MTI Reports First Quarter 2009 Results

Business development and financial results

ALBANY, N.Y.– Mechanical Technology, Incorporated (“MTI”) (OTC: MKTY), a company primarily engaged in the development and commercialization of Mobion(R) off-the-grid portable power solutions through its subsidiary MTI MicroFuel Cells Inc. (“MTI Micro”) and in the design, manufacture and sale of test and measurement instruments and systems through its subsidiary MTI Instruments, Inc. (“MTI Instruments”), today announced its financial results for the quarter ended March 31, 2009.

“Both MTI Micro and MTI Instruments have had successful achievements in both technical improvements and business development. We believe MTI Micro has reached a stage where the Mobion(R) platform can accommodate the commercialization of the micro fuel cell system in various applications in diverse industries. MTI Instruments has made strides in the solar industry, especially in Europe,” said Peng Lim, Chief Executive Officer of MTI. “At MTI Instruments, we plan to further expand our product offerings to different continents and at MTI Micro we continue to develop and partner with additional OEMs to achieve our goal of making Mobion(R) a standard power source for portable electronic devices.”

Recently, MTI Micro received an additional $0.8 million bridge loan commitment from an existing and a new investor bringing the total bridge loan amount to $3.5 million, of which $3.08 million has been drawn to date. In addition, the U.S. Department of Energy (DOE) awarded MTI Micro a $2.4 million grant to help accelerate micro fuel cell deployment in portable electronics.

Financial Highlights: First Quarter 2009

    --  Net loss was $1.2 million, a reduction of $2 million in losses from Q1
        of 2008.
    --  Cash used in operations decreased 53% to $1.4 million

Recent Developments

    --  May 05, 2009 - MTI Micro announced a developers program aimed at
        engineers and product designers at qualified OEMs. The developer program
        includes access to MTI Micro's expert engineering support team and a
        developers' kit which contains a Mobion(R) Fuel Cell system, a
        monitoring software CD, a compact methanol cartridge, a user's operation
        manual and a design guideline booklet. This developer program allows the
        OEMs to explore the opportunities to develop a greener and longer
        run-time power source alternative to batteries.
    --  April 21, 2009 - MTI Micro announced a collaboration agreement with a
        top-tier power tool manufacturer in the industrial market segment. This
        collaboration agreement opens the door to further expand the Mobion(R)
        technology for various applications as an independent power source.
    --  April 16, 2009 - MTI Micro was awarded a $2.4 million grant by the U.S.
        Department of Energy (DOE) with the intent of developing and deploying
        fuel cells technology while laying the foundation for a green energy
        economy. MTI Micro was the only micro fuel cells manufacturer to receive
        an award in this program. This program will help MTI Micro to further
        develop manufacturing processes for Mobion(R) fuel cell systems, reduce
        overall costs and help accelerate fuel cell use to power portable
        electronic devices in the consumer market.
    --  March 27, 2009 -- MTI Micro announced a collaboration agreement with a
        leading U.S. based OEM of portable chargers. With the U.S. based OEM
        global market channels and impressive reputation in the portable charger
        business, it brings MTI Micro closer to its planned commercialization
        process. This agreement is in addition to our current OEM partners with
        Samsung, NeoSolar and with a global Japanese camera manufacturer, as
        well as a letter of intent from Duracell.

First Quarter Financial Results

Revenue for the three months ended March 31, 2009 decreased 31.8 percent to $1.5 million compared to revenue of $2.2 million for the same period in 2008. First quarter revenue in 2009 was solely from MTI Instruments, as compared to $2.0 million in product revenue from MTI Instruments and $173,000 in funded Research and Development (“R&D”) revenue from MTI Micro in the first quarter of 2008. The revenue decrease in MTI Instruments was primarily the result of a $503,000 decrease in general dimensional gauging sales due to significantly lower sales to a Japanese and a domestic OEM. Otherwise, semiconductor / solar sales increased $123,000 and aviation sales remained comparable to that of the first three months of last year. Funded R&D revenue of $173,000 in the 2008 period represented reimbursement from the DOE. MTI Micro’s final billing occurred in December 2008.

Net loss for the three months ended March 31, 2009 of $1.2 million, or $0.26 per diluted share, was significantly lower than a loss of $3.2 million, or $0.67 per share for the three months ended March 31, 2008. The decrease in net loss for the first quarter of 2009 compared to 2008 includes the effects of positive and negative revenue and expense changes. These changes include decreases in funded R&D revenue, cost savings in R&D spending, decreases in Selling, General and Administrative expenses, and a decrease in gain on derivatives. Gross margin percentages on product sales for the three months ended March 31, 2009 remained consistent with the comparable period in 2008.

Cash flows: For the three months ended March 31, 2009, cash used in operations decreased by 53.3 percent to $1.4 million compared to $3.0 million in 2008, while no cash was used for capital expenditures in 2009 compared to $102,000 in 2008. Net borrowings on related party loans was $500,000 for the quarter ended March 31, 2009.

See the attached financial highlights for the Company’s first quarter ended March 31, 2009.

About MTI

MTI is primarily engaged in the development and commercialization of Mobion(R) off-the-grid portable power solutions through its subsidiary MTI MicroFuel Cells Inc. (“MTI Micro”). MTI Micro has a team of entrepreneurial business executives, researchers and scientists; a proprietary direct methanol micro fuel cell power system and a number of system prototypes demonstrating size reductions and performance improvements; and related intellectual property. MTI Micro has received government funding and developed strategic partnerships to facilitate efforts to achieve commercialization. MTI is also engaged in the design, manufacture, and sale of test and measurement instruments and systems through its subsidiary MTI Instruments, Inc. For more information about the Company please visit www.mechtech.com.

(Financial Table Attached)

Statements in this press release which are not historical fact including statements regarding management’s intentions, hopes, goals, beliefs, expectations, projections, plans, anticipation, outlook or predictions of the future are forward looking statements. Such statements include the expectation of our ability to commercialize our Mobion fuel cell system and expand MTI Instruments sales internationally. All forward-looking statements are made as of today, and MTI disclaims any duty to update such statements. It is important to note that the Company’s actual results could differ materially from those projected in forward-looking statements. Factors that could cause the anticipated results not to occur include the lack of liquidity in our common stock; and the risk factors listed from time to time in the Company’s SEC reports including but not limited to, our annual report on Form 10-K for the year ended December 31, 2008 and our quarterly report on Form 10-Q for the quarter ended March 31, 2009.

Balance Sheet Data:                                 December 31,  March 31,

                                                    2008          2009

(Dollars in Thousands)                              (Audited)     (Unaudited)

Assets

Current Assets:

Cash and cash equivalents                           $ 1,662       $794

Accounts receivable                                 540           566

Inventories, net                                    1,509         1,415

Prepaid expenses and other current assets           272           382

Total Current Assets                                3,983         3,157

Long Term Assets:

Property, plant and equipment, net                  1,528         1,353

Total Assets                                        $ 5,511       $ 4,510

Liabilities and Stockholders' Equity

Current Liabilities:

Accounts payable                                    $ 508         $ 547

Accrued liabilities                                 1,648         1,410

Deferred revenue                                    8             12

Bridge note payable - related party, at fair value  1,544         2,087

Income taxes payable                                23            23

Total Current Liabilities                           3,731         4,079

Long-Term Liabilities:

Uncertain tax position liability                    213           __

Derivative liability                                41            23

Total Long-Term Liabilities                         254           23

Total Liabilities                                   3,985         4,102

Stockholders' Equity                                1,526         408

Total Liabilities and Stockholders' Equity          $ 5,511       $ 4,510



Statements of Operations Data:                    Three Months Ended

                                                  March 31,      March 31,

                                                  2008           2009

(Dollars in Thousands, Except per Share Data)     (Unaudited)    (Unaudited)

Revenues:

Product revenue                                   $ 1,980        $ 1,549

Funded research and development revenue             173          __

Total revenues                                      2,153          1,549

Operating costs and expenses:

Cost of product revenue                             840            665

Research and product development expenses:

Funded research and product development             356          __

Unfunded research and product development           2,017          976

Total research and product development expenses     2,373          976

Selling, general and administrative expenses        2,618          1,377

Operating loss                                      (3,678    )    (1,469    )

Interest Expense                                  __               (43       )

Gain on derivatives                                 333            18

Other income, net                                   42             21

Loss before income taxes and non-controlling        (3,303    )    (1,473    )
interest

Income tax (expense)                                (8        )    194

Net loss, net of tax                                (3,311    )    (1,279    )

Net loss attributed to non-controlling interest     124            35

Net loss attributed to MTI                        $ (3,187    )  $ (1,244    )

Loss per Share (Basic and Diluted):

Loss per share                                    $ (0.67     )  $ (0.26     )

Statements of Cash Flows Data:                    Three Months Ended

                                                  March 31,      March 31,

                                                  2008           2009

(Dollars in Thousands)                            (Unaudited)    (Unaudited)

Net cash used by operating activities             $ (2,988    )  $ (1,368    )

Purchases of property, plant and equipment          (102      )  __

Net cash (used) provided by investing activities    (102      )  __

Net borrowings on related party debt              __               500

Net cash provided by financing activities         __               500

Decrease in cash and cash equivalents               (3,090    )    (868      )

Cash and cash equivalents -- beginning of period    7,650          1,662

Cash and cash equivalents -- end of period        $ 4,560        $ 794



    Source: Mechanical Technology, Incorporated

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