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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, 2003

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

Exchange Act of 1934

For the 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 October 20, 2003**Common stock, $1.00 Par Value**27,639,260 Shares**														

			MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

INDEX

 

 

 

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

Financial Statements of Mechanical Technology Incorporated   
Consolidated Balance Sheets - September 30, 2003 (Unaudited) and December 31, 2002 (Audited) 
3-4  
Consolidated Statements of Operations - Three and nine months ended September 30, 2003 and 2002 (Unaudited)
5  
Consolidated Statements of Shareholders' Equity -   Nine months ended September 30, 2003 and 2002 (Unaudited)
6  
Consolidated Statements of Cash Flows - Nine months ended September 30, 2003 and 2002 (Unaudited)
7  
Notes to Interim Consolidated Financial Statements (Unaudited)
8-26  
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
26-42  
Item 3.  Quantitative and Qualitative Disclosures About Market Risk
42-43  
Item 4.  Controls and Procedures
43  
Part II.  OTHER INFORMATION   
Item 1.  Legal Proceedings
44-45
Item 2.  Changes in Securities and Use of Proceeds
45
Item 3.  Defaults Upon Senior Securities
45
Item 4.  Submission of Matters to a Vote of Security   

         Holders
45
Item 5.  Other Information
45
Item 6.  Exhibits and Reports on Form 8-K
46  
Signatures
47
 

 

 

 

 

2
**PART I.  FINANCIAL INFORMATION

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

CONSOLIDATED BALANCE SHEETS

As of September 30, 2003 (Unaudited)

 and December 31, 2002 (Audited)

(Dollars in thousands)

 

 **
Sept. 30, 
Dec. 31, 
2003
2002
Assets  
Current Assets:  
  Cash and cash equivalents
$12,324
$ 7,320
  Securities available for sale
31,156
37,332
  Accounts receivable 
1,139
1,445
  Inventories
1,279
1,378
  Prepaid expenses and other current assets
 1,583
   668
    Total Current Assets
47,481
48,143   
Long Term Assets:  
  Derivative assets
2
6
  Property, plant and equipment, net
1,968
1,558
  Deferred income taxes
3,624
 2,677
  Notes receivable-noncurrent, less allowance of $660 
     -
     -
    Total Assets
$53,075
$52,384** 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

CONSOLIDATED BALANCE SHEETS

As of September 30, 2003 (Unaudited)

 and December 31, 2002 (Audited)  

 (Dollars in thousands, except share data)** 
Sept. 30, 
Dec. 31,  
2003
2002
Liabilities and Shareholders' Equity     
Current Liabilities:  
  Accounts payable
$    676
$    761
  Accrued liabilities
1,788
1,543
  Accrued liabilities - related parties
104
190
  Income taxes payable
10
92
  Deferred income taxes
  9,300
  8,876
    Total Current Liabilities
11,878
 11,462
Long-Term Liabilities:  
  Other liabilities
     24
     24
    Total Liabilities
 11,902
 11,486   
Commitments and Contingencies   
Minority interests
    621
    150   
Shareholders' Equity:  
  Common stock, par value $1 per share,

   authorized 75,000,000; issued 

   35,659,510 in September 2003 and 

   35,648,135 in December 2002
 

 

35,659
 

 

35,648
  Paid-in-capital
67,712
67,479
  Accumulated deficit
(61,400)
(61,874)

41,971
41,253
  Accumulated Other Comprehensive Income:  
    Unrealized gain on securities available for sale, 

    net of taxes
12,219
13,170
  Restricted stock grant
(3)
(40)
  Common stock in treasury, at cost, 

   8,020,250 shares
(13,635)
(13,635)
    Total Shareholders' Equity
 40,552
 40,748
    Total Liabilities and Shareholders' Equity
$ 53,075
$ 52,384
 

 

 

 

 

 

 

 

 

 

 

 

 

 

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
Nine months ended 
Sept. 30,
Sept. 30,
Sept. 30,
Sept. 30, 
2003
2002
2003
2002*Revenue:    
Product revenue
$ 1,598
$ 1,018
$ 4,304
$  3,203
Funded research and development
   310
   489
 1,422
  1,046
Total revenue
1,908
1,507
5,726
4,249*Operating costs and expenses:
Cost of product revenue
755
453
1,868
1,703
Research and product development expenses:
Funded research and product development 
879
761
2,502
1,778
Unfunded research and product development 
 1,317
 1,095
 3,548
  3,213
Total research and product development expenses 
2,196
1,856
6,050
4,991
Selling, general and administrative expenses
 1,842
 1,239
 4,522
  3,897
Operating loss
(2,885)
(2,041)
(6,714)
(6,342)
Interest expense
-
(12)
(7)
(36)
Gain (loss) on derivatives
2
(5)
(4)
(183)
Gain (loss) on sale of securities available for 

 sale, net
4,123
(71)
7,483
(71)
Gain on sale of holdings, net
-
952
-
5,562
Impairment losses (Note 7)
-
(945)
(418)
(8,127)
Other expense, net
   (87)
   (29)
  (151)
     (16)
Income (loss) from continuing operations before 

 income taxes, equity in holdings' losses and 

 minority interests
 

1,153
 

(2,151)
 

189
 

(9,213)
Income tax (expense) benefit 
(425)
163
(74)
2,024
Equity in holdings' losses, net of tax
 -
(2,654)
-
(8,894)
Minority interests in losses of  

 consolidated subsidiary
   195
   100
   346
    329
Income (loss) from continuing operations 
  923
(4,542)
461
(15,754)
Income from discontinued operations, net of tax
     -
   379
    13
    379
Net income (loss)
$   923
$(4,163)
$   474
$(15,375)
Income (loss) per share (Basic and Diluted):
Income (loss) per share from continuing operations
$  0.03
$ (0.13)
$  0.02
$  (0.44)
Income per share from discontinued operations 

     -

  0.01**************************