x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE | |
ACT OF 1934 | ||
FOR THE QUARTERLY PERIOD ENDED June 30, 2011 | ||
OR | ||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE | |
ACT OF 1934 |
New York | 0-6890 | 14-1462255 |
(State or Other Jurisdiction | (Commission File Number) | (IRS Employer |
of Incorporation) | Identification No.) |
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company x |
PART I. FINANCIAL INFORMATION | 2 | ||||
Item 1. Financial Statements | 2 | ||||
Condensed Consolidated Balance Sheets as of December 31, 2010 and June 30, 2011 (Unaudited) | 2 | ||||
Condensed Consolidated Statements of Operations (Unaudited) | |||||
For the Three and Six Months Ended June 30, 2010 and 2011 | 3 | ||||
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Loss (Unaudited) | |||||
For the Six Months Ended June 30, 2010 and 2011 | 4 | ||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||
For the Six Months Ended June 30, 2010 and 2011 | 5 | ||||
Notes to Condensed Consolidated Financial Statements (Unaudited) | 6 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | ||||
Item 4. Controls and Procedures | 24 | ||||
PART II. OTHER INFORMATION | 25 | ||||
Item 1. | Legal Proceedings | 25 | |||
Item 1A. | Risk Factors | 25 | |||
Item 5. | Other Information | 27 | |||
Item 6. | Exhibits | 27 | |||
SIGNATURES | 27 |
(Dollars in thousands) | December 31, | June 30, | ||||||
2010 | 2011 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 1,118 | $ | 1,592 | ||||
Accounts receivable | 1,086 | 1,004 | ||||||
Inventories | 844 | 1,086 | ||||||
Prepaid expenses and other current assets | 128 | 101 | ||||||
Total Current Assets | 3,176 | 3,783 | ||||||
Property, plant and equipment, net: | 425 | 311 | ||||||
Total Assets | $ | 3,601 | $ | 4,094 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 255 | $ | 373 | ||||
Accrued liabilities | 1,273 | 1,485 | ||||||
Deferred revenue | 21 | 53 | ||||||
Derivative liability | 73 | — | ||||||
Income taxes payable | 20 | 20 | ||||||
Total Current Liabilities | 1,642 | 1,931 | ||||||
Stockholders’ Equity (Deficit): | ||||||||
Common stock, par value $0.01 per share, authorized 75,000,000; 5,776,750 issued in | ||||||||
both 2010 and 2011 | 58 | 58 | ||||||
Paid-in-capital | 134,733 | 134,935 | ||||||
Accumulated deficit | (122,483 | ) | (122,386 | ) | ||||
Common stock in treasury, at cost, 1,005,092 shares in both 2010 and 2011 | (13,754 | ) | (13,754 | ) | ||||
Total MTI stockholders’ deficit | (1,446 | ) | (1,147 | ) | ||||
Non-controlling interest | 3,405 | 3,310 | ||||||
Total Equity | 1,959 | 2,163 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 3,601 | $ | 4,094 | ||||
(Dollars in thousands, except per share) | Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Product revenue | $ | 1,627 | $ | 2,140 | $ | 2,895 | $ | 4,679 | ||||||||
Funded research and development revenue | 418 | — | 774 | 13 | ||||||||||||
Total revenue | 2,045 | 2,140 | 3,669 | 4,692 | ||||||||||||
Operating costs and expenses: | ||||||||||||||||
Cost of product revenue | 726 | 850 | 1,271 | 1,789 | ||||||||||||
Research and product development expenses: | ||||||||||||||||
Funded research and product development | 827 | — | 1,597 | 25 | ||||||||||||
Unfunded research and product development | 345 | 387 | 705 | 858 | ||||||||||||
Total research and product development expenses | 1,172 | 387 | 2,302 | 883 | ||||||||||||
Selling, general and administrative expenses | 850 | 1,318 | 2,706 | 2,625 | ||||||||||||
Operating loss | (703 | ) | (415 | ) | (2,610 | ) | (605 | ) | ||||||||
Gain on derivatives | 16 | 29 | 18 | 73 | ||||||||||||
Other (expense) income, net | (13 | ) | (9 | ) | (28 | ) | 76 | |||||||||
Loss before income taxes and non-controlling interest | (700 | ) | (395 | ) | (2,620 | ) | (456 | ) | ||||||||
Income tax benefit | — | — | — | — | ||||||||||||
Net loss, net of tax | (700 | ) | (395 | ) | (2,620 | ) | (456 | ) | ||||||||
Plus: Net loss attributed to non-controlling interest | 263 | 298 | 949 | 553 | ||||||||||||
Net income (loss) attributed to MTI | $ | (437 | ) | $ | (97 | ) | $ | (1,671 | ) | $ | 97 | |||||
Net earnings (loss) per share attributable to MTI (Basic and Diluted) | $ | (.09 | ) | $ | (.02 | ) | $ | (.35 | ) | $ | .02 | |||||
Weighted average shares outstanding (Basic and Diluted) | 4,771,658 | 4,771,658 | 4,771,658 | 4,771,658 |
(Dollars in thousands) | Six Months Ended | |||||||
June 30, | ||||||||
2010 | 2011 | |||||||
Common Stock | ||||||||
Balance, beginning | $ | 58 | $ | 58 | ||||
Balance, ending | $ | 58 | $ | 58 | ||||
Paid-In Capital | ||||||||
Balance, beginning | $ | 133,286 | $ | 134,733 | ||||
Stock-based compensation | 1,030 | 202 | ||||||
Balance, ending | $ | 134,316 | $ | 134,935 | ||||
Accumulated Deficit | ||||||||
Balance, beginning | $ | (120,724 | ) | $ | (122,483 | ) | ||
Net income (loss) | (1,671 | ) | 97 | |||||
Balance, ending | $ | (122,395 | ) | $ | (122,386 | ) | ||
Treasury Stock | ||||||||
Balance, beginning | $ | (13,754 | ) | $ | (13,754 | ) | ||
Balance, ending | $ | (13,754 | ) | $ | (13,754 | ) | ||
Non-Controlling Interest (NCI) | ||||||||
Balance, beginning | $ | 3,156 | $ | 3,405 | ||||
Equity contribution | 990 | 458 | ||||||
Net loss attributed to NCI | (949 | ) | (553 | ) | ||||
Balance, ending | $ | 3,197 | $ | 3,310 | ||||
Total Stockholders’ Equity | ||||||||
Balance, ending | $ | 1,422 | $ | 2,163 | ||||
Total Comprehensive Income (Loss) | ||||||||
Net income (loss) | $ | (1,671 | ) | $ | 97 | |||
Other comprehensive income (loss) | — | — | ||||||
Total comprehensive income (loss) | $ | (1,671 | ) | $ | 97 | |||
(Dollars in thousands) | Six Months Ended June 30, | |||||||
2010 | 2011 | |||||||
Operating Activities | ||||||||
Net loss | $ | (2,620 | ) | $ | (456 | ) | ||
Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
Gain on derivatives | (18 | ) | (73 | ) | ||||
Depreciation and amortization | 257 | 187 | ||||||
Loss on disposal of fixed assets | — | 35 | ||||||
Stock based compensation | 1,030 | 202 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 201 | 82 | ||||||
Inventories | 42 | (242 | ) | |||||
Prepaid expenses and other current assets | (73 | ) | 27 | |||||
Accounts payable | 178 | 118 | ||||||
Deferred revenue | — | 32 | ||||||
Accrued liabilities | 65 | 212 | ||||||
Net cash provided (used) by operating activities | (938 | ) | 124 | |||||
Investing Activities | ||||||||
Purchases of property, plant and equipment | (26 | ) | (108 | ) | ||||
Net cash used by investing activities | (26 | ) | (108 | ) | ||||
Financing Activities | ||||||||
Proceeds from capital raise and warrants issued | 990 | 458 | ||||||
Net cash provided by financing activities | 990 | 458 | ||||||
Increase in cash and cash equivalents | 26 | 474 | ||||||
Cash and cash equivalents - beginning of period | 785 | 1,118 | ||||||
Cash and cash equivalents - end of period | $ | 811 | $ | 1,592 | ||||
(Dollars in thousands) | Test and | ||||||||
Measurement | |||||||||
New Energy | Instrumentation | Consolidated Totals | |||||||
December 31, 2010 | |||||||||
U.S. and State Government | $ | 111 | $ | 232 | $ | 343 | |||
Commercial | — | 743 | 743 | ||||||
Total | $ | 111 | $ | 975 | $ | 1,086 | |||
June 30, 2011 | |||||||||
U.S. and State Government | $ | 31 | $ | 11 | $ | 42 | |||
Commercial | — | 962 | 962 | ||||||
Total | $ | 31 | $ | 973 | $ | 1,004 | |||
(Dollars in thousands) | ||||||
December 31, 2010 | June 30, 2011 | |||||
Finished goods | $ | 283 | $ | 277 | ||
Work in process | 156 | 285 | ||||
Raw materials | 405 | 524 | ||||
$ | 844 | $ | 1,086 | |||
(Dollars in thousands) | Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Federal statutory tax rate | 34.00 | % | 34.00 | % | 34.00 | % | 34.00 | % | ||||||||
State taxes, net of federal tax effect | 6.14 | 6.44 | 6.04 | 6.91 | ||||||||||||
Change in valuation allowance | (40.92 | ) | (42.83 | ) | (40.27 | ) | (46.10 | ) | ||||||||
Other permanent differences, net | — | (0.12 | ) | — | (0.19 | ) | ||||||||||
Permanent tax difference on derivative valuation | 0.78 | 2.51 | 0.23 | 5.38 | ||||||||||||
Tax rate | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
Income tax (expense) benefit for the three and six months ended June 30 consists of the following: | ||||||||||||
(Dollars in thousands) | Three Months Ended | Six Months Ended | ||||||||||
June 30, | June 30, | |||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||
Operations before non-controlling interest | ||||||||||||
Federal | $ | — | $ | — | $ | — | $ | — | ||||
State | — | — | — | — | ||||||||
Total | $ | — | $ | — | $ | — | $ | — | ||||
Year Ended | Six Months Ended | |||
December 31, 2010 | June 30, 2011 | |||
Common Shares | ||||
Balance, beginning | 5,776,750 | 5,776,750 | ||
Balance, ending | 5,776,750 | 5,776,750 | ||
Treasury Stock | ||||
Balance, beginning | 1,005,092 | 1,005,092 | ||
Balance, ending | 1,005,092 | 1,005,092 | ||
December 31, 2010 | June 30, 2011 | ||||
Expected life of warrant (number of days remaining) | 365 | 182 | |||
Risk-free interest rate | 0.29 | % | 0.10 | % | |
Expected volatility of stock | 219.4 | % | 110.8 | % | |
Expected dividend yield | None | None |
Stock options outstanding | 850,236 | |
Stock options available for issuance | 715,716 | |
Warrants outstanding | 378,472 | |
Number of common shares reserved | 1,944,424 | |
MTI | Non Controlling Interest | ||||||||||||
Average | Ownership | Ownership | |||||||||||
Price | Shares | % | Shares | % | Total Shares | ||||||||
Balance at 12/31/2008 | 63,797,770 | 97.3 | 1,750,345 | 2.7 | 65,548,115 | ||||||||
Stock issued for MTI Options to MFC Employees | $ | 0.14 | 10,501 | 31,469 | |||||||||
Conversion of Bridge Loan | $ | 0.07 | 11,241,666 | 44,622,759 | 55,864,425 | ||||||||
Balance at 12/31/09 | 75,049,937 | 61.8 | 46,373,104 | 38.2 | 121,423,041 | ||||||||
Stock issued under Purchase Agreement | $ | 0.07 | 26,952,386 | 26,952,386 | |||||||||
Balance at 12/31/10 | 75,049,937 | 50.6 | 73,325,490 | 49.4 | 148,375,427 | ||||||||
Stock issued under Purchase Agreement & | $ | 0.07 | |||||||||||
Amendment | 2,904,757 | 2,904,757 | |||||||||||
Balance at 03/31/11 | 75,049,937 | 49.6 | 76,230,247 | 50.4 | 151,280,184 | ||||||||
Stock issued under Amendment | $ | 0.07 | 3,642,857 | 3,642,857 | |||||||||
Balance at 06/30/11 | 75,049,937 | 48.4 | 79,873,104 | 51.6 | 154,923,041 | ||||||||
Level 1: | Quoted market prices in active markets for identical assets or liabilities, which includes listed equities. | ||
Level 2: | Observable market based inputs or unobservable inputs that are corroborated by market data. These items are typically priced using models or other valuation techniques. These models are primarily financial industry-standard models that consider various assumptions, including the time value of money, yield curves, volatility factors, as well as other relevant economic measures. | ||
Level 3: | These use unobservable inputs that are not corroborated by market data. These values are generally estimated based upon methodologies utilizing significant inputs that are generally less observable from objective sources. |
(Dollars in thousands) | ||||||||||||
Balance at | ||||||||||||
Balance Sheet Classification | Level 1 | Level 2 | Level 3 | June 30, 2011 | ||||||||
Financial Liabilities: | ||||||||||||
Derivative liability | $ | — | $ | — | $ | — | $ | — | ||||
Total fair value of liabilities | $ | — | $ | — | $ | — | $ | — | ||||
The following is a rollforward of Level 3 fair value instruments for the twelve months ended December 31, 2010: | ||||||||||||
(Dollars in thousands) | ||||||||||||
Beginning | Total (Gains) / | Purchases, | Ending Balance | |||||||||
Balance as of | Losses Realized | Issuances, Sales | as of Dec. 31, | |||||||||
Instrument | Jan. 1, 2010 | and Unrealized | and Settlements | 2010 | ||||||||
Derivative liability | $ | 70 | $ | 3 | $ | — | $ | 73 | ||||
Total Level 3 instruments | $ | 70 | $ | 3 | $ | — | $ | 73 | ||||
The following is a rollforward of Level 3 fair value instruments for the six months ended June 30, 2011: | ||||||||||||
(Dollars in thousands) | ||||||||||||
Beginning | Total (Gains) / | Purchases, | Ending Balance | |||||||||
Balance as of | Losses Realized | Issuances, Sales | as of | |||||||||
Instrument | Jan. 1, 2011 | and Unrealized | and Settlements | June 30, 2011 | ||||||||
Derivative liability | $ | 73 | $ | (73 | ) | $ | — | $ | — | |||
Total Level 3 instruments | $ | 73 | $ | (73 | ) | $ | — | $ | — | |||
(Dollars in thousands) | Test and | Condensed | |||||||||||||||||
New | Measurement | Reconciling | Consolidated | ||||||||||||||||
Three months ended June 30, 2010 | Energy | Instrumentation | Other | Items | Totals | ||||||||||||||
Product revenue | $ | — | $ | 1,627 | $ | — | $ | — | $ | 1,627 | |||||||||
Funded research and development revenue | 418 | — | — | — | 418 | ||||||||||||||
Research and product development expenses | 931 | 241 | — | — | 1,172 | ||||||||||||||
Selling, general and administrative expenses | 66 | 506 | 278 | — | 850 | ||||||||||||||
Segment (loss) / profit from operations before | |||||||||||||||||||
income taxes and non-controlling interest | (590 | ) | 48 | (158 | ) | — | (700 | ) | |||||||||||
Segment (loss) profit | (590 | ) | 48 | (158 | ) | 263 | (437 | ) | |||||||||||
Total assets | 824 | 1,677 | 865 | — | 3,366 | ||||||||||||||
Capital expenditures | — | 13 | — | — | 13 | ||||||||||||||
Depreciation and amortization | 100 | 22 | 4 | — | 126 | ||||||||||||||
Three months ended June 30, 2011 | |||||||||||||||||||
Product revenue | $ | — | $ | 2,140 | $ | — | $ | — | $ | 2,140 | |||||||||
Funded research and development revenue | — | — | — | — | — | ||||||||||||||
Research and product development expenses | 119 | 268 | — | — | 387 | ||||||||||||||
Selling, general and administrative expenses | 388 | 545 | 385 | — | 1,318 | ||||||||||||||
Segment (loss) / profit from operations before | |||||||||||||||||||
income taxes and non-controlling interest | (582 | ) | 359 | (172 | ) | — | (395 | ) | |||||||||||
Segment (loss) profit | (582 | ) | 359 | (172 | ) | 298 | (97 | ) | |||||||||||
Total assets | 303 | 2,140 | 1,651 | — | 4,094 | ||||||||||||||
Capital expenditures | — | 90 | 5 | — | 95 | ||||||||||||||
Depreciation and amortization | 65 | 21 | 2 | — | 88 | ||||||||||||||
Six months ended June 30, 2010 | |||||||||||||||||||
Product revenue | $ | — | $ | 2,895 | $ | — | $ | — | $ | 2,895 | |||||||||
Funded research and development revenue | 774 | — | — | — | 774 | ||||||||||||||
Research and product development expenses | 1,798 | 504 | — | — | 2,302 | ||||||||||||||
Selling, general and administrative expenses | 1,173 | 978 | 555 | — | 2,706 | ||||||||||||||
Segment (loss) / profit from operations before | |||||||||||||||||||
income taxes and non-controlling interest | (2,226 | ) | (86 | ) | (308 | ) | — | (2,620 | ) | ||||||||||
Segment (loss) profit | (2,226 | ) | (86 | ) | (308 | ) | 949 | (1,671 | ) | ||||||||||
Total assets | 824 | 1,677 | 865 | — | 3,366 | ||||||||||||||
Capital expenditures | — | 26 | — | — | 26 | ||||||||||||||
Depreciation and amortization | 204 | 45 | 8 | — | 257 | ||||||||||||||
Six months ended June 30, 2011 | |||||||||||||||||||
Product revenue | $ | — | $ | 4,679 | $ | — | $ | — | $ | 4,679 | |||||||||
Funded research and development revenue | 13 | — | — | — | 13 | ||||||||||||||
Research and product development expenses | 285 | 598 | — | — | 883 | ||||||||||||||
Selling, general and administrative expenses | 781 | 1,078 | 766 | — | 2,625 | ||||||||||||||
Segment (loss) / profit from operations before | |||||||||||||||||||
income taxes and non-controlling interest | (1,107 | ) | 981 | (330 | ) | — | (456 | ) | |||||||||||
Segment (loss) profit | (1,107 | ) | 981 | (330 | ) | 553 | 97 | ||||||||||||
Total assets | 303 | 2,140 | 1,651 | — | 4,094 | ||||||||||||||
Capital expenditures | — | 103 | 5 | — | 108 | ||||||||||||||
Depreciation and amortization | 142 | 40 | 5 | — | 187 |
(Dollars in thousands) | Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Corporate and other (expenses) income: | ||||||||||||||||
Depreciation and amortization | $ | (3 | ) | $ | (2 | ) | $ | (8 | ) | $ | (5 | ) | ||||
Salaries and Benefits | (27 | ) | (176 | ) | (46 | ) | (352 | ) | ||||||||
Gain on derivatives | 16 | 29 | 18 | 73 | ||||||||||||
Income tax (expense) benefit | — | — | — | — | ||||||||||||
Other expense, net | (144 | ) | (23 | ) | (272 | ) | (46 | ) | ||||||||
Total income (expense) | $ | (158 | ) | $ | (172 | ) | $ | (308 | ) | $ | (330 | ) | ||||
(Dollars in thousands) | Six Months Ended | |||||||
June 30, | ||||||||
2010 | 2011 | |||||||
Balance, January 1 | $ | 21 | $ | 36 | ||||
Accruals for warranties issued | 14 | 23 | ||||||
Settlements made (in cash or in kind) | (7 | ) | (6 | ) | ||||
Balance, end of period | $ | 28 | $ | 53 | ||||
Six Months Ended | |||||||
(Dollars in thousands) | June 30, | ||||||
2010 | 2011 | ||||||
Cash and cash equivalents | $ | 811 | $ | 1,592 | |||
Working capital | 846 | 1,852 | |||||
Net income (loss) | (1,671 | ) | 97 | ||||
Net cash provided (used) in operating activities | (938 | ) | 124 | ||||
Purchase of property, plant and equipment | 26 | 108 |
(Dollars in thousands) | |||||||||||||||
Total Contract | |||||||||||||||
Revenues for the | Revenue Contract | Orders Received | |||||||||||||
Three Months Ended June 30, | to Date | to Date | |||||||||||||
Contract (1) | Expiration | 2010 | 2011 | June 30, 2011 | June 30, 2011 | ||||||||||
$2.3 million Air Force New PBS-4100 | |||||||||||||||
Systems | 07/28/2010 | (2) | $ | — | $ | — | $ | 2,166 | $ | 2,166 | |||||
$6.5 million Air Force Retrofit and | |||||||||||||||
Maintenance of PBS-4100 Systems | 9/27/2014 | (3) | $ | 583 | $ | 120 | $ | 2,028 | $ | 2,303 |
(Dollars in thousands) | |||||||||||||||
Total Contract | |||||||||||||||
Revenues for the | Revenue Contract | Orders Received | |||||||||||||
Six Months Ended June 30, | to Date | to Date | |||||||||||||
Contract (1) | Expiration | 2010 | 2011 | June 30, 2011 | June 30, 2011 | ||||||||||
$2.3 million Air Force New PBS-4100 | |||||||||||||||
Systems | 07/28/2010 | (2) | $ | — | $ | — | $ | 2,166 | $ | 2,166 | |||||
$6.5 million Air Force Retrofit and | |||||||||||||||
Maintenance of PBS-4100 Systems | 9/27/2014 | (3) | $ | 587 | $ | 203 | $ | 2,028 | $ | 2,303 |
(1) | Contract values represent maximum potential values and may not be representative of actual results. | |
(2) | Date represents expiration of contract, including all three option extensions. | |
(3) | Date represents expiration of contract, including all four potential option extensions. |
(Dollars in thousands) | |||||||||||||||||
Revenue | Revenue | Revenue | |||||||||||||||
Six Months | Six Months | Contract to | |||||||||||||||
Ended | % of 2010 | Ended | % of 2011 | Date | |||||||||||||
Contract | Expiration (1) | June 30, 2010 | Total | June 30, 2011 | Total | June 30, 2011 | |||||||||||
$2.9 million DOE (2) | 3/31/2011 | $ | 774 | 100 | % | $ | 6 | 50 | % | $ | 2,997 | ||||||
$296 thousand NYSERDA | 12/31/10 | $ | — | — | % | $ | 7 | 50 | % | $ | 296 |
(1) | Dates represent expiration of contract, not date of final billing. | |
(2) | The DOE contract was initially awarded for $2.4 million, effective for January 2009 through March 31, 2010. An extension to this was granted in April 2010, increasing total funding to $2.99 million and an expiration date of March 31, 2011. The DOE contract is a cost share contract. |
2010 | 2011 | Change | ||||
Inventory turnover | 2.7 | 4.0 | 1.3 | |||
Average accounts receivable days sales outstanding | 41 | 41 | — |
Less | More | ||||||||||||||
Contractual Payment Obligations | Than 1 | 1-3 | 3-5 | Than 5 | |||||||||||
(in thousands) | Year | Years | Years | Years | Total | ||||||||||
Operating Leases / Total Contractual Payment Obligations | $ | 299 | $ | 1,110 | $ | — | $ | — | $ | 1,409 | |||||
Exhibit No. | Description | |
10.20 | Lease extension and modification agreement II dated July 18, 2011 between Kingfisher, LLC and MTI MicroFuel Cells, Inc. | |
31.1 | Rule 13a-14(a)/15d-14(a) Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of Peng K. Lim | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of Frederick W. Jones | |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Peng K. Lim | |
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Frederick W. Jones | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
Mechanical Technology, Incorporated
|
||
Date: August 11, 2011 | By: | /S/ PENG K. LIM |
Peng K. Lim | ||
Chief Executive Officer | ||
By: | /S/ FREDERICK W. JONES | |
Frederick W. Jones | ||
Acting Chief Financial Officer |
1. | Section 1 of the Agreement shall remain as is. | |
2. | Section 2 of the Agreement shall be deleted and replaced with the following: | |
Tenant will pay Base Rent for the period beginning January 1, 2011 thru July 31, 2011. The Base Rent based on the current Net Usable Square Footage at $10.50 per square foot is $17,500 per month plus Tenant’s proportionate share of taxes, insurance and other building operating expenses as set forth in the original Lease making in all currently the sum of $23,451.57 per month including Base Rent and Additional Rent. The Base Rent and Additional Rent will be payable by Tenant at the rate of $5,000 per month beginning January 1, 2011 and including July 31, 2011. The balance of the Base Rent and Additional Rent shall be deferred until August 1, 2011. | ||
3. | Section 3 of the Agreement shall be deleted and replaced with the following: | |
On August 1, 2011, the unpaid portion of the rent, i.e. Base Rent plus Additional Rent of $23,451.57 per month less the $5,000 per month paid January through July of 2011 shall be due and payable in full without interest. | ||
4. | Section 4 of the Agreement shall be deleted and replaced with the following: | |
Beginning August 1, 2011 and continuing monthly through the extended term of the Lease, i.e. May 31, 2013, Tenant will pay Landlord Base Rent of $17,500 per month plus all additional rent items currently set forth in the original Lease Agreement. |
5. | Section 5 of the Agreement shall be deleted and replaced with the following: | |
Notwithstanding the provisions of paragraphs 1 through 4 above Tenant shall have a single option to terminate this Lease exercisable during the month of August, 2011, only in the event Tenant does not receive either a Department of Energy grant of $1,000,000 or greater for which Tenant has already applied, or a Department of Defense Contract of $1,000,000 or greater as to which the Tenant has submitted a bid. Tenant agrees to use its best efforts in order to obtain either or both of the Department of Energy grant and Department of Defense contract. In the event Tenant terminates this Lease as provided herein during the month of August, 2011, then in such event Tenant’s sole rental obligation to Landlord for Base Rent and Additional Rent during the period from January 1, 2011 through July 31, 2011, shall be the sum of $5,000 per month for each and every month of such period. Other than the rental obligation, Tenant shall continue to abide by and be obligated to perform all of the other terms and provisions of the Lease.
In the event the Tenant is awarded either the Department of Energy grant already applied for or the Department of Defense Contract already bid upon, then in such event Tenant shall pay Landlord not only the $5,000 per moth payments between January 1, 2011 and July 31, 2011 but also the additional monthly rental balance set forth in paragraph 2 above on August 1, 2011 and the remaining Base rent and Additional Rent provided for in paragraph 4 above commencing on August 1, 2011, through the extended term of the Lease, and otherwise perform all other terms and provisions of the Lease.
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6. | Except as modified herby, all of the terms and provisions of the Lease Agreement and all prior Amendments are hereby ratified and confirmed by the parties in all respects. | |
IN WITNESS WHEREOF, Landlord and Tenant have signed this Lease Extension and Modification Agreement as of the day and year first above written.
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/S/ EDWARD L. HOE, JR. | |
By: | Edward L. Hoe, Jr., Member Manager |
/S/ PENG K. LIM | |
By: | Peng K. Lim, Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Mechanical Technology, Incorporated; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: | |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
August 11, 2011
|
/S/ PENG K. LIM |
Peng K. Lim | |
Chief Executive Officer | |
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Mechanical Technology, Incorporated; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: | |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and | |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
August 11, 2011
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/S/ FREDERICK W. JONES |
|
Frederick W. Jones |
Acting Chief Financial Officer | |
(Principal Financial Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); and | |||
(2) | The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
August 11, 2011
|
/S/ PENG K. LIM |
|
Peng K. Lim |
Chief Executive Officer | |
(Principal Executive Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); and | |||
(2) | The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
August 11, 2011
|
/S/ FREDERICK W. JONES |
|
Frederick W. Jones |
Acting Chief Financial Officer | |
(Principal Financial Officer) |
Condensed Consolidated Balance Sheets [Parenthetical] (USD $)
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Jun. 30, 2011
|
Dec. 31, 2010
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Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 5,776,750 | 5,776,750 |
Treasury stock, shares | 1,005,092 | 1,005,092 |
Document and Entity Information
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6 Months Ended | |
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Jun. 30, 2011
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Aug. 04, 2011
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Entity Registrant Name | MECHANICAL TECHNOLOGY INC | Â |
Entity Central Index Key | 0000064463 | Â |
Current Fiscal Year End Date | --12-31 | Â |
Entity Filer Category | Smaller Reporting Company | Â |
Trading Symbol | mkty | Â |
Entity Common Stock, Shares Outstanding | Â | 5,234,883 |
Document Type | 10-Q | Â |
Amendment Flag | false | Â |
Document Period End Date | Jun. 30, 2011 | |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q2 | Â |
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Income Taxes
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Jun. 30, 2011
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Income Tax Disclosure [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Text Block] | 6. Income Taxes
The Company’s effective income tax (expense) rate from operations differed from the federal statutory rate for each of the three and six months ended June 30 as follows:
The valuation allowance at December 31, 2010 and June 30,
2011 was $27.8 and $28.0 million, respectively, and represents a full valuation allowance. The valuation allowance reflects the estimate that it is more likely than not that the net deferred tax assets in excess of deferred tax liabilities may not be realized.
At June 30, 2011, the Company had unused Federal net operating loss carry forwards of approximately $67.4 million. Of these carry forwards, $1.3 million represents windfall tax benefits from stock option transactions, the tax effect of which are not included in the Company’s net deferred tax assets. Additionally, it is estimated that $6.69 million of these carryforwards will expire prior to utilization due to IRC Section 382 limitation described below. This net operating loss limited by IRC Section 382 is not reflected in the Company’s deferred tax asset as of June 30, 2011. The Federal net operating loss carry forwards, if unused, will begin to expire in 2020.
The Company's and/or its subsidiaries’ ability to utilize their net operating loss carryforwards may be significantly limited by Section 382 of the Internal Revenue Code of 1986, as amended, if the Company or any of its subsidiaries undergoes an “ownership change” as a result of changes in the ownership of the Company's or its subsidiaries’ outstanding stock pursuant to the exercise of the warrants or otherwise. A corporation generally undergoes an “ownership change” when the ownership of its stock, by value, changes by more than 50 percentage points over any three-year testing period. In the event of an ownership change, Section 382 imposes an annual limitation on the amount of post-ownership change taxable income a corporation may offset with pre-ownership change net operating loss carryforwards and certain recognized built-in losses. As of June 30, 2011, although no formal Section 382 study has been performed, the Company does not appear to have had an ownership change for Section 382 purposes. However, as noted below, it appears that as a result of MTI Micro’s conversion of the Bridge Notes (combined with the Company’s ownership changes) MTI Micro appears to have had an ownership change for Section 382 purposes, which places limitations on the utilization of MTI Micro’s separate company net operating loss carryforwards.
As a result of the conversion of the Bridge Notes, MTI no longer maintains an 80% or greater ownership in MTI Micro. Thus, MTI Micro is no longer included in Mechanical Technology, Inc. and Subsidiaries' consolidated federal and combined New York State tax returns, effective December 9, 2009.
Pursuant to the Internal Revenue Service's consolidated tax return regulations (IRS Regulation Section 1.1502-36), upon MTI Micro leaving the Mechanical Technology, Inc. and Subsidiaries consolidated group, MTI has elected to reduce a portion of its stock tax basis in MTI Micro by “reattributing” a portion of MTI Micro’s net operating loss carryforwards to MTI, for an amount equivalent to its built in loss amount in MTI’s investment in MTI Micro’s stock.
As a result of MTI making this election with its December 31, 2009 tax return, MTI reattributed approximately $45.2 million of MTI Micro’s net operating losses (reducing its tax basis in MTI Micro’s stock by the same amount), leaving MTI Micro with approximately $13 million of separate company net operating loss carryforwards at the time of the conversion of the Bridge Notes. However, as noted above, as the result of a Section 382 limitation, caused by the conversion, it is estimated that at least $6.69 million of these net operation losses will expire prior to utilization.
As of June 30, 2011, it is estimated that MTI had net operating loss carryforwards of approximately $51.1 million and MTI Micro has net operating loss carryforwards of approximately $16.3 million (with a portion, as noted above, being subject to IRC Section 382 limitation).
As of June 30, 2011, the Company has approximately $450 thousand of research and development tax credit carry forwards, which begin to expire in 2018, and approximately $54 thousand of alternative minimum tax credit carry forwards, which have no expiration date. 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.
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Commitments and Contingencies
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Jun. 30, 2011
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Commitments and Contingencies Disclosure [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Text Block] | 11. Commitments and Contingencies
Leases
The Company and its subsidiaries lease certain manufacturing, laboratory and office facilities. The leases generally provide for the Company to pay either an increase over a base year level for taxes, maintenance, insurance and other costs of the leased properties or the Company’s allocated share of insurance, taxes, maintenance and other costs of leased properties. The leases contain renewal provisions.
The Company’s future minimum rental payments required under non-cancelable operating leases are (dollars in thousands): $299 remaining in 2011, $484 in 2012 and $365 in 2013 and $260 in 2014.
Warranties
Below is a reconciliation of changes in product warranty liabilities:
Licenses
Under a 2002 NYSERDA contract, MTI Micro agreed to pay NYSERDA a royalty of 5.0% of the sales price of any product sold incorporating IP developed pursuant to the NYSERDA contract. If the product is manufactured by a New York State manufacturer, this royalty is reduced to 1.5%. Total royalties are subject to a cap equal to two times the total contract funds paid by NYSERDA to MTI Micro, and may be reduced to reflect any New York State jobs created by MTI Micro.
Under the 2010 NYSERDA contract, MTI Micro agreed to pay NYSERDA a royalty of 5.0% of the sales price of any product sold incorporating IP developed pursuant to the NYSERDA contract. The obligation commences on the first date of the first sale of these products and is in place for fifteen years. Total royalties are subject to a cap equal to three times the total contract funds paid by NYSERDA to MTI Micro. However, if the product is manufactured by a New York State manufacturer, this royalty is reduced to 1.5% and total royalties are subject to a cap equal to one times the total contract funds paid by NYSERDA to MTI Micro.
Employment Agreements
The Company has employment agreements with certain employees that provide severance payments, certain other payments, accelerated vesting and exercise extension periods of certain options upon termination of employment under certain circumstances, as defined in the applicable agreements. As of June 30, 2011, the Company’s potential minimum cash obligation to these employees was approximately $709 thousand.
Royalty Commitment
On January 28, 2010, MTI Instruments entered into an Asset Purchase and Sale Agreement to acquire the tensile stage line of products from Ernest F. Fullam, Inc, a pioneering microscopy accessories company from Clifton Park, NY. As part of the acquisition, Mr. Peter Fullam joined MTI Instruments as a Product Sales Engineer and MTI Instruments purchased machinery, inventory and the rights to use the Fullam/MTI Instruments product name. Additionally, commencing with the calendar quarter ending March 31, 2010 and ending at the close of the calendar quarter ending December 31, 2012, MTI Instruments will pay Ernest F. Fullam, Inc. a royalty equal to 5% of the Gross Sales achieved on specific Fullam products. MTI Instruments paid Fullam $3 thousand of royalties for the six month period ending June 30, 2011.
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Liquidity and Going Concern
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6 Months Ended |
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Jun. 30, 2011
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | Â |
Liquidity Disclosure [Policy Text Block] | 2. Liquidity and Going Concern
The Company has incurred significant losses, the majority stemming from the direct methanol fuel cell product development and commercialization programs of MTI Micro, and ha
s
a consolidated accumulated deficit of $122 million and working capital of $1.9 million at June 30, 2011. The Company has projected positive cash flows to meet future cash requirements for operations and capital expenditures exclusive of MTI Micro, and has cash and cash equivalents of $1.6 million at June 30, 2011, $1.5 million without MTI Micro. Because of previous losses, limited current cash and cash equivalents, negative cash flows and accumulated deficit, the report of the Company’s independent registered public accounting firm for the year ended December 31, 2010 expressed substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of this uncertainty. However, Management believes that MTI Instruments will continue to generate positive cash flows and be able to fund its current operations. Furthermore, due to ongoing Corporate cost savings initiatives, the Company currently believes that the positive cash flows generated by MTI Instruments will be sufficient enough to cover the parent company’s operations for the foreseeable future.
At present, the Company does not expect to continue to fund MTI Micro on a long-term basis. Since the company will no longer fund MTI Micro, MTI Micro has sought other sources of funding. In September 2008, MTI Micro closed on $2.2 million of funding in the form of convertible secured notes (the “Bridge Notes”) to investors (the “Bridge Investors”), including MTI, Dr. Walter L. Robb, a member of the Company’s and MTI Micro’s Boards of Directors, and Counter Point Ventures Fund II, LP (Counter Point). Counter Point is a venture capital fund sponsored and managed by Dr. Walter L. Robb. In February 2009, MTI Micro issued additional bridge notes to Counter Point in the amount of $500 thousand. On April 15, 2009, MTI Micro, Counter Point and an additional investor agreed to additional bridge notes in the amount $800 thousand to be drawn down in increments not to exceed $165 thousand monthly. The final principal draw down occurred on December 4, 2009. The Bridge Notes carried an annual interest rate of 10%. On December 9, 2009, these bridge notes with the aggregate principal and accrued interest amount of $3,910,510 outstanding were converted into an aggregate of 55,864,425 shares of Common Stock of MTI Micro using a conversion price per share of $0.070 (the “Negotiated Conversion”).
On January 11, 2010, MTI Micro entered into a Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”) with Counter Point. The total $2 million has been drawn against this Purchase Agreement. As a result of this Purchase Agreement, Counter Point received 28,571,429 shares of MTI Micro stock and 5,714,286 warrants. See Note 8 for further discussion of this transaction.
On February 9, 2011, Amendment No. 1 to Common Stock and Warrant Purchase Agreement (the “Amendment”) was entered into between MTI Micro and Counter Point. The Amendment allowed MTI Micro to draw down an additional $450 thousand in exchange for 6,428,574 shares of MTI Micro Common Stock and 1,285,715 warrants. The funds were available through monthly “Closings”, with $90 thousand being drawn down for the month of February, $45 thousand in April, $210 thousand in May, and the final $105 thousand in August. See Note 8 for further discussion of this transaction.
On April 16, 2009, MTI Micro was awarded a cost share funding grant of $2.4 million from the United States Department of Energy (DOE) as part of DOE’s $41.9 million in American Recovery and Reinvestment Act funding for fuel cell technology. On April 30, 2010, MTI Micro was approved for an extension of this grant to December 31, 2010, with additional funds available of $594 thousand under this program. As of April 25, 2011, all amounts awarded have been billed and paid by the DOE under this grant.
On July 28, 2010, MTI Micro was awarded a cost share funding grant of $296 thousand from the New York State Energy Research and Development Authority (NYSERDA). MTI Micro has billed $296 thousand for work performed to date, and received $266 thousand through June 30, 2011.
On October 26, 2010, MTI Micro was awarded a $100 thousand firm fixed contract from a United States Department of Defense agency for the development of proof of concept fuel cells for technical testing and subsequent demonstration in a capabilities based experiment. The total contract has been billed and received as of June 30, 2011.
In order to continue full commercialization of its micro fuel cell solution, MTI Micro will need to do one or more of the following to raise additional resources, or reduce its cash requirements:
There is no guarantee that resources will be available to MTI Micro on terms acceptable to it, or at all, or that such resources will be received in a timely manner, if at all, or that MTI Micro will be able to reduce its expenditure run-rate further without materially and adversely affecting its business. MTI Micro had cash and cash equivalents of $138 thousand as of June 30, 2011. MTI Micro drew down the final $105 thousand available through the Amendment in the month of August. MTI Micro has $30 thousand in outstanding invoices on the NYSERDA contract. In order to conserve cash and extend operations while MTI Micro pursues any additional necessary financing, MTI Micro has reduced operating expenses in the first half of 2011. Without other resources, management currently believes it will need to make significant changes to, curtail or discontinue MTI Micro’s operations before the end of the third quarter of 2011.
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Issuance of Stock, Warrants and Stock Options by MTI Micro
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Issuanceofstockwarrantstovariableinterestentityandstockoption [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance Of Stock Warrants To Variable Interest Entity and Stock Option [Text Block] | 8. Issuance of Stock, Warrants and Stock Options by MTI Micro
Common Stock Issued – MTI Micro
MTI Micro was formed on March 26, 2001, and, as of June 30, 2011, the Company owned approximately 48.4% of MTI Micro’s outstanding common stock, or 75,049,937 shares, and 54.1% of the common stock and warrants issued, which includes 32,904,136 warrants outstanding. The number of MTI Micro common stock shares authorized for issuance is 240,000,000 as of June 30, 2011.
On January 11, 2010, MTI Micro entered into a Common Stock and Warrant Purchase Agreement (the “Purchase Agreement”) with Counter Point Ventures Fund II, L.P. (“Counter Point”). Counter Point is managed by Dr. Walter L. Robb, a member of the Board of Directors of the Company and MTI Micro, and is a current stockholder of MTI Micro. Pursuant to the Purchase Agreement, MTI Micro issued and sold to Counter Point 28,571,429 shares of common stock, par value $0.01 per share (the “Micro Common Stock”), at a purchase price per share of $0.070, over a period of twelve (12) months, and warrants (“Warrants”) to purchase shares of Micro Common Stock equal to 20% of the shares of Micro Common Stock purchased under the Purchase Agreement at an exercise price of $0.070 per share. The sale and issuance of the Micro Common Stock and Warrants occurred over multiple closings (each, a “Closing”). Nine Closings occurred through December 31, 2010, with MTI Micro raising $1.89 million from the sale of 26,952,386 shares of Micro Common Stock and Warrants to purchase 5,390,477 shares of Micro Common Stock to Counter Point. The final Closing occurred on January 5, 2011, whereby MTI Micro drew down the remaining $113 thousand available under the Purchase Agreement.
On February 9, 2011, Amendment No. 1 to Common Stock and Warrant Purchase Agreement (the “Amendment”) was entered into between MTI Micro and Counter Point. The Amendment allowed MTI Micro to draw down an additional $450 thousand in exchange for 6,428,574 shares of MTI Micro Common Stock and 1,285,715 warrants. The funds were available through monthly “Closings”, with $90 thousand drawn down for the month of February, $45 thousand for the month of April, $210 thousand for the month of May, and the final $105 thousand for the month of August.
Dr. Robb and Counter Point beneficially held approximately 41.4% of the common stock and warrants of MTI Micro of December 31, 2010, and as of June 30, 2011 hold an aggregate of approximately 43.7% of the common stock and warrants of MTI Micro.
The following table represents changes in common shares of MTI Micro, broken down between MTI holdings and non-controlling interests:
Warrants Issued – MTI Micro
On December 9, 2009, MTI Micro issued warrants to the current shareholders of MTI Micro, including the Company, without consideration, to purchase 32,779,310 shares of MTI Micro Stock at an exercise price of $0.07 per share. The warrants became exercisable on December 9, 2010 and expire on December 8, 2017. The warrants have been accounted for as an equity distribution of $2.03 million, including warrants to the Company with a value of $1.97 million that were eliminated in consolidation.
On December 9, 2009, MTI Micro issued warrants to the Bridge Investors of MTI Micro, including the Company, to purchase 5,081,237 shares of MTI Micro Stock at an exercise price of $0.07 per share. The Warrants became exercisable on December 9, 2009 and will expire on the earlier of: (i) April 15, 2014; (ii) immediately prior to a change in control; or (iii) immediately prior to an initial public offering of MTI Micro. The warrants were issued without consideration and were accounted for as equity and a loss on extinguishment of debt was recorded in the amount of
$289 thousand, including warrants to the Company with a value of $57 thousand that were eliminated in consolidation.
MTI Micro issued 5,714,286 warrants to Counter Point to purchase shares of MTI Micro Stock at an exercise price of $0.07 per share under the Purchase Agreement. The warrants became exercisable on the date of issuance and will expire on the earlier of (a) the five (5) year anniversary of the Date of Issuance of the Warrant; (b)
immediately prior to a Change of Control; or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement
under the Securities Act. The warrants were accounted for as equity.
Through June 30, 2011, under the Amendment MTI Micro has issued 985,714 warrants to Counter Point to purchase shares of MTI Micro Stock at an exercise price of $0.07 per share. The warrants became exercisable on the date of issuance and will expire on the earlier of (a) the five (5) year anniversary of the Date of Issuance of the Warrant; (b)
immediately prior to a Change of Control; or (c) the closing of a firm commitment underwritten public offering pursuant to a registration statement
under the Securities Act. The warrants were accounted for as equity.
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Fair Value Measurement
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Fair Value Disclosures [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Text Block] |
9. Fair Value Measurement
The estimated fair value of certain financial instruments, including cash, cash equivalents and short-term debt approximates their carrying value due to their short maturities and varying interest rates. “Fair value” is the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation methods, the Company is required to provide the following information according to the fair value accounting standards. These standards established a fair value hierarchy that ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities are classified and disclosed in one of the following three categories:
In determining the appropriate levels, the Company performs a detailed analysis of financial assets and liabilities. At each reporting period, all assets and liabilities for which the fair value measurements are based upon significant unobservable inputs are classified as Level 3. The derivative liability is valued using the Black-Sholes Option Pricing Model which is based upon unobservable inputs. The following is a summary of the Company’s fair value instruments categorized by their associated fair value input level:
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Stockholders' Equity
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Stockholders' Equity Note [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders Equity Note Disclosure Excluding Issuance Of Stock Warrant To Variable Interest Entity and Stock Option [Text Block] | 7. Stockholders’ Equity
Changes in common shares issued and treasury stock outstanding are as follows:
Warrants Issued
On December 20, 2006, the Company issued warrants to investors to purchase 378,472 shares of the Company’s common stock at an exercise price of $18.16 per share. These warrants will be fair valued by the Company
until expiration or exercise of the warrants. The warrants became exercisable on June 20, 2007 and expire on December 19, 2011.
We recognize all derivatives as either assets or liabilities in the statement of financial position and measure these instruments at fair value. The fair value of the derivative is recorded in the “Derivative liability” line on the financial statements, and is valued quarterly using the Black-Scholes Option Pricing Model. The significant assumptions used for the valuations are as follows:
The Company also follows the accounting provisions for Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in, a Company’s Own Stock, which requires freestanding contracts that are settled in a company’s own stock, including common stock warrants, to be designated as an equity instrument, asset or a liability. A contract designated as an asset or a liability must be carried at fair value, with any changes in fair value recorded in the results of operations. A contract designated as an equity instrument can be included in equity, with no fair value adjustments required. Based on the terms and conditions of the warrants discussed above, the instrument does not qualify to be designated as an equity instrument and is therefore recorded as a derivative liability.
The fair value of the warrants at December 31, 2010 and June 30, 2011 was $73 thousand and $0, respectively. Gains on derivatives are included in “Gain on derivatives” in the Consolidated Statement of Operations. During the six month periods ending June 30, 2010 and 2011, the Company recognized a gain on derivatives of $18 thousand and $73 thousand, respectively.
Reservation of Shares
The Company has reserved common shares for future issuance as of June 30, 2011 as follows:
Earnings (Loss) per Share
Not included in the computation of earnings per share, assuming dilution for the three and six months ended June 30, 2010, were options to purchase 707,716 shares of the Company’s common stock, warrants to purchase 378,472 shares of the Company’s common stock, and options to purchase 27,520,001 shares of MTI Micro’s common stock. These potentially dilutive items were excluded because the Company incurred a loss for this period and their inclusion would be anti-dilutive.
Not included in the computation of earnings per share, assuming dilution for the three and six months ended June 30, 2011, were options to purchase 850,236 shares of the Company’s common stock, warrants to purchase 378,472 shares of the Company’s common stock, and options to purchase 32,416,820 shares of MTI Micro’s common stock. These potentially dilutive items were excluded because the average market price of the common stock for both entities exceeded the exercise prices of the options and warrants for this period.
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Basis of Presentation
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Basis Of Accounting Disclosure [Abstract] | Â |
Basis of Accounting [Text Block] | 3. Basis of Presentation
In the opinion of management, our Financial Statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the periods presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and with the instructions to Form 10-Q in Article 10 of SEC Regulation S-X. The results of operations for the interim periods presented are not necessarily indicative of results for the full year.
Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
The information presented in the accompanying condensed consolidated balance sheet as of December 31, 2010 has been derived from the Company’s audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. All other information has been derived from the Company’s unaudited condensed consolidated financial statements for the three months ended June 30, 2011.
Variable Interest Entities
The Company has performed an analysis under the Variable Interest Entity ("VIE") model and determined that MTI Micro is a VIE. One of the criteria for determining whether an entity is a VIE is determining if the entity (MTI Micro) has equity at risk. Management has concluded that MTI Micro does not have equity at risk to fund operations into its next phase of development. Further, it has been determined that the Company is the primary beneficiary of MTI Micro, and therefore should continue to include MTI Micro’s results of operations in the Companies’ consolidated financial statements as of June 30, 2011.
The Company's analysis to determine the primary beneficiary of MTI Micro focused primarily on determining which variable interest holder had the power to direct the activities which the Company believes would have the most significant impact on the financial performance of MTI Micro. MTI Micro is governed by its own board of directors and significant decisions are determined by a majority vote of this board. MTI does not have control of the MTI Micro board of directors; however, at this time, the Company’s board of directors and the MTI Micro board of directors consist of the same members. Under the Articles of Incorporation of MTI Micro, each share of MTI Micro stock is entitled to a vote, and further, holders of a majority of the shares of MTI Micro's common stock have the ability to reconstitute the board. As of June 30, 2011, upon additional equity financings from Counter Point (discussed in note 8), MTI, Counter Point and Dr. Robb own 48.4%, 44.2%, and 5.2% of the outstanding common stock of MTI Micro, respectively. As a result, a majority share is not held by one party but is shared amongst the related party group: MTI, Counter Point and Dr. Walter Robb. In situations in which a reporting entity concludes that neither it nor one of its related parties has power but, as a group, the reporting entity and its related parties have the power, then the party within the related party group that is most closely associated with the VIE is the primary beneficiary. MTI continues to oversee the day to day operations and exercise management decision making and to have a vested interest in the commercialization of MTI Micro. Since inception in 2001, MTI has made the largest investment and been the principal funder of MTI Micro. MTI is exposed to losses and has the ability to benefit from MTI Micro. Considering the facts and circumstances, management believes MTI is most closely associated with the VIE and therefore, as of June 30, 2011, is the primary beneficiary and has continued to consolidate MTI Micro into its results of operations.
Should there be a change in the facts and circumstances (such as a change in governance or a change to the related party group) management will reassess whether they act as the primary beneficiary and should continue to include MTI Micro in the Company’s results of operations.
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Accounts Receivable
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Loans, Notes, Trade and Other Receivables Disclosure [Text Block] |
4. Accounts Receivable
Receivable balances consist of the following at:
For the six months ended June 30, 2010 and 2011, the largest commercial customer represented 8.2% and 17.1%, respectively, and a U.S. governmental agency represented 20.8% and 7.7%, respectively, of the Company’s test and measurement instrumentation segment product revenue. As of December 31, 2010 and June 30, 2011, the largest commercial customer represented 7.2% and 0.0%, respectively, and a U.S. governmental agency represented 23.8% and 1.1%, respectively, of the Company’s test and measurement instrumentation segment accounts receivable.
As of December 31, 2010 and June 30, 2011, a state agency represented 95% and 100%, respectively, of the accounts receivable of the new energy segment.
As of December 31, 2010 and June 30, 2011, the Company had no reserve for doubtful trade accounts receivable.
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Subsequent Events
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Subsequent Events [Abstract] | Â |
Subsequent Events [Text Block] | 12. Subsequent Events
On July 5, 2011 the Board of Directors (the “Board”) approved the adoption of the Amended and Restated 2006 Equity Incentive Plan (the “Amended Plan”), effective June 30, 2011, for the purpose of increasing the aggregate number of shares of Common Stock the Company may issue under the Amended Plan from 600,000 to 1,200,000. In addition, the Board approved the grant of 15,000 shares of fully vested restricted Common Stock (the “stock”) under the Amended Plan to each of its four outside directors. Peng K. Lim, the Company’s Chief Executive Officer, was granted 403,225 shares of the Stock. All expenses related to these transactions will be accounted for in the third quarter of 2011. Further details are available in the Company’s Form 8K filed on July 5, 2011 with the SEC.
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Inventories
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Inventory Disclosure [Text Block] | 5. Inventories
Inventories consist of the following at:
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Condensed Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Loss (USD $)
In Thousands |
Common Stock [Member]
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Paid-In Capital [Member]
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Accumulated Deficit [Member]
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Treasury Stock [Member]
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Non-Controlling Interest (NCI) [Member]
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Total
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Total Comprehensive Income (Loss) [Member]
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Balance at Dec. 31, 2009 | $ 58 | $ 133,286 | $ (120,724) | $ (13,754) | $ 3,156 | $ 2,022 | Â |
Stock-based compensation | Â | 1,030 | Â | Â | Â | 1,030 | Â |
Net income (loss) | Â | Â | (1,671) | Â | Â | (1,671) | (1,671) |
Equity contribution | Â | Â | Â | Â | 990 | 990 | Â |
Net loss attributed to NCI | Â | Â | Â | Â | (949) | (949) | Â |
Other Comprehensive income (loss) | Â | Â | Â | Â | Â | Â | 0 |
Total comprehensive income (loss) | Â | Â | Â | Â | Â | Â | (1,671) |
Balance at Jun. 30, 2010 | 58 | 134,316 | (122,395) | (13,754) | 3,197 | 1,422 | Â |
Balance at Dec. 31, 2010 | 58 | 134,733 | (122,483) | (13,754) | 3,405 | 1,959 | Â |
Stock-based compensation | Â | 202 | Â | Â | Â | 202 | Â |
Net income (loss) | Â | Â | 97 | Â | Â | 97 | 97 |
Equity contribution | Â | Â | Â | Â | 458 | 458 | Â |
Net loss attributed to NCI | Â | Â | Â | Â | (553) | (553) | Â |
Other Comprehensive income (loss) | Â | Â | Â | Â | Â | Â | 0 |
Total comprehensive income (loss) | Â | Â | Â | Â | Â | Â | 97 |
Balance at Jun. 30, 2011 | $ 58 | $ 134,935 | $ (122,386) | $ (13,754) | $ 3,310 | $ 2,163 | Â |
Description of Business
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | Â |
Nature of Operations [Text Block] | 1. Description of Business
Mechanical Technology, Incorporated, (“MTI” or the “Company”), a New York corporation, was incorporated in 1961. MTI operates in two segments, the Test and Measurement Instrumentation segment, which is conducted through MTI Instruments, Inc. (“MTI Instruments”), a wholly-owned subsidiary, and the New Energy segment which is conducted through MTI MicroFuel Cells Inc. (“MTI Micro”), a variable interest entity that is included in these consolidated statements.
MTI Instruments was incorporated in New York on March 8, 2000 and is a worldwide supplier of precision non-contact physical measurement solutions, condition based monitoring systems, portable balance equipment and wafer inspection tools. MTI Instrument’s products use a comprehensive array of technologies to solve complex, real world applications in numerous industries including manufacturing, semiconductor, solar, commercial and military aviation, automotive and data storage. Their products consist of electronic gauging instruments for position, displacement and vibration application within the design, manufacturing/production, test and research market; wafer characterization of semi-insulating and semi-conducting wafers within both the semiconductor and solar industries; tensile stage systems for materials testing at academic and industrial settings; and engine vibration analysis systems for both military and commercial aircraft.
MTI Micro was incorporated in Delaware on March 26, 2001, and is developing Mobion®, a handheld energy-generating device to replace current lithium-ion and similar rechargeable battery systems in many handheld electronic devices for the military and consumer markets. Mobion® handheld generators are based on direct methanol fuel cell (DFMC) technology, which has been recognized as enabling technology for advanced portable power sources by the scientific community and industry analysts. As the need for advancements in portable power increases, MTI Micro is developing Mobion®
as a solution for advancing current and future electronic device power needs of the multi-billion dollar portable electronics market. As of June 30, 2011, the Company owned approximately 48.4% of MTI Micro’s outstanding common stock.
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Segment Information
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Jun. 30, 2011
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Segment Reporting Disclosure [Text Block] | 10. Segment Information
The Company operates in two business segments,
New Energy
and Test and Measurement Instrumentation. The New Energy segment is focused on commercializing direct methanol fuel cells. The Test and Measurement Instrumentation segment designs, manufactures, markets and services high performance test and measurement instruments and systems, wafer characterization tools for the semiconductor and solar industries and computer-based balancing systems for aircraft engines. The Company’s principal operations are located in North America.
The accounting policies of the New Energy and Test and Measurement Instrumentation segments are similar to those described in the summary of significant accounting policies in the Company’s Annual Report on Form 10-K. The Company evaluates performance based on profit or loss from operations before income taxes, accounting changes, items management does not deem relevant to segment performance, and interest income and expense. Inter-segment sales and expenses are not significant.
Summarized financial information concerning the Company’s reportable segments is shown in the following table. The “Other” column includes corporate related items and items such as income taxes or unusual items, which are not allocated to reportable segments. The “Reconciling Items” column includes non-controlling interests in a consolidated entity. In addition, segments’ non-cash items include any depreciation and amortization in reported profit or loss.
The following table presents the details of “Other” segment loss:
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