Mechanical Technology Inc – ‘10-K’ for 9/30/99

On:  Tuesday, 12/28/99   ·   For:  9/30/99   ·   Accession #:  64463-99-63   ·   File #:  0-06890

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Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Sept 30,1999 10-K for Mechanical Technology Inc.      67    280K 
 2: EX-10       Exhibit 10.32-Stock Purchase Agreement 10/21/99       48    257K 
 3: EX-10       Exhibit 10.33-Securities Purchase Agmt 10/21/99       37    194K 
 4: EX-10       Exhibit 10.34-Mti Reg Rights Agmt 10/21/99            10     52K 
 5: EX-10       Exhibit 10.35-Satcon Reg Rights Agmt 10/21/99         19     94K 
 6: EX-10       Exhibit 10.36-Mti Stock Purchase Warrant 10/21/99     11     59K 
 7: EX-10       Exhibit 10.37-Satcon Stock Pur Warrant 10/21/99       11     57K 
 8: EX-10       Exhibit 10.38-Lease (Touhey & Mti) 8/10/99            20     76K 
 9: EX-10       Exhibit 10.39-Reg Rights Agmt (Plug & Mti) 11/1/99    15     45K 
10: EX-10       Exhibit 10.40-Plug Power Lock-Up Agmt 11/1/99          3     18K 
11: EX-21       Exhibit 21-Subsidiaries of the Company                 1      5K 
12: EX-27       Exhibit 27-Financial Data Schedule 9/30/99             1      7K 

10-K   —   Sept 30,1999 10-K for Mechanical Technology Inc.
Document Table of Contents

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==========================================================================      
UNITED STATES         
SECURITIES AND EXCHANGE COMMISSION          
WASHINGTON, D.C. 20549          
FORM 10-K           

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES             
EXCHANGE ACT OF 1934              
For the fiscal year ended September 30, 1999              
or              
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES         
EXCHANGE ACT OF 1934          
For the period from __________ to __________          

Commission file number 0-6890         

MECHANICAL TECHNOLOGY INCORPORATED      
(Exact name of registrant as specified in its charter)        

New York                                   14-1462255     
(State or other jurisdiction of                 (I.R.S. Employer                
incorporation or organization)                  Identification No.)             

325 Washington Avenue Extension, Albany, New York       12205                   
(Address of principal executive offices)             (Zip Code)                 

Registrant's telephone number, including area code: (518)218-2500     

Securities Registered Pursuant to Section 12(b) of the Act: NONE      

Securities Registered Pursuant to Section 12(g) of the Act    
$1.00 Par Value Common Stock    
(Title of Class)    

Indicate by check mark if disclosure of delinquent filers pursuant to Item      
405 of Regulation S-K is not contained herein, and will not be contained,       
to the best of registrant's knowledge, in definitive proxy or information       
statements incorporated by reference in Part III of this Form 10-K or any       
amendment to this form 10-K. [  ]                                               

Indicate by check mark whether the registrant (1) has filed all reports         
required to be filed by Section 13 or 15(d) of the Securities Exchange Act      
of 1934 during the preceding 12 months (or for such shorter period that         
the registrant was required to file such reports), and (2) has been             
subject to such filing requirements for the past 90 days.                       
Yes  X    No            
_____    _____    
The aggregate market value of the registrant's Common Stock held by             
nonaffiliates of the registrant on December 20, 1999 (based on the last         
sale price of $21.50 per share for such stock reported by NASDAQ for that       
date) was approximately $137,542,000.                                           

As of December 20, 1999, the registrant had 11,698,571 shares of Common         
Stock outstanding.                                                              
     DOCUMENTS INCORPORATED BY REFERENCE
               Document               Where Incorporated into Form 10-K Report
Proxy Statement for                                Part III     
Annual Meeting of Shareholders                                                  
to be held on March 16, 2000                                                    

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PART I                                                                          

ITEM 1:  BUSINESS                                                               

MTI manufactures and sells precision diagnostic and measurement                 
instruments and incubates alternative energy technology.   Given MTI's          
recent success with Plug Power, Inc. and its early development efforts          
with Proton Exchange Membrane ("PEM") fuel cells, gas and steam powered         
turbines and the Sterling Engines, MTI is in a unique position to be a          
leader in the evolution of alternative energy technology.  MTI's                
alternate energy strategy includes: acquisition of companies that have          
synergies with MTI's core competencies; acquisition of majority stock           
positions in established alternative energy companies; and internal             
development and growth of alternative energy businesses.                        

Over the last several years MTI sold off non-core businesses and                
restructured its balance sheet.  Today MTI is a very different company,         
substantially streamlined in focus, but with challenges remaining. MTI          
is a manufacturer of advanced diagnostic, test and measurement products         
that combine precision sensing capabilities with proprietary software           
and systems to serve a variety of applications for commercial and               
military customers.  The Company has two principal business units: the          
Advanced Products Division ("Advanced Products"), which produces                
diagnostic and sensing instruments and computer-based balancing systems;        
and Ling Electronics, Inc. ("Ling"), a developer and manufacturer of            
vibration test systems and power conversion products, which was sold on         
October 21, 1999, as part of a strategic alliance with SatCon Technology        
Corporation.                                                                    

In the coming year, Advanced Products will focus on improving existing          
products and developing additional products for diagnostic and testing          
equipment.  The non-contact sensing instrumentation products utilize            
fiber optic, laser and capacitance technology to perform high precision         
position measurements for product design and quality control inspection         
requirements, primarily in the semiconductor and computer disk drive            
industries.  Advanced Products' computer-based aircraft engine balancing        
systems include an on-wing jet engine balancing system used by both             
commercial and military aircraft fleet maintenance personnel.  This             
product provides trim balancing and vibration analysis in the field or          
in test cells.                                                                  

MTI is uniquely positioned to be the moving force behind the evolution          
of alternative energy technology.  As a pioneer in the alternative              
energy field, MTI has demonstrated its ability, first in the research           
and development of gas and steam turbines; then through its development         
efforts in connection with the Sterling Engines; and most recently in           
its research and development of PEM fuel cell technology.  MTI has              
successfully turned its PEM fuel cell research into a public company            
dedicated to bringing a safe, reliable and cost-effective fuel cell to          
market.  Plug Power, Inc., which was initially a joint venture of MTI           
and Detroit Edison, believes that it will soon have residential fuel            
cells in the market place.  MTI helped develop the strategic                    
partnerships, capital investment, and growth strategy of Plug Power,            
Inc.  It is MTI's forward strategy to use its resources and experiences         
to repeat this success with other alternative energy companies.                 

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Mechanical Technology Incorporated was incorporated in New York in 1961.        
Unless the context otherwise requires, the "registrant", "Company",             
"Mechanical Technology" and "MTI" refers to Mechanical Technology               
Incorporated and its subsidiaries.  The Company's principal executive           
offices are located at 325 Washington Avenue Extension, Albany, New York        
12205 and its telephone number is (518) 218-2500.                               

Significant Developments in the Business                                        

On June 27, 1997, the Company and Edison Development Corp. ("EDC"), a           
subsidiary of DTE Energy Co. formed a joint venture, Plug Power, L.L.C.         
("Plug Power"), to further develop the Company's Proton Exchange Membrane       
("PEM") Fuel Cell technology. In exchange for its contribution of               
contracts and intellectual property and certain other net assets that had       
comprised the fuel cell research and development business activity of the       
Technology segment (which assets had a net book value of $357 thousand),        
the Company received a 50% interest in Plug Power.  EDC made an initial         
cash contribution of $4.75 million in exchange for the remaining 50%            
interest in Plug Power. The Company's investment in Plug Power is included      
in the balance sheet caption "Investment in Plug Power"; the assets             
contributed by the Company to Plug Power had previously been included in        
the assets of the Company's Technology segment. See the supplemental            
disclosure regarding Contribution of Net Assets to Plug Power in the            
Consolidated Statements of Cash Flows for additional information regarding      
the assets contributed by the Company to Plug Power.                            

Plug Power has focused exclusively on the research, development and             
manufacture of an economically viable PEM fuel cell. During 1999, the           
Company invested $6 million cash in Plug Power and sold the MTI campus          
to Plug Power in exchange for shares of Plug Power and Plug Power's             
assumption of $6 million of debt.                                               

On October 29, 1999 Plug Power Inc. made an initial public offering             
("IPO") of its common stock on the NASDAQ National Market under the             
symbol "PLUG."  The initial public offering price for the 6 million             
shares issued was $15 per share.  Additionally, the underwriters of the         
IPO exercised their 900,000 share over allotment at the IPO price.              

Since Plug Power was formed in 1997 the Company, EDC and other investors        
have contributed substantial amounts of cash and other assets to Plug           
Power.  Contributions to Plug Power by the Company totaled $20.7 million        
as of September 30, 1999. Immediately prior to the Plug Power IPO, the          
Company purchased an additional 2,733,333 shares of Plug Power at $7.50         
per share for a total purchase price of $20.5 million.  Immediately             
after Plug Power's IPO, the Company owned 13,704,315 shares of Plug             
Power or approximately 31.9 percent of outstanding Plug Power stock.            
The Company's contribution to Plug Power increased to $41.2 million as          
of Plug Power's IPO date.                                                       

On October 21, 1999, the Company created a strategic alliance with              
SatCon Technology Corporation (SatCon), an innovator of alternative             
energy technologies.  SatCon acquired Ling Electronics, Inc. and Ling           
Electronics, Ltd. from the Company and the Company committed to invest          
approximately $7 million in SatCon.  In consideration for the                   
acquisition of Ling Electronics and the Company's investment, the               
Company will receive 1,800,000 shares of SatCon's common stock and              

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warrants to purchase an additional 100,000 shares of SatCon's common            
stock.  The Company funded $2.57 million of its investment in SatCon and        
will make the remaining investment by the end of January 2000.  SatCon          
will also receive warrants to purchase 100,000 shares of the Company's          
common stock.                                                                   

On July 12, 1999, the Company completed the sale of 801,223 shares of           
common stock to current shareholders through a rights offering.  The            
offering raised approximately $12.8 million before offering costs of            
approximately $158 thousand for net proceeds of approximately $12.7             
million.  The Company will use some or all of the proceeds of the offering      
for investment into Plug Power.  In addition, some proceeds may be used         
for acquisitions, efforts to increase market share, working capital,            
general corporate purposes and other capital expenditures.                      

On September 30, 1998, the Company completed the sale of 1,196,399 shares       
of common stock to current shareholders through a rights offering.  The         
offering raised approximately $7.2 million before offering costs of             
approximately $186 thousand for net proceeds of approximately $7 million.       
The Company used substantially all of the proceeds of the offering for          
investment in Plug Power.  The remaining proceeds were used for efforts to      
increase market share, working capital, general corporate purposes and          
other capital expenditures.                                                     

The sale of the Company's Technology Division, the sole component of the        
Technology segment, to NYFM, Incorporated (a wholly owned subsidiary of         
Foster-Miller, Inc., a Waltham, Massachusetts-based technology company)         
on March 31, 1998, completed management's planned sale of non-core              
businesses. Accordingly, the Company no longer includes Technology among        
its reportable business segments.  The Technology Division is reported          
as a discontinued operation as of December 26, 1997, and the                    
consolidated financial statements have been restated to report                  
separately the net assets and operating results of the business. The            
Company's prior year financial statements have been restated to conform         
to this treatment.  See Note 16 to the accompanying Consolidated                
Financial Statements.                                                           

On September 30, 1997, the Company sold all of the assets of its L.A.B.         
division to Noonan Machine Company of Franklin Park, IL.  The Company           
received $2.6 million in cash and two notes, totaling $650 thousand, from       
Noonan Machine Company.  The purchaser has requested that the principal         
amount of the note be reduced to reflect the resale value of certain            
assets of L.A.B.  The Company is enforcing its rights with respect to the       
note.  The net proceeds from the sale were used to pay down all                 
outstanding debt and build working capital.  The sale of L.A.B. resulted        
in a $2.0 million gain, which was recorded in the fourth quarter of fiscal      
year 1997.                                                                      

On December 27, 1996, the Company and First Albany Companies Inc. ("FAC")       
entered into a Settlement Agreement and Release whereby the Company issued      
FAC 1.0 million shares of Common Stock in full satisfaction of its              
obligations pursuant to the Claim Participation Agreement dated December        
21, 1993 and amended December 14, 1994, among United Telecontrol                
Electronics, Inc. ("UTE"), the Company and First Commercial Credit              

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Corporation, in the principal amount of $3.0 million plus accrued interest      
of $1.2 million. As a result, the Company in the first quarter of fiscal        
1997 realized a gain on the extinguishment of debt totaling $2.5 million,       
net of approximately $100 thousand of transaction related expenses and net      
of taxes of $106 thousand.                                                      

Business Segments                                                               

The Company currently conducts business in two business segments:               
Alternative Energy Technology and Test and Measurement.                         

Alternative Energy Technology                                                   

The Alternative Energy Technology segment incubates companies that              
research, develop, manufacture and distribute alternative energy                
technology solutions. Investments at September 30, 1999 consist of a 40.65      
percent equity interest in Plug Power L.L.C.  Plug Power is a leading           
designer and developer of on-site, electricity generation systems               
utilizing proton exchange membrane ("PEM") fuel cells for residential           
applications.  GE Fuel Cell Systems, LLC, a joint venture that is owned by      
General Electric's GE Power Systems business (75%) and Plug Power (25%)         
will market, sell, service, and install Plug Power's products once they         
are developed.                                                                  

On October 29, 1999 Plug Power Inc. made an initial public offering             
("IPO") of its common stock on the NASDAQ National Market under the             
symbol "PLUG."  The initial public offering price for the 6 million             
shares issued was $15 per share.                                                

Immediately prior to the Plug Power IPO, the Company purchased an               
additional 2,733,333 shares of Plug Power at $7.50 per share for a total        
purchase price of $20.5 million.  The Company financed the acquisition          
of these shares through a $22.5 million loan from KeyBank N.A.                  
Immediately after Plug Power's IPO, the Company owned 13,704,315 shares         
of Plug Power or approximately 31.9 percent of outstanding Plug Power           
stock.                                                                          

Plug Power is developing a PEM fuel cell for residential and automotive         
applications.  As of December 1999, Plug Power has reported achieving           
the following milestones:                                                       

June 1998               Powered a three-bedroom home ("Demonstration Home")     
                   with a hydrogen-fueled residential fuel cell system

November 1998           Demonstrated a methanol-fueled residential fuel cell    
system                          

December 1998           Selected to design and manufacture 80 test and          
                evaluation residential fuel cell systems for the
                  State of New York for installation at various test
sites over the next two years   

December 1998           Demonstrated a natural gas-fueled residential fuel      
cell system                     

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February 1999           Entered into agreement with GE On-Site Power to         
                  distribute and service Plug Power residential fuel
cell systems                    

June 1999               Began construction of a state-of-the-art, 51,000        
                 square foot manufacturing facility in Latham, New
York                            

August 1999             Powered the Demonstration Home with a residential       
                  fuel cell system connected to its existing natural
gas pipeline                    

September 1999          Filed their 50th patent application relating to fuel    
                 cell technology, system designs and manufacturing
processes                       

December 1999           Announced successful completion of a four-month test    
                of a natural gas powered fuel cell system in the
Demonstration Home              

In October, 1999, MTI sold Ling to SatCon in exchange for common stock and      
purchased or made commitments to purchase SatCon common stock and               
warrants.  Assuming all funding commitments are made and warrants               
exercised, MTI will own approximately 16% of SatCon's issued and                
outstanding common stock.                                                       

SatCon manufactures and sells power and energy management products for          
telecommunications, silicon wafer manufacturing, factory automation,            
aircraft, satellites and automotive applications.  SatCon has four              
operating divisions:  Film Microelectronics, Inc. designs and manufactures      
microelectronic circuits and interconnect products;  Magmotor manufactures      
motors and magnetic suspension systems;  Beacon Power manufactures              
flywheel energy storage devices;  and the Technology Center is responsible      
for new technology and product development.                                     

Test and Measurement                                                            

Test and Measurement offers a wide range of technology-based equipment and      
systems for improved manufacturing, product testing, and inspection for         
industry.  Business units in this segment include the Advanced Products         
Division, Ling Electronics, Inc. (sold on October 21, 1999) and the L.A.B.      
Division (sold on September 30, 1997).                                          

Advanced Products designs, manufactures and markets high-performance test       
and measurement instruments and systems.  These products are categorized        
in two general product families: non-contact sensing instrumentation and        
computer-based balancing systems.  The Division's largest customers             
include industry leaders in the computer, electronic, semiconductor,            
automotive, aerospace, aircraft and bioengineering fields.                      

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The non-contact sensing instrumentation products utilize fiber optic,           
laser and capacitance technology to perform high precision position             
measurements for product design and quality control inspection                  
requirements, primarily in the semiconductor and computer disk drive            
industries.  Product trademarks such as the Fotonic Sensor and Accumeasure      
are recognized worldwide.                                                       

The Division's computer-based aircraft engine balancing systems include an      
on-wing jet engine balancing system used by both commercial and military        
aircraft fleet maintenance personnel.  This product provides trim               
balancing and vibration analysis in the field or in test cells.                 

Ling, of Anaheim, California, designs, manufactures, and markets                
electro-dynamic vibration test systems, high-intensity-sound                    
transducers, power conversion equipment and power amplifiers used to            
perform reliability testing and stress screening during product                 
development and quality control. This mode of testing is used by                
industry and the military to reveal design and manufacturing flaws in a         
broad range of precision products, from satellite parts to computer             
components.  Recent Ling products for power and frequency conversion and        
"clean power" applications include systems capable of output up to 432          
kVA.  Ling was sold on October 21, 1999 to SatCon in exchange for               
770,000 shares of SatCon common stock (with a market value of $6.738            
million on the transaction date).                                               

The L.A.B. Division, which was sold on September 30, 1997, designed,            
manufactured and marketed mechanically driven and hydraulically driven          
test systems for package and product reliability testing.  Among other          
uses, this equipment simulates the conditions a product will encounter          
during transportation and distribution including shock, compression,            
vibration and impact.  This type of testing is widely conducted by              
businesses involved in product design, packaging and distribution.              

The Company believes that the test and measurement industry will undergo        
substantial consolidation in the near future.  The challenges facing MTI        
today are similar to those facing other smaller companies in industries         
where consolidation is a part of the landscape.  The Company believes           
that consolidation may become a competitive necessity and that Advanced         
Products is well-positioned to combine with complementary, synergistic          
businesses to enhance and expand product offerings and increase                 
profitability and market position.  Accordingly, the Company is actively        
exploring strategic acquisitions and alliances for its businesses.              

The business units in the Test and Measurement segment have numerous            
customers and are not dependent upon a single or a few customers.               

Backlog                                                                         

The backlog of orders believed to be firm as of September 30, is $2.1           
million for 1999 and 1998 (of which $997 thousand and $487 thousand,            
respectively, relates to the Company's Advanced Products Division).  The        
backlog relates to contracts awarded by commercial customers or government      
agencies.                                                                       

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Marketing and Sales                                                             

The Company sells its products and services through a combination of a          
direct sales force, manufacturer's representatives, distributors and            
commission salespeople.  Each business unit is responsible for its own          
sales organization. Typically, the Company's product businesses employ          
regional manufacturer's representatives on an exclusive geographic basis        
to form a nationwide or worldwide distribution organization; the business       
unit is responsible for marketing and sales management and provides the         
representatives with sales and technical expertise on an "as-required"          
basis. To a great extent, the marketing and sales of the Company's larger       
products and systems consist of a joint effort by the business unit's           
senior management, its direct sales force and manufacturer's                    
representatives to sophisticated customers.  The manufacturer's                 
representatives are compensated on a commission basis.                          

Research and Development                                                        

The Company conducts considerable research and development to support           
existing products and develop new products.  (See the accompanying              
Consolidated Statements of Operations).  The Company holds patents and          
rights in various fields of technology.  The technology of the Company is       
generally an advancement of the "state of the art", and the Company             
expects to maintain a competitive position by continuing such advances          
rather than relying on patents.  Licenses to other companies to use             
Company-developed technology have been granted and are expected to be of        
benefit to the Company, though royalty income received in recent years has      
not been material in amount and is not expected to be material in the           
foreseeable future.                                                             

Competition                                                                     

The Company and each of its business units are subject to intense               
competition. The Company faces competition from at least several                
companies, many of which are larger than MTI and have greater financial         
resources.  While the business units in the Company's Test and Measurement      
segment each have a major share of their respective markets, the Company        
does not consider any of them to be dominant within its industry.               

The primary competitive considerations in the test and measurement segment      
are product quality and performance, price and timely delivery. The             
Company believes that its product development skills and reputation are         
competitive advantages.                                                         

Employees                                                                       

The total number of employees of the Company and its subsidiaries was 104       
as of September 30, 1999, compared to 123 as of the beginning of the            
fiscal year.                                                                    

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Executive Officers                                                              

The executive officers of the registrant (all of whom serve at the              
pleasure of the Board of Directors), their ages, and the position or            
office held by each, are as follows:                                            

Position or Office                    Name                     Age  

Chief Executive Officer,              George C. McNamee               53        
and a Director                                                                

Vice President and Chief              Cynthia A. Scheuer              38        
Financial Officer                                                             

Vice President and General Manager,   Denis P. Chaves                 59        
Advanced Products                                                             

President and Chief Executive Officer James R. Clemens                50        
Ling Electronics, Inc.                                                        

Mr. McNamee has been Chief Executive Officer of the Company since April         
1998 and a director since 1996.                                                 

Ms. Scheuer was appointed Vice President and Chief Financial Officer of         
the Company in November 1997.  Prior to joining the Company, she was a          
senior business assurance manager at Coopers & Lybrand L.L.P. where she         
was employed since 1983.                                                        

Mr. Chaves has been Vice President and General Manager of the Company's         
Advanced Products Division since 1987 and was Vice President and General        
Manager of the Company's L.A.B. Division from January 1994 until it was         
sold in September, 1997. Previously, he served as Manager of Corporate          
Marketing for the Company from 1981 to 1987.                                    

Mr. Clemens has been President and Chief Executive Officer of Ling              
Electronics, Inc., a wholly owned subsidiary of the Company, since April        
1998.  Mr. Clemens was previously Vice President and General Manager of         
Ling from April 1997 to April 1998.  Mr. Clemens resigned as an officer of      
the Company on October 21, 1999, to join SatCon Technology Corporation.         
From December 1994 to March 1997, he was a site manager for Teleflex            
Control. From September 1992 to November 1994, he was President and Chief       
Operating Officer of MTI's former subsidiary United Telecontrol                 
Electronics, Inc.                                                               

ITEM 2:  PROPERTIES                                                             

The Company leases property in New York and, prior to the sale of Ling,         
leased space in California.  In management's opinion, the facilities are        
generally well-maintained and adequate to meet the Company's current and        
future needs.                                                                   

The Company's corporate headquarters were located in a building in Latham,      
New York which was sold to Plug Power during 1999 and a portion of which was    
leased back to the Company until November 1999.  The building contained a       
total of approximately 31,000 square feet.  In November 1999, the Company       

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completed its relocation to Albany, New York, where it leases a facility for    
Advanced Products and corporate headquarters.  The facility has approximately   
20,700 square feet of office and manufacturing space.  The lease expires on     
November 30, 2009.                                                              

Ling Electronics, Inc. (Ling) leases approximately 85,000 square feet of        
office and manufacturing space in Anaheim, California.  The lease will          
expire in June of 2003.  Ling was sold, and the lease assigned, to SatCon       
Technology Corporation on October 21, 1999.                                     

ITEM 3:  LEGAL PROCEEDINGS                                                      

At any point in time, the Company and its subsidiaries may be involved in       
various lawsuits or other legal proceedings; these could arise from the         
sale of products or services or from other matters relating to its regular      
business activities, may relate to compliance with various governmental         
regulations and requirements, or may be based on other transactions or          
circumstances. The Company does not believe there are any such proceedings      
presently pending that could have a material adverse effect on the              
Company's financial condition except for the matters described in Note 14       
to the accompanying Consolidated Financial Statements (which description        
is incorporated herein by reference).                                           

On September 9, 1998, Barbara Lawrence, the Lawrence Group, Inc.                
("Lawrence"), and certain other Lawrence-related entities ("Plaintiffs")        
filed suit in the United States Bankruptcy Court for the Northern District      
of New York against First Albany Corporation ("FAC"), Dale Church, Edward       
Dohring, Alan Goldberg, George McNamee, Beno Sternlicht, Marty Mastroianni      
(former President and Chief Operating Officer of MTI) and 33 other              
individuals ("Defendants") who purchased a total of 820,909 shares of MTI       
stock from the Plaintiffs.  The complaint alleged that Defendants               
purchased MTI stock from the Plaintiffs in violation of sections 10b, 20,       
20A and rule 10b-5 of the Securities Exchange Act of 1934.  In December         
1998, the complaint was amended to add MTI as a defendant and assert a          
claim for common law fraud against all the Defendants including MTI.  The       
case concerns the Defendants' 1998 purchase of MTI shares from the              
Plaintiffs at the price of $2.25 per share.  Ownership of the shares was        
disputed and several of the Plaintiffs were in bankruptcy at the time of        
the sale.  FAC acted as Placement Agent for the Defendants in the               
negotiation and sale of the shares and in proceedings before the                
Bankruptcy Court for the Northern District of New York, which approved the      
sale in September 1997.  Plaintiffs claim that the Defendants failed to         
disclose material inside information concerning Plug Power, LLC to the          
Plaintiffs and therefore the $2.25 per share purchase price was unfair.         
Plaintiffs are seeking damages of $5 million plus punitive damages and          
costs.  In April 1999, Defendants filed a motion to dismiss the amended         
compliant, which was denied.  In June 1999, the parties agreed to stay          
discovery and amend Defendants time to answer the amended complaint until       
September 17, 1999.  In October 1999, Defendants answered the amended           
Complaint.                                                                      

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ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                    

There were no matters submitted to a vote of the registrant's security          
holders during the fourth quarter of fiscal 1999.                               

PART II                                                                         

ITEM 5:  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED                      
STOCKHOLDER MATTERS                                         

Price Range of Common Stock                                                     

On April 16, 1999, the stock began trading on the NASDAQ National Market        
System under the same symbol, MKTY.  From August 1994 through April 15,         
1999, the Company's Common Stock traded on the over-the-counter market          
under the symbol MKTY on the OTC Bulletin Board. Set forth below are the        
highest and lowest prices at which shares of the Company's Common Stock         
have been traded during each of the Company's last two fiscal years.            

                                           Prices as Adjusted to
                                          Effect for April 30,1999
                     Prices as Reported    Three for Two Stock Split
                                        High        Low         High         Low

Fiscal Year 1999                                                                
First Quarter        8-5/8       6-3/4      5-3/4          4-1/2
Second Quarter       21          8          14             5-1/3
  Third Quarter        30          11-11/12   30             7-15/16
  Fourth Quarter       35-9/16     23-6/16    35-9/16        23-6/16

Fiscal Year 1998                                                                
 First Quarter         6-3/4       3-3/4      4-1/2          2-1/2
 Second Quarter        8-1/8       3-1/2      5-5/12         2-1/3
 Third Quarter         8-1/8       5-11/16    5-5/12         3-3/4
Fourth Quarter        9-3/8       6          6-1/4          4   

Number of Equity Security Holders                                               

As of December 20, 1999, the Company had approximately 479 holders of its       
$1.00 par value Common Stock.  In addition, there are approximately 4,154       
beneficial owners holding stock in "street" name.                               

Dividends                                                                       

The payment of dividends is within the discretion of the Company's Board        
of Directors and will depend, among other factors, on earnings, capital         
requirements, and the operating and financial condition of the Company.         
The Company has never paid and does not anticipate paying dividends in the      
foreseeable future.                                                             

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ITEM 6:  SELECTED FINANCIAL DATA                                                

The following table sets forth summary financial information regarding          
Mechanical Technology Incorporated for the years ended September 30, as         
indicated:                                                                      

                                                        [Enlarge/Download Table]
Statement of Earnings Data                             (In thousands, except per share data)                        
                                                                     Restated  Restated   Restated                  
                                             1999            1998      1997       1996      1995                    

                                                                                                                    
Net Sales                                $  12,885       $  21,028  $ 24,102   $ 22,755  $ 18,140                   
Gain on Sale of                                                                                                     
Subsidiary/Division or                                                                                              
Building                                         -               -     2,012        750     6,779                   
(Loss) Income from Continuing                                                                                       
Operations before                                                                                                   
Extraordinary Item and                                                                                              
Income Taxes                               (10,692)         (2,006)    2,701        673     3,352                   
(Loss) Income from Continuing                                                                                       
Operations before                                                                                                   
Extraordinary Item                         (10,729)         (2,031)    2,558        598     3,256                   
Extraordinary Item -                                                                                                
Gain on Extinguish-                                                                                                 
ment of Debt, Net of                                                                                                
Taxes ($106)                                     -               -     2,507          -         -                   
(Loss) Income from                                                                                                  
Continuing Operations                      (10,729)         (2,031)    5,065        598     3,256                   
Income (Loss) from                                                                                                  
Discontinued                                                                                                        
Operations, Net                                                                                                     
of Taxes                                        41          (2,285)2    (545)     3,150      (334)                  

Net(Loss)Income                          $ (10,688)      $  (4,316) $  4,520   $  3,748  $  2,922                   
Diluted Earnings                                                                                                    
Per Share1,3                                                                                                        
(Loss) Income from                                                                                                  
Continuing Operations                                                                                               
before Extraordinary                                                                                                
Item                                       $ (0.94)      $   (0.21) $   0.28   $   0.09  $   0.57                   
Extraordinary Item                               -               -      0.27          -         -                   
(Loss)Income from                                                                                                   
Discontinued                                                                                                        
Operations                                       -           (0.24)    (0.06)      0.50     (0.06)                  
Net (Loss)Income                           $ (0.94)      $   (0.45) $   0.49   $   0.59  $   0.51                   

Weighted Average Shares                                                                                             
Outstanding and                                                                                                     
Equivalents1                            11,330,530       9,576,672 9,149,176  6,310,094 5,742,045                   

Balance Sheet Data:                                                                                                 
Working Capital                        $    18,662       $   5,779  $  7,696   $  7,086  $  2,712                   

Total Assets                                31,780          21,128    14,003     13,481    13,444                   

Total Long- Term Debt                            -               -         -      5,508     6,960                   

Total Shareholders' Equity (Deficit)        27,786          11,124     8,213      2,164    (3,490)                  
__________________________                                                                                          

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1 Earnings per share information has been retroactively adjusted to reflect the April  30, 1999 3 for 2 stock split.
2 Includes a net charge of $1,769 related to the discontinuance of the Company's Technology Division and a $516 loss
  from operations prior to discontinuance.                                                                          
3 Earnings per share have been restated to comply with SFAS No. 128, "Earnings Per Share."                          


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Prior years have been restated to reflect the Technology and                    
Defense/Aerospace segments as discontinued operations.  (See Note 16 to         
the accompanying Consolidated Financial Statements).                            

There were no cash dividends on common stock declared for any of the            
periods presented.                                                              

ITEM 7:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL                      
CONDITION AND RESULTS OF OPERATIONS                           

Results of Operations:  1999 in Comparison with 1998                            

The following three paragraphs summarize significant organizational             
changes, which impact the comparison of 1999 and 1998 results of                
operations.                                                                     

On June 27, 1997, the Company and Edison Development Corp. ("EDC"), a           
subsidiary of DTE Energy Co. formed a joint venture, Plug Power L.L.C.          
("Plug Power") to further develop the Company's Proton Exchange Membrane        
("PEM") Fuel Cell technology.  In exchange for its contribution of              
employees, contracts, intellectual property and certain other assets that       
had comprised the fuel cell research and development business activity of       
the Technology segment (which assets had a net book value of $357               
thousand), the Company received a 50% interest in Plug Power. EDC made an       
initial cash contribution of $4.75 million in exchange for the remaining        
50% interest in Plug Power.  The Company's investment in Plug Power is          
included in the balance sheet caption "Investment in Plug Power"; the           
assets contributed by the Company to Plug Power had previously been             
included in the assets of the Company's Technology segment. See the             
supplemental disclosure regarding Contribution of Net Assets to Plug Power      
in the Consolidated Statements of Cash Flows for additional information         
regarding the assets contributed by the Company to Plug Power.                  

Since Plug Power was formed in 1997 the Company, EDC and other investors        
have contributed substantial amounts of cash and other assets to Plug           
Power.  Contributions to Plug Power by the Company totaled $20.7 million        
as of September 30, 1999 and increased to $41.2 million as of Plug              
Power's IPO date.  After Plug Power' s IPO, the Company owned 13,704,315        
shares or 31.9% of outstanding Plug Power stock.                                

The sale of the Company's Technology Division, the sole component of the        
Technology segment, to NYFM, Incorporated (a wholly owned subsidiary of         
Foster-Miller, Inc., a Waltham, Massachusetts-based technology company)         
on March 31, 1998 completed management's planned sale of non-core               
businesses. Accordingly, the Company no longer includes Technology among        
its reportable business segments.  The Technology Division is reported          
as a discontinued operation as of December 26, 1997, and the                    
consolidated financial statements have been restated to report                  
separately the net assets and operating results of the business.                

The following is management's discussion and analysis of certain                
significant factors, which have affected the Company's results of               
operations for 1999 compared to 1998.  This discussion relates only to the      
Company's continuing operations before the sale of Ling, which occurred in      

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October 1999.                                                                   

Sales for fiscal 1999 totaled $12.9 million compared to $21.0 million for       
the prior year, a decrease of $8.1 million or 38.7%.  This decrease is the      
result of continuing weak market conditions.  Advanced Products and Ling        
reported sales decreases of 48.7% and 31.6%, respectively in the year           
ended September 30, 1999.                                                       

Selling, general and administrative expenses for fiscal 1999 were 38.4% of      
sales, as compared to 27.6% in 1998. Higher levels of                           
general/administrative expenses as a percentage of sales for fiscal 1999        
resulted primarily from the 38.7% decrease in sales.  Actual selling,           
general and administrative expenses decreased $.863 million from 1998 to        
1999.                                                                           

Product development and research costs during fiscal 1999 were 8.6% of          
sales, compared to 4% for 1998.  Development costs increased $.274 million      
from 1998 to 1999 reflecting the Advanced Products Division's commitment        
to developing diagnostic and other new products.                                

The operating loss of $1.4 million for the year ended September 30, 1999        
represents a $3.4 million or 170.4% decrease from the $2 million                
operating income reported during the same period last year.  The                
decrease is the result of decreased sales levels and corresponding              
decreases in gross profits due to fixed cost absorption at lower sales          
levels.  Gross profit decreased to 36% of sales in fiscal 1999 from 41%         
of sales in fiscal 1998.                                                        

In addition to the matters noted above, the Company recorded a $9.4             
million loss from the recognition of the Company's proportionate share of       
losses of Plug Power compared to a $3.8 million loss in 1998.                   

Results during fiscal 1999 were adversely effected by the sales decrease.       
Further, as a result of ownership changes in 1996, the availability of net      
operating loss carryforwards to offset future taxable income will be            
significantly limited pursuant to the Internal Revenue Code.                    

Results of Operations: 1998 in Comparison with 1997                             

The following two paragraphs summarize significant organizational changes,      
which impact the comparison of 1998 and 1997 results of operations.             

Net assets of the discontinued technology operation were $8 thousand and        
$3,186 thousand at September 30, 1998 and 1997, respectively, and the loss      
on discontinued operations included a loss from operations of $516              
thousand and a loss on disposal of $1,769 thousand at September 30, 1998.       
The loss on disposal includes a provision for estimated operating results       
prior to disposal.  The Company's prior year financial statements have          
been restated to conform to this treatment.                                     

On September 30, 1997, the Company sold all of the assets of its L.A.B.         
Division to Noonan Machine Company of Franklin Park, IL.  The Company           
received $2.6 million in cash and two notes, totaling $650 thousand, from       
Noonan Machine Company. The purchaser has requested that the principal          
amount of the note be reduced to reflect the resale value of certain            
assets of L.A.B.  The Company is enforcing its rights with respect to the       

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note.  The net proceeds from the sale were used to pay down outstanding         
debt and build working capital.  The sale of L.A.B. resulted in a $2.0          
million gain, which was recorded in the fourth quarter of fiscal year           
1997.  In addition, $250 thousand of the proceeds associated with one of        
the notes was recorded as deferred revenue due to the possible reduction        
of the $250 thousand note receivable, in the event of a sale of certain         
fixed assets, in accordance with the terms of the note.                         

The following is management's discussion and analysis of certain                
significant factors, which have affected the Company's results of               
operations for 1998 compared to 1997.  This discussion relates only to the      
Company's continuing operations.                                                

Sales for fiscal 1998 totaled $21.0 million compared to $24.1 million for       
the prior year, a decrease of $3.1 million or 12.8%.  This decrease is          
attributable to the reduction of sales resulting from the sale of the           
L.A.B. Division on September 30, 1997, which reported sales of                  
$3.3 million and operating income of $500 thousand at September 30, 1997.       
Advanced Products reported a sales increase of 26.2% and Ling reported a        
sales decrease of 11.3% in the year ended September 30, 1998.                   

Selling, general and administrative expenses for fiscal 1998 were 27.6% of      
sales, as compared to 29.1% in 1997. Product development and research           
costs during fiscal 1998 were 4% of sales, compared to 4.2% for 1997.           
Lower levels of selling, general and administrative expenses for fiscal         
1998 resulted primarily from cost reduction efforts during fiscal 1998 as       
well as the elimination of costs for L.A.B. of $600 thousand.                   

Operating income of $2 million at September 30, 1998 represented a $400         
thousand or 25.5% increase from the $1.6 million operating income               
recorded during the same period last year.  The increase is the result          
of increased sales levels for Advanced Products and improved margins as         
a result of cost control measures.  Excluding the L.A.B. division               
results in 1997, operating income increased $900 thousand.                      

In addition to the matters noted above, during the fourth quarter of            
fiscal 1998, the Company recorded a $3.8 million loss from the recognition      
of the Company's proportionate share of losses in Plug Power compared to a      
$330 thousand loss in 1997.  During the fourth quarter of fiscal 1997, the      
Company recorded a $2.0 million gain on the sale of the L.A.B. Division.        
Further, the Company recorded a $2.5 million extraordinary gain, net of         
taxes, on the extinguishment of debt during the first quarter of fiscal         
1997.                                                                           

Results during fiscal 1998 were enhanced by lower interest expense,             
principally resulting from reduced indebtedness. Moreover, the Company          
benefited from reduced income tax expense due to the loss generated by          
discontinued operations and the use of net operating loss carryforwards.        
However, as a result of recent ownership changes, the availability of           
further net operating loss carryforwards to offset future taxable income        
will be significantly limited pursuant to the Internal Revenue Code.            

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Liquidity and Capital Resources                                                 

At September 30, 1999, the Company's order backlog was $2.1 million,            
representing no change from the prior year-end.                                 

Inventories in 1999 remained stable at $3.75 million to support expected        
sales increases during the first quarter of 2000.  Additionally, accounts       
receivable decreased by $1.1 million in 1999 due to the reduced sales           
during fiscal 1999.                                                             

Cash flow used by continuing operations was $2.3 million in 1999 compared       
with $.5 million provided in 1998 and $1.1 million provided in 1997.  Cash      
flow from operating activities was impacted in 1999 by operating losses         
and 1998 and 1997 were impacted by positive operating income and                
fluctuations in working capital components.                                     

Working capital was $18.7 million at September 30, 1999, a $12.9 million        
increase from $5.8 million at fiscal year-end 1998.  Capital increased          
$12.7 million in 1999 which reflects the proceeds received from the sale        
of common shares to existing shareholders through a rights offering.            

Capital expenditures were $2.7 million for 1999, $3.2 million for 1998 and      
$.4 million for 1997.  The capital expenditures in 1999 were in accordance      
with the higher level of planned expenditures including the construction        
of a new facility for Advanced Products and corporate headquarters and          
renovations to an existing building, which were subsequently sold to Plug       
Power in July 1999. Capital expenditures in 2000 are expected to                
approximate $.4 million, which consists of expenditures for facility fit-       
up and computer and manufacturing equipment.  The Company expects to            
finance these expenditures with cash from operations and existing credit        
facilities.                                                                     

Cash and cash equivalents were $5.9 million at September 30, 1999 compared      
to $5.6 million at September 30, 1998. Investments in marketable                
securities were $7.9 million at September 30, 1999.  These increases are        
primarily attributable to $12.7 million of net cash proceeds from the sale      
of common shares to existing shareholders through a rights offering, which      
closed on July 12, 1999 net of payments associated with the Company's           
construction project.  During 1999, the Company also funded $4 million of       
previously accrued capital contributions to Plug Power.                         

At September 30, 1999 and 1998, there were no borrowings outstanding on         
the lines of credit.  The Company has a working capital line of credit          
available in the amount of $4 million and a $1 million equipment line of        
credit.  These lines of credit expire on January 31, 2000.  The Company is      
currently negotiating an extension of these lines of credit.                    

The reduction in net assets of discontinued operations to a net liability       
of $.5 million reflects the collection of receivables and settlement of         
liabilities.  The sale of the Technology Division was completed as of           
March 31, 1998.                                                                 

KeyBank issued a letter of credit for approximately $6 million in               
connection with the issuance of $6 million of Industrial Development            
Revenue Bonds ("IDR Bonds").  The KeyBank credit agreements required the        
Company to meet certain covenants, including a fixed charge coverage and        
leverage ratio.  Further, if certain performance standards were achieved,       

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the interest rates on the debt may be reduced.  The IDR Bond Obligation,        
letter of credit and unexpended bond proceeds were transferred to Plug          
Power in connection with the sale of the MTI facility and adjacent              
residence effective July 1, 1999.                                               

The Industrial Development Agency for the Town of Colonie issued $6             
million in IDR Bonds on behalf of the Company to assist in the                  
construction of a new building for Advanced Products and the Company's          
corporate staff and renovation of existing buildings leased to Plug Power.      
The bond closing was completed December 17, 1998 and proceeds of the IDR        
Bonds were deposited with a trustee for the bondholders.  The Company has       
drawn bond proceeds to cover qualified project costs.                           

On November 1, 1999, the Company entered into a $22.5 million Credit            
Agreement with KeyBank, N.A. ("the $22.5 million Credit Agreement").  The       
proceeds of this loan were used to fund the Company's remaining $20.5           
million balance of its Mandatory Capital Commitment to contribute $22.5         
million to Plug Power. Pursuant to the Mandatory Capital Commitment, the        
Company purchased 266,667 shares of Plug Power for $2 million on September      
30, 1999 and 2,733,333 shares of Plug Power for $20.5 million in November       
1999.  The Company may sell shares of Plug Power Common Stock to pay            
monthly interest and or quarterly principal payments (beginning May 2001)       
on the Loan.  Plug Power's stock is currently traded on the NASDAQ,             
therefore the stock is subject to stock market conditions.  Due to the          
Company's significant ownership position, sales of Plug Power stock will        
be subject to SEC Rule 144 limitations including a limit of one (1)             
percent of total outstanding shares per quarter.                                

The $22.5 million Credit Agreement requires the Company to meet certain         
covenants, including maintenance of a collateral account which at all           
times has a minimum market value of $600 thousand and a balance on              
November 1, 1999 of $2.65 million, and maintenance of a collateral              
coverage ratio.  The existing covenants under the original letter of            
credit were eliminated pursuant to the $22.5 million Credit Agreement.          
The $22.5 million Credit Agreement is collateralized by 100% of the             
Company's equity interest in Plug Power.                                        

On October 21, 1999, the Company created a strategic alliance with              
SatCon Technology Corporation (SatCon).  SatCon acquired Ling                   
Electronics, Inc. and Ling Electronics, Ltd. from the Company and the           
Company committed to invest approximately $7 million in SatCon.  In             
consideration for the acquisition of Ling Electronics and the Company's         
investment, the Company will receive 1,800,000 shares of SatCon's common        
stock and warrants to purchase an additional 100,000 shares of SatCon's         
common stock.  The Company funded $2.57 million of its investment in            
SatCon and will make the remaining investment by the end of January             
2000.  SatCon will also receive warrants to purchase 100,000 shares of          
the Company's common stock.                                                     

The Company anticipates that it will be able to meet the liquidity needs        
of its continuing operations and its investment commitment to SatCon            
from current cash resources, cash flow generated by operations and              
borrowing under its existing lines of credit.                                   

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Market Risk                                                                     

Market risk represents the risk of changes in value of a financial              
instrument, caused by fluctuations in interest rates and equity prices.         

Because the Company's cash and investment position exceeds both short           
and long term obligations, the Company's exposure to interest rate risk         
relates primarily to its investment in marketable debt securities.  The         
investments are at variable rates, which generally reflect market               
conditions.  The Company manages its investments to increase return on          
investment and only invests in instruments with high credit quality.            

The Company has performed a sensitivity analysis on its marketable debt         
securities and its investment in Plug Power common stock.  The                  
sensitivity analysis presents the hypothetical change in fair value of          
those financial instruments held by the Company at September 30, 1999           
which are sensitive to changes in interest rates.  Market risk is               
estimated as the potential change in fair value resulting from an               
immediate hypothetical one-percentage point parallel shift in the yield         
curve.  The fair values of the Company's investments in marketable              
securities have been based on quoted market prices.  As the carrying            
amounts on short-term investments maturing in less than 180 days                
approximate the fair value, these are not included in the sensitivity           
analysis.  The fair value of marketable securities over 180 days is $3.0        
million.  A one-percentage point change in the interest rates would             
change the fair value of investments over 180 days by $85 thousand.             

The Company also has an investment in Plug Power, which is accounted for        
on the equity method.  The fair market value of the investment is $164.6        
million based on the October 28, 1999 $15 per share initial public              
offering price.  If the market price on the Plug Power stock would              
decrease by ten percent the fair value of the stock would decrease by           
$16.5 million.                                                                  

Year 2000                                                                       

The Company's Year 2000 plan is complete.  The plan addresses the issue         
of computer programs and embedded computer chips being unable to                
distinguish between the year 1900 and the year 2000 as well as the              
ability to recognize the leap year date of February 29, 2000.  The plan         
has been divided into six areas: (1)Systems evaluation, (2) Software            
evaluation, (3) Third-party suppliers, (4) Facility systems, (5)                
Products and (6)Contingency plans. The general phases common to all             
segments are: (1) Inventorying Year 2000 items, (2) Assigning priorities        
to identified items, (3) Assessing the Year 2000 compliance of items            
determined to be material to the Company, (4) Repairing or replacing            
material items that are determined not to be Year 2000 compliant, (5)           
Testing material items and (6) Designing and implementing contingency           
and business continuation plans for each organization and company               
location.                                                                       

Systems Evaluation                                                              

All internal systems have been identified, inventoried, prioritized and         
assessed for Year 2000 compliance. Systems found to be non-compliant            

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were replaced and compliant systems were assessed to determine what if          
any maintenance is required to keep them compliant.  Plans have been            
developed to ensure that staff is available to oversee restarting               
certain machines and manually adjusting their dates.                            

Software Evaluation                                                             

All software material to the Company has been identified, evaluated, and        
is now in compliance and certified as such by vendors or new software           
has been purchased.                                                             

Third-Party Suppliers                                                           

Third-party suppliers have been identified and reviewed to determine            
whether their products and supplies are Year 2000 compliant.  Any               
provider identified as non-compliant has been or will be replaced with          
an alternative provider if they cannot serve our needs.                         

Facility Systems                                                                

All facility systems are believed to be Year 2000 compliant including           
telephone, fire alarm, security and network components.                         

Products                                                                        

The Company has evaluated both current product offerings and products in        
the field to determine their ability to comply with Year 2000 issues.           
The products were found to fall into three categories, non-compliant,           
compliant if modifications are made and fully compliant or not impacted         
(that is, the product does not have a computer or contains an embedded          
computer but does not use a date function).  All products currently sold        
by the Company are fully Year 2000 compliant.  The Company has produced         
and made available for sale, upgrades to products requiring                     
modifications to be Year 2000 compliant.  Those products identified as          
non-compliant are products that have been in the field for a number of          
years and must be replaced by the customer.                                     

Contingency Plans                                                               

In the event the Company's Year 2000 plan is ineffective or                     
unanticipated problems arise, the Company has developed contingency             
plans which are now in place.  The plans include use of hard copy data          
and alternate suppliers.                                                        

Costs                                                                           

The total cost associated with required modifications to become Year            
2000 compliant is not expected to be material to the Company's financial        
position.  The estimated total cost of the Year 2000 project was                
approximately $120 thousand, which included software, hardware and              
cabling upgrade and replacement costs.  This estimate does not include          
the Company's potential share of Year 2000 costs that may be incurred by        
joint ventures, in which the company participates but is not the                
operator.  The total amount expended on the Plan through September 30,          
1999 was $124 thousand for the upgrade and replacement of hardware.             

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Risks                                                                           

The failure to correct a material Year 2000 problem could result in an          
interruption in, or a failure of, certain normal business activities or         
operations.  Such failures could materially and adversely affect the            
Company's results of operations, liquidity and financial condition.  Due        
to the general uncertainty inherent in the Year 2000 problem, resulting         
in part from the uncertainty of the Year 2000 readiness of third-party          
suppliers and customers, the Company is unable to determine at this time        
whether the consequences of Year 2000 failures will have a material             
impact on the Company's results of operations, liquidity or financial           
condition. The Year 2000 Plan is expected to significantly reduce the           
Company's level of uncertainty about the Year 2000 problem and, in              
particular, about the Year 2000 compliance and readiness of its material        
customers.  The Company believes that, with its Year 2000 Plan, the             
possibility of significant interruptions of normal operations should be         
reduced.                                                                        

Forward Looking Statements                                                      

Statements in this Form 10-K or in documents incorporated herein by             
reference that are not historical facts or information constitute               
"forward-looking statements" within the meaning of the Private Securities       
Litigation Reform Act of 1995, including, but not limited to, the               
information set forth herein.  Such forward looking statements involve          
known and unknown risks, uncertainties or other factors which may cause         
the actual results, levels of activity, performance or achievement of           
Company or industry results to be materially different from any future          
results, levels of activity, performance or achievement expressed or            
implied by such forward-looking statements.  Such factors include, among        
others, the following: general economic and business conditions; the            
ability of the Company to implement its business strategy; the Company's        
access to financing; the Company's ability to successfully identify new         
business opportunities; the Company's ability to attract and retain             
employees; changes in the industry; competition; the effect of regulatory       
and legal proceedings and other factors discussed in  "Management's             
Discussion and Analysis of Financial Condition and Results of Operations".      
As a result of the foregoing and other factors, no assurance can be given       
as to the future results and achievements of the Company.  Neither the          
Company nor any other person assumes responsibility for the accuracy and        
completeness of these statements.                                               

ITEM 8:  FINANCIAL STATEMENTS                                                   

The financial statements filed herewith are set forth on the Index to           
Consolidated Financial Statements on Page F-1 of the separate financial         
section which follows page 29 of this report and are incorporated herein        
by reference.                                                                   

ITEM 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON                       
ACCOUNTING AND FINANCIAL DISCLOSURE                           

None.                                                                           

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PART III                                                                        

ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                    

The information set forth under the caption "Executive Officers" in Item 1      
of this Form 10-K Report, and the information which will be set forth in        
the section entitled "Election of Directors", and under the captions            
"Security Ownership of Certain Beneficial Owners" and "Compliance with          
Section 16(a) of the Securities Exchange Act of 1934" in the section            
entitled "Additional Information", in the definitive Proxy Statement to be      
filed by the registrant, pursuant to Regulation 14A, for its Annual             
Meeting of Shareholders to be held on March 16, 2000 (the "2000 Proxy           
Statement"), is incorporated herein by reference.                               

ITEM 11:  EXECUTIVE COMPENSATION                                                

The information which will be set forth under the captions "Executive           
Compensation", "Compensation Committee Report", "Compensation Committee         
Interlocks and Insider Participation", "Employment Agreements", and             
"Directors Compensation", in the section entitled "Additional Information"      
in the registrant's 2000 Proxy Statement, is incorporated herein by             
reference.                                                                      

ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND                   
MANAGEMENT                                                  

The information which will be set forth under the captions "Security            
Ownership of Certain Beneficial Owners" and "Security Ownership of              
Management" in the section entitled "Additional Information" in the             
registrant's 2000 Proxy Statement, is incorporated herein by reference.         

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                        

The information which will be set forth under the caption "Certain              
Information Regarding Nominees" in the section entitled "Election of            
Directors", and under the captions "Directors Compensation", "Security          
Ownership of Certain Beneficial Owners", and "Certain Relationships and         
Related Transactions", in the section entitled "Additional Information",        
in the registrant's 2000 Proxy Statement is incorporated herein by              
reference.                                                                      

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PART IV                                                                         

ITEM 14:  EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON                 
FORM 8-K                                                    

(a)  (1)  The financial statements filed herewith are set forth on the          
Index to Consolidated Financial Statements on page F-1 of the separate          
financial section which accompanies this Report, which is incorporated          
herein by reference.                                                            

The following exhibits are filed as part of this Report:                  

Exhibit                                                                         
Number          Description                                                     

3.1             Certificate of Incorporation of the registrant,                 
as amended and restated. (6)                    

3.2             By-Laws of the registrant, as restated. (6)                     

4.93            Credit Agreement dated as of September 22, 1998                 
among Mechanical Technology Incorporated and    
KeyBank National Association ("KeyBank"). (8)   

4.94            Security Agreement, dated as of September 22,                   
1998, executed by the registrant in favor of    
KeyBank and securing the registrant's           
obligations to KeyBank. (8)                     

4.95            Security Agreement, dated as of September 22,                   
1998, executed by Ling Electronics, Inc. (a     
wholly owned subsidiary of the registrant) in   
favor of KeyBank and securing the registrant's  
obligations to KeyBank. (8)                     

4.96            Guaranty of Payment and Performance, dated as of                
September 22, 1998, executed by Ling            
Electronics, Inc. (a wholly-owned subsidiary of 
the registrant) in favor of KeyBank and         
guaranteeing payment of the registrant's        
obligations to KeyBank. (8)                     

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4.103           Assignment and Assumption Agreement, dated as of                
July 1, 1999, by and among Town of Colonie      
Industrial Development Agency, the registrant,  
Plug Power, LLC, KeyBank National Association   
and First Albany Corporation in connection with 
the sale of the MTI facility to Plug Power and  
the assignment and assumption of rights and     
obligations in connection with the Industrial   
Development Revenue Bonds (Letter of Credit     
Secured) Series 1998 A in the original          
aggregate amount of $6,000,000. (10)            

4.104           Credit Agreement, dated as of November 1, 1999,                 
between the registrant and KeyBank National     
Association for a $22.5 million term loan to    
finance a capital contribution to Plug Power,   
LLC. (11)                                       

4.105           Stock Pledge Agreement, dated as of November 1,                 
1999, by the registrant with KeyBank National   
Association pledging 13,704,315 shares of Plug  
Power stock in support of the $22.5 million     
credit agreement. (11)                          

10.1            Mechanical Technology Incorporated Restricted                   
Stock Incentive Plan.  Filed as Exhibit 28.1 to 
the registrant's Form S-8 Registration          
Statement No. 33-26326 and incorporated herein  
by reference. (1)                               

10.14           Mechanical Technology Incorporated Stock                        
Incentive Plan - included as Appendix A to the  
registrant's Proxy Statement, filed pursuant to 
Regulation 14A, for its December 20, 1996       
Special Meeting of Shareholders and             
incorporated herein by reference. (2)           

10.17           Agreement, dated March 14, 1998, between the                    
Registrant and Mr. James Clemens, Vice President
and General Manager of Ling Electronic, Inc.,   
regarding his employment. (3)                   

10.18           Limited Liability Company Agreement of Plug                     
Power, L.L.C., dated June 27, 1998, between     
Edison Development Corporation and Mechanical   
Technology, Incorporated. (4)(5)                

10.19           Contribution Agreement, dated June 27, 1998,                    
between Mechanical Technology, Incorporated and 
Plug Power, L.L.C. (4)(5)                       

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10.20           Asset Purchase Agreement, dated as of September                 
22, 1998, between Mechanical Technology,        
Incorporated and Noonan Machine Company. (4)    

10.21           Asset Purchase Agreement between MTI and NYFM,                  
Incorporated, dated as of March 31, 1998.  (7)  

10.24           Contribution Agreement between Edison Development               
Corporation and MTI, dated as of June 10, 1998. 
(7)                                             

10.30           Mechanical Technology Incorporated 1999 Employee                
Stock Incentive Plan. (9)                       

10.31           Agreement of Sale, dated June 23, 1999, by and                  
between the registrant and Plug Power, LLC for  
the sale of the MTI campus and adjacent         
residence. (10)                                 

10.32           Stock Purchase Agreement, dated October 21,                     
1999, between the registrant, Ling Electronics, 
Inc., Ling Electronics, Ltd. and SatCon         
Technology Corporation.                         

10.33           Securities Purchase Agreement, dated October 21,                
1999, between the registrant and SatCon         
Technology Corporation.                         

10.34           Mechanical Technology Incorporated Registration                 
 Rights Agreement, dated October 21, 1999, between
 the registrant and SatCon Technology Corporation.

10.35           SatCon Technology Corporation Registration                      
 Rights Agreement, dated October 21, 1999, between
 SatCon Technology Corporation and the registrant.

10.36           Mechanical Technology Incorporated Stock                        
Purchase Warrant dated October 21, 1999.        

10.37           SatCon Technology Corporation Stock Purchase                    
Warrant dated October 21, 1999.                 

10.38           Lease dated August 10, 1999 between Carl E.                     
Touhey and Mechanical Technology, Inc.          

10.39           Registration Rights Agreement, dated November                   
1, 1999 by and among Plug Power Inc. and the    
registrant.                                     

10.40           Plug Power Inc. Lock-Up Agreement, dated                        
November 1, 1999.                               

21              Subsidiaries of the registrant.                                 

27              Financial Data Schedule                                         

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______________________                                                          
Certain exhibits were previously filed (as indicated below) and are             
incorporated herein by reference.  All other exhibits for which no              
other filing information is given are filed herewith:                           

(1) Filed as Exhibit 28.1 to the registrant's Form S-8 Registration             
Statement No. 33-26326, filed December 29, 1988, and incorporated               
herein by reference.                                                            

(2) Filed as an Exhibit (bearing the same exhibit number) to the                
registrant's Form 10-K Report for its fiscal year ended September               
30, 1996.                                                                       

(3) Filed as an Exhibit (bearing the same exhibit number) to the                
registrant's Form 8-K Report dated May 12, 1997.                                

(4) Filed as an Exhibit (bearing the same exhibit number) to the                
registrant's Form 10-K Report for the fiscal year ended September               
30,1997.                                                                        

(5) Refiled herewith after confidential treatment request with                  
respect to certain schedules and exhibits were denied by the                    
Commission.  Confidential treatment with respect to certain                     
schedules and exhibits was granted.                                             

(6) Filed as an Exhibit to the Proxy Statement, Schedule 14A,                   
dated March 9, 1998.                                                            

(7) Filed as an Exhibit (bearing the same exhibit number) to the                
registrant's Form S-2 dated August 18, 1998.                                    

(8) Filed as an Exhibit (bearing the same exhibit number) to the                
registrant's Form 10-K Report for the fiscal year ended September               
30, 1998.                                                                       

(9) Filed as an Exhibit to the registrant's Proxy Statement,                    
Schedule 14A, dated February 12, 1999.                                          

(10) Filed as an Exhibit (bearing the same exhibit number) to the               
registrant's Form 10-Q Report for its fiscal quarter ended June                 
25, 1999.                                                                       

(11) Filed as an Exhibit to the registrant's 13D Report dated                   
November 4, 1999.                                                               

(a) (2) Schedule.  The following consolidated financial statement               
schedule for each of the three years in the period ended September 30,          
1999 is included pursuant to Item 14(d):                                        

Report of Independent Accountants on Financial Statements             
Schedule                                                              

Schedule II--Valuation and Qualifying Accounts                        

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(b) Two reports on Form 8-K were filed during the quarter ended                 
September 30, 1999 and three reports were filed subsequent to the               
quarter ended September 30, 1999.                                               

The Company filed a Form 8-K Report, dated July 2, 1999, reporting              
under item 5 thereof its intention to release 125,000 shares for the            
Rights Offering over-subscription and pre-releasing preliminary third           
quarter 1999 results.                                                           

The Company filed a Form 8-K Report, dated August 30, 1999, reporting           
under item 5 thereof that the Company's fuel cell affiliate, Plug               
Power, filed a registration statement with the Securities and                   
Exchange Commission, in connection with the initial public offering             
of its common stock.  If the public offering price is greater than              
$7.50 per share, the Company has agreed to purchase 3 million shares            
of Plug Power stock at the fixed price of $7.50 per share, pursuant             
to the Mandatory Capital Contribution Agreement dated as of January             
26, 1999.                                                                       

The Company filed a Form 8-K Report, dated October 4, 1999, reporting           
under item 5 thereof that Plug Power filed an amendment to its                  
registration statement with the Securities and Exchange Commission              
stating that shares of Plug Power would be offered at an estimated              
price range of $13 to $15 per share.  On September 30, 1999, the                
Company purchased 266,667 shares of Plug Power at $7.50 per share               
thereby reducing the Company's commitment to purchase shares at the             
public offering from 3 million to 2,733,333 shares.                             

The Company filed a Form 8-K Report, dated October 22, 1999,                    
reporting under item 5 thereof the creation of a strategic alliance             
with SatCon Technology Corporation.  SatCon acquired Ling                       
Electronics, Inc. and Ling Electronics, Ltd. from the Company and the           
Company will invest approximately $7,000,000 in SatCon.  In                     
consideration for the acquisition of Ling Electronics and the                   
Company's investment, the Company will receive 1,800,000 shares of              
SatCon's common stock and warrants to purchase an additional 100,000            
shares of SatCon's common stock.  The Company immediately funded                
$2,570,000 of its investment in SatCon and will make the remaining              
investment by the end of January 2000.  SatCon will also receive                
warrants to purchase 100,000 shares of the Company's common stock.              

The Company filed a Form 8-K Report, dated November 16, 1999,                   
reporting under item 5 thereof that on November 8, 1999 Plug Power              
received correspondence from counsel to DCT, Inc., alleging , among             
other things, that the Company misappropriated from DCT, Inc.                   
business and technical trade secrets, ideas, know-how and strategies            
relating to fuel cell systems, and that certain contractual                     
obligations owed to DCT, Inc. were breached.                                    

(d) Separate financial statements for Plug Power, Inc., a less than fifty       
percent owned entity, will be filed as an amendment to this Form 10-K as        
soon as they become available.  Plug Power's fiscal year ends December 31,      
1999 and their financial statements should be available by March 30, 1999,      
the SEC filing deadline for their Report on Form 10-K.                          

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SIGNATURES          

Pursuant to the requirements of Section 13 or 15(d) of the Securities           
Exchange Act of 1934, the registrant has duly caused this report to be          
signed on its behalf by the undersigned, thereunto duly authorized.             

              MECHANICAL TECHNOLOGY INCORPORATED

Date: December 28,1999        By:  /s/ G.C. McNamee                             
       George C. McNamee
             Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this       
report has been signed below by the following persons on behalf of the          
registrant and in the capacities and on the dates indicated.                    

SIGNATURE                        TITLE                               DATE       

/s/ George C. McNamee            Chief Executive Officer and                    
George C. McNamee                Chairman of the Board of                       
                                Directors                    December 28, 1999

/s/ Cynthia A. Scheuer           Chief Financial Officer                        
Cynthia A. Scheuer               (Principal Financial and                       
                          Accounting Officer)                    "

/s/ Dale W. Church               Director                               "       
Dale W. Church                                                                  

/s/ Edward A. Dohring            Director                               "       
Edward A. Dohring                                                               

/s/ Alan P. Goldberg             Director                               "       
Alan  P. Goldberg                                                               

/s/ E. Dennis O'Connor           Director                               "       
E. Dennis O'Connor                                                              

/s/ Walter L. Robb               Director                               "       
Dr. Walter L. Robb                                                              

/s/ Beno Sternlicht              Director                               "       
Dr. Beno Sternlicht                                                             

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   REPORT OF INDEPENDENT ACCOUNTANTS
  ON FINANCIAL STATEMENT SCHEDULES

To the Board of Directors and Shareholders                                      
of Mechanical Technology Incorporated                                           

Our audits of the consolidated financial statements referred to in our          
report dated November 12, 1999 appearing on page F-2 of this Form 10-K          
of Mechanical Technology Incorporated also included an audit of the             
financial statement schedule listed in Item 14(a)(2) of this Form 10-K.         
In our opinion, this financial statement schedule presents fairly, in           
all material respects, the information set forth therein when read in           
conjunction with the related consolidated financial statements.                 

                              /s/  PricewaterhouseCoopers L.L.P.

Albany, New York                                                                
November 12, 1999                                                               

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                                                       SCHEDULE II

       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
     VALUATION AND QUALIFYING ACCOUNTS
    (DOLLARS IN THOUSANDS)

 Additions
            Balance at  Charged to  Charged                Balance
              beginning   costs and   to other               at end of
Description        of period   expenses    accounts  Deductions   period        

Allowance for                                                                   
doubtful accounts                                                           

Year ended                                                              
September 30:                                                       

  1999        $       99  $       76  $      -  $       62   $     113
  1998                94          95         -          90          99
  1997                73          49         -          28          94

Includes accounts written off as uncollectible, recoveries and the effect       
of currency exchange rates.                                                     

Valuation allowance                                                             
for deferred tax assets                                                     

Year ended                                                              
September 30:                                                       

  1999        $    4,089  $    5,092  $      -  $    5,431   $   3,750
  1998             2,754       1,335         -           -       4,089
  1997             4,264           -         -       1,510       2,754

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                          Page

Report of Independent Accountants. . . . . . . . . . .             F-2          

Consolidated Financial Statements:                                              

Balance Sheets as of September 30, 1999 and 1998 . .          F-3 & F-4     

Statements of Operations for the Years Ended                                
September 30, 1999, 1998 and 1997 . . . . . . . .          F-5  

Statements of Shareholders' Equity for the Years Ended                      
September 30, 1999, 1998 and 1997 . . . . . . . .          F-6  

Statements of Cash Flows for the Years Ended                                
 September 30, 1999, 1998 and 1997 . . . . . . . .       F-7 - F-8

Notes to Consolidated Financial Statements . . . . .          F-9 - F-35    

Separate financial statements of the registrant alone are omitted because       
the registrant is primarily an operating company and all subsidiaries           
included in the consolidated financial statements being filed, in the           
aggregate, do not have minority equity interest and/or indebtedness to          
any person other than the registrant or its consolidated subsidiaries in        
amounts which together exceed 5% of the total assets as shown by the most       
recent year-end consolidated balance sheet.                                     

 F-1

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   REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders                                      
of Mechanical Technology Incorporated                                           

In our opinion, the accompanying consolidated balance sheets and the            
related consolidated statements of operations and retained earnings and         
of cash flows present fairly, in all material respects, the financial           
position of Mechanical Technology Incorporated and Subsidiaries at              
September 30, 1999 and 1998, and the results of their operations and            
their cash flows for each of the three years in the period ended                
September 30, 1999, in conformity with generally accepted accounting            
principles.  These financial statements are the responsibility of the           
Company's management; our responsibility is to express an opinion on            
these financial statements based on our audits.  We conducted our audits        
of these statements in accordance with generally accepted auditing              
standards which require that we plan and perform the audit to obtain            
reasonable assurance about whether the financial statements are free of         
material misstatement.  An audit includes examining, on a test basis,           
evidence supporting the amounts and disclosures in the financial                
statements, assessing the accounting principles used and significant            
estimates made by management, and evaluating the overall financial              
statement presentation.  We believe that our audits provide a reasonable        
basis for the opinion expressed above.                                          

                                  /s/PricewaterhouseCoopers L.L.P.

Albany, New York                                                                
November 12, 1999                                                               

 F-2

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
       CONSOLIDATED BALANCE SHEETS
       September 30, 1999 and 1998

                              (Dollars in thousands)
                               1999         1998
ASSETS                                                  

CURRENT ASSETS                                                                  

Cash and cash equivalents                $  5,870     $   5,567             
Investments in marketable securities        7,876             -             
Accounts receivable, less allowance of                                      
$113 (1999) and $99 (1998)                3,852         4,959           

Other receivables - related parties           105            87             

Inventories                                 3,752         3,748             
Taxes receivable                               10             8             
Note receivable - current                     329           327             
Prepaid expenses and other current assets     265           472             
Net assets of a discontinued operation          -             8             
                              ______        ______
Total Current Assets                     22,059        15,176           

Property, Plant and Equipment, net              827         4,467               

Note receivable - noncurrent                    184           264               

Investment in Plug Power                      8,710         1,221               
                             _______      ________
Total Assets                       $ 31,780     $  21,128       
                             =======      ========

The accompanying notes are an integral part of the consolidated financial       
statements.                                                                     

 F-3

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
     CONSOLIDATED BALANCE SHEETS (Continued)
     September 30, 1999 and 1998

                              (Dollars in thousands)
                               1999         1998
LIABILITIES AND SHAREHOLDERS' EQUITY                                            

CURRENT LIABILITIES                                                             
Income taxes payable                      $      -      $      5            
Accounts payable                               614         2,064            
Accrued liabilities                          2,243         3,328            
Contribution payable-Plug Power                  -         4,000            
Net liabilities of discontinued operations     540             -            
                               _______       _______
Total Current Liabilities                   3,397         9,397           

LONG-TERM LIABILITIES                                                           
Deferred income taxes and other credits       597           607           
                               _______       _______
Total Liabilities                      $  3,994      $ 10,004         
                               _______       _______
COMMITMENTS AND CONTINGENCIES                                                   

SHAREHOLDERS' EQUITY                                                            
Common stock, par value $1 per share,                                       
authorized 15,000,000; issued                                             
11,649,959 (1999) and 10,773,968(1998)     11,649        10,775           
Paid-in capital                             42,755        16,274            
Deficit                                    (26,573)      (15,885)           
                               _______       _______
                                27,831        11,164
Accumulated Other Comprehensive Loss:                                       
Unrealized loss on available for sale                                       
securities, net                               (5)            -          
Foreign currency translation adjustment        (11)          (11)           
                               _______       _______
Accumulated Other Comprehensive Loss        (16)          (11)        

Common stock in treasury, at cost,                                          
6,750 shares (1999) and                                                 
4,500 shares (1998)                          (29)          (29)         
                               _______       _______
Total Shareholders' Equity               27,786        11,124         

Total Liabilities and Shareholder's Equity $ 31,780      $ 21,128             
                               =======       =======

The accompanying notes are an integral part of the consolidated financial       
statements.                                                                     
 F-4

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF OPERATIONS
       For the Years Ended September 30, 1999, 1998 and 1997
      (Dollars in thousands, except per share)
                                                    Restated
                                1999      1998      1997

Net sales                               $ 12,885  $ 21,028    $ 24,102          
Cost of sales                              8,239    12,386      14,474          
                               _______   _______     _______
Gross profit                               4,646     8,642       9,628          
Selling, general and administrative                                             
expenses                                  4,949     5,812       7,015         
Product development and research costs     1,105       831       1,020          
                               _______   _______     _______
Operating (loss) income                 (1,408)    1,999       1,593        

Interest expense                            (106)     (102)       (323)         
Gain on sale of division/subsidiary            -         -       2,012          
Equity in losses of Plug Power            (9,363)   (3,806)       (330)         
Other income(expense), net                   185       (97)       (251)         
                               _______   _______     _______
(Loss)income from continuing operations                                     
before extraordinary item and income                                      
taxes                                 (10,692)   (2,006)      2,701       
Income tax expense                            37        25         143          
                               _______   _______     _______
(Loss)income from continuing operations                                     
before extraordinary item           (10,729)   (2,031)      2,558     
Extraordinary item- gain on extinguishment                                      
of debt, net of taxes ($106)                  -         -       2,507         
                               _______   _______     _______
(Loss)income from continuing operations  (10,729)   (2,031)      5,065          
Income(loss)from discontinued operations      41    (2,285)       (545)         
                               _______   _______     _______
Net(loss)income                       $(10,688) $ (4,316)   $  4,520        
                               =======   =======     =======

Earnings (loss) per share (Basic and Diluted):                                  

(Loss)income before extraordinary item  $   (.94) $   (.21)   $    .28          
Extraordinary item                             -         -         .27          
(Loss)from discontinued operations             -      (.24)       (.06)         
                               _______   _______     _______
Net(loss)income                         $   (.94) $   (.45)   $    .49          
                               =======   =======     =======

The accompanying notes are an integral part of the consolidated financial       
statements.                                                                     

 F-5

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
       CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
       For the Years Ended September 30, 1999, 1998 and 1997
        (Dollars in thousands)
                                                          Restated
                                    1999        1998      1997
COMMON STOCK                                                                    
Balance, October 1                                                          
(1997 balance as previously reported)   $ 10,775  $  8,864  $  4,902      
Three-for-two common stock split effected                                 
in the form of a 50% stock dividend                                   
effective April 30, 1999                     -         -     2,451    
Issuance of shares - options                  56       117         -      
Issuance of shares                           818     1,794     1,511      
                                   _______   _______   _______
Balance, September 30                    $ 11,649  $ 10,775  $  8,864       
                                   =======   =======   =======
PAID-IN-CAPITAL                                                                 
Balance, October 1                                                          
(1997 balance as previously reported)   $ 16,274  $ 10,968  $ 13,423      
Three-for-two common stock split effected                                 
in the form of a 50% stock dividend                                   
effective April 30, 1999                     -         -    (2,451)   
Issuance of shares - options                 168       108         -      
Issuance of shares                        11,826     5,198        (4)     
Plug Power investment                     14,487         -         -      
                                   _______   _______   _______
Balance, September 30                    $ 42,755  $ 16,274  $ 10,968       
                                   =======   =======   =======
DEFICIT                                                                         
Balance, October 1                       $(15,885) $(11,569) $(16,089)      
Net(loss)income                          (10,688)   (4,316)    4,520      
                                   _______   _______   _______
Balance, September 30                    $(26,573) $(15,885) $(11,569)      
                                   =======   =======   =======
UNREALIZED LOSS ON AVAILABLE FOR SALE                                           
SECURITIES, NET                                                                 
Balance, October 1                       $      -  $      -  $      -       
Unrealized loss on available for                                          
for sale securities, net                     (5)        -         -     
                                   _______   _______   _______
Balance, September 30                    $     (5) $      -  $      -       
                                   =======   =======   =======
FOREIGN CURRENCY TRANSLATION ADJUSTMENT                                         
Balance, October 1                       $    (11) $    (19) $    (19)      
Adjustments                                    -         8         -      
                                   _______   _______   _______
Balance, September 30                    $    (11) $    (11) $    (19)      

                                   =======   =======   =======

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TREASURY STOCK                                                                  
Balance, October 1                       $    (29) $    (29) $    (29)      
Restricted stock grants                        -         -         -      
                                   _______   _______   _______
Balance, September 30                    $    (29) $    (29) $    (29)      
                                   =======   =======   =======
RESTRICTED STOCK GRANTS                                                         
Balance, October 1                       $      -  $     (2) $    (24)      
Grants issued/vested, net                         -         2        22         
                                   _______   _______   _______
Balance, September 30                    $      -  $      -  $     (2)      
                                   =======   =======   =======
SHAREHOLDERS' EQUITY                                                            
September 30                             $ 27,786  $ 11,124  $  8,213       
                                   =======   =======   =======

The accompanying notes are an integral part of the consolidated financial       
statements.                                                                     
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                  MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES                    
                         CONSOLIDATED STATEMENTS OF CASH FLOWS                           
                 For The Years Ended September 30, 1999, 1998 and 1997                   
                                 (Dollars in thousands)                                  

                                                                                 Restated
                                                             1999        1998      1997  
                                                                                         
OPERATING ACTIVITIES                                                                     
 (Loss)income from continuing operations                 $ (10,729)   $ (2,031) $  5,065 
 Adjustments to reconcile net (loss) income to net cash                                  
  provided (used) by continuing operations:                                              
  Depreciation and amortization                                581         323       243 
  Gain on extinguishment of debt, net of taxes                   -           -    (2,507)
  Gain on sale of subsidiaries                                   -           -    (2,012)
  Unrealized loss on marketable securities                      (5)          -         - 
  Equity in losses of Plug Power                             9,363       3,806       330 
  Accounts receivable reserve                                   14           5        21 
  Loss on sale of fixed assets                                  28           9         - 
  Deferred income taxes and other credits                      (10)         13      (170)
  Other                                                          -           -        31 
  Stock option compensation                                     55           -         - 
 Changes in operating assets and liabilities net                                         
  of effects from discontinued operations:                                               
  Accounts receivable                                        1,093      (1,069)      (44)
  Accounts receivable - related parties                        (18)          -         - 
  Inventories                                                   (4)       (362)      228 
  Prepaid expenses and other current assets                   (174)       (346)      (18)
  Accounts payable                                          (1,450)        788       (87)
  Income taxes                                                  (7)        (76)      (49)
  Accrued liabilities                                       (1,085)       (519)       58 
                                                          ________     _______   _______ 
Net cash (used) provided by continuing operations           (2,348)        541     1,089 
                                                          ________     _______   _______ 
 Discontinued Operations:                                                                
  Income/(loss)from discontinued operations                     41      (2,285)     (574)
  Adjustments to reconcile income to net cash                                            
   provided (used) by discontinued operations:                                           
   Changes in net assets/liabilities                                                     
     of discontinued operations                                548       3,178        31 
  Net assets transferred from discontinued operations            -        (878)        - 
                                                          ________     _______   _______ 
Net cash provided (used) by discontinued operations            589          15      (543)
                                                          ________     _______   _______ 
Net cash (used) provided by operations                      (1,759)        556       546 
                                                          ________     _______   _______ 
INVESTING ACTIVITIES                                                                     
  Purchases of property, plant & equipment                  (2,738)     (3,166)     (377)
  Investment in marketable securities                       (7,876)          -         - 
  Proceeds from sale of subsidiaries                             -           -     2,600 
  Principal payments from note receivable                       78          59         - 
  Investment in Plug Power                                  (6,000)          -         - 
  Note receivable Plug Power                                     -        (500)        - 
                                                          ________     _______   _______ 
Net cash (used)provided by investing activities            (16,536)     (3,607)    2,223 
                                                          ________     _______   _______ 

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FINANCING ACTIVITIES                                                                     
  Borrowings under IDA financing, less restricted                                        
   cash                                                      5,858           -         - 
  Proceeds from options exercised                              153         225         - 
  Proceeds from rights offering                             12,820       7,178         - 
  Costs of rights offering                                    (158)       (186)        - 
  Debt issue costs                                             (75)        (28)        - 
  Net (payments) under line-of-credit and note                                           
   agreement                                                     -           -      (100)
  Principal payments on long-term debt                           -           -    (1,310)
                                                          ________     _______   _______ 
Net cash provided(used)by financing activities              18,598       7,189    (1,410)
                                                          ________     _______   _______ 

Effect of exchange rate changes on cash flows                    -           8         - 
Increase in cash and cash equivalents                          303       4,146     1,359 
Cash and cash equivalents - beginning of year                5,567       1,421        62 
                                                          ________     _______   _______ 
Cash and cash equivalents - end of year                  $   5,870    $  5,567  $  1,421 
                                                          ========     =======   ======= 

The accompanying notes are an integral part of the consolidated financial statements.    

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
       CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
       For The Years Ended September 30, 1999, 1998 and 1997
        (Dollars in thousands)
                                                                      Restated
                                                    1999     1998     1997
Supplemental Disclosures                                                        

NONCASH INVESTING ACTIVITIES                                                    

Contribution of net assets to Plug Power:                                 
   Accounts receivable                             $     -  $   500  $       -
   Note receivable                                       -      500          -
   Inventories                                           -        -          1
   Property, plant and equipment, net                    -        -        452
    Accounts payable                                      -        -        (46)
    Accrued liabilities                                   -        -        (50)
   Contribution payable - Plug Power                     -    4,000          -
                                                    ______   ______   ________

                                                   $     -  $ 5,000  $     357
                                                    ______   ______   ________
Proceeds from sale of subsidiary                                          
    Notes receivable                               $     -  $     -  $     650
                                                    ______   ______   ________

  Net noncash provided by investing activities     $     -  $ 5,000  $   1,007
                                                    ______   ______   ________

NONCASH FINANCING ACTIVITIES                                                    

Conversion of Note Payable to Common Stock:                               
     Note Payable extinguishment                    $     -  $     -  $  (3,000)
    Common stock issued                                  -        -      1,500
     Accrued interest - Note Payable                      -        -     (1,213)
  Additional paid-in capital - Other Investors      14,487        -          -
Campus contribution to Plug Power:                                        
    Debt                                            (6,000)       -          -
    Fixed assets                                     5,861        -          -
    Prepaid expenses                                   364        -          -
    Restricted cash                                    142        -          -
                                                    ______   ______   ________
Net noncash provided (used) by                                        
        financing activities                        $14,854  $     -  $  (2,713)
                                                    ______   ______   ________
Net noncash provided (used) by                                                
        investing and financing activities          $14,854  $ 5,000  $  (1,706)

                                                    ======   ======   ========

The accompanying notes are an integral part of the consolidated financial       
statements.                                                                     

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Accounting Policies                                                         

Principles of Consolidation                                                     

The consolidated financial statements include the accounts of the Company       
and its subsidiaries. All significant intercompany transactions and             
accounts have been eliminated.  The Company has a 40.65% interest in Plug       
Power, L.L.C. ("Plug Power").  The consolidated financial statements            
include the Company's investments in Plug Power (including obligations to       
invest), plus its share of losses.  The investment is included in the           
financial line "Investment in Plug Power".                                      

Use of Estimates                                                                

The preparation of the consolidated financial statements in conformity          
with generally accepted accounting principles requires management to make       
estimates and assumptions that affect the reported amounts of assets and        
liabilities and disclosure of contingent assets and liabilities at the          
date of the consolidated financial statements and the reported amounts of       
revenues and expenses during the reporting period. Actual results could         
differ from those estimates.                                                    

Financial Instruments                                                           

The fair value of the Company's financial instruments including cash and        
cash equivalents, investments, line-of-credit, note payable and long-term       
debt, approximates carrying value. Fair values were estimated based on          
quoted market prices, where available, or on current rates offered to the       
Company for debt with similar terms and maturities.                             

Inventories                                                                     

Inventories are stated at the lower of cost (first-in, first-out) or            
market.                                                                         

Property, Plant, and Equipment                                                  

Property, plant and equipment are stated at cost and depreciated using          
primarily the straight-line method over their estimated useful lives:           

Buildings and improvements              20 to 40 years                          
Leasehold improvements                     10    years                          
Machinery and equipment                  2 to 10 years                          
Office furniture and fixtures            3 to 10 years                          

Significant additions or improvements extending assets' useful lives are        
capitalized; normal maintenance and repair costs are expensed as                
incurred.  The costs of fully depreciated assets remaining in use are           
included in the respective asset and accumulated depreciation accounts.         
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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  Accounting Policies (continued)                                            

When items are sold or retired, related gains or losses are included in         
net income.                                                                     

Income Taxes                                                                    

The Company accounts for taxes in accordance with Financial Accounting          
Standard No. 109, "Accounting for Income Taxes," which requires the use         
of the asset and liability method of accounting for income taxes.  Under        
the asset and liability method, deferred income taxes are recognized for        
the tax consequences of "temporary differences" by applying enacted             
statutory tax rates applicable for future years to differences between          
financial statement and tax bases of existing assets and liabilities.           
Under FAS No. 109, the effect of tax rate changes on deferred taxes is          
recognized in the income tax provision in the period that includes the          
enactment date.  The provision for taxes is reduced by investment and           
other tax credits in the years such credits become available.                   

Revenue Recognition                                                             

Sales of products are recognized when products are shipped to customers.        
Sales of products under long-term contracts are recognized under the            
percentage-of-completion method. Percentage-of-completion is based on the       
ratio of incurred costs to current estimated total costs at completion.         
Total contract losses are charged to operations during the period such          
losses are estimable.                                                           

Foreign Currency Translation                                                    

Assets and liabilities of the foreign subsidiary are translated at year-        
end rates of exchange, and revenues and expenses are translated at the          
average rates of exchange for the year. Gains or losses resulting from          
the translation of the foreign subsidiary's balance sheet are accumulated       
in a separate component of shareholders' equity.                                

Cash and Cash Equivalents                                                       

Cash and cash equivalents consist of cash and highly liquid short-term          
investments with maturities of less than three months.                          

Investments in Marketable Securities                                            
Management determines the appropriate classification of its investments         
in marketable securities at the time of purchase and reevaluates such           
determinations at each balance sheet date.  Marketable securities for           
which the Company does not have the intent or ability to hold to                
maturity are classified as available for sale along with any                    

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)     Accounting Policies  (continued)                                        

investments in mutual funds.  Securities available for sale are carried         
at fair value, with the unrealized gains and losses, net of income              
taxes, reported as a separate component of Shareholders' Equity.  The           
Company has had no investments that qualify as trading or held to               
maturity.                                                                       

The amortized cost of debt securities is adjusted for accretion of              
discounts to maturity.  Such accretion as well as interest are included         
in interest income.  Realized gains and losses are included in Other            
income (expense), net in the Consolidated Statements of Operations. The         
cost of securities sold is based on the specific identification method.         

The Company's investments in marketable securities are diversified among        
high-credit quality securities in accordance with the Company's                 
investment policy.                                                              

Earnings (Loss) Per Share                                                       

Effective October 1, 1997, the Company adopted Financial Accounting             
Standard No. 128, "Earnings per Share."  In accordance with this                
Standard, net income(loss) per share is computed using the weighted             
average number of common shares outstanding during each year.  Diluted          
net income(loss) per share includes the effects of all potentially              
dilutive securities.  Earnings per share amounts for all periods                
presented have been computed in accordance with this Standard.                  

Advertising                                                                     

The costs of advertising are expensed as incurred.  Advertising expense         
was approximately $102, $83 and $92 thousand in 1999, 1998, and 1997,           
respectively.                                                                   

Asset Impairment                                                                

The Company adopted SFAS No. 121, "Accounting For The Impairment of Long-       
Lived Assets and for Long-Lived Assets To Be Disposed Of."  This                
statement requires companies to record impairments to long-lived assets,        
certain identifiable intangibles, and related goodwill when events or           
changing circumstances indicate a probability that the carrying amount of       
an asset may not be fully recovered.  Impairment losses are recognized          
when expected future cash flows are less than the asset's carrying value.       

Reclassification and Restatement                                                

Certain 1998 and 1997 amounts have been reclassified to conform to the          
1999 presentation.  The financial statements for 1997 have also been            
restated to reflect the discontinuance of the Company's Technology              
Division (See Note 16).                                                         

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2)  Investments in Marketable Securities                                       

The following is a summary of the investments in marketable securities          
classified as current assets:                                                   

(Dollars in thousands)                           1999           1998          

Available for sale securities:                                                  
Corporate debt securities                                                     
Fair Value                                    $ 7,876         $    -          
                                     ======          =====

Amortized Cost                                $ 7,881         $    -          
                                     ======          =====

Unrealized Loss                               $    (5)        $    -          
                                     ======          =====

The difference between the amortized cost of available for sale                 
securities and their fair market value results in unrealized gains and          
losses, which are recorded as a separate component of stockholders'             
equity.  Gross realized gains and losses on sales of available for sale         
securities were immaterial in 1999, 1998 and 1997.                              

The estimated fair value of available for sale securities by contractual        
maturity is as follows:                                                         

(Dollars in thousands)                           1999                         

Due in one year or less                        $ 4,916                          
Due after one year through three years               -                          
Due after three years                            2,960                          
                      ______
                     $ 7,876
                      ======

Expected maturities may differ from contractual maturities because the          
issuers of the securities may have the right to prepay obligations              
without prepayment penalties.                                                   

(3) Inventories                                                                 
Inventories consist of the following:                                           

(Dollars in thousands)                       1999       1998                  

Finished goods                             $    73    $   112                   
Work in process                                916        791                   
Raw materials, components and                                                   
Assemblies                                 2,763      2,845                 
                         ______     ______
                        $ 3,752    $ 3,748
                         ======     ======

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4) Property, Plant and Equipment                                               
Property, plant and equipment consists of the following:                        

            (Dollars in thousands)                      1999        1998

Land and improvements                                   $    -     $   125  
Buildings and improvements                                  26       6,111  
Leasehold improvements                                     470         517  
Machinery and equipment                                  3,686       4,285  
Office furniture and fixtures                              621         866  
                                                       _____      ______
                                                       4,803      11,904
Less accumulated depreciation                            3,976       7,437  
                                                       _____      ______
                                                      $  827     $ 4,467
                                                       =====      ======

At the beginning of 1998, assets with a net book value of $878 thousand         
consisting primarily of land, building and management information systems       
were transferred from discontinued operations to continuing operations.         

Construction in progress, included in buildings and improvements, was           
approximately $1,371 thousand in 1998.                                          

At the end of 1999, the Company was committed to approximately $387             
thousand of future expenditures for new furniture, equipment and                
fixtures.                                                                       

Depreciation expense was $489, $317 and $216 thousand for 1999, 1998            
and 1997, respectively. Repairs and maintenance expense was $166, $177          
and $175 thousand for 1999, 1998 and 1997, respectively.                        

Prior to the sale of all land and buildings to Plug Power in 1999, the          
cost and accumulated depreciation of buildings and improvements leased          
to Plug Power was:                                                              

(Dollars in thousands)                  1998         1997   

Cost                                     $ 1,547       $   21       
Accumulated depreciation                    (660)         (17)      
                                   ______        _____
                                  $   887       $    4
                                   ======        =====

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(5)  Notes Receivable                                                           

Notes receivable consists of the following:                                     

(Dollars in thousands)                1999        1998          
Notes receivable with an interest                                           
rate of 10%, interest and principal                                         
due September 30, 1998    (A)            $   250      $  250                

Notes receivable with an interest                                           
rate 10%, due in monthly installments                                       
through September 30, 2002                   263         341                
                          ______       _____
                             513         591
Less:  Current portion                      (329)       (327)               
                          ______       _____
                         $   184      $  264
                          ======       =====
(A)  The principal amount of this note may be reduced in accordance with        
the terms of the note in the event of a sale of the fixed assets. The           
purchaser has requested that the principal amount of the note be reduced        
to reflect the resale value of certain assets of L.A.B.  The Company is         
enforcing its rights with respect to the note and is currently litigating       
for the collection of this note.                                                

(6) Investment in Plug Power, L.L.C.                                            

On June 27, 1997, the Company and Edison Development Corp. ("EDC"), a           
subsidiary of DTE Energy Co. formed a joint venture, Plug Power, L.L.C.         
("Plug Power"), to further develop the Company's Proton Exchange Membrane       
("PEM") Fuel Cell technology. In exchange for its contribution of               
contracts and intellectual property and certain other net assets that had       
comprised the fuel cell research and development business activity of the       
Technology segment (which assets had a net book value of $357 thousand),        
the Company received a 50% interest in Plug Power.  EDC made an initial         
cash contribution of $4.75 million in exchange for the remaining 50%            
interest in Plug Power. The Company's investment in Plug Power is               
included in the balance sheet caption "Investment in Plug Power"; the           
assets contributed by the Company to Plug Power in fiscal 1997 had              
previously been included in the assets of the Company's Technology              
segment. See the supplemental disclosure regarding Contribution of Net          
Assets to Plug Power in the Consolidated Statements of Cash Flows for           
additional information regarding the assets contributed by the Company to       
Plug Power.  The Company recorded the carrying value of the net assets          
contributed as its initial investment in Plug Power in recognition of the       
nature of the venture's undertaking.                                            

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) Investment in Plug Power, L.L.C.  (continued)                               

On April 15, 1998, EDC contributed $2.25 million in cash to Plug Power.         
The Company contributed a below-market lease for office and manufacturing       
facilities in Latham, New York valued at $2 million and purchased a one-        
year option to match the remaining $250 thousand of EDC's contribution.         
In May 1998, EDC contributed an additional $2 million to Plug Power and         
the Company purchased another one-year option to match the contribution.        
The Company paid approximately $191 thousand for the options, which were        
scheduled to mature April 24, 1999 ($250 thousand) and June 15, 1999 ($2        
million).                                                                       

As of March 25, 1999, the Company and Plug Power exchanged the foregoing        
options and certain "research credits" (described below) for 2.25               
million Plug Power membership interests.  The Company earned the                
research credits by assisting Plug Power in securing the award of               
certain government grants and research contracts during the period June         
1997 through April 1999.                                                        

In August, 1998, the Company committed to contribute an additional $5           
million dollars (in cash, accounts receivable and research credits) to          
Plug Power between August 5, 1998 and March 31, 1999 and recorded a             
liability representing this obligation. During the period from September        
1998 to February 1999, the Company fully funded this commitment by              
contributing $4 million cash and converting $.5 million of accounts             
receivable and $.5 million of notes receivable.                                 

During April 1999, the Company and EDC amended and restated the Plug            
Power Mandatory Capital Contribution Agreement. The agreement, which was        
effective as of January 26, 1999, stated that, in the event Plug Power          
determined that it required funds at any time through December 31, 2000,        
Plug Power had the right to call upon the Company and EDC to each make          
capital contributions as follows:                                               

*  The Company and EDC would each fund capital calls of up to $7.5          
million in 1999 and $15 million in 2000 ("Capital Commitment").       
*  In exchange for such capital contributions to Plug Power, the            
Company and EDC would receive class A membership interests            
("Shares") from Plug Power at $7.50 per share.                        
*  The Company and EDC would share the Capital Commitment equally.          
*  Plug Power's Board of Managers would determine when there is             
need for such capital contributions.                                  
*  The Company and EDC would have sixty (60) days from the date of          
such authorization to tender their payment to Plug Power.             

The agreement was scheduled to terminate on December 31, 2000 or the            
date of an initial public offering of shares by Plug Power at a per             

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6)     Investment in Plug Power, L.L.C. (continued)                            

share price of greater than $7.50 per share ("Termination Date").               
In exchange for the Capital Commitment, Plug Power agreed to permit the         
Company and EDC to make capital contributions to the extent of their            
Capital Commitment on the Termination Date, whether or not such funds           
have been called, in exchange for shares at the fixed price of $7.50 per        
share.                                                                          

In June 1999, the Company and Plug Power entered into an agreement for          
the sale of the MTI campus and adjacent residence, including all land           
and buildings, to Plug Power in exchange for 704,315 Class A membership         
interests and the assumption of approximately $6 million in debt by Plug        
Power.  The sale of the MTI facility and the transfer of the $6 million         
IDR bonds to Plug Power were effective as of July 1, 1999 with no gain          
or loss recognized.                                                             

In August 1999, the Company committed to purchase 3 million shares of           
Plug Power if the public offering price of Plug Power's stock was               
greater than $7.50 per share. The Mandatory Capital Contribution                
Agreement between the Company and Plug Power, dated as of January 26,           
1999 was amended and restated to reflect this commitment.                       

On September 30, 1999, the Company purchased 266,667 shares of Plug             
Power at $7.50 per share.  This purchase reduced the Company's                  
commitment to purchase Plug Power shares at the time of its public              
offering from 3,000,000 shares to 2,733,333 shares at a price of $7.50          
per share.                                                                      

The Company's total contributions to Plug Power (including contributions        
of cash, assets, research credits, below market lease and real estate)          
for the period commencing on June 27, 1997, and ending September 30,            
1999 total $20.7 million.                                                       

During calendar 1999, Plug Power's equity increased approximately               
$50.628 million primarily due to investments by investors.  Of this             
amount, $30.368 million was received in cash, $9.010 million in property        
and services and $11.250 million represents membership interests issued         
in connection with the formation of GE Fuel Cell Systems LLC.  As a             
result, the Company recorded its proportionate share of the increase in         
Plug Power's equity ($14.854 million) as investment in Plug Power and           
additional paid-in capital.                                                     

The Company has recorded its proportionate share of Plug Power's losses         
to the extent of its recorded investment in Plug Power.  The carrying           
value of the Company's investment is $8.71 million as of September 30,          
1999 for a 40.65% interest in Plug Power.                                       

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6)     Investment in Plug Power, L.L.C.  (continued)                           

The Company will recognize its proportionate shares of losses in the            
future to the extent of its carrying value and additional future                
investments.                                                                    

On November 1, 1999, the Company purchased 2,733,333 shares of Plug             
Power at $7.50 per share.  This purchase completed the Company's                
commitment to purchase Plug Power shares at the time of its public              
offering.  Plug Power's public offering was completed at $15 per share.         
The Company's total contributions to Plug Power as of November 1, 1999          
total $41.2 million.  Immediately after the Plug Power IPO, the Company         
owned 13,704,315 shares or 31.9% of Plug Power.                                 

At September 30, 1999 and 1998, the difference between the carrying value       
of the Company's investment in Plug Power and its interest in the               
underlying equity consists of the following:                                    

   (Dollars in thousands)                       1999          1998

Calculated ownership (40.65% in 1999 and                                        
50% in 1998)                                      $12,704       $ 2,431     
Unrecognized negative goodwill                       (3,994)       (2,085)      
Value of below market lease contribution                  -        (2,000)      
Calculated 50% of equity value under option               -        (1,125)      
Contribution liability                                    -         4,000       
                                              ______        ______
Carrying value of Investment in Plug Power          $ 8,710       $ 1,221       
                                              ======        ======

Summarized below is financial information for Plug Power. Plug Power's          
fiscal year ends December 31.                                                   
    9 Months
                      Ended       Year Ended
                        Sept 30,    Dec 31,  Dec 31,
(Dollars in thousands)                   1999       1998     1997               

Current assets                        $12,024    $ 5,293   $3,917               
Noncurrent assets                      31,522      2,800      929               
Current liabilities                     6,291      2,601    1,250               
Noncurrent liabilities                  6,002          -        -               
Stockholders' equity                   31,253      5,493    3,597               

Gross revenue                           6,702      6,541    1,194               
Gross profit                           (3,148)    (2,323)     (33)              
Net loss                              (24,867)    (9,616)  (5,903)              

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       MECHANICAL TECHNOLOGY INCORPORATED AND SUBSIDIARIES
      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) Income Taxes                                                                

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.                               

Income tax expense (benefit) for the years ended September 30, consists         
of the following:                                                               

            (Dollars in thousands)             1999       1998      1997
Continuing operations                                                           
    Federal                                $      1   $     15  $     62
    State                                        36         10        81
    Deferred                                      -          -         -
                                            _______    _______   _______
                                                 37         25       143
                                            _______    _______   _______
Discontinued operations                                                         
     Federal                                       -          -       (17)
     State                                         -          -       (12)
    Deferred                                      -          -         -
                                            _______    _______   _______
                                                   -          -       (29)
                                            _______    _______   _______
Extraordinary Item                                                        
    Federal                                       -          -        28
    State                                         -          -        78
    Deferred                                      -          -         -
                                            _______    _______   _______
                                                  -          -       106
                                            _______    _______   _______
                                           $     37   $     25  $    220
                                            =======    =======   =======

The significant components of deferred income tax expense (benefit) for         
the years ended September 30, are as follows:                                   

            (Dollars in thousands)             1999       1998      1997

Continuing operations                                                           
     Deferred tax (benefit) expense         $ (1,833)  $   (667) $   (356)
    Net operating loss carryforward          (3,259)        105    1,223
     Valuation allowance                       5,092         562     (867)
                                            _______    ________  _______
                                                  -           -        -
                                            _______    ________  _______
Discontinued operations                                                         
    Deferred tax expense(benefit)               114        (508)      60
     Net operating loss carryforward             (97)       (265)    (251)
    Valuation allowance                         (17)        773      191
                                            _______    ________  _______
                                                  -           -        -
                                            _______    ________  _______
                                           $      -   $       - $      -
                                            =======    ========  =======
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      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7)     Income Taxes (continued)                                                
                                               1999       1998      1997
Extraordinary item                                                              
     Deferred tax (benefit) expense                -          -       (28)
    Net operating loss carryforward               -          -       862
     Valuation allowance                           -          -      (834)
                                            _______    _______   _______
                                                  -          -         -
                                            _______    _______   _______
                                           $      -   $      -  $      -
                                            =======    =======   =======

The Company's effective income tax rate from continuing operations              
differed from the Federal statutory rate as follows:                            

                                               1999       1998      1997

Federal statutory tax rate                          (34%)      (34%)      34%   
State taxes, net of                                                             
federal tax effect                                  -          -         2% 
Change in valuation allowances                       34%        28%      (32%)  
Alternative minimum tax                               -          -         2%   
Other, net                                            -          7%       (1%)  
                                            _______    _______   _______
                                                   -%         1%        5%
                                            =======    =======   =======

The deferred tax assets and liabilities as of September 30, consist of          
the following tax effects relating to temporary differences and                 
carryforwards:                                                                  

(Dollars in thousands)                          
                                     1999       1998
Current deferred tax assets:                                                
Loss provisions for discontinued                                
operations                          $    300   $    337   
Bad debt reserve                            112         96      
Inventory valuation                         173        161      
Inventory capitalization                     39         20      
Vacation pay                                 63         66      
Warranty and other sale obligations          86         25      
Other reserves and accruals                 116        151      
                                  _______    _______
                                      889        856
Valuation allowance                        (889)      (856)     
                                  _______    _______
Net current deferred tax assets      $      -   $      -    
                                  =======    =======

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(7) Income Taxes (continued)                                                    
                                                 1999         1998
Noncurrent deferred tax assets (liabilities):                               
 Net operating loss                          $  5,687     $  1,951
  Property, plant and equipment                    122           (9)
 Investment in Plug Power                      (3,322)         954
 Other                                            224          187
 Alternative minimum tax credit                   150          150
                                              _______      _______
                                                2,861        3,233
  Valuation allowance                           (2,861)      (3,233)
  Other credits                                   (597)        (607)
                                              _______      _______
Noncurrent net deferred tax                                                 
  liabilities and other credits               $   (597)    $   (607)
                                              =======      =======

The valuation allowance at year ended September 30, 1999 is $3.750              
million and at September 30, 1998 was $4.089 million. During the year           
ended September 30, 1999, the valuation allowance decreased by $339             
thousand.                                                                       

At September 30, 1999, the Company has unused Federal net operating loss        
carryforwards of approximately $14.219 million. The Federal net operating       
loss carryforwards if unused will begin to expire during the year ended         
September 30, 2009. The use of $5.339 million of these carryforwards is         
limited on an annual basis, pursuant to the Internal Revenue Code, due to       
certain changes in ownership and equity transactions. For the year ended        
September 30, 1999, the Company has available alternative minimum tax           
credit carryforward of approximately $150 thousand.                             

The Company made cash payments, net of refunds, for income taxes of $15,        
$42 and $361 thousand for 1999, 1998 and 1997, respectively.                    

(8) Accrued Liabilities                                                         

Accrued liabilities consist of the following:                                   
          (Dollars in thousands)                     1999       1998

Salaries, wages and related expenses                  $   553    $   999    
Acquisition and disposition costs                         431        410    
Legal and professional fees                               169        305    
Warranty and other sale obligations                       398        607    
Accrued severance                                           -        143    
Deferred income                                           264        267    
Commissions                                               182        213    
Interest expense                                            7          8    
Other                                                     239        376    
                                                   ______     ______
                                                  $ 2,243    $ 3,328
                                                   ======     ======

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      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) Debt                                                                        

The Company has a working capital line of credit available in the amount        
of $4 million with interest payable monthly at a rate of prime (8.25% and       
8.5% at September 30, 1999 and 1998, respectively) or LIBOR plus 2.5%           
(7.9% and 7.875% at September 30, 1999 and 1998, respectively).  This           
obligation is collateralized by the assets of the Company, exclusive of         
its investment in Plug Power.  The Company also has a $1 million                
equipment loan/lease line of credit at an interest rate of LIBOR plus           
2.75% (8.15% and 8.125% at September 30, 1999 and 1998, respectively).          
This obligation is collateralized by the equipment purchased under the          
line of credit.   The lines of credit expire on January 31, 2000.  No           
amounts were outstanding under these lines at September 30, 1999 and            
1998.                                                                           

On December 17, 1998, the Industrial Development Agency for the Town of         
Colonie issued $6 million in Industrial Development Revenue ("IDR") Bonds       
on behalf of the Company to assist in the construction of a new building        
for Advanced Products and the Company's corporate staff and renovation of       
existing buildings leased to Plug Power.  The IDR Bond proceeds were            
deposited with a trustee for the bondholders and the Company drew bond          
proceeds to cover qualified project costs. First Albany Companies Inc.          
("FAC"), which owns 34% of the Company's stock, underwrote the sale of          
the IDR Bonds. FAC received no fees for underwriting the IDR Bonds but          
will be reimbursed for its out-of-pocket costs.                                 

KeyBank issued a letter of credit (the credit agreement) for                    
approximately $6 million in connection with the $6 million IDR Bonds. The       
KeyBank credit agreements require the Company to meet certain covenants,        
including a fixed charge coverage and leverage ratio.  Further, if              
certain performance standards are achieved, the interest rates on the           
debt may be reduced.                                                            

The credit agreement also requires the Company to grant a first lien on         
all consolidated assets of the Company, exclusive of its investment in          
Plug Power, a first mortgage on all land and buildings owned by the             
Company and a first lien on any equipment purchased by the Company.             

The IDR Bond Obligation, letter of credit and unexpended bond proceeds          
were transferred to Plug Power in connection with the sale of the MTI           
facility and adjacent residence effective July 1, 1999.                         

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(9)     Debt (continued)                                                        

On November 1, 1999, the Company entered into a $22.5 million Credit            
Agreement with KeyBank, N.A. ("the $22.5 million Credit Agreement"), the        
Company has pledged 13,704,315 shares of Plug Power Common Stock as             
collateral for its $22.5 million loan from KeyBank, N.A. ("Loan").  The         
proceeds of this loan were used to fund the Company's remaining $20.5           
million balance of its Mandatory Capital Commitment to contribute $22.5         
million to Plug Power.  Although the Credit Agreement does not require          
the Company to sell shares of Plug Power Common Stock, the Company may          
sell shares of Plug Power Common Stock to pay interest or principal on          
the Loan.  Pursuant to the $22.5 million Credit Agreement, the Company is       
obligated to make interest only payments for the first 18 months                
following the closing of the Loan, and to repay the principal in 6 equal        
quarterly installments of $3.750 million each, commencing on June 30,           
2001.  In addition, a one time commitment fee totaling $247,500 is              
payable for the Loan, $75,000 of which was paid as of September 30, 1999.       
Interest is payable monthly at a rate of Prime (8.25% on November 1,          
1999) or if certain performance standards are achieved, the interest            
rates on the $22.5 million Credit Agreement may be reduced.                     

The $22.5 million Credit Agreement requires the Company to meet certain         
covenants, including maintenance of a collateral account which at all           
times has a minimum market value of $600 thousand and a balance on              
November 1, 1999 of $2.65 million, and maintenance of a collateral              
coverage ratio.  The existing covenants under the original letter of            
credit were eliminated pursuant to the $22.5 million Credit Agreement.          

The weighted average interest rate for the Note Payable, IDR Bonds and          
Line of Credit during 1999 was 5.11%, 9.02% during 1998 and 10.75% during       
1997.                                                                           

Cash payments for interest were $164, $97 and $201 thousand for 1999,           
1998 and 1997, respectively.                                                    

(10) Shareholders' Equity                                                       

On July 12, 1999, the Company completed the sale of 801,223 shares of           
common stock to current shareholders through a rights offering.  The            
offering raised approximately $12.820 million before offering costs of          
approximately $158 thousand for net proceeds of approximately $12.671           
million.  The Company will use some or all of the proceeds of the               
offering for investment into Plug Power.  In addition, some proceeds may        
be used for acquisitions for the Company's core businesses, efforts to          
increase market share, working capital, general corporate purposes and          
other capital expenditures.                                                     

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(10)    Shareholders' Equity (continued)                                        

On April 23, 1999, the Company declared a 3 for 2 stock split in the form       
of a stock dividend.  Holders of the Company's $1.00 par value common           
stock received one additional share of $1.00 par value common stock for         
every two shares of common stock owned as of April 30, 1999.  The               
financial statements for all prior periods have been retroactively              
adjusted to reflect this stock split for both common stock issued and           
options outstanding.                                                            

On September 30, 1998, the Company completed the sale of 1,196,399 shares       
of common stock to current shareholders through a rights offering.  The         
offering raised approximately $7.178 million before offering costs of           
approximately $186 thousand for net proceeds of approximately $6.992            
million.  The Company has used some or all of the proceeds of the               
offering for investment in Plug Power.  In addition, some                       
proceeds may be used for acquisitions for the Company's core businesses,        
efforts to increase market share, working capital, general corporate            
purposes and other capital expenditures.                                        

Changes in common shares for 1999, 1998 and 1997 are as follows:                

Common Shares                        1999         1998        1997              
Balance, October 1                                                              
(1997 balance as previously                                                 
reported)                     10,773,968   8,862,992   4,902,201          
Three-for-two common stock split                                                
effected in the form of a 50%                                               
stock dividend effective                                                    
April 30, 1999                          -           -   2,451,101           
Issuance of shares for                                                          
stock option exercises             74,768     116,377           -           
Issuance of shares for stock sale   801,223   1,794,599   1,500,000             
Issuance of shares - consultant           -           -       9,690             
                    __________  __________   _________
Balance, September 30            11,649,959  10,773,968   8,862,992             
                    ==========  ==========   =========
Treasury Shares                                                                 
Balance, October 1                    4,500       4,500       4,500             
Acquisition of shares                 2,250           -           -             
                    __________  __________   _________
Balance, September 30                 6,750       4,500       4,500             
                    ==========  ==========   =========

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      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(11) Earnings per Share                                                         

The amounts used in computing earnings per share and the effect on income       
and the weighted average number of shares of potentially dilutive               
securities are as follows:                                                      

(Dollars in Thousands)                       1999         1998         1997     

(Loss) income before extraordinary                                              
item and available to common                                                  
stockholders                         $   (10,729)  $   (2,031)  $    2,558    

Weighted average number of shares:                                              
Weighted average number of                                                      
shares used in net (loss)/income                                              
per share, including the bonus                                                
element effects for the rights                                                
offering                              11,330,530    9,576,672    9,134,308    
Effect of dilutive securities:                                                  
Stock options                                  -            -       14,868    
___________________________________________________________________________     
Weighted average number of                                                      
shares used in diluted net                                                    
(loss)/income per share               11,330,530    9,576,672    9,149,176    
___________________________________________________________________________     

During fiscal 1999, options to purchase 741,613 shares of common stock          
at prices ranging between $1.63 and $22.50 per share were outstanding but       
were not included in the computation of Earnings per Share-assuming             
dilution because the Company incurred a loss from continuing operations         
and inclusion would be anti-dilutive.  The options expire between               
December 20, 2006 and June 16, 2009.                                            

During fiscal 1998, options to purchase 607,372 shares of common stock at       
prices ranging from $1.63 to $4 per share were outstanding but were not         
included in the computation of Earnings per Share-assuming dilution             
because the Company incurred a loss from continuing operations and              
inclusion would be anti-dilutive.  The options expire between December          
20, 2006 and August 31, 2008.                                                   

(12) Stock Option Plan                                                          

During March 1999, the shareholders approved the 1999 Employee Stock            
Incentive Plan ("1999 Plan").  The 1999 Plan provides that an initial           
aggregate number of 1 million shares of common stock may be awarded or          
issued.  The number of shares available under the 1999 Plan may be              
adjusted for stock splits and during 1999 the number of shares available        
under the plan increased to 1,500,000 shares.  Under the 1999 Plan, the         
Board of Directors is authorized to award stock options to officers,            
employees and others.                                                           

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      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(12) Stock Option Plan (continued)                                              

During December 1996, the shareholders approved a stock incentive plan          
("1996 Plan"). The 1996 Plan provides that an initial aggregate number of       
500,000 shares of common stock may be awarded or issued.  The number of         
shares available under the 1996 Plan may be increased by 10% of any             
increase in the number of outstanding shares of common stock for reasons        
other than shares issued under this 1996 Plan.  During 1999 and 1998, the       
number of shares available under the 1996 Plan increased to 1,159,582 and       
719,640 shares respectively.  Under the 1996 Plan, the Board of Directors       
is authorized to award stock options, stock appreciation rights,                
restricted stock, and other stock-based incentives to officers, employees       
and others.                                                                     

Options are generally exercisable in from one to five cumulative annual         
amounts beginning 12 months after the date of grant.  Certain options           
granted may be exercisable immediately.  Option exercise prices are not         
less than the market value of the shares on the date of grant.                  
Unexercised options generally terminate ten years after grant.                  

During 1999, the Company awarded 15,000 options to a consultant.  The           
fair value of these options ($55 thousand) was charged to expense.              

For the purpose of applying Financial Accounting Standard No. 123 ("FAS         
123"), "Accounting for Stock-Based Compensation", the fair value of each        
option granted is estimated on the grant date using the Black-Scholes           
Single Option model.  The dividend yield was 0% for 1999, 1998, and 1997,       
respectively.  The expected volatility was 78% in 1999, 102% in 1998 and        
78% in 1997. The expected life of the options is 5 years. The risk free         
interest rate ranges from 4.37% to 5.81% in 1999, 5.52% to 5.85% in 1998        
and 6.12% to 6.67% in 1997. The Company applies Accounting Principles           
Board Opinion No. 25, "Accounting for Stock Issued to Employees," in            
accounting for stock options. Accordingly, no compensation cost has been        
recognized in 1999, 1998 or 1997.  Had compensation cost and fair value         
been determined pursuant to FAS 123, net loss would increase from               
$(10,688) to $(11,988) thousand in 1999 and from $(4,316) to $(4,773)           
thousand in 1998 and net income would decrease from $4,520 to $4,351            
thousand in 1997.  Basic and diluted loss per share would increase from         
$(0.94) to $(1.06) in 1999 and from $(0.45) to $(0.50) in 1998 and basic        
and diluted earnings per share would decrease from $0.49 to $0.48 in            
1997.  The weighted average fair value of options granted during 1999,          
1998 and 1997 for purposes of FAS 123, is $5.80, $4.70 and $1.96 per            
share, respectively.                                                            

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      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(12)    Stock Option Plan (continued)                                           

Activity with respect to the 1996 Plan is as follows:                           

                           1999          1998             1997
Shares under option                                                             
at October 1                    607,372       623,400                -        
Options granted                  232,550       297,750          634,650         
Options exercised                (78,949)     (116,378)               -         
Options canceled                 (19,360)     (197,400)         (11,250)        
                       ________     _________         ________
Shares under option                                                             
at September 30                 741,613       607,372          623,400        
                       ========     =========         ========
Options exercisable                                                             
at September 30                 419,438       271,373          115,200        
Shares available for                                                            
granting of options             222,642       355,710          276,600        

The weighted average exercise price is as follows:                              
                           1999          1998             1997
Shares under option                                                             
at October 1                  $    2.89    $     1.94        $       -        
Options granted                     8.62          3.83             1.94         
Options exercised                   2.26          1.91                -         
Options canceled                    3.36          1.74             1.63         
Shares under option at                                                          
September 30                       4.89          2.89             1.94        
Options exercisable at                                                          
September 30                       5.59          2.64             1.95        

The following is a summary of the status of options outstanding at              
September 30, 1999:                                                             

Outstanding Options                     Exercisable Options                     
___________________________________     ________________________________        
Weighted                        
                Average         Weighted                Weighted
Exercise                Remaining       Average                 Average         
Price                   Contractual     Exercise                Exercise        
Range        Number     Life            Price        Number     Price           

$1.63-$2.29  257,438    7.7             $2.12        151,313    $2.09           
$3.17-$4.67  244,875    8.7             $3.98        113,625    $3.98           
$5.00-$5.33  129,300    9.2             $5.28         49,500    $5.30           
$12.50       105,000    9.5             $12.50       105,000    $12.50          
$22.50         5,000    9.7             $22.50             -                    
_______                                 _______       
741,613                                 419,438       
=======                                 =======       

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      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(13) Retirement Plan                                                            

The Company maintains a voluntary savings and retirement plan (Internal         
Revenue Code Section 401(k) Plan) covering substantially all employees.         
The Company plan allows eligible employees to contribute a percentage of        
their compensation; the Company makes additional contributions in amounts       
as determined by management and the Board of Directors.  The investment         
of employee contributions to the plan is self-directed.  The cost of the        
plan was $168, $152 and $179 thousand for 1999, 1998 and 1997,                  
respectively.                                                                   

(14)    Commitments and Contingencies                                           

On September 9, 1998, Barbara Lawrence, the Lawrence Group, Inc.                
("Lawrence"), and certain other Lawrence-related entities ("Plaintiffs")        
filed suit in the United States Bankruptcy Court for the Northern               
District of New York against First Albany Corporation, a wholly owned           
subsidiary of First Albany Companies Inc., Dale Church, Edward Dohring,         
Alan Goldberg, George McNamee, Beno Sternlicht, Marty Mastroianni (former       
President and Chief Operating Officer of the Company) and 33 other              
individuals ("Defendants") who purchased a total of 820,909 shares of MTI       
stock from the Plaintiffs. The complaint alleged that Defendants                
purchased MTI stock from the Plaintiffs in violation of sections 10b, 20,       
20A and rule 10b-5 of the Securities Exchange Act of 1934.  In December         
1998, the complaint was amended to add MTI as a defendant and assert a          
Claim for common law fraud against all the Defendants including the             
Company.  The case concerns the Defendants' 1998 purchase of MTI shares         
from the Plaintiffs at the price of $2.25 per share.  Ownership of the          
shares was disputed and several of the Plaintiffs were in bankruptcy at         
the time of the sale.  First Albany Corporation acted as Placement Agent        
for the Defendants in the negotiation and sale of the shares and in             
proceedings before the Bankruptcy Court for the Northern District of New        
York, which approved the sale in September 1997.  Plaintiffs claim that         
the Defendants failed to disclose material inside information concerning        
Plug Power, LLC to the Plaintiffs and therefore the $2.25 per share             
purchase price was unfair.  Plaintiffs are seeking damages of $5 million        
plus punitive damages and costs.  In April 1999, Defendants filed a             
motion to dismiss the amended complaint, which was denied.  In June 1999,       
the parties agreed to stay discovery and amend Defendants time to answer        
the amended complaint until September 17, 1999.  In October 1999,               
Defendants answered the amended Complaint.                                      

During October 1998, a legal action brought by a group of investors             
against the Company related to a stock purchase agreement and side letter       
agreements for the sale of the stock of the Company's wholly owned              
subsidiary, Ling Electronics, Inc. ("Ling"), was determined in favor of         
the Company.                                                                    

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(14)    Commitments and Contingencies (continued)                               

In February 1995, Ling made a voluntary disclosure to the United States         
Department of Commerce regarding unlicensed exports of certain products         
shipped in the first four months of fiscal 1995. Ling has fully                 
cooperated with the Office of Export Enforcement, which has not taken any       
action to date. Possible administrative sanctions include: no action; a         
warning letter; denial of export privileges; and/or imposition of civil         
penalties. Foreign sales represent a significant portion of Ling's total        
revenue. The final outcome of this matter is not presently determinable         
and, therefore no provision for any liability that may result has been          
recorded in the Company's financial statements.                                 

The Company and its subsidiaries lease certain manufacturing, warehouse         
and office facilities.  The leases generally provide for the Company to         
pay increases over a base year level for taxes, maintenance, insurance          
and other costs of the leased properties.  The leases contain renewal           
provisions.                                                                     

Future minimum rental payments required under noncancelable operating           
leases are (dollars in thousands): $269 in 2000; $305 in 2001; $304 in          
2002; $300 in 2003; and $300 in 2004.  Rent expense under all leases was        
$482, $403 and $446 thousand for 1999, 1998 and 1997, respectively.             

Rental income under all sub-leases was $164, $66 and $19 thousand in            
1999, 1998 and 1997, respectively.                                              

(15) Related Party Transactions                                                 

At September 30, 1999 First Albany Companies Inc. ("FAC") owned                 
approximately 34% of the Company's Common Stock (See Note 19).                  

During fiscal 1999, 1998 and 1997, First Albany Corporation, a wholly           
owned subsidiary of FAC, provided financial advisory services in                
connection with the sale of the Technology Division in 1999 and 1998 and        
the L.A.B. Division in 1997, for which First Albany Corporation was paid        
fees of $15, $10 and $75 thousand, respectively.                                

Amounts receivable from an officer totaled approximately $38 thousand and       
is included in the balance sheet caption "Other receivables-related             
parties" at September 30, 1999.                                                 

On June 27, 1997, the Company entered into a management services                
agreement with Plug Power to provide certain services and facilities for        
a period of one year. This agreement expired on June 27, 1998.  The             
Company continued to provide services, which were billed on a cost              
reimbursement basis.  During 1998, the Company entered into leases for          
manufacturing, laboratory and office space which expired on July 1, 1999        
pursuant to the sale of the MTI facility to Plug Power in exchange for          
704,315 Plug Power Class A membership interests and the assumption of $6        
million in debt by Plug Power.                                                  
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(15) Related Party Transactions (continued)                                     

Billings under these agreements amounted to $448, $661 and $65 thousand         
for 1999, 1998 and 1997, respectively. Amounts receivable from Plug Power       
under these agreements is included in the balance sheet caption "Other          
receivables-related parties".                                                   

On September 30, 1999, the Company made an additional cash contribution         
of approximately $2 million to Plug Power in exchange for 266,667 Plug          
Power Class A membership interests.                                             

On July 1, 1999, the Company contributed the MTI campus to Plug Power in        
exchange for 704,315 Plug Power Class A membership interests.  During the       
remainder of 1999, the Company paid $59 thousand to Plug Power in               
connection with a lease of office and manufacturing space.  This lease          
will terminate on November 24, 1999.                                            

On August 5, 1998, the Company made a short-term loan to Plug Power of          
$500 thousand, which was subsequently contributed to capital on September       
23, 1998.  The Company also converted $500 thousand of its accounts             
receivable from Plug Power to capital on September 23, 1998.  At                
September 30, 1998, the remaining obligation to provide additional funds        
to Plug Power was $4 million. During fiscal 1999, the Company fully             
funded this commitment by contributing $4 million cash.                         

(16) Discontinued Operations                                                    

The sale of the Company's Technology Division, the sole component of the        
Technology segment, to NYFM, Incorporated (a wholly owned subsidiary of         
Foster-Miller, Inc., a Waltham, Massachusetts-based technology company)         
on March 31, 1998 completed management's planned sale of non-core               
businesses. Accordingly, the Company no longer includes Technology among        
its reportable business segments and now operates in only one segment,          
Test & Measurement.  The Technology Division is reported as a                   
discontinued operation as of December 26, 1998, and the consolidated            
financial statements have been restated to report separately the net            
assets and operating results of the business.  In exchange for the              
Technology Division's assets, NYFM, Incorporated (a) agreed to pay the          
Company a percentage of gross sales in excess of $2.5 million for a             
period of five years; (b) assumed approximately $40 thousand of                 
liabilities; and (c) established a credit for warranty work of                  
approximately $35 thousand.                                                     

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      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(16) Discontinued Operations (continued)                                        

Discontinued operations consist of the following:                               

 (Dollars in thousands)                1999       1998        1997

Sales                                     $      -    $   532     $ 7,878       
                                    =======     ======      ======
Income(loss)from discontinued                                                   
operations before income tax                  41       (516)       (574)    
Income tax (benefit)                             -          -         (29)      
                                    _______     ______      ______
Net income(loss)from discontinued                                               
operations                            $     41    $  (516)    $  (545)  
                                    =======     ======      ======

Loss on disposal of Division              $      -    $(1,769)    $     -       
Income tax (benefit)                             -          -           -       
                                    _______     ______      ______
Loss on disposal of Division              $      -    $(1,769)    $     -       
                                    =======     ======      ======

The assets and liabilities of the Company's discontinued operations are         
as follows at September 30:                                                     

(Dollars in thousands)                   1999       1998              

Assets (primarily accounts receivable)    $    220    $ 1,136                   
Liabilities (primarily accrued expenses)       760      1,128                   
                        _______     ______
Net (Liabilities)Assets                   $   (540)   $     8                   
                        =======     ======

Assets with a net book value of $878 thousand consisting primarily of           
land, building and management information systems were transferred to           
continuing operations on October 1, 1997.                                       

(17) Sale of Division/Subsidiary                                                

L.A.B. Division                                                                 

On September 30, 1997, the Company sold all of the assets of its L.A.B.         
Division to Noonan Machine Company of Franklin Park, IL.  The Company           
received $2.60 million in cash and two notes, totaling $650 thousand,           
from Noonan Machine Company. The purchaser has requested that the               
principal amount of the note be reduced to reflect the resale value of          
certain assets of L.A.B.  The Company is enforcing its rights with              
respect to the note.  The net proceeds from the sale were used to pay           
down all outstanding debt and build working capital.                            

The sale resulted in a $2.0 million gain, which was recorded in the             
fourth quarter of fiscal year 1997.  In addition, $250 thousand of the          
proceeds associated with one of the notes was recorded as deferred              
revenue due to contingencies associated with the realization of this            
note.  This note is still outstanding as of September 30, 1999.                 
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      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(18) Geographic and Segment Information                                         

The Company sells its products on a worldwide basis with its principal          
markets listed in the table below where information on export sales is          
summarized by geographic area for the Company as a whole:                       

(Dollars in thousands)                                              

Geographic Area                      1999         1998         1997             

United States                     $ 9,576     $ 17,022     $ 17,290             
Europe                              1,180        1,072        1,223             
Japan                                 787        1,534        1,243             
Pacific Rim                           760          834        1,901             
China                                 278          302        1,900             
Canada                                153          228          178             
Rest of World                         151           36          367             
                      ______      _______      _______
Total Sales                       $12,885     $ 21,028     $ 24,102             
                      ======      =======      =======

In 1999, no customers accounted for more than 10% of sales and in 1998,         
one customer accounted for 11.5% of sales.                                      

The Company operates in two business segments, Alternative Energy               
Technology and Test and Measurement. The Alternative Energy Technology          
segment incubates alternative energy technology. The Test and Measurement       
segment develops, manufactures, markets and services sensing instruments,       
computer-based balancing systems for aircraft engines, vibration test           
systems and power conversion products.                                          

The accounting policies of the Alternative Energy Technology and Test and       
Measurement segments are the same as those described in the summary of          
significant accounting policies. The Company evaluates performance based        
on profit or loss from operations before income taxes, accounting               
changes, non-recurring items and interest income and expense.  Inter-           
segment sales 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 like income taxes or unusual items,           
which are not allocated to reportable segments.  In addition, segments          
noncash items include any depreciation and amortization in reported             
profit or loss.  For the Alternative Energy Technology segment, the             
information is based on an annual period from October 1 to September 30         
derived from Plug Power's unaudited financial statements.                       

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      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(18) Geographic and Segment Information (continued)                             

                                                                [Download Table]
(Dollars in thousands)                                                           

                Alternative                                                      
                  Energy                               Reconciling  Consolidated 
                 Technology    Test and                   Items        Totals    
1999            (unaudited)   Measurement      Other   (unaudited)  (unaudited)  
                                                                                 

Revenues        $     8,247   $    12,885   $      -   $   (8,247)  $     12,885 
Segment profit/                                                                  
  (loss)            (27,391)       (1,404)        79        8,028        (10,688)
Equity in Plug                                                                   
  Power loss              -             -          -       (9,363)        (9,363)
Total assets         43,547         8,185     14,885      (34,837)        31,780 
Investment in                                                                    
  Plug Power              -             -          -        8,710          8,710 
Capital                                                                          
  expenditures        9,247           183      2,555       (9,247)         2,738 
Depreciation and                                                                 
  amortization        1,165           202        379       (1,165)           581 

1998                                                                             
Revenues        $     5,948   $    21,028   $      -   $   (5,948)  $     21,028 
Segment profit/                                                                  
  (loss)             (8,243)        2,155     (2,665)       4,437         (4,316)
Equity in Plug                                                                   
  Power loss              -             -          -       (3,806)        (3,806)
Total assets          8,093         9,424     10,483       (6,872)        21,128 
Investment in                                                                    
  Plug Power              -             -          -        1,221          1,221 
Capital                                                                          
  expenditures        1,889           202      2,964       (1,889)         3,166 
Depreciation and                                                                 
  amortization          418           205        118         (418)           323 

1997                                                                             
Revenues        $       242   $    24,102   $      -   $     (242)  $     24,102 
Segment profit/                                                                  
  (loss)             (4,752)        2,411      2,439        4,422          4,520 
Equity in Plug                                                                   
Power loss                -             -          -         (330)          (330)
Total assets          4,979         8,696      5,280       (4,952)        14,003 
Investment in                                                                    
  Plug Power              -             -          -           27             27 
Capital                                                                          
  expenditures          133           375          2         (133)           377 
Depreciation and                                                                 
  amortization           93           206         37          (93)           243 


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      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(18) Geographic and Segment Information (continued)                             

The following table presents the details of "Other" segment profit              
(loss).                                                                         

(Dollars in thousands)          1999          1998          1997                

Corporate and Other                                                             
Expenses/(Income):                                                      
Depreciation and                                                            
amortization              $  379      $    118      $     37            
Interest expense               106           102           323              
Interest income               (335)          (65)            -              
Income tax expense              37            25           143              
Other (income)expense, net    (225)          200         1,032              
(Income)loss from                                                           
discontinued operations      (41)        2,285           545            
Gain on sale of division         -             -        (2,012)             
Gain on extinguishment                                                      
of debt, net of tax        -             -        (2,507)       

               _____       _______       _______
Total (income) expense        $  (79)     $  2,665      $ (2,439)               

The reconciling items are the amounts of revenues earned and expenses           
incurred for corporate operations, which is not included in the segment         
information.                                                                    

(19) Extraordinary Item - Extinguishment of Debt                                

During fiscal 1996, FAC purchased 909,091 shares of the Company's Common        
Stock from the New York State Superintendent of Insurance as the court-         
ordered liquidator of United Community Insurance Company ("UCIC"). In           
connection with this purchase, FAC also acquired certain rights to an           
obligation ("Term Loan") due from the same finance company ("FCCC") to          
whom the Company was obligated under a Note Payable, due December 31,           
1996.                                                                           

FCCC was in default of its Term Loan to UCIC. FAC, as the owner of the          
rights to the Term Loan, filed suit-seeking payment. Collateral for the         
FCCC Term Loan included the Company's Note Payable to FCCC. FAC                 
exercised its rights to the collateral securing the Term Loan, including        
the right to obtain payment on the Note Payable directly from the               
Company. The Company and FAC entered into an agreement dated as of              
December 27, 1996 under which the Company issued to FAC 1.0 million             
shares  of  Common  Stock  in  full  satisfaction  of  the Note Payable         
and accrued interest.                                                           

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      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(19) Extraordinary Item - Extinguishment of Debt (continued)                    

If FCCC were to seek collection of the Note Payable plus accrued                
interest from the Company, the Company, based on the opinion of counsel,        
believes that the outcome of any such action pursued by FCCC against the        
Company would not have a material adverse impact on the Company's               
financial position or results of operation.                                     

(20) Comprehensive (Loss) Income                                                

Total comprehensive (loss) income for the years ended September 30              
consists of:                                                                    

(Dollars in Thousands)                 1999        1998         1997            

Net (loss)income                   $(10,688)   $ (4,316)     $ 4,520            
Other comprehensive income(loss),                                               
before tax:                                                                     
Foreign currency translation                                                
adjustments                             -           8            -          
Unrealized loss on available                                                    
for sale securities                    (5)          -            -          
Income tax related to items of                                                  
other comprehensive                                                         
income(loss)                            -           -            -          
                        _______     _______       ______

Total comprehensive (loss)income   $(10,693)   $ (4,308)     $ 4,520            
                        =======     =======       ======

(21) Subsequent Events                                                          

On October 21, 1999, the Company created a strategic alliance with              
SatCon Technology Corporation (SatCon). SatCon acquired Ling                    
Electronics, Inc. and Ling Electronics, Ltd. from the Company and the           
Company will invest approximately $7 million in SatCon. In consideration        
for the acquisition of Ling Electronics and the Company's investment,           
the Company will receive 1,800,000 shares of SatCon's common stock and          
warrants to purchase an additional 100,000 shares of SatCon's common            
stock.  The Company immediately funded $2.57 million of its investment          
in SatCon and will make the remaining investment by the end of January          
2000. SatCon will also receive warrants to purchase 100,000 shares of           
the Company's common stock.                                                     

The Company immediately issued SatCon 36,000 stock purchase warrants.           
The warrants are immediately exercisable at $37.66 per share and expire         
on October 21, 2003.  The estimated fair value of these warrants at the         
date issued was $14.81 per share using a Black Scholes option pricing           
model and assumptions similar to those used for valuing the Company's           
stock options.                                                                  

The Company immediately received 36,000 stock purchase warrants from            
SatCon.  The warrants are immediately exercisable at $8.83 per share and        
expire on October 21, 2003.                                                     
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      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(21) Subsequent Events (continued)                                              

In addition, David Eisenhaure, President and Chief Executive Officer of         
SatCon Technology Corporation, will become a member of the Board of             
Directors of the Company and Alan Goldberg, a director of the Company           
and co-Chief Executive Officer of First Albany Companies Inc. will              
become a member of SatCon Technology Corporation's Board of Directors.          
SatCon Technology Corporation has also agreed to appoint an additional          
member to its Board of Directors based on recommendations by the                
Company.                                                                        

SatCon Technology Corporation manufactures and sells power and energy           
management products for telecommunications, silicon wafer manufacturing,        
factory  automation, aircraft, satellites and automotive applications.          
SatCon has four operating divisions:  Film Microelectronics, Inc.               
designs and manufactures microelectronic circuits and interconnect              
products.  Magmotor manufactures motors and magnetic suspension systems.        
Beacon Power manufactures flywheel energy storage devices and the               
Technology Center is responsible for new technology and product                 
development.                                                                    

  F-35

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		11/30/09		10
		9/30/09		52					10-Q
		6/16/09		56
		8/31/08		56
		12/20/06		56					4
		10/21/03		66
		6/30/01		54					10-Q,  10-Q/A,  4
		12/31/00		47					10-Q,  11-K
		3/16/00		1		22			3,  PRE 14A
		2/29/00		19
		1/31/00		17		53			8-K,  PRE 14A
		12/31/99		27					10-Q,  11-K,  4,  5/A
Filed on:		12/28/99		28
		12/20/99		1		11
		11/24/99		61
		11/16/99		27					8-K
		11/12/99		29		32
		11/8/99		27
		11/4/99		26					SC 13D
		11/1/99		18		54			SC 13D
		10/29/99		3		5
		10/28/99		19
		10/22/99		27					8-K
		10/21/99		2		66			8-K
		10/4/99		27					8-K
For Period End:		9/30/99		1		62			10-K/A,  5,  5/A,  NT 10-K/A
		9/17/99		10		59
		8/30/99		27					8-K
		8/10/99		25
		7/12/99		4		54
		7/2/99		27					8-K
		7/1/99		18		61
		6/25/99		26					10-Q
		6/23/99		25
		6/15/99		47
		4/30/99		36		55			4
		4/24/99		47
		4/23/99		55
		4/16/99		11
		4/15/99		11
		3/31/99		47					4
		3/30/99		27
		3/25/99		47
		2/12/99		26					8-K
		1/26/99		27		48
		12/26/98		61
		12/17/98		18		53
		9/30/98		4		61			10-K,  4
		9/23/98		61
		9/22/98		23		25
		9/9/98		10		59
		8/18/98		26					S-2/A
		8/5/98		47		61
		6/27/98		24		60
		6/10/98		25
		4/15/98		47					PRE 14A
		3/31/98		4		61
		3/14/98		24
		3/9/98		26
		12/26/97		4		14			10-Q
		10/1/97		43		62
		9/30/97		4		62			10-K,  10-K/A,  4,  4/A
		6/27/97		3		60			10-Q
		5/12/97		26					10-Q
		12/31/96		65
		12/27/96		4		65			10-Q
		12/20/96		24					DEFS14A,  PRES14A
		9/30/96		26					10-K,  10-K/A,  NT 10-K
		12/14/94		4
		12/21/93		4
									List all Filings

15 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 3/31/22  Soluna Holdings, Inc.             10-K       12/31/21  113:10M                                    Genesis Filings LLC/FA
 8/16/21  Soluna Holdings, Inc.             S-1/A                  2:2.6M                                   Genesis Filings LLC/FA
 8/13/21  Soluna Holdings, Inc.             S-1/A                  4:3.5M                                   Genesis Filings LLC/FA
 7/23/21  Soluna Holdings, Inc.             S-1/A                  2:1.9M                                   Genesis Filings LLC/FA
 7/19/21  Soluna Holdings, Inc.             S-1/A                  5:3.5M                                   Genesis Filings LLC/FA
 6/22/21  Soluna Holdings, Inc.             S-1                    3:2.7M                                   Genesis Filings LLC/FA
 4/29/21  Soluna Holdings, Inc.             10-K/A     12/31/20    3:318K                                   EDGARX.com, LLC/FA
 4/21/21  Soluna Holdings, Inc.             S-1/A                  2:252K                                   Genesis Filings LLC/FA
 4/12/21  Soluna Holdings, Inc.             S-1/A                  4:1.7M                                   Genesis Filings LLC/FA
 4/02/21  Soluna Holdings, Inc.             S-1/A                  7:1.8M                                   Genesis Filings LLC/FA
 3/31/21  Soluna Holdings, Inc.             10-K       12/31/20   94:8.2M                                   EDGARX.com, LLC/FA
 3/10/21  Soluna Holdings, Inc.             S-1                    4:2.4M                                   EDGARX.com, LLC/FA
 1/04/21  Soluna Holdings, Inc.             10-12G/A               1:2.1M                                   EDGARX.com, LLC/FA
11/25/20  Soluna Holdings, Inc.             10-12G/A¶  11/25/20    2:2.1M                                   EDGARX.com, LLC/FA
 9/30/20  Soluna Holdings, Inc.             10-12G                18:4.9M                                   EDGARX.com, LLC/FA