REQUIRED INFORMATION

Mechanical Technology Incorporated MTI Savings and Retirement Plan (the "Plan") is subject to the Employee Retirement Income Security Act of 1974 ("ERISA"). Therefore, in lieu of the requirements of Items 1-3 of Form 11-K, the financial statements and schedules of the Plan for the two fiscal years ended December 31, 2000 and 1999, which have been prepared in accordance with the financial reporting requirements of ERISA, are attached hereto as Item 4 and incorporated herein by this reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

Mechanical Technology Incorporated MTI Savings and Retirement Plan

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedule of assets held for investment purposes at December 31, 2000 is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan's management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Albany, New York

June 8, 2001

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

December 31, 2000 and December 31, 1999

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

STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

Years Ended December 31, 2000 and December 31, 1999

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

MTI SAVINGS AND RETIREMENT PLAN

NOTES TO FINANCIAL STATEMENTS

The following brief description of the Mechanical Technology Incorporated MTI Savings and Retirement Plan (Plan) provides only general information. Participants should refer to the Plan agreement for more complete information.

1. General

The Plan is a defined contribution plan covering substantially all employees of Mechanical Technology Incorporated (Plan Sponsor). Effective July 1, 1998, employees are eligible to participate in the Plan after completing 6 months of service and attaining the age of 21. Prior to July 1, 1998, employees were eligible to participate upon the first day of the month following completion of at least one thousand hours of service during any consecutive twelve-month period commencing with the employee's date of hire and the attainment of age 21. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA), as amended.

2. Contributions

Participant contributions:

The Plan permits pre-tax (basic) participant contributions through compensation deferrals not to exceed the greater of 15% of compensation or the maximum permitted by the Internal Revenue Code. Such contributions are excluded from the participant's taxable income for federal income tax purposes until received as a withdrawal or distribution from the Plan. Participants may also elect to make after-tax (voluntary) contributions to the Plan not exceeding 9% of compensation. Participants may also contribute amounts representing distributions from other qualified defined benefit or contribution plans.

Plan Sponsor contributions:

The Plan Sponsor matches, on a discretionary basis, participant basic contributions. Matching contributions have, in the past, been as much as 4% of credited compensation, as defined in the Plan agreement.

The Plan Sponsor may also make additional discretionary profit sharing contributions for the benefit of plan participants employed on the last day of the Plan's fiscal year. Profit sharing contributions, if any, are allocated to plan participants based on the ratio of participant compensation to the total compensation of all eligible plan participants.

3. Participant Accounts

Each participant's account is credited with the participant's contribution and allocations of (a) the Plan Sponsor's contribution and, (b) Plan earnings, and may be charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account.

 

MECHANICAL TECHNOLOGY INCORPORATED

MTI SAVINGS & RETIREMENT PLAN

NOTES TO FINANCIAL STATEMENTS - Continued

 

 

4. Vesting

Participants are immediately vested in their contributions plus actual earnings thereon. As of July 1, 1998, a participant is fully vested in the Plan Sponsor matching and discretionary contribution portion of their accounts plus actual earnings thereon upon the earliest of completing five years of credited service, previously seven years; the event of death, disability or retirement; MTI terminates or freezes the Plan.

5. Investment Options

Participants may direct the investment of contributions in multiples of 5% in any of the investment options identified below, as selected by the Plan's trustees. Changes to the investment fund designations may be made daily through the Plan's third party record-keeper. The fund's investment strategies are subject to change and future performance cannot be guaranteed.

The fund is a unitized fund which invests in Mechanical Technology Incorporated common stock and maintains a portion of the fund in money market investments.

The fund's foreign growth securities may include securities of more-established companies which represent opportunities for long-term growth. The fund invests at least 65% of its total assets in foreign (including emerging market) securities. The fund may also invest in derivative securities.

The fund invests primarily in securities in three market sectors: U.S. emerging growth companies, foreign growth companies, and emerging market securities. The fund invests, under normal market conditions, at least 65% of its total assets in common stocks and related equity securities. The fund may also invest in derivative securities.

MTI SAVINGS & RETIREMENT PLAN

NOTES TO FINANCIAL STATEMENTS - Continued

The fund invests primarily in emerging growth companies that display the potential to become major enterprises or are major enterprises whose rates of earnings growth are expected to accelerate. The fund may invest, under normal market conditions, at least 65% of its total assets in common stocks or related securities. The fund may also invest in foreign securities (including emerging market securities) and may have exposure to foreign currencies. The fund may also invest in debt and derivative securities.

The fund is a "balanced" fund and invests in a combination of equity and fixed income securities. Under normal market conditions, the fund invests at least 25% of its net assets in non-convertible fixed-income securities, and at least 40% but no more than 75% of net assets in common stocks and related securities. The fund may also invest in derivative securities.

The fund invests, under normal market conditions, at least 65% of its total assets in fixed income securities including, corporate bonds (domestic and foreign (including emerging market)), U.S. government securities and mortgage-backed and asset-backed securities. The fund may also invest in derivative securities.

The fund strives to maintain a stable $1 unit value by investing primarily in stable-value investment contracts issued by major insurance companies, and major banks.

Massachusetts Investors Growth Stock Fund

The fund emphasis is placed on companies that the fund advisor believes offers better than average prospects for long-term growth. The fund may invest in foreign securities through which it may have exposure to foreign currencies. The fund invests its assets in common stocks and securities convertible into common stocks of companies. The fund may also invest in derivative securities.

The fund invests, under normal market conditions, at least 65% of its total assets in common stocks and related securities. The fund generally focuses on companies with larger capitalizations that its fund advisor believes have sustainable growth prospects and attractive valuations based on current and expected earnings or cash flow. The fund will also seek to provide income equal to approximately 90% of the dividend yield on the Standard & Poor's 500 Index. The fund may invest in foreign securities through which it may have exposure to foreign currencies. The fund may also invest in derivative securities.

6. Participant notes receivable

Plan participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their account balance. Loan transactions are treated as a transfer to (from) the investment funds from (to) the participant notes fund. Loan terms range from 1 to 5 years. The loans are collateralized by the balance in the participant's account and bear interest at the Prime interest rate plus 2 percent on the date the loan is made. Interest rates range from 8 to 10.5 percent. Principal and interest is paid ratably through monthly payroll deductions.

7. Payment of benefits

Normal retirement age is 65. The Plan permits early retirement at age 55 with five years of service. Upon retirement, disability or death, a participant or beneficiary may elect to receive his or her vested individual account balance of more than $5,000 in the form of an annuity, a lump-sum payment or monthly installments over the recipient's life expectancy, not exceeding ten years. A participant or beneficiary with a vested individual account balance under $5,000 will receive a lump-sum payment.

MTI SAVINGS & RETIREMENT PLAN

NOTES TO FINANCIAL STATEMENTS - Continued

A terminated participant is entitled to a lump-sum payment of the vested interest in his or her account. A terminated participant with five or less years of service forfeits the right to receive a portion of the accumulated benefit attributable to Plan Sponsor contributions.

8. Forfeited Accounts

At December 31, 2000, forfeited non-vested accounts totaling $83,584 were available to the Plan Sponsor and were excluded from plan assets. These amounts will be used to first pay Plan administrative expenses, then to reduce future employer contributions. Plan administrative expenses and employer contributions paid from the forfeiture account totaled $9,154 and $29,909, respectively, in 2000 and $11,644 and $0, respectively, in 1999.

9. Plan Administrative Costs

The Company pays both the annual trustee fees and annual audit fees of the Plan.

2. SIGNIFICANT ACCOUNTING POLICIES

1. Basis of preparation

The financial statements of the Plan are prepared on the accrual basis of accounting.

2. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.

3. Risks and Uncertainties

The Plan provides for various investment options in any combination of stocks, fixed income securities, mutual funds and other investment securities. Investment securities are exposed to various risks, such as interest rate, market and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term would materially affect participant's account balances and the amounts reported in the statement of net assets available for plan benefits and the statement of changes in net assets available for plan benefits.

The Plan's investments are stated at fair value. Shares of registered investment companies are valued at quoted market prices, which represent the net asset value of shares, or units held by the Plan at year-end. Participant notes receivable are valued at cost, which approximates fair value.

Purchases and sales of securities are recorded on a trade-date basis. Gains or losses on sales of securities are based on average cost. Interest income is recorded on the accrual basis.

The Plan presents in the Statements of Changes in Net Assets Available for Benefits the net appreciation (depreciation) in the fair value of its investments which consists of the realized gains or losses (computed on average cost) and the unrealized appreciation (depreciation) on those investments.

MTI SAVINGS & RETIREMENT PLAN

NOTES TO FINANCIAL STATEMENTS - Continued

5. Payments of Benefits

Benefits are recorded when paid.

3. INVESTMENTS

The Plan's investments are held by an investment company. The following table presents the fair values of investments, which includes investments that represent 5 percent or more of total plan assets.

MTI SAVINGS & RETIREMENT PLAN

NOTES TO FINANCIAL STATEMENTS - Continued

3. INVESTMENTS (Continued)

Certain calendar year 1999 amounts have been reclassified to conform with the calendar 2000 presentation.

MTI SAVINGS & RETIREMENT PLAN

Line 4i - Schedule of Assets Held for Investment Purposes at December 31, 2000