##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended October 2, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from
 _____ 

to
 _____
 Commission File Number 0-21074
 SUPERCONDUCTOR TECHNOLOGIES INC.
  Delaware
    
    77-0158076(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 460 Ward Drive,
Santa Barbara, California 93111-2356
 (805) 690-4500
 
 þ o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-accelerated Filer o
    
    Smaller reporting company þ(do not check if a smaller reporting company)
 Yes o or No þ




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##### 



SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
    
    
    1PART I  FINANCIAL INFORMATIONITEM 1. Financial StatementsCondensed Consolidated Statements of Operations
    
    
    2Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Cash Flows
    
    
    4Notes to Unaudited Interim Condensed Consolidated Financial Statements
    
    
    5ITEM 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    15ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    22ITEM 4. Controls and Procedures
    
    
    22PART II  OTHER INFORMATIONITEM 1. Legal Proceedings
    
    
    22ITEM 1A. Risk Factors
    
    
    22ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22ITEM 3. Defaults Upon Senior Securities
    
    
    22ITEM 4. (Removed and Reserved)
    
    
    22ITEM 5. Other Information
    
    
    22ITEM 6. Exhibits
    
    
    23SIGNATURE
    
    
    24Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   i




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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 This Report contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. We claim the protection of the safe harbor contained in the Private Securities Litigation
Reform Act of 1995 for these forward looking statements. Our forward-looking statements relate to
future events or our future performance and include, but are not limited to, statements concerning
our business strategy, future commercial revenues, market growth, capital requirements, new product
introductions, expansion plans and the adequacy of our funding. Other statements contained in this
Report that are not historical facts are also forward-looking statements. We have tried, wherever
possible, to identify forward-looking statements by terminology such as may, will, could,
should, expects, anticipates, intends, plans, believes, seeks, estimates and other
comparable terminology.
 We caution investors that any forward-looking statements presented in this Report, or that we
may make orally or in writing from time to time, are based on the beliefs of, assumptions made by,
and information currently available to, us. Such statements are based on assumptions, and the
actual outcome will be affected by known and unknown risks, trends, uncertainties and factors that
are beyond our control or ability to predict. Although we believe that our assumptions are
reasonable, they are not guarantees of future performance and some will inevitably prove to be
incorrect. As a result, our actual future results can be expected to differ from our expectations,
and those differences may be material. Accordingly, investors should use caution in relying on past
forward-looking statements, which are based on known results and trends at the time they are made,
to anticipate future results or trends.
 Some of the risks and uncertainties that may cause our actual results, performance or
achievements to differ materially from those expressed or implied by forward-looking statements
include the following:
 
    
    limited cash and a history of losses;
 
    
    limited number of potential customers;
 
    
    limited number of suppliers for some of our components;
 
    
    no significant backlog from quarter to quarter;
 
    
    our market is characterized by rapidly advancing technology;
 
    
    fluctuations in product demand from quarter to quarter can be significant;
 
    
    the impact of competitive filter products, technologies and pricing;
 
    
    manufacturing capacity constraints and difficulties; and
 
    
    general economic conditions, such as the current worldwide recession.
 For further discussion of these and other factors see, Managements Discussion and Analysis
of Financial Condition and Results of Operations and Risk Factors in our Annual Report on Form
10-K for 2009.
 This Report and all subsequent written and oral forward-looking statements attributable to us
or any person acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. We do not undertake any obligation to release
publicly any revisions to our forward-looking statements to reflect events or circumstances after
the date of this Report.
  1




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 SUPERCONDUCTOR TECHNOLOGIES INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  Three Months Ended
    
    
    Nine Months EndedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009Net revenues:Net commercial product revenues
    
    $
    1,830,000
    
    
    $
    2,985,000
    
    
    $
    5,901,000
    
    
    $
    5,893,000Government and other contract revenues
    
    
    144,000
    
    
    
    1,307,000
    
    
    
    1,857,000
    
    
    
    2,708,000Total net revenues
    
    
    1,974,000
    
    
    
    4,292,000
    
    
    
    7,758,000
    
    
    
    8,601,000Costs and expenses:Cost of commercial product revenues
    
    
    2,110,000
    
    
    
    2,947,000
    
    
    
    6,464,000
    
    
    
    7,186,000Cost of government and other contract
revenue
    
    
    86,000
    
    
    
    993,000
    
    
    
    1,095,000
    
    
    
    2,227,000Research and development
    
    
    1,507,000
    
    
    
    902,000
    
    
    
    3,998,000
    
    
    
    2,984,000Selling, general and administrative
    
    
    1,622,000
    
    
    
    1,629,000
    
    
    
    5,338,000
    
    
    
    5,164,000Total costs and expenses
    
    
    5,325,000
    
    
    
    6,471,000
    
    
    
    16,895,000
    
    
    
    17,561,000Loss from operations
    
    
    (3,351,000
    )
    
    
    (2,179,000
    )
    
    
    (9,137,000
    )
    
    
    (8,960,000
    )Other Income and ExpenseNoncontrolling interest in joint venture
    
    
    
    
    
    
    (30,000
    )
    
    
    
    
    
    
    (117,000
    )Adjustments to fair value of derivatives
    
    
    2,000
    
    
    
    393,000
    
    
    
    171,000
    
    
    
    (387,000
    )Interest income
    
    
    2,000
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    21,000Interest expense
    
    
    (7,000
    )
    
    
    (7,000
    )
    
    
    (21,000
    )
    
    
    (25,000
    )Net loss
    
    $
    ( 3,354,000
    )
    
    $
    (1,819,000
    )
    
    $
    (8,983,000
    )
    
    $
    (9,468,000
    )Basic and diluted loss per common share
    
    $
    (0.14
    )
    
    $
    (0.08
    )
    
    $
    (0.40
    )
    
    $
    (0.50
    )Weighted average number of common
shares outstanding
    
    
    23,335,955
    
    
    
    21,621,035
    
    
    
    22,334,644
    
    
    
    19,116,136
   2




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##### Table of Contents



SUPERCONDUCTOR TECHNOLOGIES INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 October 2,
    
    
    December 31,2010
    
    
    2009(Unaudited)
    
    
    (See Note)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    8,275,000
    
    
    $
    10,365,000Accounts receivable, net
    
    
    250,000
    
    
    
    462,000Inventory, net
    
    
    2,396,000
    
    
    
    2,644,000Prepaid expenses and other current assets
    
    
    493,000
    
    
    
    445,000Total Current Assets
    
    
    11,414,000
    
    
    
    13,916,000Property and equipment, net of accumulated depreciation of
$21,760,000 and $21,076,000, respectively
    
    
    1,457,000
    
    
    
    1,832,000Patents, licenses and purchased technology, net of accumulated amortization
of $2,466,000 and $2,384,000, respectively
    
    
    2,236,000
    
    
    
    2,163,000Other assets
    
    
    205,000
    
    
    
    215,000Total Assets
    
    $
    15,312,000
    
    
    $
    18,126,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    817,000
    
    
    $
    467,000Accrued expenses
    
    
    1,128,000
    
    
    
    671,000Fair value of warrant derivative
    
    
    
    
    
    
    171,000Current portion of capitalized lease obligations and long term debt
    
    
    34,000
    
    
    
    50,000Total Current Liabilities
    
    
    1,979,000
    
    
    
    1,359,000Other long term liabilities
    
    
    607,000
    
    
    
    526,000Total Liabilities
    
    
    2,586,000
    
    
    
    1,885,000Commitments and contingencies-Notes 6 and 7Stockholders Equity:Preferred stock, $.001 par value, 2,000,000 shares authorized,
611,523 shares issued and outstanding
    
    
    1,000
    
    
    
    1,000Common stock, $.001 par value, 250,000,000 shares authorized,
26,617,408 and 22,512,033 shares issued and outstanding, respectively
    
    
    27,000
    
    
    
    23,000Capital in excess of par value
    
    
    247,346,000
    
    
    
    241,882,000Accumulated deficit
    
    
    (234,648,000
    )
    
    
    (225,665,000
    )Total Stockholders Equity
    
    
    12,726,000
    
    
    
    16,241,000Total Liabilities and Equity
    
    $
    15,312,000
    
    
    $
    18,126,000
    3




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##### Table of Contents



SUPERCONDUCTOR TECHNOLOGIES INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Nine Months EndedOctober 2,
    
    
    September 26,2010
    
    
    2009CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (8,983,000
    )
    
    $
    (9,468,000
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    766,000
    
    
    
    1,143,000Stock-based compensation expense
    
    
    822,000
    
    
    
    843,000Provision for excess and obsolete inventories
    
    
    270,000
    
    
    
    192,000Noncontrolling interest in joint venture
    
    
    
    
    
    
    117,000Fair value of derivatives
    
    
    (171,000
    )
    
    
    387,000Changes in assets and liabilities:Accounts receivable
    
    
    212,000
    
    
    
    (670,000
    )Inventory, net
    
    
    (22,000
    )
    
    
    2,024,000Prepaid expenses and other current assets
    
    
    (48,000
    )
    
    
    (710,000
    )Patents, licenses and purchased technology
    
    
    (154,000
    )
    
    
    (123,000
    )Other assets
    
    
    8,000
    
    
    
    309,000Accounts payable, accrued expenses and other long-term liabilities
    
    
    873,000
    
    
    
    838,000Net cash used in operating activities
    
    
    (6,427,000
    )
    
    
    (5,118,000
    )CASH FLOWS FROM INVESTING ACTIVITIES:Investment in joint venture
    
    
    
    
    
    
    (8,000
    )Purchases of property and equipment
    
    
    (309,000
    )
    
    
    (183,000
    )Net cash used in investing activities
    
    
    (309,000
    )
    
    
    (191,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Repurchase of common shares for withholding obligations
    
    
    (573,000
    )
    
    
    Net proceeds from the sale of common stock
    
    
    5,219,000
    
    
    
    10,456,000Net cash provided by financing activities
    
    
    4,646,000
    
    
    
    10,456,000Net increase (decrease) in cash and cash equivalents
    
    
    (2,090,000
    )
    
    
    5,147,000Cash and cash equivalents at beginning of period
    
    
    10,365,000
    
    
    
    7,569,000Cash and cash equivalents at end of period
    
    $
    8,275,000
    
    
    $
    12,716,000
   4




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##### Table of Contents



SUPERCONDUCTOR TECHNOLOGIES INC.
 
 NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. General
 ® ®
    2. Summary of Significant Accounting Policies
 Basis of Presentation
    Principles of Consolidation
   5




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##### Table of Contents



Cash and Cash Equivalents
  Accounts Receivable
  Revenue Recognition
    Shipping and Handling Fees and Costs
  Warranties
  Guarantees
  Research and Development Costs
   6




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##### Table of Contents



Inventories
  Property and Equipment
  Patents, Licenses and Purchased Technology
  Long-Lived Assets
   Other Investments
   7




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##### Table of Contents



Restructuring Expenses
  Loss Contingencies
  Income Taxes
  Marketing Costs
  Net Loss Per Share
  Stock-based Compensation
  Three months ended
    
    Nine months endedOctober 2,
    
    September 26,
    
    October 2,
    
    
    September 26,2010
    
    2009
    
    2010
    
    
    2009Expected life in years
    
    n/a
    
    n/a
    
    
    4.0
    
    
    n/aRisk free interest rate
    
    n/a
    
    n/a
    
    
    2.04
    %
    
    n/aExpected volatility
    
    n/a
    
    n/a
    
    
    117
    %
    
    n/aDividend yield
    
    n/a
    
    n/a
    
    
    0
    %
    
    n/a
   8




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##### Table of Contents



Three months ended
    
    
    Nine months endedOctober 2,
    
    
    September 26,
    
    
    October 2,
    
    
    September 26,2010
    
    
    2009
    
    
    2010
    
    
    2009Cost of revenue
    
    $
    5,000
    
    
    $
    8,000
    
    
    $
    16,000
    
    
    $
    23,000Research and development
    
    
    89,000
    
    
    
    67,000
    
    
    
    226,000
    
    
    
    200,000Selling, general and administrative
    
    
    212,000
    
    
    
    224,000
    
    
    
    580,000
    
    
    
    620,000Total stock-based compensation expense
    
    $
    306,000
    
    
    $
    299,000
    
    
    $
    822,000
    
    
    $
    843,000
 Use of Estimates
  Fair Value of Financial Instruments
  Comprehensive Income (Loss)
  Segment Information
  Certain Risks and Uncertainties
     9




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##### Table of Contents



Recent Accounting Pronouncements
   3. Short Term Borrowings
   4. Stockholders Equity
  Convertible
    
    
    
    
    
    
    
    
    
    
    Capital inPreferred Stock
    
    
    Common Stock
    
    
    Excess of
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Par Value
    
    
    Deficit
    
    
    TotalBalance at December 31, 2009
    
    
    611,523
    
    
    $
    1,000
    
    
    
    22,512,033
    
    
    $
    23,000
    
    
    $
    241,882,000
    
    
    $
    (225,665,000
    )
    
    $
    16,241,000Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    4,000,000
    
    
    
    4,000
    
    
    
    5,217,000
    
    
    
    
    
    
    
    5,221,000Repurchase of common stock
to satisfy withholding
obligations
    
    
    
    
    
    
    
    
    
    
    (182,520
    )
    
    
    
    
    
    
    (573,000
    )
    
    
    
    
    
    
    (573,000
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    287,895
    
    
    
    
    
    
    
    820,000
    
    
    
    
    
    
    
    820,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,983,000
    )
    
    
    (8,983,000
    )Balance at October 2, 2010
    
    
    611,523
    
    
    $
    1,000
    
    
    
    26,617,408
    
    
    $
    27,000
    
    
    $
    247,346,000
    
    
    $
    (234,648,000
    )
    
    $
    12,726,000
 Common Stock
  Stock Options
   10




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##### Table of Contents



Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    Number of
    
    
    AverageNumber of
    
    
    
    
    
    
    Exercise
    
    
    Options
    
    
    ExerciseShares
    
    
    Price Per Share
    
    
    Price
    
    
    Exercisable
    
    
    PriceBalance at December 31, 2009
    
    
    1,144,876
    
    
    $
    1.43 - $493.75
    
    
    $
    20.16
    
    
    
    970,703
    
    
    $
    22.96Granted
    
    
    187,498
    
    
    
    2.62
    
    
    
    2.62Exercised
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    199,043
    
    
    
    1.85 - 493.75
    
    
    
    73.36Balance at October 2, 2010
    
    
    1,133,331
    
    
    $
    1.43 - $216.70
    
    
    $
    7.91
    
    
    
    900,131
    
    
    $
    9.18
  Restricted Stock Awards
  Warrants
  Common SharesTotal and
    
    
    PriceCurrently
    
    
    perExercisable
    
    
    Share
    
    
    Expiration DateWarrants related to April 2004 Bridge Loans
    
    
    10,000
    
    
    
    18.50
    
    
    
    April 28, 2011
    *
 *
    
    The terms of these warrants contain net exercise provisions, under which holders can elect
to receive common stock equal to the difference between the exercise price and the sale
price for common shares on the exercise date or the date immediately preceding the exercise
date instead of paying the exercise price in cash.  11




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##### Table of Contents



5. Earnings Per Share
   October 2,
    
    
    September 26,2010
    
    
    2009Outstanding stock options
    
    
    1,133,331
    
    
    
    1,157,136Unvested restricted stock awards
    
    
    720,730
    
    
    
    910,998Outstanding warrants
    
    
    10,000
    
    
    
    618,237Total
    
    
    1,864,061
    
    
    
    2,686,371
 6. Commitments and Contingencies
 Operating Leases
   Patents and Licenses
   Year ending December 31,
    
    Licenses
    
    
    Operating LeasesRemainder of 2010
    
    $
    
    
    
    $
    329,0002011
    
    
    175,000
    
    
    
    1,338,0002012
    
    
    175,000
    
    
    
    1,369,0002013
    
    
    175,000
    
    
    
    1,401,0002014
    
    
    180,000
    
    
    
    1,442,000Thereafter
    
    
    930,000
    
    
    
    2,884,000Total payments
    
    $
    1,635,000
    
    
    $
    8,763,000
  12




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##### Table of Contents



7. Contractual Guarantees and Indemnities
  Warranties
  Intellectual Property Indemnities
  Director and Officer Indemnities and Contractual Guarantees
   General Contractual Indemnities/Products Liability
  Short Term Borrowings
 See Note
3Short Term Borrowings.
 8. Severance Expense
   13




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##### Table of Contents



9. Details of Certain Financial Statement Components and Supplemental Disclosures of Cash Flow
Information and Non-Cash Activities
 Balance Sheet Data
 October 2,
    
    
    December 31,2010
    
    
    2009Accounts receivable:Accounts receivable-trade
    
    $
    208,000
    
    
    $
    204,000United States government accounts receivable-billed
    
    
    51,000
    
    
    
    269,000Less: allowance for doubtful accounts
    
    
    (9,000
    )
    
    
    (11,000
    )$
    250,000
    
    
    $
    462,000
 October 2,
    
    
    December 31,2010
    
    
    2009Inventories:Raw materials
    
    $
    1,518,000
    
    
    $
    2,010,000Work-in-process
    
    
    610,000
    
    
    
    543,000Finished goods
    
    
    1,307,000
    
    
    
    919,000Less inventory reserve
    
    
    (1,039,000
    )
    
    
    (828,000
    )$
    2,396,000
    
    
    $
    2,644,000
 October 2,
    
    
    December 31,2010
    
    
    2009Property and Equipment:Equipment
    
    $
    16,037,000
    
    
    $
    15,743,000Leasehold improvements
    
    
    6,776,000
    
    
    
    6,761,000Furniture and fixtures
    
    
    404,000
    
    
    
    404,00023,217,000
    
    
    
    22,908,000Less: accumulated depreciation and amortization
    
    
    (21,760,000
    )
    
    
    (21,076,000
    )$
    1,457,000
    
    
    $
    1,832,000
  October 2,
    
    
    December 31,2010
    
    
    2009Patents and Licenses:Patents pending
    
    $
    1,134,000
    
    
    $
    1,118,000Patents issued
    
    
    1,285,000
    
    
    
    1,141,000Less accumulated amortization
    
    
    (533,000
    )
    
    
    (477,000
    )Net patents issued
    
    
    752,000
    
    
    
    664,000Licenses Pending
    
    
    12,000
    
    
    
    18,000Licenses Issued
    
    
    563,000
    
    
    
    563,000Less accumulated amortization
    
    
    (225,000
    )
    
    
    (200,000
    )Net licenses
    
    
    338,000
    
    
    
    363,000$
    2,236,000
    
    
    $
    2,163,000
  14




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##### Table of Contents



October 2,
    
    
    December 31,2010
    
    
    2009Accrued Expenses and Other Long TermLiabilities:Salaries payable
    
    $
    258,000
    
    
    $
    107,000Compensated absences
    
    
    367,000
    
    
    
    397,000Compensation related
    
    
    106,000
    
    
    
    39,000Warranty reserve
    
    
    313,000
    
    
    
    255,000Deferred rent
    
    
    406,000
    
    
    
    384,000Other
    
    
    319,000
    
    
    
    236,0001,769,000
    
    
    
    1,418,000Less current portion
    
    
    (1,162,000
    )
    
    
    (892,000
    )Long term portion
    
    $
    607,000
    
    
    $
    526,000
 For the nine months ended,October 2,
    
    
    September 26,2010
    
    
    2009Warranty Reserve Activity:Beginning balance
    
    $
    255,000
    
    
    $
    262,000Additions
    
    
    66,000
    
    
    
    21,000Deductions
    
    
    (8,000
    )
    
    
    (6,000
    )Ending balance
    
    $
    313,000
    
    
    $
    277,000
 10. Subsequent Events
 Sale of Common Stock
 See
Note 4.
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 General
  Our Proprietary Technology
  
    
    7 patents for technologies directed toward producing thin-film materials and
structures, which expire between 2010 and 2025. We have developed a proprietary
state-of-the-art manufacturing process for producing HTS thin-films of the highest
quality.
 
    
    35 patents for cryogenic and non-microwave circuit designs, which expire between
2012 and 2028. The expertise of our highly qualified team has allowed us to design
and fabricate extremely small, high-performance circuits including RF signal filters.
  15




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
    
    17 patents covering cryogenics, packaging and systems, which expire between 2013
and 2025. Our proprietary and patented cryogenic packaging innovation provides us
with a significant competitive advantage in maintaining our HTS materials at their
critical temperatures.
 
    
    1 patent covering other superconducting technologies, which expires in 2013.
   Superconducting Power Applications
    
    
    Wind Turbines: Current wind turbine power generating capacity is limited by
the size and weight of the generator. Turbine manufacturers believe that building a
generator utilizing HTS wire will reduce its size and weight sufficiently to enable the
development of 10 megawatt (MW) and larger wind turbines. According to Emerging Energy
Research, 2731 MW of worldwide offshore capacity of wind turbines producing more than 5
MW is expected to be installed in 2016, which will rise to nearly 5377 MW in 2020.
Using a current estimated installed offshore cost of $2 million per MW, this translates
into an investment for 5 MW capacity or larger wind turbines of approximately $5.5
billion in 2016 and nearly $11 billion in 2020.
 
    
    Power Cables:Because they can carry significantly more electrical current
with less electrical loss than conventional cables, HTS power cables allow utilities to
deliver significantly more electrical current utilizing existing power cable entry
facilities in office buildings and other facilities with large and growing power
requirements.
 
    
    Fault Current Limiters:A fault current limiter is a device in a power
transmission network which cuts off electrical flow in the same manner as a ground
fault interrupter in the home. By eliminating the superconductor properties of the HTS
wire when too much electricity is flowing, the resistance in the fault current limiter
can be substantially increased, stopping current flow and preventing damage to the rest
of the power distribution network.
 
    
    Superconducting Magnetic Energy Storage (SMES):As renewable energy generating
systems continue to proliferate, the power grid needs reliable power backup to offset
the intermittent nature of those systems. The low power loss from HTS wire could be
used to provide an alternative to chemical and other forms of current battery
technology for energy storage.
 
    
    Magnetic Resonance Imaging (MRI):MRI machines used for medical imaging
already use existing low temperature superconducting wire; the improvements targeted
for 2G HTS wire may enable the manufacturers of MRI machines to reduce the initial cost
and operating expenses of these devices.
 
    
    Industrial Motors and Generators:The reduced weight and size required for a
generator built with HTS wire could enable motors and generators that can generate two
to three times the power as existing generators of the same size.
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Tunable Filter Products
  Wireless Networks
  Our Business Model
  Government Contracts
  Commercial Applications
 e
 
    
    SuperLink, a highly compact and reliable receiver front-end HTS wireless
filter system to eliminate out-of-band interference for wireless base stations,
combining filters with a proprietary cryogenic cooler and a cooled low-noise
amplifier.
 
    
    AmpLink, a ground-mounted unit for wireless base stations that includes a
high-performance amplifier and up to nine dual duplexers.
 
    
    SuperPlex, a high-performance multiplexer that provides extremely low
insertion loss and excellent cross-band isolation designed to eliminate the need for
additional base station antennas and reduce infrastructure costs.
 Risk Factors
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Joint Ventures
  Licenses
  Backlog
  Results of Operations
 Quarter and nine months ended October 2, 2010 compared to the quarter and nine months ended
September 26, 2009
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Three Months Ended
    
    
    Nine Months EndedDollars in thousands
    
    October 2, 2010
    
    
    September 26, 2009
    
    
    October 2, 2010
    
    
    September 26, 2009Net commercial product sales
    
    $
    1,830
    
    
    
    100
    %
    
    $
    2,985
    
    
    
    100
    %
    
    $
    5,901
    
    
    
    100
    %
    
    $
    5,893
    
    
    
    100
    %Cost of commercial product sales
    
    
    2,110
    
    
    
    115
    %
    
    
    2,947
    
    
    
    99
    %
    
    
    6,464
    
    
    
    110
    %
    
    
    7,186
    
    
    
    122
    %Gross profit (loss)
    
    $
    (280
    )
    
    
    (15
    )%
    
    $
    38
    
    
    
    1
    %
    
    $
    (563
    )
    
    
    (10
    )%
    
    $
    (1,293
    )
    
    
    (22
    )%
            19




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Liquidity and Capital Resources
 Cash Flow Analysis
     Financing Activities
   Contractual Obligations and Commercial Commitments
  Capital Expenditures
  Future Liquidity
   20




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Net Operating Loss Carryforward
 ,
   Critical Accounting Policies and Estimates
   Recent Accounting Pronouncements
    21




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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 Managements Discussion
and Analysis of Financial Condition and Results of Operations  Market Risk
 
 Item 4. Controls and Procedures.
    
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. (Removed and Reserved)
 
 Item 5. Other Information
   22




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Item 6. Exhibits.
 Number
    
    Description of Document10.1
    
    
    Eighth Amendment to Loan and Security Agreement by and between
Registrant and Silicon Valley Bank dated July 28, 2010*31.1
    
    
    Statement of CEO Pursuant to 302 of the Sarbanes-Oxley Act of 2002*31.2
    
    
    Statement of CFO Pursuant to 302 of the Sarbanes-Oxley Act of 2002*32.1
    
    
    Statement of CEO Pursuant to 906 of the Sarbanes-Oxley Act of 2002*32.2
    
    
    Statement of CFO Pursuant to 906 of the Sarbanes-Oxley Act of 2002*
 
 *
    
    Filed herewith.  23




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SIGNATURES
  SUPERCONDUCTOR TECHNOLOGIES INC.Dated:  November 10, 2010
    /s/ William J. BuchananWilliam J. BuchananVice President and Chief Financial Officer/s/ Jeffrey A. QuiramJeffrey A. QuiramPresident and Chief Executive Officer  24