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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, 2006

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 8, 2006**Common Stock, $.01 Par Value**31,424,313 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 - March 31, 2006 and December 31, 2005 (Unaudited) 
3  
Condensed Consolidated Statements of Operations - Three months ended March 31, 2006 and 2005 (Unaudited)
4  
Condensed Consolidated Statements of Shareholders' Equity and Comprehensive Income -   Three months ended March 31, 2006 and 2005 (Unaudited)
5  
Condensed Consolidated Statements of Cash Flows - Three months ended March 31, 2006 and 2005 (Unaudited)
6  
Notes to Condensed Consolidated Financial Statements (Unaudited)
7-22  
Item 2.  Management's Discussion and Analysis of Financial Condition 

and Results of Operations
23-30  
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
30  
Item 4.  Controls and Procedures
30  
Part II.  OTHER INFORMATION   
Item 1. 	Legal Proceedings
31
Item 1A.	Risk Factors
31
Item 2.  	Unregistered Sales of Equity Securities and Use of Proceeds
31
Item 3.  	Defaults Upon Senior Securities
31
Item 4.  	Submission of Matters to a Vote of Security Holders
31
Item 5.  	Other Information
31
Item 6.  	Exhibits
32  
Signatures
33
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2
**PART I.  FINANCIAL INFORMATION

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

CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31, 2006 and December 31, 2005 (Unaudited)

(Dollars in thousands)
 
Mar. 31,
Dec. 31, 
2006
2005**Assets**Current Assets:  
  Cash and cash equivalents
$ 9,654
$11,230
  Securities available for sale 
16,950
18,947
  Accounts receivable, less allowances of $1 in 2006 and $0 in 2005
728
998
  Other receivables - related parties
171
3
  Inventories, net
1,006
1,058
  Prepaid expenses and other current assets
     830
     451
    Total Current Assets
29,339
32,687   
Property, plant and equipment, net
2,453
2,495
Deferred income taxes
  5,405
  6,085
    Total Assets
$37,197
$41,267**Liabilities and Shareholders' Equity   **Current Liabilities:  
  Accounts payable
$    779
$    375
  Accrued liabilities
1,959
1,672
  Accrued liabilities - related parties
-
2
  Income taxes payable
107
65
  Deferred income taxes
  5,405
  6,108
    Total Current Liabilities
8,250
8,222**Long-Term Liabilities:  
    Total Liabilities
  8,250
  8,222
Commitments and Contingencies  
Minority interests 
       85
      129**Shareholders' Equity  
  Common stock, par value $.01 per share, authorized 75,000,000;   
    39,139,600 issued in 2006 and 38,965,937 issued in 2005
391
390
  Paid-in-capital
122,323
122,095
  Accumulated deficit
(85,149)
(81,718)
Accumulated Other Comprehensive Income:  
Unrealized gain on securities available for sale, net of tax
5,051
5,983   
Restricted stock grants - unearned compensation
-
(80)
Common stock in treasury, at cost, 8,040,736 shares in 2006 and 2005
(13,754)
(13,754)
    Total Shareholders' Equity
 28,862
 32,916
    Total Liabilities and Shareholders' Equity
$ 37,197
$ 41,267**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 
Mar. 31,
Mar. 31, 
2006
2005   
Product revenue
$  1,513
$  1,403
Funded research and development revenue
      45
     324
Total revenue
1,558
1,727
Operating costs and expenses:
Cost of product revenue
539
602
Research and product development expenses:
   Funded research and product development 
210
1,055
   Unfunded research and product development 
  2,350
  1,605
Total research and product development expenses 
2,560
2,660
Selling, general and administrative expenses
  3,060
  3,034
Operating loss
(4,601)
(4,569)
Loss on derivatives
-
(3,234)
Gain on sale of securities available for sale
1,266
-
Other income, net
      71
    100
Loss before income taxes and minority interests
(3,264)
(7,703)
Income tax (expense) benefit  
(569)
1,209
Minority interests in losses of consolidated subsidiary
     402
    440
Net loss
$ (3,431)
$ (6,054)
Loss per Share (Basic and Diluted):
Loss per share
$   (0.11)
$  (0.20)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
** 

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 INCOME (Unaudited)

**(Dollars in thousands)**
Three months ended
Mar. 31,
Mar. 31, 
2006
2005**Common Stock  
 Balance, beginning 
$       390
$ 38,651
   Change in par value to $.01 from $1 per share effective June 28, 2005
-
(38,264)
   Issuance of shares - options 
           1     
           -
 Balance, ending
$       391
$      387**Paid-In Capital  
 Balance, beginning 
$ 122,095
$  82,769
   Change in par value to $.01 from $1 per share effective June 28, 2005
-
38,264
   Issuance of shares - options 
265
-
   MTI MicroFuel Cell investment
(358)
(5)
   Private placement, net of expenses
-
(45)
   Share-based compensation
401
51
   Stock option exercises recognized differently for financial reporting and tax purposes
           -
           2
   Elimination of unearned compensation due to change in accounting principle
       (80)
           -
 Balance, ending
$122,323
$121,036**Accumulated Deficit  
 Balance, beginning
$ (81,718)
$ (66,624)
   Net loss
    (3,431)
   (6,054)
 Balance, ending
$ (85,149)
$ (72,678)**Accumulated Other Comprehensive Income (Loss):
Unrealized Gain (Loss) on Securities Available for Sale, Net of Taxes  
 Balance, beginning
$    5,983
 $  14,542
   Less reclassification adjustment for gains included in net income (net of taxes of $526 in 2006)
(491)
-
   Change in unrealized gain on securities available for sale (net of taxes of $0 in 2006************************************************