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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 June 30, 2002

/ / 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___

Class

Outstanding at August 9, 2002

Common stock, $1.00 Par Value

35,527,260 Shares

 

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

INDEX

 

 

 

Part I - Financial Information

Page No.
   

Consolidated Balance Sheets - June 30, 2002, December 31, 2001 and September 30, 2001

3-4
   

Consolidated Statements of Operations - Three and six months ended June 30, 2002 and 2001

5
   

Consolidated Statements of Shareholders' Equity - Six months ended June 30, 2002 and 2001

6
   

Consolidated Statements of Cash Flows - Six months ended June 30, 2002 and 2001

7
   

Notes to Consolidated Financial Statements

8-24
   

Management's Discussion and Analysis of Financial Condition and Results of Operations

25-40
   
   

Part II Other Information

  
   

Item 1 - Legal Proceedings

41

Item 6 - Exhibits and Reports on Form 8-K

42
   

Signatures

43
   

 

 

 

 

 

 

 

 

 

 

PART I FINANCIAL INFORMATION

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of June 30, 2002 and December 31, 2001 (Unaudited) and

September 30, 2001 (Derived from audited financial statements)

(Dollars in thousands)

June 30, 2002

Dec. 31,

2001

Sept. 30,

2001

Assets

      

Current Assets:

      

Cash and cash equivalents

$6,177

$4,127

$ 9,807

Restricted cash equivalents

13

14

78

Securities available for sale

970

5,734

6,704

Accounts receivable

1,369

902

586

Inventories

1,347

1,510

1,674

Notes receivable

-

25

250

Deferred income taxes

-

2,315

2,052

Prepaid expenses and other current assets

1,742

1,042

1,108

Total Current Assets

11,618

15,669

22,259
       

Derivative asset

16

194

220

Property, plant and equipment, net

1,534

1,548

1,581

Holdings, at equity

28,375

38,937

47,197

Total Assets

$41,543

$56,348

$71,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of June 30, 2002 and December 31, 2001 (Unaudited) and

September 30, 2001 (Derived from audited financial statements)

(Dollars in thousands, except share data)
 

June 30,

2002

Dec. 31, 2001

Sept. 30,

2001

Liabilities and Shareholders' Equity

      
       

Current Liabilities:

      

Line of credit

$ 1,000

$ 1,000

$ 5,000

Accounts payable

579

643

807

Accrued liabilities

1,611

1,632

1,945

Accrued liabilities - related parties

131

101

3

Income taxes payable

437

28

25

Contingent obligation to common stock

warrant holders

-

-

288

Net liabilities of discontinued

operations

356

356

358

Total Current Liabilities

4,114

3,760

8,426

Long-Term Liabilities:

      

Deferred income taxes and other credits

173

4,406

8,453

Total Liabilities

4,287

8,166

16,879
       

Commitments and Contingencies

     

Minority interests

345

574

331
       

Shareholders' Equity:

      

Common stock, par value $1 per share,

authorized 75,000,000; issued

35,547,510 in June 2002 and 35,505,010

in December and September 2001

 

 

35,547

 

 

35,505

 

 

35,505

Paid-in-capital

67,518

67,045

65,103

Accumulated deficit

(66,125)

(54,913)

(41,328)

36,940

47,637

59,280

Accumulated Other Comprehensive Loss:

      

Unrealized loss on available for sale

securities, net of tax

-

-

(5,204)
       

Common stock in treasury, at cost,

20,250 shares

(29)

(29)

(29)

Total Shareholders' Equity

36,911

47,608

54,047

Total Liabilities and Shareholders'

Equity

$ 41,543

$ 56,348

$ 71,257

 

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

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Dollars in thousands, except per share data)

Three months ended

Six months ended
 

June 30,

2002

June 30,

2001

June 30,

2002

June 30,

2001

Revenue:

        

Product revenue

$ 1,595

$ 2,260

$ 2,185

$ 3,917

Funded research and development

385

-

557

-

Total revenue

1,980

2,260

2,742

3,917

Operating costs and expenses:

Cost of product revenue

838

1,023

1,250

1,772

Research and product development expenses:

Funded research and product development expenses

672

-

1,017

-

Unfunded research and product development expenses

1,095

897

2,118

2,114

Total research and product development expenses

1,767

897

3,135

2,114

Selling, general and administrative expenses

1,023

1,412

2,658

3,037

Operating loss

(1,648)

(1,072)

(4,301)

(3,006)

Interest expense

(12)

(463)

(24)

(1,061)

Loss on derivatives

(11)

(27)

(178)

(78)

Gain on sale of holdings

2,369

25,458

4,610

31,009

Impairment losses (Note 7)

(1,900)

-

(7,182)

-

Other income (expense), net

4

(478)

13

(1,111)

(Loss) income from operations before income taxes,

equity in holdings' losses, cumulative effect of

change in accounting principle and minority

interests

 

 

(1,198)

 

 

23,418

 

 

(7,062)

 

 

25,753

Income tax (expense) benefit

(492)

(9,492)

1,861

(10,423)

Equity in holdings' losses, net of tax

(4,374)

(3,832)

(6,240)

(7,994)

Minority interest in losses of consolidated

subsidiary

108

-

229

-

(Loss) income before cumulative effect of change in

accounting principle

(5,956)

10,094

(11,212)

7,336

Cumulative effect of accounting change for

derivative financial instruments for

Company's own stock, net of tax

 

-

 

1,468

 

-

 

1,468

Net (loss) income

$(5,956)

$ 11,562

$(11,212)

$ 8,804

(Loss) Earnings Per Share (Basic):

(Loss) income before cumulative effect of changes

in accounting principle

$(.17)

$.28

$(.32)

$.21

Cumulative effect of accounting change for

derivative financial instruments for

Company's own stock

 

-

 

.04

 

-

 

 

.04

(Loss) earnings per share

$(.17)

$.32

$(.32)

$.25

(Loss) Earnings Per Share (Diluted):

(Loss) income before cumulated effect of changes in

accounting principle

$(.17)

$.27

$(.32)

$.20

Cumulative effect of accounting change for

derivative financial instruments for Company's own

stock

 

-

 

.04

 

-

 

.04

(Loss) earnings per share

$(.17)

$.31

$(.32)

$.24

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

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)

(Dollars in thousands)

Six months ended

COMMON STOCK

June 30,

2002

June 30,

2001

Balance, January 1

$ 35,505

$ 35,443

Issuance of shares - options

42

62

Balance, June 30

$ 35,547

$ 35,505

PAID-IN-CAPITAL

    

Balance, January 1

$ 67,045

$ 55,147

Issuance of shares - options

(2)

4

Plug Power holding, net of taxes

578

606

SatCon holding, net of taxes

(128)

1,303

Compensatory stock options

25

25

Stock option exercises recognized differently for

financial reporting and tax purposes

-

169

Reclassification of common stock warrants from equity

to liability, net of tax

-

(2,207)

Balance, June 30

$ 67,518

$ 55,047

ACCUMULATED DEFICIT

    

Balance, January 1

$(54,913)

$(45,478)

Net (loss) income

(11,212)

8,804

Balance, June 30

$(66,125)

$(36,674)

ACCUMULATED OTHER COMPREHENSIVE LOSS:

UNREALIZED LOSS ON AVAILABLE FOR SALE SECURITIES, NET OF TAXES

 

  

Balance, January 1

$ -

$ 14,470

Change in unrealized loss on available for sale

securities, net of taxes

-

(7,192)

Balance, June 30

$ -

$ 7,278

TREASURY STOCK

    

Balance, January 1

$ (29)

$ (29)

Balance, June 30

$ (29)

$ (29)

SHAREHOLDERS' EQUITY

    

Balance, June 30

$ 36,911

$ 61,127

TOTAL COMPREHENSIVE (LOSS) INCOME:

    

Net (loss) income

$(11,212)

$ 8,804

Other comprehensive loss:

    

Change in unrealized loss on available for

sale securities, net of tax

-

(7,192)

Total comprehensive (loss) income

$(11,212)

$ 1,612

 

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

 

 

 

 

 

 

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Dollars in thousands)
 

Six months ended
 

June 30,

2002

June 30,

2001

Operating Activities

    

Net (loss) income

$(11,212)

$ 8,804

Adjustments to reconcile net (loss) income to net cash used

    

by operations:

Cumulative effect of accounting change for derivative

financial instruments for Company's own stock, gross

-

(2,468)

Loss on derivatives

178

78

Impairment losses

7,182

-

Minority interest

(229)

-

Depreciation and amortization

266

1,527

Gain on sale of holdings

(4,610)

(31,009)

Equity in losses of equity holdings (gross)

6,218

13,367

Loss on disposal of fixed assets

3

1

Deferred income taxes and other credits

(1,918)

5,499

Stock option compensation

25

25

Changes in operating assets and liabilities:

Accounts receivable

(467)

(999)

Inventories

163

(343)

Prepaid expenses and other current assets

(729)

(171)

Accounts payable

(64)

122

Income taxes

409

434

Accrued liabilities - related parties

30

(6)

Accrued liabilities

(21)

624

Net cash used by operations

(4,776)

(4,515)
     

Discontinued Operations:

    

Change in net liabilities/assets

-

127

Net cash provided by discontinued operations

-

127

Net cash used by operating activities

(4,776)

(4,388)
     

Investing Activities

    

Purchases of property, plant and equipment

(226)

(830)

Proceeds from sale of holdings

6,986

35,717

Net change in restricted cash equivalents

1

200

Principal payments from notes receivable

25

169

Net cash provided by investing activities

6,786

35,256
     

Financing Activities

    

Net payments under bank line-of-credit

-

(10,000)

Net payments under related party debt

-

(4,052)

Financing costs

-

(200)

Proceeds from stock option exercises

40

66

Net cash provided (used) by financing activities

40

(14,186)

Increase in cash and cash equivalents

2,050

16,682

Cash and cash equivalents - beginning of period

4,127

972

Cash and cash equivalents - end of period

$ 6,177

$ 17,654

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

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1. Basis of Presentation

    2. In the opinion of management the accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and 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 accounting principles generally accepted in the United States of America 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, 2001.

    Change in Year-End

    On February 13, 2002, the Company changed its fiscal year-end from September 30 to December 31, effective with the calendar year beginning January 1, 2002. A three-month transition period from October 1, 2001 through December 31, 2001 (the "Transition Period") precedes the start of the 2002 fiscal year. "2001" refers to fiscal periods in the year ended September 30 and the Transition Period refers to the three months ended December 31, 2001. This new fiscal year makes the Company's annual and quarterly reporting periods consistent with those used by Plug Power Inc. ("Plug Power") and permits the Company to continue to account for its holdings in Plug Power on a timely basis.

  2. Significant Accounting Policies

Revenue Recognition

The Company recognizes revenue from product sales in accordance with Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition." Product revenue is recognized when there is persuasive evidence of an arrangement, delivery of the product to the customer or distributor has occurred, at which time title generally is passed to the customer or distributor, and the Company has determined that collection of a fixed fee is probable, all of which occur upon shipment of the product. If the product requires installation to be performed by the Company, all revenue related to the product is deferred and recognized upon the completion of the installation. The Company provides for a warranty reserve at the time the product revenue is recognized.

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1. Significant Accounting Policies (Continued)

The Company performs funded research and development for government agencies under cost reimbursement contracts, which generally require

the Company to absorb up to 50% of the total costs incurred. Cost reimbursement contracts provide for the reimbursement of allowable costs. Such contracts require the Company to deliver research and tangible developments in fuel cell technology, and system design and prototype fuel cell systems for test and evaluation by the government agency. Revenues are recognized in proportion to the costs incurred.

Included in accounts receivable are billed and unbilled work-in-progress on cost reimbursed government contracts. Total estimated cost to complete a contract in excess of the awarded contract amounts are charged to operations during the period such costs are estimated. While the Company's accounting for these contract costs are subject to audit by the sponsoring agency, in the opinion of management, no material adjustments are expected as a result of such audits. Cost of product revenue includes material, labor and overhead. Costs incurred in connection with funded research and development arrangements are included in funded research and product development expenses.

Derivative Accounting, Company Stock

The Company accounts for derivatives potentially settled in the Company's own stock in accordance with Emerging Issues Task Force Issue EITF 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock." The Standard requires freestanding contracts that are settled in a company's own stock, including common stock warrants, to be designated as an equity instrument, asset or a liability. Under the provisions of EITF 00-19, a contract designated as an asset or a liability must be carried at fair value, with any changes in fair value recorded in the results of operations. A contract designated as

an equity instrument must be included within equity, and no fair value adjustments are required. In accordance with EITF 00-19, the Company determined that outstanding warrants as of June 30, 2001 to purchase 300,000 shares of the Company's Common Stock issued to

SatCon Technology Corporation should be designated as a liability. Effective June 30, 2001, the fair value of all such warrants were reclassified from equity to liabilities with subsequent changes in the fair value included in the results of operations.

The classification of these warrants is reassessed periodically. As a result of the amendment to the SatCon warrant agreements on December 28, 2001, requiring the Company to settle the warrants, when

exercised, in common stock, the warrants were reclassified from liability to equity and further changes in the fair value of the warrants are no longer reported in results of operations.

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1. Significant Accounting Policies (Continued)

Accounting for Goodwill and Other Intangible Assets

Effective January 1, 2002, the Company adopted the provisions of SFAS

No. 142, "Goodwill and Other Intangible Assets." This Statement affects the Company's treatment of goodwill and other intangible assets. The Statement requires that goodwill existing at the date of adoption be reviewed for possible impairment and that impairment tests be periodically repeated, with impaired assets written down to fair value. Additionally, existing goodwill and intangible assets must be assessed and classified within the Statement's criteria. Intangible assets with finite useful lives will continue to be amortized over those periods. Amortization of goodwill and intangible assets with indeterminable lives will cease.

As a result of the adoption of the Statement, the Company will no longer amortize the goodwill associated with its equity holdings in SatCon. The Company will continue to regularly evaluate its holdings in SatCon to determine if any declines in value of holdings are other than temporary and record impairment losses, when appropriate (see Note 7). As of June 30, 2002, there is no goodwill associated with our investment in SatCon.

The Company recorded expense related to the amortization of goodwill associated with its holdings in SatCon of $0 and $1,377 thousand, during the six months ended June 30, 2002 and June 30, 2001, respectively. The Company has no intangible assets.

The Pro Forma effects of the Company adopting the provisions of SFAS No. 142 would be as follows:

 

(Dollars in thousands, except

per share data)

Three months

ended

June 30, 2002

Three months

ended

June 30, 2001

Six months

ended

June 30, 2002

Six months

ended

June 30, 2001

Reported net (loss) income

$(5,956)

$11,562

$(11,212)

$ 8,804

Add back goodwill amortization, net

of taxes

-

410

-

816

Adjusted net (loss) income

$(5,956)

$11,972

$(11,212)

$ 9,620

Basic (Loss) Income Per Share:

        

Reported net (loss) income

$ (0.17)

$ 0.32

$ ( 0.32)

$ 0.25

Goodwill amortization

-

0.01

-

0.02

Adjusted (loss) income per share

$ (0.17)

$ 0.33

$ ( 0.32)

$ 0.27

Diluted (Loss) Income Per Share:

        

Reported net (loss) income

$ (0.17)

$ 0.31

$ (0.32)

$ 0.24

Goodwill amortization

-

0.01

-

0.02

Adjusted (loss) income per share

$ (0.17)

$ 0.32

$ (0.32)

$ 0.26

 

 

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1. Significant Accounting Policies (Continued)

Accounting for Impairment or Disposal of Long-Lived Assets

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", and the accounting and reporting provisions of APB No. 30. This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets and was adopted as of January 1, 2002. This Statement specifies how impairment will be measured and how impaired

assets will be classified in the financial statements. The Company's adoption of this Statement did not have a material impact on the Company's financial statements.

  1. Reclassification

Certain 2001 amounts have been reclassified to conform to the 2002 presentation.

  1. Inventories

    2. Inventories consist of the following at:

    (Dollars in thousands)

    June 30,

    2002

    Dec. 31,

    2001

    Sept.30,

    2001

    Finished goods

    $ 336

    $ 342

    $ 272

    Work in process

    395

    479

    693

    Raw materials, components and assemblies

    616

    689

    709
     

    $1,347

    $1,510

    $1,674

  2. Holdings, at Equity

The principal components of the Company's holdings, at equity consist of the following:

 

 

 

Holding

 

Recorded

Book Value

($ in millions)

Quoted

Market Price

per Nasdaq

Calculated

Market Value

per Nasdaq

($ in millions)

 

 

Ownership

 

 

Shares

June 30, 2002

          

Plug Power Inc.

$25.776

$ 7.91

$ 90.129

22.44%

11,394,315

SatCon Technology

Corporation

2.599

$ 1.60

1.740

6.58%

1,087,500

Total

$28.375

  

$ 91.869

    

December 31, 2001

          

Plug Power Inc.

$32.177

$ 8.74

$104.830

23.83%

11,994,315

SatCon Technology

Corporation

6.760

$ 5.20

6.760

7.86%

1,300,000

Total

$38.937

  

$111.590

    

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  1. Holdings, at Equity (Continued)

 

 

Holding

 

Recorded

Book Value

($ in millions)

Quoted

Market Price

per Nasdaq

Calculated

Market Value

per Nasdaq

($ in millions)

 

 

Ownership

 

 

Shares

September 30, 2001

          

Plug Power Inc.

$36.027

$ 9.62

$115.385

23.9%

11,994,315

SatCon Technology Corporation

11.170

$ 4.86

6.318

8.05%

1,300,000

Total

$47.197

  

$121.703

    

Summarized below is financial information for Plug Power and SatCon, as derived from published financial reports. Plug Power's fiscal year ends December 31 and SatCon's fiscal year ends September 30. Our holdings in SatCon are accounted for on a one-quarter lag.

 

(Dollars in thousands)

 

SatCon

_______________________________________

Plug Power

________________________________________

 

Balance Sheet

As of

Mar. 30,

2002(1)

As of

Sept. 30,

2001(2)

As of

June 30,

2001(1)

As of

June 30,

2002(1)

As of

Dec. 31,

2001(2)

As of

Sept. 30,

2001(1)

Current

assets

$29,608

$42,466

$44,802

$ 83,589

$100,565

$111,212

Non-current

assets

22,549

26,310

24,621

46,832

50,809

53,607

Current

liabilities

11,586

12,842

9,302

9,456

10,199

7,737

Non-current

liabilities

1,050

1,423

1,723

6,070

6,172

6,534

Stockholders'

equity

39,521

54,511

58,398

114,895

135,003

150,548

Three Months Ended

Three Months Ended

Results of

Operations

Mar. 30,

2002(1)

Mar. 31,

2001(1)

June 30,

2002(1)

June 30,

2001(1)

Gross revenues

$ 10,300

$ 11,536

$ 2,544

$ 1,289

Gross profit (loss)

871

2,482

(348)

(909)

Net loss

(4,997)

(6,371)

(12,229)

(18,320)

Six Months Ended

Six Months Ended

Mar. 30,

2002(1)

Mar. 31,

2001(1)

June 30,

2002(1)

June 30,

2001(1)

Gross revenues

$ 18,640

$ 21,030

$ 5,448

$ 2,316

Gross profit (loss)

1,558

4,451

865

(1,853)

Net loss before cumulative

effect of changes in

accounting principles

 

(10,392)

 

(9,359)

 

(23,825)

 

(37,334)

Cumulative effect of changes

in accounting principles

-

(1,022)

-

-

Net loss

(10,392)

(10,381)

(23,825)

(37,334)


(1) derived from unaudited financial information

(2) derived from audited financial statements

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  1. Holdings, at Equity (Continued)

SatCon's July 31, 2002 press release on third quarter results and accomplishments for the three months ended June 29, 2002 included the following information:

(Dollars in

thousands)

 

Balance Sheet

As of

June 29,

2002(1)

Current assets

$25,046

Non-current assets

20,792

Current liabilities

11,445

Non-current liabilities

932

Stockholders' equity

33,461

Results of

Operations

3 Months Ended

June 29,

2002(1)

Gross revenues

$11,754

Gross profit

1,994

Net loss

(4,996)

(1) derived from unaudited financial information

Plug Power Inc.

The following is a roll forward of the Company's accounting for holdings in Plug Power:

 

 

(Dollars in thousands)

Six months

ended

June 30, 2002

Three months ended

Dec. 31, 2001

Twelve months ended

Sept.30, 2001

Holdings balance, beginning of period

$32,177

$ 36,027

$ 48,372

Share of Plug Power losses, gross

(5,435)

(4,069)

(22,101)

Sale of shares

(1,544)

-

(4,708)

Equity adjustment for share of third-party

investments in Plug Power which increased equity

578

219

14,464

Holdings balance, end of period

$25,776

$ 32,177

$ 36,027

There is no difference between the carrying value of the Company's holdings in Plug Power and its interest in the underlying equity at June 30, 2002, December 31, 2001 or September 30, 2001.

The Company sold shares of Plug Power and recognized gains and proceeds as follows:

 

(Dollars in thousands, except shares)

Three months ended

June 30, 2002 June 30, 2001

Six months ended

June 30, 2002 June 30, 2001

Shares sold

300,000

1,217,500

600,000

1,710,000

Proceeds

$3,174

$28,658

$6,076

$35,717

Gain on sales

$2,435

$25,458

$4,532

$31,009

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  1. Holdings, at Equity (Continued)

SatCon Technology Corporation

The following is a roll forward of the Company's accounting for holdings in SatCon:

 

 

(Dollars in thousands)

Six months

ended

June 30, 2002

Three months ended

Dec. 31, 2001

Twelve months ended

Sept.30, 2001

Holdings balance, beginning of period

$6,760

$11,170

$ 15,984

Share of SatCon losses on one-quarter lag,

gross

(783)

(727)

(1,938)

Sale of shares

(832)

-

(4,296)

Amortization of embedded difference between

the Company's basis and calculated
ownership of underlying equity, one-quarter
lag (Note 2)

 

-

 

(688)

 

(2,755)

Impairment loss (Note 7)

(2,418)

(5,790)

-

Equity adjustment for other equity activity

(128)

2,795

4,175

Holdings balance, end of period

$2,599

$ 6,760