Mechanical Technology Incorpora (NASDAQ:MKTY)

Q1 2018 Results

• Sales of $1.58 million vs $1.29 million
• EPS of $0.00 vs a loss of $0.05 in the prior year

MKTY ($1.01) announced second quarter 2017 results:

• Sales of $1.89 million vs $1.80 million in the prior year

• EPS of $0.03 vs $0.02 in the prior year

Results can be seen via the company’s 10-Q; no press release has been issued yet.  There is limited commentary in 10-Q.

We initiated our position in MKTY back in October 2016 due to strong Q3 2016 results as well as a recent investment from Brookstone Partners. The Company used the investment to improve its balance sheet and implement certain strategic activities.  You can see our original notehere.

MKTY ($0.90) announced Q1 2017 results:

• Sales of $1.29 million vs $1.22 million in prior year

• Loss per share of $0.05 vs loss per share of $0.11 in prior year

Quotes from management:

"MTI enters the second quarter of 2017 on a healthier financial foundation compared to this time last year, with $2.9 million more in cash, a multi-year contract with the U.S. Air Force in effect at MTI Instruments and a reduced organizational cost basis. As such, we expect to continue to grow revenue and improve our bottom-line throughout 2017."

Meanwhile, with assistance from our new investors at Brookstone Partners, we also continue to explore new strategic initiatives -- including potential acquisitions -- that would allow us to further increase revenue and, eventually, utilize previously-generated Federal net operating loss carryforwards to offset future taxable income. These measures, along with the previously mentioned organic growth, will allow us to achieve our overall goal of increasing value for our shareholder base."

DEAR FELLOW SHAREHOLDERS AND EMPLOYEES

As we executed upon the Company’s strategy in 2015, it became apparent that it was going to be a challenging year as we faced both economic headwinds and government contract delays. Contending with a difficult economic environment in Asia, coupled with delays in obtaining new contracts from the U.S. Air Force, we were not able to attain our targeted goals of growth in sales and earnings. As we move forward, we have not changed our goal. Our priorities are to accelerate growth in sales and global expansion, provide innovation in our technology, continue our focus on operational excellence and, in turn, expand our earnings to provide our shareholders with a solid return on their investment.  

As disappointing as the revenue shortfall was, our efforts with our new Accumeasure D system have made significant inroads, having been tested and newly qualified by several major global corporations for use in their own products. Original equipment manufacturers (OEM) customers are incorporating our sensors and instruments into their product, while other customers are using our products for process and quality measurement in automated manufacturing operations. We believe that this growing acceptance of our new and existing lines of products by these customers demonstrates our capabilities to develop and commercialize products while reaching major corporations around the world, and will have a positive impact on our 2016 results. While the recent success of the Accumeasure D and our new Microtrak 4 laser line, as discussed below, brought a significant number of qualifications, these products are incorporated into capital spending projects for our customers, which results in longer lead times. As a result of these longer lead times, however, we expect to realize the benefits of the growing adoption of our new products during 2016 and beyond.  

Innovation remains the driving force behind our strategy and the path to grow faster than our direct competitors. We believe that our current focus on creating and expanding innovations into both new and existing markets, product categories and OEM applications will prove to be the best path to long-term sustainable growth. Our engineering, product development and manufacturing improvements during 2015 provided new and smarter products that are easier to use and provide more robust performance for our customers. 

 During 2015, we also introduced the Microtrak 4 laser, specifically designed to target larger-volume automated assembly operations where higher data speeds, digital output and ease of integration is required. A key client in Asia has tested and internally approved for its use the Microtrak 4 laser. Although our sales levels generated by this product were acceptable during 2015 based on our initial sales projections for this new product, due to economic conditions, we could not meet the levels of Asian sales of our products during the prior year. Our Microtrak 4 series of products is being adopted and will be used by some of the largest consumer electronic assembly operations in Asia. Our continuing efforts to expand our technical capabilities in laser sensors and instruments are rapidly moving forward in 2016. 

We were also successful during 2015 in growing our position in the commercial aviation market, which helped to somewhat offset the decline in sales resulting from the expired U.S. Air Force contracts. Our engineering team developed new enhancements in our PBS 4100+ product, including the capability to measure vibration and balance a number of turbo-shaft engines for rotary wing aircraft (helicopter). This has shown to be effective with turboshaft engines of additional commercial customers and should result in potential new opportunities. 

 We continue to optimize our supply chain, improving our operational capacity and enhancing the efficiency of our processes and project management. Simplifying the business is a critical driver of productivity, which will enable us to achieve faster speed to market and new product launches at a lower cost. The successful recertification of ISO 9001:2008, obtained in early 2015, confirms our commitment to an effective management system and ongoing improvements in our processes.  

We are fortunate to have a very capable, highly skilled group of people at the core of what we do and part of the uniqueness of who we are as a company. Our employees, while few in number, remain the heart and soul of our company and support our desire to provide superior products and services to our customers. The organization remains strong and the commitment of our employees enhances our differentiation. This has been instrumental in helping us strive towards achieving new levels of performance in order to reach our goals efficiently and effectively to deliver profitable growth over the long term.  

While we believe the core of our business has improved, we believe that the Company continues to remain undervalued in the marketplace. As a result, we began to acquire shares of our outstanding common stock during 2016 pursuant to the share repurchase program that we initiated in December 2015. As noted above, our overall 2015 results were hampered by the economic conditions in the Asian market and the ongoing delays in military spending. This has continued to impact us during early 2016, and we continue to closely monitor and address these conditions that weakened our success in 2015.  

We are working hard to regain sales momentum and strengthen our earnings position. We have lowered our overall costs and continue to control expenses, as we work closely with customers across the globe to understand and develop products that address their needs. I am confident that we will successfully navigate through any challenges that we may encounter in the upcoming year.  

Going forward, we have a clear sense of direction, a unique blend of innovative technology, quality products, and effective business models supported by solid business approaches, the ability to execute, and a remarkable reservoir of expertise that resides in our talented employees. I want to reaffirm that we have the right strategy and supporting capability to grow and thrive in both the short and long term. Until we can grow revenue faster and create additional shareholder value, I, along with the rest of the leadership team, will not be satisfied.  

Kevin G. Lynch
Chairman and Chief Executive Officer
Mechanical Technology, Incorporated 

Full Year 2013 Results

ALBANY, N.Y.--(BUSINESS WIRE)--Mechanical Technology, Incorporated (MTI or the Company), (Trading Symbol:MKTY), a company engaged, through its subsidiary MTI Instruments, Inc. (MTI Instruments), in the design, manufacture and sale of test and measurement instruments and systems that provide solutions for precision linear displacement, vibration measurement and balancing, and wafer inspection tools developed for markets that require the exacting measurement and control of products and processes in the development and implementation of automated manufacturing, assembly, and consistent operation of complex machinery, announces its full year 2013 results.

Product revenue in MTI Instruments for the year ended December 31, 2013 increased by $2.5 million, or 41.6%, to $8.4 million from $5.9 million in 2012. This increase was primarily attributable to a 57.2% increase in shipments of military and commercial aviation balancing systems and accessory kits. Also contributing to the overall increase was a 37.3% rise in general instrumentation revenue, which was driven by higher capacitance, tensile stage and laser system sales.

As a result of the increased sales, reduced production overhead, lower product material costs and improved inventory management, the gross profit, as a percentage of product revenue, increased to 61.0% during 2013 compared to 49.7% during 2012.

On December 31, 2013, following a MTI Micro stock warrant exercise, the Company transferred management of MTI Micro to Dr. Walter L. Robb (a member of the Company’s and MTI Micro’s board of directors and Managing Director of Counter Point Ventures Fund II, LP). Consequently, MTI is no longer reporting MTI Micro as a variable interest entity (VIE). As a result of this deconsolidation, the equity of other MTI Micro shareholders and the net book value of MTI Micro were eliminated from the Company’s consolidated balance sheet and, as such, we realized a one-time, non-cash income gain from the VIE deconsolidation of $3.6 million. As of December 31, 2013, the Company owned an aggregate of approximately 47.5% of MTI Micro’s outstanding common stock.

Net income for the year ended December 31, 2013 was $3.7 million ($0.69 per share on a fully diluted basis) compared to a net loss of $2.1 million ($0.40 per share on a fully diluted basis) for the same period in 2012. The $5.7 million increase in net income is primarily attributable to the $3.6 million gain on VIE deconsolidation and an improvement in MTI Instruments net income in 2013 of $2.3 million.

Kevin Lynch, our Chairman and Chief Executive Officer, commented “In 2013 we achieved very positive results for MTI. Our focus to improve the Company came through a defined market focused strategy, increasing sales and margins, clear direction and implementation of material and operational controls, along with administrative cost reductions. We achieved $361 thousand in operating income during 2013, a $2.6 million improvement over the prior year, and succeeded in establishing a stronger balance sheet with $1.2 million in cash available, reduced liabilities, and a net worth increase of $394 thousand to $3.4 million.

At the same time, our recently defined market strategy to grow in the markets of precision automated manufacturing, complex machinery measurement and analysis, and the developments to support these markets with our core instruments business continues. One of our new product initiatives, targeting precision measurement in industrial and electronics development and manufacturing, has advanced from the Beta stage to product launch. Performance and costs of the new product are in line with our expectations. Overall, we have seen significant new sales opportunities open in Asia, and we are committed to achieving International Organization for Standardization (ISO) 9000 registration early in the second quarter of 2014 in support of our customer needs.

The start of 2014 has opened slowly, but as the year progresses; we expect to build on our momentum of 2013 to realize ongoing growth in sales and earnings, in particular, in our targeted markets with our core instrumentation product lines.”

Mechanical Technology, Incorporated and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

For the Three and Nine Months Ended September 30, 2013 and 2012

ALBANY, N.Y.--(BUSINESS WIRE)--Mechanical Technology, Incorporated (MTI) (Trading Symbol: MKTY), a company engaged in the design, manufacture and sale of test and measurement instruments and systems through its subsidiary MTI Instruments, Inc. (MTI Instruments), announces its 2013 mid-year update.

Kevin Lynch, our Chairman and Chief Executive Officer, remarked, “We are again pleased with the performance of our business in the second quarter of this year. The organization is meeting our first year goals of stabilizing our core instruments business and, increasing sales and earnings at the same time, while building the foundation for future business expansion. As a result, we have now demonstrated positive operating income ($0.04 per share this quarter) for the last three consecutive quarters, with a 64% improvement in second quarter 2013 revenue ($2.3M) over second quarter 2012 revenue ($1.4M). Additionally, our working capital has increased to $1.7M, which is ahead of our plan, and supporting future investment and growth.

Our goal of increasing shareholder value is also underway. The market capitalization of MTI has increased from a low of approximately $736k in March of 2013 to a recent high of over $8.5M. With this, trading liquidity also improved, with a reported average of 17,416 shares per day trading during the second quarter of 2013 (Yahoo Finance data).

To summarize our current position at MTI as we move forward and to reinforce what we reported in our Annual Shareholders Meeting in June...

• We will focus our commercial and operational efforts on expanding our instruments business.
• Invest and commercialize new products and applications in support of our strategy in the instruments business.
• MTI will continue to pursue opportunities to exploit the potential in our investment in MTI MicroFuel Cells’ (MTI Micro) Mobion advance vapor direct methanol fuel cells technology, for as long as MTI Micro can sustain its effort.
• Manage risk and control expenses, while improving our productivity.
• Execute our plan, with the goal of increasing cash, sales and operating earnings to subsequently improve shareholder value.

As we progress into the third quarter of 2013, in order for us to sustain our momentum, we continue to pursue new opportunities in our general instruments business to improve our business mix as military spending is seen as softening. The execution of our plan continues with the expectation for initial (beta stage) release of a new product in the fourth quarter of 2013.”

First Quarter 2013 Results

• The Company’s total revenue for the first quarter of 2013 increased to $2.2 million or 82.7% from $1.2 million in the first quarter of 2012.
• Net income attributed to MTI for the three months ended March 31, 2013 was $86 thousand, or $0.02 per diluted share, compared to a net loss attributed to MTI of $822 thousand, or $0.16 per diluted share, in 2012.

“We are pleased with the results we achieved during the first quarter of 2013, despite experiencing softness in new orders from the U.S. Air Force,” said Kevin Lynch, Chairman and Chief Executive Officer. “Even with that, our sales activities and positive operating performance generated in the fourth quarter of 2012 carried forward into the first quarter of 2013. Additionally, we realized positive results with recent growth activity from our emerging laser line of products. Going forward, we will continue to execute against our strategic plan and look to build upon this foundation throughout the year.”

Mechanical Technology, Incorporated (MTI) (Trading Symbol: MKTY), a company engaged in the design, manufacture and sale of test and measurement instruments and systems through its subsidiary MTI Instruments, Inc. (MTI Instruments), announces its 2012 financial and operating results.

The Company’s total revenue for 2012 decreased to $5.9 million or 42.6% from $10.3 million in 2011. Net loss attributed to MTI for the year ended December 31, 2012 was $2.1 million or $0.40 per diluted share, compared to a net income of $2.4 million, or $0.48 per diluted share in 2011. This decrease in net income of $4.5 million is partially attributable to a release of a portion of the deferred tax asset valuation allowance of $1.5 million in 2011. The remainder of the decrease in net income is related to a decline in sales at MTI Instruments which was partially offset by reduced operating losses of our variable interest entity, MTI MicroFuel Cells, Inc.

Kevin Lynch, CEO stated: “For the first three quarters of 2012, we experienced adverse conditions at our Instruments business primarily in the aviation balancing equipment sales due to reductions and delays in government spending; however, our fourth quarter sales and operational cost actions resulted in positive improvement in all business areas. For the first three quarters of 2012, our revenue was $3.7 million, and our full year revenue for 2012 was $5.9 million. We believe our results for the first quarter of 2013 will continue this momentum.”

Mechanical Technology, Incorporated (MTI) (Trading Symbol: MKTY), a company engaged in the design, manufacture and sale of test and measurement instruments and systems through its subsidiary MTI Instruments, Inc. (MTI Instruments), announces its 2012 financial and operating results.

The Company’s total revenue for 2012 decreased to $5.9 million or 42.6% from $10.3 million in 2011. Net loss attributed to MTI for the year ended December 31, 2012 was $2.1 million or $0.40 per diluted share, compared to a net income of $2.4 million, or $0.48 per diluted share in 2011. This decrease in net income of $4.5 million is partially attributable to a release of a portion of the deferred tax asset valuation allowance of $1.5 million in 2011. The remainder of the decrease in net income is related to a decline in sales at MTI Instruments which was partially offset by reduced operating losses of our variable interest entity, MTI MicroFuel Cells, Inc.

Kevin Lynch, CEO stated: “For the first three quarters of 2012, we experienced adverse conditions at our Instruments business primarily in the aviation balancing equipment sales due to reductions and delays in government spending; however, our fourth quarter sales and operational cost actions resulted in positive improvement in all business areas. For the first three quarters of 2012, our revenue was $3.7 million, and our full year revenue for 2012 was $5.9 million. We believe our results for the first quarter of 2013 will continue this momentum.”