====================================================================

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

							

FORM 10-Q

 /X/ Quarterly report pursuant to Section 13 or 15 (d) of the Securities

Exchange Act of 1934

For the quarterly period ended June 30, 2004

or

/ / Transition report pursuant to Section 13 or 15 (d) of the Securities

Exchange Act of 1934

For the transition period from  to 				
Commission File Number 0-6890
**MECHANICAL TECHNOLOGY INCORPORATED**
(Exact name of registrant as specified in its charter)
**New York**14-1462255
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)**431 New Karner Road, Albany, New York 12205

(Address of principal executive offices)        (Zip Code)  
**(518) 533-2200

(Registrant's telephone number, including area code)
**Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No  ̈

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes    ̈ No   x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class
Outstanding at August 11,  2004**Common Stock, $1.00 Par Value**29,241,916 Shares**														

			

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

INDEX

 

 

 

Part I. FINANCIAL INFORMATION
Page No.  
Item 1.  Financial Statements

Financial Statements of Mechanical Technology Incorporated and Subsidiaries   
Condensed Consolidated Balance Sheets - June 30, 2004 (Unaudited) and December 31, 2003  
3-4  
Condensed Consolidated Statements of Operations - Three and six months ended June 30, 2004 and 2003 (Unaudited)
5  
Condensed Consolidated Statements of Shareholders' Equity and Comprehensive Income -   Six months ended June 30, 2004 and 2003 (Unaudited)
6  
Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2004 

and 2003 (Unaudited)
7  
Notes to Condensed Consolidated Financial Statements (Unaudited)
8-27  
Item 2.  Management's Discussion and Analysis of Financial Condition 

and Results of Operations
28-37  
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
37  
Item 4.  Controls and Procedures
37  
Part II.  OTHER INFORMATION   
Item 1.  Legal Proceedings
38
Item 2.  Changes in Securities and Use of Proceeds
38
Item 3.  Defaults Upon Senior Securities
38
Item 4.  Submission of Matters to a Vote of Security Holders
38
Item 5.  Other Information
38
Item 6.  Exhibits and Reports on Form 8-K
39  
Signatures
40
 

 

 

 

 

 

 

 

 

 

 

2
**PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements****MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2004 (Unaudited) and December 31, 2003

(Dollars in thousands)

 

 **
Jun. 30, 
Dec. 31, 
2004
2003
Assets  
Current Assets:  
  Cash and cash equivalents
$20,905
$12,380
  Securities available for sale
22,389
44,031
  Accounts receivable 
856
962
  Other receivables - related parties
41
-
  Inventories, net
1,181
1,300
  Prepaid expenses and other current assets
    567
    514
    Total Current Assets
45,939
59,187   
Long Term Assets:  
  Securities available for sale - restricted
20,196
-
  Property, plant and equipment, net
2,407
1,999
  Deferred income taxes
-
 4,652
  Notes receivable-noncurrent, less allowance of $660 
         -
         -
    Total Assets
$68,542
$65,838** 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.
**3
**MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2004 (Unaudited) and December 31, 2003   

 (Dollars in thousands, except share data)
 
Jun. 30, 
Dec. 31,  
2004
2003
Liabilities and Shareholders' Equity     
Current Liabilities:  
  Accounts payable
$     866
$    692
  Accrued liabilities
2,067
1,528
  Accrued liabilities - related parties
29
48
  Income taxes payable
19
12
  Deferred income taxes
   6,873
  4,481
    Total Current Liabilities
   9,854
 16,761
Long-Term Liabilities:  
  Derivative liability
1,528
-
  Deferred income taxes and other liabilities
      501
        24
    Total Liabilities
 11,883
 16,785   
Commitments and Contingencies   
Minority interests
   1,987
      787   
Shareholders' Equity:  
  Common stock, par value $1 per share, authorized 75,000,000; 

  issued 37,281,527 at June 30, 2004 and 35,776,510 at December 31, 2003
37,281
35,776
  Paid-in-capital
75,701
68,708
  Accumulated deficit
(64,038)
(62,433)

  48,944
42,051
  Accumulated Other Comprehensive Income:  
    Unrealized gain on securities available for sale, net of taxes
19,482
19,944
  Common stock in treasury, at cost, 8,040,736 shares at June 30, 2004 

  and 8,035,974 shares at December 31, 2003
(13,754)
(13,729)
    Total Shareholders' Equity
 54,672
 48,266
    Total Liabilities and Shareholders' Equity
$ 68,542
$ 65,838
 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

4
**MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES  

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share data)**
Three months ended
Six months ended 
Jun. 30,
Jun. 30,
Jun. 30,
Jun. 30, 
2004
2003
2004
2003*Revenues:    
Product revenue
$  1,231
$ 1,423
$  2,810
$ 2,706
Funded research and development revenue
    191
   590
    579
 1,112
Total revenues
1,422
2,013
3,389
3,818*Operating costs and expenses:
Cost of product revenue
623
558
1,270
1,113
Research and product development expenses:
Funded research and product development 
541
803
1,695
1,623
Unfunded research and product development 
  2,465
1,280
 3,979
 2,231
Total research and product development expenses 
3,006
2,083
5,674
3,854
Selling, general and administrative expenses
  2,057
 1,273
 3,364
 2,705
Operating loss
(4,264)
(1,901)
(6,919)
(3,854)
Interest expense
-
(4)
-
(7)
Gain (loss) on derivatives
1,492
-
211
(6)
Gain on sale of securities available for sale, net
-
1,640
3,129
3,360
Impairment losses
-
(418)
-
(418)
Other income (expenses), net
       32
    (13)
      19
   (39)
Loss from continuing operations before income taxes 
and minority interests
(2,740)
(696)
(3,560)
(964)
Income tax benefit 
1,065
262
1,381
351
Minority interests in losses of consolidated subsidiary
    312
     35
    574
   151
Loss from continuing operations
  (1,363)
 (399)
(1,605)
(462)
Income from discontinued operations, net of tax
          -
     13
        -
     13
Net loss
$ (1,363)
$  (386)
$(1,605)
$ (449)
Loss per Share (Basic and Diluted):
Loss per share from continuing operations
$   (0.05)
$ (0.01)
$  (0.06)
$ (0.02)
Income per share from discontinued operations
          -
        -
         -
        -
Loss per share
$   (0.05)************************