+/2H5     d 1$&%*''SUPERCONDUCTIVE COMPONENTS, INC.'BALANCE SHEETS'DECEMBER 31, 2000 'ASSETS'CURRENT ASSETS'Cash (Note 2)"$ 202,4066'Accounts and notes receivable (Notes 2 and 11):='Trade, less allowance for doubtful accounts of $26,000"386,567 'Related party receivables  "4,283# 'Inventories (Notes 2 and 3): "617,468 'Prepaid expenses  "39,766 'Total current assets "1,250,490'PROPERTY AND EQUIPMENT,!'AT COST (Notes 2, 4 and 5)'Machinery and equipment"1,959,086'Furniture and fixtures "15,250'Leasehold improvements"305,586' $'Less accumulated depreciation"1,701,150' 'OTHER ASSETS (Note 2) "38,688' Q"'The accompanying notes are an integral part of these financial statements.'$'SUPERCONDUCTIVE COMPONENTS, INC.%'BALANCE SHEETS&'DECEMBER 31, 2000+('LIABILITIES AND SHAREHOLDERS' EQUITY*'CURRENT LIABILITIES9+'Capital lease obligation, current portion (Note 5)+"$ 26,279:,'Note payable shareholders, current portion (Note 6) ,"10,869-'Accounts payable-"294,028/.'Accounts payable, shareholders (Note 11) ."1,803/'Accrued expenses/"156,916 1'Total current liabilities1"489,895'4'CAPITAL LEASE OBLIGATION, NET OF5'CURRENT PORTION (Note 5) 5"57,96508'NOTE PAYABLE SHAREHOLDERS, NET OF CURRENT9'PORTION (Note 6)9"121,401'<'REDEEMABLE CONVERTIBLE PREFERRED='STOCK (Series A)=>'10% cumulative, nonvoting, no par value, $1,000 stated5?'value, liquidation and mandatory redemption at9@'stated value per share plus unpaid and accumulated#A'dividends ($260.96) (Note 7) A"87,6587D'COMMITMENTS AND CONTINGENCIES (Notes 4, 5 and 6)/F'SHAREHOLDERS' EQUITY (Notes 7, 8, and 9)=G'Convertible preferred stock, Series B, 10% cumulative,:H'nonvoting, no par value, $10 stated value, optionalI'redemption at 103%I"338,4248J'Common stock, no par value, authorized 15,000,0006K'shares; 1,816,977 shares issued and outstandingK"6,334,696!L'Additional paid-in capital L"98,187M'Accumulated deficitM"(5,660,276)O' Q' QT'The accompanying notes are an integral part of these financial statements.'V'SUPERCONDUCTIVE COMPONENTS, INC.W'STATEMENTS OF OPERATIONS-X'YEARS ENDED DECEMBER 31, 2000 AND 1999 Z^2000 Z^1999\'SALES REVENUE\"$ 2,679,597\"$ 2,253,209 ]'CONTRACT RESEARCH REVENUE]"525,566]"425,153_"3,205,163_"2,678,362b'COST OF SALES REVENUEb"2,071,309b"1,835,027 c'COST OF CONTRACT RESEARCHc"362,109c"366,156e"2,433,418e"2,201,183h'GROSS MARGINh"771,745h"477,179*j'GENERAL AND ADMINISTRATIVE EXPENSESj"560,653j"325,195%l'SALES AND PROMOTIONAL EXPENSESl"309,969l"265,631o'LOSS FROM OPERATIONSo"(98,877)o"(113,647)r'OTHER INCOME (EXPENSE)s'Interests"(57,901)s"(44,473)t'Miscellaneous, net t"3,084 t"19,700v"(54,817)v"(24,773)y'LOSS BEFORE INCOME TAXy"(153,694)y"(138,420)#{'INCOME TAX EXPENSE (Note 10) {"-- {"--~'NET LOSS~"(153,694)~"(138,420)#'DIVIDENDS ON PREFERRED STOCK"(60,783)"(91,353)*'ACCRETION OF REDEEMABLE CONVERTIBLE'PREFERRED (SERIES A)"(11,713)"(11,713)''LOSS APPLICABLE TO COMMON SHARES"$ (226,190)"$ (241,486)!'EARNINGS PER SHARE - BASIC'AND DILUTIVE (NOTE 2) 'NET LOSS PER COMMON SHARE"$ (0.15)"$ (0.20)'WEIGHTED AVERAGE COMMON'SHARES OUTSTANDING"1,471,456"1,226,138Q'The accompanying notes are an integral part of these financial statements.''SUPERCONDUCTIVE COMPONENTS, INC.)'STATEMENTS OF SHAREHOLDERS' EQUITY-'YEARS ENDED DECEMBER 31, 1999 AND 2000^CONVERTIBLE^PREFERRED^ADDITIONAL ^STOCK, ^COMMON^PAID-IN^ACCUMULATED^SERIES B ^STOCK^CAPITAL^DEFICIT ^TOTAL"'Balance - December 31, 1998"$ 876,182"$ 4,681,363"$ 245,749"$ (5,368,162)"$ 435,132('Accretion of cumulative dividends "76,637 "--"(91,353) "--"(14,716)+'Accretion of Series A offering costs "-- "--"(11,713) "--"(11,713)4'Conversion of preferred stock to common stock'(35,522 shares)"(177,610)"177,610 "-- "-- "--<'Common stock issued in exchange for services received"'(1920 shares @ $1.25/share) "-- "2,400 "-- "-- "2,400&'Payment of cumulative dividends"(83,537) "-- "-- "--"(83,537)'Net loss "-- "-- "--"(138,420)"(138,420)"'Balance - December 31, 1999"691,672"4,861,373"142,683"(5,506,582)"189,146('Accretion of cumulative dividends "52,115 "--"(60,783) "--"(8,668)+'Accretion of Series A offering costs "-- "--"(11,713) "--"(11,713)8'Exercise of options (31,920 shares @ $2.50/share) "-- "79,800 "-- "-- "79,8006'Conversion of Series A preferred (1,379 shares) "-- "8,275 "-- "-- "8,2758'Conversion of Series B preferred (113,418 shares)"(378,715)"378,715 "-- "-- "--&'Payment of cumulative dividends"(26,648) "-- "-- "--"(26,648)8'Issuance of stock (200,000 shares at $2.50/share) "--"500,000 "-- "--"500,0009'Conversion of subordinated notes payable to equity&'(202,613 shares at $2.50/share) "--"506,533 "-- "--"506,533$'Issuance of warrants (Note 7) "-- "-- "28,000 "-- "28,000'Net loss "-- "-- "--"(153,694)"(153,694)"'Balance - December 30, 2000"$ 338,424"$ 6,334,696"$ 98,187"$ (5,660,276)"$ 1,111,031Q'The accompanying notes are an integral part of these financial statements.''SUPERCONDUCTIVE COMPONENTS, INC.'STATEMENTS OF CASH FLOWS-'YEARS ENDED DECEMBER 31, 2000 AND 1999 ^2000 ^1999+'CASH FLOWS FROM OPERATING ACTIVITIES'Net loss"$ (153,694)"$ (138,420)@'Adjustments to reconcile net loss to net cash provided by'operating activities:'Depreciation"260,819"255,180'Amortization "2,463 "2,605'Inventory reserve "17,431 "9,220&'Provision for doubtful accounts "2,000 "6,6433'Changes in operating assets and liabilities:%'(Increase) decrease in assets:'Accounts receivable"(66,766)"(75,054)'Inventories"(103,218)"(61,674)'Prepaid expenses"(18,962) "8,861'Other assets "-- "1,302*'Increase (decrease) in liabilities:'Accounts payable "76,563"(34,615)'Accrued expenses"(112,006)"133,585'Total adjustments "58,324"246,053:'Net cash provided by (used in) operating activities"(95,370)"107,633+'CASH FLOWS FROM INVESTING ACTIVITIES*'Purchases of property and equipment"(107,073)"(66,322),'Net cash used in investing activities"(107,073)"(66,322)+'CASH FLOWS FROM FINANCING ACTIVITIES'Bank overdraft"(30,735) "30,7352'Principal repayments on notes payable, bank"(5,617)"(3,330)-'Principal repayments on long-term debt "--"(12,677)/'Proceeds from subordinated notes payable "-- "80,0005'Principal payments on capital lease obligation"(69,801)"(57,083)5'Proceeds from exercise of common stock options "79,800 "---'Proceeds from the sale of common stock"500,000 "--2'Proceeds from sale of common stock warrants "28,000''Payment of cummulative dividends"(26,648)"(83,536)-'Redemption of Series A preferred stock"(70,150) "--:'Net cash provided by (used in) financing activities"404,849"(45,891)Q'The accompanying notes are an integral part of these financial statements.''SUPERCONDUCTIVE COMPONENTS, INC.+'STATEMENTS OF CASH FLOWS (CONTINUED)-'YEARS ENDED DECEMBER 31, 2000 AND 1999 ^2000 ^1999&'NET INCREASE (DECREASE) IN CASH"202,406"(4,580)!'CASH - Beginning of period "-- "4,580 'CASH - End of period "$ 202,406 "$ --''SUPPLEMENTAL DISCLOSURES OF CASH'FLOW INFORMATION&'Cash paid during the years for:'Interest"$ 69,614"$ 14,681'Income taxes"$ --"$ --*'SUPPLEMENTAL DISCLOSURES OF NONCASH)'INVESTING AND FINANCING ACTIVITIES<'Property and equipment was purchased by capital lease"$ --"$ 63,344E'Subordinated debt was issued to a shareholder as reimbursementE'for the shareholder paying accounts payable of the Company and#'for accrued interest payable"132,270 "55,000F'Common stock was issued as partial payment for accounts payable "-- "2,400C'Preferred stock, Series A was redeemed by issuing additional! 'subordinated notes payable  "--  "70,125:"'Preferred stock, series A converted to common stock ""8,275 ""--L$'Subordinate debt was issued to a shareholder as reimbursement for the9%'shareholders paying a notes payable to the Company %"89,408 %"--8''Subordinated debt was converted into common stock'"506,533 '"--3)'Reduction of inventory and inventory reserve)"105,075 )"--Q+'The accompanying notes are an integral part of these financial statements.