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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, 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 May 7, 2004**Common Stock, $1.00 Par Value**29,224,666 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   
Consolidated Balance Sheets - March 31, 2004 (Unaudited) and December 31, 2003  
3-4  
Consolidated Statements of Operations - Three months ended March 31, 2004 

and 2003 (Unaudited)
5  
Consolidated Statements of Shareholders' Equity and Comprehensive Income -   Three months ended March 31, 2004 and 2003 (Unaudited)
6  
Consolidated Statements of Cash Flows - Three months ended March 31, 2004 

and 2003 (Unaudited)
7  
Notes to Interim Consolidated Financial Statements (Unaudited)
8-28  
Item 2.  Management's Discussion and Analysis of Financial Condition and 

Results of Operations
29-36  
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
36  
Item 4.  Controls and Procedures
36  
Part II.  OTHER INFORMATION   
Item 1.  Legal Proceedings
37
Item 2.  Changes in Securities and Use of Proceeds
37
Item 3.  Defaults Upon Senior Securities
37
Item 4.  Submission of Matters to a Vote of Security Holders
37
Item 5.  Other Information
37
Item 6.  Exhibits and Reports on Form 8-K
37-38  
Signatures
39
 

 

 

 

 

2
**PART I.  FINANCIAL INFORMATION

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

CONSOLIDATED BALANCE SHEETS

As of March 31, 2004 (Unaudited) and December 31, 2003

(Dollars in thousands)

 

 **
Mar. 31, 
Dec. 31, 
2004
2003
Assets  
Current Assets:  
  Cash and cash equivalents
$22,376
$12,380
  Securities available for sale
20,792
44,031
  Accounts receivable 
1,482
962
  Other receivables - related parties
22
-
  Inventories, net
1,277
1,300
  Prepaid expenses and other current assets
    800
    514
    Total Current Assets
46,749
59,187   
Long Term Assets:  
  Securities available for sale - restricted
23,160
-
  Property, plant and equipment, net
2,200
1,999
  Deferred income taxes
-
 4,652
  Notes receivable-noncurrent, less allowance of $660 
         -
         -
    Total Assets
$72,109
$65,838** 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

CONSOLIDATED BALANCE SHEETS

As of March 31, 2004 (Unaudited) and December 31, 2003   

 (Dollars in thousands, except share data)
 
Mar. 31, 
Dec. 31,  
2004
2003
Liabilities and Shareholders' Equity     
Current Liabilities:  
  Accounts payable
$  1,196
$    692
  Accrued liabilities
1,622
1,528
  Accrued liabilities - related parties
77
48
  Income taxes payable
7
12
  Deferred income taxes
  6,443
  14,481
    Total Current Liabilities
9,345
16,761
Long-Term Liabilities:  
  Derivative liability
3,020
-
  Deferred income taxes and other liabilities
  3,330
       24
    Total Liabilities
 15,695
 16,785   
Commitments and Contingencies   
Minority interests
      525
      787   
Shareholders' Equity:  
  Common stock, par value $1 per share, authorized 75,000,000; 

  issued 37,246,352 in March 2004 and 35,776,510 in December 2003
37,246
35,776
  Paid-in-capital
74,770
68,708
  Accumulated deficit
(62,675)
(62,433)

  49,341
42,051
  Accumulated Other Comprehensive Income:  
    Unrealized gain on securities available for sale, net of taxes
20,302
19,944
  Common stock in treasury, at cost, 8,040,736 shares in March 2004 

  and 8,035,974 shares in December 2003
(13,754)
(13,729)
    Total Shareholders' Equity
 55,889
 48,266
    Total Liabilities and Shareholders' Equity
$ 72,109
$ 65,838
 

 

 

 

 

 

 

 

 

 

 

 

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

4
**MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES  

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share data)**
Three months ended 
Mar. 31,
Mar. 31,   
2004
2003  *Revenues:    
Product revenue
$ 1,579
$ 1,283  
Funded research and development revenue
   388
   522  
Total revenues
1,967
1,805*Operating costs and expenses:
Cost of product revenue
647
555
Research and product development expenses:
Funded research and product development 
1,154
820
Unfunded research and product development 
1,514
   951
Total research and product development expenses 
2,668
1,771
Selling, general and administrative expenses
 1,307
 1,432
Operating loss
(2,655)
(1,953)  
Interest expense
-
(3)  
Loss on derivatives
(1,281)
(6)  
Gain on sale of securities available for sale, net
3,129
1,720  
Other expenses, net
   (13)
   (26)  
Loss from operations before income taxes and 
minority interests
(820)
(268)  
Income tax benefit 
316
89  
Minority interests in losses of consolidated subsidiary
   262
   116  
Net loss
$ (242)
$   (63)
Loss per Share (Basic and Diluted):
Loss per share
$(0.01)
$       -
 

 

 

 

 

 

 

 

 

 

.
** 

 

 

 

 

 

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

5
**MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (Unaudited)**
**(Dollars in thousands)**
Three months ended
Mar. 31,
Mar. 31, 
2004
2003
COMMON STOCK  
 Balance, beginning 
$ 35,776
$ 35,648
   Issuance of shares - options 
       51
           11
   Issuance of shares - private placement
   1,419
           -
 Balance, ending
$ 37,246
$ 35,659
PAID-IN-CAPITAL  
 Balance, beginning 
$ 68,708
$ 67,479
   Issuance of shares - options 
78
9
   MTI MicroFuel Cell investment
-
2
   Private placement
5,909
-
   Compensatory options 
-
11
   Stock option exercises recognized differently for financial   
    reporting and tax purposes
        75
          1
 Balance, ending
$ 74,770
$ 67,502
ACCUMULATED DEFICIT  
 Balance, beginning
$(62,433)
$(61,874)
   Net loss
      (242)
        (63)
 Balance, ending
$(62,675)
$(61,937)
ACCUMULATED OTHER COMPREHENSIVE INCOME:
UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE,  
NET OF TAXES  
 Balance, beginning
$  19,944
 $  13,170
   Less reclassification adjustment for gains included in net income
(1,248)
(818)****************************