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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 September 30, 2005

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   x No    ̈

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 November 4, 2005**Common Stock, $.01 Par Value**30,913,201 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 - September 30, 2005 (Unaudited) and December 31, 2004  
3-4  
Condensed Consolidated Statements of Operations - Three and Nine months ended September 30, 2005 and 2004 (Unaudited)
5  
Condensed Consolidated Statements of Shareholders' Equity and Comprehensive Income -   Nine months ended September 30, 2005 and 2004 (Unaudited)
6  
Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 2005 and 2004 (Unaudited)
7  
Notes to Condensed Consolidated Financial Statements (Unaudited)
8-26  
Item 2.  Management's Discussion and Analysis of Financial Condition 

and Results of Operations
27-37  
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
37  
Item 4.  Controls and Procedures
38  
Part II.  OTHER INFORMATION   
Item 1.  Legal Proceedings
39
Item 2.  Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
39
Item 3.  Defaults Upon Senior Securities
39
Item 4.  Submission of Matters to a Vote of Security Holders
39
Item 5.  Other Information
39
Item 6.  Exhibits
39  
Signatures
40
 

 

 

 

 

 

 

 

 

 

2
**PART I.  FINANCIAL INFORMATION

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

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2005 (Unaudited) and December 31, 2004

(Dollars in thousands)

 

 **
Sept. 30, 
Dec. 31, 
2005
2004
Assets  
Current Assets:  
  Cash and cash equivalents
$13,582
$22,545
  Securities available for sale
25,115
17,678
  Accounts receivable, less allowances of $0 in 2005 and $58 in 2004  
1,154
1,772
  Other receivables - related parties
-
3
  Inventories
1,017
1,136
  Prepaid expenses and other current assets
    603
    504
    Total Current Assets
41,471
43,638   
Long Term Assets:  
  Securities available for sale - restricted
-
16,497
  Property, plant and equipment, net
2,650
2,884
  Deferred income taxes
  8,575
   3,811
    Total Assets
$52,696
$66,830** 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 September 30, 2005 (Unaudited) and December 31, 2004  

 (Dollars in thousands, except share data)
 
Sept. 30, 
Dec. 31,  
2005
2004
Liabilities and Shareholders' Equity     
Current Liabilities:  
  Accounts payable
$     177
$      13
  Accrued liabilities
1,690
3,287
  Accrued liabilities - related parties
4
-
  Income taxes payable
6
40
  Deferred income taxes
  8,402
  5,486
    Total Current Liabilities
10,279
  8,826
Long-Term Liabilities:  
  Derivative liability
-
1,125
  Other credits
       24
        24
    Total Liabilities
 10,303
   9,975   
Commitments and Contingencies   
Minority interests
      215
   1,271   
Shareholders' Equity:  
  Common stock, par value $.01 per share, authorized 75,000,000;  issued  

  38,940,937 at September 30, 2005 and 38,650,949 at December 31, 2004
389
387
  Paid-in-capital
121,902
121,033
  Accumulated deficit
(77,380)
 (66,624)
  Accumulated Other Comprehensive Income:  
    Unrealized gain on securities available for sale, net of taxes
11,132
14,542
Restricted stock grant - unearned compensation
(111)
-
Common stock in treasury, at cost, 8,040,736 shares at

    September 30, 2005 and December 31, 2004
(13,754)
(13,754)
    Total Shareholders' Equity
 42,178
 55,584
    Total Liabilities and Shareholders' Equity
$ 52,696
$ 66,830
 

 

 

 

 

 

 

 

 

 

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
Nine months ended 
Sept. 30,
Sept. 30,
Sept. 30,
Sept. 30, 
2005
2004
2005
2004*Revenues:    
Product revenue
$  1,428
$  1,642
$   4,116
$  4,452
Funded research and development revenue
    792
     175
     1,496
      754
Total revenues
2,220
1,817
5,612
5,206*Operating costs and expenses:
Cost of product revenue
563
686
1,682
1,956
Research and product development expenses:
Funded research and product development 
877
881
2,989
2,576
Unfunded research and product development 
  1,216
  2,352
   4,677
   6,331
Total research and product development expenses 
2,093
3,233
7,666
8,907
Selling, general and administrative expenses
  2,187
  1,526
   7,729
   4,890
Operating loss
(2,623)
(3,628)
(11,465)
(10,547)
Loss on derivatives
-
(2,635)
(10,407)
(2,424)
Gain on sale of securities available for sale
490
-
10,125
3,129
Other income, net
     116
      41
      325
       60
Loss before income taxes and minority interests
(2,017)
(6,222)
(11,422)
(9,782)
Income tax (expense) benefit  
(145)
2,473
(408)
3,854
Minority interests in losses of consolidated subsidiary
     253
    356
      1,074
     930
Net loss
$ (1,909)
$ (3,393)
$(10,756)
$ (4,998)
Loss per Share (Basic and Diluted):
Loss per share
$   (0.06)
$  (0.12)
$    (0.35)
$   (0.17)
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
** 

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

5
**MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

 AND COMPREHENSIVE INCOME (Unaudited)

**(Dollars in thousands)**
Nine months ended
Sept. 30,
Sept. 30, 
2005
2004
COMMON STOCK  
 Balance, beginning 
$       387
$ 35,776
   Change in par value to $.01 from $1 per share effective June 28, 2005
-
(35,419)
   Issuance of shares - options 
1     
          2
   Issuance of shares - private placement
            1
         14
 Balance, ending
$       389
$       373
PAID-IN-CAPITAL  
 Balance, beginning 
$ 121,033
$  68,708
   Change in par value to $.01 from $1 per share effective June 28, 2005
-
35,419
   Issuance of shares - options****************************