment assets...............     (3,540,011)
                                                            -----------
       Total consolidated assets........................    $ 5,481,210
                                                            ===========
</TABLE>




                                      F-20
<PAGE>   33

                     MPM TECHNOLOGIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Other significant items:

<TABLE>
<CAPTION>
                                                      SEGMENT                   CONSOLIDATED
                                                       TOTALS    ELIMINATIONS      TOTALS
                                                      --------   ------------   ------------
<S>                                                   <C>        <C>            <C>
Interest income ..................................    $ 88,608     $(33,235)      $ 55,373
Interest expense .................................     437,625      (33,235)       404,390
Expenditures for long-lived assets ...............      56,254           --         56,254
Depreciation and amortization ....................     123,456           --        123,456
Costs and estimated earnings in excess of billings     535,252           --        535,252
</TABLE>

Adjustments to reconcile interest expense and interest income represent total
intercompany amounts.

The Company's revenues by geographic region for the year ended December 31, 1999
are as follows:

<TABLE>
<CAPTION>
        GEOGRAPHIC REGION                              REVENUES
        -----------------                            ------------
<S>                                                  <C>
        United States                                $ 16,483,711
        United Kingdom                                  2,608,847
        Other foreign countries                           322,035
                                                     ------------
        Total consolidated revenues                  $ 19,414,593
                                                     ============
</TABLE>

The Company attributes revenues to countries based on the location of the
customer.




                                      F-21
<PAGE>   34

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

<TABLE>
<CAPTION>
                                                  FIRST ELECTED
       NAME              AGE       POSITION       DIRECTOR
---------------------------------------------------------------
<S>                      <C>       <C>            <C>
Michael J. Luciano        47       Director       2/16/1998
Richard E. Appleby        60       Director       4/25/1985
Myron Katz                70       Director       4/25/1985
Daniel D. Smozanek        75       Director       4/25/1985
L. Craig Cary Smith       51       Director       4/25/1985
Anthony L. Lee            65       Director       2/16/1998
Glen Hjort                48       Director       2/16/1998
Richard Kao               60       Director       6/28/1999
</TABLE>

The directors will serve until the next meeting of shareholders or until their
successors are elected and qualified.

b) Identification of Executive Officers.

<TABLE>
<CAPTION>
      NAME              AGE       POSITION                  OFFICER SINCE
-------------------------------------------------------------------------
<S>                     <C>       <C>                       <C>
Michael J. Luciano       47       Chairman & CEO                2/16/1998
Glen Hjort               48       Chief Financial Officer       6/28/1999
Richard E. Appleby       60       Vice President                4/25/1985
Myron Katz               70       Vice President                4/25/1985
Daniel D. Smozanek       75       Treasurer                     4/25/1985
Robert D. Little         51       Secretary                     1/03/1991
</TABLE>

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, 2000, 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.



11
<PAGE>   35

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 included negotiating joint ventures in the U.S. and Asia, and
the development of the Skygas technology. 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. He has been a Director
since 1998. Mr. Hjort is a certified public accountant with over twenty years
experience providing services to numerous corporate clients in a wide variety of
industries. He is a past Chief Financial Officer for a public company where he
had responsibility for all accounting, personnel and administrative functions,
and for SEC reporting. Mr. Hjort resides in Palatine, Illinois.

Richard E. Appleby is Vice President and a Director since 1985. He attended
postgraduate courses at Rutgers 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 a Director since 1985. 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 40 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 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 completed Teacher
Certification at Seattle University. From 1985 to the present, Mr. Little as
been Operations 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 and Hemingway in Spokane, Washington. Mr. Smith resides in
Spokane, Washington.



12
<PAGE>   36

Anthony L. Lee has been a Director since 1998. Mr. Lee is Managing Director, Gas
Processing Technology at the Institute of Gas Technology in Des Plaines,
Illinois. He manages projects on hydrogenation and dehydrogenation, reforming
hydrodesulfurization, hydrocracking, membrane technology, dehydration and acid
gas removal. He holds eleven patents and has published sixty-four articles
within his scope of expertise. Mr. Lee resides in Glen Ellyn, Illinois.

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 2000 and 1999.

Summary Compensation Table

                               Annual Compensation

<TABLE>
<CAPTION>
Name and
Principal
Position   Year   Salary            Bonus(s) Compensation Awards(s)($) SARs($) Payout(s)($) Compensation
<S>        <C>    <C>               <C>

Michael J
Luciano    2000   $ 25,000          None
CEO        1999   $ 60,000(1)       301,667 options granted at market

Robert D
Little     2000     85,688
Secretary  1999    139,246
</TABLE>


13
<PAGE>   37

(1)  Mr. Luciano devotes time to MPM on an as needed basis. He received no
     salary in 1999, but an amount of $60,000 was provided as an estimate for
     compensation for time spent.

(2)  MPM contracts with Mr. Little for its shareholder relations services.
     Expenses related to this were $85,688 and $89,246 for 2000 and 1999,
     respectively. Additionally, Mr. Little exercised options in 1999 that
     resulted in expense recognized by MPM in the amount of $50,000.


Option Grants In 2000 Fiscal Year Individual Grants
Individual Grants

None

Aggregated Option/SAR Exercises in Last Fiscal Year and FYE 2000 Option/SAR
Values

<TABLE>
<CAPTION>
                                                           Number of
                                                           Securities         Value of
                                                           Underlying         Unexercised
                                                           Unexercised        In-The-Money
                                                           Options/SARs       Options/SARs
                         Shares                            At FY-End (#)      At FY-End
                         Acquired         Value            Exercisable/       Exercisable/
Name                     On Exercise      Realized($)      Unexercisable      Unexercisable
-------------------------------------------------------------------------------------------
<S>                      <C>              <C>              <C>                <C>

Michael J. Luciano       None                              321,890            $1,638,420
                                                           Exercisable

L. Craig Cary Smith      None                              139,945            $  712,320
                                                           Exercisable

Robert D. Little         None                              108,223            $  550,855
                                                           Exercisable

Glen Hjort               None                              40,000             $  203,600
                                                           Exercisable

Richard E. Appleby       None                              38,000             $  193,420
                                                           Exercisable

Daniel D. Smozanek       None                              8,000              $   40,720
                                                           Exercisable

Myron Katz               None                              8,000              $   40,720
                                                           Exercisable
</TABLE>


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.


14
<PAGE>   38

b) Proposed Remuneration.

It is not contemplated that any 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. At
the Annual Meeting of Shareholders held on June 26, 2000, the shareholders
approved an amendment to the stock option plan therefore increasing the number
of shares in the plan by 300,000.

ITEM 11. 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 146,666 or 5.00% of MPM's
outstanding shares. No other person or group was known by the Registrant to own
more than five percent of its common stock at December 31, 2000.

b) Security Ownership of Management as of March 20, 2001.

The following table sets forth, as of March 20, 2001 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.

<TABLE>
<CAPTION>
 Title of      Name of                   Amount and Nature of        Percent
   Class       Beneficial Owner         Beneficial Ownership[1]      of Class
 --------      ----------------         -----------------------      --------
<S>            <C>                      <C>                          <C>
  Common       Michael J. Luciano             673,910[2]               18.7
  Common       Richard E. Appleby               231,155                 6.4
  Common       Daniel D. Smozanek               170,257                 4.7
  Common       L. Craig Cary Smith              141,280                 3.9
  Common       Myron Katz                       131,192                 3.6
  Common       Robert D. Little                 112,080                 3.1
  Common       Richard Kao                       61,222                 1.7
  Common       Glen Hjort                        51,833                 1.4
  Common       Anthony Lee                       20,000                 *
  Common       As A Group                     1,592,929                44.3
</TABLE>

15
<PAGE>   39

[*] Less than one percent

[1] Includes options available for exercise aggregating 664,058 shares for the
entire group.

[2] Does not include 378,815 shares (10.5%) of the Company's outstanding 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 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.

Under the terms of an agreement with Michael J. Luciano, Chairman and Chief
Executive Officer, in April 1999, MPM issued 150,000 shares of its common stock
at the then current market price of $2.00 in exchange for $300,000 cash. MPM
also issued convertible debentures aggregating $400,000 which were convertible
to common stock at the discounted price of $1.20 per share. These debentures
were converted concurrently with the stock issue and resulted in an additional
333,333 shares being issued. The discount of $266,666 was treated as a financing
charge against MPM's income for 1999. At the same time, MPM issued a note
payable to Mr. Luciano in the amount of $400,000 with interest only payments
monthly through March 2004 and the entire principal balance due in April 2004.
In 2000, MPM issued 100,000 shares of its common stock in settlement of the
debt.

At December 31, 2000 and 1999, Richard Appleby was owed $65,000 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 MPM owns R.D. Little Co.. For
the year ended December 31, 2000, MPM paid $85,688 for these services.

It is the opinion of management that the amount and terms for leases and
services from affiliates are comparable to those which might be obtained from
unaffiliated parties.

c) Other Information

     None


16
<PAGE>   40


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 10-KSB.

(B)  Reports on Form 8-K

     On November 21, 2000, the Company reported that their auditing firm, BDO
Seidman, LLP, had resigned.

     On December 29, 2000, the Company reported the restructuring of the ST2EP
transaction.










17
<PAGE>   41
                                   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/ Michael J. Luciano
       -----------------------

    Title: Chairman and Chief Executive Officer
          -------------------------------------

    Date: April 12, 2001
         ---------------

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.


<TABLE>
<S>                                        <C>
/s/ Michael J. Luciano                     /s/ Glen Hjort
-------------------------------            ----------------------------------
Michael J. Luciano                         Glen Hjort
Chairman & Chief Executive Officer         Chief Financial Officer & Director

Dated: April 12, 2001                      Dated: April 12, 2001
      ----------------                           ----------------


/s/ Myron Katz                             /s/ Daniel D. Smozanek
-------------------------------            ----------------------------------
Myron Katz                                 Daniel D. Smozanek
Vice President & Director                  Treasurer & Director

Dated: April 12, 2001                      Dated: April 12, 2001
      ----------------                           ----------------


/s/ Richard E. Appleby                     /s/ L. Craig Cary Smith
-------------------------------            ----------------------------------
Richard E. Appleby                         L. Craig Cary Smith
Vice President & Director                  Director

Dated: April 12, 2001                      Dated: April 12, 2001
      ----------------                           ----------------


/s/ Richard Kao
-------------------------------
Richard Kao
Director

Dated: April 12, 2001
      ----------------
</TABLE>


18