SUPERCONDUCTIVE COMPONENTS, INC.

TABLE OF CONTENTS

Superconductive Components, Inc.

2839 Charter Street
Columbus, Ohio 43228
(614) 486-0261

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD JUNE 9, 2006

May 1, 2006

To Our Shareholders:

     The Annual Meeting of Shareholders of Superconductive Components, Inc. (the “Company”) will be held at the offices of the Company located at 2839 Charter Street, Columbus, Ohio 43228, on Friday, June 9, 2006, at 9:30 a.m. local time, for the following purposes:

	1.		To elect five directors of the Company, each to serve for terms expiring at the next Annual Meeting of Shareholders;
	2.		To approve and adopt the Company’s 2006 Stock Incentive Plan;
	3.		To ratify the selection of the independent registered public accounting firm for the year ending December 31, 2006; and
	4.		To transact any other business which may properly come before the meeting or any adjournment thereof.

     The Board of Directors has fixed April 21, 2006, as the record date for the determination of shareholders entitled to notice and to vote at the annual meeting and any adjournment thereof. A list of shareholders will be available for examination by any shareholder at the annual meeting and for a period of 10 days before the annual meeting at the executive offices of the Company.

     You will be most welcome at the annual meeting and we hope you can attend. Directors and officers of the Company and representatives of its registered independent public accounting firm are expected to be present to answer your questions and to discuss the Company’s business.

     We urge you to execute and return the enclosed proxy as soon as possible so that your shares may be voted in accordance with your wishes. If you attend the annual meeting, you may cast your vote in person and your proxy will not be used. If your shares are held in an account at a brokerage firm or bank, you must instruct them on how to vote your shares.

By Order of the Board of Directors,

Daniel Rooney
President, Chief Executive Officer, and
Chairman of the Board of Directors

SUPERCONDUCTIVE COMPONENTS, INC.

2839 Charter Street
Columbus, Ohio 43228

ELECTION OF DIRECTORS

     The Company’s Restated Code of Regulations provides that the number of directors shall be fixed by the Board. The total number of authorized directors currently is fixed at five. The nominees for director, if elected, will serve for one-year terms expiring at the next Annual Meeting of Shareholders. Daniel Rooney, Robert J. Baker, Jr., Walter J. Doyle, Robert H. Peitz, and Edward W. Ungar currently serve as directors of the Company and are being nominated by the Board of Directors for re-election as directors.

     It is intended that, unless otherwise directed, the shares represented by the enclosed proxy will be voted FOR the election of Messrs. Rooney, Baker, Doyle, Peitz, and Ungar as directors. In the event that any nominee for director should become unavailable, the number of directors of the Company may be decreased pursuant to the Restated Code of Regulations or the Board of Directors may designate a substitute nominee, in which event the shares represented by the enclosed proxy will be voted for such substitute nominee.

      The Board of Directors recommends that the shareholders vote FOR the election of the nominees for director.

     The following table sets forth for each nominee for director of the Company, such person’s name, age, and his position with the Company:

      Daniel Rooney has served as a Director of the Company since joining the Company in March 2002 as President and Chief Executive Officer. Mr. Rooney was elected as the Chairman of the Board of Directors of the Company on January 8, 2003. Prior to joining the Company, Mr. Rooney was General Manager for Johnson Matthey, Color and Coatings Division, Structural Ceramics Sector North America from 1994 to 2001. Prior to that, Mr. Rooney held various management positions at TAM Ceramics, Inc., a Cookson Group Company.

      Robert J. Baker, Jr., Ph.D. has served as a Director of the Company since 1992. Dr. Baker is the president and founder of Venture Resources International and the co-founder of Business Owners Consulting Group, which assist companies in the development of growth strategies, including marketing position and competitive strategies. Dr. Baker is currently a visiting member of the Capital University faculty serving the MBA program.

      Walter J. Doyle has served as a Director of the Company since 2004. Mr. Doyle is the President of Forest Capital, an angel capital firm. Previously, Mr. Doyle was President and CEO of Industrial Data Technologies Corp. for 21 years. Mr. Doyle earned an Electrical Engineering degree from City College of New York (CCNY) and an MBA from the Harvard Business School.

      Robert H. Peitz has served as a Director of the Company since 2004. Mr Peitz is a private investor. Mr. Peitz was a managing director and head of financial markets for PB Capital. Mr. Peitz’s 15 years of experience at PB Capital include 10 years as Treasurer. Mr. Peitz is a graduate of the University of Cincinnati with a Bachelor of Arts in Economics. Mr. Peitz also has an MBA from the American Graduate School of International Management. He also attended the European Business School and completed the Executive Development Program at the Kellogg School of Management at Northwestern University.

INFORMATION CONCERNING THE BOARD OF DIRECTORS, EXECUTIVE OFFICERS, AND PRINCIPAL SHAREHOLDERS

Meetings and Compensation of the Board of Directors

     The Board of Directors of the Company had a total of nine meetings during the year ended December 31, 2005. During 2005, no director attended fewer than 75% of the meetings of the Board of Directors held during the period for which he has been a director. Additionally, no director attended fewer than 75% of the total number of meetings held by all committees of the Board of Directors on which he served (during the periods that he served). Directors who are employed by the Company receive no compensation for serving as directors.

     As compensation for their service as directors of the Company, non-employee directors periodically receive grants of stock options with an exercise price equal to the fair market value of the Company’s common stock on the date of grant and a ten-year term. Directors are also reimbursed for all reasonable out-of-pocket expenses. On March 7, 2005, each of Messrs. Baker, Jr., Doyle, Peitz and Ungar received an option to purchase 10,000 shares of common stock of the Company, exercisable immediately and expiring 10 years from the date of grant at a price of $2.40 per share. On December 16, 2005, each of Messrs. Baker, Jr., Doyle, Peitz and Ungar received an option to purchase 10,000 shares of common stock of the Company, exercisable on December 16, 2006 and expiring 10 years from the date of grant at a price of $4.00 per share.

     It is the Company’s expectation that all members of the Board of Directors attend the Annual Meeting of Shareholders. All members of the Company’s Board of Directors were present at the Company’s 2005 Annual Meeting of Shareholders, except Dr. Baker.

Shareholder Communication

     The Company’s Board of Directors welcomes communications from shareholders. Shareholders may send communications to the Board of Directors or to any director in particular, c/o Gerald S. Blaskie, Superconductive Components, Inc., 2839 Charter Street, Columbus, Ohio 43228. Any correspondence addressed to the Board of Directors or to any one of the Company’s directors in care of the Company’s offices will be forwarded to the addressee without review by management.

     The Company has an Audit Committee and a Stock Option and Compensation Committee (the “Compensation Committee”). The purpose of the Audit Committee is to pre-approve all auditing and permitted non-audit services performed by the Company’s registered independent public accounting firm. The Audit Committee also receives reports from the Company’s registered independent public accounting firm as required by the Securities Exchange Act of 1934, as amended. The Chairman of the Audit Committee is Mr. Ungar, and the members are Messrs. Baker and Doyle. The Audit Committee met three times during 2005. The Board of Directors has not adopted a charter for the Audit Committee. The Board of Directors has determined that Messrs. Doyle and Ungar qualify as “audit committee financial experts” as that term is defined in Item 401(e) of Regulation S-B. Messrs. Doyle and Ungar and Dr. Baker each meet the criteria for audit committee independence as defined in NASDAQ Rule 4350, and Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended.

     The Compensation Committee of the Board of Directors reviews executive compensation and administers the Company’s stock incentive and incentive compensation performance plans. The Chairman of the Compensation Committee is Dr. Baker and the members are Messrs. Doyle and Ungar. The Compensation Committee met twice during 2005.

     Due to the limited size of the Company’s Board of Directors, the Board of Directors has determined that it is not necessary to establish a nominating committee. Nominations for directors are considered by the entire Board of Directors. The directors take a critical role in guiding the strategic direction and oversee the management of the Company. Director candidates are considered based on various criteria, such as their broad based business and professional skills and experiences, a global business and social perspective, concern for long term interests of shareholders, and personal integrity and judgment. In addition, directors must have available time to devote to Board activities and to enhance their knowledge of the industry.

     Accordingly, we seek to attract and retain highly qualified directors who have sufficient time to attend to their substantial duties and responsibilities to the Company. Recent developments in corporate governance and financial reporting have resulted in an increased demand for such highly qualified and productive public company directors.

     The Board of Directors will consider the recommendations of shareholders regarding potential director candidates. In order for shareholder recommendations regarding possible director candidates to be considered by the Board of Directors:

	•		such recommendations must be provided to the Board of Directors c/o Gerald S. Blaskie, Superconductive Components, Inc., 2839 Charter Street, Columbus, Ohio 43228, in writing at least 120 days prior to the date of the next scheduled annual meeting;
	•		the nominating shareholder must meet the eligibility requirements to submit a valid shareholder proposal under Rule 14a-8 of the Securities Exchange Act of 1934, as amended; and
	•		the shareholder must describe the qualifications, attributes, skills or other qualities of the recommended director candidate.

REPORT OF AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

     The Audit Committee consults with our Chief Financial Officer and other key members of our management and with our independent auditors with regard to the plan of audit; reviews, in consultation with the independent auditors, their report of audit, or proposed report of audit and the accompanying management letter, if any; and consults with our Chief Financial Officer and other key members of our management and with our independent auditors with regard to the adequacy of the internal accounting controls.

     In fulfilling its responsibilities, the Audit Committee selected Hausser + Taylor LLC as our independent accountants for purposes of auditing our financial statements for 2005. The Audit Committee has reviewed and discussed with management and the independent auditors our audited financial statements; discussed with the independent auditors the matters required to be discussed by Codification of Statements on Auditing Standards No. 61; received the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1; and discussed with the independent accountants their independence from our Company.

     Based on the reviews and discussions with management and Hausser + Taylor LLC, the Audit Committee recommended to the Board of Directors that our audited consolidated financial statements be included in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005, filed with the Securities and Exchange Commission.

     The Board of Directors evaluated the independence of each member of the Audit Committee. As part of its evaluation, the Board of Directors determined, in the exercise of its business judgment, that Messrs. Ungar and Doyle, and Dr. Baker are independent under Rule 4350(d) of the Nasdaq Stock Market and are financially literate each in his own capacity.

     Based upon its work and the information received in the inquiries outlined above, the Audit Committee is satisfied that its responsibilities for the period ended December 31, 2005, were met and that our financial reporting and audit processes are functioning effectively.

Submitted by the Audit Committee
of the Board of Directors:

Robert J. Baker, Jr.
Walter J. Doyle
Edward W. Ungar

Executive Officers

     In addition to Mr. Rooney, the following persons serve as executive officers of the Company:

      Gerald S. Blaskie , age 48, has served as the Company’s Chief Financial Officer since April 2001. On March 2, 2006, the Board of Directors of the Company appointed Mr. Blaskie to the position of Vice President and Chief Financial Officer. Prior to joining the Company, Mr. Blaskie was the Controller at Cable Link, Inc. from February 2000 to March 2001. From 1997 to 2000, he was the Plant Manager at Central Ohio Plastics Corporation, where he also served as Controller from 1993 to 1997.

      Scott Campbell , Ph.D ., age 48, has served as the Company’s Vice President of Technology since March 2005. Dr. Campbell served as the Company’s Vice-President of Research and Engineering from July 2004 to March 2005. Dr. Campbell joined the Company in July 2002 as the Company’s Technical Director. Prior to joining the Company, he was Senior Research Manager at Oxynet, Inc. for five years.

      Michael K. Barna , age 48, has served as Vice President, Sales-Photonics, since March 2, 2006. Mr. Barna joined the Company as Director of Sales and Marketing in January 2004. Prior to joining the Company Mr. Barna had more than 20 years of experience in thin film sales, including major account sales of Physical Vapor Deposition equipment, high purity targets and evaporation materials for these systems, hybrid microelectronic, telecommunications, and the commercial glass coating markets. Mr Barna served as National Sales Manager for Aerosflex Corporation from March 2001 until January 2003. From January 1, 2003, until the date he joined the Company, Mr. Barna served as the director of product management for Liquid Metal Technologies.

     Officers are elected annually by the Board of Directors and serve at its discretion.

Ownership of Common Stock by Directors and Executive Officers

     The following table sets forth, as of March 31, 2006, the beneficial ownership of the Company’s common stock by each of the Company’s directors, each executive officer named in the Summary Compensation Table, and by all directors and executive officers as a group.

Ownership of Common Stock by Principal Shareholders

     The following table sets forth information as of March 31, 2006, relating to the beneficial ownership of common stock by each person known by the Company to own beneficially more than 5% of the outstanding shares of common stock of the Company.

EQUITY COMPENSATION PLAN INFORMATION

     The following table sets forth additional information as of December 31, 2005, concerning shares of the Company’s common stock that may be issued upon the exercise of options and other rights under the Company’s existing equity compensation plans and arrangements, divided between plans approved by the Company’s shareholders and plans or arrangements not submitted to the Company’s shareholders for approval. The information includes the number of shares covered by, and the weighted average exercise price of, outstanding options and other rights and the number of shares remaining available for future grants excluding the shares to be issued upon exercise of outstanding options, warrants, and other rights.

ADOPTION OF THE COMPANY’S 2006 STOCK INCENTIVE PLAN

     At the Annual Meeting, the Company will submit to shareholders a proposal to adopt the Superconductive Components, Inc. 2006 Stock Incentive Plan (the “2006 Plan”). The Board of Directors unanimously approved the adoption of the 2006 Plan on April 20, 2006. This summary of the principal features of the 2006 Plan is qualified in its entirety by the full text of the 2006 Plan, which is attached hereto as Appendix A and incorporated herein by reference. A vote in favor of adopting the 2006 Plan will constitute approval of all terms of the 2006 Plan.

Purpose

     The 2006 Plan is intended to further the growth and profitability of the Company by providing increased incentives to and encourage share ownership on the part of key employees, officers and directors of, and consultants and advisers who render services to the Company, and any future parent or subsidiary of the Company.

General

     The 2006 Plan permits the granting of stock options and restricted stock awards (collectively, “Awards”) to eligible participants. If our shareholders approve the 2006 Plan at the annual meeting, the maximum number of shares of our common stock which will be issued pursuant to the 2006 Plan will be 600,000 shares. The market value of the 600,000 shares of our common stock to be subject to the 2006 Plan was approximately $2,160,000 at April 21, 2006. If an Award expires or is canceled without having been fully exercised or vested, the unvested or canceled shares will be available again for grants of Awards.

Administration of the 2006 Plan

     The 2006 Plan will be administered by the Company’s Stock Option and Compensation Committee (the “Committee”). The members of the Committee must qualify as “non-employee directors” under Rule 16b-3 of the Securities Exchange Act of 1934 (“Rule 16b-3”), and as “outside directors” under section 162(m) of the Internal Revenue Code (the “Code”). Subject to the terms of the 2006 Plan, the Committee has the sole discretion to determine the employees, directors and consultants who shall be granted Awards, the terms and conditions of such Awards, and to construe and interpret the 2006 Plan. The Committee also is responsible for making adjustments in outstanding Awards, the shares available for Awards, and the numerical limitations for Awards to reflect any transactions such as stock splits or stock dividends. The Committee may delegate its authority to one or more directors or officers; provided, however, that the Committee may not delegate its authority and powers (a) with respect to Section 16 Persons, or (b) in any way which would jeopardize the Plan’s qualification under Section 162(m) of the Code or Rule 16b-3. The Board of Directors may amend or terminate the 2006 Plan at any time and for any reason, but to the extent required under Rule 16b-3, material amendments to the 2006 Plan must be approved by the shareholders.

Eligibility to Receive Awards

     Eligibility to participate in the 2006 Plan extends to the management, key employees, directors and consultants of the Company. The estimated number of eligible participants is approximately 25 persons. The actual number of individuals who will receive options or restricted stock awards under the 2006 Plan cannot be determined because eligibility for participation in the 2006 Plan is at the discretion of the Committee. No participant may receive Awards covering more than 300,000 shares under the 2006 Plan.

Options

     The Committee may grant incentive stock options, which entitle the holder to favorable tax treatment, and/or non-statutory options. The number of shares covered by each option is determined by the Committee. The Committee will determine the option price per share of each option granted under the Plan, provided that the option price of each incentive stock option granted under the Plan may not be less than the fair market value of a share on the date of grant of such option.

     Within five business days following the date of exercise of an option, the optionee or other person exercising the option will make full payment of the option price in cash or, with the consent of the Committee, (i) by tendering previously acquired shares (valued at fair market value, as determined by the Committee, as of such date of tender); (ii) with a full recourse promissory note of the optionee for the portion of the option price in excess of the par value of shares subject to the option, under terms and conditions determined by the Committee; (iii) any combination of the foregoing; or (iv) if the shares subject to the option have been registered under the Securities Act of 1933, as amended, and there is a regular public market for the shares, by delivering to the Company on the date of exercise of the option written notice of exercise together with: (A) written instructions to forward a copy of such notice of exercise to a broker or dealer, as defined in section 3(a)(4) and 3(a)(5) of the Securities Exchange Act of 1934, as amended (“Broker”), designated in such notice and to deliver to the specified account maintained with the Broker by the person exercising the option a certificate for the Shares purchased upon the exercise of the option, and (B) a copy of irrevocable instructions to the Broker to deliver promptly to the Company a sum equal to the purchase price of the Shares purchased upon exercise of the option and any other sums required to be paid to the Company under the Plan. If tax offset payments sufficient to allow for withholding of taxes are not being made at the time of exercise of an option, the Company shall have the right to require the optionee or other person exercising such option to remit to the Company, by deduction from salary, wages or otherwise, an amount sufficient to satisfy federal, state and local withholding tax requirements or to deduct from all payments made under the Plan, including tax offset payments, amounts sufficient to satisfy all withholding tax requirements.

     The Committee will determine the period during which each option may be exercised; provided, however, that any incentive stock option granted under the 2006 Plan will have an option period which does not exceed 10 years from the date of grant. If the grant of any option becomes subject to Code Section 409A, then notwithstanding the foregoing, the Committee-designated exercise period may be modified to include only those dates that are compliant with Code Section 409A’s distribution rules.

     Options will expire at such time as the Committee determines at the date of grant; provided, however, that no incentive stock options may be exercised on or after 10 years from the date of grant.

Termination of Options

     Any option granted under the 2006 Plan will, subject to earlier termination by its terms, terminate automatically if not exercised:

	•		within 30 days after the optionee’s termination of employment with the Company (other than by reason of death, disability, or for cause);
	•		within one year after the employee’s death or termination of employment by the Company by reason of disability, as defined in the 2006 Plan; and
	•		prior to termination by the Company for Cause, as defined in the 2006 Plan.

Restricted Stock Awards

     Restricted stock awards are shares of the Company’s common stock which vest in accordance with terms established by the Committee in its discretion. For example, the Committee may provide that restricted stock will vest only if one or more performance goals are satisfied and/or only if the participant remains employed with the Company for a specified period of time. Any performance measures may be applied on a Company-wide or an individual business unit basis, as deemed appropriate in light of the participant’s specific responsibilities.

Awards to be Granted to Certain Individuals and Groups

     The Committee has discretion to determine the number and type of Awards to be granted to any employee, director or consultant. Accordingly, the actual number and type of Awards to be granted in the future is not determinable.

Nontransferability of Options

     Except for non-statutory stock options, Awards granted under the 2006 Plan may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the applicable laws of descent and distribution. Non-statutory stock options may be transferred for no consideration to family members or to trusts or other entities for their benefit, or to other persons, if approved by the Committee.

Tax Aspects

     As explained below, each type of award has different federal income tax consequences. In addition to these, a participant may also be subject to foreign, state and local income or other tax consequences in the jurisdiction in which the participant works and/or resides. The following is a brief general summary of the material federal income tax consequences with respect to awards under the 2006 Plan. It is not intended to be tax advice to participants. We do not intend the following discussion to be a complete explanation of all of the federal income tax consequences of participating in the 2006 Plan. Participants in the 2006 Plan should rely on their own tax advisers concerning the specific tax consequences to them, including the applicability and effect of state, local and foreign tax laws.

Stock Options

     The 2006 Plan allows the Committee to grant non-statutory as incentive stock options. Generally, no income is recognized when either type of stock option is granted to the participant, but the subsequent tax treatment differs widely.

      Non-statutory Stock Options

     Generally, if a participant exercises a non-statutory stock option, the excess of the fair market value of a share on the date of exercise over the stock option price is ordinary compensation income to the participant at the time of the exercise. The tax basis for the shares purchased is their fair market value on the date of exercise. Any gain or loss that the participant realizes from a later sale of the shares for an amount in excess of or less than the tax basis of the shares will be taxed as capital gain or loss, respectively. The character of the gain or loss (short-term or long-term) will depend upon how long the participant held the shares since exercise. Generally capital gains will be taxable as long-term capital gains if the shares are held more than one year from exercise.

      Incentive Stock Options

     Generally, a participant will recognize no regular taxable income upon the exercise of an incentive stock option. The tax basis of the shares acquired will be the exercise price. If the participant meets the Holding Periods described below, all gain or loss that he or she realizes upon a later sale of the shares for an amount in excess of or less than their tax basis will be taxed as a capital gain or loss. To receive this favorable treatment, the participant must not dispose of the shares that he or she acquires by exercising an incentive stock option within two years after the date the stock option was granted, nor within one year after the exercise date (the “Holding Periods”). If the participant disposes of the shares before the end of the Holding Periods, the amount of that gain which equals the lesser of: (1) the difference between the fair market value on the exercise date and the stock option price; or (2) the difference between the sale price and the stock option price, will be taxed as ordinary income. Any remaining gain or loss will be taxed as short-term or long-term capital gain, depending upon how long the participant held the shares.

      Alternative Minimum Tax – Incentive Stock Options

     For determining a participant’s alternative minimum taxable income subject to the alternative minimum tax, a participant’s exercise of an incentive stock option will result in the recognition of alternative minimum taxable income at the time of the exercise of the stock option in an amount equal to the excess of the fair market value of the shares on the exercise date over the stock option price.

Restricted Stock

     In general, a participant who is granted restricted shares of common stock will not recognize taxable income upon grant, but instead will recognize ordinary income when the shares vest and are no longer subject to restriction. Alternatively, within 30 days of the grant of the restricted stock a participant may elect, under Section 83(b) of the Code, to be taxed at the time of the grant. In all cases, the amount of ordinary income that a participant recognizes will be equal to the fair market value of the shares at the time the participant recognizes income, less the price paid for the shares, if any. Generally, any gain recognized thereafter will be capital gain or loss.

Superconductive Components, Inc. Tax Deduction

     Generally, we will be entitled to a tax deduction for an award made under the 2006 Plan to the extent that the participant recognizes ordinary income from the award. Section 162(m) of the Code contains special rules regarding the federal income tax deductibility of compensation paid to our Chief Executive Officer and to each of the other four most highly compensated executive officers. The general rule is that compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000 or qualifies as “performance-based” compensation under Section 162(m). We have designed the Plan so that awards to covered officers should qualify as performance-based compensation under Section 162(m).

Deferred Compensation/Section 409A Awards

     Section 409A of the Code provides that covered amounts deferred under a nonqualified deferred compensation plan are includable in the participant’s gross income to the extent not subject to a substantial risk of forfeiture and not previously included in income, unless certain requirements are met, including limitations on the timing of deferral elections and events that may trigger the distribution of deferred amounts.

     The Company has designed the Plan so that awards are either intended to comply with, or are exempt from coverage of, Section 409A of the Code. The Company intends to continue to review the terms of the Plan and may, subject to the terms of the Plan, adopt additional amendments to comply with current and additional guidance issued under Section 409A of the Code. However, if an award fails to meet or is not granted in compliance with these new requirements the award may be subject to an additional 20% tax and interest.

Required Vote

     Approval of the 2006 Plan requires the affirmative vote of a majority of the shares represented and voting, in person or by proxy, at the Annual Meeting.

The Board of Directors recommends that our shareholders vote “FOR” the approval of the 2006 Stock Incentive Plan.

REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM

     The Company has selected Hausser + Taylor LLC to serve as the Company’s registered independent public accounting firm for 2006. Hausser + Taylor LLC served as the registered independent public accounting firm for the Company for 2005 and throughout the periods covered by the Company’s financial statements. Representatives of Hausser + Taylor LLC are expected to attend the Annual Meeting of Shareholders in order to respond to appropriate questions from shareholders, and they will have the opportunity to make a statement.

     Hausser + Taylor LLC has a continuing relationship with RSM McGladrey, Inc. (“RSM”) (formerly with American Express Tax and Business Services, Inc.) from which it leases auditing staff who are full time, permanent employees of RSM and through which its shareholders provide non-audit services. As a result of this arrangement, Hausser + Taylor LLC has no full time employees and, therefore, none of the audit services performed were provided by permanent full time employees of Hausser + Taylor LLC. Hausser + Taylor LLC manages and supervises the audit and audit staff, and is exclusively responsible for the opinion rendered in connection with its examination.

FEES OF THE REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDED DECEMBER 31, 2005

Audit Fees

     The aggregate fees billed and to be billed by Hausser + Taylor LLC for professional services rendered for the audit of the Company’s annual financial statements and review of financial statements included in the Company’s Form 10-QSB were $49,700 for 2005, and $47,000 for 2004.

Audit Related Fees

     The Company paid Hausser + Taylor LLC $700 in 2005 and $0 in 2004 in aggregate fees for professional services rendered for audit related fees for assurance and related services that are reasonably related to the performance of the audit or review of the financial statements that are not reported above under the heading “audit fees.” These fees were related to the Company’s response to comments from the Securities and Exchange Commission related to its Annual Report on Form 10-KSB for the year ended December 31, 2004.

Tax Fees

     The Company paid $0 in 2005 and $300 in 2004 in aggregate tax fees for professional services rendered for tax compliance and tax advice in connection with the Company’s internally prepared corporate tax return.

All Other Fees

     The aggregate fees billed by Hausser + Taylor LLC for professional services rendered by in connection with the research and review for the acceleration of employee stock options were $4,140 for 2005 and $0 for 2004.

Pre-Approval Policy

     The Audit Committee is required to pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent auditor or other registered public accounting firm, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934 that are approved by the Audit Committee prior to completion of the audit.

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     Our Audit Committee has appointed Hausser + Taylor LLC, an independent registered public accounting firm, as the Company’s independent auditors for the fiscal year ending December 31, 2006, and has further directed that management submit the selection of independent auditors for ratification by the shareholders at the 2006 Annual Meeting of Shareholders. Hausser + Taylor LLC has audited the Company’s financial statements since the year ending December 31, 1995. The Audit Committee believes that Hausser + Taylor LLC’s experience with and knowledge of the Company are important, and would like to continue this relationship.

     Hausser + Taylor LLC has advised us that the firm does not have any direct or indirect financial interest in the Company, nor has Hausser + Taylor LLC, had any such interest since the inception of the Company in 1987, other than as a provider of auditing and accounting services. In making the selection of Hausser + Taylor LLC to continue as our independent registered public accounting firm for the year ending December 31, 2006, the Audit Committee reviewed past audit results and the non-audit services performed during the Company’s fiscal year 2005 and which are proposed to be performed during fiscal year 2006. In selecting Hausser + Taylor LLC, the Audit Committee carefully considered Hausser + Taylor LLC’s independence. Hausser + Taylor LLC has confirmed to us that it is in compliance with all rules, standards and policies of the Independence Standards Board and the SEC governing auditor independence.

     Neither the Company’s bylaws nor other governing documents requires shareholder ratification of the selection of Hausser + Taylor LLC as the Company’s independent auditors. However, we are submitting the selection of Hausser + Taylor LLC to the shareholders for ratification as a matter of good corporate practice. If our shareholders fail to ratify this selection, the Audit Committee will reconsider whether or not to continue to retain Hausser + Taylor LLC, but may still retain them. Even if this selection is ratified, the Audit Committee, in its discretion, may direct the appointment of different independent auditors at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders.

     The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the 2006 Annual Meeting will be required to ratify the selection of Hausser + Taylor LLC. Abstentions will be counted toward the tabulation of votes cast on proposals presented to the shareholders and will have the same effect as negative votes. Broker non-votes are counted toward a quorum, but are not counted for any purpose in determining whether this matter has been approved.

The Board of Directors recommends that our shareholders vote “FOR” the ratification of the independent registered public accounting firm.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers, directors and greater than 10% shareholders to file reports of ownership and changes in ownership of the Company’s securities with the Securities and Exchange Commission (“SEC”). Copies of the reports are required by SEC regulation to be furnished to the Company. Based on its review of such reports, and written representations from reporting persons, the Company believes that all reporting persons complied with all filing requirements during the year ended December 31, 2005, except for Robert H. Peitz, who had one late Form 4 filing.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Notes Payable and Capital Lease

     During 2005, the Company entered into agreements with the Estates of Edward R. Funk and Ingeborg V. Funk. The Company was indebted to the Estates in the amount of $289,391.92. The Estates agreed to cancel $288,000 of the indebtedness in exchange for 144,000 shares of common stock and warrants to purchase an additional 36,000 shares of common stock at $3.00 per share, which expire October 2010. The Company transferred to the Estates $1,391.92 in full satisfaction of the remaining amount of the indebtedness.

Convertible Promissory Notes and Stock Purchase Warrants

     On January 7, 2000, the Company issued common stock purchase warrants at $2.50 per share for 150,000 shares of common stock related to the subordinated notes payable to Edward R. and Ingeborg V. Funk. The warrants are 100% vested and expire ten years from the date of grant. The Estate of Edward R. Funk and the Estate of Ingeborg V. Funk are both greater than 5% beneficial owners of the Company.

     On June 30, 2003, the Company issued a $100,000 convertible promissory note payable to Windcom Investments SA, a greater than 5% beneficial owner of the Company. The interest on the convertible promissory note was determined by the Prime Commercial Rate in effect at Bank One, N.A., Columbus, Ohio. In addition, the Company issued to Windcom Investments SA, warrants to purchase 20,333 shares of the Company’s common stock at $1.00 per share expiring June 2008. The warrants vested according to the following schedule: (1) 8,333 vested on the date of grant; and (2) 12,000 vested at a rate of 333 per month for 32 months, then 336 per month for 4 months. On May 13, 2004, in accordance with the terms of the convertible promissory note, the balance and accrued and unpaid interest owed automatically converted to 43,119 shares of common stock after the Company raised over $500,000 in private equity financing. As of May 13, 2004, the vested warrants were fixed at 11,633; no additional warrants will vest. In connection with the private equity financing, the Company also issued to Windcom Investments SA 8,623 warrants to purchase shares of common stock at $2.88 per share. These warrants expire May 2009.

     On June 30, 2003, the Company issued to the Estate of Edward R. Funk, warrants to purchase 10,000 shares of common stock at $1.00 per share in connection with a lease guarantee. The warrants vest according to the following schedule: (1) 4,600 vested on the date of grant; and (2) 5,400 vest at a rate of 150 per month for 36 months. These warrants expire June 2008.

     On June 30, 2003, the Company issued a $166,666.67 convertible promissory note payable to Robert H. Peitz. Mr. Peitz is a greater than 5% beneficial owner of the Company. Mr. Peitz currently serves on the Company’s Board of Directors. The Prime Commercial Rate in effect at Bank One, N.A., Columbus, Ohio determined the interest on the convertible promissory note. In addition, the Company issued to Mr. Peitz warrants to purchase 33,889 shares of the Company’s common stock at $1.00 per share, which expire June 2008. The warrants vested according to the following schedule: (1) 13,889 vested on the date of grant; and (2) 20,000 vested at a rate of 556 per month for 32 months, then 552 per month for four months. On May 13, 2004, in accordance with the terms of the convertible promissory note, the balance and accrued and unpaid interest owed on the note automatically converted to 71,873 shares of common stock after the Company raised over $500,000 in private equity financing. As of May 13, 2004, the vested warrants were fixed at 14,374; no additional warrants will vest. In connection with the 2004 private equity financing, the Company also issued to Mr. Peitz 19,449 warrants to purchase shares of common stock at $2.88 per share, which expire May 2009.

     On November 3, 2004, the Company entered into a loan agreement between the Company, as borrower, and Robert H. Peitz, as lender. Mr. Peitz agreed to loan the Company up to $200,000 for working capital, to be drawn by the Company in increments of $50,000. The interest rate was Huntington National Bank’s prime rate plus 2%, which accrued and compounded monthly. The loan was secured by the Company’s assets and perfected by the filing of a UCC-1 financing statement. For each $50,000 increment drawn on the loan Mr. Peitz received 5,000 warrants to purchase the Company’s common stock, without par value, at a purchase price of $2.50 per share and exercisable until November 1, 2009. The loan was drawn on the following schedule: November 3, 2004, $100,000; January 7, 2005, $50,000; and April 1, 2005, $50,000. The loan balance (principal and accrued interest) was repaid in October 2005 and the UCC-1 financing statement was terminated.

     On April 14, 2005 the Company entered into a loan agreement between the Company, as borrower, and Robert H. Peitz, as lender. Mr. Peitz agreed to provide a $200,000 convertible secured loan to the Company for working capital. The interest rate of 10% accrued and compounded monthly. The loan was drawn on the following schedule: April 14, 2005, $100,000; and May 20, 2005, $100,000. Because the Company completed equity financing of at least $500,000 during the fourth quarter of 2005, the principal and accrued interest totaling $209,110 automatically converted on the same basis as the new financing to 104,555 shares of common stock ($2.00 per share) and warrants to purchase an aggregate of 26,139 shares of the Company’s common stock at a purchase price of $3.00 per share exercisable until October 2010.

Legal Services

     Curtis A. Loveland is the Secretary of the Company and is the beneficial owner of greater than 5% of the outstanding common stock of the Company, which ownership includes (i) 41,000 shares of common stock, which can be acquired by Mr. Loveland under stock options exercisable within 60 days of March 31, 2006; (ii) 437,256 shares of common stock beneficially owned in his capacity as the executor of the Estate of Edward R. Funk, of which 127,900 shares of common stock can be acquired by Mr. Loveland on behalf of the estate under stock options and warrants exercisable within 60 days of March 31, 2006; (iii) 462,852 shares of common stock beneficially owned by Mr. Loveland in his capacity as the executor of the Estate of Ingeborg V. Funk, of which 87,500 shares of common stock can be acquired by Mr. Loveland on behalf of the estate under stock options and warrants exercisable within 60 days of March 31, 2006; and (iv) 283,756 shares beneficially owned by Mr. Loveland as the trustee of generation-skipping irrevocable trusts established by Edward R. and Ingeborg V. Funk. Mr. Loveland is also a partner with Porter, Wright, Morris & Arthur LLP, the Company’s legal counsel.