OHIO 31-1210318
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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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 the filing requirements for at least the past 90 days. YES [X] NO [ ]
State the number of shares outstanding of each of the registrant's classes of common equity, as of the latest practicable date: 2,431,360 shares of Common Stock, without par value, were outstanding at July 31, 2004.
PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets as of June 30, 2004 (unaudited)
and December 31, 2003 3 - 4
Statements of Operations For the Three Months and Six Months
Ended June 30, 2004 and 2003 (unaudited) 5
Statements of Cash Flows For the Three Months and Six Months
Ended June 30, 2004 and 2003 (unaudited) 6 - 7
Notes to Financial Statements (unaudited) 8 - 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 13 - 22
Item 3. Controls and Procedures 23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. N/A
Item 2. Changes in Securities and Small Business Issuer Purchases of Equity Securities. 24
Item 3. Defaults Upon Senior Securities. N/A
Item 4. Submission of Matters to a Vote of Security Holders. 24
Item 5. Other Information. N/A
Item 6. Exhibits and Reports on Form 8-K. 24-25
Signatures. 25
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JUNE 30, DECEMBER 31,
2004 2003
---- ----
(UNAUDITED)
CURRENT ASSETS
Cash $ 280,622 $ 266,940
Cash, restricted for equipment 247,902 -
Accounts and notes receivable
Trade, less allowance for doubtful accounts of $7,000 and
$25,000 respectively 281,657 119,566
Employees 300 6,995
Other - 119
Inventories 539,530 500,533
Prepaid expenses 20,337 30,198
----------- -----------
Total current assets 1,370,348 924,351
----------- -----------
PROPERTY AND EQUIPMENT,
AT COST
Machinery and equipment 2,081,477 2,031,437
Furniture and fixtures 22,586 22,124
Leasehold improvements 192,337 347,349
Construction In Process 77,952 -
----------- -----------
2,374,352 2,400,910
Less accumulated depreciation (1,547,099) (1,827,076)
----------- -----------
827,253 573,834
----------- -----------
OTHER ASSETS
Deposits 8,125 7,863
Intangibles 38,615 40,159
----------- -----------
46,740 48,022
----------- -----------
TOTAL ASSETS $ 2,244,341 $ 1,546,207
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The accompanying notes are an integral part of these financial statements.
JUNE 30, DECEMBER 31,
2004 2003
---- ----
(UNAUDITED)
CURRENT LIABILITIES
Capital lease obligation, current portion $ 30,429 $ 31,994
Capital lease obligation, shareholder, current portion 68,428 68,428
Note payable shareholders, current portion 154,000 130,000
Accounts payable 342,817 222,117
Accounts payable, shareholders 7,920 7,920
Accrued contract expenses 388,694 86,049
Accrued personal property taxes 45,637 43,263
Accrued interest, shareholders 27,631 39,760
Deferred contract revenue 71,373 50,742
Accrued expenses 77,216 72,195
----------- -----------
Total current liabilities 1,214,145 752,468
----------- -----------
CAPITAL LEASE OBLIGATION, NET OF
CURRENT PORTION 30,210 31,727
----------- -----------
NOTE PAYABLE SHAREHOLDERS, NET OF CURRENT
PORTION 14,270 767,625
----------- -----------
COMMITMENTS AND CONTINGENCIES - -
----------- -----------
SHAREHOLDERS' EQUITY (DEFICIT)
Convertible preferred stock, Series B, 10% cumulative, nonvoting, no par
value, $10 stated value, optional redemption at 103% 297,183 284,591
Common stock, no par value, authorized 15,000,000
shares; 2,418,860 shares issued and outstanding 7,501,474 6,378,216
Additional paid-in capital 552,119 59,893
Accumulated deficit (7,365,060) (6,728,313)
----------- -----------
985,716 (5,613)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 2,244,341 $ 1,546,207
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The accompanying notes are an integral part of these financial statements
THREE MONTHS ENDED SIX MONTHS ENDED
2004 2003 2004 2003
---- ---- ---- ----
SALES REVENUE $ 591,788 $ 562,607 $ 1,056,644 $ 1,187,153
CONTRACT RESEARCH REVENUE 69,374 65,158 114,295 98,491
----------- ----------- ----------- -----------
661,162 627,765 1,170,939 1,285,644
----------- ----------- ----------- -----------
COST OF SALES REVENUE 452,325 438,272 863,031 913,600
COST OF CONTRACT RESEARCH 78,210 (15,664) 123,131 17,669
----------- ----------- ----------- -----------
530,535 422,608 986,162 931,269
----------- ----------- ----------- -----------
GROSS MARGIN 130,627 205,157 184,777 354,375
GENERAL AND ADMINISTRATIVE EXPENSES 231,744 237,245 493,000 416,315
SALES AND PROMOTIONAL EXPENSES 67,933 49,318 133,170 97,574
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (169,050) (81,406) (441,393) (159,514)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income 533 613 750 1,206
Interest expense (6,916) (6,049) (17,646) (12,488)
Debt conversion expense (175,362) - (175,362) -
Gain/(loss) on disposal of equipment 300 2,100 (2,181) 5,300
Miscellaneous, net (458) (1,318) (915) (1,776)
----------- ----------- ----------- -----------
(181,903) (4,654) (195,354) (7,758)
----------- ----------- ----------- -----------
LOSS BEFORE INCOME TAX (350,953) (86,060) (636,747) (167,272)
INCOME TAX EXPENSE - - - -
----------- ----------- ----------- -----------
NET LOSS BEFORE CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING (350,953) (86,060) (636,747) (167,272)
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING - - - (15,886)
----------- ----------- ----------- -----------
NET LOSS (350,953) (86,060) (636,747) (183,158)
DIVIDENDS ON PREFERRED STOCK (6,296) (6,885) (12,592) (13,770)
----------- ----------- ----------- -----------
LOSS APPLICABLE TO COMMON SHARES $ (357,249) $ (92,945) $ (649,339) $ (196,928)
=========== =========== =========== ===========
EARNINGS PER SHARE - BASIC AND DILUTIVE
(Note 2)
NET LOSS PER COMMON SHARE BEFORE CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING
Basic $ (0.16) $ (0.05) $ (0.32) $ (0.09)
=========== =========== =========== ===========
Dilutive $ (0.16) $ (0.05) $ (0.32) $ (0.09)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE AFTER CUMULATIVE
EFFECT OF A CHANGE IN ACCOUNTING
Basic $ (0.17) $ (0.05) $ (0.33) $ (0.11)
=========== =========== =========== ===========
Dilutive $ (0.17) $ (0.05) $ (0.33) $ (0.11)
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 2,149,865 1,823,256 1,987,394 1,823,256
=========== =========== =========== ===========
Dilutive 2,149,865 1,823,256 1,987,394 1,823,256
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The accompanying notes are an integral part of these financial statements.
2004 2003
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(636,747) $(183,158)
--------- ---------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 102,969 118,848
Amortization and accretion 1,544 1,544
Warrants issued for consulting 35,586 -
Debt conversion expense 175,362 -
Cumulative effect of a change in accounting - 15,886
(Gain) Loss on sale of equipment 2,181 (5,300)
Inventory reserve (2,760) (21,695)
Provision for doubtful accounts 18,000 3,000
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (173,277) (974)
Inventories (36,237) (19,552)
Prepaid expenses 9,861 8,643
Other assets (261) -
Increase (decrease) in liabilities:
Accounts payable 120,700 71,562
Accrued expenses 342,376 1,247
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Total adjustments 596,044 173,209
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Net cash used in operating activities (40,703) (9,949)
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on sale of equipment 1,602 5,300
Purchases of property and equipment (342,871) (119,011)
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Net cash used in investing activities (341,269) (113,711)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from note payable, shareholders 150,000 500,000
Principal payments on notes payable, shareholders (150,000) -
Proceeds from exercise of common stock options 3,500 -
Proceeds from sale of common stock (net) 658,782 -
Principal payments on capital lease obligations (18,726) (22,232)
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Net cash provided by financing activities 643,556 477,768
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The accompanying notes are an integral part of these financial statements.
2004 2003
---- ----
NET INCREASE IN CASH 261,584 354,108
CASH - Beginning of period 266,940 48,908
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CASH - End of period $528,524 $403,016
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SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during the years for:
Interest, net $ 2,854 4,184
Income taxes $ - -
SUPPLEMENTAL DISCLOSURES OF NONCASH
FINANCING ACTIVITIES
Property and equipment was purchased by capital lease $ 15,644 -
Note payable converted to equity $729,700
Accrued interest converted to equity $ 25,491
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The accompanying notes are an integral part of these financial statements.
NOTE 1. BUSINESS ORGANIZATION AND PURPOSE
Superconductive Components, Inc. (the "Company") is an Ohio corporation that was incorporated in May 1987. The Company was formed to develop, manufacture and sell materials using superconductive principles. Operations have since been expanded to include the manufacture and sale of non-superconductive materials. The Company's domestic and international customer base is primarily in the thin film battery, high temperature superconductor, lens and optical coatings, electronics, functional coatings industries and research.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments considered necessary for fair presentation of the results of operations for the periods presented have been included. The financial statements should be read in conjunction with the audited financial statements and the notes thereto for the fiscal year ended December 31, 2003. Interim results are not necessarily indicative of results for the full year.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Company has received a grant of $513,264 from the Ohio Department of Development's Third Frontier Action Fund (TFAF) for the purchase of equipment related to the grant's purpose. Additionally, the Company received $27,500 as part of its contract with the Department of Energy for the purchase of equipment related to the contract's purpose. The Company has elected to record the funds disbursed as a contra asset; therefore, the assets are not reflected in the Company's financial statements. As assets are purchased, the liability initially created when the cash was received is reduced with no revenue being recognized or fixed asset recorded on the balance sheet. At June 30, 2004, the Company has disbursed $264,946. Funds received and not disbursed totaling $247,902 are included in accrued contract expenses with $12,892 in accounts payable at June 30, 2004. The grant and contract both provide that as long as the Company performs in compliance with the grant/contract, the Company retains the rights to the equipment. Management states that the Company will be in compliance with the requirements and, therefore, will retain the equipment at the end of the contract/grant.
The Company's pro forma information for the six months ended June 30, 2004 and 2003 in accordance with the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" is provided below. For purposes of pro forma disclosures, stock-based compensation is amortized to expense on a straight-line basis over the vesting period. The following table compares the 2004 and 2003 results as reported to the results had the Company adopted the expense recognition provisions of SFAS #123.
June 30, June 30,
2004 2003
Net loss applicable to common shares:
As reported $(649,339) $(196,928)
Stock-based compensation, net of tax (3,120) (3,220)
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Pro forma net loss under SFAS #123 $(652,459) $(200,148)
Basic and diluted loss per share:
As reported $ (0.33) $ (0.11)
Pro forma under SFAS #123 $ (0.33) $ (0.11)
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For the periods ended June 30, 2004 and 2003, there was no stock-based employee compensation cost included in the determination of net loss as reported.
NOTE 3. INVENTORY
JUNE 30, DECEMBER 31,
2004 2003
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(unaudited)
Raw materials $ 371,694 $ 361,238
Work-in-progress 136,059 101,274
Finished goods 173,470 182,474
Inventory reserve (141,693) (144,453)
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$ 539,530 $ 500,533
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NOTE 4. COMMON STOCK, STOCK OPTIONS AND WARRANTS
The following options and warrants were granted under the 1995 Stock Option Plan during the six months ended June 30, 2004:
GRANT DATE # OPTIONS GRANTED OPTION PRICE ---------- ----------------- ------------ January 21, 2004 50,000 $2.60 April 27, 2004 45,000 $2.85 |
GRANT DATE # WARRANTS GRANTED WARRANT PRICE ---------- ------------------ ------------- May 13, 2004 114,567 $2.88 June 1, 2004 17,500 $2.88 |
NOTE 5. EARNINGS PER SHARE
Basic income (loss) per share is calculated as income available to common stockholders divided by the weighted average of common shares outstanding. Diluted earnings per share is calculated as diluted income (loss) available to common stockholders divided by the diluted weighted average number of common shares. Diluted weighted average number of common shares has been calculated using the treasury stock method for Common Stock equivalents, which includes Common Stock issuable pursuant to stock options and Common Stock warrants. At June 30, 2004 and 2003, all Common Stock options and warrants are anti-dilutive due to the net loss. The following is provided to reconcile the earnings per share calculations:
Three months ended June 30, Six months ended June 30,
2004 2003 2004 2003
---- ---- ---- ----
Loss applicable
to common shares $ (357,249) $ (92,945) $ (649,339) $ (196,928)
=========== =========== =========== ===========
Weighted average
common shares
outstanding - basic 2,149,865 1,823,256 1,987,394 1,823,256
Effect of dilutions -
stock options - - - -
----------- ----------- ----------- -----------
Weighted average
shares outstanding -
diluted 2,149,865 1,823,256 1,987,394 1,823,256
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NOTE 6. CAPITAL REQUIREMENTS; RISK OF CURTAILMENT OF BUSINESS OPERATIONS
The Company's accumulated deficit since inception was $7,365,060 (unaudited) at June 30, 2004. The losses have been financed primarily from: (i) several private offerings of debt and equity securities; (ii) additional investments and loans by major shareholders; and (iii) a private offering of common stock and warrants to purchase common stock in October 2000. The Company cannot assure that it will be able to raise additional capital in the future to fund its operations. The Company expects to continue to incur significant operating and net losses in 2004, and it is possible that it will never be able to sustain or develop the revenue levels necessary to attain profitability.
As of June 30, 2004, cash on-hand was $528,524 with $247,902 restricted for equipment purchases in accordance with the TFAF grant. Cash available for operations at June 30, 2004 was $280,622. Management believes, based on currently available financing and forecasted sales and expenses, that funding will be adequate to sustain operations through December 2004. During the first quarter of 2004 the Company began to raise additional funds through further offerings of debt and equity. The Company received additional debt financing of $150,000. This debt was repaid in the second quarter. During the first six months of 2004 the Company received $513,264 from the State of Ohio's Third Frontier Action Fund to begin purchasing capital equipment required to commercialize the Company's Lithium Thin Film Battery sputtering target manufacturing process. At June 30, 2004, $247,902 of these funds have not been expended and are included on the balance sheet as accrued contract expenses. In March 2004 the Company was approved by the Ohio Department of Development's Industrial Technology Enterprise Advisory Council Committee as an eligible entity for the Technology Investment Tax Credit program. The program is intended to benefit small Ohio-based research and development and technology-oriented companies. This approval permits individuals and businesses to receive state tax incentives for up to twenty-five percent of their qualified investments in the Company through September 2004. Through June 30, 2004, the Company, in a private placement to five accredited investors sold 279,584 shares of its common stock without par value at a purchase price of $2.40 per share. The total offering price paid in cash was $671,000. As part of the private placement, the accredited investors also received warrants to purchase 55,917 shares of the Company's common stock, without par value, at a purchase price of $2.88 per share. The Company received an additional $49,200 from the sale of common stock and warrants on the same terms in the third quarter through August 13, 2004. Because the Company completed equity financing of at least $500,000 prior to June 30, 2004, the principal and accrued interest totaling $754,845.86 due on convertible promissory notes issued on June 30, 2003, converted to 314,519 shares of common stock without par value at a conversion rate of $2.40 per share. As part of the conversion, the holders of the convertible promissory notes also received warrants to purchase an aggregate of 62,901 shares of the Company's common stock, without par value, at a purchase price of $2.88 per share.
NOTE 7. CONVERSION OF CONVERTIBLE DEBT
During second quarter 2004, the Company completed equity financing of at least $500,000 prior to June 30, 2004, thereby requiring the principal and accrued interest on the convertible promissory notes totaling $754,846 to convert to equity. Pursuant to the terms of the promissory notes, the promissory notes converted to common stock, without par value, at a rate of $2.40 per share and entitled the holders of the promissory notes to receive warrants under the same terms as provided in the 2004 private equity financing. See "Conversion of Debt to Equity Securities in Part II, Item 2 - Changes in Securities and Small Business Issuer Purchases of Equity Securities." Therefore, the Company has recorded the debt conversion in accordance with SFAS #84 - "Induced Conversions of Convertible Debt" which requires recognition of an expense equal to the fair value of the additional securities issued with conversion. The Company has expensed $175,362 of debt conversion expense.
The following discussion should be read in conjunction with the Financial Statements and Notes contained herein.
The following section contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements that express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as will likely result, are expected to, will continue, is anticipated, estimated, projection, outlook) are not statements of historical fact and may be forward looking. Forward-looking statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. These forward-looking statements are based largely on the Company's expectations and are subject to a number of risks and uncertainties, including but not limited to economic, competitive, regulatory, growth strategies, available financing and other factors discussed elsewhere in this report and in other documents filed by the Company with the Securities and Exchange Commission. Many of these factors are beyond the Company's control. Actual results could differ materially from the forward-looking statements made. In light of these risks and uncertainties, there can be no assurance that the results anticipated in the forward-looking information contained in this report will, in fact, occur.
Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statements are made or reflect the occurrence of unanticipated events, unless necessary to prevent such statements from becoming misleading. New factors emerge from time to time and it is not possible for management to predict all factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported in the Financial Statements and accompanying notes. Note 2 to the Financial Statements in the Annual Report on Form 10-KSB for the year ended December 31, 2003 describes the significant accounting policies and methods used in the preparation of the Financial Statements. Estimates are used for, but not limited to, accounting for doubtful accounts, inventory allowances, property and equipment depreciable lives, patents and licenses useful lives, asset retirement obligations and assessing changes in which impairment of certain long-lived assets may occur. Actual results could differ from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the Financial Statements. The allowance for doubtful accounts is based on our assessment of the collectibility of specific customer accounts and the aging of the accounts receivable.
If there is a deterioration of a major customer's credit worthiness or actual defaults are higher than our historical experience, our estimates of the recoverability of amounts due us could be adversely affected. Inventory purchases and commitments are based upon future demand forecasts. If there is a sudden and significant decrease in demand for our products or there is a higher risk of inventory obsolescence because of rapidly changing technology and customer requirements, we may be required to increase our inventory allowances and our gross margin could be adversely affected. Depreciable and useful lives estimated for property and equipment, licenses and patents are based on initial expectations of the period of time these assets and intangibles will provide benefit to our Company. Cost estimates for removal and repair of the current leased building or a change in timing of the relocation could impact the estimate. Changes in circumstances related to a change in our business, change in technology or other factors could result in these assets becoming impaired, which could adversely affect the value of these assets.
To date, the Company has received revenue predominantly from commercial sales, government research contracts and non-government research contracts. The Company has incurred cumulative losses of $7,365,060 from inception to June 30, 2004.
Revenues for the six months ended June 30, 2004 were $1,170,939 compared to $1,285,644, a decrease of $114,705 or 8.9% from the six months ended June 30, 2003.
Product revenues decreased to $1,056,644 in 2004 from $1,187,153 in 2003 or a decrease of 11.0%. The decline in revenues for the first six months is due to lower product shipments as a result of the weak U.S. economy and the relocation of the Company's facilities. The Company intends to intensify its marketing efforts by increasing the number of manufacturers representatives representing the Company.
Contract research revenues were $114,295 in 2004 as compared to $98,491 in 2003. The increase was due to a Phase II Small Business Innovation Research grant for $523,612 from the Department of Energy that was awarded in 2003. This award was to develop an advanced method to manufacture continuous reacted lengths of High Tc Superconductor: Bismuth Strontium Calcium Copper Oxide - 2212 Wire. Revenues of $103,805 from this grant are included in revenues for the first six months of 2004.
The Company became a member of a team led by Oxford Instruments Superconducting Technology, which was awarded a grant from the Department of Energy Superconductivity Partnership Initiative Program. Revenues of $10,490 were generated in the first six months of 2004. The focus of this program is being changed. A member of the team has determined that the technology is not as suitable for the future MRI market segment as originally projected in 2001. As a result, this member has decided to withdraw from the program. Oxford Instruments Superconducting Technology is currently working with the DOE SPI program coordinator to determine where the focus of the program could be shifted.
Total gross margin in 2004 was $184,777 or 15.8% of total revenue compared to $354,375 or 27.6% in 2003. Gross margin on product revenue was 18.3% in 2004 versus 23.0% in 2003. The decrease was due to lower sales as well as the product mix. Gross margin on contract research revenue was (7.7)% for 2004 and 82.1% for 2003. The gross margin in 2003 includes the purchase of equipment funded by the SPI grant. The gross margin in 2004 includes the Company's share of costs expended.
Selling expense in 2004 increased to $133,170 from $97,574 in 2003, an increase of 36.5%. The increase was due to the addition of a sales manager at January 1, 2004. This was partially offset by a reduction in commission costs and decreased trade show attendance.
General and administrative expense in 2004 increased to $493,000 from $416,315 in 2003, or 18.4%. The increase was due to the relocation of the Company's facility in the first quarter of 2004. $76,051 was expensed for this purpose. Rent expense increased from $33,297 to $66,525, or 99.8% due to the relocation. Also, non-employee stock warrants were granted as compensation for consulting services. This value of $35,586 was expensed in 2004.
Internal research and development costs are expensed as incurred. Research and development costs for 2004 were $6,577 compared to $73,220 in 2003. Internal research and development costs decreased due to a reduction in staff and also have been absorbed by the Department of Energy grant.
Interest expense was $17,646 for the six months ended June 30, 2004 compared to $12,488 for the six months ended June 30, 2003. Interest expense to related parties was $13,361 and $5,791 for the six months ended June 30, 2004, and June 30, 2003, respectively. The increase was due to the accrued interest incurred as a result of the financing completed in June and July of 2003. The accrued interest and related notes were converted to equity during the second quarter of 2004 and no further related party interest expense was incurred beginning in June 2004.
Net loss per common share based on the loss applicable to common shares for the six months ended June 30, 2004 and 2003 was $0.33 and $0.11, respectively. The loss applicable to common shares includes the net loss from operations, Series B preferred stock dividends and the cumulative effect of the change in accounting. The net loss per common share from operations was $0.32 and $0.09 for the six months ended June 30, 2004 and 2003, respectively. The difference between the net loss from operations and the loss applicable to common shares of $0.01 and $0.02 for the six months ended June 30, 2004 and 2003, respectively, was a result of the preferred position that the preferred shareholders have in comparison to the common shareholders and the cumulative effect of the change in accounting.
Dividends on the Series B preferred stock accrue at 10% annually on the outstanding shares. Dividends on the Series B preferred stock totaled $12,592 for the six months ended June 30, 2004 and $13,770 for the six months ended June 30, 2003.
Basic loss per common share for the six months ended June 30, 2004, was $0.33 per share with 1,987,394 weighted average common shares outstanding as compared to $0.11 per share and 1,823,256 weighted average common shares outstanding for the six months ended June 30, 2003.
Diluted loss per common share for the six months ended June 30, 2004 was $0.33 per share with 1,987,394 average common shares outstanding as compared to $0.11 per share and 1,823,256 weighted average common shares outstanding for the six months ended June 30, 2003. For the six months ended June 30, 2004 and 2003, all outstanding common stock equivalents are anti-dilutive due to the net loss.
At June 30, 2004, working capital was $156,203 compared to $608,617 at June 30, 2003. The decrease was due to a reduction in inventory, and an increase in accrued contract expenses and notes payable. Accrued contract expenses increased as a result of the monies received from the Third Frontier Action Fund that had not been disbursed as of June 30, 2004. The Company used cash from operations of approximately $41,000 and $10,000 for the six months ended June 30, 2004 and June 30, 2003, respectively. Significant non-cash items including depreciation, inventory reserve on excess and obsolete inventory, warrants issued for consulting, debt conversion expense, allowance for doubtful accounts and the cumulative effect of the change in accounting were approximately $329,000 and $116,000, respectively, for the six months ended June 30, 2004 and 2003. Accounts payable and accrued expenses increased in excess of increases in accounts receivable, inventory and prepaids by approximately $238,000 for the six months ended June 30, 2004. Accounts payable and accrued expenses increased in excess of decreases in accounts receivable, inventory and prepaids by approximately $61,000 for the six months ended June 30, 2003, as a result of timing of receipt of inventory versus required scheduled payments on this inventory and increased prepaid expenses.
For investing activities, the Company used cash of approximately $341,000 and $114,000, for the six months ended June 30, 2004 and June 30, 2003, respectively. The amounts invested were used to purchase machinery and equipment for increased production capacity, new product lines and for leasehold improvements for the new facility. Proceeds on sale of equipment totaled $1,602 and $5,300 for the six months ended June 30, 2004 and June 30, 2003, respectively.
For financing activity for the six months ended June 30, 2004, the Company provided cash of approximately $669,000. Cash payments to third parties for capital lease obligations approximated $19,000; proceeds from notes payable totaled $150,000. Net proceeds from sale of common stock was $659,000 and proceeds from the exercise of stock options totaled $3,500. Cash payments for note payable were $150,000.
For financing activity for the six months ended June 30, 2003, the Company provided cash of approximately $478,000. Cash payments to third parties for capital lease obligations approximated $22,000. Proceeds from notes payable to shareholders were $500,000.
While certain major shareholders of the Company have advanced funds in the form of subordinated debt, accounts payable and guaranteeing bank debt in the past, there is no commitment by these individuals to continue funding the Company or guaranteeing bank debt in the future. The Company will continue to seek new financing or equity financing arrangements. However, the Company cannot be certain that it will be successful in efforts to raise additional new funds.
The Company completed two private financing transactions in 2003 including (i) the issuance of convertible promissory notes in the aggregate amount of $600,000 and 122,000 warrants to purchase shares of common stock in exchange for $600,000 in cash and (ii) the redemption of the Company's entire $129,770 obligation on its Series A redeemable convertible preferred stock in exchange for convertible promissory notes in the aggregate amount of $129,770, which represented the face amount of the preferred stock plus accrued and unpaid dividends and interest, and 26,302 warrants to purchase shares of common stock. Four present shareholders invested the $600,000 of new money in the Company. $500,000 in cash and the redemption of the Series A redeemable preferred stock was received and recorded on June 30, 2003. $100,000 in cash was received and recorded on July 1, 2003. During second quarter 2004, the Company completed equity financing of at least $500,000 prior to June 30, 2004, thereby requiring the principal and accrued interest totaling $754,846 on the convertible promissory notes to convert to equity. Pursuant to the terms of the promissory notes, the promissory notes converted to common stock at a rate of $2.40 per share and entitled the holders of the promissory notes to receive warrants under the same terms as the private placement. See "Conversion of Debt to Equity Securities in Part II, Item 2 - Changes in Securities and Small Business Issuer Purchases of Equity Securities." Therefore, the Company has recorded the debt conversion in accordance with SFAS #84 - "Induced Conversions of Convertible Debt" which requires recognition of an expense equal to the fair value of the additional securities issued with conversion. The Company has expensed $175,362 of debt conversion expense.
The Company desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The following factors have affected or could affect the Company's actual results and could cause such results to differ materially from those expressed in any forward-looking statements made by the Company. Investors should consider carefully the following risks and speculative factors inherent in and affecting the business of the Company and an investment in the Company's common stock.
We commenced business in May of 1987. Our accumulated deficit since inception was $7,365,060 (unaudited) at June 30, 2004.
We have financed the losses primarily from: (i) several private offerings of debt and equity securities; and (ii) additional investments and loans by our major shareholders.
As of June 30, 2004, cash on-hand was $528,524 with $247,902 restricted for equipment purchases in accordance with the TFAF grant. Cash available for operations at June 30, 2004 was $280,622. Management believes, based on currently available financing and forecasted sales and expenses, that funding will be adequate to sustain operations through December 2004.
To successfully market our products, we must continue to develop appropriate marketing, sales, technical, customer service and distribution capabilities, or enter into agreements with third parties to provide these services. Our failure to develop these capabilities or obtain third-party agreements could adversely affect us.
Our success depends in large part on our ability to attract and retain highly qualified management, administrative, manufacturing, sales, and research and development personnel. Due to the specialized nature of our business, it may be difficult to locate and hire qualified personnel. The loss of services of one of our executive officers or other key personnel, or our failure to attract and retain other executive officers or key personnel, could have a material adverse effect on our business, operating results and financial condition. Although the Company has been successful in planning for and retaining highly capable and qualified successor management in the past, there can be no assurance that it will be able to do so in the future.
WE NEED ADDITIONAL CAPITAL, WHICH MAY REDUCE THE VALUE OF OUR COMMON STOCK.
Although the Company was successful in raising $701,000 through the first seven months of 2004 numerous factors make it necessary for the Company to seek additional capital. In order to support the initiatives envisioned in our business plan, we will need to raise additional funds through the sale of assets, public or private financing, collaborative relationships or other arrangements. Our ability to raise additional financing depends on many factors beyond our control, including the state of capital markets, the market price of our common stock and the development or prospects for development of competitive products by others. Because our common stock is not listed on a major stock exchange, many investors may not be willing or allowed to purchase it or may demand steep discounts. The necessary additional financing may not be available to us or may be available only on terms that would result in further dilution to the current owners of our common stock.
OUR COMPETITORS HAVE FAR GREATER FINANCIAL AND OTHER RESOURCES THAN WE HAVE.
The market for Thin Film Materials is a substantial market with significant competition in both ceramic and metal materials. While we believe that our products enjoy certain competitive advantages in design, function, quality, and availability, considerable competition exists from well-established firms such as a division of Praxair's Surface Science Technology group as well as MCR, Johnson Matthey, Pure Tech and CERAC, all of which have more resources than we have.
In addition, a significant portion of our business is in the very competitive market for sputtering targets made of ceramics, metals and alloys. We face substantial competition in this area from companies with far greater financial and other resources than we have. We cannot assure you that developments by others will not render our products or technologies obsolete or less competitive.
The government may cancel virtually all of our government contracts which are terminable at the option of the government. While we have complied with applicable government rules and regulations and contract provisions in the past, we could fail to comply in the future. Noncompliance with government procurement regulations or contract provisions could result in the termination of government contracts. The termination of our significant government contracts or the adoption of new or modified procurement regulations or practices could adversely affect us.
Inventions conceived or actually reduced to practice under a government contract generally result in the government obtaining a royalty-free, non-exclusive license to practice the invention. Similarly, technologies developed in whole or in part at government expense generally result in the government obtaining unlimited rights to use, duplicate or disclose technical data produced under the contract. These licenses and rights may result in a loss of potential revenues or the disclosure of our proprietary information, either of which could adversely affect us.
OUR REVENUES DEPEND ON PATENTS AND PROPRIETARY RIGHTS THAT MAY NOT BE ENFORCEABLE.
We rely on a combination of patent and trademark law, license agreements, internal procedures and nondisclosure agreements to protect our intellectual property. These may be invalidated, circumvented or challenged. In addition, the laws of some foreign countries in which our products may be produced or sold do not protect our intellectual property rights to the same extent as the laws of the United States. Our failure to protect our proprietary information could adversely affect us.
RIGHTS WE HAVE TO PATENTS AND PENDING PATENT APPLICATIONS MAY BE CHALLENGED.
We have received from the United States Patent and Trademark Office a patent for Fine-Particle Bi-Sr-Ca-Cu-O Having High Phase Purity made by a Chemical Precipitation and Low-Pressure Calcination method, and have also received a patent for a new process to join two individual strongly linked super-conductors utilizing a melt processing technique. In addition, in the future we may submit additional patent applications covering various applications. The patent application we filed and patent applications that we may file in the future may not result in patents being issued, and any patents issued may not afford meaningful protection against competitors with similar technology, and may be challenged by third parties. Because U.S. patent applications are maintained in secret until patents are issued, and because publications of discoveries in the scientific or patent literature tend to lag behind actual discoveries by several months, we may not be the first creator of inventions covered by issued patents or pending patent applications or the first to file patent applications for such inventions. Moreover, other parties may independently develop similar technologies, duplicate our technologies or, if patents are issued to us or rights licensed by us, design around the patented aspects of any technologies we developed or licensed. We may have to participate in interference proceedings declared by the U.S. Patent and Trademark Office to determine the priority of inventions, which could result in substantial costs. Litigation may also be necessary to enforce any patents held by or issued to us or to determine the scope and validity of others' proprietary rights, which could result in substantial costs.
THE RAPID RATE OF INVENTIONS AND DISCOVERIES IN THE SUPERCONDUCTIVITY FIELD HAS RAISED MANY UNRESOLVED PATENT ISSUES THAT MAY NEGATIVELY AFFECT OUR BUSINESS.
The claims in granted patents often overlap and there are disputes involving rights to inventions claimed in pending patent applications. As a result, the patent situation in the high temperature superconductor field is unusually complex. It is possible that there will be patents held by third parties relating to our products or technology. We may need to acquire licenses to design around or successfully contest the validity or enforceability of those patents. It is also possible that because of the number and scope of patents pending or issued, we may be required to obtain multiple licenses in order to use a single material. If we are required to obtain multiple licenses, our costs will increase. Furthermore, licenses may not be available on commercially reasonable terms or at all. The likelihood of successfully contesting the validity or enforceability of those patents is also uncertain; and, in any event, we could incur substantial costs in defending the validity or scope of our patents or challenging the patents of others.
The Thin Film Market is characterized by rapidly advancing technology. Our success depends on our ability to keep pace with advancing technology, processes and industry standards. To date, we have focused our development efforts on powders and targets. We intend to continue to develop and integrate advances in the thin film coatings industry. However, our development efforts may be rendered obsolete by research efforts and technological advances made by others, and materials other than those we currently use may prove more advantageous.
DEVELOPMENT STAGE OF THE COMPANY'S PRODUCTS AND UNCERTAINTY REGARDING DEVELOPMENT OF MARKETS
Some of the Company's products are in the early stages of commercialization and the Company believes that it will be several years before products will have significant commercial end-use applications, and that significant additional development work may be necessary to improve the commercial feasibility and acceptance of its products. There can be no assurance that the Company will be able to commercialize any of the products currently under development.
To date, there has been no widespread commercial use of High Temperature Superconductive (HTS) products. Additionally, the market for the Thin Film Battery materials is still in its nascent stages.
Our stock price and our listing may make it more difficult for our shareholders to resell shares when desired or at attractive prices. From April 2000 until September 2001, our common stock traded on the National Quotation Bureau (the "pink sheets"). In September 2001, our stock once again began trading on The Over the Counter Bulletin Board ("OTC Bulletin Board"). Nevertheless, our common stock has continued to trade in low volumes and at low prices. Some investors view low-priced stocks as unduly speculative and therefore not appropriate candidates for investment. Many institutional investors have internal policies prohibiting the purchase or maintenance of positions in low-priced stocks. This has the effect of limiting the pool of potential purchasers of our common stock at present price levels. Shareholders may find greater percentage spreads between bid and asked prices, and more difficulty in completing transactions and higher transaction costs when buying or selling our common stock than they would if our stock were listed on a major stock exchange, such as The New York Stock Exchange or The NASDAQ National Market.
Additionally, the market prices for securities of superconductive material companies have been volatile throughout the Company's existence. Most of the companies are traded over the counter through the National Quotation Bureau or National Association of Securities Dealers Automated Quotation System. Historical trading characteristics for public companies in this industry include limited market support, low trading volume, and wide spreads (on a percentage basis) between the bid and ask prices. Announcements regarding product developments, technological advances, significant customer orders, and financial results significantly influence per share prices.
OUR COMMON STOCK IS SUBJECT TO THE SECURITIES AND EXCHANGE COMMISSION'S "PENNY STOCK" REGULATIONS, WHICH LIMITS THE LIQUIDITY OF COMMON STOCK HELD BY OUR SHAREHOLDERS.
Based on its trading price, our common stock is considered a "penny stock" for purposes of federal securities laws, and therefore is subject to regulations, which affect the ability of broker-dealers to sell the Company's securities. Broker-dealers who recommend a "penny stock" to persons (other than established customers and accredited investors) must make a special written suitability determination and receive the purchaser's written agreement to a transaction prior to sale.
As long as the penny stock regulations apply to our common stock, it may be difficult to trade such stock because compliance with the regulations can delay and/or preclude certain trading transactions. Broker-dealers may be discouraged from effecting transactions in our common stock because of the sales practice and disclosure requirements for penny stock. This could adversely effect the liquidity and/or price of our common stock, and impede the sale of our common stock in the secondary market.
OUR ARTICLES OF INCORPORATION AUTHORIZE US TO ISSUE ADDITIONAL SHARES OF STOCK.
We are authorized to issue up to 15,000,000 shares of common stock, which may be issued by our board of directors for such consideration, as they may consider sufficient without seeking shareholders approval. The issuance of additional shares of common stock in the future will reduce the proportionate ownership and voting power of current shareholders.
Our Articles of Incorporation also authorize us to issue up to 260,000 shares of preferred stock. The issuance of preferred stock in the future could create additional securities which would have dividend and liquidation preferences prior in right to the outstanding shares of common stock. These provisions could also impede a non-negotiated change in control.
We cannot assure you that our operations will result in sufficient revenues to enable us to operate at profitable levels or to generate positive cash flow sufficient to pay dividends. We have never paid dividends on our common shares in the past and do not expect to do so in the foreseeable future.
We require substantial capital resources to maintain existing operations.
The Company has no off balance sheet arrangements including special purpose entities.
As of the end of the period covered by this report, the Company's Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934). Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the period covered by this report in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time period specified by the Securities and Exchange Commission's rules and forms.
Additionally, there were no changes in the Company's internal controls that could materially affect the Company's disclosure controls and procedures subsequent to the date of their evaluation, nor were there any material deficiencies or material weaknesses in the Company's internal controls. As a result, no corrective actions were required or undertaken.
ITEM 2. CHANGES IN SECURITIES AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES.
SALES OF UNREGISTERED SECURITIES: During the second quarter ending June 30, 2004, the Company, in a private placement to four accredited investors sold units consisting of 1,000 shares of the Company's common stock without par value and warrants to purchase 200 shares of common stock. The total offering price paid in cash by accredited investors was $620,000 for an aggregate of 258,334 shares of the Company's common stock and warrants an aggregate of 51,666 shares of the Company's common stock, without par value, at a purchase price of $2.88 per share.
In our opinion, the issuance of these shares was exempt from registration pursuant to Section 4(2) of the Securities Act and Rule 506 promulgated thereunder due to the fact the shares were sold to less than 35 purchasers all of whom were accredited investors. The Company did not use a placement agent or underwriter for the transaction.
CONVERSION OF DEBT TO EQUITY SECURITIES: Because the Company completed equity financing of at least $500,000 prior to June 30, 2004, the principal and accrued interest totaling $754,845.86 due on six convertible promissory notes issued on June 30, 2003, converted to 314,519 shares of common stock without par value at a conversion rate of $2.40 per share. As part of the conversion, the holders of the convertible promissory notes also received warrants to purchase an aggregate of 62,901 shares of the Company's common stock, without par value, at a purchase price of $2.88 per share.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual Meeting of Shareholders on May 20, 2004 for the purpose of electing three directors.
(b) The following nominees were elected as directors of the Company at the Annual Meeting of Shareholders: Robert J. Baker, Daniel Rooney, and Edward W. Ungar.
(c) The table shows the voting tabulations for the matter voted upon at the Annual Meeting of Shareholders.
FOR WITHHELD
Robert J. Baker 1,223,645 2,330
Daniel Rooney 1,223,665 2,310
Edward W. Ungar 1,170,435 55,540
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
31.1 Rule 13a-14(a) Certification of Principal Executive Officer.
31.2 Rule 13a-14(a) Certification of Principal Financial Officer.
32.1 Section 1350 Certification of Principal Executive Officer.
32.2 Section 1350 Certification of Principal Financial Officer.
None.
Pursuant to the requirements 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.
Date: August 13, 2004 /s/ Daniel Rooney
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Daniel Rooney, President and Chief
Executive Officer
(Principal Executive Officer)
/s/ Gerald S. Blaskie
----------------------------------------
Gerald S. Blaskie, Chief Financial
Officer
(Principal Financial Officer)
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I, Daniel Rooney, certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Superconductive Components, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) [reserved];
(c) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Date: August 13, 2004 /S/ Daniel Rooney
-------------------------------------
Daniel Rooney
President and Chief Executive Officer
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I, Gerald S. Blaskie, certify that:
1. I have reviewed this Quarterly Report on Form 10-QSB of Superconductive Components, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and we have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) [reserved];
c) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the small business issuer's auditors and the audit committee of small business issuer's board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Date: August 13, 2004 /S/ Gerald S. Blaskie
-----------------------
Gerald S. Blaskie
Chief Financial Officer
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SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Superconductive Components, Inc. (the "Company") on Form 10-QSB for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Daniel Rooney, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/S/ Daniel Rooney ----------------- Daniel Rooney President and Chief Executive Officer of Superconductive Components, Inc. August 13, 2004 |
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Superconductive Components, Inc. (the "Company") on Form 10-QSB for the period ending June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gerald S. Blaskie, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/S/ Gerald S. Blaskie --------------------- Gerald S. Blaskie Chief Financial Officer of Superconductive Components, Inc. August 13, 2004 |