##### 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 September 27, 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
    
    77-0158076(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer
Identification No.)
 460 Ward Drive,
Santa Barbara, California 93111-2356
 (805) 690-4500
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 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
    
    
    16ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    21ITEM 4. Disclosure Controls and Procedures
    
    
    21PART 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
    
    
    22ITEM 6. Exhibits
    
    
    22SIGNATURE
    
    
    23EX-31.1EX-31.2EX-32.1EX-32.2
  ii




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##### 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. 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 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;
    
    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;
    
    market acceptance risks; and
    
    general economic conditions.
 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 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




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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 EndedSeptember 29,
    
    
    September 27,
    
    
    September 29,
    
    
    September 27,2007
    
    
    2008
    
    
    2007
    
    
    2008Net revenues:Net commercial product revenues
    
    $
    2,277,000
    
    
    $
    2,741,000
    
    
    $
    9,463,000
    
    
    $
    6,082,000Government and other contract
revenues
    
    
    1,844,000
    
    
    
    854,000
    
    
    
    3,525,000
    
    
    
    3,933,000Total net revenues
    
    
    4,121,000
    
    
    
    3,595,000
    
    
    
    12,988,000
    
    
    
    10,015,000Costs and expenses:Cost of commercial product revenues
    
    
    2,697,000
    
    
    
    3,078,000
    
    
    
    9,827,000
    
    
    
    7,252,000Contract research and development
    
    
    963,000
    
    
    
    709,000
    
    
    
    2,019,000
    
    
    
    3,198,000Other research and development
    
    
    528,000
    
    
    
    1,006,000
    
    
    
    2,251,000
    
    
    
    2,156,000Selling, general and administrative
    
    
    1,973,000
    
    
    
    2,096,000
    
    
    
    5,916,000
    
    
    
    6,513,000Total costs and expenses
    
    
    6,161,000
    
    
    
    6,889,000
    
    
    
    20,013,000
    
    
    
    19,119,000Loss from operations
    
    
    (2,040,000
    )
    
    
    (3,294,000
    )
    
    
    (7,025,000
    )
    
    
    (9,104,000
    )Interest income
    
    
    28,000
    
    
    
    66,000
    
    
    
    115,000
    
    
    
    235,000Interest expense
    
    
    (9,000
    )
    
    
    (7,000
    )
    
    
    (30,000
    )
    
    
    (23,000
    )Net loss
    
    $
    (2,021,000
    )
    
    $
    (3,235,000
    )
    
    $
    (6,940,000
    )
    
    $
    (8,892,000
    )Basic and diluted loss per common share
    
    $
    (0.16
    )
    
    $
    (0.18
    )
    
    $
    (0.56
    )
    
    $
    (0.56
    )Weighted average number of common
shares outstanding
    
    
    12,483,367
    
    
    
    17,750,761
    
    
    
    12,483,367
    
    
    
    15,908,298
  2




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##### Table of Contents



SUPERCONDUCTOR TECHNOLOGIES INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    September 27,2007
    
    
    2008(See Note)
    
    
    (Unaudited)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    3,939,000
    
    
    $
    10,711,000Accounts receivable, net
    
    
    2,413,000
    
    
    
    1,409,000Inventory, net
    
    
    3,415,000
    
    
    
    5,114,000Prepaid expenses and other current assets
    
    
    442,000
    
    
    
    367,000Total Current Assets
    
    
    10,209,000
    
    
    
    17,601,000Property and equipment, net of accumulated depreciation of
$19,129,000 and $19,604,000, respectively
    
    
    3,961,000
    
    
    
    3,025,000Patents, licenses and purchased technology, net of accumulated
amortization
of $1,722,000 and $1,971,000, respectively
    
    
    2,236,000
    
    
    
    2,238,000Investment in joint venture
    
    
    
    
    
    
    521,000Other assets
    
    
    219,000
    
    
    
    244,000Total Assets
    
    $
    16,625,000
    
    
    $
    23,629,000LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    1,467,000
    
    
    $
    806,000Accrued expenses
    
    
    1,405,000
    
    
    
    1,026,000Proceeds for shares to be issued
    
    
    4,000,000
    
    
    
    Current portion of capitalized lease obligations and long term debt
    
    
    45,000
    
    
    
    72,000Total Current Liabilities
    
    
    6,917,000
    
    
    
    1,904,000Other long term liabilities
    
    
    518,000
    
    
    
    499,000Total Liabilities
    
    
    7,435,000
    
    
    
    2,403,000Commitments 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 17,869,030 shares issued and outstanding, respectively
    
    
    12,000
    
    
    
    18,000Capital in excess of par value
    
    
    209,163,000
    
    
    
    230,084,000Accumulated deficit
    
    
    (199,985,000
    )
    
    
    (208,877,000
    )Total Stockholders Equity
    
    
    9,190,000
    
    
    
    21,226,000Total Liabilities and Stockholders Equity
    
    $
    16,625,000
    
    
    $
    23,629,000
 
 3




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##### Table of Contents



SUPERCONDUCTOR TECHNOLOGIES INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  Nine Months EndedSeptember 29,
    
    
    September 27,2007
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (6,940,000
    )
    
    $
    (8,892,000
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    1,748,000
    
    
    
    1,313,000Share-based compensation
    
    
    258,000
    
    
    
    452,000Provision 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
    
    
    (383,000
    )
    
    
    1,003,000Inventory
    
    
    1,955,000
    
    
    
    (1,699,000
    )Prepaid expenses and other current assets
    
    
    597,000
    
    
    
    75,000Patents, licenses and purchased technology
    
    
    (148,000
    )
    
    
    (252,000
    )Other assets
    
    
    12,000
    
    
    
    (24,000
    )Accounts payable, accrued expenses and other long-
term liabilities
    
    
    (622,000
    )
    
    
    (1,006,000
    )Net cash used in operating activities
    
    
    (3,946,000
    )
    
    
    (9,030,000
    )CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from the sale of property and equipment
    
    
    26,000
    
    
    
    Investment in joint venture
    
    
    
    
    
    
    (521,000
    )Purchases of property and equipment
    
    
    (91,000
    )
    
    
    (126,000
    )Net cash used in investing activities
    
    
    (65,000
    )
    
    
    (647,000
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from shares issued
    
    
    1,000,000
    
    
    
    (4,000,000
    )Payments on long-term obligations
    
    
    (14,000
    )
    
    
    Proceeds from the sale of common stock
    
    
    
    
    
    
    20,449,000Net cash provided by (used in) financing activities
    
    
    986,000
    
    
    
    16,449,000Net increase (decrease) in cash and cash equivalents
    
    
    (3,025,000
    )
    
    
    6,772,000Cash and cash equivalents at beginning of period
    
    
    5,487,000
    
    
    
    3,939,000Cash and cash equivalents at end of period
    
    $
    2,462,000
    
    
    $
    10,711,000
  4




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##### Table of Contents



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




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Cash and Cash Equivalents
  Accounts Receivable
  Revenue Recognition
  Revenue Recognition/Contract Accounting
     Warranties
  Guarantees
  6




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##### Table of Contents



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




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##### Table of Contents



®
 Risk Factors
 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
 8




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##### Table of Contents



Stock-based Compensation
  Three months ended
    
    Nine months endedSeptember 29,
    
    September 27,
    
    September 29,
    
    September 27,2007
    
    2008
    
    2007
    
    2008Expected life in years
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.0
    
    
    
    4.0Risk free interest rate
    
    
    4.68
    %
    
    
    3.0
    %
    
    
    4.70
    %
    
    
    2.47
    %Expected volatility
    
    
    95
    %
    
    
    104
    %
    
    
    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




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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, 2007
    
    
    
    
    
    
    
    
    
    
    12,511,414
    
    
    $
    12,000
    
    
    $
    209,163,000
    
    
    
    ($199,985,000
    )
    
    $
    9,190,000Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    5,101,361
    
    
    
    5,000
    
    
    
    10,563,000
    
    
    
    
    
    
    
    10,568,000Issuance of preferred stock
    
    
    611,523
    
    
    
    1,000
    
    
    
    
    
    
    
    
    
    
    
    9,900,000
    
    
    
    
    
    
    
    9,901,000Issuance of awards and
stock based compensation
    
    
    
    
    
    
    
    
    
    
    256,255
    
    
    
    1,000
    
    
    
    458,000
    
    
    
    
    
    
    
    459,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,892,000
    )
    
    
    (8,892,000
    )Balance at September 27,
2008
    
    
    611,523
    
    
    $
    1,000
    
    
    
    17,869,030
    
    
    $
    18,000
    
    
    $
    230,084,000
    
    
    
    ($208,877,000
    )
    
    $
    21,226,000
 Common Stock
  10




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##### Table of Contents



Stock Options
    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
    
    
    576,590
    
    
    $
    1.85 - $    6.08
    
    
    $
    4.83Exercised
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    (42,484
    )
    
    $
    1.58 - $295.00
    
    
    $
    12.53Balance at September 27,2008
    
    
    1,275,964
    
    
    $
    1.43 - $493.75
    
    
    $
    21.67
    
    
    
    672,101
    
    
    $
    36.83
  Restricted Stock Awards
  11




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##### Table of Contents



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, 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.**
    
    These warrants contain special anti-dilution adjustment provisions relating to the price
of other issuances. 5. Earnings per Share
   September 29,
    
    September 27,2007
    
    2008Outstanding stock options
    
    
    826,053
    
    
    
    1,275,964Outstanding stock awards
    
    
    318,000
    
    
    
    20,000Outstanding warrants
    
    
    720,283
    
    
    
    352,466Total
    
    
    1,864,336
    
    
    
    1,648,430
 6. Commitments and Contingencies
 Operating Leases
   12




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##### Table of Contents



Patents and Licenses
   Year ending December 31,
    
    Licenses
    
    
    Operating LeasesRemainder of 2008
    
    $
    150,000
    
    
    $
    369,0002009
    
    
    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
    
    
    $
    4,814,000
 7. Contractual Guarantees and Indemnities
  Warranties
  Intellectual Property Indemnities
  Director and Officer Indemnities and Contractual Guarantees
   13




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##### Table of Contents



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
 December 31,
    
    
    September 27,2007
    
    
    2008Accounts receivable:Accounts receivable-trade
    
    $
    1,242,000
    
    
    $
    984,000United States government accounts receivable-billed
    
    
    1,246,000
    
    
    
    500,000Less: allowance for doubtful accounts
    
    
    (75,000
    )
    
    
    (75,000
    )$
    2,413,000
    
    
    $
    1,409,000
 December 31,
    
    
    September 27,2007
    
    
    2008Inventories:Raw materials
    
    $
    1,934,000
    
    
    $
    3,063,000Work-in-process
    
    
    679,000
    
    
    
    969,000Finished goods
    
    
    1,817,000
    
    
    
    1,958,000Less inventory reserve
    
    
    (1,015,000
    )
    
    
    (876,000
    )$
    3,415,000
    
    
    $
    5,114,000
 December 31,
    
    
    September 27,2007
    
    
    2008Property and Equipment:Equipment
    
    $
    15,951,000
    
    
    $
    15,489,000Leasehold improvements
    
    
    6,732,000
    
    
    
    6,736,000Furniture and fixtures
    
    
    407,000
    
    
    
    404,00023,090,000
    
    
    
    22,629,000Less: accumulated depreciation and amortization
    
    
    (19,129,000
    )
    
    
    (19,604,000
    )$
    3,961,000
    
    
    $
    3,025,000
 14




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##### Table of Contents



December 31,
    
    
    September 27,2007
    
    
    2008Patents and Licenses:Patents pending
    
    $
    705,000
    
    
    $
    911,000Patents issued
    
    
    984,000
    
    
    
    1,010,000Less accumulated amortization
    
    
    (346,000
    )
    
    
    (393,000
    )Net patents issued
    
    
    638,000
    
    
    
    617,000Licenses Pending
    
    
    
    
    
    
    19,000Licenses
    
    
    563,000
    
    
    
    563,000Less accumulated amortization
    
    
    (134,000
    )
    
    
    (158,000
    )Net licenses
    
    
    429,000
    
    
    
    405,000Purchased technology
    
    
    1,706,000
    
    
    
    1,706,000Less accumulated amortization
    
    
    (1,242,000
    )
    
    
    (1,420,000
    )Net purchased technology
    
    
    464,000
    
    
    
    286,000$
    2,236,000
    
    
    $
    2,238,000
  December 31,
    
    
    September 27,2007
    
    
    2008Accrued Expenses and Other Long TermLiabilities:Salaries Payable
    
    $
    307,000
    
    
    $
    183,000Compensated Absences
    
    
    371,000
    
    
    
    456,000Compensation related
    
    
    369,000
    
    
    
    114,000Warranty reserve
    
    
    380,000
    
    
    
    310,000Deferred Rent
    
    
    373,000
    
    
    
    339,000Other
    
    
    123,000
    
    
    
    195,0001,923,000
    
    
    
    1,597,000Less current portion
    
    
    (1,405,000
    )
    
    
    (1,098,000
    )Long term portion
    
    $
    518,000
    
    
    $
    499,000
 For the nine months ended,September 29,
    
    
    September 27,2007
    
    
    2008Warranty Reserve Activity:Beginning balance
    
    $
    428,000
    
    
    $
    380,000Additions
    
    
    75,000
    
    
    
    37,000Deductions
    
    
    (33,000
    )
    
    
    (107,000
    )Ending balance
    
    $
    470,000
    
    
    $
    310,000
 15




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
  Our Proprietary Technology
  
    
    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.
    
    27 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 innovation 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 believe our
strong intellectual property and expertise in frequency agile and thin film filters
position us well to meet this demand.
    
    Superconducting Power Transmission Lines. We have entered into a collaborative
effort and signed a Material Transfer Agreement 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 tunable HTS filter
systems for military applications, we continue to be a crucial partner in the U.S.
governments future success. Our high-
 16




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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.
 Risk Factors
 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 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.
 Risk Factors
 Joint Ventures
 ® Risk Factors
 17




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##### Table of Contents



Licenses
  Recent Developments
 Collaborative Effort
  Critical Accounting Policies and Estimates
   Backlog
  Results of Operations
 Quarter and nine months ended September 27, 2008 as compared to the quarter and nine months ended
September 29, 2007
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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 29,
    
    
    September 27,
    
    
    September 29,
    
    
    September 27,Dollars in thousands
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008Net commercial product sales
    
    $
    2,277
    
    
    
    100
    %
    
    $
    2,741
    
    
    
    100
    %
    
    $
    9,463
    
    
    
    100
    %
    
    $
    6,082
    
    
    
    100
    %Cost of commercial product sales
    
    
    2,697
    
    
    
    118
    %
    
    
    3,078
    
    
    
    112
    %
    
    
    9,827
    
    
    
    104
    %
    
    
    7,252
    
    
    
    119
    %Gross profit
    
    $
    (420
    )
    
    
    (18
    )%
    
    $
    (337
    )
    
    
    (12
    )%
    
    $
    (364
    )
    
    
    (4
    )%
    
    $
    (1,169
    )
    
    
    (19
    )%
    19




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##### Table of Contents



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




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##### Table of Contents



Future Liquidity
    Net Operating Loss Carryforward
 ,
  Recent Accounting Requirements
  
 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.
 Evaluation of Disclosure Controls and Procedures
   21




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##### Table of Contents



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.
 No matters were submitted to a vote of security holders during the third quarter
of this year.
 
 Item 5. Other Information.
 (a)
    
    Additional Disclosures.None.(b)
    
    Stockholder Nominations.There have been no material changes to the procedures by which stockholders may
recommend nominees to our board of directors.
 
 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. 22




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##### Table of Contents



SIGNATURES
  SUPERCONDUCTOR TECHNOLOGIES INC.Dated: November 12, 2008
    /s/ William J. BuchananWilliam J. BuchananController (Principal Accounting and Financial Officer)/s/ Jeffrey A. QuiramJeffrey A. QuiramPresident and Chief Executive Officer 23