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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 March 31, 2007

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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): 

Large accelerated filer [ ]	Accelerated filer [X] 		Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (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 May 4, 2007**Common Stock, $0.01 Par Value**38,070,963 Shares

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**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 - March 31, 2007 and December 31, 2006 (Unaudited) 
3
 
 
Condensed Consolidated Statements of Operations - Three months ended March 31, 2007 and 2006 (Unaudited)
4
 
 
Condensed Consolidated Statements of Shareholders' Equity and Comprehensive Loss - Three months ended March 31, 2007 and 2006 (Unaudited)
5
 
 
Condensed Consolidated Statements of Cash Flows - Three months ended March 31, 2007 and 2006 (Unaudited)
6
 
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
7-16
 
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
17-23
 
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
23
 
 
Item 4. Controls and Procedures
23
 
 
Part II. OTHER INFORMATION
 
 
 
Item 1. 	Legal Proceedings
24
 
 
Item 1A.	Risk Factors
24
 
 
Item 5. 	Other Information
25
 
 
Item 6. 	Exhibits
25
 
 
Signatures
26
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2
**PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31, 2007 and December 31, 2006 (Unaudited)

(Dollars in thousands)**

 
March 31,
December 31,
 
2007
2006**Assets**Current Assets:
 
 
Cash and cash equivalents
$ 9,885
$ 14,545
Securities available for sale 
8,184
10,075
Accounts receivable
1,328
1,613
Inventories, net
1,203
1,216
Prepaid expenses and other current assets
775 
442
Total Current Assets
21,375
27,891
 
 
 
Property, plant and equipment, net
2,683
2,926
Deferred income taxes
2,252
2,994
Total Assets
$ 26,310
$ 33,811**Liabilities and Shareholders' Equity
 
 
 **Current Liabilities:
 
 
Accounts payable
$ 462
$ 651
Accrued liabilities
2,466
2,470
Deferred revenue
254
866
Income taxes payable
14
90
Deferred income taxes
2,252
2,994
Total Current Liabilities
5,448
7,071**Long-Term Liabilities:
 
 
Uncertain tax position liability
188
-
Derivative liability 
2,695
3,664
Total Liabilities
8,331
10,735
Commitments and Contingencies
 
 
Minority interests 
140
205**Shareholders' Equity
 
 
Common stock, par value $.01 per share, authorized 75,000,000; 
 
 
46,084,678 issued in 2007 and 46,084,678 issued in 2006
461
461
Paid-in-capital
130,685
130,565
Accumulated deficit
(98,647)
(95,385)
Accumulated Other Comprehensive Income:
 
 
Unrealized gain on securities available for sale, net of tax
(906)
984
 
 
 
Common stock in treasury, at cost, 8,040,736 shares in 2007 and 2006
(13,754)
(13,754)
Total Shareholders' Equity
17,839
22,871
Total Liabilities and Shareholders' Equity
$ 26,310
$ 33,811
** 

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

3
**MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share data)**

Three months ended
 
March 31,
March 31,
 
2007
2006
 
 
 
Product revenue
$ 1,701
$ 1,513
Funded research and development revenue
615
45
Total revenue
2,316
1,558
Operating costs and expenses:
Cost of product revenue
738
539
Research and product development expenses:
Funded research and product development 
224
210
Unfunded research and product development 
3,398
2,350
Total research and product development expenses 
3,622
2,560
Selling, general and administrative expenses
2,456
3,060
Operating loss
(4,500)
(4,601)
Gain on derivatives
969
-
Gain on sale of securities available for sale
-
1,266
Other income, net
141
71
Loss before income taxes and minority interests
(3,390)
(3,264)
Income tax expense 
(11)
(569)
Minority interests in losses of consolidated subsidiary
245
402
Net loss
$ (3,156)
$ (3,431)
Loss per Share (Basic and Diluted):
Loss per share
$ (0.08)
$ (0.11)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

4
**MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

AND COMPREHENSIVE LOSS (Unaudited)

(Dollars in thousands)

Three months ended
March 31,
March 31,
 
2007
2006**Common Stock
 
 
Balance, beginning 
$ 461
$ 390
Issuance of shares - options 
- 
1
Balance, ending
$ 461
$ 391**Paid-In Capital
Balance, beginning 
$ 130,565
$ 122,095
Issuance of shares - options 
-
265
MTI MicroFuel Cell investment
(180)
(358)
Share-based compensation
300
401
Elimination of unearned compensation due to change in accounting principle
-
(80)
Balance, ending
$ 130,685
$ 122,323**Accumulated Deficit
 
 
Balance, beginning
$ (95,385)
$ (81,718)
Cumulative effect of adoption of FIN 48
(106)
-
Net loss
(3,156)
(3,431)************************************