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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 December 25, 1998
/ / 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 (I.R.S. Employer
incorporation or organization) Identification No.)
968 Albany-Shaker Rd., Latham, New York 12110
(Address of principal executive offices) (Zip Code)
(518) 785-2211
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
Class Outstanding at December 25, 1998
Common Stock, $1.00 Par Value 7,179,770 Shares
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MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
INDEX
Page No.
Part I Financial Information
Consolidated Balance Sheets - December 25, 1998
and September 30, 1998 3 - 4
Consolidated Statements of Operations -
Three months ended December 25, 1998
and December 26, 1997 5
Consolidated Statements of Cash Flows -
Three months ended December 25, 1998
and December 26, 1997 6
Notes to Consolidated Financial Statements 7 - 11
Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 16
Part II Other Information
Item 6 17
Signatures 18
PART I FINANCIAL INFORMATION
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 25, 1998 (Unaudited) and September 30, 1998
(Dollars in thousands)
Dec.25, Sept.30,
1998 1998
Assets ------- -------
Current Assets:
Cash and cash equivalents $ 5,441 $ 5,567
Restricted cash 1,176 -
Trade accounts receivable 3,812 5,058
Allowance for doubtful accounts (108) (99)
------- -------
Net receivables 3,704 4,959
Accounts receivable-Joint Venture 92 87
Inventories:
Raw materials and components 2,989 2,845
Work in process 609 791
Finished goods 122 112
------- -------
Total inventories 3,720 3,748
Note receivable - current 329 327
Prepaid expenses and other current assets 684 472
Taxes receivable - 8
Net assets of discontinued operations - 8
------- -------
Total Current Assets 15,146 15,176
Property, plant and equipment, net 5,942 4,467
Note receivable - noncurrent 244 264
Investment in Joint Venture - 1,221
------- -------
Total Assets $ 21,332 $ 21,128
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 25, 1998 (Unaudited) and September 30, 1998
(Dollars in thousands)
Dec.25, Sept.30,
1998 1998
Liabilities and Shareholders' Equity ------- -------
Current Liabilities:
Accounts payable $ 1,227 $ 2,064
Accrued liabilities 2,172 3,328
Income taxes payable 3 5
Contribution payable-Joint Venture 1,500 4,000
Current installments on long-term debt 285 -
Net liabilities of discontinued operations 295 -
------- -------
Total Current Liabilities 5,482 9,397
Long term debt, net of current maturities 5,715 -
Deferred income taxes and other credit 607 607
------- -------
Total Liabilities 11,804 10,004
Commitments
Shareholders' Equity:
Common stock 7,183 7,183
Paid-in-capital 19,866 19,866
Deficit (17,482) (15,885)
Foreign currency translation adjustment (10) (11)
Treasury stock at cost (29) (29)
------- -------
Total Shareholders' Equity 9,528 11,124
------- -------
Total Liabilities and Shareholders' Equity $ 21,332 $ 21,128
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share)
Three months ended
Dec. 25, Dec. 26,
1998 1997
------- -------
Revenue $ 2,710 $ 3,250
Cost of sales 1,711 2,021
------- -------
Gross profit 999 1,229
Selling, general and administrative
expenses 1,126 1,323
Product development and
research costs 222 148
------- -------
Operating loss (349) (242)
Interest expense (58) (5)
Equity in joint venture losses (1,221) (27)
Other income(expense), net 31 88
------- -------
Loss from continuing
operations before income taxes (1,597) (186)
Income tax expense - -
------- -------
Loss from continuing operations $ (1,597) $ (186)
------- -------
Discontinued Operations (Note 4)
Loss from operations of discontinued
Technology Division, net of tax benefit - (516)
Loss on disposal of Technology
Division, net of tax benefit - (977)
------- -------
Loss from discontinued operations - (1,493)
------- -------
Net loss $ (1,597) $ (1,679)
======= =======
Earnings per share (Basic and Diluted):
Loss from continuing operations $ (.22) $ (.03)
Loss from discontinued operations - (.25)
------- -------
Net Loss $ (.22) $ (.28)
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three months ended
Dec.25, Dec.26,
1998 1997
Operating Activities ------ ------
Net loss from continuing operations $(1,597) $ (186)
Adjustments to reconcile net income(loss) to net
cash provided (used) by continuing operations:
Depreciation and amortization 125 67
Equity in joint venture loss 1,221 27
Reserve for bad debts 9 -
Other - (3)
Changes in operating assets and liabilities
Accounts receivable 1,246 797
Accounts receivable - joint venture (5) -
Inventories 28 (503)
Prepaid expenses and other current assets (25) 61
Accounts payable (837) (111)
Income taxes 6 (252)
Contribution payable - joint venture (2,500) -
Accrued liabilities (1,156) (988)
------ ------
Net cash used by continuing operations (3,685) (1,091)
Discontinued operations: ------ ------
Net loss from discontinued operations - (1,493)
Change in net assets/liabilities of
discontinued operations 303 2,269
Net assets transferred from discontinued
operations - (907)
------ ------
Net cash provided (used) by discontinued operations 303 (131)
------ ------
Net cash used by operating activities (3,382) (1,222)
Investing Activities ------ ------
Purchases of property, plant & equipment (1,587) (33)
Principal payments from note receivable 18 10
------ ------
Net cash used by investing activities (1,569) (23)
Financing Activities ------ ------
Borrowings under IDA financing 6,000 -
------ ------
Net cash provided by financing activities 6,000 -
------ ------
Effect of exchange rate on cash 1 2
------ ------
Increase(decrease) in cash and cash equivalents 1,050 (1,243)
Cash and cash equivalents - beginning of period 5,567 1,421
------ ------
Cash and cash equivalents - end of period $ 6,617 $ 178
====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of only normal,
recurring adjustments, necessary for a fair presentation of results for such
periods. The results for any interim period are not necessarily indicative of
results for the full year. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted. These consolidated financial
statements should be read in conjunction with the financial statements and
notes thereto for the fiscal year ended September 30, 1998.
2. Income Taxes
The Company's effective tax rate for the three months ended December 25, 1998
and December 26, 1997 was 0%.
3. Earnings per Share
The amounts used in computing earnings per share and the effect on income and
the weighted average number of shares of potentially dilutive securities are as
follows:
For the three month period For the three month period
ended December 25, 1998 ended December 26, 1997
(Dollars in Thousands)
- -------------------------------------------------------------------------------
Loss before extraordinary
item and available to common
stockholders $ (1,597) $ (186)
Weighted average number of
shares:
Weighted average number of
shares used in net loss per share 7,179,748 5,905,684
Effect of dilutive securities:
Stock options - -
Weighted average number of --------- ---------
shares used in diluted net
loss per share 7,179,748 5,905,684
- -------------------------------------------------------------------------------
During the first quarter of fiscal 1999, options to purchase 453,340 shares of
common stock at prices ranging between $2.44 and $7.9375 per share were
outstanding but were not included in the computation of Earnings per Share-
assuming dilution because the Company incurred a loss from continuing
operations. Therefore, no potential common shares are included in the
computation. The options, which expire between December 20, 1999 and December
22, 2008 were still outstanding at December 25, 1998.
During the first quarter of fiscal 1998, options to purchase 449,700 shares of
common stock at prices between $2.44 and $5.70 per share were outstanding but
were not included in the computation of Earnings per Share-assuming dilution
because the Company incurred a loss from continuing operations. Therefore, no
potential common shares are included in the computation. The options, which
expire between December 20, 1999 and October 20, 2007, were still outstanding
at December 26, 1997.
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
4. Discontinued Operations
The sale of the Company's Technology Division, the sole component of the
Technology segment, to NYFM, Incorporated (a wholly owned subsidiary of Foster-
Miller, Inc., a Waltham, Massachusetts-based technology company) on March 31,
1998 completed management's planned sale of non-core businesses. Accordingly,
the Company no longer includes Technology among its reportable business
segments and now operates in only one segment, Test and Measurement. The
Technology Division is reported as a discontinued operation as of December 26,
1997, and the consolidated financial statements have been restated to report
separately the net assets and operating results of the business. In exchange
for the Technology Division's assets, NYFM, Incorporated (a) agreed to pay the
Company a percentage of gross sales in excess of $2.5 million for a period of
five years; (b) assumed approximately $40 thousand of liabilities; and (c)
established a credit for warranty work of approximately $35 thousand.
Discontinued operations during the three months ended December 26, 1997 consist
of the following:
(Dollars in thousands)
Sales $ 532
======
Loss from operations before income tax $ (516)
Income tax (benefit) -
------
Net loss from discontinued operations $ (516)
======
Loss on disposal of Division $ (977)
Income tax (benefit) -
------
Loss on disposal of Division $ (977)
======
The assets and liabilities of the Company's discontinued operations are as
follows:
Dec. 25, Sept.30,
1998 1998
------- -------
Assets $ 726 $ 1,136
Liabilities $ 1,021 $ 1,128
------ ------
Net (liabilities) assets $ (295) $ 8
====== ======
Assets with a net book value of $907 thousand consisting primarily of land,
building and management information systems were transferred to continuing
operations on October 1, 1997.
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Reclassification
Certain fiscal 1998 amounts have been reclassified to conform with the fiscal
1999 presentation.
6. Comprehensive Income
Total comprehensive income consists of:
Three months ended
Dec.25, Dec.26,
(Dollars in thousands) 1998 1997
- ------------------------------------ ------- -------
Net loss $(1,597) $(1,679)
Other comprehensive income(loss),
before tax:
Foreign currency translation
adjustments 1 2
Income tax related to items of other
comprehensive income(loss) - -
------ ------
Total comprehensive loss $(1,596) $(1,677)
====== ======
7. Investment in Plug Power, L.L.C.
On April 15, 1998, Edison Development Corporation ("EDC") contributed $2.25
million in cash to Plug Power, L.L.C. ("Plug Power"). The Company contributed a
below-market lease for office and manufacturing facilities in Latham, New York,
valued at $2 million and purchased a one year option to match the remaining
$250 thousand of EDC's contribution. In May 1998, EDC contributed an additional
$2 million to Plug Power and the Company purchased another one year option to
match the contribution. The Company paid approximately $191 thousand for the
options, which mature in April 1999 ($250 thousand) and May 1999 ($2 million).
If the Company does not exercise its options, they will lapse and the Company's
ownership will be diluted. The Company is currently negotiating with Plug Power
and EDC to have amounts due the Company for its efforts in securing government
funding for Plug Power applied as payment for its options.
In addition in August, 1998, the Company committed to contribute an additional
$5 million dollars (in cash, accounts receivable and research credits) between
August 5, 1998 and March 31, 1999 and recorded a liability representing this
obligation. Such contributions will increase the Company's total contributions
to Plug Power (including contributions of cash, assets, research credits, and a
below market lease) to $11.75 million over the period commencing on June 27,
1997, and ending on March 31, 1999.
On August 5, 1998, the Company made a short-term loan to Plug Power of $500
thousand that was subsequently contributed to capital on September 23, 1998.
The Company also converted $500 thousand of its accounts receivable from Plug
Power to capital on September 23, 1998.
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
The Company has recorded its proportionate share of Plug Power's losses only to
the extent of its recorded investment in Plug Power. Such investment is zero as
of December 25, 1998. At December 25, 1998, the Company has a balance of $1.5
million remaining on its August 1998 obligation to fund $5 million to Plug
Power.
To the extent the Company makes future investments in Plug Power, it will also
recognize its proportionate share of losses to the extent of these investments.
8. Debt
The Industrial Development Agency for the Town of Colonie issued $6 million in
Industrial Development Revenue ("IDR") Bonds on behalf of the Company to assist
in the construction of a new building for Advanced Products and the Company's
corporate staff and renovation of existing buildings leased to Plug Power. The
construction project is due to be completed in April 1999. The bond closing was
completed December 17, 1998 and proceeds of the IDR Bonds were deposited with a
trustee for the bondholders. The Company may draw the bond proceeds to cover
qualified project costs. First Albany Companies, Inc. ("FAC"), which owns 34%
of the Company's stock, underwrote the sale of the IDR Bonds. FAC received no
fees for underwriting the IDR Bonds but will be reimbursed for its
out-of-pocket costs.
KeyBank issued a letter of credit for approximately $6 million in connection
with the $6 million IDR Bonds. The KeyBank credit agreements require the
Company to meet certain covenants, including a fixed charge coverage and
leverage ratio. Further, if certain performance standards are achieved, the
interest rates on the debt may be reduced.
9. Geographic and Segment Information
The Company operates in one business segment, Test and Measurement, which
develops, manufactures, markets and services sensing instruments,
computer-based balancing systems for aircraft engines, vibration test systems
and power conversion products.
The Company evaluates performance based on profit or loss from operations
before income taxes.
The following table details information about the Test and Measurement segment
profit or loss, segment assets and shows the reconciliation of segment data to
the Company's consolidated totals. The Company does not allocate income taxes
or unusual items to segments.
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Reconciling
(Dollars in thousands) Test and Item: Consolidated
Three months ended Dec.25, 1998 Measurement Corporate Totals
- ------------------------------- ----------- ----------- ------------
Revenues $ 2,710 $ - $ 2,710
Equity in joint venture loss - (1,221) (1,221)
Loss from continuing operations
before tax (335) (1,262) (1,597)
Loss from continuing operations (335) (1,262) (1,597)
Total loss (335) (1,262) (1,597)
Segment assets 7,779 13,553 21,332
Net (liabilities) discontinued
operations - (295) (295)
Reconciling
(Dollars in thousands) Test and Item: Consolidated
Three months ended Dec.26, 1997 Measurement Corporate Totals
- ------------------------------- ----------- ----------- ------------
Revenues $ 3,250 $ - $ 3,250
Equity in joint venture loss - (27) (27)
Loss from continuing operations
before tax (109) (77) (186)
Loss from continuing
operations (109) (77) (186)
Loss on discontinued operations - (1,493) (1,493)
Total loss (109) (1,570) (1,679)
Segment assets 8,616 2,538 11,154
Net assets discontinued operations - 917 917
The reconciling items are the amounts of revenues earned and expenses incurred
for corporate operations, which is not included in the segment information.
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors, which have affected the Company's earnings during the periods included
in the accompanying consolidated statements of operation.
The sale of the Company's Technology Division, the sole component of the
Technology segment, to NYFM, Incorporated (a wholly owned subsidiary of Foster-
Miller, Inc., a Waltham, Massachusetts-based technology company) on March 31,
1998 completed management's planned sale of non-core businesses. Accordingly,
the Company no longer includes Technology among its reportable business
segments and now operates in only one segment, Test & Measurement. The
Technology Division is reported as a discontinued operation as of December 26,
1997 and the consolidated financial statements have been restated to report
separately the net assets(liabilities) and operating results of the business.
Continuing Operations
Sales decreased $540 thousand to $2,710 thousand for the three months ended
December 25, 1998 as compared to $3,250 thousand for the three months ended
December 26, 1997, a 16.6% decrease. This change is the result of weakness in
its markets and lower European sales. Market conditions were showing signs of
recovery at the end of the quarter. Operating income decreased $107 thousand to
a $349 thousand loss for the three months ended December 25, 1998 as compared
to a $242 thousand loss for the three months ended December 26, 1997, a 44.2%
decrease. This decrease is the result of decreased sales levels and
corresponding decreases in gross profits.
Other
In addition to the matters noted above, during the first quarter of fiscal
1999, the Company recorded a $1,221 thousand loss from the recognition of the
Company's proportionate share of losses of the Plug Power joint venture
compared to a $27 thousand loss in fiscal 1998.
The tax rate for the three months ended December 25, 1998 and December 26, 1997
was 0%. This rate is due to the loss generated by the investment in the joint
venture and the use of net operating loss carryforwards. However, as a result
of recent ownership changes, the availability of further net operating loss
carryforwards to offset future taxable income may be significantly limited
pursuant to the Internal Revenue Code.
Financial Condition
The Company's working capital of $9.66 million at December 25, 1998 reflects a
$3.89 million increase from September 30, 1998.
At December 25, 1998, cash and cash equivalents were $6.62 million versus $5.57
million at September 30, 1998. Net cash used by operating activities for the
first three months of fiscal 1999 amounted to $3.38 million, as compared to
cash used of $1.22 million in the prior year.
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The capital used during the first three months of fiscal 1999 was applied
principally to fund short term operating cash flow requirements and contribute
$2.5 million to the Company's joint venture, Plug Power, L.L.C. Additionally,
accounts receivable decreased to $3.70 million or 25.3% as of December 25, 1998
as compared to $4.96 million as of September 30, 1998 because of reduced sales.
The Industrial Development Agency for the Town of Colonie issued $6 million in
Industrial Development Revenue ("IDR") Bonds on behalf of the Company to assist
in the construction of a new building for Advanced Products and the Company's
corporate staff and renovation of existing buildings leased to Plug Power. The
construction project is due to be completed in April 1999. The bond closing was
completed December 17, 1998 and proceeds of the IDR Bonds were deposited with a
trustee for the bondholders. The Company may draw the bond proceeds to cover
qualified project costs.
KeyBank issued a letter of credit for approximately $6 million in connection
with the $6 million IDR Bonds. The KeyBank credit agreements require the
Company to meet certain covenants, including a fixed charge coverage and
leverage ratio. Further, if certain performance standards are achieved, the
interest rates on the debt may be reduced.
Capital spending during the first three months of fiscal 1999 was $1.59
million, an increase from the comparable period in 1998 during which capital
spending totaled $33 thousand. Capital spending during fiscal 1999 included the
construction described above. Total additional capital spending during fiscal
1999 for this project is expected to be approximately $1.1 million.
The Company anticipates that it will be able to meet its liquidity needs during
fiscal year 1999 from current cash resources, cash flow generated by operations
and borrowing under its existing line of credit.
Joint Venture
Plug Power, L.L.C. ("Plug Power") will continue to need substantial investment
for the foreseeable future. Plug Power continues to pursue strategic
partners and additional sources of capital. Plug Power is currently negotiating
with several strategic partners and has signed a preliminary Memorandum of
Understanding with General Electric Power Systems to market its residential
fuel cell units. There is no assurance, however, that Plug Power will
successfully conclude any transactions with strategic partners or find other
sources of capital. If other sources of funding cannot be found, the Company
will be faced with contributing and/or lending additional capital to Plug Power
or dilution of its interest in Plug Power. If EDC and the Company stop funding
Plug Power and no additional sources of capital are found, Plug Power will not
be able to continue as a going concern.
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Year 2000
General
Mechanical Technology Incorporated's company-wide Year 2000 plan is
proceeding on schedule. The plan is addressing the issue of computer programs
and embedded computer chips being unable to distinguish between the year 1900
and the year 2000 as well as the ability to recognize the leap year date of
February 29, 2000. The plan has been divided into six areas: (1) Systems
evaluation, (2) Software evaluation, (3) Third-party suppliers, (4) Facility
systems, (5) Products and (6) Contingency plans. The general phases common to
all segments are: (1) Inventorying Year 2000 items, (2) Assigning priorities to
identified items, (3) Assessing the Year 2000 compliance of items determined to
be material to the Company, (4) Repairing or replacing material items that are
determined not to be Year 2000 compliant, (5) Testing material items and (6)
Designing and implementing contingency and business continuation plans for each
organization and Company location.
Systems Evaluation
All internal systems have been identified, inventoried,
prioritized and assessed for Year 2000 compliance. Systems found to be totally
non-compliant are scheduled for replacement, the remaining systems were found
to be in compliance. Plans are being developed to ensure that staff are
available to oversee restarting certain machines and manually adjusting their
dates, if needed.
Software Evaluation
All software material to the Company has been identified,
evaluated, and placed into one of three categories: (1) Found to be in full
compliance and certified as such by vendors, (2) Identified as requiring
update, or (3) Identified as requiring replacement with compliant software.
Those in the latter category have been included in the current budget.
Third-Party Suppliers
This phase of the Year 2000 Plan will be completed by the
end of the second Quarter of fiscal 1999. These third-party suppliers are in
the process of implementing their own plans with an expected completion date of
1999. If any provider is not successfully compliant, the Company will evaluate
selecting alternative providers at that time.
Facility Systems
The facility systems review is complete. All systems are
believed to be Year 2000 compliant including telephone, fire alarm, security,
elevator and network components.
Products
The Company has evaluated both current product offerings and products
in the field to determine their ability to comply with Year 2000 issues. The
products were found to be non-compliant, compliant if modifications are made,
fully compliant or not impacted (that is, the product does not have a computer
or contains an embedded computer but does not use a date function). Those
products identified as non-compliant are products in the field that are not
Year 2000 compliant, cannot be modified and must be replaced. Products which
can be modified will have upgrades available for sale during fiscal 1999.
MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Contingency Plans
This phase is currently being developed. Contingency plans
should be in place by the end of the second Quarter of fiscal 1999.
Costs
The total cost associated with required modifications to become Year 2000
compliant is not expected to be material to the Company's financial position.
The estimated total cost of the Year 2000 project is approximately $120
thousand, which includes software, hardware and cabling upgrade and replacement
costs. This estimate does not include the Company's potential share of Year
2000 costs that may be incurred by our joint venture, in which the Company
participates but is not the operator. The total amount expended on the Plan
through December 25, 1998 was $34 thousand for the upgrade and replacement of
hardware.
Risks
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of the
Year 2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Year 2000 Plan is expected to
significantly reduce the Company's level of uncertainty about the Year 2000
problem and, in particular, about the Year 2000 compliance and readiness of its
material customers. The Company believes that, with the implementation and
completion of the Year 2000 Plan as scheduled, the possibility of significant
interruptions of normal operations should be reduced.
Statement Concerning Forward Looking Statements
Statements in this Form 10-Q or in documents incorporated herein by reference
that are not statements of historical fact constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, including statements regarding future revenues, expenses and profits.
These forward looking statements are subject to known and unknown risks,
uncertainties or other factors that may cause the actual results of the Company
to be materially different from the historical results or from any results
expressed or implied by the forward looking statements. Such risks and factors
include, but are not limited to, those discussed in "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
- ----------- -----------
4.97 Building Loan Contract, dated as of December 1, 1998,
between the Town of Colonie Industrial Development Agency
and the registrant with KeyBank National Association.
4.98 Reimbursement Agreement, dated as of December 1, 1998, among
the registrant and KeyBank National Association in
connection with the issuance of $6,000,000 of Taxable
Industrial Development Revenue Bonds.
4.99 Mortgage and Security Agreement, dated as of December 1,
1998, by the registrant and Town of Colonie Industrial
Development Agency to KeyBank National Association to secure
the obligations of the Company and the Industrial
Development Agency under the Reimbursement Agreement.
4.100 Pledge and Security Agreement, dated as of December 1, 1998,
from the registrant to KeyBank National Association.
4.101 Irrevocable Transferable Direct Pay Letter of Credit issued
by KeyBank National Association to Manufacturers and Traders
Trust Company, as Trustee, in connection with the issuance
of $6,000,000 of Taxable Industrial Development Revenue
Bonds.
4.102 Trust Indenture, dated as of December 1, 1998, by and
between the Town of Colonie Industrial Development Agency
and Manufacturers and Traders Trust Company, as Trustee, for
the holders of $6,000,000 of Taxable Industrial Development
Revenue Bonds.
27 Financial Data Schedule
(b) No Form 8-K Reports were filed during the quarter ended December 25, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Mechanical Technology Incorporated
02-03-99 /s/ G.C. McNamee
-------- --------------------------------------
(Date) George C. McNamee
Chief Executive Officer
02-03-99 /s/ C.A. Scheuer
-------- --------------------------------------
(Date) Cynthia A. Scheuer
Vice President/Chief Financial Officer