##### 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 June 28, 2008
 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
(State or other jurisdiction of 
incorporation or organization)
    
    77-0158076
(IRS Employer
Identification No.)
 460 Ward Drive,
Santa Barbara, California 93111-2356
 (805) 690-4500
 
  þ o
  Large accelerated filer oAccelerated filer oNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company þ o þ




---



##### 



SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
    
    
    1WHERE YOU CAN FIND MORE INFORMATION
    
    
    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
    
    
    21ITEM 4.
    
    Disclosure Controls and Procedures
    
    
    22PART II 
    
    OTHER INFORMATIONITEM 1.
    
    Legal Proceedings
    
    
    22ITEM 1A.
    
    Risk Factors
    
    
    22ITEM 2.
    
    Unregistered Sales of Equity Securities
    
    
    22ITEM 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    22ITEM 5.
    
    Other Information
    
    
    23ITEM 6.
    
    Exhibits
    
    
    23SIGNATURE
    
    
    23EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  i




---



##### Table of Contents



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. You can find many (but not all) of these statements by looking for words such as
approximates, believes, expects, anticipates, estimates, intends, plans would,
may or other similar expressions in this Report. We claim the protection of the safe harbor
contained in the Private Securities Litigation Reform Act of 1995. We caution investors that any
forward-looking statements presented in this Report, or which 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 assets 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; and our market is characterized by rapidly advancing technology. For further
discussion of these and other factors see Part I, Item 2, Managements Discussion and Analysis of
Financial Condition and Results of Operations and Part II, Item 1A. Risk Factors in this Report
and in our 2007 Annual Report on Form 10-K .
 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.
 
 WHERE YOU CAN FIND MORE INFORMATION
  1




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 
 SUPERCONDUCTOR TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedJune 30, 2007
    
    
    June 28, 2008
    
    
    June 30, 2007
    
    
    June 28, 2008Net revenues:Net commercial product revenues
    
    $
    3,653,000
    
    
    $
    1,348,000
    
    
    $
    7,187,000
    
    
    $
    3,341,000Government and other contract
revenues
    
    
    1,032,000
    
    
    
    1,601,000
    
    
    
    1,681,000
    
    
    
    3,080,000Total net revenues
    
    
    4,685,000
    
    
    
    2,949,000
    
    
    
    8,868,000
    
    
    
    6,421,000Costs and expenses:Cost of commercial product revenues
    
    
    3,228,000
    
    
    
    2,155,000
    
    
    
    7,130,000
    
    
    
    4,173,000Contract research and development
    
    
    607,000
    
    
    
    1,247,000
    
    
    
    1,055,000
    
    
    
    2,489,000Other research and development
    
    
    813,000
    
    
    
    743,000
    
    
    
    1,725,000
    
    
    
    1,151,000Selling, general and administrative
    
    
    2,043,000
    
    
    
    2,215,000
    
    
    
    3,941,000
    
    
    
    4,416,000Total costs and expenses
    
    
    6,691,000
    
    
    
    6,360,000
    
    
    
    13,851,000
    
    
    
    12,229,000Loss from operations
    
    
    (2,006,000
    )
    
    
    (3,411,000
    )
    
    
    (4,983,000
    )
    
    
    (5,808,000
    )Interest income
    
    
    35,000
    
    
    
    70,000
    
    
    
    86,000
    
    
    
    169,000Interest expense
    
    
    (11,000
    )
    
    
    (8,000
    )
    
    
    (22,000
    )
    
    
    (17,000
    )Net loss
    
    $
    (1,982,000
    )
    
    $
    (3,349,000
    )
    
    $
    (4,919,000
    )
    
    $
    (5,656,000
    )Basic and diluted loss per common share
    
    $
    (0.16
    )
    
    $
    (0.21
    )
    
    $
    (0.39
    )
    
    $
    (0.38
    )Weighted average number of common
shares outstanding
    
    
    12,483,367
    
    
    
    16,316,072
    
    
    
    12,483,367
    
    
    
    14,976,078
  2




---



##### Table of Contents



SUPERCONDUCTOR TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    June 28,2007
    
    
    2008(See Note)
    
    
    (Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    3,939,000
    
    
    $
    12,987,000Accounts receivable, net
    
    
    2,413,000
    
    
    
    1,468,000Inventory, net
    
    
    3,415,000
    
    
    
    6,215,000Prepaid expenses and other current assets
    
    
    442,000
    
    
    
    414,000Total Current Assets
    
    
    10,209,000
    
    
    
    21,084,000Property and equipment, net of accumulated depreciation of
$19,129,000 and $19,246,000, respectively
    
    
    3,961,000
    
    
    
    3,351,000Patents, licenses and purchased technology, net of accumulated
amortization
of $1,722,000 and $1,887,000, respectively
    
    
    2,236,000
    
    
    
    2,245,000Investment in joint venture
    
    
    
    
    
    
    401,000Other assets
    
    
    219,000
    
    
    
    229,000Total Assets
    
    $
    16,625,000
    
    
    $
    27,310,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    1,467,000
    
    
    $
    1,213,000Accrued expenses
    
    
    1,405,000
    
    
    
    1,182,000Proceeds for shares to be issued
    
    
    4,000,000
    
    
    
    Current portion of capitalized lease obligations and long term debt
    
    
    45,000
    
    
    
    64,000Total Current Liabilities
    
    
    6,917,000
    
    
    
    2,459,000Other long term liabilities
    
    
    518,000
    
    
    
    521,000Total Liabilities
    
    
    7,435,000
    
    
    
    2,980,000Commitments and contingencies-Notes 6 and 7Stockholders Equity:Preferred stock, $.001 par value, 2,000,000 shares authorized,
611,523 issued and outstanding
    
    
    
    
    
    
    1,000Common stock, $.001 par value, 250,000,000 shares authorized,
12,511,414 and 17,612,775 shares issued and outstanding, respectively
    
    
    12,000
    
    
    
    18,000Capital in excess of par value
    
    
    209,163,000
    
    
    
    229,953,000Accumulated deficit
    
    
    (199,985,000
    )
    
    
    (205,642,000
    )Total Stockholders Equity
    
    
    9,190,000
    
    
    
    24,330,000Total Liabilities and Stockholders Equity
    
    $
    16,625,000
    
    
    $
    27,310,000
 
 3




---



##### Table of Contents



SUPERCONDUCTOR TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedJune 30, 2007
    
    
    June 28, 2008CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (4,919,000
    )
    
    $
    (5,656,000
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    1,212,000
    
    
    
    871,000Warrants-Options
    
    
    176,000
    
    
    
    302,000Provision for excess and obsolete inventories
    
    
    160,000
    
    
    
    Reserve for impairment of note and interest receivable from
Stockholder
    
    
    (583,000
    )
    
    
    Changes in assets and liabilities:Accounts receivable
    
    
    (666,000
    )
    
    
    943,000Inventory
    
    
    1,934,000
    
    
    
    (2,800,000
    )Prepaid expenses and other current assets
    
    
    676,000
    
    
    
    27,000Patents, licenses and purchased technology
    
    
    (92,000
    )
    
    
    (175,000
    )Other assets
    
    
    (13,000
    )
    
    
    (8,000
    )Accounts payable, accrued expenses and other long-term liabilities
    
    
    (379,000
    )
    
    
    (429,000
    )Net cash used in operating activities
    
    
    (2,494,000
    )
    
    
    (6,925,000
    )CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from the sale of property and equipment
    
    
    25,000
    
    
    
    Investment in joint venture
    
    
    
    
    
    
    (401,000
    )Purchases of property and equipment
    
    
    (96,000
    )
    
    
    (95,000
    )Net cash used in investing activities
    
    
    (71,000
    )
    
    
    (496,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds
from shares to be issued
    
    
    
    
    
    
    (4,000,000
    )Payments on long-term obligations
    
    
    (10,000
    )
    
    
    Proceeds from the sale of common stock
    
    
    
    
    
    
    20,469,000Net cash provided by (used in) financing activities
    
    
    (10,000
    )
    
    
    16,469,000Net increase (decrease) in cash and cash equivalents
    
    
    (2,575,000
    )
    
    
    9,048,000Cash and cash equivalents at beginning of period
    
    
    5,487,000
    
    
    
    3,939,000Cash and cash equivalents at end of period
    
    $
    2,912,000
    
    
    $
    12,987,000
  4




---



##### 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
  Cash and Cash Equivalents
  5




---



##### Table of Contents



Accounts Receivable
  Revenue Recognition
  Revenue Recognition/Contract Accounting
     Warranties
  Guarantees
  6




---



##### Table of Contents



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




---



##### Table of Contents



Loss Contingencies
  Income Taxes
 Accounting for Income Taxes
 Accounting for Uncertainty in
Income Taxes  An Interpretation of FASB Statement No. 109
 Marketing Costs
  Net Loss Per Share
  Stock-based Compensation
 8




---



##### Table of Contents



Three months ended
    
    Six months endedJune 30, 2007
    
    June 28, 2008
    
    June 30, 2007
    
    June 28, 2008Expected life in years
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.0Risk free interest rate
    
    
    4.95
    %
    
    
    2.8
    %
    
    
    4.80
    %
    
    
    2.46
    %Expected volatility
    
    
    95
    %
    
    
    106
    %
    
    
    95
    %
    
    
    109
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
  Use of Estimates
  Fair Value of Financial Instruments
  Comprehensive Income (Loss)
  Segment Information
  Certain Risks and Uncertainties
   9




---



##### Table of Contents



Recent Accounting Pronouncement
   3. Short Term Borrowings
   4. Stockholders Equity
 Common
Stock
   Stock Options
   10




---



##### Table of Contents



Weighted
    
    
    
    
    
    WeightedAverage
    
    Number of
    
    AverageNumber of
    
    
    
    
    
    Exercise
    
    Options
    
    ExerciseShares
    
    Price Per Share
    
    Price
    
    Exercisable
    
    PriceBalance at December 31, 2007
    
    
    741,858
    
    
    $
    1.43  $493.75
    
    
    $
    34.24
    
    
    
    663,174
    
    
    $
    37.87Granted
    
    
    571,590
    
    
    $
    3.73  $    6.08
    
    
    $
    4.85Exercised
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    (32,176
    )
    
    $
    1.58  $295.00
    
    
    $
    14.24Balance at June 28, 2008
    
    
    1,281,272
    
    
    $
    1.43  $493.75
    
    
    $
    21.63
    
    
    
    665,647
    
    
    $
    37.17
  Restricted Stock Awards
   Warrants
  Common SharesTotal and
    
    PriceCurrently
    
    perExercisable
    
    Share
    
    Expiration DateWarrants related to issuance of common stock
    
    
    342,466
    
    
    $
    6.74
    
    
    
    August 16, 2010
    * **Warrants related to April 2004 Bridge Loans
    
    
    10,000
    
    
    
    18.50
    
    
    
    April 28, 2011
    *Total
    
    
    352,466
 
 *
    
    The terms of these warrants contain net exercise provisions, wherein instead of a cash
exercise 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.**
    
    These warrants contain anti-dilution adjustment provisions. 5. Earnings Per Share
 11




---



##### Table of Contents



6. Commitments and Contingencies
 Operating Leases
   Capital Leases
  Patents and Licenses
   Year ending December 31,
    
    Licenses
    
    
    Operating LeasesRemainder of 2008
    
    $
    150,000
    
    
    $
    715,0002009
    
    
    150,000
    
    
    
    1,474,0002010
    
    
    150,000
    
    
    
    1,525,0002011
    
    
    150,000
    
    
    
    1,436,0002012
    
    
    150,000
    
    
    
    9,000Thereafter
    
    
    1,050,000
    
    
    
    1,000Total payments
    
    $
    1,800,000
    
    
    $
    5,160,000
 7. Contractual Guarantees and Indemnities
  Warranties
  12




---



##### Table of Contents



Intellectual Property Indemnities
  Director and Officer Indemnities and Contractual Guarantees
   General Contractual Indemnities/Products Liability
  Short Term Borrowings
 See Note 3 Short
Term Borrowings
 Contractual Contingency
  8. Details of Certain Financial Statement Components and Supplemental Disclosures of Cash Flow
Information and Non-Cash Activities
 Balance Sheet Data
 13




---



##### Table of Contents



December 31,
    
    
    June 28,2007
    
    
    2008Accounts receivable:Accounts receivable-trade
    
    $
    1,242,000
    
    
    $
    477,000United States government accounts receivable-billed
    
    
    1,246,000
    
    
    
    1,066,000Less: allowance for doubtful accounts
    
    
    (75,000
    )
    
    
    (75,000
    )$
    2,413,000
    
    
    $
    1,468,000
 December 31,
    
    
    June 28,2007
    
    
    2008Inventories:Raw materials
    
    $
    1,934,000
    
    
    $
    3,417,000Work-in-process
    
    
    679,000
    
    
    
    1,024,000Finished goods
    
    
    1,817,000
    
    
    
    2,682,000Less inventory reserve
    
    
    (1,015,000
    )
    
    
    (908,000
    )$
    3,415,000
    
    
    $
    6,215,000
 December 31,
    
    
    June 28,2007
    
    
    2008Property and Equipment:Equipment
    
    $
    15,951,000
    
    
    $
    15,457,000Leasehold improvements
    
    
    6,732,000
    
    
    
    6,736,000Furniture and fixtures
    
    
    407,000
    
    
    
    404,00023,090,000
    
    
    
    22,597,000Less: accumulated depreciation and amortization
    
    
    (19,129,000
    )
    
    
    (19,246,000
    )$
    3,961,000
    
    
    $
    3,351,000
  December 31,
    
    
    June 28,2007
    
    
    2008Patents and Licenses:Patents pending
    
    $
    705,000
    
    
    $
    850,000Patents issued
    
    
    983,000
    
    
    
    1,001,000Less accumulated amortization
    
    
    (345,000
    )
    
    
    (377,000
    )Net patents issued
    
    
    638,000
    
    
    
    624,000Licenses Pending
    
    
    
    
    
    
    13,000Licenses
    
    
    563,000
    
    
    
    563,000Less accumulated amortization
    
    
    (134,000
    )
    
    
    (150,000
    )Net licenses
    
    
    429,000
    
    
    
    413,000Purchased technology
    
    
    1,706,000
    
    
    
    1,706,000Less accumulated amortization
    
    
    (1,242,000
    )
    
    
    (1,361,000
    )Net purchased technology
    
    
    464,000
    
    
    
    345,000$
    2,236,000
    
    
    $
    2,245,000
  14




---



##### Table of Contents



December 31,
    
    
    June 28,2007
    
    
    2008Accrued Expenses and Other Long Term
Liabilities:Salaries Payable
    
    $
    307,000
    
    
    $
    399,000Compensated Absences
    
    
    371,000
    
    
    
    472,000Compensation related
    
    
    369,000
    
    
    
    64,000Warranty reserve
    
    
    380,000
    
    
    
    314,000Deferred Rent
    
    
    373,000
    
    
    
    350,000Other
    
    
    123,000
    
    
    
    168,0001,923,000
    
    
    
    1,766,000Less current portion
    
    
    (1,405,000
    )
    
    
    (1,245,000
    )Long term portion
    
    $
    518,000
    
    
    $
    521,000
 For the six months ended,June 30,
    
    
    June 28,2007
    
    
    2008Warranty Reserve Activity:Beginning balance
    
    $
    428,000
    
    
    $
    380,000Additions
    
    
    51,000
    
    
    
    21,000Deductions
    
    
    (28,000
    )
    
    
    (87,000
    )Ending balance
    
    $
    451,000
    
    
    $
    314,000Lease Abandonment Costs:Beginning balance
    
    $
    8,000
    
    
    
    Additions
    
    
    
    
    
    
    Deductions
    
    
    (8,000
    )
    
    
    Ending balance
    
    $
    
    
    
    
    Product Line Exit Costs:Beginning balance
    
    $
    319,000
    
    
    
    Additions
    
    
    
    
    
    
    Deductions
    
    
    (319,000
    )
    
    
    Ending balance
    
    $
    
    
    
    
    
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
  Our Propriety Technology
 15




---



##### Table of Contents




    
    6 patents for technologies directed toward producing thin-film materials and
structures. We have developed a proprietary state of the art manufacturing process for
producing HTS thin-films of the highest quality.
    
    26 patents for cryogenic and non-microwave circuit designs. The expertise of our
highly qualified team has allowed us to design and fabricate extremely small,
high-performance circuits including RF signal filters.
    
    17 patents covering cryogenics, packaging and systems. Our proprietary and
patented cryogenic packaging innovations provides us with a significant competitive
advantage in maintaining our HTS materials at their critical temperatures.
    
    5 patents covering other superconducting technologies.
   
    
    Wireless Networks.Our current commercial products help maximize the performance of
wireless telecommunications networks by improving the quality of uplink signals from
mobile wireless devices. Our products increase capacity utilization, lower dropped
and blocked calls, extend coverage, and enable higher wireless data throughput  all
while reducing capital and operating costs.
    
    Reconfigurable Handset Filters.The trend in the wireless handset industry is to
continually reduce size and cost, while adding more features and making the unit more
adaptable to different air interfaces and frequencies throughout the world. This
drives the need for more complex and reconfigurable transceivers. We are uniquely
positioned to meet this demand with its strong intellectual property and expertise in
frequency agile and thin film filters.
    
    Superconducting Power Transmission Lines. We have entered into a collaborative
effort with the Department of Energys (DOE) Los Alamos National Laboratory (LANL) to
apply our HTS expertise to LANLs research initiative to develop HTS coated conductors
for power transmission lines. If successfully developed, HTS superconducting cables
could replace copper power transmission lines, resulting in higher capacity with less
resistive cable losses.
    
    Government Products. As the worldwide leader in developing HTS filter systems for
military applications, we continue to be a crucial partner in the U.S. governments
future success. Our high-performance HTS filter systems have been proven to increase
the detection range, reduce interference, and in some cases, detect signals that were
previously undetectable with conventional technology. Currently, we actively
participate in the development of technologies for application in military
communications, signals intelligence, and electronic warfare.
  Our Business Model
  Government Contracts
  16




---



##### Table of Contents



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 which includes a
high-performance amplifier and up to six 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.
  Joint Ventures
 ®
 Licenses
  Recent Developments
 Collaborative Effort
  Sale of Common Stock
  Critical Accounting Policies and Estimates
 17




---



##### Table of Contents



Backlog
  Results of Operations
 Quarter and six months ended June 28, 2008 as compared to the quarter and six months ended June 30,
2007
      18




---



##### Table of Contents



Dollars in thousands
    
    Three Months Ended
    
    
    Six Months EndedJune 30, 2007
    
    
    June 28, 2008
    
    
    June 30, 2007
    
    
    June 28, 2008Net commercial product sales
    
    $
    3,653
    
    
    
    100
    %
    
    $
    1,348
    
    
    
    100
    %
    
    $
    7,187
    
    
    
    100
    %
    
    $
    3,341
    
    
    
    100
    %Cost of commercial product sales
    
    
    3,228
    
    
    
    88
    %
    
    
    2,155
    
    
    
    160
    %
    
    
    7,130
    
    
    
    99
    %
    
    
    4,173
    
    
    
    125
    %Gross profit
    
    $
    425
    
    
    
    12
    %
    
    $
    (807
    )
    
    
    (60
    )%
    
    $
    57
    
    
    
    1
    %
    
    $
    (832
    )
    
    
    (25
    )%
        Liquidity and Capital Resources
 Cash Flow Analysis
   19




---



##### Table of Contents



Financing Activities
    Contractual Obligations and Commercial Commitments
  Capital Expenditures
  Future Liquidity
    Net Operating Loss Carryforward
 ,
 20




---



##### Table of Contents



Recent Accounting Requirements
   Forward-Looking Statements
   
    
    fluctuations in product demand from quarter to quarter which can be significant,
    
    the impact of competitive filter products, technologies and pricing,
    
    manufacturing capacity constraints and difficulties,
    
    market acceptance risks, and
    
    general economic conditions.
 Risk Factors
 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 Managements Discussion and Analysis of
Financial Condition and Results of Operations  Market Risk
 21




---



##### Table of Contents



Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
   
 Item 4. Submission of Matters to a Vote of Security Holders.
  (1)
    
    The two (2) Class 1 nominated directors were elected to serve for the ensuing
three years or until their successors are duly elected and qualified.
 NUMBER OFNUMBER OF
    
    % OF SHARES
    
    SHARES
    
    % OF SHARESSHARES FOR
    
    VOTING
    
    WITHHELD
    
    VOTINGJeffrey A Quiram
    
    
    10,767,055
    
    
    
    98.0
    
    
    
    214,592
    
    
    
    2.0Martin A. Kaplan
    
    
    10,753,498
    
    
    
    97.9
    
    
    
    228,149
    
    
    
    2.1
 (2)
    
    Our 2003 Equity Incentive Plan was amended to delete the sub-limit for granting
restricted stock thereunder (section 4.1.2).
 NUMBER OF SHARES FOR
    
    % OF SHARES VOTINGVotes For
    
    
    2,729,113
    
    
    
    90.1Votes Against
    
    
    299,105
    
    
    
    9.9Votes Abstaining
    
    
    24,844
    
    
    
    
 22




---



##### Table of Contents



(3)
    
    Stonefield Josephson, Inc was appointed as our independent registered public
accounting firm for the year ending December 31, 2008.
 NUMBER OF SHARES FOR
    
    % OF SHARES VOTINGVotes For
    
    
    10,870,330
    
    
    
    99.4Votes Against
    
    
    61,230
    
    
    
    0.6Votes Abstaining
    
    
    50,087
    
    
    
    
 
 Item 5. Other Information.
 (a) Additional Disclosures.
  (b) Stockholder Nominations.
  
 Item 6. Exhibits.
 Number
    
    Description of Document31.1
    
    Statement of CEO Pursuant to 302 of the Sarbanes-Oxley Act of 2002 (*)31.2
    
    Statement of Principal Financial Officer 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 Principal Financial Officer Pursuant to 906 of the
Sarbanes-Oxley Act of 2002 (*)
 
 *
    
    Filed herewith. 
 SIGNATURES
  SUPERCONDUCTOR TECHNOLOGIES INC.Dated:  August 12, 2007
    /s/ William J. BuchananWilliam J. BuchananController (Principal Financial Officer)/s/ Jeffrey A. QuiramJeffrey A. QuiramPresident and Chief Executive Officer 23