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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

             For the Quarterly Period Ended September 30, 2002

OR

o 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 000-49890

MTC TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Delaware
   02-0593816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

4032 Linden Avenue, Dayton, Ohio                  45432
(Address of principal executive offices)                         (Zip Code)

(937) 252-9199
(Registrant’s telephone number, including area code)

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    

The number of shares of Common Stock, $0.001 par value, of the registrant
outstanding as of November 8, 2002 was 12,866,074.

Table of Contents

MTC TECHNOLOGIES, INC. AND SUBSIDIARIES
       
Index      
Page 1      
      Page
      Number
       
Part I Financial Information  
       
  Item 1. Financial Statements  
       
    Condensed Consolidated Balance Sheets at September 30, 2002 and December 31, 2001
3
       
    Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2002 and September 30, 2001 4
       
    Condensed Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2002 5
       
    Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2002 and September 30, 2001 6
       
    Notes to Condensed Consolidated Financial Statements 7-12
       
  Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13-24
       
  Item 3. Quantitative and Qualitative Disclosures About Market Risk 24
       
  Item 4. Controls and Procedures 25
       
Part II Other Information  
       
  Item 1. Legal Proceedings 26
       
  Item 2. Changes in Securities and Use of Proceeds 26-27
       
  Item 5. Other Information 27
       
  Item 6. Exhibits and Reports on Form 8-K 27-28
       
Signatures    
       
Certifications    

Table of Contents

MTC TECHNOLOGIES, INC. AND SUBSIDIARIES

Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(Dollars in Thousands Except Per Share Data)
Page 2
  September 30,   December 31,
  2002   2001
 
 
Assets
              
Current assets:
              
Cash and cash equivalents (Note J)
$
 24,599
    
$
60
  
               
Marketable equity securities - trading
  
—
      
167
  
               
Accounts receivable, net
  
26,779
      
21,877
  
               
Costs and estimated earnings in excess of amounts
              
billed on uncompleted contracts
  
1,916
      
518
  
               
Prepaid expenses and other current assets
  
1,608
      
273
  
 
 
               
Total current assets
  
54,092
      
22,895
  
               
Property, plant and equipment, net
  
1,594
      
1,136
  
               
Goodwill, net
  
1,558
      
1,558
  
               
Other assets
  
2,171
      
145
  
 
 
               
 
$
 60,225
    
$
 25,734
  
 
 
               
Liabilities and Stockholders’ Equity
              
Current liabilities:
              
Accounts payable
$
6,735
    
$
5,073
  
               
Current maturities of long-term debt (Note C)
  
—
      
1,000
  
               
Compensation and related items
  
6,045
      
5,612
  
               
Billings in excess of costs and estimated earnings on uncompleted contracts
  
221
      
1,057
  
               
Other current liabilities
  
275
      
38
  
 
 
               
Total current liabilities
  
13,276
      
12,780
  
               
Long-term debt (Note C)
  
—
      
13,075
  
               
Commitments and contingencies (Note K)
              
               
               
Stockholders’ equity (Deficiency in net assets):
              
Common stock, $0.001 par value; 50,000,000 shares
              
authorized; 12,843,149 and 9,887,482 shares issued and outstanding, at
              
September 30, 2002 and December 31, 2001, respectively
  
13
      
10
  
               
               
Paid-in capital (Note B)
  
49,387
      
6,399
  
               
Due from stockholder (Note B)
  
—
      
(2,000
)
               
Accumulated deficit
  
(2,451
)
    
(4,530
)
 
 
               
Total stockholders’ equity (deficiency in net assets)
  
46,949
      
(121
)
 
 
               
 
$
60,225
    
$
25,734
  
 
 

See accompanying Notes to Condensed Consolidated Financial Statements.

Table of Contents

MTC TECHNOLOGIES, INC. AND SUBSIDIARIES

Item 1. Financial Statements
Condensed Consolidated Statements of Operations
(Dollars in Thousands Except Share and Per Share Data)
Page 3
  Three months ended September 30,   Nine months ended September 30,
 
 
                               
  2002   2001   2002   2001
 
 
 
 
Revenue
$
30,939
    
$
22,919
    
$
81,930
    
$
67,774
  
                               
                               
Cost of revenue
  
25,082
      
18,780
      
66,633
      
55,217
  
 
 
 
 
                               
Gross profit
  
5,857
      
4,139
      
15,297
      
12,557
  
                               
General and administrative expenses, 
                              
excluding stock compensation expense
  
2,023
      
2,191
      
6,005
      
6,237
  
                               
Stock compensation expense (Note F)
  
—
      
—
      
5,215
      
—
  
 
 
 
 
                               
Operating income
  
3,834
      
1,948
      
4,077
      
6,320
  
                               
Interest income (expense):
                              
                               
Interest income
  
115
      
162
      
144
      
320
  
                               
Interest expense
  
(7
)
    
(283
)
    
(396
)
    
(822
)
 
 
 
 
                               
Net interest income (expense)
  
108
      
(121
)
    
(252
)
    
(502
)
 
 
 
 
                               
                               
Income from continuing operations
                              
before income tax expense (benefit)
  
3,942
      
1,827
      
3,825
      
5,818
  
                               
Income tax expense (benefit) (Note A)
  
1,577
      
—
      
(1,067
)
    
—
  
 
 
 
 
                               
Income from continuing operations
  
2,365
      
1,827
      
4,892
      
5,818
  
                               
Loss from discontinued operations
  
—
      
(218
)
    
—
      
(578
)
 
 
 
 
                               
Net income
$
2,365
    
$
1,609
    
$
4,892
    
$
5,240
  
 
 
 
 
                               
Basic earnings per share:
                              
Income from continuing operations
$
0.18
    
$
0.18
    
$
0.45
    
$
0.59
  
                               
                               
Loss from discontinued operations
  
—
      
(0.02
)
    
—
      
(0.06
)
                               
Net income
$
0.18
    
$
0.16
    
$
0.45
    
$
0.53
  
 
 
 
 
                               
Diluted earnings per share: