10-K

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2000

or

/ / 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.)

30 South Pearl Street, Albany, New York 12207

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (518)433-2170

Securities Registered Pursuant to Section 12(b) of the Act: NONE

Securities Registered Pursuant to Section 12(g) of the Act

$1.00 Par Value Common Stock

(Title of Class)

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. [ ]

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

The aggregate market value of the registrant's common stock held by nonaffiliates of the registrant on December 19, 2000 (based on the last sale price of $2.625 per share for such stock reported by NASDAQ for that date) was approximately $52,207,341.

As of December 19, 2000, the registrant had 35,422,335 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Document Where Incorporated into Form 10-K Report

Proxy Statement for Part III

Annual Meeting of Shareholders

to be held on April 24, 2001

PART I

ITEM 1: BUSINESS

Overview

Mechanical Technology, Inc., ("Mechanical Technology" or "the Company") is a New York Corporation, and was incorporated in 1961.

Over the last five years, Mechanical Technology has strengthened its commitment to and involvement in the new energy sector. The Company has sold off non-core businesses and restructured its balance sheet in order to implement its core business strategy, which is to develop a series of coordinated new energy efforts in areas which may include, but are not limited to, embedded, distributed and improved power, advanced power transmission and storage or enabling technologies and services. The Company plans to implement this strategy through the internal development and growth of businesses, the acquisition of majority stock positions in emerging new energy companies, and strategic investments in established new energy businesses.

Mechanical Technology held interests in the following new energy companies as of September 30, 2000:

Investment	Nasdaq Stock Symbol	Shares Owned	Ownership Percentage
Plug Power Inc. ("Plug")	PLUG	13,704,315	31.4%
SatCon Technology Corporation ("SatCon")	SATC	1,800,000	13.2%
Beacon Power Corporation ("Beacon Power")(a)	BCON	3,866,649	10.0%

1. Ownership as of December 20, 2000, subsequent to its initial public offering on November 17, 2000, a 2-for-1 stock split immediately prior to its IPO and Mechanical Technology's exercise, on December 20, 2000, of warrants on a cash-less basis.

Plug Power researches, develops and manufactures proton exchange membrane (PEM) fuel cell systems for electric power generation. SatCon designs, develops and manufactures power and energy management products. Beacon Power designs and develops flywheel energy storage systems.

Subsequent to September 30, 2000, Mechanical Technology launched another new energy endeavor: a strategic initiative to develop direct methanol fuel cell ("DMFC") technology capable of providing power ranging from 100 milliwatts to several hundred watts. Initial applications are believed to include, but are not limited to, handheld and portable electronics.

Mechanical Technology intends to continue implementing its core business strategy with the goal of providing much-needed energy products and services and increasing shareholder value.

Mechanical Technology's majority-owned subsidiary, MTI Instruments, Inc., ("MTI Instruments"), formerly the Advanced Products Division of the Company, commenced operations on April 1, 2000. MTI Instruments has three product lines: portable engine balancing systems for the aircraft industry, non-contact measurement probes and electronics, and metrology tools for the semiconductor industry. MTI Instruments' strategy is to continue to enhance and expand its product offerings with the goal of increasing market share and profitability.

Products and Services

Mechanical Technology is focusing its entrepreneurial efforts in the field of new energy, helping to accelerate the development of new energy technologies and companies.

The Company plans to use its experience as a founding member of Plug Power and a strategic partner of Satcon and Beacon Power, to accelerate the commercialization of other new energy technologies. The Company's approach will include forming strategic alliances and working partnerships with industry leaders, structuring research and development processes, developing the ramp-up to manufacturing and product distribution, and directing the hiring of the key people needed to successfully launch entrepreneurial efforts. The Company also plans to provide other resources and varied levels of strategic assistance to innovative companies in the field.

As of September 30, 2000, companies in which Mechanical Technology held interests, provided the following products and services:

Plug Power is developing and producing residential fuel cells that are essentially miniature home power plants using a combustion-free process to produce electricity. Plug Power's fuel cells are intended to provide homes and small businesses with a compact, efficient, reliable, clean, and economically advantageous method of meeting their power requirements.

SatCon is designing, developing and manufacturing power and energy management products which convert, condition, store and manage electricity for businesses and consumers requiring high-quality, high-efficiency, uninterruptible power. SatCon's products are intended to be enabling technologies for the emerging distributed power generation and power quality markets. SatCon is focusing its development and manufacturing efforts on products for high-growth markets in the following categories: power electronics and control software serving fuel cells and microturbine power generation systems; and high-performance motors and electric drivetrains for hybrid-electric vehicles.

Beacon Power is developing flywheel energy storage systems to provide standby power when a primary power source fails. Flywheel systems draw electrical energy from a primary power source (i.e., the electric grid or fuel cells), store that energy, and then convert that energy to immediately provide uninterruptible electric power when the primary power source fails or is disrupted. The expected advantages of flywheels include higher reliability, longer life, lower life-cycle cost, improved recharging capability, reduced maintenance, more reliable monitoring, and greater environmental friendliness. The systems are expected to be used for communications networks, computers, the internet, industrial manufacturing, commercial facilities and distributed generation products.

MTI Instruments is involved in the design, manufacture and sale of high-performance test and measurement instruments and systems. MTI Instruments has three product groups: non-contact sensing instrumentation, computer-based balancing systems, and semiconductor systems.

Non-contact sensing instrumentation products utilize fiber optic, laser, and capacitance technology to perform high precision position measurements for product design and quality control inspection requirements, primarily in the semiconductor and computer disk drive industries. Product trademarks such as the Fotonic SensorÔ and AccumeasureÔ are recognized worldwide.

MTI Instruments' computer-based aircraft engine balancing systems include an on-wing jet engine balancing system used by both commercial and military aircraft fleet maintenance personnel. This product provides trim balancing and vibration analysis in the field or in test situations.

The semiconductor group designs and produces manual, semi-automated and fully automated metrology tools designed specifically for the semiconductor industry. Such tools are based on MTI Instruments' proprietary Push-PullÔ technology.

MTI Instruments' largest customers include industry leaders in the computer, electronic, semiconductor, automotive, aerospace, aircraft and bioengineering fields.

Business Strategy

Mechanical Technology operates in the segment of new energy technologies, and MTI Instruments operates in the segment of test and measurement instrumentation.

In the segment of new energy, Mechanical Technology plans to further implement its core business strategy of developing new technologies and companies with the goal of positioning them to capitalize on opportunities in the field of new energy.

The Company's most recent initiative is the research and development of Direct Methanol Fuel Cells ("DMFC"). Fuel cells convert chemical energy in a fuel to electrical energy through an electrochemical process much like a battery. DMFC systems use methanol fuel directly in the fuel cell without the need for a fuel processor. For small systems (<100w), DMFC technology could offer much higher power density than is currently available in batteries. In addition, DMFCs do not need to be recharged like a battery but can make electricity as long as fuel is available, and additional fuel may be added without interrupting power generation.

The Company believes that the initial applications of DMFCs include, but are not limited to, handheld and portable electronic devices such as cell phones, PDA's and laptops, and that DMFCs should provide the consumer with longer use time for these devices, as well as instant and easy refueling.

Because of the dramatically increasing demand for portable electronic devices and the potential uses and advantages of DMFCs, the Company anticipates significant market opportunities for DMFCs, and it predicts that these opportunities will continue to exist or grow substantially over the next decade or more. The Company also believes that DMFCs could be an enabling technology that may provide the increased power necessary to combine portable electronic products, and therefore, should provide significant new market opportunities.

After conducting scientific and market sizing research, the Company has made a commitment to hiring top scientists and engineers in the area of DMFCs and to establishing relationships with strategic partners in order to rapidly commercialize DMFCs. The Company also has patents filed, pending and in process and has entered into an agreement to license DMFC technology from Los Alamos National Laboratories (see the Intellectual Property and Proprietary Rights Section under Item 1). In addition, the Company's new team of officers and senior staff will use their expertise in technical, financial, business development, organizational and marketing areas to help the DMFC commercialization effort (see the Executive Officers Section under Item 1). Despite these beliefs and actions, the Company's efforts in DMFC technology remain in the research and development phase and the Company recognizes that significant technical and engineering challenges remain before DMFCs can become commercially viable and available.

In addition to its own efforts to develop new energy products, Mechanical Technology has holdings in companies that control their own product development efforts, such as Plug Power, SatCon and Beacon Power. However, the Company realizes that their products and any products developed by the Company itself, are not necessarily lower cost alternatives to existing energy technologies but are often solutions to questions of reliability, capacity, quality, maintenance, environmental issues and other current and future power requirements or concerns.

The Company intends to expand its activities in the new energy segment through a series of strategic and coordinated efforts that may include any or all of the following: the acquisition of majority stock positions in new energy companies; the acquisition of existing new energy companies, and the internal development and growth of new energy technologies and companies. These companies and technologies may be in areas including embedded, distributed and improved power, advanced power transmission and storage or enabling technologies, distribution and service for new energy.

In the segment of test and measurement instrumentation, MTI Instruments' strategy is to continue to enhance and expand its product offerings and market share and increase profitability. MTI Instruments expects to introduce the following product offerings in 2001: The semiconductor product group will add a new automated wafer thickness measurement system specifically designed to handle 300 mm wafers. This system will offer edge handling robotics and full wafer mapping capability. The general instruments group will introduce a new generation of CCD-based laser triangulation sensors. This new product is expected to offer accuracy and speed or frequency response advantages over existing competitive products. In January 2001, the PBS group's 4100 product line will be enhanced by a next generation vibration diagnostics and balancing system - the WinPBS - for on-wing balancing and test cell applications. The test cell version permits exchange of data with other test cell instrumentation using Ethernet.

Marketing and Sales

Mechanical Technology's officers and senior staff attend and speak at conferences appropriate to developing the Company's efforts and expanding its activities in the new energy sector.

In the sector of test and measurement instrumentation, MTI Instruments markets its products and services through a separate experienced marketing, sales and applications engineering staff. The marketing and sales efforts of MTI Instruments are supported by a network of manufacturers' representatives, a regional sales office in the USA, and sales agents and distributors in foreign markets. In some cases, such as OEM accounts, MTI Instruments sells direct.

To supplement these efforts, MTI Instruments also attends numerous trade shows in the areas of its concentration and uses product listings in appropriate media and directories and the internet.

A comparison of sales by class of products, which account for over 10 percent of the Company's consolidated sales, are shown below for the years ended September 30:

Test and Measurement Instrumentation	2000	1999	1998
(Dollars in thousands)
Vibration test equipment (Ling)	$ 140	$ 4,862	$ 8,720
Starsine power conditioning (Ling)	-	1,333	1,644
Parts (Ling)	-	2,106	1,870
Engine balancing systems (MTI Instruments)	1,503	1,570	3,492
OEM (MTI Instruments)	1,421	1,169	3,455
Capacitance probes and sensors (MTI Instruments)	976	-	-
Fiber optic probes and sensors (MTI Instruments)	563	-	-
Total	$4,603	$11,040	$19,181

Competition

Mechanical Technology, its subsidiary and each of the businesses in which it has holdings, are subject to intense competition. The Company faces competition from large diversified companies with greater resources and from smaller developing companies as it enters new markets. The Company does not consider itself dominant in either the new energy or precision instrumentation markets but believes its management team, product development skills, product quality and reputation are competitive advantages.

Research and Development

As part of its core business strategy of helping to accelerate new energy technologies and companies, Mechanical Technology will conduct research on developing and existing efforts in the field of new energy. As of September 30, 2000, the Company's research and development activities were in Direct Methanol Fuel Cells ("DMFCs"). A discussion of DMFCs is covered more fully in the Business Strategy Section under this Item 1.

MTI Instruments conducts research and develops technology to support its existing products and to develop new products. MTI Instruments' technology is generally an advancement of state of the art in its industries. MTI Instruments expects to maintain a competitive position by continuously advancing its technology rather than relying on patent protection.

During fiscal years 2000, 1999 and 1998, the Company expended $2.0, $1.1, and $.8 million, respectively, on product development and research costs.

Intellectual Property and Proprietary Rights

Mechanical Technology relies on a combination of patent, trade secret, and copyright and trademark laws to protect its intellectual property. It has entered into confidentiality agreements with all of its employees and consultants with respect to its intellectual property, whether developed internally or licensed from other parties.

The Company will continue to develop intellectual property related to its core business strategy in new energy, and will seek to appropriately protect this intellectual property using patents and other appropriate legal protection.

The Company has entered into an agreement to license certain core Direct Methanol Fuel Cell ("DMFC") Technology from Los Alamos National Laboratory ("LANL"). Under this agreement, the Company has a nonexclusive right to use technology developed by LANL's research teams. The technology relates to fundamental DMFC construction and architecture of the power generating components of the DMFC.

In addition to licensing technology from LANL, the Company has developed intellectual property related to DMFC systems. To date, the Company has applied for five patents. These patents cover, among other things, fuel cell system designs that result in increased efficiency, ease of manufacture, and overall performance, as well as designs for individual components of a DMFC system, and subsystems, which assist in controlling the DMFC system. A discussion of DMFCs is covered more fully in the Business Strategy Section under this Item 1.

The Company will continue to develop intellectual property related to DMFC systems, and will seek to appropriately protect this intellectual property using patents and other appropriate legal protection.

The Company's majority-owned subsidiary, MTI Instruments, relies primarily on trade secret law to protect its intellectual property.

Segment Information

Segment information is set forth in Note 20 - Geographic and Segment Information - of the Notes to Consolidated Financial Statements referred to in Item 8 below and incorporated herein by reference.

Subsequent Events

Subsequent to September 30, 2000, Mechanical Technology has launched a strategic initiative to develop direct methanol fuel cell ("DMFC") technology capable of providing power ranging from 100 milliwatts to several hundred watts. Initial applications are believed to include, but are not limited to, handheld and portable electronics. A discussion of DMFCs is covered more fully in the Business Strategy Section under this Item 1.

On December 20, 2000, the Company exercised its 1,333,333 warrants in Beacon Power Corporation ("Beacon Power") common stock at an exercise price of $2.25 per share. This transaction was a cash-less exercise, which resulted in the Company obtaining an additional 985,507 shares of Beacon Power's common stock as a result of the exercise.

On December 27, 2000, the Company restructured its $50 million line of credit with KeyBank, N.A. ("Line of Credit"), to provide greater liquidity for the Company as the price of Plug Power stock, which secured the Line of Credit, declined in volatile markets. This agreement was amended as follows:

The $50 million Credit Agreement, as amended, was reduced to $30 million ("the $30 million Credit Agreement, as amended"). Concurrent with this amendment, KeyBank, N.A. permanently waived all covenant violations related to the minimum price of Plug Power common stock and the Company made a principal reduction of $3 million, bringing the loan balance to $25.2 million as of the amendment date. Additional borrowings are available when the Plug Power stock price is above $20 per share.

The Company has pledged 8 million shares of Plug Power common stock as collateral. In addition, the Company entered into a Put and Call with First Albany Companies, Inc. ("FAC") to provide independent credit support for repayment of the loan ("FAC Credit Enhancement"). The FAC Credit Enhancement provides FAC with the option, if the price of Plug Power stock falls to $4 per share, to either purchase 6.3 million Plug Power shares pledged as collateral on the loan or take an assignment of KeyBank N.A.'s rights under the Credit Agreement, as amended. The FAC Credit Enhancement may be triggered in the event of a default and expires on April 27, 2001 and may be renewed by the Company and FAC on a monthly basis upon mutually agreeable terms. Upon expiration of the FAC Credit Enhancement, if Plug Power stock is trading below $20 per share the loan is immediately due and payable. Mandatory repayments on any outstanding balance in excess of $25.2 million would be required if the Plug Power stock price declines below $16 per share while the FAC Credit Enhancement is in place. After the FAC Credit Enhancement expires, mandatory repayments on any outstanding balance would be required if the Plug Power stock price is below $20 per share. If the line of credit is due and payable upon expiration of the FAC Credit Enhancement on April 27, 2001, the Company may need to sell assets including certain investments to fund this obligation. The Company is obligated to make interest-only payments through March 15, 2002, and upon exercise of a term loan option at the end of the line of credit term, to repay the principal in 8 equal quarterly installments beginning March 31, 2002. Interest is payable monthly at either the Prime Rate or if certain performance standards are achieved, based on both the trading volume and market price of Plug Power common stock, at LIBOR based rates. On September 30, 2000, $27 million of debt was outstanding at Prime (9.5%).

Subsequent Events (Continued)

On December 27, 2000, the Company entered into two bridge loan agreements with FAC. The first loan was for $945,000 and was used to pay the purchase price for the FAC Credit Enhancement. The Company has pledged 200,000 shares of Plug Power common stock as collateral. The second loan is for $5 million, $3 million of which was used to make the principal loan repayment to KeyBank, N.A. and the remaining $2 million will be used for working capital. The Company pledged 1 million shares of Plug Power common stock as collateral. Both loans bear interest at the Prime Rate (9.5% at December 27, 2000); and both interest and principal are due on January 3, 2002. Upon mutual agreement of FAC and the Company, the loans may be converted to equity prior to maturity.

Significant Business Developments or Historical Business Developments

On June 27, 1997, the Company and Edison Development Corp. ("EDC"), a subsidiary of DTE Energy Co. formed a joint venture, Plug Power, LLC ("Plug Power"), to further develop the Company's Proton Exchange Membrane (" PEM") Fuel Cell technology. In exchange for its contribution of contracts and intellectual property and certain other net assets that had comprised the fuel cell research and development business activity of the Technology segment (the assets of which had a net book value of $357 thousand), the Company received a 50% interest in Plug Power. EDC made an initial cash contribution of $4.75 million in exchange for the remaining 50% interest in Plug Power. The Company's investment in Plug Power is included in the balance sheet caption "Investments, at equity".

Plug Power has focused exclusively on the research, development and manufacture of an economically viable PEM fuel cell.

On October 29, 1999, Plug Power Inc. made an initial public offering ("IPO") of its common stock on the Nasdaq National Market under the symbol "PLUG." The initial public offering price for the 6 million shares issued was $15 per share. Additionally, the underwriters of the IPO exercised their 900,000 shares over allotment at the IPO price.

Since Plug Power was formed in 1997, the Company, EDC and other investors have contributed substantial amounts of cash and other assets to Plug Power. Contributions to Plug Power by the Company totaled $20.7 million as of September 30, 1999. Immediately prior to the Plug Power IPO, the Company purchased an additional 2,733,333 shares of Plug Power at $7.50 per share for a total purchase price of $20.5 million. The Company owns 13,704,315 shares of Plug Power or approximately 31.4% of outstanding Plug Power stock at September 30, 2000.

On October 21, 1999, the Company created a strategic alliance with SatCon Technology Corporation ("SatCon"), an innovator of new energy technologies. SatCon acquired Ling Electronics, Inc. and Ling Electronics, Ltd. ("Ling") from the Company, and the Company invested approximately $7 million in SatCon. In consideration for the acquisition of Ling and the Company's investment, the Company received 1,800,000 shares of SatCon's common stock and warrants to purchase an additional 100,000 shares of SatCon's common stock. SatCon also received warrants to purchase 100,000 (300,000 post-split) shares of the Company's common stock.

On May 23, 2000, the Company purchased preferred stock and received warrants to purchase common stock and the right to receive additional warrants for common stock if there was an initial public offering ("IPO"), from Beacon Power Corporation, in exchange for $6 million in cash. In August 2000, the Company exercised its 12,000 warrants. At September 30, 2000, the Company owned 1,428,571 shares of Beacon Power Class F Preferred Stock and 12,000 shares of common stock. On November 17, 2000, Beacon Power completed its initial public offering of its common stock, and the warrant terms were set for the purchase of 1,333,333 shares of common stock at an exercise price of $2.25 per share, exercisable as of November 17, 2000. The warrants expire May 23, 2005. Immediately prior to its IPO, Beacon Power converted its preferred stock to common stock and completed a 2-for-1 stock split. On December 20, 2000, the Company exercised its 1,333,333 warrants on a cash-less basis which resulted in the Company's receiving an additional 908,507 shares of Beacon Power common stock.

On July 12, 1999, the Company completed the sale of 801,223 shares of common stock to current shareholders through a rights offering. The offering raised approximately $12.8 million before offering costs of approximately $158 thousand for net proceeds of approximately $12.7 million. The Company used some of the proceeds of the offering for investment into Plug Power. In addition, some proceeds were used for acquisitions for the Company's core businesses, efforts to increase market share, working capital, general corporate purposes and other capital expenditures.

On September 30, 1998, the Company completed the sale of 1,196,399 shares of common stock to current shareholders through a rights offering. The offering raised approximately $7.2 million before offering costs of approximately $186 thousand for net proceeds of approximately $7 million. The Company used some of the proceeds of the offering for investment in Plug Power. In addition, some proceeds were used for acquisitions for the Company's core businesses, efforts to increase market share, working capital, general corporate purposes and other capital expenditures.

Risk Factors

This Annual Report on Form 10-K contains forward-looking statements. You

can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate," and "continue," or similar words. You should read statements that contain these words carefully because they discuss our future expectations contain projections of our future results of operations or of our financial condition or state other "forward-looking" information. All statements other than historical information should be deemed to be forward looking statements. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and actual results may differ materially from those discussed as a result of various factors, including the risks described below.

We need to secure additional financing for our future capital needs

In December 2000, we restructured our loan agreement with KeyBank, N.A., reducing our credit line from $50 million to $30 million and made a $3 million principal repayment. To provide independent credit support for the repayment of the loan, the Company purchased the FAC Credit Enhancement from First Albany Companies Inc. In exchange, KeyBank, N.A. agreed to permanently waive any covenant violations related to the price of Plug Power stock. The Company may resume borrowing on the line when Plug Power's stock price is above $20 per share. After the FAC Credit Enhancement expires on April 27, 2001, mandatory repayments on any outstanding balance would be required if Plug Power stock is trading at less than $20 per share. As of December 27, 2000, the total amount outstanding on our line of credit was $25.2 million.

In December 2000, the Company also entered into two bridge loan agreements with First Albany Companies Inc. The first loan was for $945 thousand and was used to pay the purchase price for the FAC Credit Enhancement. The second loan is for $5 million, $3 million of which was used to make the principal loan repayment to KeyBank, N.A. and the remaining $2 million will be used for working capital. The Company pledged 1.2 million shares of Plug Power common stock as collateral for the two loans. Both loans bear interest at the Prime Rate and both interest and principal are due on January 3, 2002. Both loans may also be converted to equity prior to maturity.

The Company believes that it will be able to meet the liquidity needs of its continuing operations for the next year from one or more of the following sources: additional borrowings, equity financings, the sale of assets, debt financings, current cash resources, cash flow generated by operations, and borrowings under its bridge loan from First Albany Companies Inc. If future financing is not available or is not available on acceptable terms, we may not be able to fund our future needs, which would have a material adverse effect on our business, results of operations and financial condition.

Our new energy strategy involves several risks

A component of our business strategy is to develop or acquire businesses, products, assets and technologies that are related to embedded, distributed and improved power; advanced power transmission and storage; or enabling technologies, distribution and service for this sector.

Internal development of businesses and technologies is extremely difficult. We cannot assure that we will be able to successfully develop any new technologies, or if we are successful, that such technologies will be commercially viable. Development of new technologies requires substantial resources including financial, managerial and technical resources. We cannot assure that all the necessary resources will be available to the degree, and at the times they are needed. If we are unable to successfully develop new energy businesses and technologies, the results of operations could be materially adversely affected.

Acquisitions are difficult to identify and complete for a number of reasons, including competition among prospective buyers and the need for regulatory approvals, including antitrust approvals. There is no assurance that we will be able to successfully identify acquisition candidates or complete future acquisitions. In order to finance acquisitions, we may have to raise additional funds. Such funds may not be available at all, or may be on terms that are not favorable to us. There is no assurance that acquired businesses will be operated profitably or achieve their growth strategy. The successful combination of companies in a rapidly changing high technology industry such as ours may be more difficult to accomplish than in other industries. Our ability to integrate any newly acquired entities will require us to continue to improve our operational, financial and management information systems, and to motivate and effectively manage our employees. If our management is unable to manage growth effectively, the results of operations could be materially and adversely affected.

Our new energy strategy requires market acceptance of new energy technologies

The success of the Company's new energy strategy depends on increased acceptance of alternatives to traditional methods of power generation, transmission, storage and distribution. We believe the market is at an early stage in the c ommercialization of new energy technologies and products, but the future commercial prospects are not yet clear. The businesses of our portfolio companies, and therefore our financial results and condition, will be materially adversely affected if new energy generation, transmission, storage and distribution methods do not receive significant levels of acceptance.

There are unique risks associated with our Direct Methanol Fuel Cell initiative

There are unique and substantial risks associated with our direct methanol fuel cell (DMFC) initiative. Significant technical challenges must be resolved before DMFCs can be commercialized, and there is no guarantee that we will be able to overcome these challenges in either the short or long term, or that we will be able to resolve these challenges in a manner that allows for commercialization of DMFC technology. In addition, there are other entities involved in the development of DMFCs, who also seek to commercialize DMFC technology, and may resolve these issues more quickly, more completely, or more efficiently than we do. We may seek strategic partners to participate in this initiative, but may not be able to negotiate relationships with suitable partners on acceptable terms, if at all. The success of the DMFC initiative will further depend on our ability to fund the initiative, attract talented scientific, managerial and professional personnel, and develop a DMFC that satisfies the needs of prospective customers.

We have incurred losses and anticipate continued losses

As of September 30, 2000, we had an accumulated deficit of $45.2 million. Our net loss for the year ended September 30, 2000 was $18.6 million, $15.8 million of which was generated by our proportionate shares of losses, after taxes, in our portfolio companies. We expect to continue incurring net losses until we and our portfolio companies can produce sufficient revenues to cover costs. In order to achieve profitability, we and our portfolio companies must successfully achieve all or some combination of the following:

• develop new products for existing markets;
• sell these products to existing and new customers;
• increase gross margins through higher volumes and manufacturing efficiencies;
• control operating expenses; and
• develop and manage distribution capability.

We may become an inadvertent investment company

Our equity investments in other companies constitute investment securities under the Investment Company Act. In general, a company may be deemed to be an investment company if it owns investment securities with a value exceeding 40% of its total assets, subject to certain exclusions and exemptions. Investment companies are subject to registration under, and compliance with, the Investment Company Act unless a particular exclusion or safe harbor provision applies. If we were to be deemed an investment company, we would become subject to the requirements of the Investment Company Act. As a consequence, we would be prohibited from engaging in certain businesses or issuing certain securities, certain of our contracts might be voidable, and we might be subject to civil and criminal penalties for noncompliance.

Although our investment securities currently comprise more than 40% of our total assets, our interest in Plug Power, based upon the level of our ownership of shares of Plug Power and our influence over its management or policies, enable us to qualify for a safe harbor exemption from the Act. Fluctuations in the value of our investment securities or of our other assets, or the reclassification of our interest in Plug Power, may cause this safe harbor exemption to be unavailable. Unless an exclusion or safe harbor was available to us, we would have to attempt to reduce our investment securities. If we were required to sell investment securities, we may sell them sooner than we otherwise would. These sales may be at depressed prices and we may never realize anticipated benefits from, or may incur losses on, these investments. We may be unable to sell some investments due to contractual or legal restrictions or the inability to locate a suitable buyer. Moreover, we may incur tax liabilities when selling assets.

Our stock price may fluctuate as the value of our portfolio companies fluctuates

The primary assets of the Company are equity securities of publicly traded companies. As of September 30, 2000, the Company owned shares of common stock in Plug Power and SatCon, each of which is a publicly traded company. The Company also owns shares of Beacon Power, which went public in November 2000. The market price and valuations of the securities the Company holds in these companies may fluctuate due to market conditions and other conditions over which the Company has no control. Fluctuations in the market price and valuations of the securities held by the Company may result in fluctuations in the market price of the Company's common stock.

We are partially dependent on the success of our portfolio companies, some of which are in developmental stages

Our success is partially dependent on the success of our portfolio companies. Each of these companies is still researching and developing technologies. Plug Power, a developer of residential fuel cells, has stated that it does not expect to have a commercial product available until at least 2002. There is no assurance Plug Power will successfully develop a commercial product, or if it does, that it will do so in the time frames predicted. Although SatCon currently produces and sells some products, it continues to research and develop other products for commercial business applications. There is no assurance that such products will be accepted by the market or will be produced at a cost that is commercially feasible. Finally, Beacon, a developer of flywheel energy storage devices, is still in the development stage. There is no assurance it will develop a commercially viable flywheel at the costs or in the timeframes it currently predicts.

Alternatives to new energy technologies could render our business obsolete

New energy technology markets are characterized by rapid technological change, frequent new product introductions and enhancements, uncertain product life cycles, changes in customer requirements and evolving industry standards. The introduction of new products embodying new technologies and the emergence of shifting customer demands or changing industry standards could render the products of our portfolio companies and our research and development efforts obsolete and unmarketable which would have a material adverse effect on our business, operating results and financial condition. Our future success will depend upon our and our portfolio companies' ability to continue to develop and introduce a variety of new products and product enhancements to address the increasingly sophisticated needs of customers. This will require that our portfolio companies and we continue to make substantial product development investments. Our portfolio companies and we may experience delays in releasing new products and product enhancements in the future. Such material delays may cause customers to forego purchases of products and/or purchase those of our competitors. Technological advances in new energy products and improvements in existing technologies and power supplies may render our technologies and the technologies of our portfolio companies obsolete.

We may not be able to protect our patents and intellectual property

Patent and trade secret rights are of material importance to us and to our portfolio companies. No assurance can be given as to the issuance of patents or, if so issued, as to their scope. Patents granted may not provide meaningful protection from competitors. Even if a competitor's products were to infringe patents owned by us, or our portfolio companies, it would be costly to pursue an enforcement action and would divert funds and resources which otherwise could be used in operations. Furthermore, there can be no assurance that an enforcement action would be successful. In addition, there is no assurance that we, or our portfolio companies, will not infringe patent or intellectual property rights of third parties. Such infringement could be costly and cause delays in product development and introduction. In addition to our patent rights, we also rely on treatment of our technology as trade secrets and upon confidentiality agreements. These agreements may be breached, and we may not have adequate remedies for any breach.

Our share price could be subject to extreme price fluctuations, and shareholders could have difficulty trading shares

The markets for high technology companies in particular have been volatile, and the market price of our common stock, which is traded on the Nasdaq National Market under the symbol MKTY, may be subject to significant fluctuations. Fluctuations could be in response to operating results, announcements of technological innovations or new products by us, our portfolio companies, or by our competitors, patent or proprietary rights developments, and market conditions for high technology stocks in general. In addition, the stock market in recent years has experienced extreme price and volume fluctuations that often have been unrelated or disproportionate to the operating performance of individual companies. These market fluctuations, as well as general economic conditions, may adversely affect the market price of our common stock.

General economic conditions may affect investors' expectations regarding our financial performance and adversely affect our stock price

Certain industries in which we, or our portfolio companies sell products, such as the energy and semiconductor industry, are highly cyclical. In the future, our results may be subject to substantial period-to-period fluctuations as a consequence of the industry patterns of our customers, general or regional economic conditions, and other factors. These factors may also have a material adverse effect on our business, operating results and financial condition.

Current shareholders may be diluted

If we raise additional funds through the sale of equity or convertible debt securities, current shareholders' percentage ownership will be reduced. In addition, these transactions may dilute the value of common stock outstanding. We may have to issue securities that may have rights, preferences and privileges senior to our common stock. We cannot assure current shareholders that we will be able to raise additional funds on terms acceptable to us, if at all. If future financing is not available or is not available on acceptable terms, we may not be able to fund our future needs, which would have a material adverse effect on our business, results of operations and financial condition.

We are dependent on continued government funding for new energy research and development

A large percentage of the revenue of our portfolio companies is from government contracts. The loss of such contracts could adversely affect our financial condition. We believe that government funding for areas of research and development activities of our portfolio companies will continue without reduction, however, we cannot assure that this funding will not be reduced in the future.

There may be conflicts of interest among the Company, its officers, directors, its portfolio companies and its majority shareholder

Some of the Company's officers and directors serve as officers or directors of one or more of the Company's portfolio companies. Some of the Company's officers and directors also serve as officers and directors of the Company's majority shareholder. As a result, the Company, the Company's officers and directors, the Company's portfolio companies and the Company's majority shareholder may face potential conflicts of interest with each other and with its stockholders. Specifically, the Company's officers and directors may be presented with situations in their capacity as officers or directors of one of the Company's portfolio Companies or as officers and directors of the Company's majority shareholder that conflict with their obligations as officers or directors of the Company.

Anticipated growth in new energy will strain the Company's managerial, operational, and financial resources

The Company is focused on developing and expanding its new energy initiative. In doing so, the Company has expended substantial managerial, operational, and financial resources, which have, at times, placed significant strains on its managerial, operational, and financial resources. As the Company continues to develop and expand its new energy strategy, it will be required to manage multiple relationships with strategic partners and other third parties. Further growth of the Company or its strategic relationships may increase these strains, and may hinder its ability to rapidly implement its business plan.

We face intense competition

A variety of companies compete in accelerating new energy companies and technologies, test and measurement instrumentation and in the businesses in which our portfolio companies are engaged. We expect competition to intensify greatly as the need for new energy alternatives and precision instrumentation becomes more apparent and continues to increase. Some of our competitors, and the competitors of our portfolio companies, are well established and have substantially greater managerial, technical, financial, marketing and product development resources. Additional companies, both large and small, are entering the markets in which we compete. There can also be no assurance that current and future competitors will not be more successful in the markets in which we compete than we have been, or will be in the future. There can be no assurance that we will be successful in such a competitive environment.

Competition for key personnel in our industries is intense

Our success will depend, in large part, upon our ability to attract, motivate and retain highly qualified scientists and engineers, as well as highly skilled and experienced management and technical personnel. Competition for these personnel is intense, and there can be no assurance that we will be successful in attracting, motivating or retaining key personnel. Our success depends to a significant extent upon a number of key employees, including members of senior management. The loss of the services of one or more of these key employees could have a material adverse effect on our plans for expansion in the future.

Our business is under the significant control of our directors, officers, and their affiliates

As of September 30, 2000, our officers, directors, and their affiliates, beneficially own approximately 44% of our outstanding common stock; and First Albany Companies Inc. holds approximately 34% of the outstanding common stock. This concentration of ownership may have the effect of delaying or preventing a change in control of the Company.

Operations Sold or Discontinued

Ling Electronics, Inc. and Ling Electronics, Ltd. ("Ling") were sold on October 21, 1999 to SatCon in exchange for 770,000 shares of SatCon common stock (which stock had a market value of approximately $6.7 million on the transaction date). Ling, of Anaheim, California, designed, manufactured, and marketed electro-dynamic vibration test systems, high-intensity-sound transducers, power conversion equipment and power amplifiers used to perform reliability testing and stress screening during product development and quality control. This mode of testing is used by industry and the military to reveal design and manufacturing flaws in a broad range of precision products, from satellite parts to computer components. Ling products for power and frequency conversion and "clean power" applications include systems capable of output up to 432 kVA.

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) was completed on March 31, 1998. Accordingly, the Company no longer includes Technology among its reportable business segments. 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. The Company's prior year financial statements have been restated to conform to this treatment. See Note 18 of the Notes to Consolidated Financial Statements referred to in Item 8 below.

On September 30, 1997, the Company sold all of the assets of its L.A.B. Division to Noonan Machine Company of Franklin Park, IL. The Company received $2.6 million in cash and two notes, totaling $650 thousand, from Noonan Machine Company. The purchaser has requested that the principal amount of the $250 thousand note be reduced to reflect the resale value of certain assets of L.A.B. The Company is enforcing its rights with respect to the note. The net proceeds from the sale were used to pay down all outstanding debt on September 30, 1997 and build working capital. The sale of L.A.B. resulted in a $2.0 million gain, which was recorded in the fourth quarter of fiscal year 1997.

The L.A.B. Division designed, manufactured, and marketed mechanically and hydraulically-driven test systems for package and product reliability testing. Among other uses, this equipment simulates the conditions a product will encounter during transportation and distribution including shock, compression, vibration and impact. This type of testing is widely conducted by businesses involved in product design, packaging and distribution.

Backlog

The backlog of orders believed to be firm as of September 30, is $1.9 million and $2.1 million ($1.1 million of which relates to Ling, which was sold on October 21, 1999) for 2000 and 1999, respectively. The backlog relates to contracts awarded by commercial customers or government agencies.

Employees

The total number of employees of Mechanical Technology and its subsidiaries was 59 as of September 30, 2000, as compared to 104 as of September 30, 1999. This reduction in employees is primarily due to the sale of Ling on October 21, 1999.

Fiscal 2000 employees reflect the strategic development of a new executive team and staff for Mechanical Technology as the Company stepped up its involvement in new energy. Executives and staff were chosen for their acumen, ability and experience in areas critical to the execution of the Company's core business strategy. The backgrounds of the Company's officers are more fully detailed under the Executive Officers Section of Item 1.

Significant Customers

Significant customers information is set forth in Note 20 of the Notes to Consolidated Financial Statements referred to in Item 8 below and incorporated herein by reference.

Executive Officers

The executive officers of the registrant (all of whom serve at the pleasure of the Board of Directors), their ages, and the position or office held by each, are as follows:

Position or Office	Name	Age
Chief Executive Officer and Director	George C. McNamee	54
President and Chief Technology Officer	William P. Acker	39
Vice President and Chief Marketing Officer	Judith A. Barnes	52
Vice President of Business Development	James T. Bunch	29
Vice President of Corporate Development	Catherine S. Hill	38
Vice President and Chief Financial Officer	Cynthia A. Scheuer	39

Mr. McNamee has been a Director and Chairman of the Company's Board since 1996, and Chief Executive Officer since April 1998. Mr. McNamee is and has been the Chairman of the Board of First Albany Companies, Inc. ("FAC") since 1985 and its Co-Chief Executive Officer since 1994 (see "Securities Ownership of Certain Beneficial Owners" in Item 10 below). Mr. McNamee also serves as Chairman of the Board of Plug Power Inc., a position he has held since Plug Power was formed in 1997. He is a member of the Board of Directors of MapInfo Corporation and The Meta Group, Inc. He is on the Board of Directors of the New York Stock Exchange, and the New York Conservation Education Fund.

Dr. Acker was appointed President of the Company in June 2000. From 1997 to June 2000, Dr. Acker was Vice President of Technology and Product Development at Plug Power, Inc., a manufacturer of residential fuel cells founded as a joint venture of the Company and DTE Energy. Before his tenure at Plug Power, Dr. Acker joined Texaco in 1990 and served in numerous management positions, including Global Manager for Engineering and Product Testing from 1996 to 1997, where he was responsible for the development of energy products and was involved in the formation of Texaco's strategic business direction.

Dr. Barnes had a consulting practice from 1971 until March 2000, when she joined the Company as Vice President and Chief Marketing Officer. She provided services in marketing, advertising, management communication and technical communication to clients in business and industry, finance, the arts, education, healthcare, retailing and entertainment. Dr. Barnes is and has been an adjunct professor in the Lally School of Management and Technology at Rensselaer Polytechnic Institute, where she has taught in its graduate and executive programs since 1990.

Mr. Bunch, who joined the Company as Vice President of Business Development in June 2000, has worked in the energy sector as an equity research analyst. He evaluated international integrated and Russian oil companies with Goldman, Sachs in New York from 1993 to 1995 and London from 1997 to 1998. From 1996 to 1997, he worked in Moscow with Renaissance Capital, a Russian investment bank, where he was involved in the sale of part of one of Russia's largest integrated oil and gas companies to a leading international petroleum company. Mr. Bunch also worked with the Boston Consulting Group in London during the summer of 1999, while completing his MBA from Harvard University, which he received in May 2000.

Ms. Hill, who joined the Company in March of 2000 as Vice President of Corporate Development, has focused on counseling high technology start-up firms throughout her career, first at Wilmer, Cutler & Pickering in Washington, D.C. from 1990 through 1996, and then at Whiteman, Osterman, Hanna in Albany, New York from 1997 to 1999. She was instrumental in forming Plug Power and in developing and implementing its early strategic relationships. From 1999 until she joined the Company, Ms. Hill worked as outside general counsel for a number of start-up internet and software companies.

Ms. Scheuer was appointed Vice President and Chief Financial Officer of the Company in November 1997. Prior to joining the Company, she was a Senior Business Assurance Manager at PricewaterhouseCoopers L.L.P, where she was employed from 1983 to 1997. From 1989 to 1997, she was a Senior Business Assurance Manager responsible for the planning and delivery of audit and financial consulting services to a diverse group of clients in manufacturing, high technology, retailing and government.

Other Key Employees

Mr. Chaves has been Vice President and General Manager of MTI Instruments, Inc., a majority-owned subsidiary of the Company, since March 2000. He was Vice President and General Manager of the Company's Advanced Products Division from 1987 to March 2000, and Vice President and General Manager of the Company's L.A.B Division from January 1994 until it was sold in September 1997. Previously, he served as Manager of Corporate Marketing for the Company from 1981 to 1987.

ITEM 2: PROPERTIES

The Company leases property in New York and, prior to the sale of Ling in October 1999, leased space in California. In management's opinion, the facilities are generally well-maintained and new facilities are being evaluated to support the new energy segment and corporate offices. The new energy segment has offices and laboratories in the MTI Instruments' facility.

The Company leases approximately 2,800 square feet for its corporate headquarters in Albany, New York. The lease is month to month. The Company's majority-owned subsidiary, MTI Instruments, Inc., leases a facility of approximately 20,700 square feet of office and manufacturing space in Albany, New York. The lease expires on November 30, 2009.

ITEM 3: LEGAL PROCEEDINGS

At any point in time, the Company and its subsidiaries may be involved in various lawsuits or other legal proceedings; these could arise from the sale of products or services or from other matters relating to its regular business activities, compliance with various governmental regulations and requirements, or other transactions or circumstances. The Company does not believe there are any such proceedings presently pending, which could have a material adverse effect on the Company's financial condition except for the matters described in Note 16 of the Notes to Consolidated Financial Statements referred to in Item 8 below incorporated herein by reference.

On September 9, 1998, Barbara Lawrence, the Lawrence Group, Inc.

("Lawrence"), and certain other Lawrence-related entities ("Plaintiffs") filed suit in the United States Bankruptcy Court for the Northern District of New York against First Albany Corporation, Mechanical Technology, Dale Church, Edward Dohring, Alan Goldberg, George McNamee, Beno Sternlicht, Marty Mastroianni (former President and Chief Operating Officer of MTI), and 33 other individuals ("Defendants") who purchased a total of 820,909 shares of the Company's stock from the Plaintiffs. The case concerns the Defendants' 1997 purchase of Mechanical Technology shares from the Plaintiffs at the price of $2.25 per share. FAC acted as Placement Agent for the Defendants in the negotiation and sale of the shares and in proceedings before the Bankruptcy Court for the Northern District of New York, which approved the sale in September 1997. Plaintiffs claim that the Defendants failed to disclose material inside information concerning Plug Power, LLC to the Plaintiffs and therefore the $2.25 per share purchase price was unfair. Plaintiffs are seeking damages of $5 million plus punitive damages and costs. In April 1999, Defendants filed a motion to dismiss the amended complaint, which was denied by the Bankruptcy Court. On appeal in October 2000, Plaintiffs' cause of action was dismissed by the United States District Court for the Northern District of New York. In November 2000, Plaintiffs filed an appeal of that dismissal with the United States Court of Appeals for the Second Circuit. That appeal is presently pending.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of the registrant's security holders during the fourth quarter of fiscal 2000.

PART II

ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED

STOCKHOLDER MATTERS

Price Range of Common Stock

On April 16, 1999, the stock began trading on the Nasdaq National Market under the symbol MKTY. From August 1994 through April 15, 1999, the Company's stock traded on the over-the-counter market under the symbol MKTY on the OTC Bulletin Board. Set forth below are the highest and lowest prices at which shares of the Company's common stock have been traded during each of the Company's last two fiscal years.

	Prices as Adjusted to Effect for Stock Splits High Low
Fiscal Year 2000
First Quarter	$11.667	$4.917
Second Quarter	33.667	6.333
Third Quarter	24.333	7.625
Fourth Quarter	16.500	8.625
Fiscal Year 1999
First Quarter	$ 1.917	$1.500
Second Quarter	4.667	1.778
Third Quarter	10.000	2.648
Fourth Quarter	11.854	7.792

Number of Equity Security Holders

As of December 19, 2000, the Company had approximately 482 holders of its $1.00 par value common stock. In addition, there are approximately 3,466 beneficial owners holding stock in "street" name.

Dividends

The payment of dividends is within the discretion of the Company's Board of Directors and will depend, among other factors, on earnings, capital requirements, and the operating and financial condition of the Company. The Company has never paid and does not anticipate paying dividends in the foreseeable future.

ITEM 6: SELECTED FINANCIAL DATA

The following table sets forth summary financial information regarding Mechanical Technology for the years ended September 30, as indicated:

Statement of Earnings Data (In thousands, except per share data)
	2000	1999		1998	Restated4 1997			Restated4 1996
Net Sales	$ 5,547	$ 12,885		$ 21,028	$ 24,102			$ 22,755
Gain on Sale of Subsidiary/Division	1,262	-		-	2,012			750
(Loss) Income from Continuing Operations before Income Taxes, Equity in Investee Losses and Extraordinary Item	(4,917)	(1,329)		(1,800)	3,031			673
Equity in Investee Losses, Net of Tax Benefit	(15,849)	(9,363)		(3,806)	(330)			-
(Loss) Income from Continuing Operations before Extraordinary Item	(18,839)	(10,729)		(2,031)	2,558			598
Income (Loss) from Discontinued Operations, Net of Taxes	243	41		(2,285)2	(545)			3,150
Extraordinary Item - Gain on Extinguishment of Debt, Net of Taxes	-	-		-	2,507			-
Net (Loss) Income	$(18,596)	$(10,688)		$ (4,316)	$ 4,520			$ 3,748
Basic and Diluted Earnings Per Share1,3
(Loss) Income from Continuing Operations before Extraordinary Item	$ (0.54)		$ (0.31)	$ (0.07)		$ 0.09	$ 0.03
Income (Loss) from Discontinued Operations	.01		-	(0.08)		(0.02)	0.17
Extraordinary Item	-		-	-		0.09	-
Net (Loss) Income	$ (0.53)		$ (0.31)	$ (0.15)		$ 0.16	$ 0.20
Weighted Average Shares Outstanding and Equivalents1	35,236,278		33,991,590	28,730,016		27,447,528	18,930,282
Balance Sheet Data:
Working Capital	$ (24,293)		$ 18,662	$ 5,779		$ 7,696	$ 7,086
Investments, at Equity	64,356		8,710	1,221		27	-
Investments, at Cost	6,050		-	-		-	-
Total Assets	77,266		31,780	21,128		14,003	13,481
Total Long-Term Debt	-		-	-		-	5,508
Total Shareholders' Equity	45,029		27,786	11,124		8,213	2,164

_________________________________

1Earnings per share information has been retroactively adjusted to reflect both the April 3, 2000 3-for-1 and the April 30, 1999 3-for-2 stock splits.

2Includes a net charge of $1,769 related to the discontinuance of the Company's Technology Division and a $516 loss from operations prior to discontinuance.

3Earnings per share for 1997 and 1996 have been restated to comply with SFAS No. 128, "Earnings per Share."

4Prior years have been restated to reflect the Technology and Defense/Aerospace segments as discontinued operations. (See Note 18 of the Notes to Consolidated Financial Statements.)

There were no cash dividends on common stock declared for any of the periods presented.

ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Results of Operations: 2000 in Comparison with 1999

The following three paragraphs summarize significant organizational changes, which impact the comparison of September 30, 2000 and 1999 results of operations:

The Company is developing new energy technologies and takes majority and sometimes minority positions in companies involved in new energy technologies. As of September 30, 2000, the Company has holdings in the following three new energy companies: Plug Power Inc., SatCon Technology Corporation and Beacon Power Corporation.

On October 21, 1999, the Company created a strategic alliance with SatCon Technology Corporation ("SatCon"). SatCon acquired Ling Electronics, Inc. and Ling Electronics, Ltd. ("Ling") from the Company and the Company agreed to invest approximately $7 million in SatCon. In consideration for the acquisition of Ling and the Company's investment, the Company received 1,800,000 shares of SatCon's common stock and warrants to purchase an additional 100,000 shares of SatCon's common stock. SatCon also received warrants to purchase 300,000 shares of the Company's common stock (after the effects of the Company's 3-for-1 stock split).

On May 23, 2000, the Company purchased preferred stock and received warrants to purchase common stock and the right to receive additional warrants to purchase common stock if there was an initial public offering ("IPO"), from Beacon Power Corporation, in exchange for $6 million in cash. In August 2000, the Company exercised its 12,000 warrants. At September 30, 2000, the Company owned 1,428,571 shares of Beacon Power Class F Preferred Stock and 12,000 shares of common stock. On November 17, 2000, Beacon Power completed its initial public offering of its common stock, and the warrant terms were set for the purchase of 1,333,333 shares of common stock at an exercise price of $2.25 per share, exercisable as of November 17, 2000. The warrants expire May 23, 2005. Immediately prior to its IPO, Beacon Power converted its preferred stock to common stock and completed a 2-for-1 stock split. The Company exercised the warrants, on a cash-less basis, on December 20, 2000 and received 985,507 shares of Beacon Power common stock. After the exercise of the warrants, the Company owned 3,866,949 shares, approximately 10%, of Beacon Power common stock.

The following is management's discussion and analysis of certain significant factors, which have affected the Company's results of operations for the year ended September 30, 2000 compared to the year ended September 30, 1999.

Sales for fiscal 2000 totaled $5.5 million compared to $12.9 million for the prior year, a decrease of $7.3 million or 56.9%. This decrease is primarily due to the October 21, 1999 sale of Ling, which had sales of $8.4 million in 1999 and $.14 million in 2000 prior to the sale. Annual sales for MTI Instruments, Inc. ("MTI Instruments"), now a separate

Results of Operations: 2000 in Comparison with 1999 (Continued)

subsidiary but formerly the Advanced Products Division, were $5.4 million

for fiscal 2000, an increase of $.9 million over fiscal 1999 sales due primarily to marketing efforts for a new wafer thickness gauge product line and increased sales of capacitance products in the Pacific Rim and Japan.

Gross profit increased to 53.6% of sales in fiscal 2000 from 36% of sales in fiscal 1999. Gross profits increased in 2000 due to the sale of Ling which had lower gross profits.

Selling, general and administrative expenses for fiscal 2000 were 87.7% of sales, as compared to 38.4% in 1999. Higher levels of selling, general and administrative expenses as a percentage of sales for fiscal 2000, resulted from the 56.9% decrease in sales coupled with the costs of building a management team to implement the new energy business strategy. Selling, general and administrative expenses decreased $.85 million from 1999 to 2000.

Product development and research costs during fiscal 2000 were 36.7% of sales, compared to 8.6% for 1999. Development costs increased $.9 million from 1999 to 2000, reflecting MTI Instruments' commitment to developing both its new wafer thickness gauge product line and its OEM products.

The operating loss of $3.9 million for the year ended September 30, 2000 represents a $2.5 million or 178.9% increase from the $1.4 million operating loss reported during the same period last year. The increase is the result of increased research and development efforts coupled with increased management focus on implementing the new energy business strategy.

Results during fiscal 2000 were reduced by higher interest expense of $1.9 million compared to $.100 million in 1999. This increase results primarily from increased debt used to fund purchases of Plug Power, Beacon Power and SatCon stock and working capital requirements.

The Company recorded a $15.8 million loss, net of tax, from the recognition of the Company's proportionate share of losses in equity investees compared to a $9.4 million loss, net of tax, in 1999.

Equity in investee losses result from the Company's minority ownership in certain investments that are accounted for under the equity method of accounting. Under the equity method of accounting, the Company's proportionate share of each investee's operating losses and amortization of the Company's net excess investment over its equity in each investee's net assets is included in equity in investee losses. Equity in investee

losses for the year ended September 30, 2000 includes the results from the Company's minority ownership in Plug Power and SatCon. Equity in investee losses for the year ended September 30, 1999 included the results from the Company's minority ownership in Plug Power. The Company expects these companies to continue to invest in development of their products and services, and to recognize operating losses, which will

result in future charges recorded by the Company to reflect its proportionate share of such losses.

Results of Operations: 2000 in Comparison with 1999 (Continued)

Equity in investee losses includes a loss, before taxes, from Plug Power of $23.1 million in 2000 compared to $9.4 million in 1999. This $13.8 million increase in losses is primarily the result of Plug Power expanding business operations including costs to develop and prototype residential fuel cell units. Equity in investee losses in 2000 also includes our proportionate share of losses from SatCon of $.9 million and embedded difference (the difference between the carrying value of the Company's investment and its interest in the underlying equity) amortization of $2.1 million. Our investment in SatCon is accounted for on a one-quarter lag and includes results of SatCon through June 30, 2000. The Company acquired its investment in SatCon during fiscal 2000.

The tax rate for fiscal 2000 is (39.2%) compared to 0% in 1999. The fiscal 2000 tax rate is due to losses generated by operations and changes in deferred tax liabilities associated with the accounting for holdings in and recognition of the Company's proportionate share of losses from Plug Power and SatCon. Further, as a result of ownership changes in 1996, the availability of net operating loss carryforwards to offset future taxable income will be significantly limited pursuant to the Internal Revenue Code.

Results of Operations: 1999 in Comparison with 1998

The following three paragraphs summarize significant organizational changes, which impact the comparison of September 30, 1999 and 1998 results of operations:

On June 27, 1997, the Company and Edison Development Corp. ("EDC"), a subsidiary of DTE Energy Co. formed a joint venture, Plug Power LLC ("Plug Power") to further develop the Company's Proton Exchange Membrane ("PEM") Fuel Cell technology. In exchange for its contribution of employees, contracts, intellectual property and certain other assets that had comprised the fuel cell research and development business activity of the Technology segment (the assets of which had a net book value of $357 thousand), the Company received a 50% interest in Plug Power. EDC made an initial cash contribution of $4.75 million in exchange for the remaining 50% interest in Plug Power. The Company's investment in Plug Power is included in the balance sheet caption "Investments, at equity."

Since Plug Power was formed in 1997, the Company, EDC and other investors have contributed substantial amounts of cash and other assets to Plug Power. Contributions, both cash and non-cash, to Plug Power by the Company totaled $20.7 million as of September 30, 1999 and increased to $41.2 million as of Plug Power's Initial Public Offering ("IPO") date. After Plug Power's IPO, the Company owned 13,704,315 shares or approximately 31.9% of outstanding Plug Power stock.

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) was completed on March 31, 1998. Accordingly, the Company no longer includes Technology among its reportable business segments. The Technology Division is reported as a discontinued operation as of December 26, 1997, and the consolidated financial statements have been

Results of Operations: 1999 in Comparison with 1998 (Continued)

restated to report separately the net assets and operating results of the business.

The following is management's discussion and analysis of certain significant factors, which have affected the Company's results of operations for the years ended September 30, 1999 compared to 1998. This discussion relates only to the Company's continuing operations.

Sales for fiscal 1999 totaled $12.9 million compared to $21.0 million for the prior year, a decrease of $8.1 million or 38.7%. This decrease is the result of continuing weak market conditions. Advanced Products and Ling reported sales decreases of 48.7% and 31.6%, respectively in the

year ended September 30, 1999.

Gross profit decreased to 36% of sales in fiscal 1999 from 41% of sales in fiscal 1998.

Selling, general and administrative expenses for fiscal 1999 were 38.4% of sales, as compared to 27.6% in 1998. Higher levels of general and administrative expenses as a percentage of sales for fiscal 1999 resulted primarily from the 38.7% decrease in sales. Actual selling, general and administrative expenses decreased $.863 million from 1998 to 1999.

Product development and research costs during fiscal 1999 were 8.6% of sales, compared to 4% for 1998. Development costs increased $.274 million from 1998 to 1999 reflecting the Advanced Products Division's commitment to developing diagnostic and other new products.

The operating loss of $1.4 million for the year ended September 30, 1999 represents a $3.4 million or 170.4% decrease from the $2 million operating income reported during the same period last year. The decrease is the result of decreased sales levels and corresponding decreases in gross profits due to fixed cost absorption at lower sales levels.

In addition to the matters noted above, the Company recorded a $9.4 million loss from the recognition of the Company's proportionate share of losses of Plug Power compared to a $3.8 million loss in 1998.

Results during fiscal 1999 were adversely affected by the sales decrease. Further, as a result of ownership changes in 1996, the availability of net operating loss carryforwards to offset future taxable income will be significantly limited pursuant to the Internal Revenue Code.

Liquidity and Capital Resources

At September 30, 2000, the Company's order backlog was $1.9 million, compared to $1 million (excluding $1.1 million in backlog for Ling which was sold on October 21, 1999) for the prior year.

Inventory and accounts receivable turnover ratios and their changes for the years ended September 30 are as follows:

	2000	1999	Change
Inventory	2.1	2.1	-
Accounts receivable	7.5	4.0	3.5

Liquidity and Capital Resources (Continued)

The change in the accounts receivable turnover ratio is the direct result of the sale of Ling on October 21, 1999. Although there was no net change in the inventory turnover ratio, the ratio increased due to higher sales in MTI Instruments, while maintaining lower inventory levels throughout most of fiscal 2000, and decreased because of the sale of Ling on October 21, 1999.

Inventories in fiscal 2000 of $1.2 million reflect inventory levels for MTI Instruments required to support expected first quarter sales. Additionally, accounts receivable decreased by $3.2 million in fiscal 2000 primarily due to the sale of Ling.

Cash flow used by continuing operations was $3.9 million in 2000 compared with $2.3 million used in 1999 and $.5 million provided in 1998. Cash flow from operating activities was impacted in 2000 and 1999 by operating losses and 1998 was impacted by positive operating income and fluctuations in working capital components.

Working capital was ($24.3) million at September 30, 2000, a $43 million decrease from $18.7 million at September 30, 1999. This decrease reflects the sale of Ling in October 1999 and its impact on working capital items, as well as the investment in SatCon ($7.07 million) and Beacon Power ($6.05 million) and the classification of the $27 million line of credit balance as current.

Capital expenditures were $.3 million for 2000, $2.7 million for 1999, and $3.2 million for 1998. The capital expenditures in 2000 were in accordance with the lower level of planned expenditures including leasehold improvements, computers and manufacturing equipment. Capital expenditures in 2001 are expected to approximate $1.9 million, which consists of expenditures for facility fit-up and computer and manufacturing equipment. The Company expects to finance these expenditures with cash from operations and other financing sources.

Cash and cash equivalents were $1.5 million at September 30, 2000 compared to $5.9 million at September 30, 1999. Investments in marketable debt securities were $0 at September 30, 2000 compared to $7.9 million in the prior year. These decreases are primarily attributable to new energy technology investments made by the Company in Beacon Power and SatCon.

The $50 million Credit Agreement, as amended, was reduced to $30 million ("the $30 million Credit Agreement, as amended"). Concurrent with this amendment, KeyBank, N.A. permanently waived all covenant violations related to the minimum price of Plug Power common stock and the Company made a principal reduction of $3 million, bringing the loan balance to $25.2 million as of the amendment date. Additional borrowings are available when the Plug Power stock price is above $20 per share.

The Company has pledged 8 million shares of Plug Power common stock as collateral. In addition, the Company entered into a Put and Call with First Albany Companies, Inc. ("FAC") to provide independent credit support for repayment of the loan ("FAC Credit Enhancement"). The FAC Credit Enhancement provides FAC with the option, if the price of Plug Power stock falls to $4 per share, to either purchase 6.3 million Plug Power shares pledged as collateral on the loan or take an assignment of KeyBank N.A.'s rights under the Credit Agreement, as amended. The FAC Credit Enhancement may be triggered in the event of a default and the FAC Credit Enhancement expires on April 27, 2001 and may be renewed by Liquidity and Capital Resources (Continued)

the Company and FAC on a monthly basis upon mutually agreeable terms.

Upon expiration of the FAC Credit Enhancement, if Plug Power stock is trading below $20 per share the loan is immediately due and payable. Mandatory repayments on any outstanding balance in excess of $25.2 million would be required if the Plug Power stock price declines below $16 per share while the FAC Credit Enhancement is in place. After FAC Credit Enhancement expires, mandatory repayments on any outstanding balance would be required if the Plug Power stock price is below $20 per share. The Company is obligated to make interest only payments through March 15, 2002, and upon exercise of a term loan option at the end of the line of credit term, to repay the principal in 8 equal quarterly installments beginning March 31, 2002. Interest is payable monthly at either the Prime Rate or if certain performance standards are achieved, based on both the trading volume and market price of Plug Power common stock, at LIBOR based rates. On September 30, 2000, $27 million of debt was outstanding at Prime (9.5%)and classified as short term. If the line of credit is due and payable upon expiration of the FAC Credit Enhancement on April 27, 2001, the Company may need to sell assets including certain investments to fund this obligation.

On December 27, 2000, the Company entered into two bridge loan agreements with FAC. The first loan was for $945 thousand and was used to pay the purchase price for the FAC Credit Enhancement. The Company has pledged 200,000 shares of Plug Power common stock as collateral. The second loan is for $5 million, $3 million of which was used to make the principal loan repayment to KeyBank, N.A. and the remaining $2 million will be used for working capital. The Company pledged 1 million shares of Plug Power common stock as collateral. Both loans bear interest at the Prime Rate (9.5% at December 27, 2000) and both interest and principal are due on January 3, 2002. Upon mutual agreement of FAC and the Company, the loans may be converted to equity prior to maturity.

As of December 27, 2000, the $30 million Credit Agreement, as amended, requires the Company to meet certain covenants, including maintenance of a debt service reserve account (equal to 6 months of interest payments on outstanding debt, amounting to $1.142 million at September 30, 2000) and a collateral coverage ratio, the FAC Credit Enhancement, and a minimum Plug Power share price. All other covenants in the previous KeyBank, N.A. credit agreements were eliminated in connection with this financing.

The reduction in net assets of discontinued operations to a net liability of $.2 million reflects the collection of receivables, settlement of liabilities and the reversal of accruals for discontinued operations in the fourth quarter of fiscal 2000. The sale of the Technology Division was completed as of March 31, 1998.

The Company anticipates that it will be able to meet the liquidity needs of its continuing operations, including the repayment of its line of credit in April 2001 if the FAC Credit Enhancement is not extended, for the next year from current cash resources, cash flow generated by operations, borrowings under its bridge loans from FAC, equity financings, and sale of assets, if deemed appropriate. However, there can be no assurance that the Company will not require additional financing within this time frame or that any additional financing will be available to the Company on terms acceptable to the Company, if at all.

Liquidity and Capital Resources (Continued)

As of September 30, 2000, the Company has investments in the following securities:

Plug Power Inc. 13,704,315 shares

SatCon Technology Corporation 1,800,000 "

Beacon Power Corporation (a) 3,866,649 "

1. As of December 20, 2000, subsequent to its initial public offering on November 17, 2000, a 2-for-1 stock split immediately prior to its IPO and Mechanical Technology's exercise, on December 20, 2000, of warrants on a cash-less basis.

These securities are currently traded on the Nasdaq National Market, therefore these securities are subject to stock market conditions and in Beacon Power's case, an underwriter's lockup prohibiting the sale of securities until May 17, 2001. Due to the Company's significant ownership positions in each security, most of these securities will be considered "restricted securities" as defined in Rule 144 and may be sold in the future without registration under the Securities Act subject to compliance with the provisions of Rule 144. Generally, restricted securities that have been owned for a period of at least two years may be sold immediately after an investee has an initial public offering ("IPO"). Restricted securities that have been owned for at least one year may be sold immediately after the completion of an IPO subject to the volume limitations of Rule 144.

In general, and where the Company is deemed an affiliate like in the case of Plug Power, under Rule 144 as currently in effect, assuming the investees are current in public filings with the Securities Exchange Commission, a person who has beneficially owned shares for at least one year is entitled to sell, through a broker's transaction or in a transaction directly with a market maker, within any three-month period

commencing 90 days after the date of the completion of an IPO, a number of shares that does not exceed the greater of 1% of the then outstanding shares of common stock of the investee, or the average weekly trading volume of the common stock during the four calendar weeks preceding the date on which notice of such sale is filed, subject to certain restrictions.

Liquidity and Capital Resources of Investments, at Equity

As disclosed in Plug Power's most recent Form 10-Q filed for the period ended September 30, 2000:

Plug Power's cash requirements depend on numerous factors, including completion of its product development activities, ability to commercialize residential fuel cell systems, market acceptance of its systems and other factors. Plug Power expects to devote substantial capital resources to continue its development programs directed at commercializing its fuel cell systems for worldwide residential use, to hire and train its production staff, develop and expand its manufacturing capacity, begin production activities and expand research and development activities. Plug Power will pursue the expansion of its operations through internal growth and strategic acquisitions and expect such activities will be funded from its existing cash and cash equivalents, issuance of additional equity or debt securities, or additional borrowings subject to market and other conditions. There can be no assurance that such additional financing will be available on Liquidity and Capital Resources of Investments, at Equity (Continued)

terms acceptable to Plug Power or at all. Failure to raise the funds necessary to finance future cash requirements or consummate future acquisitions could adversely affect Plug Power's ability to pursue its strategy and could negatively affect operations in future periods. Plug Power anticipates incurring substantial additional losses over at least the next several years and believes its current cash balances will provide it with sufficient capital to fund operations for at least the next twelve months.

As disclosed in SatCon's most recent Form 10-Q filed for the period ended June 30, 2000:

Since inception, SatCon has financed its operations and met its capital expenditure requirements primarily through the sale of private equity securities, public security offerings, borrowings on its line of credit and capital equipment leases.

SatCon anticipates that the existing $9.6 million in cash and cash equivalents will be sufficient to fund operations for at least the next twelve months. However, there can be no assurance that SatCon will not require additional financings within this time frame or that any additional financing, if needed, will be available to SatCon on terms acceptable to it, if at all.

Market Risk

Market risk represents the risk of changes in value of a financial instrument caused by fluctuations in interest rates and equity prices.

At September 30, 2000, the Company had variable rate debt totaling $27 million. Interest rate changes generally do not affect the fair market value but do impact future earnings and cash flows. The earnings and cash flow impact for the next year resulting from a one-percentage point increase in interest rates would be approximately $.270 million, holding other variables (debt level) constant.

The Company has performed a sensitivity analysis on its holdings of Plug Power and SatCon common stock. The sensitivity analysis presents the hypothetical change in fair value of those financial instruments held by

the Company at September 30, 2000, which are sensitive to changes in

interest rates. Market risk is estimated as the potential change in fair value resulting from an immediate hypothetical one-percentage point parallel shift in the yield curve. The fair values of the Company's holdings in marketable securities have been based on quoted market prices.

The Company's interests in Plug Power and SatCon are accounted for on the equity method. The fair market values, at September 30, 2000, of the Company's interests in Plug Power and SatCon are $510.5 and $64.4 million, respectively. If the market price on these interests decreased by ten percent, the fair value of the stocks would decrease by $51.05 and $6.44 million for Plug Power and SatCon, respectively.

Market Risk (Continued)

The Company also has an investment in Beacon Power, which is accounted for at cost. The fair market value of the Company's interest in 3,866,649 shares of Beacon Power common stock after the December 20, 2000 cash-less warrant exercise is $23.2 million based on the November 17, 2000 $6 per share IPO price. If the market price on the Beacon Power stock would decrease by ten percent, the fair value of the stock would decrease by $2.32 million.

ITEM 8: FINANCIAL STATEMENTS

The financial statements filed herewith are set forth on the Index to Consolidated Financial Statements on Page F-1 of the separate financial section which follows page 52 of this report and are incorporated herein by reference.

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information set forth under the caption "Executive Officers" in Item 1 of this Form 10-K Report is incorporated herein by reference.

DIRECTORS

At the Annual Meeting of Shareholders, to be held April 24, 2001, three Directors are to be elected, each to hold office until the expiration of his term and until a successor shall be elected and shall qualify. The Directors serve staggered terms.

Alan Goldberg, Walter Robb and Beno Sternlicht are nominated to serve three-year terms; Dale Church, Edward Dohring and David Eisenhaure are in the first year of three-year terms; George McNamee and Dennis O'Connor are in the second year of three-year terms. Management's nominees for Directors, together with certain information concerning them, are on the following pages.

Certain Information Regarding Nominees

Mr. Goldberg, 55, a Director since 1996, is with First Albany Companies, Inc. ("FAC") where he has been the President since 1993, Co-Chief Executive Officer since 1994 and a Director since 1985 (see "Securities Ownership of Certain Beneficial Owners", below). He has served as Chairman of the Board of Trustees of the Albany Institute of History and Art, and as Director and Chairman of the Center for Economic Growth and Director of the Albany Symphony Orchestra. He serves on the Board of Directors of SatCon Technology Corporation and Beacon Power Corporation.

Certain Information Regarding Nominees (Continued)

Dr. Robb, 72, a Director since 1997, has been a management consultant and President of Vantage Management, Inc., since 1993. Prior to that, Dr. Robb was with General Electric Company ("GE") in a number of executive positions. He was Senior Vice President for Corporate Research and Development from 1986 until his retirement on December 31, 1992, directing the GE Research and Development Center, one of the world's largest and most diversified industrial laboratories, and serving on GE's Corporate Executive Council. He has served on the Board of Directors of Plug Power Inc., since its formation in 1997, and is a Director of Cree Inc., Celgene Inc., and a number of other privately owned companies.

Dr. Sternlicht, 71, a Director since 1996 and a co-founder of the Company, has been President of Benjosh Management Corporation, a management firm in New York City, since 1976; President of Amcast since 1976; and President of Arben International,LLC, with offices in Moscow and New York City, since 1994. He has also served as Chairman of the Board of Comfortex Corp. since 1994. Dr. Sternlicht was a Director of the Company from 1961 to 1992, and prior to 1985 held a number of positions with the Company. At the time of his departure from the Company in 1985, he served as Technical Director and Vice Chairman of the Board of Directors. Dr. Sternlicht was one of the founders of VITA Volunteers in Technical Assistance, and has served on various advisory committees of NASA, DOE and the Commerce Department under Presidents Carter, Reagan and Bush, and served as an Advisor on Energy to PRL, Israel and India.

Certain Information Regarding Incumbent Directors

Mr. Church, 60, a Director since 1997, has practiced law in private practice, government, and corporate environments for over 30 years with specialties in U.S. and international government contracting, developing companies, mergers and acquisitions, and joint ventures. He has been the Chief Executive Officer of Ventures & Solutions LLC since 1996 and the Chairman and CEO of the Intelligent Inspection Corporation since 1999, and, prior to that time, was a partner in the law firm of McDermott, Will & Emery from 1993 to 1997. He served as General Counsel to the American Electronics Association from 1994 to 1998. His previous experience includes working for the U.S. Government's Central Intelligence Agency and Department of Defense and as corporate counsel to establish several companies in the Silicon Valley of California. He is a Trustee of the National Security Industrial Association and is a director of various private corporations.

Certain Information Regarding Incumbent Directors (Continued)

Mr. Dohring, 67, a Director since 1997, became President of MTI Instruments, Inc., a majority-owned subsidiary of the Company, on April 1, 2000. Mr. Dohring retired December 31, 1998 from Silicon Valley Group, Inc. ("SVG") where he had been Vice President since July 1992 and President of its SVG Lithography Systems, Inc. ("SVGL") unit since October 1994. From June 1992 to October 1994, he served as President of SVG's Track Systems Division. He joined SVG from Rochester Instrument Systems, Inc., where he served as President from April 1989 to June 1992. He also held management positions with General Signal, CVC Products, Bendix, Bell & Howell and Veeco Instruments. He is a member of the Board of Directors of many companies including Tropel Corporation and Tegal Corporation, and has served as a director of Semiconductor Equipment & Materials International (SEMI) and International Disc Equipment Manufacturers Association (IDEMA). He currently serves on the State University of New York Maritime College Board of Directors and is a trustee of the College.

Mr. Eisenhaure, 55, a Director since 2000, has served as President, Chief Executive Officer and Chairman of the Board of Directors of SatCon Technology Corporation ("SatCon") from 1985. Prior to founding SatCon, Mr. Eisenhaure was associated with the Charles Stark Draper Laboratory, Incorporated from 1974 to 1985, and with its predecessor, the Massachusetts Institute of Technology's Instrumentation Laboratory, from 1967 to 1974. In addition to his duties at SatCon, Mr. Eisenhaure holds an academic position at the Massachusetts Institute of Technology serving as a lecturer in the Department of Mechanical Engineering. He also serves on the Board of Directors of Beacon Power Corporation. Mr. Eisenhaure became a Director of the Company when he was selected by SatCon as its designee on the Company's Board of Directors pursuant to the agreements entered into in connection with the October 1999 transactions in connection with the strategic alliance between SatCon and the Company.

Mr. McNamee, 54, a Director and Chairman of the Company's Board since 1996, and Chief Executive Officer since April 1998. Mr. McNamee is and has been the Chairman of the Board of First Albany Companies, Inc. ("FAC") since 1985 and its Co-Chief Executive Officer since 1994 (see "Securities Ownership of Certain Beneficial Owners", below). Mr. McNamee also serves as Chairman of the Board of Plug Power Inc., a position he has held since Plug Power was formed in 1997. He is a member of the Board of Directors of MapInfo Corporation and The Meta Group, Inc. He is on the Board of Directors of the New York Stock Exchange, and the New York Conservation Education Fund.

Certain Information Regarding Incumbent Directors (Continued)

Mr. O'Connor, 61, a Director since 1993, is a registered patent attorney and from 1984 until his retirement in June 2000, was the Director of New Products and Technology for Masco Corporation, a diversified manufacturer of building, home improvement, and other specialty products for the home and family. He is a director of various private corporations. Mr. O'Connor originally became a Director of the Company when he was selected by Masco Corporation as its designee on the Company's Board of Directors pursuant to agreements entered into in connection with the 1992 transaction in which Masco sold 1,730,000 shares of the Company's common Stock to subsidiaries of the Lawrence Insurance Group, Inc., a former majority shareholder of the Company. The Lawrence Insurance Group, Inc. subsidiaries agreed to vote their shares to elect a designee of Masco to the Company's Board of Directors so long as Masco remained liable under a guarantee it had executed in connection with the Company's obligations under a line of credit. This Agreement with Masco terminated when Mr. Lawrence lost control of his shares in 1996. Furthermore, the guarantee was released on October 15, 1998 after the Company replaced its existing line of credit with a line of credit from KeyBank, N.A.

SECTION 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's Directors and Executive Officers, and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission ("SEC") initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, Directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

Based on Company records and other information, the Company believes that all SEC filing requirements applicable to its Directors and Officers with respect to the Company's fiscal year ended September 30, 2000 were complied with.

SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

First Albany Companies Inc. ("FAC"), 30 South Pearl Street, Albany, New York, 12207, are beneficial owners of 11,882,433 shares, or approximately 34%, of the outstanding common stock of the Company. Messrs. McNamee and Goldberg may be deemed the beneficial owners of at least a portion of the shares owned by FAC. Messrs. McNamee and Goldberg disclaim such beneficial ownership.

EMPLOYMENT AGREEMENTS

Dr. Judith A. Barnes, Vice President and Chief Marketing Officer will receive 100% of her base salary for 6 months if we terminate her employment without cause. For fiscal year 2000, her base annual salary is $175,000.

Dr. William P. Acker, President and Chief Technological Officer will receive 100% of his base salary and benefits for one year if we terminate him without cause. For fiscal year 2000, his base annual salary is $175,000.

EMPLOYMENT AGREEMENTS (Continued)

Ms. Catherine S. Hill, Vice President of Corporate Development will receive 100% of her base salary for 6 months if we terminate her employment without cause. For fiscal year 2000, her base annual salary is $150,000.

ITEM 11: EXECUTIVE COMPENSATION

Summary Compensation

The following tables set forth information with respect to the compensation and stock option grants for the fiscal year ended September 30, 2000 (and during the Company's two prior fiscal years), of each person who served as Chief Executive Officer during such year, and of all other persons who served as executive officers of the Company and other key employees during such year whose total annual compensation exceeded $100,000:

SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
NAME AND POSITION OF PRINCIPAL	FISCAL YEAR	SALARY	BONUS	SECURITIES UNDER-LYING OPTIONS (#)	ALL OTHER COMP
Dr. William P. Acker, President & Chief Technology Officer	2000	$ 50,481	$ -	175,000	$ -
Dr. Judith A. Barnes, Vice President & Chief Marketing Officer	2000	$100,962	$62,500	140,000	$ -
James T. Bunch, Vice President of Business Development	2000	$ 45,769	$10,000	75,000	$ -
Denis P. Chaves, Vice President & General Manager MTI Instruments, Inc.	2000 1999 1998	$160,000 $160,000 $133,481	$25,000 $30,000 $33,500	300,450 292,950 202,950	$127,472(3) $ 6,523(2) $ 5,793(2)
Catherine S. Hill, Vice President of Corporate Development	2000	$ 86,539	$ -	215,000	$ -
George C. McNamee, Chief Executive Officer (1)	2000 1999 1998	$ - $ - $ -	$ - $ - $ -	120,000 90,000 None	$ - $ - $ -
Cynthia A. Scheuer, Vice President & Chief Financial Officer	2000 1999	$115,037 $103,849	$10,000 $10,000	107,500 112,500	$ 65,567(4) $ 4,235(2)

1. Mr. McNamee was appointed Chief Executive Officer on April 15, 1998.
2. Represents Company matching contributions of $1.00 for each $1.00 contributed by the named individual to the 401(k) Savings Plan up to a maximum of 4% of base pay.
3. Includes gain on stock option exercises of $121,318 and Company matching contributions of $1.00 for each $1.00 contributed to the 401(k) Savings Plan up to a maximum of 4% of base pay totaling $6,154.

4. Includes gain on stock option exercises of $61,006 and Company matching contributions of $1.00 for each $1.00 contributed to the 401(k) Savings Plan up to a maximum of 4% of base pay totaling $4,561.
   

OPTION GRANTS IN FISCAL 2000

	Individual Grants
Name	Number of Shares Underlying Options Granted	Percentage of Total Options Granted to Employees	Exercise Price (per share)	Expiration Date	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term1 5%($) 10%($)
Dr. William P. Acker	175,0003	21.58%	$10.650	06/19/2010	$1,172,102	$2,970,338
Dr. Judith A. Barnes	105,0004 35,0005	12.95% 4.32%	$21.917 $12.963	03/07/2010 06/20/2010	$1,447,244 $ 285,322	$3,667,600 $ 723,061
James T. Bunch	75,0006	9.25%	$11.475	06/26/2010	$ 541,242	$1,371,615
Denis P. Chaves	30,0007	3.70%	$21.625	03/30/2010	$ 407,995	$1,033,940
Catherine S. Hill	105,0004 35,0005	12.95% 4.32%	$21.917 $12.963	03/07/2010 06/20/2010	$1,447,244 $ 285,322	$3,667,600 $ 723,061
George C. McNamee	30,0002	3.70%	$20.917	04/01/2010	$ 394,631	$1,000,073
Cynthia A. Scheuer	30,0007 10,0008	3.70% 1.23%	$21.625 $12.963	03/30/2010 06/20/2010	$ 407,995 $ 81,520	$1,033,940 $ 206,589

_______________

1. Potential realizable value is based on the assumption that the common stock appreciates at the annual rate shown, compounded annually, from the date of grant until expiration of the 10-year term. These numbers are calculated based upon Securities and Exchange Commission requirements and do not reflect the Company's projection or estimate of future stock price growth. Potential realizable values are computed by multiplying the number of shares of common stock subject to a given option by the fair market value on the date of grant, assuming that the aggregate stock value derived from that calculation compounds at the annual 5% or 10% rate shown in the table for the entire 10-year term of the option and subtracting from that the aggregate option exercise price.
2. 100% exercisable at grant.
3. 25% or 43,750 shares are exercisable each year beginning June 19, 2000.
4. 25% or 26,250 shares are exercisable each year beginning March 7, 2000.
5. 33.33% or 11,666 shares are exercisable each year beginning June 20, 2001.
6. 25% or 18,750 shares are exercisable each year beginning June 26, 2001.
7. 25% or 7,500 shares are exercisable each year beginning March 30, 2001.
8. 33.33% or 3,333 shares are exercisable each year beginning June 20, 2001.

Fiscal Year-End Option Values

Option Exercises and Option Values

The following table sets forth information concerning the number and value of unexercised options to purchase common stock of the Company held by the Named Executive Officers of the Company who held such options at September 30, 2000.

AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

			Number of Securities Underlying Unexercised Options at Fiscal Year End (#)		Value of Unexercised In-the-Money Options at Fiscal Year End ($)(1)
Name	Shares Acquired On Exercise (#)	Value Real ($)	Exercisable	Unexercisable	Exercisable	Unexercisable
Dr. William P. Acker	-	-	43,750	131,250	$ 7,131	$ 21,394
Dr. Judith A. Barnes	-	-	26,250	113,750	$ -	$ -
James T. Bunch	-	-	-	75,000	$ -	$ -
Denis P. Chaves	22,500	$121,318	129,825	170,625	$1,256,466	$1,320,016
Catherine S. Hill	-	-	101,250	113,750	$ 406,585	$ -
George C. McNamee	-	-	120,000	-	$ 706,295	$ -
Cynthia A. Scheuer	45,000	$ 61,006	-	107,500	$ -	$ 627,596

1. Based on the last reported sale price on the Nasdaq National Market on September 29, 2000, less the option exercise price.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

ON EXECUTIVE COMPENSATION

The Compensation Committee reviews and evaluates individual executive officers and determines the compensation for each executive officer. In general, compensation is designed to attract, retain and motivate a superior executive team, reward individual performance, relate compensation to Company goals and objectives and align the interests of the executive officers with those of the Company's stockholders.

Compensation for the Named Executive Officers during Fiscal 2000 included salary and bonus. Base salary was determined by reviewing the previous levels of base salary, base salaries paid by comparable companies to executives with similar responsibilities, perceived level of individual performance and the overall performance of the Company. No specific weight was given to any of these factors in the evaluation of base salaries because each of these factors was considered significant and the relevance of each varies depending on an officer's responsibilities.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

ON EXECUTIVE COMPENSATION (Continued)

For fiscal 2000, bonus amounts were based on the Named Executive Officers' specific contributions made during the year toward the Company's goals established at the beginning of the year. Bonus amounts are paid in cash generally during the first quarter after year-end. Stock options are also granted to executive officers based upon their specific responsibilities. The Compensation Committee believes that with current salary, bonus and stock option grants, which generally vest over a four-year period, the executive team is properly motivated to achieve the short and long-term goals of the Company.

The Budget Reconciliation Act of 1993 amended the Internal Revenue Code to add Section 162(m), which bars a deduction to any publicly held corporation for compensation paid to a "covered employee" in excess of $1 million per year. The Compensation Committee does not believe that this law will impact the Company because the current level of compensation for each of the Company's executive officers is well below the $1 million salary limitation. The Compensation Committee will continue to evaluate the impact of such provisions and take such actions as it deems appropriate.

CHIEF EXECUTIVE OFFICER COMPENSATION

George C. McNamee became Chief Executive Officer of the Company on April 15, 1998. Mr. McNamee receives no salary or bonus from the Company; however, he does receive stock options as a member of the Board of Directors of the Company.

Compensation Committee

Mr. Alan P. Goldberg

Dr. Beno Sternlicht

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee ("Committee") approves all of the policies under which compensation is paid or awarded to the Company's officers and employee directors. The Committee, in fiscal 2000, consisted of Mr. Goldberg and Dr.  Sternlicht.

Mr. Goldberg is Co-Chief Executive Officer of First Albany Companies Inc. ("FAC"). (See "Securities Ownership of Certain Beneficial Owners" in Item 10 and "Certain Relationships and Related Transactions," in Item 13, below).

DIRECTORS COMPENSATION

Directors who are not salaried officers or employees receive fees of $750 for each Board of Directors meeting attended and all directors receive annual stock option grants for 10,000 shares. Directors also are reimbursed for travel expenses incurred in attending meetings.

Shareholder Return Performance Graph

Below is a line graph comparing the percentage change in the cumulative total shareholder return on the Company's common stock, based on the market price of the Company's common stock, with the total return of companies included within the Standard & Poor's (S&P)500 Composite Index and the companies included within the S&P Technology Sector Composite Index for the period commencing October 1, 1999 and ending September 30, 2000. The calculation of total cumulative return assumes a $100 investment in the Company's common stock, the S&P 500 Composite Index and the S&P Technology Sector Composite Index on October 1, 1999, the first day of the Company's fiscal year.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

AMONG MECHANICAL TECHNOLOGY INCORPORATED, THE S&P INDEX

AND THE S&P TECHNOLOGY SECTOR INDEX

[GRAPH APPEARS HERE]

Measurement Period (Fiscal Year Covered)	MKTY		S&P 500 Index		S&P Technology Sector Index
FYE 9/30/95	100	100		100
FYE 9/30/96	170	120.34		122.85
FYE 9/30/97	280	169.01		199.52
FYE 9/30/98	570	184.30		225.89
FYE 9/30/99	4267.50	235.54		394.81
FYE 9/30/00	3892.50	266.83		471.73

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT

The following table sets forth information regarding the beneficial ownership of our common stock as of September 30, 2000 for:

• All persons known by us to own beneficially 5% or more of the common stock;

• each of our directors;
• the executive officers and key employees listed in the Summary Compensation Table; and
• all directors and executive officers as a group.

Shares Beneficially Owned(1)
Name of Beneficial Owner	Number (2)		Percent
First Albany Companies Inc.	11,882,433		32.08%
Dr. William P. Acker	43,750	(3)	*
Dr. Judith A. Barnes	26,250	(4)	*
James T. Bunch	-		*
Denis P. Chaves	129,825	(5)	*
Dale W. Church	328,500	(6)	*
Edward A. Dohring	193,689	(7)	*
David B. Eisenhaure	333,000	(8)	*
Alan P. Goldberg	12,904,851	(9),(12)	34.8
Catherine S. Hill	106,350	(10)	*
George C. McNamee	13,440,549	(9),(11),(12)	36.3
E. Dennis O'Connor	349,500	(13)	*
Dr. Walter L. Robb	198,300	(13)	*
Cynthia A. Scheuer	50,625	(14)	*
Dr. Beno Sternlicht	934,018	(7), (15)	2.5
All present Directors and Officers as a group (13 persons)	17,026,949		46.0

*Percentage is less than 1.0% of the outstanding common stock.

1. Unless otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares of common stock beneficially owned by the Stockholder. The address of George C. McNamee and Alan P. Goldberg is First Albany Companies Inc., 30 South Pearl Street, Albany, New York 12207. The address of all other listed stockholders is c/o Mechanical Technology Inc., 30 South Pearl Street, Albany, New York 12207.
2. The number of shares beneficially owned by each stockholder is determined under rules promulgated by the Securities and Exchange Commission and includes voting or investment power with respect to securities. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and includes any shares as to which the individual or entity has the right to acquire beneficial ownership within 60 days after September 30, 2000, through the exercise of any warrant, stock option or other right. The inclusion in this proxy statement of such shares, however, does not constitute an admission that the named stockholder is a direct or indirect beneficial owner of such shares. The number of shares of common stock outstanding used in calculating the percentage for each listed person includes the shares of common stock underlying options held by such person, which are exercisable within 60 days of September 30, 2000, but excludes shares of common stock underlying options held by any other person. Percentage of beneficial ownership is based on 37,039,985 shares of common stock outstanding as of September 30, 2000.
3. Includes options for 43,750 shares granted on June 19, 2000, which are exercisable within 60 days of September 30, 2000.
   
4. Includes options for 26,250 shares granted on March 7, 2000, which are exercisable within 60 days of September 30, 2000.
   
5. Includes options for 22,500 shares granted on December 18, 1998, 45,000 shares granted on June 16, 1998 and 62,325 shares granted on August 27, 1997, which are exercisable within 60 days of September 30, 2000.
   
6. Includes options for 30,000 shares granted April 1, 2000, 45,000 shares granted on April 1, 1999, 45,000 shares granted on August 31, 1998, 45,000 shares granted on April 16, 1997, which are exercisable within 60 days of September 30, 2000 and 2,250 shares owned by Mr. Church's wife. Mr. Church disclaims beneficial ownership of such shares.
7. Includes options for 30,000 shares granted on April 1, 2000, 45,000 shares granted on April 1, 1999, 45,000 shares granted on August 31, 1998 and 45,000 shares granted on April 16, 1997, which are exercisable within 60 days of September 30, 2000.
8. Includes options for 30,000 shares granted on April 1, 2000, which are exercisable within 60 days of September 30, 2000 and 300,000 shares of common stock issuable upon the exercise of outstanding warrants exercisable within 60 days of September 30, 2000. Mr. Eisenhaure, a director and officer of SatCon Technology Corporation, may be deemed the beneficial owner of these shares. Mr. Eisenhaure disclaims beneficial ownership of these shares.
   
9. Includes 11,882,433 shares owned by First Albany Companies Inc.; see "Security Ownership of Certain Beneficial Owners." However, Messrs. McNamee and Goldberg disclaim beneficial ownership of such shares.
   
10. Includes options for 30,000 shares granted on March 30, 2000, 26,250 shares granted on March 7, 2000 and 45,000 shares granted on January 8, 1999, which are exercisable within 60 days of September 30, 2000.
11. Includes 57,375 shares owned by Mr. McNamee's wife. Mr. McNamee disclaims beneficial ownership of such shares.
    
12. Includes options for 30,000 shares granted on April 1, 2000, 45,000 shares granted on April 1, 1999 and 45,000 shares granted on November 12, 1998, which are exercisable within 60 days of September 30, 2000.
    
13. Includes options for 30,000 shares granted on April 1, 2000, 45,000 shares granted on April 1, 1999 and 45,000 shares granted on August 31, 1998, which are exercisable within 60 days of September 30, 2000.
    
14. Includes options for 16,875 shares granted on October 20, 1997, which are exercisable within 60 days of September 30, 2000.
    
15. Includes 200,970 shares held by Dr. Sternlicht's wife as custodian for their children. Dr. Sternlicht disclaims beneficial ownership of such shares.
    

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

At September 30, 2000, First Albany Companies, Inc. ("FAC") owned approximately 34% of the Company's common stock. George McNamee, a Director and Chief Executive Officer of the Company, is Chairman of the Board of Directors, Co-Chief Executive Officer and a shareholder of FAC. Alan Goldberg, a Director of the Company, is a Director, President and Co-Chief Executive Officer and a shareholder of FAC.

Transactions among related parties are as fair to the Company as obtainable from unaffiliated third parties.

On December 27, 2000, the Company entered into a Put and Call with First Albany Companies, Inc. ("FAC") to provide independent credit support for repayment of the loan ("FAC Credit Enhancement"). The FAC Credit Enhancement provides FAC with the option, if the price of Plug Power stock falls to $4 per share, to either purchase 6.3 million Plug Power shares pledged as collateral on the loan or take an assignment of KeyBank N.A.'s rights under the Credit Agreement, as amended. The FAC Credit Enhancement may be triggered in the event of a default and expires on April 27, 2001, and may be renewed by the Company and FAC on a monthly basis upon mutually agreeable terms. In the event of default, the proceeds from the FAC Credit Enhancement will be used to pay down the $30 million Credit Agreement, as amended. Upon expiration of the FAC Credit Enhancement, if Plug Power stock is trading below $20 per share the loan is immediately due and payable.

On December 27, 2000, the Company entered into two bridge loan agreements with FAC. The first loan was for $945 thousand and was used to pay the purchase price for the FAC Credit Enhancement. The Company has pledged 200,000 shares of Plug Power common stock as collateral. ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)

The second loan is for $5 million, $3 million of which was used to make a principal loan repayment to KeyBank, N.A. and the remaining $2 million will be used for working capital. The Company pledged 1 million shares of Plug Power common stock as collateral. Both loans bear interest at the Prime Rate (9.5% at December 27, 2000) and both interest and principal are due on January 3, 2002. Upon mutual agreement of FAC and the Company, the loans may be converted to equity prior to maturity.

In April 2000, the Company entered into a management services agreement with First Albany Corporation, a wholly-owned subsidiary of FAC, to provide certain services on a month-to-month basis. Under this agreement, FAC bills services to the Company (phone, network, postage, etc.) on a cost reimbursement basis. Billings under these agreements amounted to approximately $30 thousand for 2000.

During November 1999, FAC/Equities, a division of First Albany Corporation, a wholly-owned subsidiary of FAC, was paid approximately $353 thousand for financial advisory and investment banking services in connection with the sale of Ling Electronics, Inc. and Ling Electronics, Ltd. ("Ling") to SatCon Technology Corporation ("SatCon").

FAC/Equities was a co-manager in the Plug Power Inc. ("Plug Power") initial public offering ("IPO"). George C. McNamee is the Chairman and Co-Chief Executive Officer of FAC, the Chairman and Co-Chief Executive Officer of First Albany Corporation, the Chairman of the Board and Chief Executive Officer of Mechanical Technology, and is currently the Chairman of the Board of Directors of Plug Power. In addition, Dr. Walter L. Robb, a director of Mechanical Technology, is a director of Plug Power and Dr. Beno Sternlicht, a director of Mechanical Technology, was a director of Plug Power until just before the Plug Power IPO in 1999.

The Company received approximately $5 thousand in interest income from Beacon Power Corporation ("Beacon Power") for bridge loan interest. Mechanical Technology owns approximately 10% of Beacon Power, after its IPO and the Company's exercise of warrants on December 20, 2000, and Alan Goldberg is the Company's representative on the Beacon Power Board of Directors.

Plug Power has agreed to purchase power conditioners from SatCon for its residential fuel cell systems. Mechanical Technology owns approximately 13.2% of SatCon's outstanding stock and has the right to appoint two members to SatCon's Board of Directors. Alan Goldberg is the Company's current representative on the SatCon board.

David B. Eisenhaure, a Director of the Company, is President, Chief Executive Officer and Chairman of the Board of Directors of SatCon. On October 21, 1999, the Company created a strategic alliance with SatCon. SatCon acquired Ling from the Company and the Company agreed to invest approximately $7 million in SatCon. This investment was done in two stages. In consideration for the acquisition of Ling and the Company's investment, the Company received 1,800,000 shares of SatCon's common stock and warrants to purchase an additional 100,000 shares of SatCon's common stock. SatCon also received warrants to purchase 300,000 shares of the Company's common stock (after the effects of the Company's 3-for-1 stock split).

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)

As a part of the SatCon transaction, the Company issued to SatCon warrants to purchase 108,000 and 192,000 shares of the Company's stock on October 21, 1999 and January 31, 2000, respectively. The warrants are immediately exercisable at $12.56 per share and expire on October 21, 2003 and January 31, 2004, respectively. The estimated fair value of these warrants at the dates issued were $4.94 and $16.38 per share, respectively, using a Black-Scholes option pricing model and assumptions similar to those used for valuing the Company's stock options.

The Company also received warrants to purchase 36,000 and 64,000 shares of SatCon common stock on October 21, 1999 and January 31, 2000, respectively. The warrants are immediately exercisable at $8.80 per share and expire on October 21, 2003 and January 31, 2004, respectively.

Prior to becoming Vice President of Corporate Development, Catherine Hill's law firm, Catherine S. Hill, PLLC, served as general counsel to the Company. Billings for 2000 totaled approximately $141 thousand.

Ms. Hill also received 30,000 stock options during 2000 with a Black Scholes value of approximately $446 thousand.

PART IV

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON

FORM 8-K

1. (1) The financial statements filed herewith are set forth on the Index to Consolidated Financial Statements on page F-1 of the separate financial section which accompanies this Report, which is incorporated herein by reference.

The following exhibits are filed as part of this Report:

Exhibit Number	Description
3.1	Certificate of Incorporation of the registrant, as amended and restated. (6)
3.2	By-Laws of the registrant, as restated. (6)
4.93	Credit Agreement dated as of September 22, 1998 among Mechanical Technology Incorporated and KeyBank National Association ("KeyBank"). (8)
4.94	Security Agreement, dated as of September 22, 1998, executed by the registrant in favor of KeyBank and securing the registrant's obligations to KeyBank. (8)
4.95	Security Agreement, dated as of September 22, 1998, executed by Ling Electronics, Inc. (a wholly-owned subsidiary of the registrant) in favor of KeyBank and securing the registrant's obligations to KeyBank. (8)
4.96	Guaranty of Payment and Performance, dated as of September 22, 1998, executed by Ling Electronics, Inc. (a wholly-owned subsidiary of the registrant) in favor of KeyBank and guaranteeing payment of the registrant's obligations to KeyBank. (8)
4.103	Assignment and Assumption Agreement, dated as of July 1, 1999, by and among Town of Colonie Industrial Development Agency, the registrant, Plug Power, LLC, KeyBank National Association and First Albany Corporation in connection with the sale of the Mechanical Technology facility to Plug Power and the assignment and assumption of rights and obligations in connection with the Industrial Development Revenue Bonds (Letter of Credit Secured) Series 1998 A in the original aggregate amount of $6,000,000. (10)
4.104	Credit Agreement, dated as of November 1, 1999, between the registrant and KeyBank National Association for a $22.5 million term loan to finance a capital contribution to Plug Power, LLC. (11)
4.105	Stock Pledge Agreement, dated as of November 1,1999, by the registrant with KeyBank National Association pledging 13,704,315 shares of Plug Power stock in support of the $22.5 million credit agreement. (11)
Exhibit Number	Description
4.106	Amended and Restated Credit Agreement, dated as of March 29, 2000, between the registrant and KeyBank National Association for a $50 million revolving note. (14)
4.107	Revolving Note, dated as of March 29, 2000, between the registrant and KeyBank National Association for the $50 million credit agreement. (14)
4.108	Amended and Restated Stock Pledge Agreement, dated as of March 29, 2000, by The registrant and KeyBank National Association pledging 2,000,000 shares of Plug Power stock in support of the $50 million credit agreement. (14)
4.109	Amendment dated as of October 1, 2000 to the Amended and Restated Credit Agreement originally dated as of March 29, 2000 between the registrant and KeyBank National Association.
4.110	Waiver and Amendment dated as of December 27, 2000 to the Amended and Restated Credit Agreement originally dated as of March 29, 2000 between the registrant and KeyBank National Association.
4.111	Amendment dated December 27, 2000 to the Stock Pledge Agreement, dated as of March 29, 2000, by the registrant with KeyBank National Association pledging 8,000,000 shares of Plug Power Stock in support of Amended $30 million Credit Agreement.

4.112	Put and Call Agreement dated as of December 27, 2000, between the registrant, First Albany Companies Inc. and KeyBank.
4.113	Bridge Promissory Note in the amount of $5 million, dated as of December 27, 2000 between the registrant and First Albany Companies Inc.
4.114	Put Promissory Note in the amount of $945,000, dated as of December 27, 2000, between the registrant and First Albany Companies Inc.
4.115	Stock Pledge Agreement, dated as of December 27, 2000, by registrant with First Albany Companies Inc. pledging 1,000,000 shares of Plug Power Stock in support of the $5 million Bridge Promissory Note.
4.116	Stock Pledge Agreement, dated as of December 27, 2000, by registrant with First Albany Companies Inc. pledging 200,000 shares of Plug Power Stock in support of the $945,000 Put Promissory Note.
4.117	Account Control Agreement, dated as of December 22, 2000, by registrant, KeyBank, and McDonald Investments Inc.

Exhibit Number	Description
10.1	Mechanical Technology Incorporated Restricted Stock Incentive Plan. Filed as Exhibit 28.1 to the registrant's Form S-8 Registration Statement No. 33-26326 and incorporated herein by reference. (1)
10.14	Mechanical Technology Incorporated Stock Incentive Plan - included as Appendix A to the registrant's Proxy Statement, filed pursuant to Regulation 14A, for its December 20, 1996 Special Meeting of Shareholders and incorporated herein by reference. (2)
10.17	Agreement, dated March 14, 1998, between the Registrant and Mr. James Clemens, Vice President and General Manager of Ling Electronics, Inc., regarding his employment. (3)
10.18	Limited Liability Company Agreement of Plug Power, LLC, dated June 27, 1998, between Edison Development Corporation and Mechanical Technology, Incorporated. (4)(5)
10.19	Contribution Agreement, dated June 27, 1998, between Mechanical Technology, Incorporated and Plug Power, LLC. (4)(5)
10.20	Asset Purchase Agreement, dated as of September 22, 1998, between Mechanical Technology, Incorporated and Noonan Machine Company. (4)
10.21	Asset Purchase Agreement between Mechanical Technology and NYFM, Incorporated, dated as of March 31, 1998. (7)
10.24	Contribution Agreement between Edison Development Corporation and Mechanical Technology, dated as of June 10, 1998.(7)
10.30	Mechanical Technology Incorporated 1999 Employee Stock Incentive Plan. (9)
10.31	Agreement of Sale, dated June 23, 1999, by and between the registrant and Plug Power, LLC for the sale of the Mechanical Technology campus and adjacent residence. (10)
10.32	Stock Purchase Agreement, dated October 1,1999, between the registrant, Ling Electronics, Inc., Ling Electronics, Ltd. and SatCon Technology Corporation. (12)
10.33	Securities Purchase Agreement, dated October 21, 1999, between the registrant and SatCon Technology Corporation. (12)
10.34	Mechanical Technology Incorporated Registration Rights Agreement, dated October 21, 1999, between the registrant and SatCon Technology Corporation. (12)
10.35	SatCon Technology Corporation Registration Rights Agreement, dated October 21, 1999, between SatCon Technology Corporation and the registrant. (12)
Exhibit Number	Description
10.36	Mechanical Technology Incorporated Stock Purchase Warrant dated October 21, 1999. (12)
10.37	SatCon Technology Corporation Stock Purchase Warrant dated October 21, 1999. (12)
10.38	Lease dated August 10, 1999 between Carl E. Touhey and Mechanical Technology, Inc. (12)
10.39	Registration Rights Agreement, dated November 1, 1999 by and among Plug Power Inc. and the registrant. (12)
10.40	Plug Power Inc. Lock-Up Agreement, dated November 1, 1999. (12)
10.41	Mechanical Technology Incorporated Stock Purchase Warrant dated January 31, 2000. (13)
10.42	SatCon Technology Corporation Stock Purchase Warrant dated January 31, 2000. (13)
21	Subsidiaries of the registrant.
23	Consents of experts and counsel.
27	Financial Data Schedule.
99	Other

_____________________

Certain exhibits were previously filed (as indicated below) and are incorporated herein by reference. All other exhibits for which no other filing information is given are filed herewith:

1. Filed as Exhibit 28.1 to the registrant's Form S-8 Registration Statement No. 33-26326, filed December 29, 1988, and incorporated herein by reference.
2. Filed as Appendix A to the registrant's Definitive Proxy Statement Schedule 14A filed November 19, 1996.
3. Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-Q Report dated May 12, 1997.
4. Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-K Report for the fiscal year ended September 30, 1997.
5. Re-filed herewith after confidential treatment request, with respect to certain schedules and exhibits were denied by the Commission. Confidential treatment with respect to certain schedules and exhibits was granted.
   
6. Filed as an Exhibit to the Proxy Statement, Schedule 14A, dated March 9, 1998.
7. Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form S-2 dated August 18, 1998.
   
8. Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-K Report for the fiscal year ended September 30, 1998.
9. Filed as an Exhibit to the registrant's Proxy Statement, Schedule 14A, dated February 12, 1999.
10. Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-Q Report for its fiscal quarter ended June 25, 1999.
11. Filed as an Exhibit to the registrant's Form 13-D Report dated November 4, 1999.
12. Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-K Report for the fiscal year ended September 30, 1999.
    
13. Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-Q Report for its fiscal quarter ended December 31, 1999.
    
14. Filed as an Exhibit (bearing the same exhibit number) to the registrant's Form 10-Q Report for its fiscal quarter ended March 31, 2000.

(a) (2) Schedule. The following consolidated financial statement schedule for each of the three years in the period ended September 30, 2000 is included pursuant to Item 14(d):

Report of Independent Accountants on Financial Statements Schedule;

Schedule II--Valuation and Qualifying Accounts.

(b) No reports on Form 8-K were filed during the quarter ended September 30, 2000 and one report was filed subsequent to the quarter ended September 30, 2000. The Company filed a Form 8-K Report, dated December 22, 2000, reporting under Items 2 and 7 thereof its sale of Ling Electronics and acquisition of SatCon shares as of October 21, 1999 and the associated pro-forma financial statements and financial statements of SatCon for the year ended September 30, 1999.

(d) Separate financial statements for Plug Power Inc. and SatCon Technology Corporation; less than fifty percent owned entities, will be filed as Exhibit 99 to this Form 10-K or as an amendment to this Form 10-K as soon as they become available. Plug Power's fiscal year ends December 31, 2000 and their financial statements should be available by March 31, 2001, the SEC filing deadline for their Report on Form 10-K. SatCon's fiscal year ends September 30, 2000 and their financial statements have been attached as Exhibit 99 to this Form 10-K.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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

Date: December 28, 2000 By: /s/ William P. Acker
Dr. William P. Acker

President and Chief Technology Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE
/s/ William P. Acker Dr. William P. Acker	President and Chief Technology Officer	December 28, 2000
/s/ Cynthia A. Scheuer Cynthia A. Scheuer	Chief Financial Officer (Principal Financial and Accounting Officer)	"
/s/George C. McNamee George C. McNamee	Chief Executive Officer and Chairman of the Board of Directors	"
/s/ Dale W. Church Dale W. Church	Director	"
/s/ Edward A. Dohring Edward A. Dohring	Director	"
/s/ David B. Eisenhaure David B. Eisenhaure	Director	"
/s/ Alan P. Goldberg Alan P. Goldberg	Director	"
/s/ E. Dennis O'Connor E. Dennis O'Connor	Director	"
/s/ Walter L. Robb Dr. Walter L. Robb	Director	"
/s/ Beno Sternlicht Dr. Beno Sternlicht	Director	"

REPORT OF INDEPENDENT ACCOUNTANTS

ON FINANCIAL STATEMENT SCHEDULES

To the Board of Directors and Shareholders

of Mechanical Technology Incorporated

Our audits of the consolidated financial statements referred to in our report dated October 27, 2000, except for Notes 8, 11, and 17 for which the date is December 27, 2000, appearing on page F-2 of this Form 10-K of Mechanical Technology Incorporated, also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/PricewaterhouseCoopers L.L.P.

Albany, New York

October 27, 2000,

except for Notes 8,

11, and 17 for which

the date is

December 27, 2000

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

(DOLLARS IN THOUSANDS)

Description	Balance at beginning of period	Additions Charged to Charged costs and to other expenses accounts		Deductions	Balance at end of period
Allowance for doubtful accounts (accounts and notes receivable)
Year ended September 30:
2000	$ 113	$ 660	$ -	$ 113	$ 660
1999	99	76	-	62	113
1998	94	95	-	90	99

Includes accounts written off as uncollectible, recoveries and the effect of currency exchange rates.

Valuation allowance for deferred tax assets
Year ended September 30:
2000	$ 3,750	$ -	$ 1,144	$ 3,750	$ 1,144
1999	4,089	5,092	-	5,431	3,750
1998	2,754	1,335	-	-	4,089

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Accountants. . . . . . . . . . . F-2

Consolidated Financial Statements:

Balance Sheets as of September 30, 2000 and 1999. . F-3 & F-4

Statements of Operations for the Years Ended

September 30, 2000, 1999 and 1998 . . . . . . . . F-5

Statements of Shareholders' Equity for the Years Ended

September 30, 2000, 1999 and 1998 . . . . . . . . F-6

Statements of Cash Flows for the Years Ended

September 30, 2000, 1999 and 1998 . . . . . . . . F-7 - F-8

Notes to Consolidated Financial Statements . . . . . F-9 - F-42

Separate financial statements of the registrant alone are omitted because the registrant is primarily an operating company and all subsidiaries included in the consolidated financial statements being filed, in the aggregate, do not have minority equity interest and/or indebtedness to any person other than the registrant or its consolidated subsidiaries in amounts which together exceed 5% of the total assets as shown by the most recent year-end consolidated balance sheet.

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders

of Mechanical Technology Incorporated

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Mechanical Technology Incorporated and Subsidiaries at September 30, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers L.L.P.

Albany, New York

October 27, 2000,

except for Notes

8, 11, and 17 for

which the date is

December 27, 2000

F-2

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2000 and 1999

	(Dollars in thousands) 2000 1999
Assets
Current Assets:
Cash and cash equivalents	$ 1,552	$ 5,870
Investments in marketable debt securities	-	7,876
Accounts receivable, less allowances of $0
in 2000 and $113 in 1999	693	3,852
Other receivables - related parties	-	105
Inventories	1,193	3,752
Notes receivable - current	344	329
Deferred income taxes	979	-
Prepaid expenses and other current assets	331	265
Taxes receivable	-	10
Total Current Assets	5,092	22,059
Restricted cash equivalents (Note 11)	1,142	-
Property, plant and equipment, net	529	827
Notes receivable - noncurrent, less allowance of $660 in 2000 and $0 in 1999	97	184
Investments, at equity	64,356	8,710
Investments, at cost	6,050	-
Total Assets	$77,266	$31,780

F-3

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Continued)

September 30, 2000 and 1999

	(Dollars in thousands) 2000 1999
Liabilities and Shareholders' Equity
Current Liabilities:
Line of credit (Note 11)	$27,000	$ -
Accounts payable	283	614
Accrued liabilities	1,853	2,243
Accrued liabilities - related parties	9	-
Income taxes payable	9	-
Net liabilities of discontinued operations	231	540
Total Current Liabilities	29,385	3,397
Long-Term Liabilities:
Deferred income taxes and other credits	2,852	597
Total Liabilities	32,237	3,994
Commitments and Contingencies
Shareholders' Equity
Common stock, par value $1 per share, authorized 50,000,000; issued 35,437,285 in 2000 and 34,949,877 in 1999	35,437	34,947
Paid-in-capital	54,790	19,457
Accumulated deficit	(45,169)	(26,573)
	45,058	27,831
Accumulated Other Comprehensive Loss:
Unrealized loss on available for sale
securities, net	-	(5)
Foreign currency translation adjustment	-	(11)
Accumulated Other Comprehensive Loss	-	(16)
Common stock in treasury, at cost, 20,250 shares in 2000 and 1999	(29)	(29)
Total Shareholders' Equity	45,029	27,786
Total Liabilities and Shareholders' Equity	$77,266	$31,780

F-4

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended September 30, 2000, 1999 and 1998

(Dollars in thousands, except per share)

	2000	1999	1998
Net sales	$ 5,547	$ 12,885	$ 21,028
Cost of sales	2,576	8,239	12,386
Gross profit	2,971	4,646	8,642
Selling, general and administrative expenses	4,864	4,949	5,812
Product development and research costs	2,034	1,105	831
Operating (loss) income	(3,927)	(1,408)	1,999
Interest expense	(1,943)	(106)	(102)
Gain on sale of subsidiary	1,262	-	-
Other (expense) income, net	(309)	185	(97)
(Loss)income from continuing operations before income taxes and equity in investee losses	(4,917)	(1,329)	1,800
Income tax (benefit) expense	(1,927)	37	25
Equity in investee losses (net of tax benefit of $10,219 in 2000 and $0 in 1999 and 1998)	(15,849)	(9,363)	(3,806)
Loss from continuing operations	(18,839)	(10,729)	(2,031)
Income (loss) from discontinued operations (net of taxes of $157 in 2000 and $0 in 1999 and 1998)	243	41	(2,285)
Net loss	$(18,596)	$(10,688)	$ (4,316)
Earnings (loss) per share (Basic and Diluted):
Loss from continuing operations	$ (.54)	$ (.31)	$ (.07)
Income (loss) from discontinued operations	.01	-	(.08)
Net loss	$ (.53)	$ (.31)	$ (.15)

F-5

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

For the Years Ended September 30, 2000, 1999 and 1998

(Dollars in thousands)

COMMON STOCK	2000	1999	1998
Balance, October 1 (1998 balance as previously reported)	$ 34,947	$ 32,325	$ 8,864
Three-for-one common stock split effected in the form of a 200% stock dividend effective April 3, 2000	-	-	17,728
Issuance of shares - options	490	168	351
Issuance of shares	-	2,454	5,382
Balance, September 30	$ 35,437	$ 34,947	$ 32,325
PAID-IN-CAPITAL
Balance October 1 (1998 balance as previously reported)	$ 19,457	$ (5,276)	$ 10,968
Three-for-one common stock split effected in the form of a 200% stock dividend effective April 3, 2000	-	-	(17,728)
Issuance of shares - options	(3)	1	(126)
Issuance of shares	-	10,190	1,610
Plug Power investment, net of deferred taxes	29,252	14,487	-
SatCon investment, net of deferred taxes	872	-	-
Warrants issued, net of deferred taxes	2,207	-	-
Compensatory stock options, net of deferred taxes	1,199	55	-
Stock option exercises recognized differently for financial reporting and tax purposes	1,806	-	-
Balance, September 30	$ 54,790	$ 19,457	$ (5,276)
DEFICIT
Balance, October 1	$ (26,573)	$ (15,885)	$ (11,569)
Net loss	(18,596)	(10,688)	(4,316)
Balance, September 30	$ (45,169)	$ (26,573)	$ (15,885)
UNREALIZED LOSS ON AVAILABLE FOR SALE SECURITIES, NET
Balance, October 1	$ (5)	$ -	$ -
Unrealized loss on available for sale securities, net	5	(5)	-
Balance, September 30	$ -	$ (5)	$ -
FOREIGN CURRENCY TRANSLATION ADJUSTMENT
Balance, October 1	$ (11)	$ (11)	$ (19)
Adjustments	11	-	8
Balance, September 30	$ -	$ (11)	$ (11)
TREASURY STOCK
Balance, October 1	$ (29)	$ (29)	$ (29)
Balance, September 30	$ (29)	$ (29)	$ (29)
RESTRICTED STOCK GRANTS
Balance, October 1	$ -	$ -	$ (2)
Grants issued/vested, net	-	-	2
Balance, September 30	$ -	$ -	$ -
SHAREH0LDERS' EQUITY
September 30	$ 45,029	$ 27,786	$ 11,124
OTHER COMPREHENSIVE (LOSS) INCOME:
Net loss	$ (18,596)	$ (10,688)	$ (4,316)
Other comprehensive (loss) income:
Foreign currency translation adjustment	11	-	8
Unrealized loss on available for sale securities	5	(5)	-
Total comprehensive loss	$ (18,580)	$ (10,693)	$ (4,308)

F-6

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Years Ended September 30, 2000, 1999 and 1998

(Dollars in thousands)

OPERATING ACTIVITIES	2000	1999	1998
Loss from continuing operations	$(18,839)	$(10,729)	$ (2,031)
Adjustments to reconcile net (loss) income to net cash provided (used) by continuing operations:
Depreciation and amortization	264	581	323
Gain on sale of subsidiaries	(1,262)	-	-
Equity in losses of equity investees, gross	26,068	9,363	3,806
Allowance for bad debts	636	14	5
Loss on sale of fixed assets	20	28	9
Deferred income taxes and other credits	(12,152)	(10)	13
Stock based compensation	547	55	-
Changes in operating assets and liabilities net of effects from discontinued operations:
Accounts receivable	887	1,093	(1,069)
Other receivables - related parties	105	(18)	-
Inventories	(343)	(4)	(362)
Prepaid expenses and other current assets	(76)	(174)	(346)
Accounts payable	311	(1,450)	788
Income taxes	19	(7)	(76)
Accrued liabilities - related parties	9	-	-
Accrued liabilities	(127)	(1,085)	(519)
Net cash (used) provided by continuing operations	(3,933)	(2,343)	541
Discontinued Operations: Income(loss) from discontinued operations	243	41	(2,285)
Deferred income taxes and other credits	157	-	-
Changes in net liabilities/assets of discontinued operations	(309)	548	2,300
Net cash provided by discontinued operations	91	589	15
Net cash (used) provided by operations	(3,842)	(1,754)	556
INVESTING ACTIVITIES
Purchases of property, plant & equipment	(286)	(2,738)	(3,166)
Purchase of stock in Plug Power	(20,500)	(6,000)	-
Purchase of stock in SatCon	(7,070)	-	-
Purchase of stock in Beacon Power	(6,050)	-	-
Proceeds from sale of subsidiary, net	23	-	-
Change in restricted cash equivalents, net	(1,142)	-	-
Investment in marketable debt securities	(2,000)	(7,881)	-
Proceeds from sale of marketable debt securities	9,881	-	-
Note receivable - other	(660)	-	-
Principal payments from note receivable	72	78	59
Notes receivable Plug Power	-	-	(500)
Net cash used by investing activities	(27,732)	(16,541)	(3,607)
FINANCING ACTIVITIES
Borrowings under IDA financing, less restricted cash	-	5,858	-
Proceeds from stock option exercises	489	153	225
Proceeds from rights offering	-	12,820	7,178
Costs of rights offering	-	(158)	(186)
Debt issue costs	(233)	(75)	(28)
Payments under line-of-credit	(5,500)	-	-
Borrowings under line-of-credit	32,500	-	-
Net cash provided by financing activities	27,256	18,598	7,189
Effect of exchange rate on cash	-	-	8
(Decrease) increase in cash and cash equivalents	(4,318)	303	4,146
Cash and cash equivalents - beginning of year	5,870	5,567	1,421
Cash and cash equivalents - end of year	$ 1,552	$ 5,870	$ 5,567

F-7

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

For The Years Ended September 30, 2000, 1999 and 1998

(Dollars in thousands)

	2000	1999	1998
Non-cash Investing and Financing Activities:
Acquired stock of Plug Power in exchange for net assets contributed	$ -	$ 367	$ 5,000
Additional investment and paid-in-capital resulting from other investors' investments in Plug Power	42,310	14,487	-
Acquired stock of SatCon Technology Corporation in exchange for net assets of Ling Electronics, Inc. and subsidiaries	6,738	-	-
Additional investment and paid-in-capital resulting from warrant issuance to SatCon Technology Corporation	3,678	-	-
Additional investment and paid-in-capital resulting from other investors' investments in SatCon Technology Corporation	1,418	-	-
Additional paid-in-capital resulting from stock option exercises treated differently for financial reporting and tax purposes	1,806	-	-

F-8

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. The equity method of accounting is used for investments in entities over which the Company has significant influence, generally this represents common stock ownership or partnership equity of at least 20% and not more than 50%, or where the Company has the ability to exercise significant influence over operating and financial policies of the investees. All significant intercompany transactions are eliminated in consolidation.

Under the equity method of accounting, the Company recognizes its proportionate share of income or loss of investees. Investee losses are generally recognized only to the extent of investments. Changes in equity of investees, other than income or loss, which change the Company's proportionate interest in the underlying equity of investees, are generally accounted for as changes in investment and additional paid-in-capital. Non-monetary contributions to equity investees are recorded at book value, and if the Company's calculated share of net assets of investees exceeds the book value of non-monetary contributions, the difference is accounted for as a basis difference. Original differences between the Company's carrying amount of an equity investment and its calculated share of net assets of investees is treated as an embedded difference if the Company's carrying amount is higher, or as a basis difference if lower. Embedded differences are amortized into net income (loss) from investees generally over a five-year period while basis differences are generally not amortized due to the research and development nature of investees. Upon an equity investee's initial public offering, basis differences are eliminated in connection with the change in equity. Impairment is measured in accordance with the Company's Asset Impairment Policy.

On October 21, 1999, Ling Electronics, Inc. and Ling Electronics, Ltd. ("Ling") was sold and is therefore not included in the consolidation after that date. Further, the Company acquired an equity interest in SatCon Technology Corporation as of October 21, 1999.

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-9

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting Policies (Continued)

Financial Instruments

The fair value of the Company's financial instruments, including cash and cash equivalents, investments and line-of-credit, approximates carrying value. Fair values were estimated based on quoted market prices, where available, or on current rates offered to the Company for debt with similar terms and maturities.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market.

Property, Plant, and Equipment

Property, plant and equipment are stated at cost and depreciated using primarily the straight-line method over their estimated useful lives:

Leasehold improvements	10 years
Machinery and equipment	2 to 10 years
Office furniture, equipment and fixtures	2 to 10 years

Significant additions or improvements extending assets' useful lives are capitalized; normal maintenance and repair costs are expensed as incurred. The costs of fully depreciated assets remaining in use are included in the respective asset and accumulated depreciation accounts.

When items are sold or retired, related gains or losses are included in

net income.

Income Taxes

The Company accounts for taxes in accordance with Financial Accounting

Standard No. 109, "Accounting for Income Taxes," which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable for future years to differences between financial statement and tax bases of existing assets and liabilities. Under FAS No. 109, the effect of tax rate changes on deferred taxes is recognized in the income tax provision in the period that includes the enactment date. The provision for taxes is reduced by investment and other tax credits in the years such credits become available.

Revenue Recognition

Sales of products are recognized when products are shipped to customers or distributors. Sales of products under long-term contracts are recognized under the percentage-of-completion method. Percentage-of-completion is based on the ratio of incurred costs to current estimated total costs at completion. Total contract losses are charged to operations during the period such losses are estimable.

F-10

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting Policies (Continued)

Foreign Currency Translation

Assets and liabilities of the foreign subsidiary are translated at year-end rates of exchange, and revenues and expenses are translated at the average rates of exchange for the year. Gains or losses resulting from the translation of the foreign subsidiary's balance sheet are accumulated in a separate component of shareholders' equity.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid short-term investments with original maturities of less than three months.

Investments in Marketable Securities

Management determines the appropriate classification of its investments in marketable securities at the time of purchase and reevaluates such determinations at each balance sheet date. Marketable securities for which the Company does not have the intent or ability to hold to maturity are classified as available for sale along with any

investments in mutual funds. Securities available for sale are carried at fair value, with the unrealized gains and losses, net of income taxes, reported as a separate component of shareholders' equity. The

Company has had no investments that qualify as trading or held to maturity.

The amortized cost of marketable debt securities is adjusted for accretion of discounts to maturity. Such accretion as well as interest are included in interest income. Realized gains and losses are included in "Other (expense) income, net" in the Consolidated Statements of Operations. The cost of securities sold is based on the specific identification method.

The Company's investments in marketable securities are diversified among high-credit quality securities in accordance with the Company's investment policy.

Net Loss per Basic and Diluted Common Share

The Company reports net loss per basic and diluted common share in accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which establishes standards for computing and presenting loss per share. Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution, if any, which could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the Company.

F-11

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting Policies (Continued)

Stock Based Compensation

Pursuant to SFAS No. 123 "Accounting for Stock-Based Compensation," the Company has elected to follow the accounting provisions of Accounting Principles Board Opinion No.25, "Accounting for Stock Issued to Employees," for stock-based compensation issued to employees and to adopt

the disclosure provisions of SFAS No. 123. The Company will follow the accounting provisions of SFAS No. 123 for stock-based compensation issued to consultants and record a charge to earnings for fair value of options granted.

Advertising

The costs of advertising are expensed as incurred. Advertising expense was approximately $44, $102 and $83 thousand in 2000, 1999 and 1998, respectively.

Asset Impairment

The Company adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement requires companies to record impairments to long-lived assets, certain identifiable intangibles, and related goodwill when events or changing circumstances indicate a probability that the carrying amount of an asset may not be fully recovered. Impairment losses are recognized when expected future cash flows are less than the asset's carrying value.

Concentration of Credit Risk

Financial instruments that subject the Company to concentrations of credit risk consist principally of cash equivalents, investments in marketable securities, trade accounts receivable and unbilled contract costs.

The Company's trade accounts receivable and unbilled contract costs and fees are primarily from sales to commercial customers and U.S. government agencies. The Company does not require collateral and has not historically experienced significant credit losses related to receivables or unbilled contract costs and fees from individual customers or groups of customers in any particular industry or geographic area.

The Company deposits its cash and invests in short-term investments and marketable securities primarily through one regional commercial bank and an investment company.

Credit exposure to any one entity is limited by Company policy.

Research and Development Costs

The Company expenses research and development costs as incurred.

F-12

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting Policies (Continued)

Comprehensive Loss

Comprehensive loss includes net loss, as well as changes in stockholders' equity, other than those resulting from investments by shareholders (i.e., issuance or repurchase of common shares and dividends).

Effect of Recent Accounting Pronouncements

In June 1999, the Financial Accounting Standards Board issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133," which defers the effective date of SFAS No. 133 (SFAS No. 133), "Accounting for Derivative Instruments and Hedging Activities" to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133 establishes a new model for accounting for derivatives and hedging activities. It requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and measure these instruments at fair value. The Company will adopt SFAS No. 133 as of October 1, 2000. Upon adoption of SFAS No. 133, the Company will be required to record any unrealized gains or losses on the fair value of its investments in derivatives in its results of operations and will record a cumulative adjustment to reflect the impact of adopting this accounting standard. Adoption of SFAS No. 133 is expected to have a material impact on the Company's consolidated financial position and results of operations but not cash flows. The Company holds warrants to purchase common stock of Beacon Power Corporation and SatCon Technology Corporation. The cumulative adjustment impact, upon adoption, is currently estimated to be a gain of approximately $9.99 million and be reported in the Company's statements of operations.

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition". This bulletin, as amended, established guidelines for revenue recognition and is effective for fiscal 2001. The Company does not expect that the adoption of the guidance required by SAB No. 101 will have a material impact on its financial condition or results of operations.

Reclassification and Retroactive Adjustments

Certain 1999 and 1998 amounts have been reclassified to conform to the 2000 presentation. The financial statements for all prior periods have been retroactively adjusted to reflect stock splits for common stock issued and options and warrants outstanding (See Note 12).

F-13

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Investments in Marketable Debt Securities

The following is a summary of the investments in marketable debt securities classified as current assets at September 30:

(Dollars in thousands)	2000	1999
Available for sale securities:
Corporate debt securities
Fair value	$ -	$7,876
Amortized cost	$ -	$7,881
Unrealized loss	$ -	$ (5)

The difference between the amortized cost of available for sale securities and their fair market value results in unrealized gains and losses, which are recorded as a separate component of stockholders' equity. Gross realized gains and losses on sales of available for sale securities were immaterial in 2000 and 1999.

The estimated fair value of available for sale securities by contractual maturity at September 30 is as follows:

(Dollars in thousands)	2000	1999
Due in one year or less	$ -	$4,916
Due after one year through three years	-	-
Due after three years	-	2,960
	$ -	$7,876

Expected maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

3. Long-Term Contracts Receivable

Included in accounts receivable are the following at September 30:

(Dollars in thousands)	2000	1999
U.S. Government: Amount billed and billable	$ -	$ 43
Retainage	-	-
	-	43
Commercial Customers: Amounts billed and billable	-	1,673
Retainage	-	312
	$ -	$2,028

F-14

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) Long-Term Contracts Receivable (Continued)

The balances billed but not paid by customers pursuant to retainage provisions in contracts are due upon completion of the contracts and acceptance by the customer. Based on the Company's experience, most retainage amounts are expected to be collected within the ensuing year.

4. Inventories

Inventories consist of the following at September 30:

(Dollars in thousands)	2000	1999
Finished goods	$ 150	$ 73
Work in process	249	916
Raw materials, components and assemblies	794	2,763
	$1,193	$3,752

5. Property, Plant and Equipment

Property, plant and equipment consists of the following at September 30:

(Dollars in thousands)	2000	1999
Leasehold improvements	$ 72	$ 496
Machinery and equipment	1,417	3,686
Office furniture and fixtures	72	621
	1,561	4,803
Less accumulated depreciation	1,032	3,976
	$ 529	$ 827

Depreciation expense was $169, $489 and $317 thousand for 2000, 1999 and 1998, respectively. Repairs and maintenance expense was $52, $166 and $177 thousand for 2000, 1999 and 1998, respectively.

F-15

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) Notes Receivable

Notes receivable consists of the following at September 30:

(Dollars in thousands)	2000	1999
Notes receivable with interest at prime (9.5% at September 30, 2000), interest and principal due May 18, 2005	$ 660	$ -
Notes receivable with an interest rate of 10%, interest and principal due September 30, 1998 (A)	250	250
Notes receivable with an interest rate of 10%, due in monthly installments through September 30, 2002	191	263
	1,101	513
Less: Current portion	(344)	(329)
Less: Allowance for bad debt	(660)	-
	$ 97	$ 184

(A) The principal amount of this note may be reduced in accordance with the terms of the note in the event of a sale of the fixed assets. The purchaser has requested that the principal amount of the note be reduced to reflect the resale value of certain assets of the L.A.B. Division, which was sold on September 30, 1997. The Company is enforcing its rights with respect to the note and is currently litigating for the collection of this note.

7. Investments, at Equity

At September 30, 2000, the principal components of investments in equity investees are the following:

Investment	Calculated Market Value per Nasdaq	Ownership	Shares	Description of Business
Plug Power Inc.	$510.5 million	31.4%	13,704,315	A leading U.S. designer and developer of on-site, electricity generation systems utilizing proton exchange membrane fuel cells for residential applications.
SatCon Technology Corporation	$ 64.4 million	13.2%	1,800,000	Designer, developer and manufacturer of high-efficiency, high-reliability and long-lived power and energy management products to serve the distributed power generation and power quality markets.

F-16

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Investments, at Equity (Continued)

Plug Power Inc.

The following is a roll forward of the Company's investment in Plug Power at September 30:

(Dollars in thousands)	2000	1999	1998
Investment balance, October 1	$ 8,710	$ 1,221	$ 27
Share of Plug Power losses	(23,148)	(9,363)	(3,806)
Equity adjustment for share of third- party investments in Plug Power which increased equity	4,364	14,485	-
Capital contribution - cash	20,500	2,000	-
Capital commitment - cash	-	-	4,000
Capital contribution - notes receivable	-	-	500
Capital contribution - accounts Receivable	-	-	500
Company's contribution of campus, at book value	-	367	-
Company's contribution of below market lease, at book value	-	-	-
Company's contribution of research credits, at book value	-	-	-
Equity adjustment for share of pre-IPO, IPO and over-allotment third-party investments in Plug Power	37,946	-	-
Investment balance, September 30	$48,372	$ 8,710	$ 1,221

The difference between the carrying value of the Company's investment in Plug Power and its interest in the underlying equity consists of the following at September 30:

(Dollars in thousands)	2000	1999
Calculated ownership (31.4% in 2000 and 40.65% in 1999)	$48,372	$12,704
Unrecognized basis difference	-	(3,994)
Carrying value of investment in Plug Power	$48,372	$ 8,710

F-17

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Investments, at Equity (Continued)

Summarized below is financial information for Plug Power whose fiscal year ends December 31.

(Dollars in thousands)	9 Months Ended Sept.30, Sept.30, 2000 1999			Year Ended Dec.31, Dec.31, 1999 1998
Current assets		$112,897	$ 12,024		$177,413	$ 5,293
Noncurrent assets		57,100	31,522		38,712	2,800
Current liabilities		9,618	6,291		8,202	2,601
Noncurrent liabilities		6,303	6,002		6,517	-
Stockholders' equity		154,076	31,253		201,407	5,493
Gross revenue		6,898	6,702		11,000	6,541
Gross profit		(3,534)	(3,148)		(4,497)	(2,323)
Net loss		(63,929)	(24,867)		(33,469)	(9,616)

On June 27, 1997, the Company and Edison Development Corp. ("EDC"), a subsidiary of DTE Energy Co., formed a joint venture, Plug Power LLC ("Plug Power") to further develop the Company's Proton Exchange Membrane ("PEM") Fuel Cell technology. In exchange for its contribution of employees, contracts, intellectual property and certain other net assets that had comprised the fuel cell research and development business activity of the Technology segment (the assets of which had a net book value of $357 thousand), the Company received a 50% interest in Plug Power. EDC made an initial cash contribution of $4.75 million in exchange for the remaining 50% interest in Plug Power. The Company's investment in Plug Power is included in the balance sheet caption "Investments, at equity".

On April 15, 1998, EDC contributed $2.25 million in cash to 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 were scheduled to mature April 24, 1999 ($250 thousand) and June 15, 1999 ($2 million).

As of March 25, 1999, the Company and Plug Power exchanged the foregoing options and certain "research credits" (described below) for $2.25 million Plug Power membership interests. The Company earned the research credits by assisting Plug Power in securing the award of certain government grants and research contracts during the period June 1997 through April 1999.

F-18

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Investments, at Equity (Continued)

In August 1998, the Company committed to contribute an additional $5 million (in cash, accounts receivable and research credits) to Plug Power between August 5, 1998 and March 31, 1999 and recorded a liability representing this obligation. During the period from September 1998 to February 1999, the Company fully funded this commitment by contributing $4 million cash and converting $.5 million of accounts receivable and $.5 million of notes receivable.

During April 1999, the Company and EDC amended and restated the Plug Power Mandatory Capital Contribution Agreement. The agreement, which was effective as of January 26, 1999, stated that, in the event Plug Power determined that it required funds at any time through December 31, 2000, Plug Power had the right to call upon the Company and EDC to each make capital contributions as follows:

• The Company and EDC would each fund capital calls of up to $7.5 million in 1999 and $15 million in 2000 ("Capital Commitment").
• In exchange for such capital contributions to Plug Power, the Company and EDC would receive class A membership interests ("Shares") from Plug Power at $7.50 per share.
• The Company and EDC would share the Capital Commitment equally.
• Plug Power's Board of Managers would determine when there is need for such capital contributions.
• The Company and EDC would have sixty (60) days from the date of such authorization to tender their payment to Plug Power.

The agreement was scheduled to terminate on December 31, 2000 or the date of an initial public offering of shares by Plug Power at a per

share price of greater than $7.50 per share ("Termination Date").

In exchange for the Capital Commitment, Plug Power agreed to permit the Company and EDC to make capital contributions to the extent of their Capital Commitment on the Termination Date, whether or not such funds have been called, in exchange for shares at the fixed price of $7.50 per share.

In June 1999, the Company and Plug Power entered into an agreement for the sale of the Company's campus and adjacent residence, including all land and buildings, to Plug Power in exchange for 704,315 Class A membership interests and the assumption of approximately $6 million in debt by Plug Power. The sale of the Company's facility and the transfer of the $6 million IDR bonds to Plug Power were effective as of July 1, 1999 with no gain or loss recognized.

In August 1999, the Company committed to purchase 3 million shares of Plug Power if the public offering price of Plug Power's stock was greater than $7.50 per share. The Plug Power Mandatory Capital Contribution Agreement between the Company and Plug Power, dated as of January 26, 1999 was amended and restated to reflect this commitment.

F-19

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Investments at Equity (Continued)

On September 30, 1999, the Company purchased 266,667 shares of Plug Power at $7.50 per share. This purchase reduced the Company's commitment to purchase Plug Power shares at the time of its public offering from 3,000,000 shares to 2,733,333 shares at a price of $7.50

per share.

On November 1, 1999, the Company purchased 2,733,333 shares of Plug Power at $7.50 per share. This purchase completed the Company's commitment to purchase Plug Power shares at the time of its public offering. Plug Power's public offering was completed at $15 per share.

SatCon Technology Corporation

On October 21, 1999, the Company created a strategic alliance with SatCon Technology Corporation ("SatCon"). SatCon acquired Ling Electronics, Inc. and Ling Electronics, Ltd ("Ling") from the Company and the Company agreed to invest approximately $7 million in SatCon. This investment was funded in two stages during fiscal 2000. In consideration for the acquisition of Ling and the Company's investment, the Company received 1,800,000 shares of SatCon's common stock and warrants to purchase an additional 100,000 shares of SatCon's common stock. SatCon also received warrants to purchase 300,000 shares of the Company's common stock (after the effects of the Company's 3-for-1 stock split).

As a part of the SatCon transaction, the Company issued to SatCon warrants to purchase 108,000 and 192,000 shares of the Company's stock on October 21, 1999 and January 31, 2000, respectively. The warrants are immediately exercisable at $12.56 per share and expire on October 21, 2003 and January 31, 2004, respectively. The estimated fair value of these warrants at the dates issued were $4.94 and $16.38 per share, respectively, using a Black-Scholes option pricing model and assumptions similar to those used for valuing the Company's stock options.

The Company also received warrants to purchase 36,000 and 64,000 shares of SatCon common stock on October 21, 1999 and January 31, 2000, respectively. The warrants are immediately exercisable at $8.80 per share and expire on October 21, 2003 and January 31, 2004, respectively.

The sale resulted in a $1.26 million gain, which was recorded in the first quarter of fiscal year 2000.

F-20

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Investments, at Equity (Continued)

The following is a roll forward of the Company's investment in SatCon at September 30:

(Dollars in thousands)	2000
Investment balance, October 1	$ -
Exchange of Ling for 770,000 shares of SatCon valued at $8.75/share	6,738
Cash investment for purchase of shares of SatCon (1,030,000) and warrants to purchase shares of SatCon (100,000)	7,070
Warrants to purchase 300,000 shares of the Company's common stock issued to SatCon - valued using Black-Scholes method	3,678
Share of SatCon losses on one-quarter lag	(853)
Amortization of embedded difference between the Company's basis and calculated ownership of underlying equity	(2,067)
Equity adjustment for share of third-party investments in SatCon	1,418
Investment balance, September 30	$15,984

The difference between the carrying value of the Company's investment in SatCon and its interest in the underlying equity consists of the following at September 30:

(Dollars in thousands)	2000
Calculated ownership (13.2%)	$ 4,275
Embedded difference	11,709
Carrying value of investment in SatCon	$15,984

Summarized below is financial information for SatCon. SatCon's fiscal year ends September 30. The investment in SatCon is accounted for on a one-quarter lag.

(Dollars in thousands)	6 Months Ended June 30, 2000
Current assets	$24,935
Noncurrent assets	18,560
Current liabilities	5,271
Noncurrent liabilities	5,773
Stockholders' equity	32,451
Gross revenue	12,101
Gross profit	4,214
Net loss	(4,379)

F-21

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(8) Investments, at Cost

Prior to making its investment in Beacon Power Corporation ("Beacon Power"), the Company made a one time $1.2 million bridge loan to Beacon Power in April 2000. This bridge loan was converted to equity as part of a $6 million investment. As part of the bridge financing, the Company received warrants to purchase 12,000 shares of Beacon Power's common stock at $4.20 per share. The Company exercised the warrants on August 24, 2000 and purchased 12,000 shares of Beacon Power common stock for approximately $50 thousand.

On May 23, 2000, the Company invested $6 million in Beacon Power Class F Preferred Stock ("Beacon Preferred Stock"). In connection with the investment, the Company received warrants to purchase shares of common stock, the exercise date, number of shares and exercise price of which would be determined upon either the sale of Beacon Power or the consummation of an underwritten public offering of Beacon Power common stock. On November 17, 2000, Beacon Power completed its initial public offering ("IPO") and the warrant terms were set for the purchase of 1,333,333 shares of common stock at an exercise price of $2.25 per share exercisable as of November 17, 2000. The warrants expire on May 23, 2005.

At September 30, 2000, the Company owned 1,428,571 shares of Beacon Power Preferred Stock and 12,000 shares of common stock or approximately 9.7% of Beacon Power. The market value of the investment in Beacon Power stock was not readily determinable at September 30, 2000.

On November 17, 2000, the date of the Beacon Power IPO, Beacon Power converted Beacon Preferred Stock to common stock and completed a 2-for-1 stock split immediately prior to the IPO. After Beacon Power's IPO, the Company owned 2,881,142 shares, approximately 7.5%, of Beacon Power common stock valued as of the initial public offering at $17.3 million.

The Company exercised the warrants on a cash-less basis, on December 20, 2000, and received 985,507 shares of Beacon Power common stock. After the exercise of the warrants, the Company owned 3,866,949 shares, approximately 10%, of Beacon Power common stock.

Beacon Power develops and manufactures a line of energy storage systems based on advanced flywheel technology. Beacon Power's flywheel energy storage system consists of a rotating, composite rim that spins on

magnetic bearings in a vacuum. During power outages or periods of low power quality, the flywheel motor converts to a generator and transfers the stored electricity to the end user. These systems have applications in fiber optic communication networks that require power at remote cabinets and that must maintain telephone and computer communications network services, including the internet, even during a power outage.

F-22

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. Income Taxes

Deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates.

Income tax expense (benefit) consists of the following for the years ended September 30:

(Dollars in thousands)	2000	1999	1998
Continuing operations before equity investee losses
Federal	$ (457)	$ 1	$ 15
State	14	36	10
Deferred	(1,484)	-	-
	(1,927)	37	25
Equity investee losses
Federal	-	-	-
State	-	-	-
Deferred	(10,219)	-	-
	(10,219)	-	-
Total continuing operations	(12,146)	37	25
Discontinued operations
Federal	-	-	-
State	-	-	-
Deferred	157	-	-
Total discontinued operations	157	-	-
	$(11,989)	$ 37	$ 25
Items charged (credited) directly to stockholders' equity:
Increase in additional paid-in capital for equity investments, and warrants and options issued - Deferred	18,825	5,794	-
Expenses for employee stock options recognized differently for financial reporting/tax purposes - Federal	(1,806)	(380)	-
Valuation allowance	(3,750)	(5,414)	-
	$ 13,269	$ -	$ -

F-23

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) Income Taxes (Continued)

The significant components of deferred income tax expense (benefit) consists of the following for the years ended September 30:

(Dollars in thousands)	2000	1999	1998
Continuing operations
Deferred tax (benefit) expense	$ (647)	$ (488)	$ 456
Net operating loss carryforward	(1,981)	(859)	504
Valuation allowance	1,144	1,347	(960)
	(1,484)	-	-
Equity investee losses
Deferred tax (benefit) expense	(8,179)	(1,345)	(1,123)
Net operating loss carryforward	(2,040)	(2,400)	(399)
Valuation allowance	-	3,745	1,522
	(10,219)	-	-
Discontinued operations
Deferred tax expense (benefit)	187	114	(508)
Net operating loss carryforward	(30)	(97)	(265)
Valuation allowance	-	(17)	773
	157	-	-
	$(11,546)	$ -	$ -

The Company's effective income tax rate from continuing operations, including loss from equity investees, differed from the Federal statutory rate for the years ended September 30:

(Dollars in thousands)	2000	1999	1998
Federal statutory tax rate	(34%)	(34%)	(34%)
State taxes, net of federal tax effect	( 6%)	-	-
Change in valuation allowances	4%	34%	28%
Research and development credit	( 1%)	-	-
Other, net	( 2%)	-	7%
	(39%)	-%	1%

Pre-tax loss from continuing operations including pre-tax losses from equity investees was $30,985, $10,692 and $2,006 for the years ended September 30, 2000, 1999 and 1998, respectively.

F-24

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) Income Taxes (Continued)

The deferred tax assets and liabilities consist of the following tax effects relating to temporary differences and carryforwards as of September 30:

(Dollars in thousands)	2000	1999
Current deferred tax assets:
Loss provisions for discontinued Operations	$ 104	$ 300
Bad debt reserve	336	112
Inventory valuation	17	173
Inventory capitalization	14	39
Vacation pay	45	63
Warranty and other sale Obligations	22	86
Stock options	241	-
Other reserves and accruals	200	116
	979	889
Valuation allowance	-	(889)
Net current deferred tax assets	$ 979	$ -

Noncurrent deferred tax assets (liabilities):
Net operating loss	$11,543	$ 5,687
Property, plant and equipment	(38)	122
Investment, in equity investees	(13,835)	(3,322)
Other	223	224
Research and development tax credit	399	-
Alternative minimum tax credit	150	150
	(1,558)	2,861
Valuation allowance	(1,144)	(2,861)
Other credits	(150)	(597)
Noncurrent net deferred tax liabilities and other credits	$(2,852)	$ (597)

The valuation allowance at September 30, 2000 is $1.144 million and at September 30, 1999 was $3.750 million. During the year ended September 30, 2000, the valuation allowance was increased through the statement of operations by $1.144 million and decreased by $3.750 million through paid-in-capital, for a net decrease of $2.606 million.

At September 30, 2000, the Company has unused Federal net operating loss carryforwards of approximately $29.320 million. The Federal net operating loss carryforwards, if unused, will begin to expire during the year ended September 30, 2009. The use of $5.339 million of these carryforwards is limited on an annual basis, pursuant to the Internal Revenue Code, due to certain changes in ownership and equity transactions. For the year ended September 30, 2000, the Company has approximately $399 thousand of research and development tax credit carryforwards, which begin to expire in 2018, and approximately $150 thousand of alternative minimum tax credit carryforwards, which have no expiration date.

F-25

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) Income Taxes (Continued)

The Company received net (refunds) or made cash payments, net of refunds, for income taxes of $(18), $15 and $42 thousand for 2000, 1999 and 1998, respectively.

10. Accrued Liabilities

Accrued liabilities consist of the following at September 30:

(Dollars in thousands)	2000	1999
Salaries, wages and related expenses	$ 383	$ 553
Acquisition and disposition costs	483	431
Legal and professional fees	169	169
Warranty and other sale obligations	54	398
Deferred income	250	264
Commissions	72	182
Interest expense	219	7
Other	223	239
	$1,853	$2,243

11. Debt

On March 29, 2000, the Company entered into a $50 million Amended and Restated Credit Agreement with KeyBank, N.A. ("the $50 million Credit Agreement"). This agreement superceded all previous credit agreements with KeyBank, N.A. At September 30, 1999, there were no borrowings outstanding on the lines of credit available at that time.

On October 1, 2000, this agreement was previously amended ("the $50 million Credit Agreement, as amended") as follows:

The Company has pledged shares of Plug Power common stock as collateral for the $50 million Credit Agreement, as amended (2,000,000 shares as of September 30, 2000). The Company is obligated to make interest only payments through March 15, 2002, and upon exercise of a term loan option at the end of the line of credit term, to repay the principal in 8 equal quarterly installments beginning March 31, 2002. Interest is payable monthly at either the Prime Rate or if certain performance standards are achieved, based on both the trading volume and market price of Plug Power common stock, at LIBOR based rates. On September 30, 2000, $27 million of debt was outstanding at Prime (9.5%) and is classified as short-term.

On December 27, 2000, this agreement was again amended as follows:

The $50 million Credit Agreement, as amended, was reduced to $30 million ("the $30 million Credit Agreement, as amended"). Concurrent with this amendment, the Bank permanently waived all covenant violations related to the minimum price of Plug Power common stock and the Company made a

F-26

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(11) Debt (Continued)

principal reduction of $3 million, bringing the loan balance to $25.2

million as of the amendment date. Additional borrowings are available

when the Plug Power stock price is above $20 per share.

The Company has pledged 8 million shares of Plug Power common stock as collateral. In addition, the Company entered into a Put and Call with First Albany Companies, Inc. ("FAC") to provide independent credit support for repayment of the loan ("FAC Credit Enhancement"). The FAC Credit Enhancement provides FAC with the option, if the price of Plug Power stock falls to $4 per share, to either purchase 6.3 million Plug Power shares pledged as collateral on the loan or take an assignment of KeyBank N.A.'s rights under the Credit Agreement, as amended. The FAC Credit Enhancement may be triggered in the event of a default and expires on April 27, 2001 and may be renewed by the Company and FAC on a monthly basis upon mutually agreeable terms. Upon expiration of the FAC Credit Enhancement, if Plug Power stock is trading below $20 per share the loan is immediately due and payable. Mandatory repayments on any outstanding balance in excess of $25.2 million would be required if the Plug Power stock price declines below $16 per share while the FAC Credit Enhancement is in place. After the FAC Credit Enhancement expires, mandatory repayments on any outstanding balance would be required if the Plug Power stock price is below $20 per share. If the line of credit is due and payable upon expiration of the FAC Credit Enhancement on April 27, 2001, the Company may need to sell assets including certain investments to fund this obligation. The Company is obligated to make interest-only payments through March 15, 2002, and upon exercise of a term loan option at the end of the line of credit term, to repay the principal in 8 equal quarterly installments beginning March 31, 2002. Interest is payable monthly at either the Prime Rate or if certain performance standards are achieved, based on both the trading volume and market price of Plug Power common stock, at LIBOR based rates.

As of December 27, 2000, the $30 million Credit Agreement, as amended, requires the Company to meet certain covenants, including maintenance of a debt service reserve account (equal to 6 months of interest payments on outstanding debt, amounting to $1.142 million at September 30, 2000) and a collateral coverage ratio, the FAC Credit Enhancement and a minimum Plug Power share price. All other covenants in the previous KeyBank credit agreements were eliminated in connection with this financing.

On December 27, 2000, the Company entered into two bridge loan agreements with FAC. The first loan was for $945 thousand and was used to pay the purchase price for the FAC Credit Enhancement. The Company has pledged 200,000 shares of Plug Power common stock as collateral. The second loan is for $5 million, $3 million of which was used to make the principal loan repayment to KeyBank, N.A. and the remaining $2 million will be used for working capital. The Company pledged 1 million shares of Plug Power common stock as collateral. Both loans bear interest at the Prime Rate (9.5% at December 27, 2000) and both interest and principal are due on January 3, 2002. Upon mutual agreement of FAC and the Company, the loans may be converted to equity prior to maturity.

F-27

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. Debt (Continued)

The above agreement supercedes a November 1, 1999 $22.5 million Credit Agreement with KeyBank, N.A. ("the $22.5 million Credit Agreement"). The Company had pledged 13,704,315 shares of Plug Power common stock as collateral for its $22.5 million loan from KeyBank, N.A. ("Loan"). The proceeds of this Loan were used to fund $20.5 million of the Company's Mandatory Capital Commitment to Plug Power. Pursuant to the $22.5 million Credit Agreement, the Company was obligated to make interest- only payments for the first 18 months following the closing of the Loan, and to repay the principal in 6 equal quarterly installments of $3.750 million each, commencing in August 2001. In addition, a one-time commitment fee totaling $247,500 was paid for the Loan, $75,000 of which was paid as of September 30, 1999. Interest was payable monthly at the Prime Rate or if certain performance standards were achieved, at a reduced rate. The performance standards were based on the trading volume and market price of Plug Power common stock. The $22.5 million Credit Agreement terminated on March 29, 2000 when the $50 million Credit Agreement was executed.

At September 30, 1999, the Company had a working capital line of credit available in the amount of $4 million with interest payable monthly at the Prime Rate (8.25% at September 30, 1999) or LIBOR plus 2.5% (7.9% at September 30, 1999). This obligation was collateralized by the assets of the Company, exclusive of its investment in Plug Power. The Company

also had a $1 million equipment loan/lease line of credit at an interest rate of LIBOR plus 2.75% (8.15% at September 30, 1999). This obligation was collateralized by equipment purchased under the line of credit. The lines of credit terminated on March 29, 2000 when the $50 million Credit Agreement was executed. No amounts were outstanding under these lines at September 30, 1999.

On December 17, 1998, 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 building for MTI Instruments, Inc. and the Company's corporate staff and renovation of existing buildings leased to Plug Power. The IDR Bond proceeds were deposited with a trustee for the bondholders, and the Company drew 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 was reimbursed for its out-of-pocket costs.

KeyBank, N.A. issued a letter of credit ("the credit agreement") for approximately $6 million in connection with the $6 million IDR Bonds. The credit agreement required the Company to meet certain covenants,

F-28

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(11) Debt (Continued)

including a fixed charge coverage and leverage ratio. Further, if certain performance standards were achieved, the interest rates on the debt could be reduced.

The credit agreement also required the Company to grant a first lien on all consolidated assets of the Company, exclusive of its investment in Plug Power, a first mortgage on all land and buildings owned by the Company and a first lien on any equipment purchased by the Company.

The IDR Bond Obligation, letter of credit and unexpended bond proceeds were transferred to Plug Power in connection with the sale of the Company's facility and adjacent residence effective July 1, 1999. As of September 30, 1999, there is no continuing obligation, contingent or direct, with respect to the IDR Bonds or related letter of credit.

The weighted average interest rate on short-term borrowings outstanding was 0% during 2000 and 1999 and 9.02% during 1998.

Cash payments for interest were $1,731, $164 and $97 thousand for 2000, 1999 and 1998, respectively.

12. Shareholders' Equity

Stock Splits

On March 8, 2000, the Company declared a 3-for-1 stock split in the form of a dividend. Holders of the Company's $1.00 par value common stock received two additional shares of $1.00 par value common stock for every one share of common stock owned as of April 3, 2000.

On April 23, 1999, the Company declared a 3-for-2 stock split in the form of a stock dividend. Holders of the Company's $1.00 par value common stock received one additional share of $1.00 par value common stock for every two shares of common stock owned as of April 30, 1999.

F-29

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. Shareholders' Equity (Continued)

Stock Sales

On July 12, 1999, the Company completed the sale of 801,223 shares of common stock to current shareholders through a rights offering. The offering raised approximately $12.820 million before offering costs of approximately $158 thousand for net proceeds of approximately $12.671 million. The Company used some of the proceeds of the offering for investment into Plug Power. In addition, some proceeds were used for acquisitions for the Company's core businesses, efforts to increase market share, working capital, general corporate purposes and other capital expenditures.

On September 30, 1998, the Company completed the sale of 1,196,399 shares of common stock to current shareholders through a rights offering. The offering raised approximately $7.178 million before offering costs of approximately $186 thousand for net proceeds of approximately $6.992 million. The Company used some of the proceeds of the offering for investment in Plug Power. In addition, some proceeds were used for acquisitions for the Company's core businesses, efforts to increase market share, working capital, general corporate purposes and other capital expenditures.

Warrants

The Company issued warrants as part of its strategic alliance with SatCon. The warrants, as adjusted for the April 3, 2000 stock split, provide for the purchase of 108,000 and 192,000 shares of the Company's common stock and were issued on October 21, 1999 and January 31, 2000, respectively. The warrants are immediately exercisable at $12.56 per share and expire on October 21, 2003 and January 31, 2004, respectively.

Changes in Common Shares

Changes in common shares as of September 30 are as follows:

Common Shares	2000	1999	1998
Balance, October 1 (1998 balance as previously reported)	34,949,877	32,321,904	8,862,992
Three-for-one common stock split effected in the form of a 200% stock dividend effective April 3, 2000	-	-	17,725,984
Issuance of shares for stock option exercises	487,408	224,304	349,131
Issuance of shares for stock sale	-	2,403,669	5,383,797
Issuance of shares - consultant	-	-	-
Balance, September 30	35,437,285	34,949,877	32,321,904
Treasury Shares
Balance, October 1 (1998 balance as previously reported)	20,250	13,500	4,500
Three-for-one common stock split effected in the form of a 200% stock dividend effective April 3, 2000	-	-	9,000
Acquisition of shares	-	6,750	-
Balance, September 30	20,250	20,250	13,500

F-30

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Earnings per Share

The following is the reconciliation, effected for stock splits in 2000 and 1999, of the numerators and denominators of the basic and diluted per share computations of net loss at September 30:

(Dollars in thousands)	2000	1999	1998
Loss from continuing operations attributable to common stockholders	$ (18,839)	$ (10,729)	$ (2,031)
Common shares outstanding, beginning of period	34,949,877	32,321,904	8,862,992
Three-for-one common stock split effected in the form of a 200% stock dividend effective April 3, 2000	-	-	17,725,984
Weighted average common shares issued during the period	286,401	599,997	128,235
Weighted average common shares issued during the period, as calculated for the bonus element effects for rights offerings (a)	-	1,069,689	2,012,805
Weighted average common stock equivalents	-	-	-
Weighted average shares outstanding - basic and diluted	35,236,278	33,991,590	28,730,016
Net loss per weighted average share - basic and diluted	$ (.54)	$ (.31)	$ (.07)

(a) The rights offerings on July 12, 1999 and September 30, 1998 offered to all existing shareholders the right to purchase stock at exercise prices that were less than the fair value of the stock at the time of issuance. As a result, basic and diluted Earnings per Share have been adjusted retroactively for the bonus element for all periods presented.

During fiscal 2000, options to purchase 2,703,374 shares of common stock at prices ranging from $0.54 to $21.90 per share were outstanding but were not included in the computation of Earnings per Share-assuming dilution because the Company incurred a loss during this period and inclusion would be antidilutive. The options expire between December 20, 2006, and August 3, 2010. The Company also issued 300,000 warrants to SatCon Technology Corporation at $12.56 per share. These warrants were outstanding at September 30, 2000 but were not included in the computation of Earnings per Share-assuming dilution because the Company incurred a loss during this period and inclusion would be antidilutive. The warrants expire on October 21, 2003 (108,000) and

January 31, 2004 (192,000).

F-31

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Earnings per Share (Continued)

During fiscal 1999, options to purchase 2,224,839 shares of common stock

at prices ranging between $0.54 and $7.50 per share were outstanding but

were not included in the computation of Earnings per Share-assuming dilution because the Company incurred a loss during this period and inclusion would be antidilutive. The options expire between December 20, 2006 and June 16, 2009.

During fiscal 1998, options to purchase 1,822,116 shares of common stock at prices ranging from $0.54 to $1.33 per share were outstanding but were not included in the computation of Earnings per Share-assuming dilution because the Company incurred a loss during this period and inclusion would be anti-dilutive. The options expire between December 20, 2006 and August 31, 2008.

14. Stock Based Compensation

During March 1999, the shareholders approved the 1999 Employee Stock Incentive Plan ("1999 Plan"). The 1999 Plan provides that an initial aggregate number of 1 million shares of common stock may be awarded or issued. The number of shares available under the 1999 Plan has been

adjusted for stock splits, and during 2000 and 1999 the number of shares available under the 1999 Plan increased to 4,500,000 and 1,500,000 shares, respectively. Under the 1999 Plan, the Board of Directors is authorized to award stock options to officers, employees and others.

During December 1996, the shareholders approved a stock incentive plan ("1996 Plan"). The 1996 Plan provides that an initial aggregate number of 500,000 shares of common stock may be awarded or issued. The number of shares available under the 1996 Plan may be increased by 10% of any increase in the number of outstanding shares of common stock for reasons other than shares issued under this 1996 Plan. The number of shares available under the 1996 Plan have been adjusted for stock splits and rights offerings, and during 2000 and 1999, the number of shares available under the 1996 Plan increased to 3,478,746 and 1,159,582 shares, respectively. Under the 1996 Plan, the Board of Directors is authorized to award stock options, stock appreciation rights, restricted stock, and other stock-based incentives to officers, employees and others.

Options are generally exercisable in from one to four cumulative annual amounts beginning 12 months after the date of grant. Certain options granted may be exercisable immediately. Option exercise prices are not less than 85 percent of the market value of the shares on the date of grant. Unexercised options generally terminate ten years after grant.

The Company has elected to follow Accounting Principles Board ("APB") No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for employee stock-based compensation and to provide the disclosures required under SFAS No. 123, "Accounting for

F-32

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Stock Based Compensation (Continued)

Stock Based Compensation." APB No. 25 requires no recognition of compensation expense for most of the stock-based compensation arrangements provided by the Company, namely, broad- based employee stock purchase plans and option grants where the exercise price is equal to or not less than 85 percent of the market value at the date of grant. However, APB No. 25 requires recognition of compensation expense for variable award plans over the vesting periods of such plans, based upon the then-current market values of the underlying stock. In contrast, SFAS No. 123 requires recognition of compensation expense for grants of stock, stock options, and other equity instruments, over the vesting periods of such grants, based on the estimated grant-date fair values of those grants.

During fiscal year 2000 and 1999, the Company awarded 60,000 and 45,000 options, respectively, to consultants. Presented below is a summary of compensation expense recorded in "Selling, general and administrative expenses" in the Consolidated Statements of Operations for the years ended September 30:

(Dollars in thousands)	2000	1999	1998
SFAS 123 - Consultants	$ 505	$ 55	$ -
APB No. 25 - Variable stock options	42	-	-
Total compensation expense	$ 547	$ 55	$ -

Presented below is a summary of the stock option plans' activity for the years ended September 30:

	2000	1999	1998
Shares under option at October 1	2,224,839	1,822,116	1,870,200
Granted	1,081,000	697,650	893,250
Exercised	(474,808)	(236,847)	(349,134)
Canceled	(127,656)	(58,080)	(592,200)
Shares under option at September 30	2,703,375	2,224,839	1,822,116
Options exercisable at September 30	1,500,636	1,258,314	814,119
Shares available for granting of options	4,214,582	667,926	1,067,130
The weighted average exercise price is as follows:
	2000	1999	1998
Shares under option at October 1	$ 1.63	$ .96	$ .65
Granted:
Exercise price less than fair market value at grant date	11.55	-	-
Exercise price equal to fair market value at grant date	19.87	2.87	1.28
Exercised	1.01	.75	.64
Canceled	2.34	1.12	.58
Shares under option at September 30	7.85	1.63	.96
Options exercisable at September 30	6.42	1.86	.88

F-33

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13. Stock Based Compensation (Continued)

The following table summarizes information for options outstanding and exercisable at September 30, 2000:

Outstanding Options				Options Exercisable
Exercise Price Range	Number	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Number	Weighted Average Exercise Price
$ 0.54-$ 0.76	437,975	6.8	$ 0.69	310,287	$ 0.67
$ 1.06-$ 1.56	569,325	7.7	$ 1.32	338,700	$ 1.32
$ 1.76-$ 1.78	315,075	8.2	$ 1.77	159,149	$ 1.77
$ 4.17	315,000	8.5	$ 4.17	315,000	$ 4.17
$ 6.27-$ 9.25	60,000	9.4	$ 8.07	11,250	$ 8.67
$10.65-$14.05	379,000	9.7	$11.58	43,750	$10.65
$20.92-$21.92	627,000	9.5	$21.40	322,500	$21.15
	2,703,375			1,500,636

Option quantities and prices have been adjusted for the three-for-one common stock split effected in the form of a 200% stock dividend effective April 3, 2000.

Pro Forma Fair Value Disclosures

Had compensation expense for the Company's stock options been recognized based on the fair value on the grant date under the methodology prescribed by SFAS No. 123, the Company's net loss and net loss per share for the three years ended September 30, would have been impacted as shown in the following table (in thousands, except per share).

	2000	1999	1998
Reported net loss	$(18,596)	$(10,688)	$(4,316)
Pro forma net loss	(22,321)	(11,988)	(4,773)
Reported diluted net loss per share	(.53)	(.31)	(.15)
Pro forma diluted net loss per share	(.63)	(.35)	(.17)

F-34

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Stock Based Compensation (Continued)

The fair value of options granted, which is amortized to expense over the option vesting period in determining the pro forma impact, is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2000	1999	1998
Expected life of option	5 yrs	5 yrs	5 yrs
Risk-free interest rate	6.00-6.55%	4.37-5.81%	5.52-5.85%
Expected volatility of the Company's stock	91%	78%	102%
Expected dividend yield on the Company's stock	0%	0%	0%
The weighted average fair value of options granted during the years ended September 30, is as follows:
	2000	1999	1998
Fair value of each option granted	$ 12.55	$ 1.93	$ 1.57
Total number of options granted	1,081,000	697,650	893,250
Total fair value of all options Granted	$13,566,550	$1,346,465	$1,402,403

In accordance with SFAS No. 123, the weighted average fair value of stock options granted is required to be based on a theoretical statistical model using the preceding Black-Scholes assumptions. In actuality, because the Company's stock options are not traded on any exchange, employees can receive no value nor derive any benefit from holding stock options under these plans without an increase in the market price of the Company's stock. Such an increase in stock price would benefit all shareholders commensurately.

(15) Retirement Plan

The Company maintains a voluntary savings and retirement plan (Internal Revenue Code Section 401(k) Plan) covering substantially all employees. The Company plan allows eligible employees to contribute a percentage of their compensation; the Company makes additional voluntary contributions in amounts as determined by management and the Board of Directors. The investment of employee contributions to the plan is self-directed. Effective October 21, 1999, Ling employees no longer participate in the plan due to Ling's sale to SatCon. The cost of the plan was $81, $168 and $152 thousand for 2000, 1999 and 1998, respectively.

F-35

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14. Commitments and Contingencies

On September 9, 1998, Barbara Lawrence, the Lawrence Group, Inc.

("Lawrence"), and certain other Lawrence-related entities ("Plaintiffs") filed suit in the United States Bankruptcy Court for the Northern District of New York against First Albany Corporation, Mechanical Technology, Dale Church, Edward Dohring, Alan Goldberg, George McNamee, Beno Sternlicht, Marty Mastroianni (former President and Chief Operating Officer of MTI), and 33 other individuals ("Defendants") who purchased a total of 820,909 shares of the Company's stock from the Plaintiffs. The case concerns the Defendants' 1997 purchase of Mechanical Technology shares from the Plaintiffs at the price of $2.25 per share. FAC acted as Placement Agent for the Defendants in the negotiation and sale of the shares and in proceedings before the Bankruptcy Court for the Northern District of New York, which approved the sale in September 1997. Plaintiffs claim that the Defendants failed to disclose material inside information concerning Plug Power, LLC to the Plaintiffs and therefore the $2.25 per share purchase price was unfair. Plaintiffs are seeking damages of $5 million plus punitive damages and costs. In April 1999, Defendants filed a motion to dismiss the amended complaint, which was denied by the Bankruptcy Court. On appeal in October 2000, Plaintiffs' cause of action was dismissed by the United States District Court for the Northern District of New York. In November 2000, Plaintiffs filed an appeal of that dismissal with the United States Court of Appeals for the Second Circuit. That appeal is presently pending.

The Company and its subsidiaries lease certain manufacturing, warehouse and office facilities. The leases generally provide for the Company to pay increases over a base year level for taxes, maintenance, insurance and other costs of the leased properties. The leases contain renewal provisions.

Future minimum rental payments required under noncancelable operating leases are (dollars in thousands): $311 in 2001; $310 in 2002; $305 in 2003; $300 in 2004 and $313 in 2005. Rent expense under all leases was $392, $482 and $403 thousand for 2000, 1999 and 1998, respectively.

Rental income under all sub-leases was $12, $164 and $66 thousand in 2000, 1999 and 1998, respectively.

F-36

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Related Party Transactions

At September 30, 2000, First Albany Companies Inc. ("FAC") owned approximately 34% of the Company's common stock.

Transactions among related parties are as fair to the Company as obtainable from unaffiliated third parties.

In April 2000, the Company entered into a management services agreement with First Albany Corporation, a wholly-owned subsidiary of FAC, to provide certain services on a month to month basis. Under this agreement, FAC bills services to the Company (phone, network, postage, etc.) on a cost reimbursement basis. Billings under these agreements amounted to approximately $30 thousand for 2000. Amounts payable to FAC is included in the financial statement line "Accrued liabilities - related parties".

During fiscal 2000, FAC/Equities, a division of First Albany Corporation, provided financial advisory services in connection with the sale of Ling to SatCon, for which FAC/Equities was paid a fee of approximately $353 thousand.

During fiscal 1999 and 1998, First Albany Corporation provided financial advisory services in connection with the sale of the Technology Division,

for which First Albany Corporation was paid fees of $15 and $10 thousand, respectively.

The Company received approximately $5 thousand in interest income from Beacon Power for bridge loan interest.

Amounts receivable from an officer totaled approximately $38 thousand and is included in the financial statement line "Other receivables-related parties" at September 30, 1999. The balance was paid during fiscal 2000.

On June 27, 1997, the Company entered into a management services agreement with Plug Power to provide certain services and facilities for a period of one year. This agreement expired on June 27, 1998. The Company continued to provide services through fiscal 1999, which were billed on a cost reimbursement basis. During 1998, the Company entered into leases for certain of its facilities for manufacturing, laboratory and office space. These leases expired on July 1, 1999 pursuant to the sale of the Company's facility to Plug Power in exchange for 704,315 Plug Power Class A membership interests and the assumption of $6 million in debt by Plug Power. Billings under these agreements amounted to $0, $448 and $661 thousand for 2000, 1999 and 1998, respectively. Amounts receivable from Plug Power under these agreements are included in the financial statement line "Other receivables-related parties."

F-37

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. Related Party Transactions (Continued)

Prior to becoming Vice President of Corporate Development, Catherine Hill's law firm, Catherine S. Hill, PLLC, served as general counsel to the Company. Billings for 2000 totaled approximately $141 thousand. She also received 30,000 stock options during 2000 with a Black-Scholes value of approximately $446 thousand.

During fiscal 2000, the Company sold furniture and equipment to Plug Power totaling approximately $12 thousand.

The Company made investments in related parties during the fiscal years ended September 30:

(Dollars in thousands)	2000	1999	1998
Plug Power- cash	$20,500	$6,000	$ -
Plug Power- capital commitment in 1998 and funded in 1999	-	(4,000)	4,000
Plug Power- notes receivable	-	-	500
Plug Power- accounts receivable	-	-	500
Plug Power- campus contribution	-	367	-
SatCon-cash	7,070	-	-
Beacon Power- cash	6,050	-	-
	$33,620	$2,367	$5,000

During 2000 and 1999, the Company paid approximately $35 and $59 thousand, respectively to Plug Power in connection with a lease of office and manufacturing space. This lease terminated on November 24, 1999.

On December 27, 2000, the Company entered into a Put and Call with First Albany Companies, Inc. ("FAC") to provide independent credit support for repayment of the loan ("FAC Credit Enhancement"). The FAC Credit Enhancement provides FAC with the option, if the price of Plug Power stock falls to $4 per share, to either purchase 6.3 million Plug Power shares pledged as collateral on the loan or take an assignment of KeyBank N.A.'s rights under the Credit Agreement, as amended. The FAC Credit Enhancement may be triggered in the event of a default and expires on April 27, 2001 and may be renewed by the Company and FAC on a monthly basis upon mutually agreeable terms. Upon expiration of the FAC Credit Enhancement, if Plug Power stock is trading below $20 per share the loan is immediately due and payable.

On December 27, 2000, the Company entered into two bridge loan agreements with FAC. The first loan was for $945 thousand and was used to pay the purchase price for the FAC Credit Enhancement. The Company has pledged 200,000 shares of Plug Power common stock as collateral. The second loan is for $5 million, $3 million of which was used to make the principal loan repayment to KeyBank, N.A. and the remaining $2 million will be used for working capital. The Company pledged 1 million shares of Plug Power common stock as collateral. Both loans bear interest at the Prime Rate (9.5% at December 27, 2000) and both interest

F-38

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Discontinued Operations

and principal are due on January 3, 2002. Upon mutual agreement of FAC and the Company, the loans may be converted to equity prior to maturity.

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) was completed on March 31, 1998. Accordingly, the Company no longer includes Technology among its reportable business segments. 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 on an annual basis for a period of five years after the sale as follows: yearly combined gross sales (in excess of $2.5 million) multiplied by .13, .053, .027, for years one, two and three-to-five, respectively; (b) assumed approximately $40 thousand of liabilities; and (c) established a credit for warranty work of approximately $35 thousand. The Company received approximately $0 and $41 thousand as contingent sales proceeds from NYFM, Incorporated in 2000 and 1999, respectively. This amount is included in the financial statement line, "Income (loss) from discontinued operations."

During the fourth quarter of fiscal 2000, the Company reversed $400 thousand ($243 thousand, net of tax) of the previously recorded loss on disposal of the Technology Division. The reversal includes estimated reductions in warranty and accounts receivable reserves.

Discontinued operations consist of the following at September 30:

(Dollars in thousands)	2000	1999	1998
Sales	$ -	$ -	$ 532
Loss from discontinued operations before income tax	-	-	(516)
Income tax (benefit)	-	-	-
Net loss from discontinued Operations	$ -	$ -	$ (516)
Gain (loss) on disposal of Division	$ 400	$ 41	$(1,769)
Income tax	157	-	-
Gain (loss) on disposal of Division	$ 243	$ 41	$(1,769)

The assets and liabilities of the Company's discontinued operations are as follows at September 30:

(Dollars in thousands)	2000	1999
Assets (primarily accounts receivable)	$ 30	$ 220
Liabilities (primarily accrued expenses)	261	760
Net liabilities	$(231)	$(540)

F-39

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

18. Discontinued Operations (Continued)

The nature of the net liability for discontinued operations as of September 30, 2000 and the expected period of liquidation are as follows (Dollars in thousands):

Nature of (Liabilities)/Assets	Amount	Expected Period of Liquidation
Accounts receivable	$ 30	Fiscal 2001
Warranty	(163)	Fiscal 2001
Severance	(60)	Fiscal 2001
Personnel and wind-down costs	(38)	Fiscal 2001
	$(231)

(19) Sale of Division/Subsidiary

On October 21, 1999, the Company created a strategic alliance with SatCon Technology Corporation ("SatCon"). SatCon acquired Ling Electronics, Inc. and Ling Electronics, Ltd. ("Ling") from the Company and the Company agreed to invest approximately $7 million in SatCon. This investment was funded in two stages during fiscal 2000. In consideration for the acquisition of Ling and the Company's investment, the Company received 1,800,000 shares of SatCon's common stock and warrants to purchase an additional 100,000 shares of SatCon's common stock. SatCon also received warrants to purchase 300,000 shares of the Company's common stock (after the effects of the Company's 3-for-1 stock split).

As a part of the SatCon transaction, the Company issued to SatCon warrants to purchase 108,000 and 192,000 shares of the Company's stock on October 21, 1999 and January 31, 2000, respectively. The warrants are immediately exercisable at $12.56 per share and expire on October 21, 2003 and January 31, 2004, respectively. The estimated fair value of these warrants at the dates issued were $4.94 and $16.38 per share, respectively, using a Black-Scholes option pricing model and assumptions similar to those used for valuing the Company's stock options.

The Company also received warrants to purchase 36,000 and 64,000 shares of SatCon common stock on October 21, 1999 and January 31, 2000, respectively. The warrants are immediately exercisable at $8.80 per share and expire on October 21, 2003 and January 31, 2004, respectively.

The sale resulted in a $1.262 million gain, which was recorded in the first quarter of fiscal year 2000.

F-40

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

20. Geographic and Segment Information

The Company sells its products on a worldwide basis with its principal markets listed in the table below where information on export sales is summarized by geographic area for the Company as a whole for the years ended September 30:

(Dollars in thousands)
Geographic Area	2000	1999	1998
United States	$4,362	$ 9,576	$17,022
Europe	185	1,180	1,072
Japan	397	787	1,534
Pacific Rim	387	760	834
China	88	278	302
Canada	20	153	228
Rest of World	108	151	36
Total Sales	$5,547	$12,885	$21,028

The Company operates in two business segments, New Energy and Test and Measurement Instrumentation. The New Energy segment develops new energy technologies and companies. The Test and Measurement Instrumentation segment develops, manufactures, markets and services sensing instruments and computer-based balancing systems for aircraft engines; and prior to the sale of Ling in October 1999, vibration test systems and power conversion products.

The accounting policies of the New Energy and Test and Measurement Instrumentation segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on profit or loss from operations before income taxes, accounting changes, non-recurring items, and interest income and expense. Inter-segment sales are not significant.

In the Test and Measurement Instrumentation Segment, in 2000, one customer accounted for $1.16 million or 20.9% of sales and one customer accounted for $620 thousand or 11.2% of sales; no customers accounted for more than 10% of sales in 1999; and in 1998 one customer accounted for $2.83 million or 13.5% of sales and one customer accounted for $2.41 million or 11.5% of sales.

Summarized financial information concerning the Company's reportable segments is shown in the following table. The "Other" column includes corporate related items and items like income taxes or unusual items, which are not allocated to reportable segments. In addition, segments' noncash items include any depreciation and amortization in reported profit or loss. The New Energy segment figures include the Company's activities related to evaluating new energy technologies, investment and growth opportunities, and the Company's investments in Plug Power, SatCon and Beacon Power and the results of the Company's equity method of accounting for certain investments. SatCon's results are accounted for on a one-quarter lag. The results for Plug Power and SatCon are derived from their unaudited quarterly and audited annual financial statements.

F-41

MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(20) Geographic and Segment Information (Continued)

(Dollars in thousands)

Sept.30, 2000	New Energy	Test and Measurement Instrumentation	Other	Consolidated Totals
Revenues	$ -	$ 5,547	$ -	$ 5,547
Segment profit (loss)	(17,071)	(2,431)	906	(18,596)
Equity in investee losses, net of tax	(15,849)	-	-	(15,849)
Total assets	70,438	2,286	4,542	77,266
Investments, at equity	64,356	-	-	64,356
Investments, at cost	6,050	-	-	6,050
Capital expenditures	9	137	140	286
Depreciation and amortization	3	130	131	264
Sept.30, 1999
Revenues	$ -	$ 12,885	$ -	$ 12,885
Segment profit (loss)	(9,363)	(1,404)	79	(10,688)
Equity in investee losses, net of tax	(9,363)	-	-	(9,363)
Total assets	8,710	8,185	14,885	31,780
Investments, at equity	8,710	-	-	8,710
Capital expenditures	-	183	2,555	2,738
Depreciation and amortization	-	202	379	581
Sept.30, 1998
Revenues	$ -	$ 21,028	$ -	$ 21,028
Segment profit (loss)	(3,806)	2,155	(2,665)	(4,316)
Equity in investee losses, net of tax	(3,806)	-	-	(3,806)
Total assets	1,221	9,424	10,483	21,128
Investments, at equity	1,221	-	-	1,221
Capital expenditures	-	202	2,964	3,166
Depreciation and amortization	-	205	118	323

The following table presents the details of "Other" segment profit (loss) for the years ended September 30:

(Dollars in thousands)	2000	1999	1998
Corporate and other expenses (income):
Depreciation and amortization	$ 131	$ 379	$ 118
Interest expense	1,943	106	102
Interest income	(463)	(335)	(65)
Income tax (benefit) expense	(1,927)	37	25
Other expense (income), net	915	(225)	200
(Income) loss from discontinued operations, net	(243)	(41)	2,285
Gain on sale of division	(1,262)	-	-
Total (income) expense	$ (906)	$ (79)	$2,665

F-42

EX-4

EXHIBIT 4.109

AMENDMENT dated as of October 1, 2000 (this "Amendment"), to the Amended and Restated Credit Agreement dated as of March 29, 2000 (as the same may be amended, supplemented, waived or otherwise modified from time to time, the "Credit Agreement"), between MECHANICAL TECHNOLOGY INCORPORATED, a New York corporation (the "Borrower"), and KEYBANK NATIONAL ASSOCIATION, a national banking association, as Lender thereunder (the "Lender").

W I T N E S S E T H

WHEREAS, pursuant to the Credit Agreement, the Lender has agreed to make certain loans and other extensions of credit to the Borrower;

WHEREAS, the Borrower has requested that the Lender amend the Credit Agreement in order to revise certain financial and other covenants; and

WHEREAS, the Lender is willing to agree to the requested amendments, but only upon the terms and conditions set forth herein;

NOW THEREFORE, in consideration of the premises contained herein, the parties hereto agree as follows:

1. Defined Terms. Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement are used herein as defined therein.
2. Amendments to Credit Agreement.
1. Amendment of Section 1.1 (Certain Defined Terms).

Section 1.1 of the Credit Agreement is hereby amended by deleting clause (i) of the definition of "Liquidity Event" and substituting therefor the following:

"(i) the Market Value per share of common stock of the Company is less than $20.00;".

2. Amendment to Section 3.2 (Scheduled Repayments and Mandatory Prepayments and Commitment Reductions).

Section 3.2 of the Credit Agreement is hereby amended by deleting section 3.2(b) in its entirety and substituting therefor the following:

"(b) If Collateral Coverage Ratio Not Met.

(i) If on any date (after giving effect to any other payments on such date) when the Market Value per share of the common stock of the Company falls below $50.00 per share (but not below $30.00 per share), the Lender determines (which determination shall be binding on the parties, in the absence of manifest error) that the Collateral Coverage Ratio is less than 2.00 to 1.00, then (1) the Lender shall promptly notify the Borrower thereof in writing, specifying the amount of additional shares of common stock of the Company which would be required to be pledged under the Pledge Agreement so as to result in a Collateral Coverage Ratio of at least 2.00 to 1.00, and (2) if within three Business Days after any such notice is given the Borrower does not so pledge such additional shares of the Company sufficient to achieve such Collateral Coverage Ratio, the Borrower will immediately prepay Loans in an aggregate principal amount, conforming to the requirements as to the amount of partial prepayments provided for in section 3.1, at least sufficient to result in a Collateral Coverage Ratio of at least 2.00 to 1.00.

(ii) If on any date (after giving effect to any other payments on such date) when the Market Value per share of the common stock of the Company falls below $30.00 per share, the Lender determines (which determination shall be binding on the parties, in the absence of manifest error) that the Collateral Coverage Ratio is less than 4.00 to 1.00, then (1) the Lender shall promptly notify the Borrower thereof in writing, specifying the amount of additional shares of common stock of the Company which would be required to be pledged under the Pledge Agreement so as to result in a Collateral Coverage Ratio of at least 4:00 to 1:00, and (2) if within three Business Days after any such notice is given the Borrower does not so pledge such additional shares of the Company sufficient to achieve such Collateral Coverage Ratio, the Borrower will immediately prepay Loans in an aggregate principal amount, conforming to the requirements as to the amount of partial prepayments provided for in section 3.1, at least sufficient to result in a Collateral Coverage Ratio of at least 4:00 to 1.00.

(iii) Any prepayments of the Term Loans pursuant to this section 3.2(b) shall be applied (if applicable) to the Scheduled Repayments in inverse order of maturity. Additional shares of common stock of the Company required to be pledged hereunder shall be pledged based on initial date of continuous legal ownership of such shares by the Borrower, from oldest to most recent."

3. Amendment of Section 7.2 (Consolidation, Mergers, Acquisitions, Asset Sales, etc.). Section 7.2(c) of the Credit Agreement is hereby amended by deleting clause (ii) thereof in its entirety and substituting therefor the following:

"(ii) both before and after giving effect to such sale and any contemporaneous prepayment of the Loans out of the proceeds thereof, the applicable minimum Collateral Coverage Ratio set forth in section 7.6 would be satisfied;"

4. Amendment of Section 7.6 (Collateral Coverage Ratio). Section 7.6 is hereby amended by deleting such section in its entirety and substituting therefor the following:

"7.7. Collateral Coverage Ratio. The Borrower will not permit the Collateral Coverage Ratio to be (i) less than 2.0 to 1.0 at any time the Market Value per share of the common stock of the Company is equal to or greater than $30.00 and (ii) less than 4.0 to 1.0 at any time the Market Value per share of the common stock of the Company is less than $30.00."

3. General Provisions.
1. Representations and Warranties. On and as of the date hereof and after giving effect to this Amendment, the Borrower hereby confirms, reaffirms and restates the representations and warranties set forth in Section 5 of the Credit Agreement mutatis mutandis, except to the extent that such representations and warranties expressly relate to a specific earlier date in which case the Borrower hereby confirms, reaffirms and restates such representations and warranties as of such earlier date, provided that the references to the Credit Agreement in such representations and warranties shall be deemed to refer to the Credit Agreement as amended prior to the date hereof and pursuant to this Amendment.
2. Effectiveness. This Amendment shall become effective as of the date hereof upon receipt by the Lender of (i) counterparts of this Amendment duly executed and delivered by the Borrower and (ii) at its Payment Office or as otherwise directed by the Lender of an amendment fee equal to $50,000.00.
3. Continuing Effect; No Other Amendments. Except as expressly amended hereby, all of the terms and provisions of the Credit Agreement are and shall remain in full force and effect. The amendments provided for herein are limited to the specific sections of the Credit Agreement specified herein and shall not constitute an amendment or waiver of, or an indication of the Lender's willingness to amend or waive, any other provisions of the Credit Agreement or the same sections for any other date or time period (whether or not such other provisions or compliance with such sections for another date or time period are affected by the circumstances addressed in this Amendment).
4. Expenses. The Borrower agrees to pay and reimburse the Lender for all its costs and expenses incurred in connection with the preparation and delivery of this Amendment, including, without limitation, the reasonable fees and disbursements of counsel to the Lender.
5. Counterparts. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Amendment signed by the parties hereto shall be delivered to the Borrower and the Lender.
6. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written.

MECHANICAL TECHNOLOGY INCORPORATED

By: Cynthia A. Scheuer Title: Vice President and Chief Financial Officer

Accepted and Agreed to:

KEYBANK NATIONAL ASSOCIATION

By: Timothy M. Rudge
Title: Assistant Vice President

EX-4

EXHIBIT 4.110

THIS WAIVER AND SECOND AMENDMENT dated as of December 27, 2000 (this "Amendment") to the Amended and Restated Credit Agreement dated as of March 29, 2000, as amended pursuant to a certain Amendment to the Amended and Restated Credit Agreement dated as of October 1, 2000 (the "Credit Agreement"), between MECHANICAL TECHNOLOGY INCORPORATED, a New York corporation (the "Borrower"), and KEYBANK NATIONAL ASSOCIATION, a national banking association (the "Lender").

W I T N E S S E T H

WHEREAS, pursuant to the Credit Agreement, the Lender has agreed to make certain loans and other extensions of credit to the Borrower;

WHEREAS, certain Events of Default have occurred and are continuing under the Credit Agreement due to the occurrence of certain Liquidity Events;

WHEREAS, the Borrower has requested that the Lender waive such Events of Default and amend the Credit Agreement to take account of the changed circumstances which have given rise to the aforementioned Liquidity Events; and

WHEREAS, the Lender is willing to agree to the requested waiver and amendments, but only upon the terms and conditions set forth herein;

NOW THEREFORE, in consideration of the premises contained herein, the parties hereto agree as follows:

1. Defined Terms. Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement are used herein as defined therein.
2. Amendments to Credit Agreement.
1. Amendment of Section 1.1 (Certain Defined Terms).
1. Section 1.1 of the Credit Agreement is hereby amended by adding the following defined terms and definitions thereof:

"Block 1 Shares" shall mean 6,300,000 shares of the common stock the Company pledged by the Borrower under the Pledge Agreement.

"Block 2 Shares" shall mean 1,700,000 shares of the common stock Company pledged by the Borrower under the Pledge Agreement.

2. Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of the term "Collateral Coverage Ratio" and substituting therefor the following defined terms and definitions:

"Block 1 Shares Coverage Ratio" shall mean at any date of determination the ratio of (i) the Market Value of the Block 1 Shares at such time, to (ii) the sum of $25,200,000 or, if less, the then aggregate outstanding principal amount of the Loans.

"Block 2 Shares Coverage Ratio" shall mean at any date of determination the ratio of (i) the Market Value of the Block 2 Shares at such time, to (ii) the sum of the then Excess Loan Amount.

3. Section 1.1 of the Credit Agreement is hereby amended by adding the following defined term and definition thereof:

"Excess Loan Amount" shall mean the aggregate outstanding principal amount of the Loans in excess of $25,200,000.

4. Section 1.1 of the Credit Agreement is hereby amended by (a) deleting clause (i) of the definition of the term "Liquidity Event" and substituting therefor the following:

(i) the Market Value per share of common stock of the Company is equal to or less than the lesser of (x) $10.00 and (y) so long as the Put Agreement is in full force and effect, the strike price per share under the Put Agreement.

and (b) adding a new clause (v) to the definition of the term "Liquidity Event" as follows:

(v) the Market Value per share of common stock of the Company is equal to or less than $6.00 and First Albany Companies Inc. fails to provide the Lender with (A) a copy of its most recent monthly FOCUS report, (B) a written representation that it has access to funds sufficient to honor its obligations under the Put Agreement and (C) a written undertaking to provide the Lender (for so long as the Market Value per share of common stock of the Company remains equal to or less than $6.00) with (x) a copy of each subsequent monthly FOCUS report and (y) written notice in the event of any material adverse change in its ability to honor its obligations under the Put Agreement. It shall also be a Liquidity Event if First Albany Companies Inc. fails to provide the Lender with the items specified clauses (x) and (y) in the preceding sentence pursuant to the undertaking referred to therein, or subsequently provides the Lender with written notice of a material adverse change in its ability to honor its obligations under the Put Agreement.

5. Section 1.1 of the Credit Agreement is hereby amended by adding the following defined term and definition thereof:

"Put Agreement" shall mean (i) the Put and Call Agreement dated as of December 27, 2000 among the Borrower, the Lender and First Albany Companies Inc., substantially in the form of Annex 1 attached to the Second Amendment, or (ii) if at any time such Put Agreement shall not be in full force and effect, a substitute agreement to be entered into among the Borrower, the Lender and a counterparty satisfactory to the Lender in form and substance satisfactory to the Lender, each as modified, amended or supplemented from time to time with the written consent of the Lender and otherwise in accordance with the terms thereof and hereof.

6. Section 1.1 of the Credit Agreement is hereby amended by adding the following defined term and definition thereof:

"Put Exercise Event" shall mean the occurrence of any of the following:

(i) the Borrower shall default in the payment when due of any amount owing hereunder or under any other Credit Document, and such default shall continue for five or more days after the due date thereof ;

(ii) the Market Value per share of the common stock of the Company is equal to or less than $4.00;

(iii) the Put Agreement is terminated prior to the end of the initial stated term thereof without the written consent of the Lender;

(iv) the Put Agreement is not renewed or extended on terms satisfactory to the Lender prior to the last day of the stated term thereof, if on such date (x) the Market Value per share of the common stock of the Company is less than $20.00 or (y) the two-year holding period requirement set forth in Rule 144(k) of the 1933 Act has not been satisfied; or

(v) the occurrence of an act or an event that results in or could result in the cessation or suspension of trading or delisting from NASDAQ of the common stock of the Company.

7. Section 1.1 of the Credit Agreement is hereby amended by adding the following defined term and definition thereof:

"Required Prepayment Amount" shall mean at any date of determination an amount equal to the excess of the aggregate outstanding principal amount of the Loans on such date of determination over the following amount:

SP
_____	X	TL
$20.00

Where,

TL is equal to the aggregate outstanding principal amount of the Loans on the date the Market Value per share of the common stock of the Company falls below $20.00; and

SP is equal to the Market Value per share of the common stock of the Company on such date of determination rounded down to the nearest whole dollar amount.

8. Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of the term "Revolving Commitment" and substituting therefor the following:

"Revolving Commitment" shall mean the obligation of the Lender to make Revolving Loans in an aggregate principal amount initially equal to $30,000,000 as such amount may be reduced from time to time on the terms hereof.

9. Section 1.1 of the Credit Agreement is hereby amended by adding the following defined term and definition thereof:

"Second Amendment" shall mean the Waiver and Second Amendment to this Agreement dated as of December 27, 2000 between the Borrower and the Lender.

2. Amendment of Section 2.1 (Commitment for Loans). Section 2.1 of the Credit Agreement is hereby amended by deleting such section in its entirety and substituting therefor the following:

2.1. Commitment for Loans. (a)  Revolving Commitment. Subject to the terms and conditions hereof, the Lender agrees to make revolving credit loans ("Revolving Loans") to the Borrower from time to time during the Revolving Commitment Period in an aggregate principal amount at any one time outstanding which does not exceed the amount of the Revolving Commitment. During the Revolving Commitment Period the Borrower may use the Revolving Commitment by borrowing, prepaying the Revolving Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof; provided, however, that the Lender shall not be obligated to make Revolving Loans unless (i) the Market Value per share of the common stock of the Company is equal to or greater than $20.00 for at least the three consecutive days immediately preceding the date of borrowing and (ii) either (x) under Rule 144(e)(3)(ii) of the 1933 Act, the Lender would be permitted to sell at least 500,000 shares of the common stock of the Company in the period of three calendar months following the date of such borrowing, or (y) the two-year holding period requirement set forth in Rule 144(k) of the 1933 Act has been satisfied. The Revolving Loans may from time to time be Eurodollar Loans or Prime Rate Loans, as determined by the Borrower and notified to the Lender in accordance with sections 2.3 and 2.6. The Borrower shall repay all outstanding Revolving Loans on the Revolving Termination Date.

(b) Term Commitment. Subject to the terms and conditions hereof, the Lender agrees to make term loans ("Term Loans") to the Borrower on the Revolving Termination Date in an amount not to exceed the amount of the Revolving Commitment then in effect; provided, however, that the Lender shall not be obligated to make Term Loans in excess of the aggregate outstanding principal amount the Revolving Loan on the Revolving Termination Date unless (i) the Market Value per share of the common stock of the Company is equal to or greater than $20.00 for at least the three consecutive days immediately preceding the date of borrowing and (ii) either (x) under Rule 144(e)(3)(ii) of the 1933 Act, the Lender would be permitted to sell at least 500,000 shares of the common stock of the Company in the period of three calendar months following the date of such borrowing, or (y) the two-year holding period requirement set forth in Rule 144(k) of the 1933 Act has been satisfied. The Term Loans may from time to time be Eurodollar Loans or Prime Rate Loans, as determined by the Borrower and notified to the Lender in accordance with sections 2.3 and 2.6.

3. Amendment of Section 2.7 (Interest). Section 2.7 of the Credit Agreement is hereby amended by adding the following section 2.7(h):

(h) Optional Interest Rate Reduction. So long as the Put Agreement is in full force and effect, the Borrower may elect to have the Loans bear interest at a rate per annum equal to the Adjusted Eurodollar Rate for successive one month Interest Periods plus the margin set forth below by paying to the Lender the following fees in respect of the following periods (such fees to be paid in full in cash on or before the first day of the respective period):

(1) The six-month period beginning on the effective date of the Second Amendment:

Interest Reduction Fee	Margin
$30,000	2.5%
$60,000	2.2%

(2) The six-month period beginning on the six-month anniversary of the effective date of the Second Amendment:

Interest Reduction Fee	Margin
$30,000	2.5%
$60,000	2.2%

(3) Any six-month period thereafter, as agreed between the Lender and the Borrower.

4. Amendment of Section 3.2 (Scheduled Repayments and Mandatory Prepayments and Commitment Reductions). Section 3.2 of the Credit Agreement is hereby amended by deleting section 3.2(b) in its entirety and substituting therefor the following:

"(b) Mandatory Prepayment. (i) If on any date (after giving effect to any other payments on such date) the Market Value per share of the common stock of the Company falls below $20.00 per share and the Put Agreement is not in full force and effect, then the Borrower will immediately prepay the Loans in an aggregate principal amount equal to the Required Prepayment Amount.

(ii) If on any date (after giving effect to any other payments on such date) the Market Value per share of the common stock of the Company falls below $20.00 per share and (x) the Put Agreement is in full force and effect and (y) under Rule 144(e)(3)(ii) of the 1933 Act, the Lender would be permitted to sell at least 500,000 shares of the common stock of the Company in the period of three calendar months following the date of such borrowing, then the Borrower will immediately prepay the Loans in an aggregate principal amount determined in accordance with the following table:

Market Value Per Share	Maximum Loan	Required Prepayment
>=17.00	$30,000,000	None
< $17.00; >=16.00	$29,000,000	$1,000,000
< $16.00; >=15.00	$28,000,000	$2,000,000
< $15.00; >=14.00	$27,000,000	$3,000,000
< $14.00; >=13.00	$26,000,000	$4,000,000
< $13.00; >=12.00	$25,200,000	$4,800,000

(iii) Any prepayments of the Term Loans pursuant to this section 3.2(b) shall be applied (if applicable) to the Scheduled Repayments in inverse order of maturity.

5. Amendment of Section 7.6 (Collateral Coverage Ratio). Section 7.6 of the Credit Agreement is hereby amended by deleting such section in its entirety and substituting therefor the following:

7.6. Coverage Ratios.

(a) Block 1 Shares. The Borrower will not permit the Block 1 Shares Coverage Ratio to be less than 4.0 to 1.0 at any time. The covenant contained in this section 7.6(a) shall be deemed to be waived so long as the Put Agreement is in full force and effect.

(b) Block 2 Shares. The Borrower will not permit the Block 2 Shares Coverage Ratio to be less than 4.0 to 1.0 at any time.

6. Addition of Section 8.4. The Credit Agreement is hereby amended by the addition of the following new section 8.4:

8.4. Put Exercise. Upon the occurrence of a Put Exercise Event, the Lender may, or the Borrower shall upon receipt of the Lender's written instructions therefor, exercise the put under the Put Agreement by delivering the Notice of Exercise referred to therein; provided that so long as the Put Agreement is extended for 15 days after the last day of the stated term thereof the Lender shall not exercise the put or cause the Borrower to exercise the put prior the last day of such 15-day period. The proceeds of the sale of the Pledged Shares pursuant to the exercise of the put shall be applied in accordance with section 8.3.

3. Waiver. The Lender hereby waives the Event of Default under Section 8.1(j) of the Credit Agreement arising out of the occurrence of certain Liquidity Events. The foregoing waiver is limited precisely as drafted and is not to be construed as a waiver of any other provisions of the Credit Agreement or for any other time period.
4. General Provisions.
1. Representations and Warranties. On and as of the date hereof and after giving effect to this Amendment, the Borrower hereby confirms, reaffirms and restates the representations and warranties set forth in section 5 of the Credit Agreement mutatis mutandis, except to the extent that such representations and warranties expressly relate to a specific earlier date, in which case the Borrower hereby confirms, reaffirms and restates such representations and warranties as of such earlier date, provided that the references to the Credit Agreement in such representations and warranties shall be deemed to refer to the Credit Agreement as amended prior to the date hereof and pursuant to this Amendment.
2. Effectiveness. This Amendment shall become effective as of the date hereof upon the satisfaction of each of the following conditions:
1. The Lender shall have received counterparts of this Amendment duly executed and delivered by the Borrower;
2. The Lender shall have received at its Payment Office or as otherwise directed by the Lender in immediately available funds and in lawful money of the United States of America the amount of $3,000,000 to be applied to prepay the outstanding Loans;
3. The Borrower shall have duly executed and delivered to the Lender, (i) an Account Control Agreement; (ii) the Security Agreement and (iii) the Amendment to the Pledge Agreement and the same shall be in full force and effect;
4. If an election has been made by the Borrower under section 2.7(h) of the Credit Agreement, the Lender shall have received at its Payment Office or as otherwise directed by the Lender in immediately available funds and in lawful money of the United States of America the relevant interest reduction fee set forth in section 2.7(h) of the Credit Agreement;
5. The Lender shall have received a fully executed copy of the Put Agreement which shall be in full force and effect; and
6. The Lender shall have received at its Payment Office or as otherwise directed by the Lender in immediately available funds and in lawful money of the United States of America a fee in the amount of $100,000.
3. Continuing Effect; No Other Amendments. Except as expressly amended hereby, all of the terms and provisions of the Credit Agreement are and shall remain in full force and effect. The amendments provided for herein are limited to the specific sections of the Credit Agreement specified herein and shall not constitute an amendment or waiver of, or an indication of the Lender's willingness to amend or waive, any other provisions of the Credit Agreement or the same sections for any other date or time period (whether or not such other provisions or compliance with such sections for another date or time period are affected by the circumstances addressed in this Amendment).
4. Expenses. The Borrower agrees to pay and reimburse the Lender for all of its costs and expenses incurred in connection with the preparation and delivery of this Amendment, including, without limitation, the reasonable fees and disbursements of counsel to the Lender.
5. Counterparts. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Amendment signed by the parties hereto shall be delivered to the Borrower and the Lender.
6. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written.

MECHANICAL TECHNOLOGY INCORPORATED

By: s/Cynthia A. Scheuer

Name: Cynthia A. Scheuer

Title: Vice President

Accepted and Agreed to:

KEYBANK NATIONAL ASSOCIATION

By: s/William B. Palmer

Name: William B. Palmer

Title: Vice President

ANNEX 1

Form of Put Agreement

EX-4

EXHIBIT 4.111

THIS AMENDMENT dated as of December 27, 2000 (this "Amendment") to the Stock Pledge Agreement dated as of March 29, 2000 (the "Stock Pledge Agreement"), between MECHANICAL TECHNOLOGY INCORPORATED, a New York corporation (the "Borrower" or the "Pledgor"), and KEYBANK NATIONAL ASSOCIATION, a national banking association, as Lender thereunder (the "Lender").

W I T N E S S E T H

WHEREAS, the Borrowers and the Lender are parties to the Amended and Restated Credit Agreement, dated as of March 29, 2000, as amended by an Amendment dated as of October 1, 2000 and by the Waiver and Second Amendment (the "Second Amendment") dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), pursuant to which the Lender has agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein; and

WHEREAS, it is a condition precedent to the effectiveness of the Second Amendment that the Pledgor shall have executed and delivered this Amendment to the Lender;

NOW THEREFORE, in consideration of the premises contained herein, the parties hereto agree as follows:

1. Defined Terms. Unless otherwise defined herein, capitalized terms which are defined in the Stock Pledge Agreement are used herein as defined therein.
2. Amendments to Stock Pledge Agreement.
1. Substitution of Schedule 1. Schedule 1 to the Stock Pledge Agreement is hereby replaced by Schedule 1 attached hereto.
3. General Provisions.
1. Representations and Warranties. On and as of the date hereof and after giving effect to this Amendment, the Pledgor hereby confirms, reaffirms and restates the representations and warranties set forth in section 4 of the Stock Pledge Agreement mutatis mutandis, except to the extent that such representations and warranties expressly relate to a specific earlier date, in which case the Pledgor hereby confirms, reaffirms and restates such representations and warranties as of such earlier date, provided that the references to the Stock Pledge Agreement in such representations and warranties shall be deemed to refer to the Stock Pledge Agreement as amended prior to the date hereof and pursuant to this Amendment.
2. Effectiveness. This Amendment shall become effective as of the date hereof upon the receipt by the Lender of counterparts of this Amendment duly executed and delivered by the Pledgor.
3. Continuing Effect; No Other Amendments. Except as expressly amended hereby, all of the terms and provisions of the Stock Pledge Agreement are and shall remain in full force and effect. The amendments provided for herein are limited to the specific sections of the Stock Pledge Agreement specified herein and shall not constitute an amendment or waiver of, or an indication of the Lender's willingness to amend or waive, any other provisions of the Stock Pledge Agreement or the same sections for any other date or time period (whether or not such other provisions or compliance with such sections for another date or time period are affected by the circumstances addressed in this Amendment).
4. Expenses. The Borrower agrees to pay and reimburse the Lender for all of its costs and expenses incurred in connection with the preparation and delivery of this Amendment, including, without limitation, the reasonable fees and disbursements of counsel to the Lender.
5. Counterparts. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the counterparts of this Amendment containing the signatures of each party hereto shall be delivered to the Borrower and the Lender.
6. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written.

MECHANICAL TECHNOLOGY INCORPORATED

By: s/Cynthia A. Scheuer

Name: Cynthia A. Scheuer

Title: Vice President

Accepted and Agreed to:

KEYBANK NATIONAL ASSOCIATION

By: s/William B. Palmer

Name: William B. Palmer

Title: Vice President

SCHEDULE I

Stock Issuer		Class of Stock	Stock Certificate Nos.		Par Value		Number of Shares		Percentage of Outstanding Shares
Plug Power Inc.	Common Stock			PLG 0917 PLG 1304 PLG 1305 PLG 1306 PLG 1307		$1.00		2,000,000 2,000,000 2,000,000 1,000,000 1,000,000		31.4%

EX-4

EXHIBIT 4.112

Put and Call Agreement

Put and Call Agreement among Mechanical Technology Incorporated, a New York corporation ("MTI"), First Albany Companies Inc., a New York corporation ("FAC"), and KeyBank National Association, a national banking association ("Key"), dated as of December 27, 2000.

1. MTI Put Option

1. At any time prior to the close of business (6:00 p.m. EST) on April 27, 2001 (the "Expiration Date") (and subject to Section 2 below), MTI shall have the right to put to FAC, and FAC shall have the obligation to purchase from MTI, up to 6,300,000 of the Pledged Plug Power Shares (as hereinafter defined), at a purchase price of $4.00 per share, subject to paragraph (b) below. This Agreement may be extended by written agreement of the parties beyond the Expiration Date on a monthly basis through January 3, 2002. "Pledged Plug Power Shares" means the shares of Common Stock of Plug Power Inc. ("Plug Power") pledged by MTI to Key pursuant to the Stock Pledge Agreement dated as of March 29, 2000 (as amended) between MTI and Key.
2. Notwithstanding the foregoing, the maximum number of Pledged Plug Power Shares which FAC shall be obligated to purchase pursuant to paragraph (a) above is that number of shares whose aggregate purchase price is equal to the aggregate principal amount of the loans then outstanding (but in no event more than $25,200,000) under the Amended and Restated Credit Agreement dated as of March 29, 2000 (as amended), between MTI and Key (the "Credit Agreement").
3. In order to exercise the put option, MTI must deliver a written notice of exercise to FAC prior to the Expiration Date, as extended from time to time ("Notice of Exercise"), provided, however, if a Put Exercise Event (as defined in the MTI Credit Agreement) has occurred, the Notice of Exercise may be given by Key.
4. The number of Pledged Plug Power Shares subject to the MTI put option provided for herein, and the purchase price per share, shall be adjusted upon the occurrence of any stock dividend, stock split, reverse stock split, subdivision, combination, reclassification or other similar action with respect to the outstanding shares of Common Stock of Plug Power.

2. FAC Call Option

1. Upon receiving MTI's or Key's Notice of Exercise referred to in Section 1(c) above, FAC shall have the right in lieu of performing under the MTI put option to call from Key, and Key shall have the obligation to sell to FAC, all of Key's right, title and interest in and under the Credit Agreement as the same may be amended, supplemented, waived or otherwise modified from time to time and as of the date of FAC's call thereof from Key, together with all of Key's rights in loans made under the Credit Agreement to MTI as well as all collateral, security agreements or financing statements related to such loans and the Credit Agreement (collectively, the "MTI Loan"), at a price equal to the principal amount of loans outstanding thereunder (but in no event more than $25,200,000) plus unpaid fees and interest.
2. In order to exercise the FAC call option, FAC must deliver a written Notice of Exercise to MTI and Key by the close of business on the fourth business day after receiving MTI's or Key's notice of exercise referred to in Section 1(c) above.
3. Between the date hereof and the date of the Closing referred to in Section 3 hereof, without FAC's prior written consent: (i) MTI and Key agree not to enter into any written amendment, supplement or other modification of the Credit Agreement or to permit the outstanding principal amount of loans thereunder to exceed $25,200,000, (ii) Key agrees not to grant any written waiver or consent in favor of MTI under the Credit Agreement, (iii) Key agrees not to subordinate its rights under the Credit Agreement or to release any collateral thereunder, (iv) Key agrees not to exercise any rights under the Credit Agreement or the MTI Loan arising out of or based upon the Market Value of the Pledged Plug Power Shares (other than (A) as provided in clause (v) of the definition of "Liquidity Event" in Section 1.1 of the Credit Agreement and (B) in respect of any Pledged Plug Power Shares in excess of 6,300,000).
4. If MTI and Key agree with FAC's prior written consent as provided in clause (i) of the preceding paragraph to permit the principal amount of loans outstanding under the Credit Agreement to exceed $25,200,000, then MTI, Key and FAC will contemporaneously amend the FAC call option to permit Key to retain the principal amount of Loans in excess of $25,200,000 and Key's rights under the Credit Agreement in respect of such excess amount of loans.

3. Closing of Sale of Shares or Purchase of Loan

1. The closing of the sale of shares pursuant to the exercise of the put option or of the purchase of the MTI Loan pursuant to the exercise of the call option shall take place at the offices of FAC, located at 30 South Pearl Street, Albany, NY 12207, on the fifth business day following FAC's receipt of MTI's or Key's Notice of Exercise referred to in Section 1(c) above (the "Closing"). Business day means any day that is not a Saturday, a Sunday or other day on which commercial banks in New York, New York are required or authorized by law to be closed.
2. At the Closing of the sale of the shares pursuant to the exercise of the put option, subject to the provisions of this Agreement, MTI (or Key, if the Notice of Exercise is given by Key, pursuant to Section 1(c) above), shall deliver to FAC certificates representing the Pledged Plug Power Shares to be purchased by FAC hereunder, duly endorsed in blank or accompanied by stock powers in blank in a form reasonably acceptable to FAC (and subject to such escrow arrangements as FAC shall advise may be necessary pending any required Hart-Scott-Rodino Act filing), and FAC shall pay to MTI (or to Key if the Notice of Exercise is given by Key pursuant to Section 1(c) above), by wire transfer of immediately available funds to an account designated by MTI (or by Key, if the Notice of Exercise is given by Key pursuant to Section 1(c) above) at least two business days before the Closing, $4.00 for each Pledged Plug Power Share purchased by FAC.

3. At the Closing of the purchase of the MTI Loan pursuant to the exercise of the call option, Key and FAC shall enter into an assignment agreement in customary form by which Key shall assign to FAC all of its right, title and interest in and under the Credit Agreement together with all of Key's rights in the MTI Loan (subject to adjustment as provided in Section 2(d) above in the event that the principal amount of loans exceeds $25,200,000). MTI shall be a party to such assignment agreement for the purpose of consenting to the assignment and also to the extent necessary to preserve such rights of Key against MTI as may have arisen prior to the Closing and have not been discharged at or before the Closing. FAC shall pay to Key, by wire transfer of immediately available funds to an account designated by Key at least two business days before the Closing, the principal amount of the MTI Loan (but in no event more than $25,200,000) plus unpaid fees and interest.

4. Put Option Fee

As consideration for FAC entering into this Agreement, MTI shall pay to FAC, on the date hereof, an option fee of $945,000, by wire transfer of immediately available funds to an account designated by FAC. If this Agreement is extended, MTI shall pay to FAC on the date of extension an option fee, as determined between MTI and FAC, by wire transfer of immediately available funds to an account designated by FAC.

5. Representations and Warranties of MTI

MTI represents and warrants to FAC that MTI is the record and beneficial owner of the Pledged Plug Power Shares, the Pledged Plug Power Shares are validly issued, fully paid and nonassessable, and upon the sale and transfer of the Pledged Plug Power Shares to FAC, FAC will acquire good and valid title to the Pledged Plug Power Shares, free and clear of any liens or encumbrances, provided, however, that the Pledged Plug Power Shares may be subject to restrictions on transfer under state and/or federal securities laws.

6. Representations and Warranties of FAC FAC represents and warrants to MTI and Key as follows:

1. Organization and Standing; Certificate and Bylaws. FAC is a corporation duly organized and validly existing under, and by virtue of, the laws of the State of New York and is in good standing under such laws. FAC has the requisite corporate power and authority to own and operate its properties and assets, and to carry on its business as presently conducted.
2. Corporate Power. FAC has all requisite corporate power and authority to execute and deliver this Agreement, to purchase the Pledged Plug Power Shares or the MTI Loan, and to carry out and perform its obligations under the terms of this Agreement .
3. Authorization. FAC has taken all corporate action necessary for the authorization, execution and delivery of this Agreement and the performance by FAC of its obligations hereunder, including the purchase of the Pledged Plug Power Shares or the MTI Loan. This Agreement constitutes the valid and binding obligation of FAC, enforceable in accordance with its terms.

7. Representations and Warranties of Key

Key represents and warrants to FAC (a) that it is a national banking association duly organized under the laws of the United States of America, (b) that it has the requisite power and authority to execute and deliver this Agreement and to carry out and perform its obligations hereunder, (c) that it has taken all action necessary for the authorization, execution and delivery of this Agreement and the performance by Key of its obligations hereunder and (d) that it has made no prior assignment of any of its right, title and interest in and to the Credit Agreement or the MTI Loan. This Agreement constitutes the valid and binding obligation of Key, enforceable in accordance with its terms.

8. Miscellaneous

1. Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of New York.
2. Notices, Etc. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger to each party hereto at its address set forth under its signature hereto or such other address such party may specify to the other parties hereto. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at its receipt.
3. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and may not be amended or modified except by an instrument in writing signed by each of the parties hereto.
4. Assignment. This Agreement may not be assigned by any party without the express written consent of all other parties, except that Key may assign its rights hereunder to any of its permitted assigns under the Credit Agreement.

9. Acknowledgement of Key's Rights as Primary Beneficiary.

FAC acknowledges that it is entering into this Agreement for the purpose of providing credit support for MTI's obligations under the Credit Agreement and that Key is relying on this Agreement in granting certain concessions to MTI under the Credit Agreement. The obligation of FAC to purchase the Pledged Plug Power Shares pursuant to Section 1 hereof may be enforced by Key against FAC by any remedy available at law or in equity, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of MTI under the Credit Agreement or any other agreement or instrument referred to therein, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might constitute a legal or equitable discharge or defense of a surety or guarantor. In order further to protect Key's rights hereunder, it is hereby agreed that notwithstanding the occurrence of the Expiration Date or expiration of any renewal term hereof, as between FAC and Key, this Agreement will not expire until the date 15 days after the Expiration Date or expiration of such renewal term if a Put Exercise Event is in existence on the Expiration Date or such later expiration date.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first set forth above.

FIRST ALBANY COMPANIES, INC.

a New York corporation

By:s/George M. McNamee

Name: George M. McNamee

Title: Chairman and Co-Chief Executive Officer

Address: 30 South Pearl Street

Albany, New York 12207

MECHANICAL TECHNOLOGY INCORPORATED

a New York corporation

By:s/Cynthia A. Scheuer

Name: Cynthia A. Scheuer

Title: Vice President

Address: 30 South Pearl Street

Albany, New York 12207

KEYBANK NATIONAL ASSOCIATION,

a national banking association

By:s/William B. Palmer

Name: William B. Palmer

Title: Vice President

Address: 66 South Pearl Street

Albany, NY 12207

EX-4

EXHIBIT 4.113

BRIDGE PROMISSORY NOTE

$5,000,000.00 December 27, 2000

New York, New York

 1. Promise to Pay Principal. FOR VALUE RECEIVED, MECHANICAL TECHNOLOGY INCORPORATED, a corporation organized under the laws of the state of New York (the "Payor"), hereby unconditionally promises to pay to the order of FIRST ALBANY COMPANIES INC., a corporation organized under the laws of the State of New York (the "Payee"), the principal sum of FIVE MILLION DOLLARS ($5,000,000.00), or such lesser amount as shall equal the unpaid principal amount of this Note, on January 3, 2002.

2. Interest. The Payor hereby unconditionally promises to pay to the Payee interest on the unpaid principal amount of this Note for the period from and including the date of this Note to but excluding the date this Note is paid in full at the Prime Rate (as such term is defined below) as in effect from time to time. Notwithstanding the foregoing, the Payor hereby promises to pay to the Payee interest on any principal or interest payable by the Payor under this Note that shall not be paid in full when due, for the period from and including the due date of such payment to but excluding the date the same is paid in full, at a rate per annum equal to the lesser of (a) the Prime Rate plus 2% and (b) the highest interest rate then permitted by law (the "Post-Default Rate"). Accrued interest shall be due and payable (a) on January 3, 2002 and (b) upon the payment or prepayment of any principal of this Note (but only on the principal amount so paid or prepaid); provided that any interest accruing at the Post-Default Rate shall also be payable from time to time upon demand. Interest shall be compounded quarterly on each March 31, June 30, September 30 and December 31 (commencing with the first such date after the date of this Note). Interest payable under this Note shall be computed on the basis of a year of 365 days for the actual number of days elapsed (including the first day but excluding the last day) occurring in the period for which payable.

 3. Amounts Owing. The Payee shall maintain records of the amounts owing under this Note, and such records shall, absent manifest error, be conclusive evidence of such amounts. Prior to any sale, assignment or transfer of this Note, each payment of principal theretofore made under this Note, together with each reduction in the principal amount of this Note effected under Paragraph 15 of this Note, shall be endorsed by the Payee on Annex A hereto (or any continuation of said Annex).

4. Manner of Payment. All payments of principal and interest to be made by the Payor under this Note shall be made in Dollars, in immediately available funds, by wire transfer to an account at a commercial bank located in New York, New York (which account shall be identified in a notice to the Payor), not later than 6:00 p.m. New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). Except as otherwise expressly provided in Paragraph 15 of this Note, all amounts payable under this Note shall be paid free and clear of, and without reduction by reason of, any deduction, set-off or counterclaim. The Payor shall, at the time of making each payment under this Note, specify to the Payee the amounts payable by the Payor under this Note to which such payment is to be applied, in which case such payment shall be so applied (and in the event that the Payor fails to so specify, such payment shall be applied in such manner as is determined to be appropriate by the Payee).

5. Payments on Business Days. If the due date of any payment under this Note would otherwise fall on a day that is not a Business Day, such due date shall be extended to the next succeeding Business Day, and interest shall be payable on any principal so extended for the period of such extension.

6. Prepayments. At any time or from time to time, the Payor shall have the right to prepay all or any portion of the principal amount owing under this Note, provided that each prepayment shall be in a principal amount of not less than $100,000.

7. Right of Set-Off. The Payor agrees that, in addition to (and without limitation of) any right of set-off or counterclaim the Payee may otherwise have, the Payee shall be entitled, at its option, to offset amounts owing by the Payee to the Payor, in Dollars or in any other currency (regardless of whether such amounts are then due to the Payor), against any amount payable by the Payor to the Payee under this Note that is not paid when due; provided that nothing contained herein shall require the Payee to exercise any such right.

8. Representations and Warranties. The Payor hereby represents and warrants to the Payee as follows:

(a) No Breach. None of the execution and delivery of this Note, the making of the extension of credit evidenced hereby, the consummation of the transactions herein contemplated and compliance with the terms and provisions hereof will conflict with or result in a breach of, or require any consent under, any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which the Payor is a party or by which the Payor is bound or to which the Payor is subject, or constitute a default under, or result in the creation of any lien under, any such agreement or instrument.

(b) Action; Execution and Delivery; Enforceability. The Payor has all necessary power and authority to execute, deliver and perform its obligations under this Note, and this Note has been duly and validly executed and delivered by the Payor and constitutes its legal, valid and binding obligation, enforceable against the Payor in accordance with its terms.

(c) Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency are necessary for the execution, delivery or performance by the Payor of this Note or for the validity or enforceability hereof.

9. Certain Expenses. The Payor agrees to pay or reimburse the Payee for paying: (a) all costs and expenses of the Payee (including, without limitation, reasonable counsels' fees) in connection with any enforcement or collection proceedings hereunder; and (b) all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Note or any other document referred to herein.

10. Default; Remedies; Expenses. If one or more of the following events (herein called "Events of Default") shall occur and be continuing:

(a) the Payor shall default in the payment of any Obligations when the same shall become due (whether at stated maturity or otherwise); or

(b) the Payor shall default in the payment when due of any principal of or interest on any of its other Indebtedness; or any event specified in any note, agreement, indenture or other document evidencing or relating to any such Indebtedness shall occur if the effect of such event is to cause, or (with the giving of any notice or the lapse of time or both) to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, such Indebtedness to become due, or to be prepaid in full (whether by redemption, purchase, offer to purchase or otherwise), prior to its stated maturity; or

(c) any representation, warranty or certification made or deemed made herein or in the Pledge Agreement by the Payor shall prove to have been false or misleading as of the time made or furnished in any material respect; or

(d) the Payor shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code or (vi) take any corporate action for the purpose of effecting any of the foregoing; or

(e) a proceeding or case shall be commenced, without the application or consent of the Payor, in any court of competent jurisdiction, seeking (i) its reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of the Payor or of all or any substantial part of its property or (iii) similar relief in respect of the Payor under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 45 or more days; or an order for relief against the Payor shall be entered in an involuntary case under the Bankruptcy Code; or

(f) the liens created by the Pledge Agreement shall at any time not constitute a valid and perfected lien on the collateral intended to be covered thereby in favor of the Payee, free and clear of all other liens, or the Pledge Agreement shall for whatever reason be terminated or cease to be in full force and effect, or the enforceability thereof shall be contested by the Payor;

THEREUPON: (1) in the case of an Event of Default other than one referred to in clause (d) or (e) of this Paragraph 10, the Payee may, by notice to the Payor, declare the principal amount then outstanding of, and the accrued interest on, this Note and all other amounts payable by the Payor hereunder and under the Pledge Agreement to be forthwith due and payable, whereupon such amounts shall be immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Payor; and (2) in the case of the occurrence of an Event of Default referred to in clause (d) or (e) of this Paragraph 10, the principal amount then outstanding of, and the accrued interest on, this Note and all other amounts payable by the Payor hereunder and under the Pledge Agreement shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Payor.

11. Definitions. As used herein, the following terms shall have the following respective meanings:

"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as amended from time to time.

"Business Day" shall mean any day on which commercial banks are not authorized or required to close in New York, New York.

"Dollars" and "$" shall mean lawful money of the United States of America.

"Federal Funds Effective Rate" shall mean, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by KeyBank, from three Federal Funds brokers of recognized standing selected by KeyBank.

"Indebtedness" shall mean, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business; (c) Indebtedness of others secured by a lien on the property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) capital lease obligations of such Person; and (f) Indebtedness of others guaranteed by such Person.

"KeyBank" shall mean KeyBank National Association, a national banking association, and its successors.

"Obligations" shall mean all amounts owing under this Note (whether for principal, interest or any other amount) and all amounts owing to the Payee under the Pledge Agreement.

"Person" shall mean any individual, corporation, company, voluntary association, partnership, limited liability company, joint venture, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof).

"Pledge Agreement" shall mean the Bridge Pledge Agreement dated as of the date of this Note between the Payor and the Payee, as the same shall be amended, modified and supplemented and in effect from time to time.

"Prime Rate" shall mean, for any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the greater of (i) the rate of interest established by KeyBank in Cleveland, Ohio, from time to time, as its prime rate, whether or not publicly announced, which interest rate may or may not be the lowest rate charged by it for commercial loans or other extensions of credit, and (ii) the Federal Funds Effective Rate in effect from time to time plus 1/2 of 1% per annum.

12. Waiver.

No failure on the part of the Payee to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Note shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Note preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

13. Notices.

All notices and other communications in respect of this Note (including, without limitation, any modifications of, or requests, waivers or consents under, this Note) shall be given or made in writing (including, without limitation, by telecopy) to the Payor or the Payee, as applicable, at the "Address for Notices" specified below its name on the signature pages hereof or, as to either the Payor or the Payee, at such other address as shall be designated by such party in a notice to the other party. Except as otherwise provided in this Note, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.

14. Amendments; Successors; Assignments. This Note may not be amended except by an instrument in writing signed by each of the Payor and the Payee. This Note shall be binding upon and inure to the benefit of the Payor and the Payee and their respective successors and permitted assigns. The Payor shall not assign any of its rights or obligations under this Note without the prior consent of the Payee. The Payee may at any time and from time to time, without the consent of the Payor, assign all or any portion of its rights under this Note to one or more persons or entities, and, upon the Payee giving notice of such assignment to the Payor specifying the interest hereunder being assigned and the person or entity to which such interest is being assigned, each reference herein to the Payee shall (solely in respect of the interest so assigned) constitute a reference to such assignee (as if such assignee were named herein) rather than the Payee. The Payee shall be entitled to have this Note subdivided, by exchange of this Note for promissory notes of lesser denominations or otherwise, to the extent necessary to reflect any such assignment.

15. Equity Conversion Provisions. If, at any time prior to the date on which the outstanding principal amount of and accrued and unpaid interest on this Note is paid in full, the Payor effects one or more Qualified Rights Offerings, or issues additional Capital Stock in one or more Qualified Stock Offerings (each such event, an "Equity Event") then, with the consent of the Payor (which consent may be withheld by the Payor in its sole discretion), the Payee may apply all or a portion of the outstanding principal amount of and accrued and unpaid interest on this Note toward the purchase price of Equity Rights in such Qualified Rights Offering or toward the purchase price of Capital Stock in such Qualified Stock Offering (as the case may be) on and subject to the following terms:

(a) The Payee would participate in such Equity Event on a pari passu basis with the other participants therein and on economic terms identical to the economic terms on which such other participants are acquiring the related Equity Interests, except that the amount that would otherwise be payable in cash by the Payee to acquire such Equity Interests would be paid for by the Payee by means of a reduction in the outstanding principal amount of this Note and accrued and unpaid interest hereon.

(b) Each such reduction shall be applied first to reduce the amount of accrued and unpaid interest then owing on this Note and then to reduce the then outstanding principal amount of this Note (in each case determined as of the date on which such Equity Interests are issued in connection with such Equity Event).

As used in this Paragraph 15, the following terms shall have the following respective meanings:

"Equity Interests" shall mean Equity Rights issued in a Qualified Rights Offering and Capital Stock issued in a Qualified Stock Offering.

"Equity Rights" shall mean any rights to acquire any Capital Stock.

"Capital Stock" shall mean any capital stock of the Payor.

"Qualified Rights Offering" shall mean an offering by the Payor of Equity Rights after the date hereof.

"Qualified Stock Offering" shall mean an offering by the Payor of any Capital Stock after the date hereof, provided that such Capital Stock is offered in a registered public offering or private placement.

 16. Governing Law; Submission to Jurisdiction; Venue. This Note shall be governed by, and construed in accordance with, the law of the State of New York. The Payor hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York County for the purposes of all legal proceedings arising out of or relating to this Note or the transactions contemplated hereby. The Payor irrevocably waives, to the fullest extent permitted by applicable law, any objection which he may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

17. Waiver of Jury Trial.

EACH OF THE PAYOR AND THE PAYEE, BY ITS ACCEPTANCE OF THE BENEFITS OF THIS NOTE, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed and delivered as of the day and year first above written.

MECHANICAL TECHNOLOGY INCORPORATED

By_s/Cynthia A. Scheuer___________

Name: Cynthia A. Scheuer

Title: Vice President and Chief Financial Officer

Address for Notices:

Mechanical Technology Incorporated

30 South Pearl Street

Albany, New York 12205

Attention: Chief Financial Officer

Telephone No.: (518) 433-2170

Telecopier No.: (518) 433-2171

ACCEPTED AND AGREED:

FIRST ALBANY COMPANIES INC.

By s/George M. McNamee

Name: George M. McNamee

Title: Chairman and Co-Chief Executive Officer

Address for Notices

First Albany Companies Inc.

30 South Pearl Street

Albany, New York 12205

Attention: Chief Financial Officer

Telephone No.: (518) 447-8059

Telecopier No.: (518) 447-8068

ANNEX A

Amount of Date of Notation

Payment   Payment   Made By

EX-4

EXHIBIT 4.114

PUT PROMISSORY NOTE

$945,000 December 27, 2000

New York, New York

 1. Promise to Pay Principal. FOR VALUE RECEIVED, MECHANICAL TECHNOLOGY INCORPORATED, a corporation organized under the laws of the state of New York (the "Payor"), hereby unconditionally promises to pay to the order of FIRST ALBANY COMPANIES INC., a corporation organized under the laws of the State of New York (the "Payee"), the principal sum of NINE HUNDRED FORTY FIVE THOUSAND DOLLARS ($945,000), or such lesser amount as shall equal the unpaid principal amount of this Note, on January 3, 2002.

2. Interest. The Payor hereby unconditionally promises to pay to the Payee interest on the unpaid principal amount of this Note for the period from and including the date of this Note to but excluding the date this Note is paid in full at the Prime Rate (as such term is defined below) as in effect from time to time. Notwithstanding the foregoing, the Payor hereby promises to pay to the Payee interest on any principal or interest payable by the Payor under this Note that shall not be paid in full when due, for the period from and including the due date of such payment to but excluding the date the same is paid in full, at a rate per annum equal to the lesser of (a) the Prime Rate plus 2% and (b) the highest interest rate then permitted by law (the "Post-Default Rate"). Accrued interest shall be due and payable (a) on January 3, 2002 and (b) upon the payment or prepayment of any principal of this Note (but only on the principal amount so paid or prepaid); provided that any interest accruing at the Post-Default Rate shall also be payable from time to time upon demand. Interest shall be compounded quarterly on each March 31, June 30, September 30 and December 31 (commencing with the first such date after the date of this Note). Interest payable under this Note shall be computed on the basis of a year of 365 days for the actual number of days elapsed (including the first day but excluding the last day) occurring in the period for which payable.

 3. Amounts Owing. The Payee shall maintain records of the amounts owing under this Note, and such records shall, absent manifest error, be conclusive evidence of such amounts. Prior to any sale, assignment or transfer of this Note, each payment of principal theretofore made under this Note, together with each reduction in the principal amount of this Note effected under Paragraph 15 of this Note, shall be endorsed by the Payee on Annex A hereto (or any continuation of said Annex).

4. Manner of Payment. All payments of principal and interest to be made by the Payor under this Note shall be made in Dollars, in immediately available funds, by wire transfer to an account at a commercial bank located in New York, New York (which account shall be identified in a notice to the Payor), not later than 6:00 p.m. New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). Except as otherwise expressly provided in Paragrpah 15 of this Note, all amounts payable under this Note shall be paid free and clear of, and without reduction by reason of, any deduction, set-off or counterclaim. The Payor shall, at the time of making each payment under this Note, specify to the Payee the amounts payable by the Payor under this Note to which such payment is to be applied, in which case such payment shall be so applied (and in the event that the Payor fails to so specify, such payment shall be applied in such manner as is determined to be appropriate by the Payee).

5. Payments on Business Days. If the due date of any payment under this Note would otherwise fall on a day that is not a Business Day, such due date shall be extended to the next succeeding Business Day, and interest shall be payable on any principal so extended for the period of such extension.

6. Prepayments. At any time or from time to time, the Payor shall have the right to prepay all or any portion of the principal amount owing under this Note, provided that each prepayment shall be in a principal amount of not less than $100,000.

7. Right of Set-Off. The Payor agrees that, in addition to (and without limitation of) any right of set-off or counterclaim the Payee may otherwise have, the Payee shall be entitled, at its option, to offset amounts owing by the Payee to the Payor, in Dollars or in any other currency (regardless of whether such amounts are then due to the Payor), against any amount payable by the Payor to the Payee under this Note that is not paid when due; provided that nothing contained herein shall require the Payee to exercise any such right.

8. Representations and Warranties. The Payor hereby represents and warrants to the Payee as follows:

(a) No Breach. None of the execution and delivery of this Note, the making of the extension of credit evidenced hereby, the consummation of the transactions herein contemplated and compliance with the terms and provisions hereof will conflict with or result in a breach of, or require any consent under, any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which the Payor is a party or by which the Payor is bound or to which the Payor is subject, or constitute a default under, or result in the creation of any lien under, any such agreement or instrument.

(b) Action; Execution and Delivery; Enforceability. The Payor has all necessary power and authority to execute, deliver and perform its obligations under this Note, and this Note has been duly and validly executed and delivered by the Payor and constitutes its legal, valid and binding obligation, enforceable against the Payor in accordance with its terms.

(c) Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any governmental or regulatory authority or agency are necessary for the execution, delivery or performance by the Payor of this Note or for the validity or enforceability hereof.

9. Certain Expenses. The Payor agrees to pay or reimburse the Payee for paying: (a) all costs and expenses of the Payee (including, without limitation, reasonable counsels' fees) in connection with any enforcement or collection proceedings hereunder; and (b) all transfer, stamp, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Note or any other document referred to herein.

10. Default; Remedies; Expenses. If one or more of the following events (herein called "Events of Default") shall occur and be continuing:

(a) the Payor shall default in the payment of any Obligations when the same shall become due (whether at stated maturity or otherwise); or

(b) the Payor shall default in the payment when due of any principal of or interest on any of its other Indebtedness; or any event specified in any note, agreement, indenture or other document evidencing or relating to any such Indebtedness shall occur if the effect of such event is to cause, or (with the giving of any notice or the lapse of time or both) to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, such Indebtedness to become due, or to be prepaid in full (whether by redemption, purchase, offer to purchase or otherwise), prior to its stated maturity; or

(c) any representation, warranty or certification made or deemed made herein or in the Pledge Agreement by the Payor shall prove to have been false or misleading as of the time made or furnished in any material respect; or

(d) the Payor shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code or (vi) take any corporate action for the purpose of effecting any of the foregoing; or

(e) a proceeding or case shall be commenced, without the application or consent of the Payor, in any court of competent jurisdiction, seeking (i) its reorganization, liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of the Payor or of all or any substantial part of its property or (iii) similar relief in respect of the Payor under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 45 or more days; or an order for relief against the Payor shall be entered in an involuntary case under the Bankruptcy Code; or

(f) the liens created by the Pledge Agreement shall at any time not constitute a valid and perfected lien on the collateral intended to be covered thereby in favor of the Payee, free and clear of all other liens, or the Pledge Agreement shall for whatever reason be terminated or cease to be in full force and effect, or the enforceability thereof shall be contested by the Payor;

THEREUPON: (1) in the case of an Event of Default other than one referred to in clause (d) or (e) of this Paragraph 10, the Payee may, by notice to the Payor, declare the principal amount then outstanding of, and the accrued interest on, this Note and all other amounts payable by the Payor hereunder and under the Pledge Agreement to be forthwith due and payable, whereupon such amounts shall be immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Payor; and (2) in the case of the occurrence of an Event of Default referred to in clause (d) or (e) of this Paragraph 10, the principal amount then outstanding of, and the accrued interest on, this Note and all other amounts payable by the Payor hereunder and under the Pledge Agreement shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Payor.

11. Definitions. As used herein, the following terms shall have the following respective meanings:

"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as amended from time to time.

"Business Day" shall mean any day on which commercial banks are not authorized or required to close in New York, New York.

"Dollars" and "$" shall mean lawful money of the United States of America.

"Federal Funds Effective Rate" shall mean, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by KeyBank, from three Federal Funds brokers of recognized standing selected by KeyBank.

"Indebtedness" shall mean, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business; (c) Indebtedness of others secured by a lien on the property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) capital lease obligations of such Person; and (f) Indebtedness of others guaranteed by such Person.

"KeyBank" shall mean KeyBank National Association, a national banking association, and its successors.

"Obligations" shall mean all amounts owing under this Note (whether for principal, interest or any other amount) and all amounts owing to the Payee under the Pledge Agreement.

"Person" shall mean any individual, corporation, company, voluntary association, partnership, limited liability company, joint venture, trust, unincorporated organization or government (or any agency, instrumentality or political subdivision thereof).

"Pledge Agreement" shall mean the Put Pledge Agreement dated as of the date of this Note between the Payor and the Payee, as the same shall be amended, modified and supplemented and in effect from time to time.

"Prime Rate" shall mean, for any period, a fluctuating interest rate per annum as shall be in effect from time to time which rate per annum shall at all times be equal to the greater of (i) the rate of interest established by KeyBank in Cleveland, Ohio, from time to time, as its prime rate, whether or not publicly announced, which interest rate may or may not be the lowest rate charged by it for commercial loans or other extensions of credit, and (ii) the Federal Funds Effective Rate in effect from time to time plus 1/2 of 1% per annum.

12. Waiver.

No failure on the part of the Payee to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Note shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Note preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

13. Notices.

All notices and other communications in respect of this Note (including, without limitation, any modifications of, or requests, waivers or consents under, this Note) shall be given or made in writing (including, without limitation, by telecopy) to the Payor or the Payee, as applicable, at the "Address for Notices" specified below its name on the signature pages hereof or, as to either the Payor or the Payee, at such other address as shall be designated by such party in a notice to the other party. Except as otherwise provided in this Note, all such communications shall be deemed to have been duly given when transmitted by telecopier or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.

14. Amendments; Successors; Assignments. This Note may not be amended except by an instrument in writing signed by each of the Payor and the Payee. This Note shall be binding upon and inure to the benefit of the Payor and the Payee and their respective successors and permitted assigns. The Payor shall not assign any of its rights or obligations under this Note without the prior consent of the Payee. The Payee may at any time and from time to time, without the consent of the Payor, assign all or any portion of its rights under this Note to one or more persons or entities, and, upon the Payee giving notice of such assignment to the Payor specifying the interest hereunder being assigned and the person or entity to which such interest is being assigned, each reference herein to the Payee shall (solely in respect of the interest so assigned) constitute a reference to such assignee (as if such assignee were named herein) rather than the Payee. The Payee shall be entitled to have this Note subdivided, by exchange of this Note for promissory notes of lesser denominations or otherwise, to the extent necessary to reflect any such assignment.

15. Equity Conversion Provisions. If, at any time prior to the date on which the outstanding principal amount of and accrued and unpaid interest on this Note is paid in full, the Payor effects one or more Qualified Rights Offerings, or issues additional Capital Stock in one or more Qualified Stock Offerings (each such event, an "Equity Event") then, with the consent of the Payor (which consent may be withheld by the Payor in its sole discretion), the Payee may apply all or a portion of the outstanding principal amount of and accrued and unpaid interest on this Note toward the purchase price of Equity Rights in such Qualified Rights Offering or toward the purchase price of Capital Stock in such Qualified Stock Offering (as the case may be) on and subject to the following terms:

(a) The Payee would participate in such Equity Event on a pari passu basis with the other participants therein and on economic terms identical to the economic terms on which such other participants are acquiring the related Equity Interests, except that the amount that would otherwise be payable in cash by the Payee to acquire such Equity Interests would be paid for by the Payee by means of a reduction in the outstanding principal amount of this Note and accrued and unpaid interest hereon.

(b) Each such reduction shall be applied first to reduce the amount of accrued and unpaid interest then owing on this Note and then to reduce the then outstanding principal amount of this Note (in each case determined as of the date on which such Equity Interests are issued in connection with such Equity Event).

As used in this Paragraph 15, the following terms shall have the following respective meanings:

"Equity Interests" shall mean Equity Rights issued in a Qualified Rights Offering and Capital Stock issued in a Qualified Stock Offering.

"Equity Rights" shall mean any rights to acquire any Capital Stock.

"Capital Stock" shall mean any capital stock of the Payor.

"Qualified Rights Offering" shall mean an offering by the Payor of Equity Rights after the date hereof.

"Qualified Stock Offering" shall mean an offering by the Payor of any Capital Stock after the date hereof, provided that such Capital Stock is offered in a registered public offering or private placement.

 16. Governing Law; Submission to Jurisdiction; Venue. This Note shall be governed by, and construed in accordance with, the law of the State of New York. The Payor hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York County for the purposes of all legal proceedings arising out of or relating to this Note or the transactions contemplated hereby. The Payor irrevocably waives, to the fullest extent permitted by applicable law, any objection which he may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

17. Waiver of Jury Trial.

EACH OF THE PAYOR AND THE PAYEE, BY ITS ACCEPTANCE OF THE BENEFITS OF THIS NOTE, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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IN WITNESS WHEREOF, the undersigned has caused this Note to be duly executed and delivered as of the day and year first above written.

MECHANICAL TECHNOLOGY INCORPORATED

By_s/Cynthia A. Scheuer______________________

Name: Cynthia A. Scheuer

Title: Vice President and Chief Financial Officer

Address for Notices:

Mechanical Technology Incorporated

30 South Pearl Street

Albany, New York 12205

Attention: Chief Financial Officer

Telephone No.: (518) 433-2170

Telecopier No.: (518) 433-2171

ACCEPTED AND AGREED:

FIRST ALBANY COMPANIES INC.

By_s/George M. McNamee______

Name: George M. McNamee

Title: Chairman and Co-Chief Executive Officer

Address for Notices

First Albany Companies Inc.

30 South Pearl Street

Albany, New York 12205

Attention: Chief Financial Officer

Telephone No.: (518) 447-8059

Telecopier No.: (518) 447-8068

ANNEX A

Amount of Date of Notation

Payment   Payment   Made By

EX-4

EXHIBIT 4.115

STOCK PLEDGE AGREEMENT

THIS STOCK PLEDGE AGREEMENT, dated as of December 27, 2000 (herein as amended or otherwise modified, the "Agreement"), by MECHANICAL TECHNOLOGY INCORPORATED, a New York corporation (herein, together with its successors and assigns, the "Pledgor" or the "Borrower"), with FIRST ALBANY COMPANIES INC., a corporation organized under the laws of the State of New York (herein, together with its successors and assigns, the "Lender"). Terms used in this Agreement and not otherwise defined shall have the meanings assigned to them in the Bridge Note referred to below.

On the date hereof, for value received, the Pledgor has issued to the Lender a promissory note in the original principal amount of $5,000,000 (the "Bridge Note"). To induce the Lender to extend credit to the Pledgor under the Bridge Note, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Pledgor has agreed to pledge to the Lender, and grant to the Lender a security interest in, 1,000,000 shares of common stock of Plug Power Inc., a Delaware corporation (together with its successors and assigns, the "Company") (the "Pledged Shares") and the other Pledged Collateral referred to below to secure all of its obligations under the Bridge Note. Accordingly, the parties hereto hereby agree as follows:

1. The Pledgor hereby pledges to the Lender, and grants to the Lender a security interest in the Pledged Shares, the certificates representing the Pledged Shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares, including, without limitation, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of all of the foregoing (collectively, the "Pledged Collateral"):

2. Security for Secured Obligations. This Agreement secures the payment of (i) all obligations of the Borrower now or hereafter existing under the Bridge Note, whether for principal, interest, fees, expenses or otherwise and (ii) all obligations of the Pledgor now or hereafter existing under this Agreement (all such obligations of the Borrower referred to in this Section 2 being the "Secured Obligations"). Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by the Borrower but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower.

3. Delivery of Pledged Collateral; Removal of Legends; Use of Securities Account. (a) All certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by or on behalf of the Lender pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Lender. The Lender shall have the right, in its discretion, at any time during the continuance of an Event of Default and without notice to the Pledgor, to transfer to or to register in the name of the Lender or any of its nominees any or all of the Pledged Collateral, subject only to the revocable rights specified in Section 6(a). In addition, the Lender shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations.

(b) If any Pledged Collateral is subject to any contractual restriction on transfer arising under any agreement to which the Pledgor is a party with the issuer, other shareholders and/or any underwriters, and any certificate or certificates for such Pledged Collateral contain a legend which makes reference to such restrictions, the Pledgor will, from time to time and as promptly as circumstances permit, take all such actions as are within its power to request and obtain the removal of such legend from certificates for the maximum number of shares as to which it is entitled to have such legend removed.

(c) If after the date hereof any or all of the Pledged Collateral may be held in book entry form and the Pledgor desires that such Pledged Collateral be held in such form in an account which the Pledgor has with a broker which is a member firm of the National Association of Securities Dealers, then the Lender will cooperate with the Pledgor in transferring such Pledged Collateral to such account, provided that there is in place an "account control agreement" reasonably satisfactory to the Lender which is sufficient to perfect its security interest in the Pledged Collateral held in such account and all proceeds thereof.

4. Representations and Warranties. The Pledgor represents and warrants that:

(a) The Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable.

(b) The Pledgor (i) is the legal and beneficial owner of the Pledged Collateral free and clear of any lien, security interest, option or other charge or encumbrance except for the security interest created by this Agreement and (ii) has legally and beneficially owned the Pledge Shares since June 27, 1997.

(c) The pledge of the Pledged Shares pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral, securing the payment of the Secured Obligations.

(d) No consent of any other person or entity and no authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required (i) for the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Pledgor, (ii) for the perfection or maintenance of the security interest created hereby (including the first priority nature of such security interest) or (iii) for the exercise by the Lender of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement (except as may be required in connection with any disposition of any portion of the Pledged Collateral by laws affecting the offering and sale of securities generally).

(e) The Pledged Shares constitute as of such date the percentage of the issued and outstanding shares of stock of the issuer thereof indicated on Schedule I.

(f) There are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived.

(g) The Pledgor has, independently and without reliance upon the Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.

5. Further Assurances. (a) The Pledgor agrees that at any time and from time to time, at the expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Lender to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral.

(b) If the Pledgor registers shares of common stock of the Company with the intention of retaining ownership, the Pledgor agrees to register or cause to be registered that portion of the Pledged Collateral subject to SEC Rule 144 as soon as it is feasible.

6. Voting Rights; Dividends; etc. (a) So long as no Event of Default shall have occurred and be continuing:

(i) The Pledgor shall be entitled to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement.

(ii) The Pledgor shall be entitled to receive and retain any and all dividends and distributions paid in respect of the Pledged Collateral, provided, however, that any and all

(A) dividends and distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, Pledged Collateral, and

(B) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus,

shall be, and shall be forthwith delivered to the Lender to hold as, Pledged Collateral and shall, if received by the Pledgor, be received in trust for the benefit of the Lender, be segregated from the other property or funds of the Pledgor, and be forthwith delivered to the Lender as Pledged Collateral in the same form as so received (with any necessary endorsement or assignment).

(iii) The Lender shall execute and deliver (or cause to be delivered) to the Pledgor all such proxies and other instruments as the Pledgor may reasonably request for the purposes of enabling the Pledgor to receive dividends or distributions that it is authorized to receive and retain pursuant to paragraph (ii) above.

(b) Upon the occurrence and during the continuance of an Event of Default:

(i) All rights of the Pledgor (x) to exercise or refrain from exercising the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 6(a)(i) shall, upon notice to the Pledgor by the Lender, cease and (y) to receive the dividends and distributions which it would otherwise be authorized to receive and retain pursuant to Section 6(a)(ii) shall automatically cease, and all such rights shall thereupon become vested in the Lender who shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights and to receive and hold as Pledged Collateral such dividends and distributions.

(ii) All dividends and distributions which are received by the Pledgor contrary to the provisions of paragraph (i) of this Section 6(b) shall be received in trust for the benefit of the Lender, shall be segregated from other funds of the Pledgor and shall be forthwith paid over to the Lender as Pledged Collateral in the same form as so received (with any necessary endorsement).

(iii) The Lender, in its sole and absolute discretion, shall either (x) apply in any manner any Pledged Collateral consisting of cash received by or on behalf of the Lender under this Section 6(b) to the payment of principal of and interest on the Bridge Note and other obligations hereunder and under the Bridge Note or (y) deposit and hold such Pledged Collateral consisting of cash in the Debt Service Reserve Account as additional Pledged Collateral.

7. Transfers and Other Liens. The Pledgor agrees that it will not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral and any such sale, assignment or disposition shall be null and void; or (ii) create or permit to exist any lien, security interest, option or other charge or encumbrance upon or with respect to any of the Pledged Collateral, except for the security interest under this Agreement.

8. Lender Appointed Attorney-in-Fact. The Pledgor hereby appoints the Lender the Pledgor's attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time in the Lender's discretion to take any action and to execute any instrument which the Lender may deem necessary or advisable to accomplish the purposes of this Agreement (subject to the rights of the Pledgor under Section 6), including, without limitation, to receive, indorse and collect all instruments made payable to the Pledgor representing any dividend, or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same, which appointment as attorney-in-fact is irrevocable and coupled with an interest.

9. Lender May Perform. If the Pledgor fails to perform any agreement contained herein, the Lender may itself perform, or cause performance of, such agreement, and the expenses of the Lender incurred in connection therewith shall be payable by the Pledgor under Section 14.

10. The Lender's Duties. The powers conferred on the Lender hereunder are solely to protect its interest in the Pledged Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Pledged Collateral in its possession and the accounting for moneys actually received by it hereunder, the Lender shall have no duty as to any Pledged Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not the Lender has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Pledged Collateral. The Lender shall be deemed to have exercised reasonable care in the custody and preservation of any Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equal to that which the Lender accords its own property.

11. Remedies upon Default. If any Event of Default shall have occurred and be continuing:

(a) The Lender may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code in effect in the State of New York at that time (the "Code") (whether or not the Code applies to the affected Collateral), and may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the Lender's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Lender may deem commercially reasonable. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Lender shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

(b) Any cash held by the Lender as Pledged Collateral and all cash proceeds received by the Lender in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral may, in the discretion of the Lender, be held by the Lender as collateral for, and/or then or at any time thereafter be applied (after payment of any amounts payable to the Lender pursuant to Section 14) in whole or in part by the Lender against, all or any part of the Secured Obligations in such order as the Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender and remaining after payment in full of all the Secured Obligations shall be paid over to the Pledgor or to whomsoever may be lawfully entitled to receive such surplus.

(c) The Pledgor recognizes that Lender may be unable to effect a public sale of all or part of the Pledged Collateral by reason of certain provisions contained in the 1933 Act or in the rules and regulations promulgated thereunder or in applicable state securities or blue sky laws, but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that private sales so made may be at prices and on other terms less favorable to the seller than if the Pledged Collateral were sold at a public sale, and that the Lender has no obligation to delay the sale of the Pledged Collateral for the period of time necessary to permit the registration of the Pledged Collateral for public sale under the 1933 Act and under applicable state securities or Blue Sky laws. The Pledgor agrees that a private sale or sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner.

12. Registration Rights. (a) If the Lender shall determine to exercise its right to sell all or any of the Pledged Collateral pursuant to Section 11, the Pledgor agrees that, upon request of the Lender, the Pledgor will, at its own expense:

(i) execute and deliver, and use its best efforts to cause the Company to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Lender, advisable to register such Pledged Collateral under the provisions of the 1933 Act (as defined in the Credit Agreement), and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of the Lender, are necessary or advisable, all in conformity with the requirements of the 1933 Act and the rules and regulations of the SEC (as so defined) applicable thereto;

(ii) endeavor to qualify the Pledged Collateral under the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Pledged Collateral, as requested by the Lender;

(iii) use its best efforts to cause the Company to make available to its security holders, as soon as practicable, an earning statement which will satisfy the provisions of Section 11(a) of the 1933 Act; and

(iv) do or cause to be done all such other acts and things as may be necessary to make such sale of the Pledged Collateral or any part thereof valid and binding and in compliance with applicable law.

(b) The Pledgor agrees that it shall take any and all actions necessary (including using its best efforts to cause the Registration Rights Agreement (as defined below) to be amended so that the Lender will be a party to such agreement) to ensure that the portion of the Pledged Collateral that is deemed to be Registrable Securities (as defined in the Registration Rights Agreement dated November 1, 1999 (as amended, supplemented or otherwise modified from time to time, the "Registration Rights Agreement") among each of the Holders executing a signatory page thereto and the Company) shall have "piggy-back" registration rights of the Pledgor pursuant to Section 2 of the Registration Rights Agreement. The Pledgor further agrees that, upon request of the Lender, as between the Pledged Collateral and all other shares of the Company legally and beneficially owned by the Pledgor, the Pledgor shall cause the Pledged Collateral to be registered pursuant to Section 2 of the Registration Rights Agreement prior to any other such shares (other than shares then pledged to KeyBank to secured obligations under the Credit Agreement).

13. Instructions from Lender. The Pledgor hereby authorizes and instructs each issuer of any Pledged Shares pledged hereunder to (i) comply with any instruction received by it from the Lender in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that each such issuer shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Pledged Shares directly to the Lender.

14. Expenses. The Pledgor will upon demand pay to the Lender the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Lender may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the Lender hereunder or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof.

15. Amendments, etc. No amendment or waiver of any provision of this Agreement, and no consent to any departure by the Pledgor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

16. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telecopier, electronic e-mail, telegraphic, telex or cable communication) and mailed, telecopied, e-mailed, telegraphed, telexed, cabled or delivered to it, at its address specified on the signature page hereto, or, as to either party, at such other address as shall be designated by such party in a written notice to the other party. All such notices and other communications shall be effective when received.

17. Continuing Security Interest. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) remain in full force and effect until the payment in full of the Bridge Note and all other Secured Obligations, (ii) be binding upon the Pledgor, and its successors and assigns, and (iii) inure to the benefit of, and be enforceable by, the Lender and its successors, transferees and assigns. Upon the payment in full of the Bridge Note and all other Secured Obligations, the security interest granted hereby shall terminate and all rights to the Pledged Collateral shall revert to the Pledgor. Upon any such termination, the Lender will, at the Pledgor's expense, return to the Pledgor such of the Pledged Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof and execute and deliver to the Pledgor such documents as the Pledgor shall reasonably request to evidence such termination.

18. Governing Law; UCC Terms. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. Unless otherwise defined herein, terms defined in Article 9 of the Code are used herein as therein defined.

19. Counterparts. This Agreement may be executed in any number of counterparts, and by different parties on separate counterparts, each of which shall be an original, but all of which together shall constitute one agreement.

IN WITNESS WHEREOF, the Pledgor and the Lender have caused this Agreement to be duly executed and delivered as of the date first above written.

MECHANICAL TECHNOLOGY INCORPORATED,

as Pledgor

By s/Cynthia A. Scheuer______________________

Name: Cynthia A. Scheuer

Title: Vice President and Chief Financial Officer

Address for Notices:

Mechanical Technology Incorporated

30 South Pearl Street

Albany, New York 12205

Attention: Chief Financial Officer

Telephone No.: (518) 433-2170

Telecopier No.: (518) 433-2171

FIRST ALBANY COMPANIES INC.,

as Lender

By s/George M. McNamee___________________

Name: George M. McNamee

Title: Chairman and Co-Chief Executive Officer

Address for Notices

First Albany Companies Inc.

30 South Pearl Street

Albany, New York 12205

Attention: Chief Financial Officer

Telephone No.: (518) 447-8059

Telecopier No.: (518) 447-8068

SCHEDULE I

Stock Issuer	Class of Stock	Stock Certificate No.	Par Value	Number of Shares	Percentage of Outstanding Shares
Plug Power Inc.	Common Stock		$0.01	1,000,000	%

EX-4

EXHIBIT 4.116

STOCK PLEDGE AGREEMENT

THIS STOCK PLEDGE AGREEMENT, dated as of December 27, 2000 (herein as amended or otherwise modified, the "Agreement"), by MECHANICAL TECHNOLOGY INCORPORATED, a New York corporation (herein, together with its successors and assigns, the "Pledgor" or the "Borrower"), with FIRST ALBANY COMPANIES INC., a corporation organized under the laws of the State of New York (herein, together with its successors and assigns, the "Lender"). Terms used in this Agreement and not otherwise defined shall have the meanings assigned to them in the Put Note referred to below.

On the date hereof, for value received, the Pledgor has issued to the Lender a promissory note in the original principal amount of $945,000 (the "Put Note"). To induce the Lender to extend credit to the Pledgor under the Put Note, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Pledgor has agreed to pledge to the Lender, and grant to the Lender a security interest in, 200,000 shares of common stock of Plug Power Inc., a Delaware corporation (together with its successors and assigns, the "Company") (the "Pledged Shares") and the other Pledged Collateral referred to below to secure all of its obligations under the Put Note. Accordingly, the parties hereto hereby agree as follows:

1. The Pledgor hereby pledges to the Lender, and grants to the Lender a security interest in the Pledged Shares, the certificates representing the Pledged Shares, and all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares, including, without limitation, all proceeds, products, offspring, accessions, rents, profits, income, benefits, substitutions and replacements of all of the foregoing (collectively, the "Pledged Collateral"):

2. Security for Secured Obligations. This Agreement secures the payment of (i) all obligations of the Borrower now or hereafter existing under the Put Note, whether for principal, interest, fees, expenses or otherwise and (ii) all obligations of the Pledgor now or hereafter existing under this Agreement (all such obligations of the Borrower referred to in this Section 2 being the "Secured Obligations"). Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts which constitute part of the Secured Obligations and would be owed by the Borrower but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower.

3. Delivery of Pledged Collateral; Removal of Legends; Use of Securities Account. (a) All certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by or on behalf of the Lender pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Lender. The Lender shall have the right, in its discretion, at any time during the continuance of an Event of Default and without notice to the Pledgor, to transfer to or to register in the name of the Lender or any of its nominees any or all of the Pledged Collateral, subject only to the revocable rights specified in Section 6(a). In addition, the Lender shall have the right at any time to exchange certificates or instruments representing or evidencing Pledged Collateral for certificates or instruments of smaller or larger denominations.

(b) If any Pledged Collateral is subject to any contractual restriction on transfer arising under any agreement to which the Pledgor is a party with the issuer, other shareholders and/or any underwriters, and any certificate or certificates for such Pledged Collateral contain a legend which makes reference to such restrictions, the Pledgor will, from time to time and as promptly as circumstances permit, take all such actions as are within its power to request and obtain the removal of such legend from certificates for the maximum number of shares as to which it is entitled to have such legend removed.

(c) If after the date hereof any or all of the Pledged Collateral may be held in book entry form and the Pledgor desires that such Pledged Collateral be held in such form in an account which the Pledgor has with a broker which is a member firm of the National Association of Securities Dealers, then the Lender will cooperate with the Pledgor in transferring such Pledged Collateral to such account, provided that there is in place an "account control agreement" reasonably satisfactory to the Lender which is sufficient to perfect its security interest in the Pledged Collateral held in such account and all proceeds thereof.

4. Representations and Warranties. The Pledgor represents and warrants that:

(a) The Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable.

(b) The Pledgor (i) is the legal and beneficial owner of the Pledged Collateral free and clear of any lien, security interest, option or other charge or encumbrance except for the security interest created by this Agreement and (ii) has legally and beneficially owned the Pledge Shares since June 27, 1997.

(c) The pledge of the Pledged Shares pursuant to this Agreement creates a valid and perfected first priority security interest in the Pledged Collateral, securing the payment of the Secured Obligations.

(d) No consent of any other person or entity and no authorization, approval, or other action by, and no notice to or filing with, any governmental authority or regulatory body is required (i) for the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement or for the execution, delivery or performance of this Agreement by the Pledgor, (ii) for the perfection or maintenance of the security interest created hereby (including the first priority nature of such security interest) or (iii) for the exercise by the Lender of the voting or other rights provided for in this Agreement or the remedies in respect of the Pledged Collateral pursuant to this Agreement (except as may be required in connection with any disposition of any portion of the Pledged Collateral by laws affecting the offering and sale of securities generally).

(e) The Pledged Shares constitute as of such date the percentage of the issued and outstanding shares of stock of the issuer thereof indicated on Schedule I.

(f) There are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived.

(g) The Pledgor has, independently and without reliance upon the Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.

5. Further Assurances. (a) The Pledgor agrees that at any time and from time to time, at the expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Lender to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral.

(b) If the Pledgor registers shares of common stock of the Company with the intention of retaining ownership, the Pledgor agrees to register or cause to be registered that portion of the Pledged Collateral subject to SEC Rule 144 as soon as it is feasible.

6. Voting Rights; Dividends; etc. (a) So long as no Event of Default shall have occurred and be continuing:

(i) The Pledgor shall be entitled to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement.

(ii) The Pledgor shall be entitled to receive and retain any and all dividends and distributions paid in respect of the Pledged Collateral, provided, however, that any and all

(A) dividends and distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, Pledged Collateral, and

(B) dividends and other distributions paid or payable in cash in respect of any Pledged Collateral in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus,

shall be, and shall be forthwith delivered to the Lender to hold as, Pledged Collateral and shall, if received by the Pledgor, be received in trust for the benefit of the Lender, be segregated from the other property or funds of the Pledgor, and be forthwith delivered to the Lender as Pledged Collateral in the same form as so received (with any necessary endorsement or assignment).

(iii) The Lender shall execute and deliver (or cause to be delivered) to the Pledgor all such proxies and other instruments as the Pledgor may reasonably request for the purposes of enabling the Pledgor to receive dividends or distributions that it is authorized to receive and retain pursuant to paragraph (ii) above.

(b) Upon the occurrence and during the continuance of an Event of Default:

(i) All rights of the Pledgor (x) to exercise or refrain from exercising the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 6(a)(i) shall, upon notice to the Pledgor by the Lender, cease and (y) to receive the dividends and distributions which it would otherwise be authorized to receive and retain pursuant to Section 6(a)(ii) shall automatically cease, and all such rights shall thereupon become vested in the Lender who shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights and to receive and hold as Pledged Collateral such dividends and distributions.

(ii) All dividends and distributions which are received by the Pledgor contrary to the provisions of paragraph (i) of this Section 6(b) shall be received in trust for the benefit of the Lender, shall be segregated from other funds of the Pledgor and shall be forthwith paid over to the Lender as Pledged Collateral in the same form as so received (with any necessary endorsement).

(iii) The Lender, in its sole and absolute discretion, shall either (x) apply in any manner any Pledged Collateral consisting of cash received by or on behalf of the Lender under this Section 6(b) to the payment of principal of and interest on the Put Note and other obligations hereunder and under the Put Note or (y) deposit and hold such Pledged Collateral consisting of cash in the Debt Service Reserve Account as additional Pledged Collateral.

7. Transfers and Other Liens. The Pledgor agrees that it will not (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Pledged Collateral and any such sale, assignment or disposition will be null and void; or (ii) create or permit to exist any lien, security interest, option or other charge or encumbrance upon or with respect to any of the Pledged Collateral, except for the security interest under this Agreement.

8. Lender Appointed Attorney-in-Fact. The Pledgor hereby appoints the Lender the Pledgor's attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time in the Lender's discretion to take any action and to execute any instrument which the Lender may deem necessary or advisable to accomplish the purposes of this Agreement (subject to the rights of the Pledgor under Section 6), including, without limitation, to receive, indorse and collect all instruments made payable to the Pledgor representing any dividend, or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same, which appointment as attorney-in-fact is irrevocable and coupled with an interest.

9. Lender May Perform. If the Pledgor fails to perform any agreement contained herein, the Lender may itself perform, or cause performance of, such agreement, and the expenses of the Lender incurred in connection therewith shall be payable by the Pledgor under Section 14.

10. The Lender's Duties. The powers conferred on the Lender hereunder are solely to protect its interest in the Pledged Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Pledged Collateral in its possession and the accounting for moneys actually received by it hereunder, the Lender shall have no duty as to any Pledged Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not the Lender has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Pledged Collateral. The Lender shall be deemed to have exercised reasonable care in the custody and preservation of any Pledged Collateral in its possession if such Pledged Collateral is accorded treatment substantially equal to that which the Lender accords its own property.

11. Remedies upon Default. If any Event of Default shall have occurred and be continuing:

(a) The Lender may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code in effect in the State of New York at that time (the "Code") (whether or not the Code applies to the affected Collateral), and may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the Lender's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Lender may deem commercially reasonable. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Lender shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

(b) Any cash held by the Lender as Pledged Collateral and all cash proceeds received by the Lender in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral may, in the discretion of the Lender, be held by the Lender as collateral for, and/or then or at any time thereafter be applied (after payment of any amounts payable to the Lender pursuant to Section 14) in whole or in part by the Lender against, all or any part of the Secured Obligations in such order as the Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender and remaining after payment in full of all the Secured Obligations shall be paid over to the Pledgor or to whomsoever may be lawfully entitled to receive such surplus.

(c) The Pledgor recognizes that Lender may be unable to effect a public sale of all or part of the Pledged Collateral by reason of certain provisions contained in the 1933 Act or in the rules and regulations promulgated thereunder or in applicable state securities or blue sky laws, but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that private sales so made may be at prices and on other terms less favorable to the seller than if the Pledged Collateral were sold at a public sale, and that the Lender has no obligation to delay the sale of the Pledged Collateral for the period of time necessary to permit the registration of the Pledged Collateral for public sale under the 1933 Act and under applicable state securities or Blue Sky laws. The Pledgor agrees that a private sale or sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner.

12. Registration Rights. (a) If the Lender shall determine to exercise its right to sell all or any of the Pledged Collateral pursuant to Section 11, the Pledgor agrees that, upon request of the Lender, the Pledgor will, at its own expense:

(i) execute and deliver, and use its best efforts to cause the Company to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Lender, advisable to register such Pledged Collateral under the provisions of the 1933 Act (as defined in the Credit Agreement), and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of the Lender, are necessary or advisable, all in conformity with the requirements of the 1933 Act and the rules and regulations of the SEC (as so defined) applicable thereto;

(ii) endeavor to qualify the Pledged Collateral under the state securities or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Pledged Collateral, as requested by the Lender;

(iii) use its best efforts to cause the Company to make available to its security holders, as soon as practicable, an earning statement which will satisfy the provisions of Section 11(a) of the 1933 Act; and

(iv) do or cause to be done all such other acts and things as may be necessary to make such sale of the Pledged Collateral or any part thereof valid and binding and in compliance with applicable law.

(b) The Pledgor agrees that it shall take any and all actions necessary (including using its best efforts to cause the Registration Rights Agreement (as defined below) to be amended so that the Lender will be a party to such agreement) to ensure that the portion of the Pledged Collateral that is deemed to be Registrable Securities (as defined in the Registration Rights Agreement dated November 1, 1999 (as amended, supplemented or otherwise modified from time to time, the "Registration Rights Agreement") among each of the Holders executing a signatory page thereto and the Company) shall have "piggy-back" registration rights of the Pledgor pursuant to Section 2 of the Registration Rights Agreement. The Pledgor further agrees that, upon request of the Lender, as between the Pledged Collateral and all other shares of the Company legally and beneficially owned by the Pledgor, the Pledgor shall cause the Pledged Collateral to be registered pursuant to Section 2 of the Registration Rights Agreement prior to any other such shares (other than shares then pledged to KeyBank to secured obligations under the Credit Agreement).

13. Instructions from Lender. The Pledgor hereby authorizes and instructs each issuer of any Pledged Shares pledged hereunder to (i) comply with any instruction received by it from the Lender in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from the Pledgor, and the Pledgor agrees that each such issuer shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Pledged Shares directly to the Lender.

14. Expenses. The Pledgor will upon demand pay to the Lender the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which the Lender may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Pledged Collateral, (iii) the exercise or enforcement of any of the rights of the Lender hereunder or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof.

15. Amendments, etc. No amendment or waiver of any provision of this Agreement, and no consent to any departure by the Pledgor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

16. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telecopier, electronic e-mail, telegraphic, telex or cable communication) and mailed, telecopied, e-mailed, telegraphed, telexed, cabled or delivered to it, at its address specified on the signature page hereto, or, as to either party, at such other address as shall be designated by such party in a written notice to the other party. All such notices and other communications shall be effective when received.

17. Continuing Security Interest. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (i) remain in full force and effect until the payment in full of the Put Note and all other Secured Obligations, (ii) be binding upon the Pledgor, and its successors and assigns, and (iii) inure to the benefit of, and be enforceable by, the Lender and its successors, transferees and assigns. Upon the payment in full of the Put Note and all other Secured Obligations, the security interest granted hereby shall terminate and all rights to the Pledged Collateral shall revert to the Pledgor. Upon any such termination, the Lender will, at the Pledgor's expense, return to the Pledgor such of the Pledged Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof and execute and deliver to the Pledgor such documents as the Pledgor shall reasonably request to evidence such termination.

18. Governing Law; UCC Terms. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. Unless otherwise defined herein, terms defined in Article 9 of the Code are used herein as therein defined.

19. Counterparts. This Agreement may be executed in any number of counterparts, and by different parties on separate counterparts, each of which shall be an original, but all of which together shall constitute one agreement.

IN WITNESS WHEREOF, the Pledgor and the Lender have caused this Agreement to be duly executed and delivered as of the date first above written.

MECHANICAL TECHNOLOGY INCORPORATED,

as Pledgor

By_s/Cynthia A. Scheuer____________________

Name: Cynthia A. Scheuer

Title: Vice President and Chief Financial Officer

Address for Notices:

Mechanical Technology Incorporated

30 South Pearl Street

Albany, New York 12205

Attention: Chief Financial Officer

Telephone No.: (518) 433-2170

Telecopier No.: (518) 433-2171

FIRST ALBANY COMPANIES INC.,

as Lender

By s/George M. NcNamee____________________

Name: George M. McNamee

Title: Chairman and Co-Chief Executive Officer

Address for Notices

First Albany Companies Inc.

30 South Pearl Street

Albany, New York 12205

Attention: Chief Financial Officer

Telephone No.: (518) 447-8059

Telecopier No.: (518) 447-8048

SCHEDULE I

Stock Issuer	Class of Stock	Stock Certificate No.	Par Value	Number of Shares	Percentage of Outstanding Shares
Plug Power Inc.	Common Stock		$0.01	200,000	%

EX-4

EXHIBIT 4.117

ACCOUNT CONTROL AGREEMENT

This Account Control Agreement, dated as of December 27, 2000, by (i) KeyBank National Association, a commercial bank having an office at 66 Pearl Street, Albany, New York 12207 ("Creditor"); (ii) Mechanical Technology Incorporated, a New York corporation whose principal place of business is located at 30 South Pearl Street, Albany, New York 12207 ("Debtor"); and (iii) McDonald Investments Inc., a corporation having its principal place of business at Cleveland, Ohio, through its office located at 800 Superior Avenue, Cleveland, Ohio 44114 ("Broker").

Preliminary Statements:

(1) Creditor and Debtor are parties to a Stock Pledge Agreement, as amended by an Amendment dated as of the date hereof (as amended, supplemented or modified from time to time, the "Stock Pledge Agreement"), pursuant to which Debtor has granted a security interest in the Pledged Shares (as defined in the Stock Agreement), which Pledged Shares constitute financial assets to be carried in the Account (as defined herein);

(2) Creditor and Debtor are parties to an Amended and Restated Credit Agreement dated as of March 29, 2000, as amended by an Amendment dated as of October 1, 2000 and by the Waiver and Second Amendment (the "Second Amendment") dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"); and

(3) It is a condition precedent to the effectiveness of the Second Amendment that the parties hereto enter into this Agreement.

The parties hereby agree as follows:

Section 1. The Parties' Agreements. Broker and Debtor have entered into a customer agreement (the "Customer Agreement"), pursuant to which Broker is establishing a securities account number 54564470 in the name of Debtor (the "Account"). Debtor and Creditor have entered into the Second Amendment and have amended the Stock Pledge Agreement contemporaneously herewith. Creditor, Debtor and Broker are entering into this Agreement to provide for the control of the Account.

Section 2. The Account. Broker hereby represents and warrants to Creditor and Debtor that (a) the Account is being been established in the name of Debtor as recited above, (b) Exhibit A attached hereto is a description of the financial assets to be deposited and carried therein, (c) Exhibit A does not reflect any financial assets which are registered in the name of Debtor, payable to its order, or specially endorsed to it, which have not been endorsed to Broker or in blank, (d) the Customer Agreement, the security entitlements arising out of the financial assets carried in the Account and such free credit balance are valid and legally binding obligations of Broker, and (e) except for the claims and interest of Creditor and of Debtor in the Account, Broker does not know of any claim to or interest in the Account or in any financial asset carried therein. Broker will treat all property held by it in the Account as financial assets under Article 8 of the Uniform Commercial Code of the State of New York.

Section 3. No Withdrawals by Debtor Except Under Certain Circumstances. As provided in Section 5 below, Broker shall neither accept nor comply with any entitlement order from Debtor withdrawing any financial assets from the Account nor deliver any such financial assets to Debtor nor pay any free credit balance or other amount owing from Broker to Debtor with respect to the Account, without the specific prior written consent of Creditor, which consent will not be unreasonably withheld, except that Debtor may instruct Broker to sell up to 1,700,000 of the Pledged Shares, provided that the proceeds of any such sale shall be paid directly to Creditor and applied to reduce Debtor's outstanding obligations under the Credit Agreement.

Section 4. Priority of Lien. Broker hereby acknowledges that it has received a copy of the Stock Pledge Agreement, consents to the terms thereof and recognizes the security interest granted therein to Creditor by Debtor. Broker hereby confirms that it will not advance any margin or other credit to Debtor in the Account, either directly executing purchase orders in excess of any credit balance or money market mutual funds held in the Account, executing sell orders on securities not held in the Account or by allowing him to trade in instruments such as options and commodities contracts that create similar obligations, nor hypothecate any securities carried in the Account. Broker hereby waives and releases all liens, encumbrances, claims and rights of setoff it may have against the Account or any financial asset carried in the Account or any credit balance in the Account and agrees that, except for payment of its customary fees and commission pursuant to the Customer Agreement, it will not assert any such lien, encumbrance, claim or right or the priority thereof against the Account or any financial asset carried in the Account or any credit balance in the Account. Broker will not agree with any third party that Broker will comply with entitlement orders concerning the Account originated by such third party without the prior written consent of Creditor and Debtor.

Section 5. Control. Until such time as Broker receives written notice from Creditor authorizing it to do otherwise, Broker will comply with entitlement orders originated by Creditor concerning the Account without further consent by Debtor and (b) except as provided in Section 3, Broker shall not make trades of financial assets held in the Account at the instruction of Debtor, or its authorized representatives, and shall not comply with entitlement orders concerning the Account from Debtor, or his authorized representatives.

Section 6. Statements, Confirmations and Notices of Adverse Claims. Broker will send copies of all statements, confirmations and other correspondence concerning the Account simultaneously to each of Debtor and Creditor at the address set forth in the heading of this Agreement. If any person asserts any lien, encumbrance or adverse claim against the Account or in any financial asset carried therein, Broker will promptly notify Creditor and Debtor thereof.

Section 7. Responsibility of Broker. Broker shall have no responsibility or liability to Debtor for complying with entitlement orders concerning the Account originated by Creditor. Broker shall have no duty to investigate or make any determination as to whether or an Event of Default (as defined in the Credit Agreement) has occurred and shall comply with entitlement orders concerning the Account originated by Creditor even if it believes that an Event of Default has not occurred. None of this Agreement, the Credit Agreement or the Stock Pledge Agreement imposes or creates an obligation or duty of Broker other than those expressly set forth herein.

Section 8. Tax Reporting. All items of income, gain, expense and loss recognized in the Account shall be reported to the Internal Revenue Service and all state and local taxing authorities under the name and taxpayer identification number of Debtor.

Section 9. Customer Agreement. This Agreement supplements the Customer Agreement among the parties hereto. In the event of a conflict between this Agreement and the Customer Agreement, the terms of this Agreement will prevail. Regardless of any provision in the Customer Agreement, New York shall be deemed to be the Broker's location for the purposes of this Agreement and the perfection and priority of Creditor's security interest in the Account.

Section 10. Termination. The rights and powers granted herein to Creditor have been granted in order to perfect its security interest in the Account, are powers coupled with an interest and will neither be affected by the death or bankruptcy of Debtor nor by the lapse of time. The obligations of Broker under Sections 3, 4, 5 and 6 above shall continue in effect until the security interest of Creditor in the Account has been terminated pursuant to the terms of the Stock Pledge Agreement and Creditor has notified Broker of such termination in writing. Upon receipt of such notice the obligations of Broker under Sections 3, 4, 5 and 6 above with respect to the operation and maintenance of the Account after the receipt of such notice shall terminate, Creditor shall have no further right to originate entitlement orders concerning the Account and Broker may take such steps as Debtor may request to vest full ownership and control of the Account in Debtor, including, but not limited to, transferring all of the financial assets and credit balances in the Account to another securities account in the name of Debtor or its or his designee.

Section 11. This Agreement. This Agreement, the schedules and exhibits hereto and the agreements and instruments required to be executed and delivered thereunder set forth the entire agreement of the parties with respect to the subject matter hereof and supersede and discharge all prior agreements (written or oral) and negotiations and all contemporaneous oral agreements concerning such subject matter and negotiations. There are no oral conditions precedent to the effectiveness of this Agreement.

Section 12. Amendments. No amendment, modification or termination of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by the party to be charged.

Section 13. Severability. If any term or provision set forth in this Agreement shall be invalid or unenforceable, the remainder of this Agreement, or the application of such terms or provision to persons or circumstances, other than those to which it is held invalid or unenforceable, shall be construed in all respects as if such invalid or unenforceable term or provision were omitted.

Section 14. Successors. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and assigns.

Section 15. Rules of Construction. In this Agreement, words in the singular number include the plural, and in the plural include the singular, and when the sense so indicates words of the masculine, feminine or neuter gender may refer to any other gender and the word "or" is disjunctive but not exclusive. The captions and section numbers appearing in this Agreement are inserted only as a matter of convenience and do not define or limit the scope or intent of the provisions of this Agreement.

Section 16. Notices. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the applicable party at the address set forth next to such party's name at the heading of this Agreement. Any party may change his address for notices in the manner set forth above.

Section 17. Counterparts. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts.

Section 18. Choice of Law. This Agreement and the rights and obligations of the parties under this Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York, including Section 5-1401 of the New York General Obligations Law.

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have executed this Agreement on the day and year first above written.

CREDITOR KEYBANK NATIONAL

ASSOCIATION

By: s/William B. Palmer

William B. Palmer

Vice President

DEBTOR MECHANICAL TECHNOLOGY

INCORPORATED

By: s/Cynthia A. Scheuer

Cynthia A. Scheuer

Vice President

BROKER McDONALD INVESTMENTS INC.

By: s/David L. Gruber

David L. Gruber

Vice President

EXHIBIT A

Description of Financial Assets to be Deposited in the Account

Stock Issuer	Class of Stock	Stock Certificate Nos.	Par Value	Number of Shares	Percentage of Outstanding Shares
Plug Power Inc.	Common Stock	PLG 0917 PLG 1304 PLG 1305 PLG 1306 PLG 1307	$1.00	2,000,000 2,000,000 2,000,000 1,000,000 1,000,000	31.4%

EX-21

EXHIBIT 21

SUBSIDIARIES OF MECHANICAL TECHNOLOGY INCORPORATED
Subsidiary Name	Jurisdiction of Incorporation or Organization
Turbonetics Energy, Inc.	New York
MTI International, Inc.	Guam
MTI Instruments, Inc.	New York
Embedded Power LLC	Delaware

EX-23

EXHIBIT 23

Consent of Independent Accountants

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-76817, 333-72841, and 333-41863) of Mechanical Technology Incorporated and Subsidiaries of our report dated October 27, 2000, except for Notes 8, 11, and 17, as to which the date is December 27, 2000, relating to the financial statements and financial statement schedule which appears in this Annual Report on Form 10-K.

s/PricewaterhouseCoopers L.L.P.

Albany, New York

December 27, 2000

EX-99

EXHIBIT 99

CONSOLIDATED FINANCIAL STATEMENTS OF SATCON TECHNOLOGY CORPORATION

                               TABLE OF CONTENTS



                                                                PAGE
                                                              --------

PART I: FINANCIAL STATEMENTS OF SATCON TECHNOLOGY
  CORPORATION

Report of Independent Public Accountants....................     36

Report of Independent Accountants...........................     37

Consolidated Financial Statements:
  Consolidated Balance Sheets as of September 30, 2000 and
    1999....................................................     38
  Consolidated Statements of Operations for the Years Ended
    September 30, 2000, 1999
    and 1998................................................     39
  Consolidated Statements of Changes in Stockholders' Equity
    for the Years Ended
    September 30, 2000, 1999 and 1998.......................     40
  Consolidated Statements of Cash Flows for the Years Ended
    September 30, 2000, 1999
    and 1998................................................     41
  Notes to Consolidated Financial Statements................     42



                                       35

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
SatCon Technology Corporation:

    We have audited the accompanying consolidated balance sheet of SatCon
Technology Corporation and its subsidiaries (a Delaware corporation) as of
September 30, 2000 and 1999 and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the years
then ended. These financial statements are the responsibility of SatCon
Technology Corporation's management. Our responsibility is to express an opinion
on these financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SatCon Technology
Corporation and its subsidiaries as of September 30, 2000 and 1999 and the
results of their operations and their cash flows for each of the years then
ended in conformity with auditing standards generally accepted in the United
States.

                                          /s/ ARTHUR ANDERSEN LLP

Boston, Massachusetts
November 28, 2000

                                       36

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of

SatCon Technology Corporation:

    In our opinion, the consolidated statements of operations, of changes in
stockholders' equity and of cash flows for the year ended September 30, 1998
present fairly, in all material respects, the results of operations and cash
flows of SatCon Technology Corporation and its subsidiaries for the year ended
September 30, 1998, in conformity with generally accepted accounting principles.
In addition, in our opinion, the financial statement schedule for the year ended
September 30, 1998 presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedule are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedule based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above. We have not audited the consolidated financial
statements of SatCon Technology Corporation for any period subsequent to
September 30, 1998.

    As discussed in Note A, the accompanying consolidated financial statements
for the year ended September 30, 1998 reflect revised accounting for the
recapitalization of Beacon Power Corporation.

                                          /s/ PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts
December 17, 1998,
except to the restatement described
in Note A, as to which the date is
September 11, 2000

                                       37

                         SATCON TECHNOLOGY CORPORATION

                          CONSOLIDATED BALANCE SHEETS



                                                                    SEPTEMBER 30,
                                                              --------------------------
                                                                  2000          1999
                                                              ------------   -----------

                           ASSETS
Current assets:
  Cash and cash equivalents.................................  $  8,814,324   $ 2,533,072
  Accounts receivable, net of allowance of $320,222 and
    $386,686 at September 30, 2000 and 1999, respectively...     7,495,942     2,799,143
  Unbilled contract costs and fees, net of allowance of $0
    and $746,121 at September 30, 2000 and 1999,
    respectively............................................       824,829     1,462,201
  Inventory.................................................     8,001,661     3,697,972
  Prepaid expenses and other current assets.................       614,622       349,070
                                                              ------------   -----------
      Total current assets..................................    25,751,378    10,841,458
Investment in Beacon Power Corporation......................            --       414,729
Warrants to purchase Mechanical Technology Incorporated
  common stock..............................................     2,473,713            --
Property and equipment, net.................................     6,257,476     3,260,632
Intangibles, net............................................     9,080,089     3,194,609
Other long-term assets......................................       924,583       103,675
                                                              ------------   -----------
        Total assets........................................  $ 44,487,239   $17,815,103
                                                              ============   ===========
  LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
                    STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $  3,074,517   $ 1,563,605
  Accrued payroll and payroll-related expenses..............     1,284,884       479,888
  Deferred revenue..........................................     1,525,116       113,179
  Funding commitment to Beacon Power Corporation............            --       333,333
  Other accrued expenses....................................     1,459,218       620,874
  Current portion of long-term debt.........................        17,494        16,226
                                                              ------------   -----------
      Total current liabilities.............................     7,361,229     3,127,105
Long-term debt, net of current portion......................        16,377        33,871
Other long-term liabilities.................................       197,349        29,735
Commitments and contingencies (Note H)
Contingent obligation to Class D preferred stockholders of
  Beacon Power Corporation..................................     5,793,879     5,309,115
Series A redeemable convertible preferred stock.............            --     4,894,112
Stockholders' equity:
  Preferred stock; $0.01 par value, 1,000,000 shares
    authorized no shares issued and outstanding at September
    30, 2000; 8,000 shares series A redeemable convertible
    preferred stock issued and outstanding at September 30,
    1999....................................................                          --
  Common stock, $0.01 par value, 25,000,000 shares
    authorized; 13,841,185 and 9,617,009 shares issued at
    September 30, 2000 and 1999, respectively...............       138,412        96,170
  Additional paid-in capital................................    72,498,540    37,074,161
  Common stock held in escrow, at market value; 0 and 42,860
    shares at September 30, 2000 and 1999, respectively.....            --      (428,600)
  Amounts receivable from exercise of stock options.........            --    (1,816,667)
  Accumulated deficit.......................................   (40,195,340)  (30,254,195)
  Accumulated other comprehensive loss......................    (1,073,503)           --
  Treasury stock, at cost; 44,500 shares at September 30,
    2000 and 1999...........................................      (249,704)     (249,704)
                                                              ------------   -----------
      Total stockholders' equity............................    31,118,405     4,421,165
                                                              ------------   -----------
        Total liabilities, redeemable convertible preferred
        stock and stockholders' equity......................  $ 44,487,239   $17,815,103
                                                              ============   ===========



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

                                       38

                         SATCON TECHNOLOGY CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS



                                                           FOR THE YEARS ENDED SEPTEMBER 30,
                                                       -----------------------------------------
                                                           2000           1999          1998
                                                       ------------   ------------   -----------

Product revenue......................................  $ 22,427,428   $  9,122,498   $ 7,520,188
Funded research and development revenue..............     8,627,601      6,355,383     8,010,735
                                                       ------------   ------------   -----------
Total revenue........................................    31,055,029     15,477,881    15,530,923
Cost of product revenue..............................    19,069,192      9,510,941     5,474,067
                                                       ------------   ------------   -----------
Gross margin.........................................    11,985,837      5,966,940    10,056,856
                                                       ------------   ------------   -----------
Research and development expenses....................    10,300,765      6,554,464     6,793,634
Selling, general and administrative expenses.........     9,969,580      8,818,706     4,523,424
Amortization of intangibles..........................     1,217,490        371,087       290,957
                                                       ------------   ------------   -----------
Total operating expenses.............................    21,487,835     15,744,257    11,608,015
                                                       ------------   ------------   -----------
Operating loss.......................................    (9,501,998)    (9,777,317)   (1,551,159)
Other income (loss)..................................         9,891       (150,464)           --
Interest income......................................       453,631         42,287       179,861
Interest expense.....................................        (3,176)      (115,692)      (10,206)
                                                       ------------   ------------   -----------
Net loss before income taxes and loss from Beacon
  Power Corporation..................................    (9,041,652)   (10,001,186)   (1,381,504)
Provision for income taxes...........................            --             --        (3,872)
Loss from Beacon Power Corporation...................      (899,493)    (4,340,567)   (3,472,438)
                                                       ------------   ------------   -----------
Net loss.............................................    (9,941,145)   (14,341,753)   (4,857,814)
Accretion of redeemable convertible preferred stock
  discount...........................................    (3,105,888)       (50,904)           --
                                                       ------------   ------------   -----------
Net loss attributable to common stockholders.........  $(13,047,033)  $(14,392,657)  $(4,857,814)
                                                       ============   ============   ===========
Net loss per share, basic and diluted................  $      (1.03)  $      (1.57)  $      (.54)
                                                       ============   ============   ===========
Weighted average number of common shares, basic and
  diluted............................................    12,629,822      9,176,041     8,956,671
                                                       ============   ============   ===========



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

                                       39

                         SATCON TECHNOLOGY CORPORATION

                           CONSOLIDATED STATEMENTS OF
                        CHANGES IN STOCKHOLDERS' EQUITY

             FOR THE YEARS ENDED SEPTEMBER 30, 2000, 1999 AND 1998


                                                                                                                   AMOUNTS
                                                                                                                 RECEIVABLE
                                                                                           COMMON     COMMON        FROM
                                                                            ADDITIONAL     SHARES      STOCK     EXERCISE OF
                                                      COMMON      COMMON      PAID-IN     HELD IN     HELD IN       STOCK
                                                      SHARES      STOCK       CAPITAL      ESCROW     ESCROW       OPTIONS
                                                    ----------   --------   -----------   --------   ---------   -----------

Balance, September 30, 1997.......................   8,769,146   $ 87,691   $26,576,600        --           --            --
Net loss..........................................          --         --            --        --           --            --
Exercise of stock options.........................     100,266      1,003       580,736        --           --            --
Exercise of warrants..............................     149,137      1,491     1,220,382        --           --            --
Treasury stock purchased..........................          --         --            --        --           --            --
Change in net unrealized losses on marketable
  securities......................................          --         --            --        --           --            --
                                                    ----------   --------   -----------   -------    ---------   -----------
Balance, September 30, 1998.......................   9,018,549   $ 90,185   $28,377,718        --           --            --
Net loss..........................................          --         --            --        --           --            --
Exercise of stock options.........................     455,600      4,556     3,173,445        --           --    (1,816,667)
Treasury stock purchased..........................          --         --            --        --           --            --
Common stock issued in acquisitions...............     100,000      1,000       567,800        --           --            --
Common stock issued in connection with settlement
  agreement which is held in escrow...............      42,860        429       189,762    42,860     (190,191)           --
Compensation expense related to stock options and
  warrants issued to non-employees................          --         --     2,208,639        --           --            --
Valuation adjustment for common stock held in
  escrow..........................................          --         --       238,409        --     (238,409)           --
Warrants issued in connection with the sale of
  redeemable preferred stock......................          --         --     2,369,292        --           --            --
Change in net unrealized losses on marketable
  securities......................................          --         --            --        --           --            --
Accretion of redeemable convertible preferred
  stock discount..................................          --         --       (50,904)       --           --            --
                                                    ----------   --------   -----------   -------    ---------   -----------
Balance, September 30, 1999.......................   9,617,009   $ 96,170   $37,074,161    42,860    $(428,600)  $(1,816,667)
Net loss..........................................          --         --            --        --           --            --
Common stock issued in connection with Ling
  acquisition.....................................     770,000      7,700     7,748,656        --           --            --
Common stock issued in connection with MTI
  investment......................................   1,030,000     10,300     6,964,926        --           --            --
MTI warrants received in connection with MTI
  investment......................................          --         --     3,495,438        --           --            --
Valuation adjustment for MTI warrants.............          --         --            --        --           --            --
Common stock issued in connection with NGC asset
  acquisition.....................................     578,761      5,788     5,465,770        --           --            --
Conversion of redeemable convertible preferred
  stock into common stock.........................   1,025,641     10,256     7,989,744        --           --            --
Exercise of common stock options..................     701,774      7,018     5,496,853        --           --
Exercise of common stock warrants.................     118,000      1,180     1,111,720        --           --            --
Payments on amounts receivable from exercise of
  stock options...................................          --         --            --        --           --     1,816,667
Valuation adjustment for common stock held in
  escrow..........................................          --         --       257,160        --     (257,160)           --
Common stock released from escrow.................          --         --            --   (42,860)     685,760            --
Accretion of redeemable convertible preferred
  stock discount..................................          --         --    (3,105,888)       --           --            --
Foreign currency translation adjustment...........          --         --            --        --           --            --
                                                    ----------   --------   -----------   -------    ---------   -----------
Balance, September 30, 2000.......................  13,841,185   $138,412   $72,498,540        --    $      --   $        --
                                                    ==========   ========   ===========   =======    =========   ===========



                                                                    ACCUMULATED
                                                                       OTHER
                                                    ACCUMULATED    COMPREHENSIVE   TREASURY   TREASURY
                                                      DEFICIT          LOSS         SHARES      STOCK
                                                    ------------   -------------   --------   ---------

Balance, September 30, 1997.......................  $(11,054,628)   $   (20,215)        --           --
Net loss..........................................    (4,857,814)            --         --           --
Exercise of stock options.........................            --             --         --           --
Exercise of warrants..............................            --             --         --           --
Treasury stock purchased..........................            --             --     28,300    $(173,076)
Change in net unrealized losses on marketable
  securities......................................            --          9,835         --           --
                                                    ------------    -----------     ------    ---------
Balance, September 30, 1998.......................  $(15,912,442)   $   (10,380)    28,300    $(173,076)
Net loss..........................................   (14,341,753)            --         --           --
Exercise of stock options.........................            --             --         --           --
Treasury stock purchased..........................            --             --     16,200      (76,628)
Common stock issued in acquisitions...............            --             --         --           --
Common stock issued in connection with settlement
  agreement which is held in escrow...............            --             --         --           --
Compensation expense related to stock options and
  warrants issued to non-employees................            --             --         --           --
Valuation adjustment for common stock held in
  escrow..........................................            --             --         --           --
Warrants issued in connection with the sale of
  redeemable preferred stock......................            --             --         --           --
Change in net unrealized losses on marketable
  securities......................................            --         10,380         --           --
Accretion of redeemable convertible preferred
  stock discount..................................            --             --         --           --
                                                    ------------    -----------     ------    ---------
Balance, September 30, 1999.......................  $(30,254,195)            --     44,500     (249,704)
Net loss..........................................    (9,941,145)            --         --           --
Common stock issued in connection with Ling
  acquisition.....................................            --             --         --           --
Common stock issued in connection with MTI
  investment......................................            --             --         --           --
MTI warrants received in connection with MTI
  investment......................................            --             --         --           --
Valuation adjustment for MTI warrants.............            --     (1,021,725)        --           --
Common stock issued in connection with NGC asset
  acquisition.....................................            --             --         --           --
Conversion of redeemable convertible preferred
  stock into common stock.........................            --             --         --           --
Exercise of common stock options..................            --             --         --           --
Exercise of common stock warrants.................            --             --         --           --
Payments on amounts receivable from exercise of
  stock options...................................            --             --                      --
Valuation adjustment for common stock held in
  escrow..........................................            --             --         --           --
Common stock released from escrow.................            --             --         --           --
Accretion of redeemable convertible preferred
  stock discount..................................            --             --         --           --
Foreign currency translation adjustment...........            --        (51,778)        --           --
                                                    ------------    -----------     ------    ---------
Balance, September 30, 2000.......................  $(40,195,340)   $(1,073,503)    44,500    $(249,704)
                                                    ============    ===========     ======    =========



                                                               TOTAL
                                                           STOCKHOLDERS'
                                                              EQUITY
                                                    ---------------------------

Balance, September 30, 1997.......................  $                15,589,448
Net loss..........................................                   (4,857,814)
Exercise of stock options.........................                      581,739
Exercise of warrants..............................                    1,221,873
Treasury stock purchased..........................                     (173,076)
Change in net unrealized losses on marketable
  securities......................................                        9,835
                                                    ---------------------------
Balance, September 30, 1998.......................  $                12,372,005
Net loss..........................................                  (14,341,753)
Exercise of stock options.........................                    1,361,334
Treasury stock purchased..........................                      (76,628)
Common stock issued in acquisitions...............                      568,800
Common stock issued in connection with settlement
  agreement which is held in escrow...............                           --
Compensation expense related to stock options and
  warrants issued to non-employees................                    2,208,639
Valuation adjustment for common stock held in
  escrow..........................................                           --
Warrants issued in connection with the sale of
  redeemable preferred stock......................                    2,369,292
Change in net unrealized losses on marketable
  securities......................................                       10,380
Accretion of redeemable convertible preferred
  stock discount..................................                      (50,904)
                                                    ---------------------------
Balance, September 30, 1999.......................  $                 4,421,165
Net loss..........................................                   (9,941,145)
Common stock issued in connection with Ling
  acquisition.....................................                    7,756,356
Common stock issued in connection with MTI
  investment......................................                    6,975,226
MTI warrants received in connection with MTI
  investment......................................                    3,495,438
Valuation adjustment for MTI warrants.............                   (1,021,725)
Common stock issued in connection with NGC asset
  acquisition.....................................                    5,471,558
Conversion of redeemable convertible preferred
  stock into common stock.........................                    8,000,000
Exercise of common stock options..................                    5,503,871
Exercise of common stock warrants.................                    1,112,900
Payments on amounts receivable from exercise of
  stock options...................................                    1,816,667
Valuation adjustment for common stock held in
  escrow..........................................                           --
Common stock released from escrow.................                      685,760
Accretion of redeemable convertible preferred
  stock discount..................................                   (3,105,888)
Foreign currency translation adjustment...........                      (51,778)
                                                    ---------------------------
Balance, September 30, 2000.......................  $                31,118,405
                                                    ===========================



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

                                       40

                         SATCON TECHNOLOGY CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                  FOR THE YEARS ENDED SEPTEMBER 30,
                                                              -----------------------------------------
                                                                  2000           1999          1998
                                                              ------------   ------------   -----------

Cash flows from operating activities:
  Net loss..................................................  $ (9,941,145)  $(14,341,753)  $(4,857,814)
    Adjustments to reconcile net loss to net cash used in
      operating activities:
        Depreciation and amortization.......................     2,038,391      1,013,037       625,976
        Allowance for unbilled contract costs and fees......            --        688,510       (19,065)
        Allowance for doubtful accounts.....................       265,744        334,850       (94,424)
        Allowance for inventory.............................       658,774        870,021      (549,765)
        Loss from Beacon Power Corporation..................       899,493      4,340,567     3,472,438
        Loss on sale of marketable securities...............            --         87,535            --
        Write-off impaired assets...........................            --        255,544        50,104
        Compensation expense related to release of stock
          from escrow, issuance of stock options and
          warrants to non-employees.........................       385,760      2,208,639            --
        Changes in operating assets and liabilities, net of
        effects of acquisitions:
          Accounts receivable...............................    (3,025,520)        89,858      (301,909)
          Unbilled contract costs and fees..................       637,372       (954,393)      532,573
          Prepaid expenses and other assets.................       144,687         31,455        (8,529)
          Inventory.........................................      (628,472)      (601,120)   (1,550,819)
          Other long-term assets............................         8,072        517,402      (607,245)
          Accounts payable..................................       869,225             72       647,689
          Accrued expenses and payroll......................       641,266        (98,163)     (291,061)
          Other liabilities.................................     1,566,051        (72,763)        6,802
                                                              ------------   ------------   -----------
    Total adjustments.......................................     4,460,843      8,711,051     1,912,765
                                                              ------------   ------------   -----------
Net cash used in operating activities.......................    (5,480,302)    (5,630,702)   (2,945,049)
                                                              ------------   ------------   -----------
Cash flows from investing activities:
  Sales and maturities of marketable securities.............            --        580,144     1,340,609
  Patent and intangible expenditures........................       (78,962)      (102,227)     (431,526)
  Purchases of property and equipment.......................    (2,463,777)      (220,416)     (601,331)
  Acquisitions, net of cash acquired........................       (24,054)      (995,876)           --
  Investment in Beacon Power Corporation....................      (333,333)      (696,667)   (2,007,508)
                                                              ------------   ------------   -----------
Net cash used in by investing activities....................    (2,900,126)    (1,435,042)   (1,699,756)
                                                              ------------   ------------   -----------
Cash flows from financing activities:
  Repayment of capital lease obligations....................       (16,226)      (100,000)      (40,625)
  Borrowings under line of credit...........................            --      2,657,234            --
  Repayment of borrowings under line of credit..............            --     (2,657,234)           --
  Net proceeds from issuance of redeemable convertible
    preferred stock.........................................            --      7,212,500            --
  Net proceeds from issuance of common stock................     6,975,226             --            --
  Proceeds from exercise of stock options and payment of
    amounts receivable from exercise of stock options.......     7,320,538      1,361,334       581,739
  Proceeds from exercise of warrants........................     1,112,900             --     1,221,873
  Purchase of treasury stock................................            --        (76,628)     (173,076)
  Deferred equity financing costs...........................      (678,980)            --            --
                                                              ------------   ------------   -----------
                                                                        --
Net cash provided by financing activities...................    14,713,458      8,397,206     1,589,911
                                                              ------------   ------------   -----------
Effect of foreign currency exchange rates on cash and cash
  equivalents...............................................       (51,778)            --            --
                                                              ------------   ------------   -----------
Net increase (decrease) in cash and cash equivalents........     6,281,252      1,331,462    (3,054,894)
Cash and cash equivalents at beginning of year..............     2,533,072      1,201,610     4,256,504
                                                              ------------   ------------   -----------
Cash and cash equivalents at end of year....................  $  8,814,324   $  2,533,072   $ 1,201,610
                                                              ============   ============   ===========



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

                                       41

                         SATCON TECHNOLOGY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.  ORGANIZATION, RESTATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES

    ORGANIZATION

    SatCon Technology Corporation (the "Company" or "SatCon") was organized as a
Massachusetts corporation in February 1985 and reincorporated in Delaware in
1992. SatCon develops enabling technologies for the emerging distributed power
generation and power quality markets. SatCon also manufactures power and energy
management products that convert, condition, store and manage electricity for
businesses and consumers that require high-quality, uninterruptible power.
SatCon is utilizing its engineering and manufacturing expertise to develop
products to serve the distributed power generation and power quality markets,
including products for fuel cell and microturbine power generation systems,
hybrid-electric vehicles and flywheel energy storage systems. SatCon believes
the family of products it is developing will be integral components of
distributed power generation and power quality systems.

    In the past three years, SatCon has expanded its business and capabilities
through the following acquisitions:

    - K&D Magmotor Corp.--a manufacturer of custom electric motors, acquired in
      January 1997.

    - Film Microelectronics, Inc. ("FMI")--a manufacturer of hybrid
      microelectronics, acquired in April 1997.

    - Inductive Components, Inc.--a value-added supplier of customized electric
      motors, acquired in January 1999.

    - Lighthouse Software, Inc.--a supplier of control software for machine
      tools, acquired in January 1999.

    - HyComp, Inc.--a manufacturer of electronic multi-chip modules, acquired in
      April 1999.

    - Ling Electronics, Inc.--a manufacturer of test equipment, power
      converters, amplifiers and converters, acquired in October 1999.

    All of these acquisitions were accounted for using the purchase method of
accounting. In addition, in November 1999, the Company acquired intellectual
property, tooling and other assets from Northrop Grumman Corporation enabling
the Company to manufacture and sell electric drivetrains. See Note O.

RESTATEMENTS

    During fiscal 2000, the Company has restated its financial statements on two
separate occasions. A description of each restatement is as follows:

AUGUST 2000 RESTATEMENT

    In August 2000, the Company restated its financial statements for fiscal
1997, 1998 and 1999. The restatement was prompted by the initial audit of the
financial statements of its affiliate, Beacon Power Corporation ("Beacon Power")
and reflects treating certain costs as expenses rather than being included in
the value of the net assets of Beacon Power at December 24, 1997 (see Note E).
The Company previously had accounted for these costs either as fixed assets or
as part of the net assets of Beacon Power. The Company had capitalized
$2.9 million of costs incurred during 1996, 1997 and 1998 in developing design
documentation, tooling and test fixtures for Beacon Power's flywheel energy
storage system. At the time

                                       42

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A.  ORGANIZATION, RESTATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONTINUED)
these costs were capitalized, the Company believed that it had a fully
functional design that could meet customer performance requirements and that the
product could be manufactured and sold at a profit so that the capitalized costs
would be recovered. The Company believed that its flywheel energy storage
product was beyond the research and development stage. As part of the initial
audit of Beacon Power during 2000 for the period from inception (May 1997)
through December 31, 1999, the Company reviewed the audit evidence supporting
the capitalized costs and determined that these costs had not been properly
capitalized. Accordingly, the Company has expensed these costs as incurred. In
addition, as a result of the initial audit of the financial statements of Beacon
Power, additional immaterial adjustments were made to the historical financial
statements of Beacon Power. A summary of the additional adjustments is as
follows:



Record additional revenue during 1997.......................  $ 45,000
Reclassification of certain SG&A expenses to R&D during
  1997......................................................  $264,000
Write-off certain current assets including inventory and
  accounts receivable.......................................  $ 37,000
Write-off certain intangibles...............................  $ 91,000
Record additional accrued expenses..........................  $ 73,000



As a result, the Company's investment in Beacon Power was reduced by
$3.1 million as of December 24, 1997. The adjustments to the financial
statements at December 24, 1997, the date on which the Company initially began
accounting for its investment in Beacon Power under the equity method of
accounting, consisted of a reduction of $37,000 from current assets, a reduction
of $3.0 million from property and equipment and intangible assets and an
increase of $73,000 of accrued expenses. The Company has adjusted its
accumulated deficit as of September 30, 1996 for the effect of the 1996
restatement. The cumulative effect of this change on the Company's stockholders'
equity as of September 30, 1996 was a reduction of $924,192. The cumulative
effect of this change on the Company's stockholders' equity as of September 30,
1999 was a reduction of $130,504. The effect of this change on the reported
results for each period is as follows:

                                       43

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A.  ORGANIZATION, RESTATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONTINUED)
CONSOLIDATED STATEMENTS OF OPERATIONS:



                                                                  FOR THE YEAR ENDED
                                                                  SEPTEMBER 30, 1999
                                                              ---------------------------
                                                              AS RESTATED    AS REPORTED
                                                              ------------   ------------

Product revenue.............................................  $  9,122,498   $  9,122,498
Funded research and development revenue.....................     6,355,383      6,355,383
                                                              ------------   ------------
Total revenue...............................................    15,477,881     15,477,881
Cost of product revenue.....................................     9,510,941      9,510,941
                                                              ------------   ------------
Gross margin................................................     5,966,940      5,966,940
                                                              ------------   ------------
Research and development expenses...........................     6,554,464      6,554,464
Selling, general and administrative expenses................     8,818,706      8,818,706
Amortization of intangibles.................................       371,087        371,087
                                                              ------------   ------------
Total operating expenses....................................    15,744,257     15,744,257
                                                              ------------   ------------
Operating loss..............................................    (9,777,317)    (9,777,317)
Other losses................................................      (150,464)      (150,464)
Interest income.............................................        42,287         42,287
Interest expense............................................      (115,692)      (115,692)
                                                              ------------   ------------
Net loss before loss from Beacon Power Corporation..........   (10,001,186)   (10,001,186)
Loss from Beacon Power Corporation..........................    (1,030,000)    (2,357,679)
                                                              ------------   ------------
Net loss....................................................   (11,031,186)   (12,358,865)
Accretion of redeemable convertible preferred stock
  discount..................................................       (50,904)       (50,904)
                                                              ------------   ------------
Net loss attributable to common stockholders................  $(11,082,090)  $(12,409,769)
                                                              ============   ============
Net loss per share, basic and diluted.......................  $      (1.21)  $      (1.35)
                                                              ============   ============
Weighted average number of common shares, basic and
  diluted...................................................     9,176,041      9,176,041
                                                              ============   ============



                                       44

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A.  ORGANIZATION, RESTATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONTINUED)



                                                                 FOR THE YEAR ENDED
                                                                 SEPTEMBER 30, 1998
                                                              -------------------------
                                                              AS RESTATED   AS REPORTED
                                                              -----------   -----------

Product revenue.............................................  $ 7,520,188   $ 7,520,188
Funded research and development revenue.....................    8,010,735     7,965,735
                                                              -----------   -----------
Total revenue...............................................   15,530,923    15,485,923
Cost of product revenue.....................................    5,474,067     5,474,067
                                                              -----------   -----------
Gross margin................................................   10,056,856    10,011,856
                                                              -----------   -----------
Research and development expenses...........................    6,793,634     5,863,296
Selling, general and administrative expenses................    4,523,424     4,787,070
Amortization of intangibles.................................      290,957       290,957
                                                              -----------   -----------
Total operating expenses....................................   11,608,015    10,941,323
                                                              -----------   -----------
Operating loss..............................................   (1,551,159)     (929,467)
Interest income.............................................      179,861       179,861
Interest expense............................................      (10,206)      (10,206)
                                                              -----------   -----------
Net loss before income taxes and loss from Beacon Power
  Corporation...............................................   (1,381,504)     (759,812)
Loss from Beacon Power Corporation..........................   (1,888,619)   (3,541,817)
Provision for income taxes..................................       (3,872)       (3,872)
                                                              -----------   -----------
Net loss attributable to common stockholders................  $(3,273,995)  $(4,305,501)
                                                              ===========   ===========
Net loss per share, basic and diluted.......................  $      (.37)  $      (.48)
                                                              ===========   ===========
Weighted average number of common shares, basic and
  diluted...................................................    8,956,671     8,956,671
                                                              ===========   ===========

                                                                  FOR THE YEAR ENDED
                                                                  SEPTEMBER 30, 1997
                                                              ---------------------------
                                                              AS RESTATED    AS REPORTED
                                                              ------------   ------------

Product revenue.............................................  $  3,728,042   $  3,728,042
Funded research and development revenue.....................     8,738,293      8,738,293
                                                              ------------   ------------
Total revenue...............................................    12,466,335     12,466,335
Cost of product revenue.....................................     2,683,389      2,683,389
                                                              ------------   ------------
Gross margin................................................     9,782,946      9,782,946
                                                              ------------   ------------
Research and development expenses...........................    11,442,465      9,876,968
Selling, general and administrative expenses................     6,197,951      6,197,951
Amortization of intangibles.................................       120,467        120,467
                                                              ------------   ------------
Total operating expenses....................................    17,760,883     16,195,386
                                                              ------------   ------------
Operating loss..............................................    (7,977,937)    (6,412,440)
Interest income.............................................       283,131        283,131
Interest expense............................................       (13,933)       (13,933)
                                                              ------------   ------------
Net loss attributable to common stockholders................  $ (7,708,739)  $ (6,143,242)
                                                              ============   ============
Net loss per share, basic and diluted.......................  $       (.97)  $       (.77)
                                                              ============   ============
Weighted average number of common shares, basic and
  diluted...................................................     7,959,309      7,959,309
                                                              ============   ============



                                       45

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A.  ORGANIZATION, RESTATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONTINUED)
CONSOLIDATED BALANCE SHEET DATA:



                                             SEPTEMBER 30, 1999            SEPTEMBER 30, 1998
                                         ---------------------------   ---------------------------
                                         AS RESTATED    AS REPORTED    AS RESTATED    AS REPORTED
                                         ------------   ------------   ------------   ------------

Investment in Beacon Power
  Corporation..........................            --             --             --   $  1,458,183
Total assets...........................  $ 17,400,374   $ 17,400,374   $ 16,708,407   $ 18,166,590
Accrued losses from investment in
  Beacon Power Corporation.............  $    333,333   $    202,829             --             --
Accumulated deficit....................  $(25,359,809)  $(25,229,305)  $(14,328,623)  $(12,870,440)
Total liabilities, redeemable
  convertible
  preferred stock and stockholders'
  equity...............................  $ 17,400,374   $ 17,400,374   $ 16,708,407   $ 18,166,590



SEPTEMBER 2000 RESTATEMENT

    In September 2000, the Company restated the financial statements for fiscal
years 1998 and 1999. The Company determined that the recapitalization of Beacon
Power Corporation on December 24, 1997 did not qualify as a divestiture of a
subsidiary for accounting purposes in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 30/Topic 5E (SAB Topic 5.E.)
"Accounting for Divestiture of a Subsidiary or Other Business Operation," as the
Company had not transferred the risk and other incidents of ownership of Beacon
Power with sufficient certainty. In accordance with SAB Topic 5.E., the Company
has included 100% of Beacon Power's net loss in its statements of operations
from December 24, 1997 to May 1999 in a manner similar to the equity method of
accounting and has included the assets and liabilities transferred to Beacon
Power as separate components in its September 30, 1998 balance sheet. In June
1999, in connection with a bridge note financing at Beacon Power, the Company
determined that the risks and other incidents of ownership of Beacon Power had
passed with sufficient certainty to other investors and the Company began
accounting for its investment in Beacon Power under the equity method of
accounting. The Company has recorded the face value of and cumulative dividends
on Beacon Power's Class D preferred stock issued on October 23, 1998 as an
additional investment in Beacon Power. As more fully discussed in Note E, the
Class D preferred stockholders have the right to require the Company to purchase
their shares of Class D preferred stock in certain events. The Company has
recorded the face value and the cumulative dividends as a liability.

    The accompanying financial data reflect the following changes:

    - The Company's share of Beacon Power's net loss for fiscal 1998 and 1999
      increased by $1,583,819 and $3,310,567, respectively.

    - As of September 30, 1998, the Company wrote off all of its advances to
      Beacon Power of $596,453 and recorded the assets and liabilities
      transferred to Beacon Power of $576,786 and $1,564,152, respectively.

    - As of September 30, 1999, the Company recorded its net investment balance
      in Beacon Power of $414,729 and its contingent obligation to the Class D
      preferred stockholders of Beacon Power of $5,309,115.

    - The as restated and as reported consolidated statements of operations data
      and consolidated balance sheet data follows (the as reported financial
      information presented here includes the effects of the August 2000
      restatement discussed above):

                                       46

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A.  ORGANIZATION, RESTATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONTINUED)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:



                                                       FOR THE YEAR ENDED
                                                       SEPTEMBER 30, 1999
                                                   ---------------------------
                                                   AS RESTATED    AS REPORTED
                                                   ------------   ------------

Loss from Beacon Power Corporation...............  $ (4,340,567)  $ (1,030,000)
Net loss.........................................   (14,341,753)   (11,031,186)
Net loss attributable to common stockholders.....   (14,392,657)   (11,082,090)
Net loss per share, basic and diluted............         (1.57)         (1.21)





                                                       FOR THE YEAR ENDED
                                                       SEPTEMBER 30, 1998
                                                   ---------------------------
                                                   AS RESTATED    AS REPORTED
                                                   ------------   ------------

Loss from Beacon Power Corporation...............  $ (3,472,438)  $ (1,888,619)
Net loss attributable to common stockholders.....    (4,857,814)    (3,273,995)
Net loss per share, basic and diluted............          (.54)          (.37)



CONSOLIDATED BALANCE SHEET DATA:



                                             SEPTEMBER 30, 1999            SEPTEMBER 30, 1998
                                         ---------------------------   ---------------------------
                                         AS RESTATED    AS REPORTED    AS RESTATED    AS REPORTED
                                         ------------   ------------   ------------   ------------

Amount due from Beacon Power
  Corporation..........................  $         --   $         --   $         --   $    596,453
Investment in Beacon Power
  Corporation..........................       414,729             --             --             --
Assets transferred to Beacon Power
  Corporation..........................            --             --        576,786             --
Total assets...........................    17,815,103     17,400,374     16,688,740     16,708,407
Funding commitment to Beacon Power
  Corporation..........................       333,333        333,333             --             --
Liabilities transferred to Beacon Power
  Corporation..........................            --             --      1,564,152             --
Contingent obligation to Class D
  preferred stockholders of Beacon
  Power Corporation....................     5,309,115             --             --             --
Accumulated deficit....................   (30,254,195)   (25,359,809)   (15,912,442)   (14,328,623)
Total liabilities, redeemable
  convertible preferred stock and
  stockholders' equity.................    17,815,103     17,400,374     16,688,740     16,708,407



    The Company's financial statements as of September 30, 1999 and 2000 and for
the years ended September 30, 1998, 1999 and 2000 include the effects of the
August 2000 and September 2000 restatements.

    BASIS OF CONSOLIDATION

    The consolidated financial statements include the accounts of SatCon and its
majority-owned subsidiaries. All intercompany accounts and transactions have
been eliminated in consolidation.

                                       47

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A.  ORGANIZATION, RESTATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONTINUED)
    FOREIGN CURRENCY TRANSLATION

    The functional currency of the Company's foreign subsidiary is the local
currency. Assets and liabilities of foreign subsidiaries are translated at the
rates in effect at the balance sheet date, while stockholders' equity (deficit)
is translated at historical rates. Statements of operations and cash flow
amounts are translated at the average rate for the period. Translation
adjustments are included as a component of accumulated other comprehensive loss.
Foreign currency gains and losses arising from transactions are reflected in the
loss from operations and were not significant during the year ended
September 30, 2000.

    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 has occurred, at which time title generally is passed to
the customer, 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.

    The Company performs funded research and development and product development
for commercial companies and government agencies under both cost reimbursement
and fixed-price contracts. Product development revenue is included in product
revenue. Cost reimbursement contracts provide for the reimbursement of allowable
costs and, in some situations, the payment of a fee. These contracts may contain
incentive clauses providing for increases or decreases in the fees depending on
how costs compare with a budget. On fixed-price contracts, revenue is generally
recognized on the percentage of completion method based upon the proportion of
costs incurred to the total estimated costs for the contract. Revenue from
reimbursement contracts is recognized as the services are performed. In each
type of contract, the Company receives periodic progress payments or payments
upon reaching interim milestones. All payments to the Company for work performed
on contracts with agencies of the U.S. government are subject to audit and
adjustment by the Defense Contract Audit Agency. Adjustments are recognized in
the period made. When the current estimates of total contract revenue for
commercial product development contracts indicate a loss, a provision for the
entire loss on the contract is recorded. Any losses incurred in performing
funded research and development projects are recognized as research and
development expense as incurred. As of September 30, 2000, the Company has
accrued $150,000 for anticipated contract losses on commercial contracts. There
were no anticipated contract losses at September 30, 1999.

    Cost of revenue includes cost of product revenue including material, labor
and overhead and costs associated with product development contracts. Costs
incurred in connection with funded research and development arrangements are
included in research and development expenses.

    Deferred revenue consists of payments received from customers in advance of
services performed, product shipped or installation completed.

    CASH AND CASH EQUIVALENTS

    Cash and cash equivalents include demand deposits and highly liquid
investments with maturities of three months or less when acquired. Cash
equivalents are stated at cost, which approximates market value.

                                       48

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A.  ORGANIZATION, RESTATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONTINUED)
    INVENTORY

    Inventories are stated at the lower of cost or market and costs are
determined based on the first-in, first-out method of accounting and include
material, labor and manufacturing overhead costs.

    PROPERTY AND EQUIPMENT

    Property and equipment are stated at cost. Depreciation and amortization is
computed using the straight-line method over the asset's estimated useful life.
The estimated useful lives of property and equipment are as follows:



                                                       ESTIMATED LIVES
                                                       ---------------

Computer equipment and software...........  3-5 years
Electronic laboratory and shop              5 years
  equipment...............................
Mechanical laboratory and shop              10 years
  equipment...............................
Sales and demonstration equipment.........  3-10 years
Furniture and fixtures....................  7-10 years
Leasehold improvements....................  Lesser of the life of the lease or the
                                            useful life of the improvement


    When assets are retired or otherwise disposed of, the cost and related
depreciation and amortization are eliminated from the accounts and any resulting
gain or loss is reflected in other income.

    LONG-LIVED ASSETS

    The Company periodically evaluates the potential impairment of its
long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. At the occurrence of a
certain event or change in circumstances or at each balance sheet date, the
Company evaluates the potential impairment of an asset based on future
undiscounted cash flows. In the event that impairment exists, the Company will
measure the amount of such impairment based on the present value of estimated
future cash flows using a discount rate commensurate with the risks involved.
Factors that management considers in performing this assessment include current
operating results, trends and prospects and, in addition, demand, competition
and other economic factors. At September 30, 2000 and 1999, the Company
determined that there had been no impairment of its long-lived assets, except as
in Notes D and G.

                                       49

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A.  ORGANIZATION, RESTATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONTINUED)
    Intangibles consisted of the following:



                                                             SEPTEMBER 30,
                                           ESTIMATED    ------------------------
                                             LIVES         2000          1999
                                          -----------   -----------   ----------

Patents.................................  15-20 years   $   755,748   $  676,786
Identifiable intangible assets from
  MagMotor acquisition..................  5 years            44,250       44,250
Goodwill from MagMotor acquisition......  7 years            65,198       65,198
Identifiable intangible assets from FMI
  acquisition...........................  5-10 years      1,750,000    1,750,000
Goodwill from FMI acquisition...........  15 years          826,218      826,218
Identifiable intangible assets from
  Inductive/ Lighthouse acquisition.....  5 years           275,000      275,000
Goodwill from Inductive/Lighthouse
  acquisition...........................  10 years          389,079      389,079
Goodwill from Ling acquisition..........  7 years         3,754,910           --
Identifiable intangible assets from NGC
  acquisition...........................  3-10 years      3,281,423           --
                                                        -----------   ----------
                                                         11,141,826    4,026,531
Less: accumulated amortization..........                  2,061,737      831,922
                                                        -----------   ----------
                                                        $ 9,080,089   $3,194,609
                                                        ===========   ==========



    Amortization expense related to intangibles for the years ended
September 30, 2000, 1999 and 1998 was $1,229,815, $389,685 and $303,674,
respectively.

    TREASURY STOCK

    The Company was authorized to repurchase up to 5% of the Company's
outstanding shares of common stock through July 2000. Under the repurchase
program, the Company purchased 44,500 shares of the Company's outstanding common
stock at a cost of $249,704.

    USE OF ESTIMATES

    The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the period
reported. Actual results could differ from these estimates.

    INCOME TAXES

    The Company accounts for income taxes in accordance with Statements of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
which is the asset and liability method for accounting and reporting for income
taxes. Under SFAS No. 109, deferred tax assets and deferred tax liabilities are
recognized based on temporary differences between the financial reporting and
income tax basis of assets and liabilities using statutory rates. In addition,
SFAS No. 109 requires a valuation allowance

                                       50

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A.  ORGANIZATION, RESTATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONTINUED)
against net deferred tax assets if, based upon the available evidence, it is
more likely than not that some or all of the deferred tax assets will not be
realized.

    STOCK-BASED COMPENSATION

    SFAS No. 123, "Accounting for stock-based Compensation," requires the
measurement of the fair value of stock options or warrants granted to employees
to be included in the statement of operations or, alternatively, disclosed in
the notes to consolidated financial statements. The Company has determined that
it will account for stock-based compensation of employees under the intrinsic
value method of Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees" and elect the disclosure-only alternative under
SFAS No. 123. The Company records the fair market value of stock options and
warrants granted to non-employees in exchange for services in accordance with
Emerging Issues Task Force (EITF) No. 96-18, "Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services," in the consolidated statement of operations.

    NET LOSS PER BASIC AND DILUTED COMMON SHARE

    The Company reports net loss per basic and diluted common share in
accordance with SFAS No. 128, "Earnings Per Share," which establishes standards
for computing and presenting earnings per share. Basic earnings per share
excludes dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the Company.

    CONCENTRATION OF CREDIT RISK

    Financial instruments that subject the Company to concentrations of credit
risk principally consist of cash equivalents, trade accounts receivable,
unbilled contract costs and amounts receivable from exercise of stock options.

    The Company's trade accounts receivable and unbilled contract costs and fees
are primarily from sales to U.S. government agencies and commercial customers.
The Company does not require collateral and has not historically experienced
significant credit losses related to receivables or unbilled contract costs and
fees from individual customers or groups of customers in any particular industry
or geographic area.

    The Company deposits its cash and invests in short-term investments
primarily through a regional commercial bank and an investment company. Credit
exposure to any one entity is limited by Company policy.

    RESEARCH AND DEVELOPMENT COSTS

    The Company expenses research and development costs as incurred. Research
and development expense includes costs incurred in connection with funded
research and development arrangements.

    COMPREHENSIVE LOSS

    Comprehensive loss includes net loss, unrealized gains and losses on
marketable securities, valuation adjustment for warrants to purchase shares of
Mechanical Technology Incorporated's common stock and foreign currency
translation adjustments.

                                       51

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A.  ORGANIZATION, RESTATEMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES (CONTINUED)
    FAIR VALUE OF FINANCIAL INSTRUMENTS

    The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, unbilled contract costs and fees, warrants to purchase
shares of Mechanical Technology Incorporated's common stock, accounts payable,
debt instruments, contigent obligation to Class D preferred stockholders of
Beacon Power Corporation and amounts receivable from exercise of stock options.
The estimated fair values of these financial instruments approximate their
carrying values at September 30, 2000 and 1999. The estimated fair values have
been determined through information obtained from market sources and management
estimates.

    RECLASSIFICATIONS

    Certain prior-year balances have been reclassified to conform to
current-year presentations. For all periods presented, expenses associated with
funded research and development activities have been reclassified as research
and development expenses from cost of revenue.

    EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS

    In June 1999, the Financial Accounting Standards Board (FASB) issued SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral
of the Effective Date of FASB Statement No. 133," which defers the effective
date of SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," to all fiscal quarters of all fiscal years beginning after
June 15, 2000. SFAS No. 133 establishes a new model for accounting for
derivatives and hedging activities. It requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure these instruments at fair value. The Company will adopt
SFAS No. 133 beginning in the first quarter of the fiscal year ending
September 30, 2001. Upon adoption of SFAS No. 133, the Company will be required
to record an unrealized loss on the fair value of the warrants to purchase
shares of Mechanical Technology Incorporated's common stock in its results of
operations as a cumulative effect of a change in accounting principle of
$1.0 million reflecting the impact of adopting this accounting standard. The
Company will be required to record future unrealized gains and losses on the
fair value of the warrants in its results of operations.

    In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS
No. 140 provides accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities. Under SFAS No. 140,
after a transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred, derecognizes
financial assets when control has been surrendered, and derecognizes liabilities
when extinguished. SFAS No. 140 also provides standards for distinguishing
transfers of financial assets that are sales from transfers that are secured
borrowings. SFAS No. 140 is effective for certain transactions occurring after
March 31, 2001 and certain disclosures for the fiscal year ending September 30,
2001. The Company is currently evaluating the impact of SFAS No. 140 on its
financial statements and related disclosures, but does not expect that adoption
of SFAS No. 140 will have a material impact on its financial statements.

B.  UNBILLED CONTRACT COSTS AND FEES

    Unbilled contract costs and fees represent revenue recognized in excess of
amounts billed due to contractual provisions or deferred costs that have not yet
been recognized as revenue or billed to the

                                       52

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

B.  UNBILLED CONTRACT COSTS AND FEES (CONTINUED)
customer. These amounts included retained fee and unliquidated costs totaling
$209,832 and $282,746 at September 30, 2000 and 1999, respectively.

C.  INVENTORY

    Inventory includes material, labor and overhead and consisted of the
following:



                                                            SEPTEMBER 30,
                                                       -----------------------
                                                          2000         1999
                                                       ----------   ----------

Raw material.........................................  $3,081,265   $1,139,064
Work-in-process......................................   2,932,965    2,199,199
Finished goods.......................................   1,987,431      359,709
                                                       ----------   ----------
                                                       $8,001,661   $3,697,972
                                                       ==========   ==========



D.  PROPERTY AND EQUIPMENT

    Property and equipment consisted of the following:



                                                           SEPTEMBER 30,
                                                      ------------------------
                                                         2000          1999
                                                      -----------   ----------

Machinery and equipment.............................  $ 8,059,916   $4,505,287
Furniture and fixtures..............................      305,777      280,769
Computer software...................................      744,308      621,583
Leasehold improvements..............................      751,793      648,734
                                                      -----------   ----------
                                                        9,861,794    6,056,373
Less: accumulated depreciation and amortization.....    3,604,318    2,795,741
                                                      -----------   ----------
                                                      $ 6,257,476   $3,260,632
                                                      ===========   ==========



    Depreciation and amortization expense relating to property and equipment for
the years ended September 30, 2000, 1999 and 1998 was $808,577, $633,964 and
$540,213, respectively.

    As of September 30, 2000 and 1999, there was $19,903 and $29,910 of capital
leases that were included in machinery and equipment and computer software,
respectively.

    During 1999, the Company determined that certain of its machinery and
equipment with a net book value totaling $105,544 was impaired based on a
significant change in the manner in which the asset was used, and such assets
were written-off during 1999. These assets included $86,492 of tooling costs
associated with the introduction of brushless motor products at the Company's
MagMotor Division that were impaired based on design changes in the product and
$19,052 of optics equipment at the Company's Technology Center that were
abandoned. These impairment losses have been included in cost of product revenue
and research and development expenses, respectively.

                                       53

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

E.  INVESTMENT IN BEACON POWER CORPORATION

    On May 28, 1997, SatCon Technology Corporation entered into a Securities
Purchase Agreement, dated as of May 28, 1997, by and among the Company, Beacon
Power, ("Beacon Power"), a new wholly-owned subsidiary of the Company and
Duquesne Enterprises ("Duquesne"). Pursuant to the terms of the Agreement,
Duquesne purchased from the Company and the Company issued, sold and delivered
to Duquesne 798,138 shares of the Company's Common Stock. The aggregate
consideration received by the Company was $5,000,000. In exchange for a capital
contribution, the Company received all of the capital stock of Beacon Power,
consisting of 3,375,000 shares of Beacon Power's Common Stock and 1,125,000
shares of Beacon Power's preferred stock, par value $0.01 per share, as adjusted
to reflect a 1:1.125 stock split. Duquesne also entered into agreements pursuant
to which it will act as exclusive distributor of Beacon Power's products,
subject to certain exceptions, in seven Mid-Atlantic States and the District of
Columbia.

    During a recapitalization of Beacon Power on December 24, 1997, Beacon Power
obtained equity financing of $30,000 from private investors and the Company
converted approximately 80% of its ownership of Beacon Power to nonvoting
Class A convertible preferred stock ("Class A Stock") and transferred certain
assets and liabilities to Beacon Power. Upon completion of this
recapitalization, the Company owned 20% of the voting stock of Beacon Power and
99.9% of the capital stock of Beacon Power. Each share of Class A Stock that the
Company held was convertible into two shares of common stock at the option of
the Company. The Class A Stock was nonvoting and upon liquidation, the Company
was entitled to receive, out of funds then generally available prior to any
payment with respect to the holders of common stock, $4.45 per share, plus any
declared and unpaid dividends thereon. The Company had the right to receive the
same dividends as declared by the Board of Directors of Beacon Power on common
shares on an "as-if-converted" basis. The Class A Stock would automatically be
converted into shares of common stock upon the closing of a public offering of
common stock of Beacon Power, upon a vote of the Board of Directors of Beacon
Power or upon the automatic conversion of the Class D preferred stock of Beacon
Power. Class A Stock was subordinate to Class D, E and F preferred stock of
Beacon Power and had parity with Class B and C preferred stock. The Class A
Stock did not have redemption features.

    The Company has determined that the recapitalization of Beacon Power on
December 24, 1997 did not qualify as a divestiture of a subsidiary for
accounting purposes as described in SAB Topic 5.E. "Accounting for Divestiture
of a Subsidiary or Other Business Operation," as the Company had not transferred
risks and other incidents of ownership of Beacon Power with sufficient certainty
as the Company was the only stockholder of Beacon Power at risk of loss of its
investment. In accordance with SAB Topic 5.E., the Company has included 100% of
Beacon Power's net loss in its statements of operations as of December 24, 1997,
in a manner similar to the equity method of accounting and has included the
assets and liabilities transferred to Beacon Power as separate components in its
September 30,

                                       54

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

E.  INVESTMENT IN BEACON POWER CORPORATION (CONTINUED)
1998 balance sheet. The book value of assets and liabilities transferred to
Beacon Power on December 24, 1997 was as follows:





Accounts receivable.........................................  $    14,487
Prepaid expenses and other assets...........................       67,147
Subscriptions receivable....................................    2,007,508
Accounts payable............................................      (50,000)
Accrued payroll and payroll related expenses................      (32,298)
Accrued expenses............................................     (118,225)
                                                              -----------
Investment in Beacon Power Corporation......................  $ 1,888,619
                                                              ===========



    At September 30, 1998, prior to the 1:1.25 stock split, the Company owned
19.9% of the voting stock of Beacon Power, 99.9% of the outstanding capital
stock of Beacon Power and had amounts of $596,453 due from Beacon Power. These
amounts arose from transactions after December 24, 1997, whereby the Company
advanced money and made payments for certain expenses incurred by Beacon Power.
These advances have been written off as of September 30, 1998. These advances
were subsequently repaid in connection with the October 23, 1998 financing.

    On October 23, 1998, the Company entered into a Securities Purchase
Agreement, by and among Beacon Power, Perseus Capital, L.L.C. ("Perseus"), DQE
Enterprises, Inc., Micro Generation Technology Fund, L.L.C ("Micro", and
together with Perseus and DQE Enterprises, the "Purchasers") and the Company.
Pursuant to the terms of the Agreement: (i) the Purchasers purchased from Beacon
Power and Beacon Power issued, sold and delivered to the Purchasers 1,900,000
shares (the "Shares") of Beacon Power's Class D Redeemable Preferred Stock,
$0.01 par value per share; (ii) the Class D Redeemable Preferred Stock earns
cumulative dividends at an annual rate of 12.5% through May 23, 2000 and 6% on
and after this date; (iii) the Purchasers have the right to receive certain
warrants to purchase shares of Beacon Power's common stock, $0.01 par value per
share ("Beacon Power's Common Stock"); (iv) the Company granted the Purchasers
the right (the "Put Right") to cause the Company, in circumstances described
below, to purchase all of the Shares and all of Beacon Power's Common Stock
issuable upon conversion of the Shares; and (v) upon exercise of the Put Right
pursuant to the terms of the Agreement, the Company must pay the consideration
contemplated by the Agreement in shares of the Company's common stock, $0.01 par
value per share. The aggregate consideration received by Beacon Power was
$4,750,000. The Put Right is exercisable within 60 days of the second, third,
fourth and fifth anniversary of the closing date of the transaction, upon
certain events of bankruptcy of Beacon Power and upon the occurrence of certain
going private transactions involving the Company. The Put Right will terminate,
if not previously exercised, on the earlier of (i) October 23, 2003, (ii) upon
the listing of Beacon Power's Common Stock on the New York Stock Exchange or the
Nasdaq National Market, or (iii) with respect to put rights resulting from an
event described above, 100 days after the Purchasers receive written notice from
the Company requesting that the Purchasers either exercise or waive their put
rights resulting from that event. The Company has recorded the face value of and
cumulative dividends on Beacon Power's Class D Preferred Stock as a liability.
As of September 30, 1999, the contingent obligation to the Class D preferred
stockholders is $5,309,115, consisting of $4,750,000 face value and $559,115 of
cumulative dividends.

                                       55

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

E.  INVESTMENT IN BEACON POWER CORPORATION (CONTINUED)
    Upon completion of the issuance of the Class D preferred stock of Beacon
Power and at September 30, 1999, the Company owned .1% of Beacon Power's voting
stock and 67% of Beacon Power's outstanding capital stock.

    In June 1999, the Company committed to provide up to $1,000,000 of
additional financing to Beacon Power representing a minority share, 33%, of a
funding commitment received by Beacon Power and, therefore, increased its
investment in Beacon Power and accrued the funding commitment of $1,000,000. As
a result of this financing, the Company determined that risks and other
incidents of ownership of Beacon Power had passed with sufficient certainty to
other investors and, therefore, began accounting for its investment in Beacon
Power under the equity method.

    On June 22, 1999, the Company entered into a note with Beacon Power (the
"June 22, 1999 Note") with a principal amount of $125,000 due and payable on the
earlier of (i) September 22, 1999 ("Maturity Date") or (ii) upon the occurrence
of an event of default, as defined therein. The note bore interest at 12% per
annum. The June 22, 1999 Note was issued pursuant to the terms of a Note
Purchase Agreement, dated as of June 22, 1999, by and among Beacon Power, the
Purchasers named therein, and the Company (the "Note Purchase Agreement").
Interest on the June 22, 1999 Note was payable on the Maturity Date.

    On July 6, 1999, the Company entered into an additional note with Beacon
Power (the "July 6, 1999 Note") with a principal amount of $125,000 due and
payable on the earlier of (i) Maturity Date or (ii) upon the occurrence of an
event of default. The note bore interest at 12% per annum (the "July 6, 1999
Note" and, together with the June 22, 1999 Note, the "Notes"). The July 6, 1999
Note was also issued pursuant to the terms of the Note Purchase Agreement.
Interest on the July 6, 1999 Note was payable on the Maturity Date.

    In August 1999, the Company exchanged in full the Notes and $83,333.33 for a
note with a principal amount of $333,333.33 ("Bridge Note") plus accrued
interest due and payable on the earlier of (i) the date of conversion of the
note as described below or (ii) upon the occurrence of an event of default. The
Bridge Note bore interest at 12% per annum. The Bridge Note was issued pursuant
to the terms of a Note and Warrant Purchase Agreement, dated as of August 2,
1999, by and among Beacon Power, the Purchasers named therein, and the Company
(the "Note and Warrant Purchase Agreement"). Interest on the Bridge Note was
payable on the Maturity Date.

    Pursuant to the terms of the Note and Warrant Purchase, the Company entered
into two additional notes, each with a principal amount of $333,333.33 on
September 16, 1999 and October 19, 1999. The Bridge Note and the additional
notes each with a principal amount of $333,333.33 are collectively referred to
as the "Bridge Securities." At September 30, 1999, the Company has $333,333
payable under this $1,000,000 commitment to Beacon Power.

    On January 7, 2000, the Company entered into a $200,000 convertible
promissory note with Beacon Power. This convertible promissory note is due and
payable on the earlier of (i) the maturity date, as defined, or (ii) upon the
occurrence of an event of default by Beacon Power. The note bears interest at
12 1/2% per annum. Interest on the January 7, 2000 Note is due and payable on
the maturity date. The Company did not accrue losses of $200,000 relating to its
share of Beacon Power's losses incurred through December 31, 1999, as those
amounts, including interest, were repaid on February 14, 2000.

    On February 25, 2000, the Company entered into a $300,000 convertible
promissory note with Beacon Power. This convertible promissory note is due and
payable on the earlier of (i) the maturity date, as defined, or (ii) upon the
occurrence of an event of default by Beacon Power. The note bears interest at

                                       56

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

E.  INVESTMENT IN BEACON POWER CORPORATION (CONTINUED)
12 1/2% per annum. Interest on the February 25, 2000 Note is due and payable on
the maturity date. The Company did not accrue losses up to $300,000 relating to
its share of Beacon Power's losses incurred through March 31, 2000, as those
amounts, including interest, were repaid on April 27, 2000.

    On April 7, 2000, Beacon Power issued 1,226,141 shares of its class E
redeemable preferred stock and warrants to purchase 306,535 shares of its
class E preferred stock in exchange for the conversion of all of its outstanding
bridge notes of which the Company received 347,407 shares of Beacon Power's
class E redeemable preferred stock and a warrant to purchase 86,852 shares of
Beacon Power's class E redeemable preferred stock. As of April 7, 2000, the
Company owned 11.0% of Beacon Power's voting stock and 61.0% of Beacon Power's
outstanding capital stock. On April 21, 2000, Beacon Power raised an additional
$4.1 million through the sale of additional bridge notes and warrants to
purchase 41,000 shares of Beacon Power's common stock. The Company did not
participate in this financing. On May 23, 2000, Beacon Power issued 6,785,711
shares of its class F preferred stock and additional warrants to purchase shares
of Beacon Power's common stock. The shares of class F preferred stock and the
additional warrants were issued in consideration for the cancellation of
$5.2 million in bridge notes and an additional $23.3 million cash investment by
existing and new investors. The Company did not participate in this financing
either. As of May 23, 2000, the Company owned 3.5% of Beacon Power's voting
stock and 33.0% of Beacon Power's outstanding capital stock.

    As of September 30, 2000, the Company owned approximately 3% of the
outstanding voting stock of Beacon Power and 32% of the capital stock of Beacon
Power. On November 22, 2000, Beacon Power completed an initial public offering
(IPO) of its common stock and issued 8,000,000 shares of common stock at $6.00
per share. Upon completion of the initial public offering, the Company owned
approximately 25% of Beacon Power's voting and capital stock.

    The results of the Company's operations included $3,111,381 loss of Beacon
Power from May 8, 1997 to December 24, 1997 under the consolidation method of
accounting. On December 24, 1997, the Company began accounting for its
investment in Beacon Power in accordance with SAB Topic 5.E. and has included
100% of Beacon Power's $7,079,297 loss for the period from December 25, 1997
through May 1999 in a manner similar to the equity method of accounting, at
which time, the Company's initial investment of $1,888,619, the $30,000
additional investment and the additional deemed investment of $4,750,000 and
accrued dividends of $410,678 had been written down to zero. In June 1999, the
Company committed up to $1,000,000 of additional financing to Beacon Power,
representing a minority share, 33%, of a funding commitment received by Beacon
Power, and the Company began accounting for its investment in Beacon Power under
the equity method. As of June 30, 1999, the Company owned approximately 0.1% of
the voting stock of Beacon Power; however, as the Company was providing 33% of
the current funding to Beacon Power, the Company has included 33% of Beacon
Power's losses in its results of operation until the $1,000,000 investment was
reduced to zero in December 1999. The Company continued to record losses from
Beacon Power after December 31, 1999 to the extent of the additional dividends
that accrued on the contingent obligation to class D preferred stockholders of
Beacon Power. From June 1999 through September 30, 2000, the Company has
included in its results from operations its share of Beacon Power's losses of
$1,633,201. At September 30, 2000, the Company's investment in Beacon Power had
been reduced to zero and the contingent obligation to Beacon Power's Class D
preferred stockholders was $5,722,629. The Company continues to record
additional losses from Beacon Power to the extent of additional interest accrued
on the contingent obligation to the Class D preferred stockholders of Beacon
Power.

                                       57

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

E.  INVESTMENT IN BEACON POWER CORPORATION (CONTINUED)
    In connection with Beacon Power's initial public offering, the Put Right was
terminated and the contingent obligation to class D preferred stockholders of
Beacon Power will be reclassified as additional paid in capital. In addition,
the Company's preferred stock holdings in Beacon Power were converted into
9,694,812 shares of Beacon Power common stock. In accordance with SEC SAB
No. 51, the Company's investment and additional paid in capital will be written
up during the first quarter of fiscal 2001 to reflect its beneficial interest in
the book value of the stockholders' equity of Beacon Power, which the Company
estimates to be approximately $15.0 million. After the write-up of the Company's
investment in Beacon Power, the Company will continue to account for its
investment in Beacon Power under the equity method of accounting and will record
its share of future losses from Beacon Power on a one-quarter trailing basis
until its investment in Beacon Power has been reduced to zero.

    If in the future, the Company's ownership interest in Beacon Power's
outstanding capital stock is reduced to below 20% and the Company determines
that it does not have the ability to exercise significant influence over the
operating and financial policies over Beacon Power, the Company's investment in
Beacon Power will be accounted for using the fair value method as set forth in
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," based upon the carrying value of the Company's investment in Beacon
Power at the time the Company's interest is reduced to below 20%. At that time,
the Company will no longer be required to record its share of any losses from
Beacon Power. The value of the investment will be carried at fair market value
with any unrealized holding gains or losses to be included in stockholders'
equity as a component of other comprehensive income.

    Beacon Power accounted for $470,996, $72,644 and $424,418 of the Company's
total revenue for the fiscal years ended September 30, 2000, 1999 and 1998,
respectively. At September 30, 2000 and 1999, the Company had $346,066 and
$5,390, respectively, of accounts receivable and unbilled contract costs and
fees from Beacon Power.

F.  LINE OF CREDIT

    In December 1998, as modified, the Company obtained a $3,000,000 demand
discretionary line of credit with a bank. The line of credit bears interest at
the bank's prime rate plus 1 1/2%. Available borrowings were based on a formula
of eligible accounts receivable and inventory. There were no amounts outstanding
under the line of credit at September 30, 1999. During 1999, the maximum amount
outstanding on the line of credit was $2,657,234. The Company has pledged all
assets of the Company as collateral against this line of credit. On August 29,
2000, the Company terminated the line of credit.

G.  LONG-TERM DEBT

    Long-term debt consists of the following:



                                                            SEPTEMBER 30,
                                                         --------------------
                                                           2000        1999
                                                         ---------   --------

Capital lease obligations..............................  $  33,871   $ 50,097
Less: Current portion..................................    (17,494)   (16,226)
                                                         ---------   --------
                                                         $  16,377   $ 33,871
                                                         =========   ========



                                       58

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

G.  LONG-TERM DEBT (CONTINUED)
    At September 30, 2000, maturities of these obligations are as follows:



FISCAL YEAR
-----------

2001........................................................  $ 17,494
2002........................................................    10,778
2003........................................................     5,599
                                                              --------
                                                                33,871
Less: Current Portion.......................................   (17,494)
                                                              --------
                                                              $ 16,377
                                                              ========



    On March 1, 1999, the Company reached a definitive settlement arrangement
with Albert R. Snider (the "Settlement Agreement"), the holder of a note payable
that commenced on April 16, 1997, regarding a suit filed against Mr. Snider for
breach of certain representations made by him, including statements of inventory
balances in the Asset Purchase Agreement dated as of April 3, 1997 between FMI
and Mr. Snider relating to the purchase of the business of FMI and a
counterclaim filed by Mr. Snider seeking, among other things, payments allegedly
due from the Company under a promissory note.

    Pursuant to the terms of the Settlement Agreement, the Company made a
$100,000 cash payment to Mr. Snider on March 9, 1999 and the parties executed
mutual general releases dismissing any and all claims between them. In addition,
the Settlement Agreement provides a right of first refusal in favor of the
Company with respect to certain shares of the Company's Common Stock,
beneficially owned by Mr. Snider. Concurrently with the execution of the
Settlement Agreement, the Company and Mr. Snider entered into a consulting
agreement pursuant to which Mr. Snider will perform certain consulting, advisory
and related services as the Company may reasonably request from time to time
between October 1, 1999 and October 1, 2002. In exchange for these services, the
Company issued 42,860 shares of its Common Stock to Mr. Snider, which were held
by an escrow agent. The Company has recorded these shares held in escrow at
market value and as a reduction to stockholders' equity as of September 30,
1999.

    On April 26, 2000, the escrow agent, as authorized by the Company released
the 42,860 shares of common stock that were held in escrow to Mr. Snider. The
Company recorded these securities at fair value until they were released from
escrow at a market price of $16.00 per share or $685,760. The Company determined
that the value of these securities exceeded the net realizable value of the
underlying services to be received by $235,760. The Company has charged this
excess amount to selling, general and administrative expenses during the fiscal
year ended September 30, 2000. The Company is amortizing the realizable asset of
$450,000 over the three-year period of service through September 30, 2002. At
September 30, 2000, the unamortized value of this asset is $300,000.

H.  COMMITMENTS AND CONTINGENCIES

    OPERATING LEASES

    The Company leases its facilities under various operating leases that expire
through October 2005. The Company has also entered into a master leasing
agreement to lease various items of equipment not to exceed $600,000. The
availability under this facility has expired as of September 30, 1999.

                                       59

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

H.  COMMITMENTS AND CONTINGENCIES (CONTINUED)
    Future minimum annual rentals under lease agreements at September 30, 2000
are as follows:



FISCAL YEAR
-----------

2001........................................................  $2,015,395
2002........................................................   1,916,712
2003........................................................   1,545,762
2004........................................................     280,850
2005........................................................     201,996
Thereafter..................................................      16,833
                                                              ----------
Total (not reduced by minimum sublease rentals of
  $889,872).................................................  $5,977,548
                                                              ==========



    Total rental expense including operating expenses and real estate taxes for
operating leases amounted to $2,157,506, $1,683,749 and $1,235,867 for the years
ended September 30, 2000, 1999 and 1998, respectively.

    Certain of the facility leases contain escalation clauses, effective
October 1, 1998, rental expense has been recognized on a straight-line basis
over the remaining lease term. At September 30, 2000 and 1999, deferred rent
expense amounted to $207,739 and $110,390, respectively.

LITIGATION

    On October 15, 1997, the Company received a letter from the Department of
the Air Force ("the Air Force") stating that it may terminate for default an
approximately $1.6 million contract between the Air Force and the Company for
development of a satellite component, unless perceived performance problems were
cured. As of that date, the Company had received payments of approximately $1.4
million in connection with this contract. In the event of an actual default, the
Company could be liable for extra costs incurred by the U.S. government in
developing the component and could be required to return a portion of the monies
the Company received on this contract. On December 15, 1997, the Air Force
issued a "Show Cause Notice" to the Company requiring the Company to demonstrate
to the Air Force why the contract should not be terminated "for cause." On
December 31, 1997, the Company responded to the Air Force's "Show Cause Notice,"
explaining the Company's view that the Company should not be terminated for
cause. On May 11, 2000, the Company contacted the Air Force again to offer to
settle these differences and to explore obtaining additional settlement amounts.
On August 3, 2000, the Company sent a memorandum to the Air Force explaining the
basis of a settlement request of $353,248. Also on August 3, 2000, the Company
received from the Air Force a proposed settlement offer in which the contract
would be concluded through a contract modification with no additional payment,
but without termination for cause. As of September 30, 1999, the Company had
provided a full reserve of $521,000 against the unbilled contract costs and fees
to the Department of the Air Force. As of September 30, 2000, all of the
$521,000 unbilled contract costs and fees had been written off. The contract is
still subject to normal audit and accounting of final cost.

    On November 6, 1999, APACE, Inc. ("APACE") commenced an action against the
Company to the Supreme Court of the State of New York claiming the Company had
been awarded a prime contract by the U.S. Department of Energy ("DOE") and that
the Company had failed or refused to negotiate a subcontract with APACE,
allegedly in breach of a contract between the Company and APACE. APACE is
seeking in excess of $1,000,000 in damages. The Company denied the allegations,
moved to stay the action

                                       60

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

H.  COMMITMENTS AND CONTINGENCIES (CONTINUED)
and filed for arbitration with the American Arbitration Association in Boston,
Massachusettes. The American Arbitration Association decided that the
arbitration would go forward in Boston. In the meantime, APACE requested that
the court permit the action to go forward and for the arbitration to compelling
arbitration and staying APACE's action pending arbitration to be conducted by
the American Arbitration Association in Boston.

    On June 26, 2000, APACE served the Company with an amended answering
statement and counterciaim, including additional allegations that the Company
has engaged in unfair and deceptive trade practices and that the Company's
actins were willful and knowing. Based on these allegations, APACE is seeking
multiple damages, as well as attorneys' fees and expenses. On July 19, 2000, the
Company filed an answer to APACE's amended answering statement and counterclaim,
denying the allegations and asserting various defenses.

    An arbitrator has been selected and the arbitration is scheduled to go
forward in Boston for nine days in February, March and April 2001. The parties
have exchanged some discovery, and expect to make a further exchange early in
2001.

    The final outcome of this matter is not presently determinable and,
therefore, no provision for any liability that may result has been recorded in
the Company's financial statements.

    From time to time, the Company is a party to routine litigation and
proceedings in the ordinary course of business. The Company is not aware of any
current or pending litigation to which the Company is or may be a party that the
Company believes could materially adversely affect the Company's results of
operations or financial condition.

I.  EMPLOYEE BENEFIT PLAN

    The Company offers a 401(k) Employee Benefit Plan (the "Plan"). Under the
Plan, any regular employee, as defined by the Plan, who has completed six months
of service and has attained the age of 21 years is eligible to participate.
Under the terms of the Plan, an employee may defer up to 15% of his or her
compensation through contributions to the Plan. During 1999, the Company
extended the Plan to its wholly-owned subsidiaries. The Company made matching
contributions to the Plan of $366,264, $218,729 and $86,883 during 2000, 1999
and 1998, respectively.

                                       61

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

J.  INCOME TAXES

    The provision for income taxes consists of the following:



                                                            FOR THE YEARS ENDED SEPTEMBER 30,
                                                         ---------------------------------------
                                                            2000          1999          1998
                                                         -----------   -----------   -----------

Current payable:
  Federal..............................................      (14,699)           --            --
  State................................................           --            --   $     3,872
  Foreign..............................................       14,699            --            --
                                                         -----------   -----------   -----------
                                                                  --            --   $     3,872
                                                         -----------   -----------   -----------

Deferred tax expense/(benefit):
  Federal..............................................  $(2,962,183)  $(3,888,031)  $(1,349,519)
  State................................................     (890,122)   (1,167,905)     (404,950)
  Change in valuation allowance........................    3,852,305     5,055,936     1,754,469
                                                         -----------   -----------   -----------
                                                                  --            --            --
                                                         -----------   -----------   -----------
                                                                  --            --   $     3,872
                                                         ===========   ===========   ===========



    Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. As of September 30, 2000
and 1999, the components of the net deferred tax assets/(liabilities) are as
follows:



                                                               2000           1999
                                                           ------------   ------------

Federal net operating loss...............................  $ 13,385,851   $  5,566,879
State net operating loss, net of federal benefit.........     1,912,496        495,980
Credits..................................................       421,035        499,585
Depreciation.............................................      (227,657)       336,038
Loss from Beacon Power Corporation.......................     4,932,397      3,128,804
Other....................................................       834,326      1,562,820
Valuation allowance......................................   (21,258,448)   (11,590,106)
                                                           ------------   ------------
Net deferred income taxes................................            --             --
                                                           ============   ============



    The Company has placed a full valuation allowance against its net deferred
tax assets since the Company believes it is more likely than not that it will
not be able to utilize its deferred tax asset.

                                       62

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

J.  INCOME TAXES (CONTINUED)

    The provision for income taxes differs from the federal statutory rate due
to the following:



                                                                  FOR THE YEARS ENDED
                                                                     SEPTEMBER 30,
                                                          ------------------------------------
                                                            2000          1999          1998
                                                          --------      --------      --------

Tax at statutory rate...............................       (34.0)%       (34.0)%       (34.0)%
State taxes--net of federal benefit.................        (6.2)         (6.2)         (6.2)
Other...............................................         1.6          (0.7)         (0.5)
Change in valuation allowance.......................        38.6          40.9          40.8
                                                           -----         -----         -----
Effective tax rate..................................          -- %          -- %         0.1 %
                                                           =====         =====         =====



    At September 30, 2000, the Company had net operating loss carry-forwards of
approximately $39,370,000 and $30,590,000 for federal and state income tax
purposes, respectively. The federal net operating losses expire beginning
September 30, 2008 through 2020. The state net operating losses will expire
beginning September 30, 2000 through 2005. The use of these losses may be
limited due to ownership change limitations under Section 382 of the Internal
Revenue Code.

K.  STOCKHOLDERS' EQUITY

INVESTMENT FROM MECHANICAL TECHNOLOGY INCORPORATED

    On October 21, 1999, the Company received a $7,070,000 investment from
Mechanical Technology Incorporated ("MTI"). In consideration for MTI's
investment, MTI received 1,030,000 shares of the Company's Common Stock at a
discounted price of approximately $6.80 per share, and warrants to purchase an
additional 100,000 shares of the Company's Common Stock at an exercise price of
$8.80 per share and an expiration date four years from the date of issuance. MTI
funded $2,570,000 of its investment in the Company on October 21, 1999 and
received 370,800 of the 1,030,000 shares of the Company's Common Stock and a
warrant to purchase 36,000 of the 100,000 shares of the Company's Common Stock.
MTI made the remaining investment on January 31, 2000 of $4,500,000 and received
the remaining 659,200 shares of the Company's Common Stock and a warrant to
purchase the remaining 64,000 shares of the Company's Common Stock. The Company
incurred approximately $95,000 of legal, accounting, consultation and filing
fees in connection with this transaction. The Company has valued the warrants
issued to MTI on October 21, 1999 and January 31, 2000, at $231,912 and
$1,273,509, respectively using the Black-Scholes option pricing model.

    In addition, the Company received a warrant to purchase 108,000 shares of
MTI's common stock on October 21, 1999 and a warrant to purchase 192,000 shares
of MTI's common stock on January 31, 2000 at exercise prices of $12.56 per
share, as adjusted to reflect a 3:1 stock split in April 2000, and expiration
dates four years from the date of issuance. The Company has valued the warrant
received on October 21, 1999 and January 31, 2000 at $568,553 and $2,926,885,
respectively, using the Black-Scholes option pricing model, and has recorded the
warrants as an asset and additional paid in capital. In accordance with EITF
No. 96-11, "Accounting for Forward Contracts and Purchased Options to Acquire
Securities Covered by FASB Statement No. 115," options that are entered into to
purchase securities that will be accounted for under SFAS 115 should, at
inception, be designated as held-to-maturity, available-for-sale, or trading and
accounted for in a manner consistent with the accounting prescribed by
SFAS No. 115 for that category of securities. The Company has designated that
the securities to be purchased under the warrant agreement

                                       63

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

K.  STOCKHOLDERS' EQUITY (CONTINUED)
will be available-for-sale securities and, therefore, the Company has marked to
market the fair value of the warrants at each reporting period dated and has
recorded any unrealized gains and losses as a component of accumulated other
comprehensive loss included in stockholders' equity. At September 30, 2000, the
warrants have an unrealized loss of $1,021,725, which is included in accumulated
other comprehensive loss included in stockholders' equity.

    STOCK OPTIONS

    Under the Company's 1992, 1994, 1996, 1998 and 1999 Stock Option Plans
(collectively, the "Plans"), both qualified and non-qualified stock options may
be granted to certain officers, employees, directors and consultants to purchase
up to 3,050,000 shares of the Company's Common Stock. At September 30, 2000,
2,773,550 of the 3,050,000 stock options available for grant under the Plans
have been granted.

    The Plans are subject to the following provisions:

    The aggregate fair market value (determined as of the date the option is
granted) of the common stock that any employee may purchase in any calendar year
pursuant to the exercise of qualified options may not exceed $100,000. No person
who owns, directly or indirectly, at the time of the granting of a qualified
option to him or her, more than 10% of the total combined voting power of all
classes of stock of the Company shall be eligible to receive any qualified
options under the Plans unless the option price is at least 110% of the fair
market value of the common stock subject to the option, determined on the date
of grant. Non-qualified options are not subject to this limitation.

    Qualified options are issued only to employees of the Company, while
non-qualified options may be issued to non-employee directors, consultants and
others, as well as to employees of the Company. Options granted under the Plans
may not be granted with an exercise price less than 100% of fair value of the
Company's common stock, as determined by the Board of Directors on the grant
date.

    Options under the Plans must be granted within 10 years from the effective
date of the Plan. Qualified options granted under the Plans cannot be exercised
more than 10 years from the date of grant, except that qualified options issued
to 10% or greater stockholders are limited to five-year terms. All options
granted under the Plans provide for the payment of the Company's exercise price
in cash, or by delivery to the Company of shares of common stock already owned
by the optionee having fair market value equal to the exercise price of the
options being exercised, or by a combination of such methods of payment.
Generally, the options vest and become exercisable ratably over a four-year
period.

    The Plans contain antidilutive provisions authorizing appropriate
adjustments in certain circumstances. Shares of common stock subject to options
that expire without being exercised or that are canceled as a result of the
cessation of employment are available for further grants.

                                       64

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

K.  STOCKHOLDERS' EQUITY (CONTINUED)
    A summary of the status of the Company's stock options as of September 30,
2000, 1999 and 1998 and changes for the years then ended are presented below.



                                                   2000                   1999                    1998
                                           --------------------   ---------------------   --------------------
                                                       WEIGHTED                WEIGHTED               WEIGHTED
                                           NUMBER OF   AVERAGE    NUMBER OF    AVERAGE    NUMBER OF   AVERAGE
                                            SHARES      PRICE       SHARES      PRICE      SHARES      PRICE
                                           ---------   --------   ----------   --------   ---------   --------

Outstanding at beginning of year.........  1,851,227    $ 8.06       820,910    $9.58      700,427     $8.44
  Granted................................    820,050     16.62     1,604,000     7.03      319,000     11.20
  Exercised..............................   (701,774)     7.84      (455,600)    6.98     (100,266)     5.80
  Canceled...............................    (92,398)     7.83      (118,083)    8.84      (98,251)    10.55
                                           ---------    ------    ----------    -----     --------     -----
Outstanding at end of year...............  1,877,105    $11.89     1,851,227    $8.06      820,910     $9.58
                                           =========    ======    ==========    =====     ========     =====
Options exercisable at year-end..........    463,764    $ 9.26       840,560    $8.57      413,403     $8.48
                                           =========    ======    ==========    =====     ========     =====



    The following table summarizes information about stock options outstanding
as of September 30, 2000.



                               OPTIONS OUTSTANDING            OPTIONS EXERCISABLE
                        ----------------------------------   ----------------------
                                      WEIGHTED    WEIGHTED                 WEIGHTED
                                       AVERAGE    AVERAGE                  AVERAGE
      RANGE OF            NUMBER      REMAINING   EXERCISE     NUMBER      EXERCISE
   EXERCISE PRICES      OUTSTANDING     LIFE       PRICE     EXERCISABLE    PRICE
---------------------   -----------   ---------   --------   -----------   --------

$       5.00--$ 7.81       311,456        7.9     $  5.67       70,509      $ 5.53
$       8.05--$10.50       708,548        8.0        8.43      253,673        9.02
$      11.00--$13.38       240,751        7.3       11.67      139,582       11.57
$      16.13--$20.63       546,350        9.4       17.55           --          --
$      31.25--$37.25        70,000        9.8       31.30           --          --
                         ---------      -----     -------      -------      ------
                         1,877,105        8.4     $ 11.89      463,764      $ 9.26
                         =========      =====     =======      =======      ======



    At September 30, 2000, an additional 276,450 shares were available under the
Plans for future grants.

    During 1999, the Company granted fully vested and immediately exercisable
options to purchase 755,000 shares of the Company's common stock to consultants
at exercise prices ranging from $5.75 to $10.00 per share, of which 300,000
stock options were granted outside of the Plans. The Company has recorded the
fair value of the options, as determined by the Black-Scholes option pricing
model, of $2,152,277, to selling, general and administrative expenses during the
year ended September 30, 1999. As of September 30, 1999, options to purchase
450,000 shares at an exercise price of $7.00 per share were exercised. As of
September 30, 1999, the Company received $1,333,333 of cash on these exercises
and the remaining amount due from the stockholders is classified within
stockholders' equity as amounts receivable from exercise of stock options. As of
September 30, 2000, options to purchase 750,000 shares at exercise prices
ranging from $5.75 to $10.00 per share have been exercised. As of September 30,
2000, the Company has received full payment on these exercises.

    During 2000, the Company granted 216,000 non-qualified stock options to
employees at an exercise price of $17.56 per share outside of the Board approved
Plans, which are included in the above table.

                                       65

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

K.  STOCKHOLDERS' EQUITY (CONTINUED)
WARRANTS

    On June 5, 1998, the Company issued to certain individuals, in settlement of
a claim asserted against the Company, Common Stock Purchase Warrants to purchase
up to 68,795 shares of common stock, as amended, at an exercise price of $11.43
per share. The value of these warrants was not material to the financial
statements. These warrants expired on November 11, 1999, unexercised.

    On November 11, 1998, the Company issued common stock warrants to purchase
up to 67,125 shares of the Company's Common Stock at an exercise price of $11.43
per share. The Company has recorded the fair value of these warrants, as
determined by the Black-Scholes option-pricing model, of $56,362, to selling,
general and administrative expenses during the year ended September 30, 1999.
These warrants expired on November 11, 1999 unexercised.

    On August 25, 1999, in connection with the $8 million private placement of
8,000 shares of the Company's Series A Convertible Preferred Stock, $0.01 par
value per share, with Brown Simpson Strategic Growth Funds (see Note L), the
Company issued common stock warrants to purchase up to 120,000 and 675,000
shares of common stock at an exercise price of $7.80 and $8.54, respectively.
These warrants expire on August 25, 2003. The Company has valued these warrants
at $2,369,292, using the Black-Scholes option pricing model. At September 30,
1999, none of these warrants were exercised. At September 30, 2000, 18,000
shares of common stock had been purchased at an exercise price of $7.80 per
share.

    On October 21, 1999, in connection with an investment by MTI, the Company
issued a warrant to purchase up to 36,000 shares of the Company's Common Stock
at an exercise price of $8.80 per share. This warrant expires on October 21,
2003. On January 31, 2000, in connection with a second closing of this
investment, the Company issued an additional warrant to purchase up to 64,000
shares of the Company's Common Stock at an exercise price of $8.80 per share.
This warrant expires on January 31, 2004. The Company valued the warrants issued
to MTI on October 12, 1999 and January 31, 2000 at $231,912 and $1,273,509,
respectively, using the Black-Scholes option pricing model. At September 30,
2000, none of these warrants had been exercised.

    On November 16, 1999, in connection with the acquisition of certain
intellectual property, equipment and other assets from Northrop Grumman
Corporation, the Company issued a warrant to purchase up to 100,000 shares of
the Company's Common Stock at an exercise price of $9.725 per share. The Company
has valued this warrant at $631,000 using the Black-Scholes option pricing
model. As of September 30, 2000, all of these warrants had been exercised.

    On February 4, 2000, the Company issued to Northrop Grumman Corporation an
additional warrant to purchase up to 100,000 shares of the Company's Common
Stock at an exercise price of $9.725 per share. This warrant is exercisable upon
the occurrence of certain defined events. As of September 30, 2000, this warrant
is not yet exercisable. This warrant expires on December 31, 2006. As of
September 30, 2000, the fair value of this warrant, using the Black-Scholes
option pricing model, was $936,485, which will be added to the purchase price of
the assets acquired from Northrop Grumman Corporation when it becomes
exerciseable.

    STOCK-BASED COMPENSATION

    Had compensation cost for the Company's stock-based compensation been
determined based on fair value at the grant dates as calculated in accordance
with SFAS No. 123, the Company's net loss and loss

                                       66

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

K.  STOCKHOLDERS' EQUITY (CONTINUED)
per share for the years ended September 30, 2000, 1999 and 1998 would have been
increased to the pro forma amounts indicated below:



                                             2000                      1999                      1998
                                    -----------------------   -----------------------   -----------------------
                                      NET LOSS                  NET LOSS                  NET LOSS
                                    ATTRIBUTABLE   LOSS PER   ATTRIBUTABLE   LOSS PER   ATTRIBUTABLE   LOSS PER
                                     TO COMMON      COMMON     TO COMMON      COMMON     TO COMMON      COMMON
                                    STOCKHOLDERS    SHARE     STOCKHOLDERS    SHARE     STOCKHOLDERS    SHARE
                                    ------------   --------   ------------   --------   ------------   --------

As reported.......................  $(13,047,033)   $(1.03)   $(14,392,657)   $(1.57)   $(4,857,814)    $(.54)
Pro forma.........................  $(17,092,280)   $(1.35)   $(15,597,109)   $(1.70)   $(5,433,804)    $(.61)


    The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. SFAS No. 123 does not apply to awards prior to
1996 and additional awards in future years are anticipated.

    The fair value of each stock option is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted average
assumptions: an expected life of seven years, expected volatility ranging from
80.1% to 112.3%, no dividends, and risk-free interest rate of 6.17% for
September 30, 2000; an expected life of seven years, expected volatility of
80.0%, no dividends, and risk-free interest rate of 6.08% for September 30,
1999; and an expected life of seven years, expected volatility of 57.9%, no
dividends, and risk-free interest rate of 5.76% for September 30, 1998. The
weighted average price of the fair value of options granted for years ended
September 30, 2000, 1999 and 1998 are $14.05, $5.21 and $7.14, respectively.

    In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation, an Interpretation of APB
Opinion No. 25." This interpretation clarifies the application of APB Opinion
No. 25, including (a) the definition of employee for purposes of applying
Opinion No. 25, (b) the criteria for determining whether a plan qualifies as a
noncompensatory plan, (c) the accounting consequences of various modifications
to the terms of a previously fixed stock option or award, and (d) the accounting
for an exchange of stock compensation awards in a business combination. The
Interpretation is effective July 1, 2000, and the effects of applying the
Interpretation are recognized on a prospective basis. The adoption of this
Interpretation did not have a material impact on the Company's financial
condition or results of operations.

COMMON STOCK OFFERING

    On October 30, 2000, the Company filed for a public offering of its Common
Stock. In connection with this offering, the Company has incurred $678,980 of
deferred equity financing costs that are included in other long-term assets at
September 30, 2000.

                                       67

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

L.  PREFERRED STOCK

    The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock, $0.01 par value per share ("Preferred Stock"). The Preferred Stock may be
issued in one or more series, the terms of which may be determined at the time
of issuance by the Board of Directors, without further action by stockholders,
and may include voting rights (including the right to vote as a series on
particular matters), preferences as to dividends and liquidation, conversion and
redemption rights and sinking fund provisions.

    On August 25, 1999, the Company completed an $8 million private placement of
8,000 shares of its Series A Redeemable Convertible Preferred Stock, $0.01 par
value per share (the "Series A Preferred Stock"), with Brown Simpson Strategic
Growth Funds ("Brown Simpson"). The Series A Preferred Stock is initially
convertible into 1,025,641 shares of the Company's common stock, $0.01 par value
per share (the "Common Stock").

    In connection with the transaction, Brown Simpson also received warrants to
purchase up to 675,000 fully vested and immediately exercisable additional
shares of Common Stock at $8.54 per share (the "Brown Simpson Warrants"). The
Brown Simpson Warrants expire on August 25, 2003. The Company has valued these
warrants at $1,818,558 based on the fair value of these warrants, as determined
by the Black-Scholes option pricing model, and has recorded this amount as a
discount to the Preferred Stock. In addition, the Company incurred direct costs
of $1,338,234 in connection with this preferred stock offering which have also
been recorded as a discount to the Series A Preferred Stock.

    H.C. Wainwright & Co., Inc. ("H.C. Wainwright") served as placement agent
for the transaction and received a commission of $560,000 and warrants to
purchase 120,000 shares of the Company's Common Stock at $7.80 per share. These
warrants expire on August 25, 2003. H.C. Wainwright will also receive a future
fee in the amount of 4% of any monies received by the Company upon the exercise
of the Brown Simpson Warrants. The Company has recorded the fair value of these
warrants, as determined by the Black-Scholes option pricing model, of $550,734
as a discount to the Series A Preferred Stock.

    The Company has valued the Series A Preferred Stock at issuance to be
$4,843,208 based on the relative fair market values of the financial instruments
issued in connection with this placement and net of offering costs. The Company
is accreting the carrying value of the preferred stock to its redemption value
of $8,000,000 at August 25, 2003, using the effective interest method. As of
September 30, 1999, the Company accreted $50,904 and recorded this as a charge
against additional paid-in capital.

    On March 7, 2000, the preferred stockholders elected to convert all 8,000
shares of the Series A Preferred Stock into 1,025,641 shares of the Company's
Common Stock, which resulted in the accretion of an additional $3,105,888 of the
discount on the redeemable preferred stock during the year ended September 30,
2000.

                                       68

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

M.  SIGNIFICANT CUSTOMERS

    Significant customers, defined as those customers that account for 10% or
more of total net revenue in a fiscal year or 10% or more of accounts receivable
and unbilled contract costs and fees at the end of a fiscal year, were as
follows:



                                                                                       PERCENTAGE OF
                                                                                    ACCOUNTS RECEIVABLE
                                                                                       AND UNBILLED
                                                                                    CONTRACT COSTS AND
                                                    PERCENTAGE OF TOTAL REVENUE           FEES AT
                                                      YEAR ENDED SEPTEMBER 30,         SEPTEMBER 30,
                                                   ------------------------------   -------------------
CUSTOMER                                             2000       1999       1998       2000       1999
--------                                           --------   --------   --------   --------   --------

U.S. government:
  U.S. Department of Defense.....................    *          20.6%      22.1%      10.3%      20.4%
  U.S. Department of Energy......................    11.5%      *          *          *          20.0%
Applied Materials................................    10.6%      *          *          22.3%      *


------------------------

*   Less than 10%

N.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

NON-CASH INVESTING AND FINANCING ACTIVITIES



                                                                 YEAR ENDED SEPTEMBER 30,
                                                          --------------------------------------
                                                             2000          1999         1998
                                                          -----------   ----------   -----------

Accretion of redeemable convertible preferred stock
  discount..............................................  $ 3,105,888   $   50,904   $        --
                                                          ===========   ==========   ===========
Acquisition of equipment under capital leases...........  $        --   $   49,813   $        --
                                                          ===========   ==========   ===========
Contingent obligation to Class D preferred stockholders
  of Beacon Power Corporation...........................  $   484,764   $5,309,115   $        --
                                                          ===========   ==========   ===========
Conversion of redeemable convertible preferred stock to
  common stock..........................................  $ 8,000,000   $       --   $        --
                                                          ===========   ==========   ===========
Common stock held in escrow issued in connection with
  settlement agreement..................................  $        --   $  190,191   $        --
                                                          ===========   ==========   ===========
Valuation adjustment for common stock held in escrow....  $   257,160   $  238,409   $        --
                                                          ===========   ==========   ===========
Warrants issued in connection with MTI investment.......  $ 1,505,421   $       --   $        --
                                                          ===========   ==========   ===========
MTI warrant received in connection with MTI
  investment............................................  $ 3,495,438   $       --   $        --
                                                          ===========   ==========   ===========
Valuation adjustment for MTI warrants...................  $(1,021,725)  $       --   $        --
                                                          ===========   ==========   ===========



                                       69

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

N.  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION (CONTINUED)
    Net cash paid for the acquisitions of Inductive Components Inc., Lighthouse
Software, Inc., HyComp, Inc., Ling Electronics, Inc. and certain intellectual
property, equipment and other assets from Northrop Grumman Corporation was as
follows:



                                                               YEAR ENDED SEPTEMBER 30,
                                                      ------------------------------------------
                                                          2000           1999           1998
                                                      ------------   ------------   ------------

Fair value of assets................................  $ 11,200,265   $  1,742,812             --
Cost in excess of net assets of companies acquired,
  net...............................................     3,754,910        389,079             --
Liabilities assumed, including transaction costs....    (2,476,383)      (567,215)            --
Fair value of common stock issued...................   (12,408,792)      (568,800)            --
                                                      ------------   ------------   ------------
Cash paid...........................................  $     70,000   $    995,876             --
Less: Cash acquired.................................       (45,946)            --             --
                                                      ------------   ------------   ------------
Net cash paid for the acquisitions..................  $     24,054   $    995,876             --
                                                      ============   ============   ============



    INTEREST AND INCOME TAXES PAID

    Cash paid for interest and income taxes was as follows:



                                                      FOR THE YEARS ENDED
                                                         SEPTEMBER 30,
                                                 ------------------------------
                                                   2000       1999       1998
                                                 --------   --------   --------

Interest.......................................  $  3,176   $115,692   $10,206
                                                 ========   ========   =======
Income taxes...................................        --         --   $ 5,772
                                                 ========   ========   =======



O.  ACQUISITIONS

    INDUCTIVE COMPONENTS, INC. AND LIGHTHOUSE SOFTWARE, INC.

    On January 4, 1999, the Company's MagMotor subsidiary acquired substantially
all of the assets and assumed certain liabilities of Inductive Components, Inc.
and Lighthouse Software, Inc., pursuant to the terms of an Asset Purchase
Agreement, dated January 4, 1999, among MagMotor, the Company, Inductive
Components, Inc, Lighthouse Software, Inc. and Thomas Glynn, the sole
stockholder of Inductive Components, Inc. and the majority stockholder of
Lighthouse Software, Inc. The aggregate consideration paid by the Company for
the acquired assets of Inductive Components, Inc. and Lighthouse Software, Inc.
was 100,000 shares of the Company's common stock, valued at $5.6875 per share or
$568,750. In addition, the Company assumed indebtedness of approximately
$246,000. The Company has included in its consolidated results of operations the
acquisition of Inductive Components, Inc. and Lighthouse Software, Inc. under
the purchase method of accounting. The purchase price has been allocated as
follows:



Inventory...................................................  $ 50,000
Property and equipment......................................   100,597
Intangibles.................................................   275,000
Goodwill....................................................   389,079
                                                              --------
                                                              $814,676
                                                              ========



                                       70

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

O.  ACQUISITIONS (CONTINUED)
    The pro forma financial information has not been presented, as the
acquisitions of Inductive Components, Inc. and Lighthouse Software, Inc. are not
material.

    HYCOMP, INC.

    On April 12, 1999, the Company executed an agreement to purchase
substantially all of the assets and assume certain liabilities of HyComp, Inc.
("HyComp"). This agreement was dated March 31, 1999 and was by and between
HyComp and HyComp Acquisition Corp., a wholly-owned subsidiary of the Company.
The aggregate consideration paid by the Company for the acquired assets of
HyComp consisted of (i) $750,000 in cash; (ii) the assumption of certain
liabilities and obligations of HyComp in the amount of approximately $422,000;
(iii) transaction costs of $95,000; and (iv) a 5% royalty to HyComp on certain
sales through April 12, 2000. At September 30, 1999, the Company has recorded
$50,000 of accrued royalties. The Company has included in its consolidated
results of operations the acquisition of HyComp under the purchase method of
accounting. The purchase price has been allocated as follows:



Accounts receivable.........................................  $   38,556
Inventory...................................................     318,359
Deposits....................................................      19,800
Property and equipment......................................     940,500
                                                              ----------
                                                              $1,317,215
                                                              ==========



    The pro forma financial information has not been presented as the
acquisition of HyComp is not material.

LING ELECTRONICS, INC.

    On October 21, 1999, the Company acquired Ling Electronics, Inc. and Ling
Electronics, Ltd. (collectively, "Ling Electronics") from MTI. In consideration
for the acquisition of Ling Electronics, MTI received $70,000 and 770,000 shares
of the Company's Common Stock valued at $9.8438 per share or $7,579,726. In
addition, the Company incurred approximately $177,000 of legal, accounting,
consultation and filing fees as a cost of this transaction. The purchase price
of the acquisition has been allocated as follows:



Cash and cash equivalents...................................  $   45,946
Accounts receivable.........................................   1,937,023
Inventory...................................................   3,127,991
Prepaid expenses and other assets...........................     260,239
Property and equipment......................................     250,000
Goodwill....................................................   3,754,910
Accounts payable............................................    (641,687)
Accrued payroll and payroll related expenses................    (334,129)
Deferred revenues...........................................     (13,500)
Other accrued expenses......................................    (560,437)
                                                              ----------
                                                              $7,826,356
                                                              ==========



                                       71

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

O.  ACQUISITIONS (CONTINUED)
    The following unaudited pro forma financial information combines SatCon and
Ling's results of operations as if the acquisition had taken place on
October 1, 1998. The pro forma results are not necessarily indicative of what
the results of operations actually would have been if the transaction had
occurred on the applicable dates indicated and are not intended to be indicative
of future results of operations.



                                                  YEAR ENDED SEPTEMBER 30,
                                         ------------------------------------------
                                             2000           1999           1998
                                         ------------   ------------   ------------
                                                        (UNAUDITED)

Revenue................................  $ 31,194,618   $ 23,849,881   $ 27,764,923
Operating loss.........................  $ (9,822,203)  $(11,316,689)  $ (2,433,575)
Net loss...............................  $(10,260,029)  $(15,881,125)  $ (5,740,230)
Net loss attributable to common
  stockholders.........................  $(13,365,917)  $(15,932,029)  $ (5,740,230)
Net loss per share, basic and
  diluted..............................  $      (1.06)  $      (1.60)  $      (0.59)



NORTHROP GRUMMAN CORPORATION

    On November 16, 1999, the Company purchased certain intellectual property,
equipment and other assets from Northrop Grumman Corporation ("NGC"). These
assets were used by NGC in connection with its power electronics product
business. The Company is amortizing the purchase price allocated to completed
technology on a straight-line basis over a 10-year period. The Company is
depreciating the purchase price allocated to property and equipment on a
straight-line basis over a 10-year period. The Company also entered into (i) a
sublease with NGC pursuant to which it agreed to a five-year sublease for
approximately 14,863 square feet of rentable space in the Baltimore, Maryland
area and (ii) a three-year Transition Services Agreement providing the Company
access to certain test facilities and personnel of NGC on a fee basis. In
consideration for these foregoing assets and agreements, NGC received 578,761
shares of the Company's Common Stock valued at $8.3438 per share or $4,829,066.
In addition, the Company issued to NGC a warrant to purchase an additional
100,000 shares of the Company's Common Stock at an exercise price of $9.725 per
share. The Company has recorded the fair value of this warrant, as determined by
the Black-Scholes option pricing model, of approximately $631,000 and
approximately $119,000 of legal, accounting, consultation and filing fees as a
cost of this transaction. On February 4, 2000, the Company issued to NGC an
additional warrant to purchase 100,000 shares of the Company's Common Stock at
an exercise price of $9.725 per share. This warrant is exercisable upon the
occurrence of certain

                                       72

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

O.  ACQUISITIONS (CONTINUED)
defined events, none of which had occurred as of September 30, 2000. The
purchase price of the asset purchase has been allocated as follows:



Inventory...................................................               $1,206,000
Property and equipment......................................                1,091,643
Intangibles:
  Completed technology......................................  $3,142,882
  Transition services agreement.............................     101,542
  Favorable lease...........................................      36,999
                                                              ----------
      Total intangibles.....................................                3,281,423
                                                                           ----------
                                                                           $5,579,066
                                                                           ==========



    The pro forma financial information has not been presented, as this
transaction is the purchase of assets rather than as a business combination. The
Company has determined that this transaction was the acquisition of assets and
not the acquisition of a business as this business ceased operations more than
12 months prior to this acquisition of assets, the Company did not acquire
facilities, employees or customer base and there is not sufficient continuity of
the acquired entity's operations prior to and after the transaction.

    For the fiscal year ended September 30, 2000, the Company recognized
$413,991 of revenue, primarily related to funded research and development
arrangements, from NGC. At September 30, 2000, the Company had $62,492 of
accounts receivable and unbilled contract costs and fees from NGC.

P.  LOSS PER SHARE

    The following is the reconciliation of the numerators and denominators of
the basic and diluted loss per share computations:



                                                                  FOR THE YEARS ENDED
                                                                     SEPTEMBER 30,
                                                       -----------------------------------------
                                                           2000           1999          1998
                                                       ------------   ------------   -----------

Net loss attributable to common shareholders.........  $(13,047,033)  $(14,392,657)  $(4,857,814)
                                                       ============   ============   ===========

BASIC AND DILUTED:
  Common shares outstanding, beginning of year.......     9,529,649      8,990,249     8,769,146
  Weighted average common shares issued during the
    year.............................................     3,100,173        200,017       190,163
  Weighted average shares repurchased during the
    year.............................................            --        (14,225)       (2,638)
                                                       ------------   ------------   -----------
  Weighted average shares outstanding--basic and
    diluted..........................................    12,629,822      9,176,041     8,956,671
                                                       ============   ============   ===========
  Net loss per share, basic and diluted..............  $      (1.03)  $      (1.57)  $      (.54)
                                                       ============   ============   ===========



    At September 30, 2000, 1999 and 1998, 44,500, 44,500 and 28,300 common
shares, respectively, were excluded from common shares outstanding as they were
held in treasury. At September 30, 2000 and 1999, 42,860 common shares were
excluded from common shares outstanding as they were held in escrow.

                                       73

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

P.  LOSS PER SHARE (CONTINUED)
    At September 30, 2000, 1999 and 1998, options and warrants to purchase
2,854,105, 2,782,147, and 884,758 shares of common stock, respectively, were
excluded from the diluted weighted average common shares outstanding as their
effect would be antidilutive.

Q.  COMPREHENSIVE LOSS

    The Company's total comprehensive loss is as follows:



                                                                  FOR THE YEARS ENDED
                                                                     SEPTEMBER 30,
                                                       -----------------------------------------
                                                           2000           1999          1998
                                                       ------------   ------------   -----------

Net loss.............................................  $ (9,941,145)  $(14,341,753)  $(4,857,814)
                                                       ============   ============   ===========
Other comprehensive income/(loss), net of tax:
    Unrealized gains on securities...................  $         --   $     10,380   $     9,835
    Valuation adjustment for MTI warrants............    (1,021,725)            --            --
    Foreign currency translation adjustment..........       (51,778)            --            --
                                                       ------------   ------------   -----------
    Other comprehensive (loss)/income................  $ (1,073,503)  $     10,380   $     9,835
                                                       ------------   ------------   -----------
Comprehensive loss...................................  $(11,014,648)  $(14,331,373)  $(4,847,979)
                                                       ============   ============   ===========



R.  SEGMENT DISCLOSURES

    As of October 1, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS No. 131 establishes
annual and interim reporting standards for an enterprise's operating segments
and related disclosures about its products and services, geographical areas and
major customers. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group, in
deciding how to allocate resources and assess their performance.

    The Company's organizational structure is based on strategic business units
that perform services and offer various products to the principal markets in
which the Company's products are sold. These business units equate to three
reportable segments: research and development, power electronic products and
motion-control products.

    The Company performs research and development services in collaboration with
third parties. Film Microelectronics, Inc. designs and manufactures power
electronics products. The Magmotor and Ling Divisions specialize in the
engineering and manufacturing of motion-control products. The Company's
principal operations and markets are located in North America.

    The accounting policies of each of the segments are the same as those
described in the summary of significant accounting policies. The Company
evaluates performance based on revenue and profit and loss from operations
before income taxes, interest income, interest expense, other income and losses
and loss from investment in Beacon Power Corporation, excluding the effects of
amortization of intangible assets associated with acquisitions. Common costs not
directly attributable to a particular segment are allocated among segments based
on management's estimates.

                                       74

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

R.  SEGMENT DISCLOSURES (CONTINUED)
    The following is a summary of the Company's operations by operating segment:



                                                                  YEAR ENDED SEPTEMBER 30,
                                                      ------------------------------------------------
                                                         2000              1999              1998
                                                      -----------      ------------      -------------

Research and development:
Product revenue.................................      $    31,486                --                 --
Funded research and development revenue.........      $ 8,627,601      $  6,355,383      $   8,010,735
                                                      -----------      ------------      -------------
  Total revenue.................................      $ 8,659,087      $  6,355,383      $   8,010,735
                                                      -----------      ------------      -------------
  Loss from operations, net of amortization of
    intangibles.................................      $(3,838,907)     $ (6,577,012)     $  (1,454,707)
                                                      ===========      ============      =============
Electronics products:
  Product revenue...............................      $ 8,584,446      $  6,306,085      $   5,909,765
                                                      -----------      ------------      -------------
  (Loss) income from operations, net of
    amortization of intangibles.................      $(3,128,643)     $ (2,073,946)     $     504,528
                                                      ===========      ============      =============
Motion-control products:
  Product revenue...............................      $13,811,496      $  2,816,413      $   1,610,423
                                                      -----------      ------------      -------------
  Loss from operations, net of amortization of
    intangibles.................................      $(1,316,958)     $   (755,272)     $    (310,023)
                                                      ===========      ============      =============

Consolidated:
  Product revenue...............................      $22,427,428      $  9,122,499      $   7,520,188
  Funded research and development revenue.......      $ 8,627,601      $  6,355,383      $   8,010,735
                                                      -----------      ------------      -------------
  Total revenue.................................      $31,055,029      $ 15,477,882      $  15,530,923
                                                      ===========      ============      =============
  Loss from operations, net of amortization.....      $(8,284,508)     $ (9,406,230)     $  (1,260,202)
  Amortization of intangibles...................      $(1,217,490)     $   (371,087)     $    (290,957)
                                                      -----------      ------------      -------------
  Operating loss................................      $(9,501,998)     $ (9,777,317)     $  (1,551,159)
  Other income (loss)...........................      $     9,891      $   (150,464)     $          --
  Interest income...............................      $   453,631      $     42,287      $     179,861
  Interest expense..............................      $    (3,176)     $   (115,692)     $     (10,206)
                                                      -----------      ------------      -------------
  Net loss before income taxes and loss from
    Beacon Power Corporation....................      $(9,041,652)     $(10,001,186)     $  (1,381,504)
                                                      ===========      ============      =============



                                       75

                         SATCON TECHNOLOGY CORPORATION

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

R.  SEGMENT DISCLOSURES (CONTINUED)
    The following is a summary of the Company's total segment assets by
operating segment:



                                                                    SEPTEMBER 30,
                                                              -------------------------
                                                                 2000          1999
                                                              -----------   -----------

Research and development:
  Segment assets............................................  $18,464,754   $ 6,283,773
Electronics products:
  Segment assets............................................  $10,132,575   $ 8,643,258
Motion-control products:
  Segment assets............................................  $13,416,197   $ 2,473,343
Consolidated:
  Segment assets............................................  $42,013,526   $17,400,374
  Investment in Beacon Power Corporation....................  $        --   $   414,729
  Warrants to purchase Mechanical Technology
  Incorporated common stock.................................  $ 2,473,713   $        --
                                                              -----------   -----------
Total assets................................................  $44,487,239   $17,815,103
                                                              ===========   ===========



    The Company operates and markets its services and products on a worldwide
basis with its principal markets as follows:



                                                               YEAR ENDED SEPTEMBER 30,
                                                       ----------------------------------------
                                                          2000           1999          1998
                                                       -----------   ------------   -----------

Revenue by geographic region:
  United States......................................  $27,701,844   $ 14,627,000   $15,333,525
  Rest of world......................................    3,353,185        850,981       197,398
                                                       -----------   ------------   -----------
    Total revenue....................................  $31,055,029   $ 15,477,981   $15,530,923
                                                       ===========   ============   ===========



                                       76