Mechanical Technology Incorporated (Nasdaq: MKTY) has reported financial results for its second quarter ended June 30, 2006.
For the three months ended June 30, 2006, the Company reported net loss of $3.222 million, or $(0.10) per diluted share, on revenues of $1.793 million while total cash used during the quarter totaled $0.266 million. Revenues included $1.700 million in product revenue generated by the Company’s subsidiary, MTI Instruments, Inc. (MTI Instruments) and $0.093 million in funded research and development revenues generated by the Company’s subsidiary, MTI MicroFuel Cells Inc. (MTI Micro).
This compares with net loss of $2.793 million, or $(0.09) per diluted share, on revenues of $1.665 million — $1.285 million generated by MTI Instruments and $0.380 million generated by MTI Micro — for the same period of 2005. The $0.415 million increase in MTI Instruments product revenue is the result of capacitance product sales, which have increased 18% since last year ($0.377 million in 2006 versus $0.319 million in 2005). Increases were also recorded totaling $0.249 million in aviation revenue and $0.087 million in semiconductor sales. There was also a $0.287 million decrease in funded research and development revenue at MTI Micro primarily due to the suspension of existing Department of Energy (DOE) funding for 2006 and the completion of other programs which were active in 2005.
Operating loss for the second quarter of 2006 increased by $0.688 million, to $4.961 million compared to $4.273 million for the same period in 2005. This increase includes positive and negative revenue and expense changes and the effects of the mandated adoption at the beginning of 2006 of the new accounting standard for share-based payments, which requires that the value of share-based compensation be estimated and recorded as an expense over the related service period.
In the past, the Company only disclosed this information in its footnotes. These changes include: increased costs for non-cash share-based compensation of $1.229 million; increased costs in research and product development expenses totaling $0.081 million — primarily related to an increase in development costs at MTI Instruments for new product development and current product enhancement programs and personnel; decreased funded research and development revenues of $0.287 million; partially offset by an increase of $0.206 million in gross margins related to the MTI Instruments sales increase and product mix change; and cost savings in selling, general and administrative expenses (SG&A) totaling $0.703 million — primarily reflecting savings attributable to reduced employee costs .
Results for the second quarter of 2006 included a $2.544 million gain on the sale of securities available for sale compared to a $9.635 million gain for the same period in 2005. Further, the second quarter of 2006 included no loss on derivatives while the comparable period in 2005 included a loss of $7.173 million.
For the quarter ended June 30, 2006, cash used in operations was $3.737 million while cash used for capital expenditures was $0.251 million.
Six-Month Financial Results
For the six months ended June 30, 2006, MTI reported a net loss of $6.653 million or $(0.21) per diluted share, on revenues of $3.351 million. Revenues included $3.213 million in product revenue generated by MTI Instruments and $0.138 million in funded R&D revenue generated by MTI Micro. This compares with a net loss of $8.847 million, or $(0.29) per diluted share, on revenues of $3.392 million during the same period of 2005, with $2.688 million in product revenue generated by MTI Instruments and $0.704 million in funded R&D revenue generated by MTI Micro.
Product revenue increased by $0.525 million from the prior year period, primarily as the result of capacitance product sales, which have increased 65.2 % since last year ($1.031 million in 2006 versus $0.624 million in 2005) and are primarily due to new business and increased shipments to a distributor in Singapore. Increases were also recorded in aviation sales up $0.086 million due to commercial sales and in semi-conductor sales by $0.092 million while other sales were down $0.060 million. The decrease in funded R&D revenue of $0.566 million is primarily the result of suspension of existing DOE funding for 2006 and the completion of other programs that were active in 2005.
Operating loss for the six months ended June 30, 2006 increased by $0.720 million, to $9.562 million compared to $8.842 million for the same period in 2005. This increase includes positive and negative revenue and expense changes and the effects of the mandated adoption at the beginning of 2006 of the new accounting standard for share-based payments, which requires that the value of share-based compensation be estimated and recorded as an expense over the related service period.
In the past, the Company only disclosed this information in its footnotes. These changes include: increased costs for non- cash stock-based compensation of $1.579 million; an increase of $0.379 million in gross margins related to the MTI Instruments sales increase and product mix change; cost savings in selling, general and administrative expenses (SG&A) totaling $0.932 million- primarily reflecting savings attributable to reduced employee costs and decreased license payments; decreased costs in research and product development expenses totaling $0.114 million- primarily related to a decrease in development costs at MTI Micro for funded projects due to the change in active contracts from 2005 to 2006; and decreased funded research and development revenues of $0.566 million.
Results for the first six months of 2006 included a $3.810 million gain on the sale of securities available for sale compared to a $9.635 million gain for the comparable 2005 period. MTI recorded no loss on derivatives during the first six months of 2006 compared to a loss of $10.407 million on derivative accounting for the comparable period in 2005 when the derivative was exercised in full.
For the six months ended June 30, 2006, cash used in operations was $7.124 million while cash used for capital expenditures was $0.513 million.
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