MTI Reports First Quarter 2008 Results

Mechanical Technology, Incorporated (“MTI”) (NASDAQ: MKTY), a company primarily engaged in the development and commercialization of Mobion 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, 2008.

Today, MTI also announced that its subsidiary MTI Micro delivered a Mobion® power source prototype to a global Japanese consumer electronics company under a development agreement entered into earlier this month.

“We have made significant progress since the start of the year,” said Peng Lim, CEO of MTI. “At MTI Micro, we launched a developmental pilot production line for Mobion®, signed an agreement with a global Japanese consumer electronics company and developed and demonstrated three different Mobion® prototypes at global conferences and meetings – an external charging device, a power accessory attached to a digital camera and an embedded fuel cell-powered GPS device – all to help prepare for the planned launch of an initial Mobion® product in 2009. At MTI Instruments, we achieved a 16 percent increase in revenue.”

Financial Highlights: First Quarter 2008
- Product revenue increased 16.4 percent to $2.0 million (2007 Q1: $1.7 million)
- Funded research and development (R&D) revenue decreased 71.9 percent to $173,000 (2007 Q1: $615,000)
- Net loss was $3.2 million, consistent with 2007 Q1
- Capital resources (cash and marketable securities) totaled $8.1 million (2007 Q1: $18.1 million)
- Cash used in operations decreased 35.2 percent to $3.0 million

Recent Developments
- May 12, 2008 – MTI Micro announced that the U.S. Department of Energy (“DOE”) authorized the release of an additional $325,000 under its cost-shared program with MTI Micro. The program is designed to support the development of manufacturing techniques and the optimization of the Mobion® technology platform.
- May 7, 2008 – MTI Micro announced that it had entered into an agreement with a global Japanese consumer electronics company that develops products utilizing advanced optical and digital technologies, including digital cameras, to evaluate the feasibility, development and production of Mobion® products.
- May 2, 2008 – MTI Micro unveiled a new embedded Mobion® micro fuel cell prototype design for handheld global positioning system (“GPS”) devices at the tenth Annual International Small Fuel Cells Conference in Atlanta, Georgia. The new Mobion® powered GPS prototype provides three times as much energy as GPS devices powered by four disposable AA batteries and, on a model with a large, full-color screen, generates up to 60 hours of continuous power. The prototype can be instantly recharged by refilling it with methanol and includes a USB interface, allowing it to be used as an independent energy source for recharging mobile phones, digital cameras, portable media players and other handheld electronic devices.
- April 30, 2008 – MTI announced that the U.S. Department of Transportation issued a final ruling that will permit passengers and crew to carry methanol fuel cell cartridges and fuel cell systems designed for portable electronic devices on board airplanes in carry-on baggage. The effective date of the ruling is October 1, 2008, although voluntary compliance with the ruling may commence as of May 30, 2008.
- April 2, 2008 – MTI Instruments unveiled the PV1000, a thickness measurement system for the solar cell production industry, at the Photovoltaic Technology Show in Munich, Germany. The PV1000 was created out of the platform for EVE, MTI Instruments’ advanced data acquisition and analysis system. The PV1000, designed to be incorporated into solar cell production lines to quickly determine quality control issues, addresses a critical need for solar cell manufacturers around the world who are experiencing a growth in demand and need to manufacture high volumes of solar cells for mass consumption.

Company Milestones
Milestones for the first half of 2008 include:
- Implementation of an operational developmental pilot line, which was achieved in January
- Signing of an OEM for the consumer market, which was fulfilled by the agreement with the global Japanese consumer electronics company
Milestones for the second half of 2008 include:
- Demonstration of a next generation power source prototype with a removable cartridge
- Delivery of product intent prototypes to OEMs for evaluation
- Selection of manufacturing partners

First Quarter Financial Results
Revenue for the three months ended March 31, 2008 increased 7.0 percent to $2.2 million compared to revenue of $2.3 million for the same period in 2007. First quarter revenue included $2.0 million in product revenue from MTI Instruments and $173,000 in funded Research and Development (“R”) revenue from MTI Micro. During the first quarter of 2008, product revenue increased $279,000, or 16.4 percent, reflecting sales increases in MTI Instruments’ aviation product line – in particular commercial aviation sales – coupled with smaller sales increases in semiconductor and general dimensional gauging products. Funded R&D revenue decreased $442,000, or 71.9 percent, with $418,000 of the decrease attributable to the completion of the SAFT contract during the first quarter of 2007. Revenue from MTI Micro’s contract with the DOE increased by $170,000 but was offset by a revenue decrease of $194,000 attributable to the conclusion of a strategic alliance agreement in July 2007.
Net loss for the three months ended March 31, 2008 of $3.2 million, or $0.08 per diluted share, was consistent with the net loss for the three months ended March 31, 2007. Net loss for the first quarter of 2008 compared to 2007 includes the effects of positive and negative revenue and expense changes. These changes include increases in gross margins on product sales, decreases in funded R&D revenue, cost savings in R&D spending, an increase in Selling, General and Administrative expenses, a decrease in gain on derivatives and a decrease in the income effects of minority interest shareholders. The R&D cost savings were primarily the result of savings derived from the first quarter 2007 decision to suspend efforts on MTI Micro’s high power program. Gross margin percentages on product sales for the three months ended March 31, 2008, remained consistent with the comparable period in 2007.
Cash flows: For the three months ended March 31, 2008, cash used in operations decreased by 35.2 percent to $3.0 million compared to $4.6 million in 2007, while cash used for capital expenditures increased to $102,000 from $50,000 in 2007.
See the attached financial highlights for the Company’s first quarter ended March 31, 2008.
Conference Call: First Quarter Results
MTI will host a conference call and webcast today at 10:30 a.m. EDT. The dial-in phone number for the conference call is (866) 277-1184 or (617) 597-5360 for international callers, and the pass code is 23267958. There will be a simultaneous webcast that can be heard by logging onto MTI’s Web site at www.mechtech.com. A replay of the conference call will be available within 24 hours on the Web site and will also be available via phone by dialing (888) 286-8010, or (617) 801-6888 for international callers, and when prompted, entering pass code 86043495.

For further information on Mechanical Technology, Incorporated
Contact: George Relan, Vice President of Corporate Development, 518-533-2220, grelan@mechtech.com

Source: Fuel Cell Today