UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For The Fiscal Year Ended December 31, 2002

                         Commission File Number: 0-31641

                        SUPERCONDUCTIVE COMPONENTS, INC.
                 (Name of small business issuer in its charter)

               OHIO                                            31-0121318
  (State or other jurisdiction of                           (I.R.S. Employer
  incorporation or organization)                           Identification No.)

                             1145 CHESAPEAKE AVENUE
                              COLUMBUS, OHIO 43212
                    (Address of principal executive offices,
                               including zip code)

                                 (614) 486-0261
                           (Issuer's telephone number,
                              including area code)

 Securities registered pursuant to Section 12(b) of the Act:  None

 Securities registered pursuant to Section 12(g) of the Act:      Common Stock,
                                                               without par value
                                                                (Title of Class)

         Check whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to the filing requirements for at
least the past 90 days.
Yes    X       No
    --------       ------

         Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B contained in this form, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

         The issuer's revenues for the fiscal year ended December 31, 2002, were
$2,958,544.

         The aggregate market value of the Registrant's common equity held by
non-affiliates of the Registrant was approximately $268,351 on March 17, 2003.

         There were 1,823,256 shares of the Registrant's Common Stock
outstanding on March 24, 2003.

         Transitional Small Business Disclosure Format (check one): Yes   No X
                                                                       ---  ---

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of our Proxy Statement for the 2003 Annual Meeting of
Stockholders are incorporated by reference in Part III.

<PAGE>

<TABLE>
<CAPTION>
                                                 TABLE OF CONTENTS
                                                 -----------------
                                                                                                              Page
                                                                                                              ----

                                                      PART I

<S>               <C>                                                                                          <C>
Item 1.           Description of Business.................................................................      3

Item 2.           Description of Property.................................................................      11

Item 3.           Legal Proceedings.......................................................................      11

Item 4.           Submission of Matters to a Vote of Security Holders.....................................      11


                                                      PART II

Item 5.           Market for Common Equity and Related Stockholder Matters................................     12

Item 6.           Management's Discussion and Analysis or Plan of Operation...............................     13

Item 7.           Financial Statements....................................................................     17

Item 8.           Changes in and Disagreements with Accountants on Accounting and
                  Financial Disclosure....................................................................     17

                                                     PART III

Item 9.           Directors, Executive Officers, Promoters and Control Persons; Compliance with Section
                  16(a) of the Exchange Act...............................................................     18

Item 10.          Executive Compensation..................................................................     18

Item 11.          Security Ownership of Certain Beneficial Owners and Management..........................     18

Item 12.          Certain Relationships and Related Transactions..........................................     18

                                                     PART IV

Item 13.          Exhibits and Reports on Form 8-K........................................................     18

Item 14.          Controls and Procedures.................................................................     20

Signatures................................................................................................     21

Certifications of CEO and CFO.............................................................................. 22-23
</TABLE>

NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This Annual Report on Form 10-KSB contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 26A of the Securities Act of 1933, as amended. The words
"anticipate," "believe," "expect," "estimate," and "project" and similar words
and expressions identify forward-looking statements, which speak only as of the
date hereof. Investors are cautioned that such statements involve risks and
uncertainties that could cause actual results to differ materially from
historical or anticipated results due to many factors, including, but not
limited to, the factors discussed in "Description of Business - Risk Factors."
The Company undertakes no obligation to publicly update or revise any
forward-looking statements.


                                       -2-

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

INTRODUCTION

         Superconductive Components, Inc. ("SCI" or the "Company"), an Ohio
corporation, was incorporated on May 29, 1987, to develop, manufacture and
market products based on or incorporating high temperature superconductive
("HTS") materials. During the Company's 15-year history it has evolved from
producing only HTS materials to the production and development of several
different ceramic and metal formulations, with applications in a variety of
industries from HTS magnets to coatings on optical lens.

         The Company presents itself to the market as SCI Engineered Materials,
an operating unit of Superconductive Components Inc. The change to a single
operating unit was made to more effectively utilize the Company's resources. The
Company controls the manufacturing process and measures performance, in terms of
sales, in two categories, Ceramics and Metals, as the products sold are easily
separable into these categories. The performance measurements made in these two
categories are, however, not conducive to segment reporting as there are many
shared operating expenses relating to the production of both Ceramics and Metals
that cannot be attributed solely to one or the other.

HISTORY OF THE COMPANY

         The Company was founded in 1987 by Dr. Edward R. Funk and his wife
Ingeborg Funk to develop, manufacture, and market High Temperature
Superconductive materials (HTS materials), including sputtering targets and
ceramic powders for commercial applications of the newly-discovered
superconducting ceramics. HTS materials are complex metal oxides - ceramics - of
certain stoichiometries (chemical mixture ratios), which exhibit superconducting
phenomena when cooled to at least -196(degree) Centigrade. These complex metal
oxides are identified as members of the Perovskite family of ceramic materials.
Perovskites are a large family of crystalline ceramics that derive their name
from the perovskite mineral. The perovskite minerals are the most abundant
minerals on earth and have approximately a 2:3 metal-to-oxygen ratio.
Copper-oxide superconductors are layered perovskites. The Company's initial
efforts were directed toward mastering the manufacturing process for making high
temperature superconducting ceramic powders. During this period, the market for
high temperature superconductors was very small, estimated at $1 million a year
or less, consisting primarily of demonstration kits and small amounts of HTS
powder for research purposes. Sales, though relatively small, covered a wide
range of superconducting products, including ceramic powders. The Company sold
ceramic powders as finished products and in other forms such as pressed pills or
pellets, which were achieved by sintering the ceramic powders, and solid shapes.
Products sold in such forms were used primarily in research applications.

         Subsequently, the Company began to develop other forms of HTS
materials. The Company began to focus on the market for superconducting
thin-film materials, made from the Company's sputtering targets. A sputtering
target is a metal, alloy or sintered ceramic. The targets are specially sized to
fit into a special coating device called a sputtering system, in general the
sputtering targets are rectangular or cylindrical in geometry.

         These HTS Physical Vapor Deposition materials are used by customers of
the Company in a vapor deposition process to make thin films of the target
materials. This process operates in a vacuum, hence, the frequently heard term,
vacuum deposition or Physical Vapor Deposition ("PVD"). HTS thin films are then
patterned, using techniques similar to those in the semiconductor industry, to
manufacture sensors, circuits and other devices, which in turn can be used in
medical diagnostics, geological exploration, advanced radar, wireless
communication and other niche applications.

         Despite our efforts, a broad market for HTS materials had not developed
and therefore, in 1992 the Company established the TMI Division and began
marketing sputtering targets of materials other than HTS materials for thin film
deposition. This division was located within the headquarters of the Company in
Columbus, Ohio and shared facilities and staff with the SCI Division. In 2002
the Company abandoned the separate TMI Division designation and combined its
marketing efforts with SCI Engineered Materials as a single operating unit of
Superconductive


                                       -3-
<PAGE>


Components, Inc. The purpose of the reorganization was to develop a more market
driven business focused in three primary areas: High Temperature Superconductive
Materials, Photonic/Optical Coating and Thin Film Battery materials. These three
market areas are connected in that the applications use Physical Vapor
Deposition (PVD) as a manufacturing technique to produce their products. The
Company now sells over 80% of its products into PVD applications. In the near
term the Company sees this percentage growing to 90%.

         During early 2002 Mr. Daniel Rooney was brought in as the President and
Chief Executive Officer of the Company as successor management to Dr. Funk. In
December 2002, Dr. Edward Funk, Chairman of the Board, passed away from
complications associated with cancer. In January 2003, Mr. Rooney succeeded Dr.
Funk as Chairman of the Company.

BUSINESS

         The Company views its business as supplying ceramic and metal
materials, including sputtering targets and ceramic powders, to a variety of
industrial applications including: HTS, Photonics/Optical, Thin Film Batteries
and Fuel Cells.

          The production and sale of High Temperature Superconducting (HTS)
materials was the initial focus of the Company's operations and these materials
continue to be a significant part of the Company's development efforts. The
Company is a subcontractor to Oxford Instrument's Superconducting Technology
Division Department of Energy Superconductivity Partnership Initiative; this
government-funded program will put HTS magnets into an operating magnetic
resonance imaging unit (MRI) during 2005. MRI's are currently the largest
application for Low Temperature Superconducting Wire. The Company continues to
work with private companies and government agencies to develop new and improved
products for future applications.

         Optical/Photonics currently represents the Company's largest market for
its materials. The Company's customers are continually identifying new materials
that improve the utility of optical coatings, including improvements in their
ability to focus or filter light or coatings that improve wear and chemical
attack resistance, all of which increases the potential demand for the types and
amounts of materials we sell in this market. Photonic applications continue to
expand as new methods are found to manipulate light waves to enhance the various
properties of light the device manufacturers are seeking.

         Thin Film Battery materials is a developing market where manufacturers
of batteries use these materials to produce very small power supplies, with
small quantities of stored energy. A typical Thin Film Battery would be produced
via Physical Vapor Deposition with five (5) or more thin layers. These batteries
are often one (1) centimeter square but only fifteen (15) microns thick.
Potential applications for these batteries include but are not limited to:
active RFID tags, battery on chip and portable electronics.

         The Company had total annual revenues of $2,958,544, $3,663,488 and
$3,205,163 in the fiscal years ended December 31, 2002, 2001 and 2000,
respectively.

         Principal suppliers to the Company in 2002 were Lattice Materials
Corporation, Williams Advanced Materials and Standard Resources. In every case,
the Company believes that suitable substitute vendors can be found. Also, as the
Company's volume grows, the Company may make alliances or purchasing contracts
with these or other vendors.

         The Company's largest customer represented over 10% of total revenues
in 2002. The Company had $249,677 and $402,462 in government contracts for the
years ending December 31, 2002 and 2001, respectively, representing 8.4% and
11.0% of total revenues in 2002 and 2001, respectively.

MARKETING AND SALES

         Most of the Company's orders are in response to requests for
quotations. The Company distributes a catalogue of its products and exhibits at
several relevant tradeshows. The Company's catalogue lists 183 products. The
Company also has an operating website www.sciengineeredmaterials.com. The
Company intends to intensify its marketing efforts in the future by increasing
the number of manufacturers representatives representing the Company in 2003. In
addition, a sales manager will be added to the organization at some point in the
future.


                                       -4-
<PAGE>


         The Company uses various distribution channels to reach end user
markets including: directs sales, manufacturers representatives and
internationally through distributors. The internet provides tremendous reach for
new customers to be able to identify the Company as a source for their product
needs. In 2002 the Company sold product to 451 customers. Domestic sales account
for approximately 79% of total sales, compared to 21% export sales.

         Ceramics

         The Company is capable of producing ceramic powders using several
different processing routes including solid state, precipitation and combustion
synthesis. Ceramic targets can also be produced in a variety of ways depending
on the end user applications. Production routes include sintering, hot and cold
isostatic pressing and hot pressing.

         Most of the Company's products are manufactured from component
chemicals and metals supplied by various vendors. Production of HTS materials is
dependent upon high purity Yttrium to manufacture its superconducting products.
Several suppliers currently satisfy the Company's requirements for this
material. If the Company suddenly lost the services of such suppliers, there
could be a disruption in its manufacturing process until the suppliers were
replaced, but the Company has identified several other firms as potential
back-up suppliers who would be capable of supplying this material to the Company
as necessary. To date, the Company has not experienced an interruption of raw
material supplies. Ceramic shipments of powders and targets represented
approximately 35.5% and 34.9% of total revenues in 2002 and 2001 respectively.

         Metals

         In addition to the ceramic powders and targets mentioned above, the
Company produces metal sputtering targets, and backing plates, and bonds the
targets to the backing plates for application in the Physical Vapor Deposition
Industry. These targets can be produced by casting, hot pressing and machining
of metals and metal alloys depending on the application.

         Applications for metal targets are highly varied from applying
decorative coatings for end uses such as sink faucets to the production of
various electronic and photonic products.

         The Company purchases various metals of reasonably high purity for its
applications. The Company is not dependent on a single source for these metals
and does not believe losing a vendor would materially affect the business.

         The Company has continually added production processes and testing
equipment for the many product compositions that can be used as Physical Vapor
Deposition materials. Metal shipments represented approximately 64.5% and 65.1%
of total Company revenues in 2002 and 2001 respectively.

COMPETITION

         The Company has a number of domestic and international competitors in
both the ceramics and metals fields, many of whom have resources far in excess
of the Company's resources. With respect to ceramics specifically, Cerac
provides both powders and thin film deposition products. Kurt Lesker is another
supplier of targets and Dowa Chemicals of Japan supplies HTS materials. With
regard to metals, Tosoh, Pure Tech, Kurt Lesker and Plasmaterials are competing
suppliers of these materials.


                                       -5-
<PAGE>

RESEARCH AND DEVELOPMENT

         The Company focuses its research and development efforts in areas that
build on its expertise in multi-component ceramic oxides. These efforts
currently include optimization and scale up efforts for BSCCO 2-2-1-2 powders.

         During 2002 the Company completed the development work on a sponsored
project BSCCO 2-2-1-2 funded by the National Science Foundation and the Company
also completed a project sponsored by NASA to develop a rotation/levitation
apparatus for gravity modification research.

         During 2002 the Company was awarded a Phase I SBIR grant from the
Department of Energy. The purpose of the grant is to study the effects of
increasing density on the current carrying capacity of long length HTS wires.

         The Company also became a subcontractor to Oxford Instruments
Superconducting Technology for a Superconductivity Partnership Initiative (SPI)
program from the Department of Energy. This program will ultimately put HTS
materials in Siemens MRI equipment. The program started in 2002 and will not be
completed until 2005.

         All of the sponsored research and development contracts can be
cancelled at the sponsor's option, with accrued costs being paid. The Company
currently has $44,445 of funding from government sponsored research and
development programs that could be cancelled at any time.

         The Company intends to continue to seek government funding and grants
because this funding maintains and expands the technical understanding within
the Company.

         The Company has certain proprietary knowledge and trade secrets related
to the manufacture of ceramic oxide Physical Vapor Deposition materials.

NEW PRODUCT INITIATIVES

         In 2002, the Company began more actively developing and marketing its
existing products for use in the Thin Film Battery and Fuel Cell production
market. In addition, the Company has undertaken research and development
opportunities with respect to new and innovative materials and processes to be
used in connection with the production of Thin Film Batteries and Fuel Cells.
Thin Film Battery materials is a developing market. Manufacturers of batteries
use these materials to produce very small power supplies with small quantities
of stored energy. A typical Thin Film Battery would be produced via Physical
Vapor Deposition with five or more thin layers. These batteries are often one
centimeter square but only 15 microns thick.

         Presently, there are approximately five manufacturers of Thin Film
Batteries in the U.S., each in various stages of prototyping, with production
capacities ranging from a few batteries to several thousand batteries per week.
In addition there are several firms and research institutes conducting tests on
Thin Film Batteries. Management believes this market may potentially become very
large with significant growth expected during the next two years. There are
numerous applications for Thin Film Batteries, including, but not limited to,
active RFID tags, battery on chip and portable electronics. Given the many
potential uses for Thin Film Batteries, the Company anticipates that the market
for materials necessary to produce Thin Film Batteries will grow in direct
correlation to the Thin Film Battery market itself.

         The Company currently faces competition from other producers of
materials used in connection with the manufacture of Thin Film Batteries. Our
major competitors are Cerac and PureTech, both of which are substanially larger
and better funded companies than the Company. The Company believes that it has
certain competitive advantages in terms of quality. The Company intends to
actively market its materials to Thin Film Battery producers in the upcoming
year in order to gain a strong presence in this market. The Company's President,
Technical Director and Customer Service Manager are personally handling the
marketing to achieve this goal.


                                       -6-

<PAGE>

         At present, the Company has several customers for the materials it
produces for Thin Film Batteries, including seven domestic customers. Since we
have begun producing materials for the Thin Film Battery market, we have
experienced no problems securing the supplies we need to produce the materials.
We do not anticipate there being supply problems in the near future. However,
changes in production methods and advancing technologies could render our
current products obsolete and the new production protocols may require supplies
that are less available in the marketplace, which may cause a slowing or
complete halt to production as well as expanding costs which we may or may not
be able to pass on to our customers.

INTELLECTUAL PROPERTY

         The Company has received a patent for Fine-Particle Bi-Sr-Ca-Cu-O
Having High Phase Purity made by a Chemical Precipitation and Low-Pressure
Calcination method from the United States Patent and Trademark Office. The
Company has also received a patent for a new process to join two individual
strongly linked super-conductors utilizing a melt processing technique.

         In the future, we may submit additional patent applications covering
various applications, which have been developed by the Company. Because U.S.
patent applications are maintained in secret until patents are issued, and
because publications of discoveries in the scientific or patent literature tend
to lag behind actual discoveries by several months, we may not be the first
creator of inventions covered by issued patents or pending patent applications
or the first to file patent applications for such inventions. Additionally,
other parties may independently develop similar technologies, duplicate our
technologies or, if patents are issued to us or rights licensed by us, design
around the patented aspects of any technologies we developed or licensed.

         We rely on a combination of patent and trademark law, license
agreements, internal procedures and nondisclosure agreements to protect our
intellectual property. Unfortunately, these may be invalidated, circumvented or
challenged. In addition, the laws of some foreign countries in which our
products may be produced or sold do not protect our intellectual property rights
to the same extent as the laws of the United States.

EMPLOYEES

         The Company had 21 employees as of December 31, 2002, of which 20 were
full-time employees. Of these employees two held PhDs in Material Science. The
Company has never experienced work stoppage and considers its relations with
employees to be good. The employees do not have a bargaining unit.

ENVIRONMENTAL MATTERS

         The Company generates small quantities of ceramic dust from grinding or
machining and has approval from the Ohio EPA for the emission of the exhaust
from these materials, which are primarily Zinc Oxide. The Company maintains
filters and dust collectors that it believes are in accordance with all EPA
regulations. Local EPA authorities have inspected the Company from time to time
and the few noted deficiencies have been corrected. To date, the Company is not
under any EPA strictures.

         The Company does not handle "hazardous materials" as defined on the
Materials Safety and Data Sheets ("MSDS"). The Company supplies MSDS sheets to
its customers with all shipments as a routine procedure.

COLLECTIONS AND WRITE-OFFS

         The Company collected its receivables in an average of 32 days in 2002.
The Company has occasionally been forced to write-off a few small invoices as
uncollectible. The Company considers credit management important to its success.

SEASONAL TRENDS

         The Company has not experienced and does not in the future expect to
experience seasonal trends in its business operations.


                                       -7-

<PAGE>

 RISK FACTORS

         The Company desires to take advantage of the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995. The following factors
have affected or could affect the Company's actual results and could cause such
results to differ materially from those expressed in any forward-looking
statements made by the Company. Investors should consider carefully the
following risks and speculative factors inherent in and affecting the business
of the Company and an investment in the Company's common stock.

         WE HAVE EXPERIENCED SIGNIFICANT OPERATING LOSSES IN THE PAST AND MAY
CONTINUE TO DO SO IN THE FUTURE.

         We commenced business in May of 1987. Our accumulated deficit since
inception was $6,007,437 at December 31, 2002.

         We have financed the losses primarily from: (i) several private
offerings of debt and equity securities; (ii) additional investments and loans
by our major shareholders; and (iii) a private offering of common stock and
warrants to purchase common stock in October 2000. We cannot assure you,
however, that we will be able to raise additional capital in the future to fund
our operations.

         WE HAVE LIMITED MARKETING AND SALES CAPABILITIES.

         To successfully market our products, we must continue to develop
appropriate marketing, sales, technical, customer service and distribution
capabilities, or enter into agreements with third parties to provide these
services. Our failure to develop these capabilities or obtain third-party
agreements could adversely affect us.

         OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN KEY MANAGEMENT PERSONNEL.

         Our success depends in large part on our ability to attract and retain
highly qualified management, administrative, manufacturing, sales, and research
and development personnel. Due to the specialized nature of our business, it may
be difficult to locate and hire qualified personnel. The loss of services of one
of our executive officers or other key personnel, or our failure to attract and
retain other executive officers or key personnel, could have a material adverse
effect on our business, operating results and financial condition. Although the
Company has been successful in planning for and retaining highly capable and
qualified successor management in the past, there can be no assurance that it
will be able to do so in the future.

         WE NEED ADDITIONAL CAPITAL, WHICH MAY REDUCE THE VALUE OF OUR COMMON
STOCK.

         The Company has incurred substantial operating losses through 2002, and
numerous factors, including a need to secure new facilities for the Company's
operations in the near future, makes it necessary for the Company to seek
additional capital. There is no assurance that new capital will be available or
that it will be available on terms that will not result in substantial dilution
or reduction in value of the Company's common stock. The Company continues to
lose money and will continue to do so unless the Company increases sales in the
near future. As a result, additional capital may be needed in order to continue
the Company's operations.

         OUR COMPETITORS HAVE FAR GREATER FINANCIAL AND OTHER RESOURCES THAN WE
HAVE.

         The market for Thin Film Materials is a substantial market with
significant competition in both ceramic and metal materials. While we believe
that our products enjoy certain competitive advantages in design, function,
quality, and availability, considerable competition exists from well-established
firms such as a division of Praxair's Surface Science Technology group as well
as MCR, Johnson Matthey, Pure Tech and CERAC, all of which have more resources
than we have.

         In addition, a significant portion of our business is in the very
competitive market for sputtering targets made of ceramics, metals and alloys.
We face substantial competition in this area from companies with far greater
financial and other resources than we have. We cannot assure you that
developments by others will not render our products or technologies obsolete or
less competitive.


                                       -8-
<PAGE>


         GOVERNMENT CONTRACTS MAY BE TERMINATED OR SUSPENDED FOR NONCOMPLIANCE
OR OTHER EVENTS BEYOND OUR CONTROL.

         The government may cancel virtually all of our government contracts
which are terminable at the option of the government. While we have complied
with applicable government rules and regulations and contract provisions in the
past, we could fail to comply in the future. Noncompliance with government
procurement regulations or contract provisions could result in the termination
of government contracts. The termination of our significant government contracts
or the adoption of new or modified procurement regulations or practices could
adversely affect us.

         Inventions conceived or actually reduced to practice under a government
contract generally result in the government obtaining a royalty-free,
non-exclusive license to practice the invention. Similarly, technologies
developed in whole or in part at government expense generally result in the
government obtaining unlimited rights to use, duplicate or disclose technical
data produced under the contract. These licenses and rights may result in a loss
of potential revenues or the disclosure of our proprietary information, either
of which could adversely affect us.

         OUR REVENUES DEPEND ON PATENTS AND PROPRIETARY RIGHTS THAT MAY NOT BE
ENFORCEABLE.

         We rely on a combination of patent and trademark law, license
agreements, internal procedures and nondisclosure agreements to protect our
intellectual property. These may be invalidated, circumvented or challenged. In
addition, the laws of some foreign countries in which our products may be
produced or sold do not protect our intellectual property rights to the same
extent as the laws of the United States. Our failure to protect our proprietary
information could adversely affect us.

         RIGHTS WE HAVE TO PATENTS AND PENDING PATENT APPLICATIONS MAY BE
CHALLENGED.

         We have received from the United States Patent and Trademark Office a
patent for Fine-Particle Bi-Sr-Ca-Cu-O Having High Phase Purity made by a
Chemical Precipitation and Low-Pressure Calcination method, and have also
received a patent for a new process to join two individual strongly linked
super-conductors utilizing a melt processing technique. In addition, in the
future we may submit additional patent applications covering various
applications. The patent application we filed and patent applications that we
may file in the future may not result in patents being issued, and any patents
issued may not afford meaningful protection against competitors with similar
technology, and may be challenged by third parties. Because U.S. patent
applications are maintained in secret until patents are issued, and because
publications of discoveries in the scientific or patent literature tend to lag
behind actual discoveries by several months, we may not be the first creator of
inventions covered by issued patents or pending patent applications or the first
to file patent applications for such inventions. Moreover, other parties may
independently develop similar technologies, duplicate our technologies or, if
patents are issued to us or rights licensed by us, design around the patented
aspects of any technologies we developed or licensed. We may have to participate
in interference proceedings declared by the U.S. Patent and Trademark Office to
determine the priority of inventions, which could result in substantial costs.
Litigation may also be necessary to enforce any patents held by or issued to us
or to determine the scope and validity of others' proprietary rights, which
could result in substantial costs.

         THE RAPID RATE OF INVENTIONS AND DISCOVERIES IN THE SUPERCONDUCTIVITY
FIELD HAS RAISED MANY UNRESOLVED PATENT ISSUES THAT MAY NEGATIVELY AFFECT OUR
BUSINESS.

         The claims in granted patents often overlap and there are disputes
involving rights to inventions claimed in pending patent applications. As a
result, the patent situation in the high temperature superconductor field is
unusually complex. It is possible that there will be patents held by third
parties relating to our products or technology. We may need to acquire licenses
to design around or successfully contest the validity or enforceability of those
patents. It is also possible that because of the number and scope of patents
pending or issued, we may be required to obtain multiple licenses in order to
use a single material. If we are required to obtain multiple licenses, our costs
will increase. Furthermore, licenses may not be available on commercially
reasonable terms or at all. The likelihood of successfully contesting the
validity or enforceability of those patents is also uncertain; and, in any
event, we could incur substantial costs in defending the validity or scope of
our patents or challenging the patents of others.


                                       -9-
<PAGE>


         THE RAPID TECHNOLOGICAL CHANGES OF OUR INDUSTRY MAY ADVERSELY AFFECT US
IF WE DO NOT KEEP PACE WITH ADVANCING TECHNOLOGY.

         The Thin Film Market is characterized by rapidly advancing technology.
Our success depends on our ability to keep pace with advancing technology,
processes and industry standards. To date, we have focused our development
efforts on powders and targets. We intend to continue to develop and integrate
advances in the thin film coatings industry. However, our development efforts
may be rendered obsolete by research efforts and technological advances made by
others, and materials other than those we currently use may prove more
advantageous.

         DEVELOPMENT STAGE OF THE COMPANY'S PRODUCTS AND UNCERTAINTY REGARDING
DEVELOPMENT OF MARKETS

         Some of the Company's products are in the early stages of
commercialization and the Company believes that it will be several years before
products will have significant commercial end-use applications, and that
significant additional development work may be necessary to improve the
commercial feasibility and acceptance of its products. There can be no assurance
that the Company will be able to commercialize any of the products currently
under development.

         To date, there has been no widespread commercial use of High
Temperature Superconductive (HTS) products. Additionally, the market for the
Thin Film Battery materials is still in its nascent stages.


         THE MARKET FOR OUR COMMON STOCK IS LIMITED, AND AS SUCH OUR
SHAREHOLDERS MAY HAVE DIFFICULTY RESELLING THEIR SHARES WHEN DESIRED OR AT
ATTRACTIVE MARKET PRICES.

         Our stock price and our listing may make it more difficult for our
shareholders to resell shares when desired or at attractive prices. From April
2000 until September 2001, our common stock traded on the National Quotation
Bureau (the "pink sheets"). In September 2001, our stock once again began
trading on The Over the Counter Bulletin Board ("OTC Bulletin Board").
Nevertheless, our common stock has continued to trade in low volumes and at low
prices. Some investors view low-priced stocks as unduly speculative and
therefore not appropriate candidates for investment. Many institutional
investors have internal policies prohibiting the purchase or maintenance of
positions in low-priced stocks. This has the effect of limiting the pool of
potential purchasers of our common stock at present price levels. Shareholders
may find greater percentage spreads between bid and asked prices, and more
difficulty in completing transactions and higher transaction costs when buying
or selling our common stock than they would if our stock were listed on a major
stock exchange, such as The New York Stock Exchange or The NASDAQ National
Market.

         Additionally, the market prices for securities of superconductive
material companies have been volatile throughout the Company's existence. Most
of the companies are traded over the counter through the National Quotation
Bureau or National Association of Securities Dealers Automated Quotation System.
Historical trading characteristics for public companies in this industry include
limited market support, low trading volume, and wide spreads (on a percentage
basis) between the bid and ask prices. Announcements regarding product
developments, technological advances, significant customer orders, and financial
results significantly influence per share prices.

         OUR COMMON STOCK IS SUBJECT TO THE SECURITIES AND EXCHANGE COMMISSION'S
"PENNY STOCK" REGULATIONS, WHICH LIMITS THE LIQUIDITY OF COMMON STOCK HELD BY
OUR SHAREHOLDERS.

         Based on its trading price, our common stock is considered a "penny
stock" for purposes of federal securities laws, and therefore is subject to
regulations, which affect the ability of broker-dealers to sell the Company's
securities. Broker-dealers who recommend a "penny stock" to persons (other than
established customers and accredited investors) must make a special written
suitability determination and receive the purchaser's written agreement to a
transaction prior to sale.

         As long as the penny stock regulations apply to our common stock, it
may be difficult to trade such stock because compliance with the regulations can
delay and/or preclude certain trading transactions. Broker-dealers may be
discouraged from effecting transactions in our common stock because of the sales
practice and disclosure requirements for penny stock. This could adversely
effect the liquidity and/or price of our common stock, and impede the sale of
our common stock in the secondary market.

         OUR ARTICLES OF INCORPORATION AUTHORIZE US TO ISSUE ADDITIONAL SHARES
OF STOCK.

         We are authorized to issue up to 15,000,000 shares of common stock
which may be issued by our board of directors for such consideration as they may
consider sufficient without seeking shareholder approval. The issuance of
additional shares of common stock in the future will reduce the proportionate
ownership and voting power of current shareholders.

         Our Articles of Incorporation also authorize us to issue up to 260,000
shares of preferred stock. The


                                      -10-

<PAGE>

issuance of preferred stock in the future could create additional securities
which would have dividend and liquidation preferences prior in right to the
outstanding shares of common stock. These provisions could also impede a
non-negotiated change in control.

         WE HAVE NOT PAID DIVIDENDS ON OUR COMMON STOCK IN THE PAST AND DO NOT
EXPECT TO DO SO IN THE FUTURE.

         We cannot assure you that our operations will result in sufficient
revenues to enable us to operate at profitable levels or to generate positive
cash flow sufficient to pay dividends. We have never paid dividends on our
common shares in the past and do not expect to do so in the foreseeable future.


ITEM 2.  DESCRIPTION OF PROPERTY.

         The Company's current office and manufacturing facilities are located
at 1145 Chesapeake Avenue, Columbus, Ohio, where it occupies about 20,000 square
feet. Additional space of 10,000 square feet is currently sub-leased by the
Company and can be reclaimed for Company use on three months notice. The
Company's lease on the property expired on December 31, 2002, and it currently
leases the property on a month-to-month basis. The Company intends to relocate
during 2003. The Company is currently negotiating for a suitable 30,000 square
foot manufacturing space.

         The Company is current on all operating lease liabilities.

ITEM 3.  LEGAL PROCEEDINGS.

         There are no known legal proceedings against the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         Not applicable.


                                      -11-

<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

MARKET FOR COMMON STOCK

         The Company's common stock currently trades on the OTC Bulletin Board
under the symbol "SCCI.OB". From April 2000 until September 2001, however, the
Company's common stock traded over the counter through the National Quotation
Bureau (a.k.a. - the "pink sheets"). The following table sets forth for the
periods indicated the high and low bid quotations for the Company's common stock
on the OTC Bulletin Board, except for the quarters ended March 31, 2001 through
September 30, 2001, which sets forth the high and low bid quotations for the
Company's common stock as reported on the National Quotation Bureau.

                                                            HIGH        LOW
                                                            ----        ---

FISCAL 2001

         Quarter ended March 31, 2001                       $2.91       $1.34

         Quarter ended June 30, 2001                         1.91        0.60

         Quarter ended September 30, 2001                    1.95        1.08

         Quarter ended December 31, 2001                     1.60        0.80

FISCAL 2002

         Quarter Ended March 31, 2002                        2.00        0.90

         Quarter Ended June 30, 2002                         1.95        1.00

         Quarter Ended September 30, 2002                    1.05        0.50

         Quarter Ended December 31, 2002                     1.00        0.30

         The quotations provided herein may reflect inter-dealer prices without
retail mark-up, markdown, or commissions, and may not represent actual
transactions.

         As discussed above, at the present time, the Company's common stock
trades on the OTC Bulletin Board. Based on its trading price, the Company's
common stock is considered a "penny stock" for purposes of federal securities
laws, and therefore is subject to certain regulations, which are summarized
below.

         The Securities Enforcement and Penny Stock Reform Act of 1990 requires
special disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a "penny stock." Specifically, Rules 15g-1
through 15g-9 under the Securities Exchange Act of 1934 (the "Exchange Act")
impose sales practice and disclosure requirements on NASD broker-dealers who
make a market in a "penny stock." Securities and Exchange Commission regulations
generally define a penny stock to be an equity security that has a market price
of less than $5.00 per share and that is not listed on The NASDAQ SmallCap Stock
Market or a major stock exchange. These regulations affect the ability of
broker-dealers to sell the Company's securities and also may affect the ability
of purchasers of the Company's common stock to sell their shares in the
secondary market.

         Under the penny stock regulations, a broker-dealer selling penny stock
to anyone other than an established customer or "accredited investor,"
generally, an individual with net worth in excess of $1,000,000 or an annual
income exceeding $200,000, or $300,000 together with his or her spouse, must
make a special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale,


                                      -12-

<PAGE>

unless the broker-dealer or the transaction is otherwise exempt. In addition,
the penny stock regulations require the broker-dealer to deliver, prior to any
transaction involving a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, unless the broker-dealer or the
transaction is otherwise exempt. A broker-dealer is also required to disclose
commissions payable to the broker-dealer and the registered representative and
current quotations for the securities. Finally, a broker-dealer is required to
send monthly statements disclosing recent price information with respect to the
penny stock held in a customer's account and information with respect to the
limited market in penny stocks.

         As long as the penny stock regulations apply to the Company's stock, it
may be difficult to trade such stock because compliance with the regulations can
delay and/or preclude certain trading transactions. Broker-dealers may be
discouraged from effecting transactions in the Company's stock because of the
sales practice and disclosure requirements for penny stock. This could adversely
effect the liquidity and/or price of the Company's common stock, and impede the
sale of the Company's stock in the secondary market.

HOLDERS OF RECORD

         As of December 31, 2002, there were approximately 625 holders of record
of the common stock of the Company and 1,823,256 shares outstanding, one holder
of Series A preferred stock and 99 shares of Series A preferred stock
outstanding, and approximately 44 holders of Series B preferred stock and 25,185
shares of Series B preferred stock outstanding. The Company has come to have
approximately 625 registered holders of common stock as a result of various
unregistered exempt private offerings of its common stock since the Company's
inception in 1987, including issuances of stock options to employees and to
members of the Company's board of directors, and subsequent trading of the
common stock on the OTC Bulletin Board and over the counter through the National
Quotation Bureau. The number of holders of common stock has also increased due
to conversions of Series B preferred stock into shares of common stock. There is
no public market for the Series A preferred stock or Series B preferred stock.

DIVIDENDS

         The Company has never paid cash dividends on its common stock and does
not expect to pay any dividends in the foreseeable future. The Company intends
to retain future earnings for use in the business.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS.

         In 1992 the Company segmented into two divisions to pursue areas of
mixed metal oxide development in Advanced Ceramics applications under SCI and
TMI to build markets in sales for thin film materials. The SCI and TMI divisions
required the same manufacturing equipment for significant portions of each
business. The Company has, in the past, reported financial results in terms of
TMI and SCI segments. In the beginning of 2002, the Company integrated the two
business segments and ceased reporting financial results separate for the two
divisions, in light of management's opinion that a single streamlined business
benefits the Company in the following areas: manufacturing efficiencies and
manufacturing cost containment; improved sales through the merging of the
strengths of the two material businesses; and improvements in quality through
increased availability of analytical equipment and personnel.

RESULTS OF OPERATIONS

Critical Accounting Policies

         The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires management to make judgments, assumptions and estimates that affect the
amounts reported in the Financial Statements and accompanying notes. Note 2 to
the Financial Statements in the Annual Report on Form 10-KSB for the year ended
December 31, 2002 describes the significant accounting policies and methods used
in the preparation of the Financial Statements. Estimates are used for, but not
limited to, the accounting for the allowance for doubtful accounts, inventory
allowances, property and equipment depreciable lives, patents and licenses
useful lives and assessing changes in which impairment of certain long-lived
assets may occur. Actual results could differ from these estimates. The
following critical accounting policies are impacted significantly by judgments,
assumptions and estimates used in the preparation of the Financial Statements.
The allowance for doubtful accounts is


                                      -13-

<PAGE>

based on our assessment of the collectibility of specific customer accounts and
the aging of the accounts receivable. If there is a deterioration of a major
customer's credit worthiness or actual defaults are higher than our historical
experience, our estimates of the recoverability of amounts due us could be
adversely affected. Inventory purchases and commitments are based upon future
demand forecasts. If there is a sudden and significant decrease in demand for
our products or there is a higher risk of inventory obsolescence because of
rapidly changing technology and customer requirements, we may be required to
increase our inventory allowances and our gross margin could be adversely
affected. Lower of cost or market changes could also have an adverse effect on
gross margin and inventory allowance. Depreciable and useful lives estimated for
property and equipment, licenses and patents are based on initial expectations
of the period of time these assets and intangibles will provide benefit to our
Company. Changes in circumstances related to a change in our business, change in
technology or other factors could result in these assets becoming impaired,
which could adversely affect the value of these assets.

         To date, the Company has received revenue predominantly from commercial
sales, government research contracts and non-government research contracts. The
Company has incurred cumulative losses of $6,007,437 from inception to December
31, 2002.

Fiscal Year 2002 As Compared to Fiscal Year 2001

         Revenues

         Revenues in fiscal 2002 decreased by 19.2% to $2,958,544 from the
fiscal 2001 level of $3,663,488.

         Product sales decreased to $2,704,082 in 2002 from $3,248,347 in 2001
or a decrease of 16.8%. The decrease in sales is a result of the weak U.S.
economy and lower sales of tantalum and various scrap metals.

         In 2002, total contract research revenues were $254,462 as compared to
$415,141 in 2001. Government development contract revenue was $249,677, or 8.4%
of total revenues in 2002 and $402,462 or 11.0% of total revenues in 2001. The
decrease is due to a Phase I SBIR grant from the National Science Foundation
that expired in 2001. Revenues of $100,000 from this grant are included in 2001
revenues. In addition, revenues from a Phase II SBIR grant from the National
Aeronautics and Space Administration are included in 2001 revenues. This grant
ended March 31, 2001 and $70,454 of revenue was recognized in 2001.

         During 2001 the Company was awarded an extension to a Phase II Small
Business Innovation Research grant for $300,000 from the National Science
Foundation. This award was to develop an advanced method to manufacture
continuous reacted lengths of High Tc Superconductor: Bismuth Strontium Calcium
Copper Oxide - 2212 Wire. This contract generated $184,616 in revenues in 2002.
National Science Foundation was the Company's largest contract customer,
accounting for 6.2% and 9.1% of the Company's revenues in fiscal 2002 and 2001,
respectively. Significant loss of government funding would have a material
adverse effect on the Company's financial condition and results of operations.

         The Company was awarded a $100,000 Phase I SBIR from the Department of
Energy in 2002. This contract generated $55,555 in revenues in 2002. This award
is for the development of processes to tailor the particle size distribution of
ceramic superconductor powders to improve the manufacturing of ceramic
superconductor wire.

         The Company became a member of a team led by Oxford Instruments
Superconducting Technology that was awarded a grant from the Department of
Energy Superconductivity Partnership Initiative Program. This program recognized
$4,785 in revenues in 2002. The Company's share of the grant is expected to
result in $131,736 in revenues. The purpose of this program is the scale-up of
ceramic superconductor powder production to meet the future demands for ceramic
superconductor wire production for the fabrication of next generation MRI
equipment.


                                      -14-
<PAGE>

         Gross Margin

         Total gross margin in 2002 was $617,814 or 20.9% of total revenue as
compared to $1,199,998 or 32.8% in 2001. The primary reason for the reduction is
an inventory write-down of $190,881. This included a write-down of $88,334 due
to a reduction in raw material due to lower of cost or market. In addition,
$102,547 of obsolete inventory was written off the books and charged to cost of
goods sold in 2002. This was due to new management's change in philosophy of
identifying inventory that was obsolete or no longer used in the manufacturing
process.

         Gross margin on product revenue was 29.4% in 2002 versus 34.7% in 2001.
The decrease was due to sales of scrap metal in 2001. Gross margin on contract
research revenue was 5.2% for 2002 compared to 17.7% in 2001. The decrease in
gross margin on contract research revenue was due to the expiration of the Phase
I SBIR grant from the National Science Foundation, which began in January 2001,
and lower sub-contractor costs in 2001.

         Gross margins on the Company's products vary widely and are impacted
from period to period by sales mix and utilization of production capacity. The
gross margin on the contract research is generally lower than the other
products. The Company expects that gross margins will improve as sales grow.

         Inventory reserves are established for obsolete inventory and excess
inventory quantities based on management's estimate of net realizable value.
Changes in this reserve are expensed or reduce inventory and approximated
$88,334 and $23,211 for the years ended December 31, 2002, and 2001,
respectively. Management deems the inventory reserve, after its assessment of
obsolete inventory, at December 31, 2002, of $126,123 to be adequate for excess
inventory and a lower of cost-or-market analysis. The increase in the reserve
for 2002 is a result of the reduction of a portion of inventory to the lower of
cost-or-market method.

         Selling Expense

         Selling expense in fiscal 2002 decreased to $210,730 from $233,570 in
fiscal 2001, a decrease of $22,840, or 9.8%. This decrease was due to a reduced
staff and lower commission costs.

         General and Administrative Expense

         General and Administrative expense in fiscal 2002 decreased to
$868,005, from $898,622 in fiscal 2001, a decrease of $30,617, or 3.4%. The
decrease in these costs was due primarily to a reduction in administrative staff
and a reduction in legal and accounting fees. Some of these savings were offset
by consulting services for management assistance and for the use of production
utilization consultants and implementation of their suggestions for lean
manufacturing. These projects represented $75,573 for 2002.

         Research and Development Expenses

         Internal research and development costs are expensed as incurred.
Research and development costs for 2002 were $43,885 compared to $48,915 in
2001, a decrease of 10.3%. Internal research and development costs decreased due
to a reduction in staff.

         Interest Expense.

         Interest expense was $26,341, or 0.9% of Company revenues in fiscal
2002, up 14.9% from $22,935 in fiscal 2001. Interest expense includes $4,084 of
accrued dividends payable to the sole holder of our Series A preferred stock and
$10,961 for related party expense.

INCOME (LOSS) APPLICABLE TO COMMON SHARES

         Net income (loss) per common share based on the income (loss)
applicable to common shares was $(0.24) and $0.00 per common share for the years
ended December 31, 2002 and 2001, respectively. The income (loss) applicable to
common shares includes the net income (loss) from operations, Series A and B
preferred stock dividends and the accretion of Series A preferred stock. The net
income (loss) per common share from operations


                                      -15-

<PAGE>

was $(0.22) and $0.03, for the years ended December 31, 2002 and 2001,
respectively. The difference between the net income (loss) from operations and
the income (loss) applicable to common shares of $(0.02) and $(0.03),
respectively, is a result of the preferred position that the preferred
shareholders have in comparison to the common shareholders.

         Dividends on the Series A and B preferred stock accrue at 10% annually
on the outstanding shares. Dividends on the Series A preferred stock totaled
$4,125 and $9,900 for the years ended December 31, 2002 and 2001, respectively.
Dividends on the Series B preferred stock totaled $27,541 and $27,542, for the
years ended December 31, 2002 and 2001, respectively.

         The accretion of Series A preferred stock represents issue costs of
$70,277 that were netted against the proceeds of Series A preferred stock. The
issue costs are being amortized on a straight-line basis over the payout period
of seven years to loss applicable to common shares and additional paid-in
capital. The annual accretion totaled $6,469 and $13,618 for the years ended
December 31, 2002 and 2001, respectively.

LIQUIDITY AND WORKING CAPITAL

         At December 31, 2002, working capital was $301,938 compared to $691,403
at December 31, 2001. The decrease in working capital of $389,465 was due mainly
to the reduction in cash used to purchase production equipment and to the
disposal of obsolete inventory as well as the reduction of a portion of
inventory to lower-of-cost or market. The Company provided cash from operations
for the years ended December 31, 2002, and 2001 of $72 and $216,795,
respectively. Significant non-cash expenses included depreciation, amortization
and inventory reserve on excess and obsolete inventory approximate $320,000 and
$197,000, respectively, for the years ended December 31, 2002, and 2001.
Overall, accounts receivable, inventory and prepaids decreased in excess of
decreases in accounts payable and accrued expenses by approximately $119,000 for
the year ended December 31, 2002 as a result of the write-off of obsolete
inventory. Accounts receivable, inventory and prepaids increased in excess of
increases in accounts payable and accrued expenses by approximately $28,000 for
the year ended December 31, 2001 as a result of timing of receipt of inventory
versus required scheduled payments on this inventory.

         For investing activities, the Company used cash of approximately
$52,000 and $227,000 for the years ended December 31, 2002, and 2001,
respectively. The amounts invested in 2002 and 2001 were used to purchase
machinery and equipment for increased production capacity. Proceeds on sale of
equipment totaled $36,500 and $0 for the years ended December 31, 2002 and 2001,
respectively.

         For financing activities for the year ended December 31, 2002, the
Company used cash of approximately $17,000. Cash payments to third parties for
debt and capital lease obligations approximated $42,000. Cash payments for
accrued cumulative dividends on Series A and B preferred stock approximated
$25,000. Proceeds from notes payable from shareholder totaled $50,000

         For financing activities for the year ended December 31, 2001, the
Company used cash of approximately $74,000. Cash payments to shareholders for
notes payable and capital lease obligations were approximately $17,000. Cash
payments to third parties for capital lease obligations were approximately
$34,000. Cash payments for accrued cumulative dividends on Series A and B
preferred stock were approximately $25,000. Proceeds from the exercise of common
stock options totaled $2,000.

         Until his death in December 2002, Dr. Funk guaranteed bank debt of the
Company. The Estate of Edward R. Funk continues to guarantee such bank debt.
There was no outstanding balance at December 31, 2002.

         While certain major shareholders of the Company have advanced funds in
the form of subordinated debt, accounts payable and guaranteeing bank debt in
the past, there is no commitment by these individuals to continue funding the
Company or guaranteeing bank debt in the future. The Company will continue to
seek new financing or equity financing arrangements. However, the Company cannot
be certain that it will be successful in efforts to raise additional new funds.


                                      -16-

<PAGE>

INFLATION

         The Company believes that there has not been a significant impact from
inflation on the Company's operations during the past three fiscal years.

FUTURE OPERATING RESULTS

         During 2002, the Company used cash to purchase production equipment.
The Company is currently looking to relocate from its present facilities in
2003. The relocation will provide the Company with the space to expand its
production facilities and improve productivity. The relocation is contingent
upon raising additional capital of approximately $300,000.

         The Company plans to place some of its larger purchase commitments on
an annualized basis for raw materials that can be purchased in larger quantities
at reduced prices. In general, the Company attempts to limit inventory price
increases by making an annual commitment, and drawing the material either as
required, or on a monthly or quarterly basis. Such annual commitments may reach
$500,000 in 2003 and greater in 2004 depending on sales volume increases. The
terms of payment for such commitments are worked out with the vendor on a
case-by-case basis, but in all cases are cancelable at the Company's discretion
without penalty to the Company.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         This document contains forward-looking statements that reflect the
views of management with respect to future events and financial performance.
These forward-looking statements are subject to certain uncertainties and other
factors that could cause actual results to differ materially from such
statements. See "Risk Factors" above. These uncertainties and other factors
include, but are not limited to, the words "anticipates," "believes,"
"estimates," "expects," "plans," "projects," "targets" and similar expressions
which identify forward-looking statements. You should not place undue reliance
on these forward-looking statements, which speak only as of the date the
statements were made. The Company undertakes no obligation to publicly update or
revise any forward-looking statements.

ITEM 7.  FINANCIAL STATEMENTS

         Our balance sheet as of December 31, 2002, and the related statements
of operations, stockholders' equity and cash flows for the two years ended
December 31, 2002 and 2001, together with the independent certified public
accountants' report thereon appear on Pages F-1 through F-22 hereof.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

         None.


                                      -17-

<PAGE>

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS; COMPLIANCE WITH
        SECTION 16(a) OF THE EXCHANGE ACT.

         The information required by this item is included under the captions,
"ELECTION OF DIRECTORS," "EXECUTIVE OFFICERS" and "SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE" in our proxy statement and is incorporated
herein by reference.

ITEM 10. EXECUTIVE COMPENSATION.

         The information required by this item is included under the caption
"EXECUTIVE COMPENSATION" in our proxy statement and is incorporated herein by
reference.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED SHAREHOLDER MATTERS.

         The information required by this item is included under the captions
"OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS," "OWNERSHIP OF
COMMON STOCK BY PRINCIPAL SHAREHOLDERS," and "EQUITY COMPENSATION PLAN
INFORMATION" in our proxy statement and is incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item is included under the caption
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in our proxy statement and is
incorporated herein by reference.


                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

         (a) The following documents are filed as part of this Annual Report on
Form 10-KSB:

             (1)   The following financial statements are included in this
                   report pursuant to Item 7:

                   Independent Auditors' Report.

                   Balance Sheet as of December 31, 2002.

                   Statements of Operations for the two years ended December 31,
                   2002.

                   Statements of Shareholders' Equity for the two years ended
                   December 31, 2002.

                   Statements of Cash Flows for the two years ended December 31,
                   2002.

                   Notes to the Financial Statements.


                                      -18-

<PAGE>

                  (2) Exhibits:

       EXHIBIT                               EXHIBIT
       NUMBER                              DESCRIPTION
       ------                              -----------

         3(a)    *     Amended and Restated Articles of Incorporation of
                       Superconductive Components, Inc.

         3(b)    *     Restated Code of Regulations of Superconductive
                       Components, Inc.

         10(a)   *     Lease Agreement between Superconductive Components, Inc.
                       and University Area Rentals dated as of February 7, 1997.

         10(b)   *     Subcontract Agreement between Superconductive Components,
                       Inc. and The Ohio State University effective as of
                       April 1, 2000.

         10(c)   *     1987 Incentive Stock Option Plan.

         10(d)   *     1991 Non-Statutory Stock Option Plan.

         10(e)   *     1995 Stock Option Plan.

         10(f)   **    License Agreement with Sandia Corporation dated February
                       26, 1996.

         10(g)   **    Nonexclusive License with The University of Chicago (as
                       Operator of Argonne National Laboratory) dated October
                       12, 1995.

         10(h)   **    Nonexclusive License with The University of Chicago (as
                       Operator of Argonne National Laboratory) dated October
                       12, 1995.

         10(i)   **    Sales Distribution Agreement with Earth Chemical Co.,
                       Ltd.

         10(j)   **    National Aeronautics Space Administration Contract dated
                       April 8, 1999.

         10(k)   **    National Science Foundation award dated August 26, 1999.

         10(l)   **    National Science Foundation award dated November 27,
                       2000.

         10(m)   **    10% Subordinated Promissory Note dated March 1, 1993.

         10(n)   **    National Science Foundation award dated August 2, 2001.

         10(o)         Letter Agreement with Oxford Superconducting Technology
                       dated October 23, 2002.

         10(p)         Department of Energy award dated July 29, 2002.

         23            Consent of Hausser & Taylor LLP

         24            Powers of Attorney.

         99(a)         Certification of Chief Executive Officer pursuant to 18
                       U.S.C. Section 1350.

         99(b)         Certification of Chief Financial Officer pursuant to 18
                       U.S.C. Section 1350.
--------------
*   Filed with the Company's initial Form 10-SB on September 28, 2000.
**  Filed with the Company's Form 10-SB Amendment No. 1 on January 3, 2001.


                                      -19-

<PAGE>

         (B)      REPORTS ON FORM 8-K

                  None.

         (C)      EXHIBITS

                  The exhibits to this report follow the Signature Page.

ITEM 14. CONTROLS AND PROCEDURES.

         As of a date within 90 days of the date of this report, the Company's
Chief Executive Officer and Chief Financial Officer evaluated the effectiveness
of the design and operation of the Company's disclosure controls and procedures.
Based upon this evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the Securities and Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the time period
specified by the Securities and Exchange Commission's rules and forms.

         Additionally, there were no significant changes in the Company's
internal controls that could significantly affect the Company's disclosure
controls and procedures subsequent to the date of their evaluation, nor were
there any significant deficiencies or material weaknesses in the Company's
internal controls. As a result, no corrective actions were required or
undertaken.


                                      -20-

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                   SUPERCONDUCTIVE COMPONENTS, INC.


Date:  March 28, 2003              By:  /s/ Daniel Rooney
                                      -----------------------------------------
                                        Daniel Rooney, Chairman of the Board of
                                        Directors, President and Chief
                                        Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 28th day of March 2003.

         Signature                                       Title
         ---------                                       -----


        /s/  Daniel Rooney                  Chairman of the Board of Directors,
        -------------------------------     President, and Chief Executive
             Daniel Rooney                  Officer (principal executive
                                            officer)

            Gerald S. Blaskie*              Chief Financial Officer (principal
        -------------------------------     financial officer and principal
            Gerald S. Blaskie               accounting officer)

            Robert J. Baker*                Director
        -------------------------------
            Robert J. Baker

            Edward W. Ungar*                Director
        -------------------------------
            Edward W. Ungar


*By:     /s/ Daniel Rooney
        -------------------------------
        Daniel Rooney, Attorney-in-Fact


                                      -21-

<PAGE>

          CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Daniel Rooney, certify that:

         1. I have reviewed this annual report on Form 10-KSB of Superconductive
Components, Inc.;

         2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a) designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

         c) presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

         5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

         a) all significant deficiencies in the design or operation of internal
            controls which could adversely affect the registrant's ability to
            record, process, summarize and report financial data and have
            identified for the registrant's auditors any material weaknesses in
            internal controls; and

         b) any fraud, whether or not material, that involves management or
            other employees who have a significant role in the registrant's
            internal controls; and

         6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: March 28, 2003                   /s/ Daniel Rooney
                                       -------------------------------------
                                           Daniel Rooney
                                           President and Chief Executive Officer


                                      -22-

<PAGE>


          CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gerald S. Blaskie, certify that:

         1. I have reviewed this annual report on Form 10-KSB of Superconductive
Components, Inc.;

         2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

         3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

         4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a) designed such disclosure controls and procedures to ensure that
            material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

         b) evaluated the effectiveness of the registrant's disclosure controls
            and procedures as of a date within 90 days prior to the filing date
            of this annual report (the "Evaluation Date"); and

         c) presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

         5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

         a)  all significant deficiencies in the design or operation of internal
             controls which could adversely affect the registrant's ability to
             record, process, summarize and report financial data and have
             identified for the registrant's auditors any material weaknesses in
             internal controls; and

         b)  any fraud, whether or not material, that involves management or
             other employees who have a significant role in the registrant's
             internal controls; and

         6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: March 28, 2003                           /s/ Gerald S. Blaskie
                                               ---------------------------------
                                               Gerald S. Blaskie
                                               Chief Financial Officer


                                      -23-

<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

                                                                          Page
                                                                          ----


Independent Auditors' Report                                              F-1

Balance Sheet                                                             F-2-3

Consolidated Statements of Operations                                     F-4

Consolidated Statement of Shareholders' Equity                            F-5

Consolidated Statements of Cash Flows                                     F-6-7

Notes to Consolidated Financial Statements                                F-8-24



<PAGE>

To the Board of Directors and Shareholders
Superconductive Components, Inc.
Columbus, Ohio

                          INDEPENDENT AUDITORS' REPORT
                          ----------------------------

         We have audited the accompanying balance sheet of Superconductive
Components, Inc. as of December 31, 2002, and the related statements of
operations, shareholders' equity and cash flows for the two years ended December
31, 2002. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Superconductive
Components, Inc. as of December 31, 2002, and the results of its operations and
its cash flows for the two years then ended in conformity with accounting
principles generally accepted in the United States of America.


                                         /s/ HAUSSER + TAYLOR LLP



Columbus, Ohio
February 14, 2003


                                       F-1

<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                                  BALANCE SHEET

                                December 31, 2002
                                -----------------

                                     ASSETS
                                     ------


CURRENT ASSETS
  Cash                                                              $    48,908
  Accounts and notes receivable
    Trade, less allowance for doubtful accounts of $18,000              170,038
    Contracts Receivable                                                 71,087
    Related party receivables                                             4,368
    Employees                                                            11,985
    Other                                                                   733
 Inventories                                                            655,432
 Prepaid expenses                                                        33,934
                                                                    -----------
       Total current assets                                             996,485
                                                                    -----------
PROPERTY AND EQUIPMENT,
 AT COST
  Machinery and equipment                                             2,312,869
  Furniture and fixtures                                                 22,124
  Leasehold improvements                                                347,349
                                                                    -----------
                                                                      2,682,342
  Less accumulated depreciation                                      (2,068,246)
                                                                    -----------
                                                                        614,096
                                                                    -----------
OTHER ASSETS
  Intangibles                                                            43,247
                                                                    -----------
TOTAL ASSETS                                                        $ 1,653,828
                                                                    ===========


   The accompanying notes are an integral part of these financial statements.


                                       F-2

<PAGE>



                        SUPERCONDUCTIVE COMPONENTS, INC.

                                  BALANCE SHEET

                                DECEMBER 31, 2002
                                -----------------

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
<TABLE>

<S>                                                                               <C>
CURRENT LIABILITIES
  Capital lease obligation, current portion                                       $    40,144
  Capital lease obligation, shareholder, current portion                               48,171
  Note payable shareholders, current portion                                          130,000
  Accounts payable                                                                    329,693
  Accounts payable, shareholders                                                        7,920
  Accrued contract expenses                                                            21,143
  Accrued personal property taxes                                                      54,002
  Accrued interest, shareholder                                                        20,638
  Accrued expenses                                                                     42,836
                                                                                  -----------
        Total current liabilities                                                     694,547
                                                                                  -----------
CAPITAL LEASE OBLIGATION, NET OF
 CURRENT PORTION                                                                       63,721
                                                                                  -----------
CAPITAL LEASE OBLIGATION, SHAREHOLDER, NET OF
 CURRENT PORTION                                                                       20,257
                                                                                  -----------
NOTE PAYABLE SHAREHOLDERS, NET OF CURRENT
 PORTION                                                                               38,270
                                                                                  -----------
REDEEMABLE CONVERTIBLE PREFERRED
 STOCK (Series A)
 10% cumulative, nonvoting, no par value, $1,000 stated value,
     liquidation and mandatory redemption at stated value per share
     plus unpaid and accumulated dividends of $230.00 per share                       121,770
                                                                                  -----------
COMMITMENTS AND CONTINGENCIES                                                              --
                                                                                  -----------
SHAREHOLDERS' EQUITY
  Convertible preferred stock, Series B, 10% cumulative, nonvoting,
     no par value, $10 stated value, optional redemption at 103%                      335,492
  Common stock, no par value, authorized 15,000,000
     shares; 1,823,256 shares issued and outstanding                                6,378,216
  Additional paid-in capital                                                            8,992
  Accumulated deficit                                                              (6,007,437)
                                                                                  -----------
                                                                                      715,263
                                                                                  -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                        $ 1,653,828
                                                                                  ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       F-3
<PAGE>



                        SUPERCONDUCTIVE COMPONENTS, INC.

                            STATEMENTS OF OPERATIONS

                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------


                                              2002           2001
                                              ----           ----

SALES REVENUE                             $ 2,704,082    $ 3,248,347
CONTRACT RESEARCH REVENUE                     254,462        415,141
                                          -----------    -----------
                                            2,958,544      3,663,488
                                          -----------    -----------
COST OF SALES REVENUE                       1,908,693      2,121,658
INVENTORY WRITE-DOWN                          190,881             --
COST OF CONTRACT RESEARCH                     241,155        341,832
                                          -----------    -----------
                                            2,340,729      2,463,490
                                          -----------    -----------
GROSS MARGIN                                  617,815      1,199,998

GENERAL AND ADMINISTRATIVE EXPENSES           868,005        898,622

SALES AND PROMOTIONAL EXPENSES                210,730        233,570
                                          -----------    -----------
INCOME (LOSS) FROM OPERATIONS                (460,919)        67,806
                                          -----------    -----------
OTHER INCOME (EXPENSE)
  Interest, net                               (21,705)       (17,460)
  Insurance proceeds                           39,083             --
  Gain on sale of assets                       36,500             --
  Miscellaneous, net                               --          9,535
                                          -----------    -----------
                                               53,878         (7,925)
                                          -----------    -----------
INCOME (LOSS) BEFORE INCOME TAX              (407,042)        59,881

INCOME TAX EXPENSE                                 --             --
                                          -----------    -----------
NET INCOME (LOSS)                            (407,042)        59,881

DIVIDENDS ON PREFERRED STOCK                  (31,666)       (37,442)

ACCRETION OF REDEEMABLE CONVERTIBLE
 PREFERRED (SERIES A)                          (6,469)       (13,618)
                                          -----------    -----------

INCOME (LOSS) APPLICABLE TO COMMON
 SHARES                                   $  (445,177)   $     8,821
                                          ===========    ===========

EARNINGS PER SHARE - BASIC AND DILUTIVE
 (Note 2)

NET INCOME (LOSS) PER COMMON SHARE
  Basic                                   $     (0.24)   $      0.00
                                          ===========    ===========
  Dilutive                                $     (0.24)   $      0.00
                                          ===========    ===========

WEIGHTED AVERAGE SHARES OUTSTANDING
  Basic                                     1,823,256      1,821,175
                                          ===========    ===========
  Dilutive                                  1,823,256      1,822,774
                                          ===========    ===========


   The accompanying notes are an integral part of these financial statements.


                                       F-4

<PAGE>



                           SUPERCONDUCTIVE COMPONENTS, INC.

                        STATEMENT OF STOCKHOLDERS' EQUITY

                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------


<TABLE>
<CAPTION>
                                                   CONVERTIBLE                    ADDITIONAL
                                                  PREFERRED STOCK,  COMMON          PAID-IN    ACCUMULATED
                                                     SERIES B        STOCK          CAPITAL       DEFICIT         TOTAL
                                                  -----------------------------------------------------------------------
<S>                                                <C>           <C>              <C>          <C>             <C>
BALANCE 12/31/00                                   $  338,424    $ 6,334,696      $  98,187    $(5,660,276)    $1,111,031

Accretion of cumulative dividends                      27,542                       (37,442)                       (9,900)

Accretion of Series A offering costs                                                (13,618)                      (13,618)

Issuance of stock (19,000 shares)                                     22,750                                       22,750

Exercise of options (750 shares)                                       1,875                                        1,875

Payment of cumulative dividends                       (25,185)                                                    (25,185)

Conversion of Series B preferred (1,529 shares)        (7,645)         7,645                                           --

Net income                                                                                          59,881         59,881
                                                   ----------------------------------------------------------------------
BALANCE 12/31/01                                      333,136      6,366,966         47,127     (5,600,395)     1,146,834

Accretion of cumulative dividends                      27,541                       (31,666)                       (4,125)

Accretion of Series A offering costs                                                 (6,469)                       (6,469)

Issuance of stock                                                     11,250                                       11,250

Payment of cumulative dividends                       (25,185)                                                    (25,185)

Net income                                                                                        (407,042)      (407,042)
                                                   ----------------------------------------------------------------------
BALANCE 12/31/02                                   $  335,492    $ 6,378,216      $   8,992    $(6,007,437)    $  715,263
                                                   ======================================================================
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       F-5
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                            STATEMENTS OF CASH FLOWS

                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------
<TABLE>
<CAPTION>
                                                                                2002          2001
                                                                                ----          ----
<S>                                                                          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                                          $(407,042)   $  59,881
                                                                             ---------    ---------
  Adjustments to reconcile net income (loss) to net cash used in
    operating activities:
    Depreciation                                                               228,888      218,208
    Amortization                                                                 2,971        2,451
    Gain on sale of equipment                                                  (36,500)          --
    Inventory reserve                                                           88,334      (23,211)
    Provision for doubtful accounts                                              5,000      (13,000)
    Changes in operating assets and liabilities:
      (Increase) decrease in assets:
        Accounts receivable                                                    154,235        1,404
        Inventories                                                            114,226     (217,313)
        Prepaid expenses                                                       (21,083)      26,915
        Other assets                                                            (2,226)      (7,755)
      Increase (decrease) in liabilities:
        Accounts payable                                                        11,233       49,549
        Accrued expenses                                                      (137,964)     119,666
                                                                             ---------    ---------
          Total adjustments                                                    407,114      156,914
                                                                             ---------    ---------
              Net cash provided by operating activities                             72      216,795
                                                                             ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds on sale of equipment                                                 36,500           --
  Purchases of property and equipment                                          (88,967)    (227,114)
                                                                             ---------    ---------
              Net cash used in investing activities                            (52,467)    (227,114)
                                                                             ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds (payments) on note payable, shareholders                             50,000      (14,000)
  Principal payments on capital lease obligations                              (41,595)     (34,066)
  Principal payments on capital lease obligations, related party                    --       (2,628)
  Proceeds from exercise of common stock options                                    --        1,875
  Payment of cummulative dividends                                             (25,185)     (25,185)
                                                                             ---------    ---------
              Net cash provided by (used in) financing activities              (16,780)     (74,004)
                                                                             ---------    ---------
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       F-6

<PAGE>



                        SUPERCONDUCTIVE COMPONENTS, INC.

                      STATEMENTS OF CASH FLOWS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 2002 AND 2001
                     --------------------------------------


<TABLE>
<CAPTION>
                                                                                2002          2001
                                                                                ----          ----
<S>                                                                          <C>          <C>
NET DECREASE IN CASH                                                           (69,175)     (84,323)

CASH - Beginning of period                                                     118,083      202,406
                                                                             ---------    ---------
CASH - End of period                                                         $  48,908    $ 118,083
                                                                             =========    =========
SUPPLEMENTAL DISCLOSURES OF CASH
 FLOW INFORMATION
  Cash paid during the years for:
    Interest                                                                 $  10,905    $  22,935
    Income taxes                                                             $      --    $      --

SUPPLEMENTAL DISCLOSURES OF NONCASH
 INVESTING AND FINANCING ACTIVITIES

  Common stock was issued as partial payment for accounts payable            $      --    $  19,000

  Property and equipment was purchased by capital lease                      $      --    $ 166,339
</TABLE>



   The accompanying notes are an integral part of these financial statements.


                                       F-7

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 1.           BUSINESS ORGANIZATION AND PURPOSE

                  Superconductive  Components,  Inc.  (the  Company)  is an Ohio
                  corporation that was incorporated in May 1987. The Company was
                  formed  to  develop,  manufacture  and  sell  materials  using
                  superconductive   principles.   Operations   have  since  been
                  expanded   to   include   the    manufacture   and   sale   of
                  non-superconductive  materials.  The  Company's  domestic  and
                  international  customer  base is  primarily  in the thin  film
                  battery,  high  temperature  superconductor,  lens and optical
                  coatings,   research,   electronics  and  functional  coatings
                  industries.

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       A.         Inventories -  Inventories  are stated at the lower of cost or
                  market on an acquired or  internally  produced lot basis,  and
                  consist of raw materials,  work-in-process and finished goods.
                  Cost includes material,  labor,  freight and applied overhead.
                  Inventory  reserves are established for obsolete inventory and
                  excess inventory quantities based on management's  estimate of
                  net realizable  value. The inventory reserve increased $88,334
                  in 2002 due to a  reduction  in raw  material  due to lower of
                  cost or market. This amount was charged to cost of goods sold.
                  In addition,  $102,547 of obsolete  inventory  was written off
                  the books and charged to cost of goods sold in 2002.

                  The  Company  enters  into  cancelable   purchase   commitment
                  arrangements   for   some   suppliers.    Estimated   purchase
                  commitments to these suppliers  approximate  $50,000 for 2002.
                  The  Company can cancel  these  commitments  at the  Company's
                  discretion without penalty.

       B.         Property and Equipment - Property and equipment are carried at
                  cost.  Depreciation  is provided on the  straight-line  method
                  based  on  the  estimated  useful  lives  of  the  assets  for
                  financial reporting purposes and allowable accelerated methods
                  for tax purposes. Useful lives range from ten years on certain
                  furniture   and   fixtures   to  three   years  on   leasehold
                  improvements and computer software.  Expenditures for renewals
                  and betterments are capitalized and  expenditures  for repairs
                  and maintenance are charged to operations as incurred.

                  Long-lived assets are reviewed for impairment  whenever events
                  or changes in circumstances  indicate that the carrying amount
                  may not be  recoverable.  If the fair  value is less  than the
                  carrying  amount of the asset,  a loss is  recognized  for the
                  difference. There have been no such impairment adjustments.



                                       F-8

<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

       C.         Research and  Development - Internal  research and development
                  costs are  expensed  as  incurred.  Research  and  development
                  expenses  for the years ended  December 31, 2002 and 2001 were
                  $43,885 and $48,915, respectively.

                  Third-party  research and development  costs are expensed when
                  the contracted work has been performed or as milestone results
                  have  been  achieved.   These   contracts  vary  from  six  to
                  twenty-four  months in duration.  The terms of the  contracts,
                  which are fixed  price,  require the  Company to submit  final
                  reports  and/or  progress  reports to the  sponsor.  While the
                  contracts  are subject to  cancellation,  management  believes
                  that the Company  will comply with all terms of the  contracts
                  and that all of the  amounts  awarded to the  Company  will be
                  collected.

                  Research revenue and expenses associated to third parties are
                  separately identified in the Statements of Operations.

                  During  2002  and  2001,  the  Company  earned   $254,462  and
                  $415,141,  respectively,  in contract revenue. At December 31,
                  2002,  there  was  an  outstanding  accounts  receivable  from
                  contract research revenue of $71,087.

                  During 2001, the Company was awarded a twelve-month  extension
                  to a contract in the amount of $300,000,  that began September
                  1, 2001.

                  During 2002, the Company was awarded a nine-month  contract in
                  the amount of $100,000 that began August 22, 2002.  Also,  the
                  Company   became  a  member  of  a  team  and  was  awarded  a
                  thirty-five  month  contract  in the amount of  $263,471.  The
                  Company  will share 50% of the cost.  The  contract  agreement
                  date was November 19, 2002.

         D.       Licenses - The Company has secured licenses to produce various
                  superconductive  materials for periods up to the expiration of
                  the applicable  patents.  The license fees, included in "Other
                  Assets" on the balance  sheet,  are being  amortized  over the
                  expected life of the agreement or applicable patent,  which is
                  seventeen years. Cost and accumulated amortization of licenses
                  at December  31,  2002 are  $21,000 and $8,937,  respectively.
                  Amortization  expense was $1,259 for the years ended  December
                  31, 2002 and 2001.  Amortization  expense is  estimated  to be
                  $1,259 for each of the next five years.

         E.       Patent - The  Company has  secured  patents for  manufacturing
                  processes used in its operations. Costs incurred to secure the
                  patents have been  capitalized,  included in "Other Assets" on
                  the balance  sheet,  and are being  amortized over the life of
                  the patents.  Cost and accumulated  amortization of the patent
                  at December  31,  2002 are  $36,473 and $5,289,  respectively.
                  Amortization expense was $1,712 and $1,192 for the years ended
                  December  31,  2002  and  December  31,  2001,   respectively.
                  Amortization expense is estimated to be $1,712 for each of the
                  next five years.


        F.        Income Taxes - Income taxes are provided for by utilizing  the
                  asset and liability  method which requires the  recognition of
                  deferred tax assets and  liabilities  for the expected  future
                  tax consequences of temporary differences between the carrying
                  amounts and the tax

                                       F-9
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                  bases of assets and liabilities  using  presently  enacted tax
                  rates.  Deferred tax assets are  recognized  for net operating
                  loss carryforwards,  reduced by a valuation allowance which is
                  established  when  "it is more  likely  than  not"  that  some
                  portion  or  all  of  the  deferred  tax  assets  will  not be
                  recognized.

       G.         Stock Based Compensation - The Company utilizes the provisions
                  of Accounting Principles Board ("APB") No. 25, "Accounting for
                  Stock Issued to Employees"  which  utilized a fair value based
                  method.  The Financial  Accounting  Standards  Board  ("FASB")
                  Statement No. 123, "Accounting for Stock-Based  Compensation",
                  utilized  a  fair  value  based  method.   The  FASB  requires
                  disclosure for new employee stock options of the impact to the
                  financial  statements of utilizing the intrinsic  value versus
                  the fair value  based  method  (see Note 8).  For stock  based
                  compensation  other than employees,  the Company  utilizes the
                  fair value method as provided for in FASB #123.

       H.         Income  (Loss)  Per  Common  Share - Income  (loss) per common
                  share  amounts  are based on the  weighted  average  number of
                  shares  outstanding.  Due to the net loss in 2002, the assumed
                  conversion  of preferred  stock and exercise of stock  options
                  and warrants are anti-dilutive and have not been considered in
                  the calculation of per share amounts.

       I.         Statements  of Cash Flows - For purposes of the  statements of
                  cash  flows,   the  Company   considers   all  highly   liquid
                  investments purchased with maturity of three months or less to
                  be cash. No such investments were purchased.

       J.         Concentrations  of Credit Risk - The Company's  cash balances,
                  which are at times in excess of federally insured levels,  are
                  maintained  at a large  regional  bank,  and  are  continually
                  monitored  to minimize  the risk of loss.  The Company  grants
                  credit  to its  customers,  who are  varied  in terms of size,
                  geographic location and financial strength.  Customer balances
                  are continually monitored to minimize the risk of loss.

                  The  Company had one major  customer  in 2002 and 2001,  which
                  accounted   for    approximately    $519,000   and   $538,000,
                  respectively,  of the total  revenue  and $55,000 of the trade
                  accounts receivable at December 31, 2002.

       K.         Use of Estimates - The preparation of financial  statements in
                  conformity with accounting  principles  generally  accepted in
                  the  United  States of  America  requires  management  to make
                  estimates and assumptions  that affect the reported amounts of
                  assets and liabilities and disclosure of contingent assets and
                  liabilities  at the date of the financial  statements  and the
                  reported amounts of revenues and expenses during the reporting
                  period. Actual results could differ from those estimates.

       L.         Fair Value - The estimated  fair value of amounts  reported in
                  the financial  statements have been determined using available
                  market information and valuation methodologies,  as applicable
                  (see Note 12).

       M.         Revenue Recognition - Revenue from product sales is recognized
                  upon shipment to customers.  Provisions for discounts, returns
                  and others  adjustments are provided for in the same period as
                  the related sales are recorded.


                                      F-10
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                  Revenue from contract  research  provided for third parties is
                  recognized  when the contracted  work has been performed or as
                  milestone results have been achieved.

       N.         Accounts  Receivable - The Company extends unsecured credit to
                  customers under normal trade agreements, which require payment
                  within 30 days.  Accounts greater than 90 days past due, which
                  amounted  to $11,000 and  $21,000 of net  receivables  for the
                  years  ended  December  31,  2002 and 2001,  respectively  are
                  considered delinquent. The Company does not charge interest on
                  delinquent  trade accounts  receivable.  Accounts greater than
                  one  year  past  due,  which  amount  to  $0  and  $0  of  net
                  receivables  for the years ended December 31, 2002 and 2001are
                  placed  on  non-accrual   status.   Unless  specified  by  the
                  customer,  payments are applied to the oldest unpaid  invoice.
                  Accounts receivable are presented at the amount billed.

                  Management estimates an allowance for doubtful accounts, which
                  was  $18,000  and  $13,000 as of  December  31, 2002 and 2001,
                  respectively.  The estimate is based upon management's  review
                  of  delinquent  accounts and an  assessment  of the  Company's
                  historical evidence of collections. Bad debt expense of $0 and
                  $0 was  recognized  for the years ended  December 31, 2002 and
                  2001,  respectively  as a result  of this  estimate.  Specific
                  accounts are charged  directly to the reserve when  management
                  obtains  evidence  of a  customer's  insolvency  or  otherwise
                  determines that the account is  uncollectible.  Charge-offs of
                  specific  accounts  for the years ended  December 31, 2002 and
                  2001 totaled $2,000 and $13,000 respectively.

       O.         Intangible Assets - In July 2001, the FASB issued Statement of
                  Financial  Accounting  Standards No. 142,  "Goodwill and Other
                  Intangible  Assets"  ("SFAS 142").  SFAS 142 requires  certain
                  intangible  assets to be tested for  impairment  under certain
                  circumstances,  and  written  off when  impaired,  rather than
                  being amortized as previous  standards  required.  SFAS 142 is
                  effective for fiscal years  beginning after December 31, 2001.
                  The adoption of SFAS 142 in 2002 did not have an effect on the
                  Company's operating results or financial condition.

       P.         In June 2002,  the FASB  issued FAS No. 146,  "Accounting  for
                  Exit or Disposal  Activities."  FAS 146 addresses  significant
                  issues regarding the recognition,  measurement,  and reporting
                  of  costs  that  are   associated   with  exit  and   disposal
                  activities,   including  restructuring   activities  that  are
                  currently  accounted  for  pursuant to the  guidance  that the
                  Emerging  Issues Task Force (EITF) has set forth in EITF Issue
                  No.  94-3,   "Liability   Recognition  for  Certain   Employee
                  Termination  Benefits  and  Other  Costs  to Exit an  Activity
                  (including  Certain Costs Incurred in a  Restructuring)".  The
                  scope  of  FAS  146  also  includes:   (1)  costs  related  to
                  terminating  a  contract  that is not a capital  lease and (2)
                  termination  benefits  that  employees  who are  involuntarily
                  terminated  receive  under  the  terms of a  one-time  benefit
                  arrangement  that is not an ongoing benefit  arrangement or an
                  individual   deferred-compensation  contract.  Under  the  new
                  standard,  exit and disposal activities are generally expensed
                  as incurred.  FAS 146 will be  effective  for exit or disposal
                  activities that are initiated  after December 31, 2002.  Early
                  application is encouraged.

                  In June 2001, the Financial  Accounting Standards Board (FASB)
                  issued FAS 143, "Accounting for Asset Retirement Obligations,"
                  which  requires the  recognition  of a liability at fair value
                  for an asset  retirement  obligation in the period in which it
                  is

                                      F-11

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                  incurred.  Retirement  obligations  associated with long-lived
                  assets  included  within  the  scope of FAS 143 are  those for
                  which there is a legal  obligation to settle under existing or
                  enacted law,  statute,  written or oral contract,  or by legal
                  obligation   under  the  doctrine  of   promissory   estoppel.
                  Retirement  obligations  are  included  in  the  scope  of the
                  standard  only if the legal  obligation  exists in  connection
                  with or as a result of the permanent  retirement,  abandonment
                  or sale of a long-lived asset. When the liability is initially
                  recorded,  the carrying amount of the related long-lived asset
                  is  correspondingly  increased.  Over time,  the  liability is
                  accreted  to  its  future  value.  The  corresponding   amount
                  capitalized at inception is  depreciated  over the useful life
                  of the asset. The liability must be revalued each period based
                  on current  market  prices.  SFAS 143 is effective  for fiscal
                  years beginning after June 15, 2002.  Management estimates the
                  costs  associated with this obligation  range from $175,000 to
                  $225,000.  The Company will  implement this  pronouncement  in
                  first quarter 2003.

                  In December 2002, the FASB issued FAS No. 148, "Accounting for
                  Stock-Based  Compensation  -  Transition  and  Disclosure - an
                  amendment of FASB  Statement No. 123." This  Statement  amends
                  FAS No. 123,  "Accounting  for  Stock-Based  Compensation"  to
                  provide  alternative  methods of  transition  for a  voluntary
                  change  to the fair  value  based  method  of  accounting  for
                  stock-based employee compensation. In addition, this Statement
                  amends the disclosure requirements of Statement 123 to require
                  prominent  disclosures  in both annual and  interim  financial
                  statements  about the  method of  accounting  for  stock-based
                  employee  compensation  and the effect of the  method  used on
                  reported results.  FAS No. 148 provides for voluntary adoption
                  of the fair value method for entities with fiscal years ending
                  after  December 15, 2002.  The Company has elected to continue
                  the use of the  intrinsic  value  method for the  fiscal  year
                  ending  December  31,  2002  but  has  adopted  the  prominent
                  disclosure provisions.

NOTE 3.           INVENTORIES

                  Inventories consist of the following at December 31, 2002

                  Raw materials                              $   459,784

                  Work-in-process                                145,838

                  Finished goods                                 175,933
                                                            ------------
                                                                 781,555

                  Less reserve for obsolete inventory            126,123
                                                            ------------

                                                            $    655,432
                                                            ============

NOTE 4.           NOTES PAYABLE - BANK

                  The  Company  has a bank  line  of  credit  in the  amount  of
                  $100,000,  interest at prime,  (4.25% at December  31,  2002),
                  maturing  June 30, 2003.  As of December 31, 2002, $0 has been
                  drawn on this line of credit.  No  collateral,  other than the
                  personal  guarantee  by a major  shareholder  of the  Company,
                  collateralizes the bank line of credit.

                                      F-12

<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 5.           LEASE OBLIGATIONS

                  OPERATING
                  ---------

                  The Company leases certain office  equipment under  agreements
                  classified as operating  leases  expiring  through 2004.  Rent
                  expense which includes  various  monthly rentals for the years
                  ended December 31, 2002 and 2001, totaled $73,420 and $77,983,
                  respectively.  Future  minimum lease  payments at December 31,
                  2002 are as follows:

                                   2003        $   6,046

                                   2004            2,777
                                               ---------
                                               $   8,823
                                               =========


                  CAPITAL
                  -------

                  The Company also leases certain equipment under capital leases
                  including the lease with a major  shareholder  entered into in
                  2001.  The  future  minimum  lease  payments  by year with the
                  present value of such payments,  as of December 31, 2002 is as
                  follows:

                                                            RELATED
                                                             PARTY       OTHER
                                                            --------     -----

                  2003                                      $ 54,123   $ 47,297
                  2004                                        20,817     35,934
                  2005                                            --     23,889
                  2006                                            --      9,780
                                                            --------   --------
                  Total minimum lease payments                74,940    116,900
                  Less amount representing interest            6,512     13,035
                                                            --------   --------
                  Present value of minimum lease payments     68,428    103,865
                  Less current portion                        48,171     40,144
                                                            --------   --------
                  Long-term capital lease obligations       $ 20,257   $ 63,721
                                                            ========   ========

                  The equipment under capital lease at December 31, 2002 is
                  included in the accompanying balance sheet under the following
                  captions:

                                                          RELATED
                                                           PARTY       OTHER
                                                          -------      ------

                  Machinery and equipment                 $ 68,428    $211,355

                  Less accumulated depreciation             14,663     105,351
                                                          --------    --------
                  Net book value                          $ 53,765    $106,004
                                                          ========    ========


                                      F-13

<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 5.           LEASE OBLIGATIONS (CONTINUED)

                  These assets are amortized  over four to seven years using the
                  straight-line   method  and   amortization   is   included  in
                  depreciation expense.

                  Amortization expense totaled $39,969 and $28,087 for the years
                  ended December 31, 2002 and 2001, respectively.

NOTE 6.           RELATED PARTY NOTES PAYABLE

                  Effective  December 31, 2000, the Company  converted  accounts
                  payable  and  accrued   interest   payable  to  certain  major
                  shareholders totaling $132,270 to a note payable shareholders.
                  The same shareholder  converted $50,000 of accounts payable in
                  March 2002 to the note payable.  The note provides for monthly
                  payments  of  principal  of $2,000 per month for the period of
                  February 1, 2001 through December 1, 2002 and, thereafter,  in
                  monthly  installments of $4,000 for principal until the entire
                  outstanding  balance is paid in full.  There were no principal
                  payments  made  on this  note  during  2002.  The  note  bears
                  interest  at prime  (4.25% at  December  31,  2002).  Interest
                  expense  on this note  charged  to  operations  was $8,037 and
                  $8,902  for the  years  ended  December  31,  2002  and  2001,
                  respectively.

                  The  aggregate  long-term  debt  payments for each of the next
                  five years are:

                                2003                   130,000
                                2004                    38,270
                                                      --------
                                                       168,270
                                Current                130,000
                                                      --------
                                Long-term             $ 38,270
                                                      ========


                                      F-14
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 7.           COMMON AND PREFERRED STOCK

                  COMMON STOCK ISSUES
                  -------------------

                  During  2002  and  2001,  0 and  1,529  respectively,  of  the
                  outstanding  shares of Series B preferred stock were converted
                  to 0 and 1,529  shares of common  stock.  Additionally,  stock
                  options  were  exercised  for a total of 750  shares of common
                  stock with total proceeds of $1,875.

                  During  2001,  the  Company  paid cash of  $12,500  and issued
                  19,000 shares of common stock of the Company at a subscription
                  price of $1.00 per share to Taratec  Corporation  for services
                  rendered to the Company.  The president of Taratec, Mr. Ungar,
                  is a director of the  Company.  The fair  market  value of the
                  common  stock  issued  at the date of  issuance  was $1.34 per
                  share,  or a discount of 25%. The Company issued the shares at
                  a discounted price as the shares are unregistered,  therefore,
                  limited as to marketability  for sale until the securities are
                  registered under the Securities Act of 1933.

                  PREFERRED STOCK
                  ---------------

                  Shares of preferred stock authorized and outstanding at
                  December 31, 2002 are as follows:

                                                   SHARES          SHARES
                                                  AUTHORIZED      OUTSTANDING
                                                  ----------      -----------

                  Cumulative Preferred Stock         10,000               --

                  Voting Preferred Stock            125,000               --

                  Non-Voting Preferred Stock        125,000 (a)       25,284 (b)

                  (a)  Includes  700  shares  of  Series A  Preferred  Stock and
                  100,000  shares of Series B  Preferred  Stock  authorized  for
                  issuance.
                  (b) Includes 99 shares of Series A Preferred  Stock and 25,185
                  shares of Series B Preferred Stock outstanding at December 31,
                  2002.


                                      F-15
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 7.           COMMON AND PREFERRED STOCK (CONTINUED)

                  In June 1995, the Company  completed an offering of 215 shares
                  of  $1,000   stated   value  1995  Series  A  10%   non-voting
                  convertible  preferred  stock.  In January  1996,  the Company
                  completed  an  offering of 70,000  shares of $10 stated  value
                  1995 Series B 10% non-voting  convertible preferred stock. For
                  the first  three  years,  the  dividends  on both  issues were
                  payable by issuing  additional  Series A or B preferred shares
                  or in cash.  The  Series A shares  are  convertible  to common
                  shares at the rate of $6.00  per share and  Series B shares at
                  the rate of $5.00 per share. At the Company's option, Series A
                  and  Series  B  shares  are   redeemable  at  103%  after  the
                  respective third anniversary dates.

                  The Series A preferred  shares have a mandatory  redemption at
                  25% annually of the issued Series A preferred  shares at their
                  stated value plus accrued and unpaid dividends. As of December
                  31,  2002,  none of the  Series A  preferred  shares  had been
                  redeemed.  As  security  for  cash  dividends,   or  mandatory
                  redemption  payments due on the Series A preferred shares, and
                  to   collateralize   the   preference   upon  a   liquidation,
                  dissolution  or winding up of the affairs of the Company,  Dr.
                  and Mrs.  Funk pledged an aggregate of 60,000 shares of common
                  stock,  $.01  par  value  of   Interpore/Cross   International
                  (Interpore) (formerly known as Cross Medical Products, Inc.).

                  Series A redeemable  convertible  preferred  stock and accrued
                  dividends in the amount of $121,770 is outstanding at December
                  31, 2002 and was due May 31, 2002.  Management is working with
                  the  shareholder  to  negotiate  repayment  terms.  Management
                  expects  to have a  resolution  prior to the end of the second
                  quarter of 2003.

                  Issue  costs of $70,277 on Series A were  netted  against  the
                  proceeds and are being amortized over the term of the Series A
                  payout period of seven years using the  straight-line  method.
                  Unamortized  costs at December 31, 2001 are $0. The  amortized
                  (accreted)  amount is reflected in income (loss) applicable to
                  common  shares  and  additional  paid-in-capital.  The  annual
                  accretion  totaled  $6,469  and  $13,618  for the years  ended
                  December 31, 2002 and 2001, respectively.

                  As  security  for cash  dividends  on the  Series B  preferred
                  shares,  Dr. and Mrs.  Funk had pledged an  aggregate  131,000
                  shares  of $.01  par  value  common  stock  of  Interpore.  In
                  December of 2002, the pledged  Interpore  shares were released
                  in accordance  with the terms of the pledge  agreement.  Issue
                  costs  of  approximately  $116,110  on  Series  B were  netted
                  against the proceeds of that issue.

                  During 2002 and 2001, Series B cash dividends totaling $25,185
                  and $25,185 were paid, respectively.  Additionally,  preferred
                  stock was  converted  to 0 and 1,529  shares of common  stock,
                  respectively.


                                      F-16

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 7.           COMMON AND PREFERRED STOCK (CONTINUED)

                  EARNINGS PER SHARE
                  ------------------

                  At December  31, 2001,  options  were  included in the diluted
                  earnings per share as detailed  below in the weighted  average
                  number of shares outstanding.

                  At December 31, 2002, all outstanding common stock equivalents
                  which  include  preferred  stock  Series A and B employee  and
                  director  stock options and warrants are  antidilutive  due to
                  the net loss.  All common stock  equivalents  were excluded in
                  the diluted loss per share  calculation as there were none "in
                  the money",  and  therefore,  not  included as a common  stock
                  equivalent.


                                               DECEMBER 31,      DECEMBER 31,
                                                  2002              2001
                                               ----------       ------------

                  Options                        504,550          449,700
                  Warrants                       160,000          160,000
                  Preferred Series A              16,500           16,500
                  Preferred Series B              50,370           50,370
                                                 -------          -------
                                                 731,420          676,570
                                                 =======          =======

                                      F-17

<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 7.           COMMON AND PREFERRED STOCK (CONTINUED)

                  EARNINGS PER SHARE (CONTINUED)
                  ------------------------------

                  The following  data show the amounts used in computing  income
                  (loss)  per  share  (EPS) and the  effect  on  income  and the
                  weighted average number of shares of dilutive potential common
                  stock.

                                                           2002         2001
                                                           ----         ----

Income (loss) available to common shareholders
  used in basic EPS and diluted EPS                   $  (445,177)   $     8,821
                                                      ===========    ===========

Weighted average number of common shares
  used in EPS                                           1,823,256      1,821,175

Effect of dilutive securities:

Stock options and warrants                                     --          1,599
                                                      -----------    -----------

Weighted number of common shares and dilutive
  potential common stock used in diluted EPS            1,823,256      1,822,774
                                                      ===========    ===========

NOTE 8.            INCENTIVE STOCK OPTION PLANS

                  In November 1987, the Company adopted the 1987 Incentive Stock
                  Option Plan (the Incentive Plan) for key employees under which
                  options  to  purchase  up to 40,000  shares  of the  Company's
                  common stock may be granted to qualified employees, subject to
                  the  execution  of stock  option  agreements.  Options  may be
                  exercised for periods up to 10 years from the date of grant at
                  prices not less than 100% of fair market  value on the date of
                  grant. All remaining options outstanding for this Plan expired
                  in 2001.

                  In February 1991, the Company  adopted the 1991  Non-Statutory
                  Stock Option Plan (the Non-Statutory Plan) under which options
                  to purchase up to 20,000 shares of the Company's  common stock
                  may be  granted  to  key  employees,  directors,  consultants,
                  advisors and sales  representatives,  subject to the execution
                  of stock  option  agreements.  Options  may be  exercised  for
                  periods  up to 10 years from the date of grant at prices to be
                  determined by the Board of Directors. The Company has reserved
                  2,000 of the  shares  subject  to the  Non-Statutory  Plan for
                  options to be granted to sales representatives.



                                      F-18

<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 8.           INCENTIVE STOCK OPTION PLANS (CONTINUED)

                  On  September  29,  1995,  the Company  adopted the 1995 Stock
                  Option  Plan (the 1995 Plan) as  incentive  to key  employees,
                  directors and  consultants  under which options to purchase up
                  to  900,000  shares  of  the  Company's  common  stock  may be
                  granted,  subject to the execution of stock option agreements.
                  Incentive  stock  options may be granted to key  associates of
                  the  Company  and  Non-Statutory  options  may be  granted  to
                  directors  who  are  not  employees  and  to  consultants  and
                  advisors who render  services to the  Company.  Options may be
                  exercised for periods up to 10 years from the date of grant at
                  prices not less than 100% of fair market  value on the date of
                  grant.

                  The cumulative status at December 31, 2002 and 2001 of options
                  granted  and  outstanding,  as well as  options  which  became
                  exercisable   in  connection   with  the  Incentive   Plan  is
                  summarized as follows:

                  EMPLOYEE STOCK OPTION PLANS
                  ---------------------------
<TABLE>
<CAPTION>

                                                                                         WEIGHTED
                                                                                          AVERAGE
                                                                    STOCK OPTIONS      EXERCISE PRICE
                                                                    -------------      --------------
<S>                                                                    <C>            <C>
                  Outstanding at December 31, 2000                      299,700        $   2.47
                    Granted                                              50,750            1.82
                    Exercised                                                --              --
                    Forfeited                                           (87,250)           2.76
                                                                      ---------        ---------
                  Outstanding at December 31, 2001                      263,200            2.22
                    Granted                                             190,000            1.55
                    Exercised                                                --              --
                    Forfeited                                           (55,650)           2.89
                                                                      ---------        ---------
                  Outstanding at December 31, 2002                    $ 397,550            1.94
                                                                      =========        =========
                  Shares exercisable at December 31, 2001                80,510            2.35

                  Shares exercisable at December 31, 2002               123,200            2.42


</TABLE>



                                F-19
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 8.           INCENTIVE STOCK OPTION PLANS (CONTINUED)

                  NON-EMPLOYEE DIRECTOR OPTION PLANS
                  ----------------------------------

<TABLE>
<CAPTION>

                                                                                   WEIGHTED
                                                                                    AVERAGE
                                                               STOCK OPTIONS    EXERCISE PRICE
                                                               -------------    --------------

<S>               <C>                                             <C>             <C>
                  Outstanding at December 31, 2000                 157,500        $   2.53

                    Granted                                         45,000            1.46

                    Exercised                                         (750)           2.50

                    Forfeited                                       (5,250)           2.50
                                                                  --------        --------
                  Outstanding at December 31, 2001                 196,500            2.22

                    Granted                                             --              --

                    Exercised                                           --              --

                    Forfeited                                      (89,500)           2.00
                                                                  --------        --------
                  Outstanding at December 31, 2002                 107,000        $   2.14
                                                                  ========        ========


                  Shares exercisable at December 31, 2001          115,500            2.46

                  Shares exercisable at December 31, 2002           98,000            2.14

</TABLE>
                  Exercise  prices  for  options  range  from $1.34 to $3.00 for
                  options at December 31,  2002.  The  weighted  average  option
                  price for all  options  outstanding  is $1.98  with a weighted
                  average remaining contractual life of 6.9 years.

                  The exercise price for all options exercisable at December 31,
                  2002 range from $1.34 to $3.00.

                  In  electing  to  continue  to  follow  APB  #25  for  expense
                  recognition  purposes,  the  Company is obliged to provide the
                  expanded  disclosures required under SFAS #123 for stock-based
                  compensation  including disclosure of pro-forma net income and
                  earnings  per share had  compensation  expense  been  measured
                  under the fair value recognition provisions.

                  The weighted  average fair values at date of grant for options
                  granted   during   2002  and  2001  were   $1.45  and   $1.65,
                  respectively,  and  were  estimated  using  the  Black-Scholes
                  option  valuation  model with the following  weighted  average
                  assumptions:  2002 2001 ---- ----  Expected life in years 6.89
                  6.71 Interest rate 5% 6% Volatility  110.67% 111.25%  Dividend
                  yield 0% 0%

                                      F-20
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS.


NOTE 8.           INCENTIVE STOCK OPTION PLANS (CONTINUED)

                  The  Company's  pro  forma  information  for the  years  ended
                  December 31, 2002 and 2001 in accordance  with the  provisions
                  of FASB #123 is  provided  below.  For  purposes  of pro forma
                  disclosures,  stock-based compensation is amortized to expense
                  on  a  straight-line   basis  over  the  vesting  period.  The
                  following  table compares 2002 and 2001 results as reported to
                  the results had the  Company  adopted the expense  recognition
                  provisions of FASB #123.

                                                             2002        2001
                                                             ----        ----
                  Net income (loss) applicable to
                   common shares:

                    As reported                          $ (445,177)   $ 8,821
                    Pro forma under SFAS #123              (447,360)     2,480
                  Basic and diluted income (loss)
                    per share:
                    As reported                          $    (0.24)   $  0.00
                    Pro forma under SFAS #123                 (0.25)      0.00
                  Diluted income (loss) per share:
                    As reported                          $    (0.24)   $  0.00
                    Pro forma under SFAS #123                 (0.25)      0.00

NOTE 9.           WARRANTS ISSUED

                  Warrants  unexercised at December 31, 2002,  issued to related
                  parties are as follows:
<TABLE>
<CAPTION>

# OF COMMON                                                   ISSUE                  EXERCISE
   SHARES          ISSUED TO       CONSIDERATION              DATE      EXPIRATION    PRICE
--------------     ---------       -------------              ----      ----------    -----

<S>                <C>             <C>                          <C>       <C>         <C>
Related Parties
10,000             Edward Funk     Lease Guarantee              3-96      3-03        $ 5.00
75,000             Edward Funk     Subordinated notes payable   1-00      1-10        $ 2.50
75,000             Ingeborg Funk   Subordinated notes payable   1-00      1-10        $ 2.50
</TABLE>

                  The Company has issued common stock purchase warrants at $2.50
                  (fair  market  value at date of grant)  per  common  share for
                  150,000  shares of common  stock  related to the  subordinated
                  notes  payable to Edward and Ingeborg  Funk,  The warrants are
                  100%  vested  and  expire  ten years from the date of grant of
                  January 7, 2000.

                                      F-21
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 10.          INCOME TAXES

                  Deferred  tax assets and  liabilities  result  from  temporary
                  differences  in the  recognition of income and expense for tax
                  and financial  reporting purposes.  Significant  components of
                  the  Company's  deferred  tax  assets and  liabilities  are as
                  follows at December 31:

                                                                      2002
                                                                      ----
                  Deferred tax assets

                    NOL Carryforward                             $   1,697,000

                    UNICAP                                              49,000

                    Allowance for doubtful accounts                      6,000

                    Reserve for obsolete inventory                      43,000

                    Property and equipment                              18,000
                                                                  ------------
                                                                     1,813,000

                  Valuation allowance                                1,813,000
                                                                  ------------

                  Net                                            $          --
                                                                  ============

                  A  valuation   allowance   has  been   recorded   against  the
                  realizability  of the net  deferred  tax  asset,  such that no
                  value is recorded for the asset in the accompanying  financial
                  statements.  The valuation  allowance  totaled  $1,813,000 and
                  $1,728,000 at December 31, 2002 and 2001, respectively.

                  The Company has net operating  loss  carryovers  available for
                  federal and state tax  purposes of  approximately  $4,991,000,
                  which expire in varying amounts from 2003 through 2022.

                  For  the  years  ended   December   31,   2002  and  2001,   a
                  reconciliation  of the statutory  rate and effective  rate for
                  the provisions for income taxes consists of the following:


                                                        PERCENTAGE
                                                ---------------------------
                                                     2001              2000
                                                     ----              ----

                  Federal statutory rate            (34.0)            (34.0)
                  Valuation allowance                34.0              34.0
                                                ---------         ---------
                  Effective rate                       -- %              --%
                                                =========         =========

                  The expense (benefit) for income taxes consists of the
                  following:

                   Current expense                $   --         $  --
                   Deferred expense                   --            --
                                                  ------         -----
                  Total                           $   --         $  --
                                                  ======         =====

                                      F-22
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 11.          RELATED PARTY TRANSACTIONS

                  Sales to a related party amounted to $20,812 and $12,224
                  during 2002 and 2001, respectively.

                  The  Company  has a note  receivable  from an  employee of the
                  Company in the amount of $11,985.  The note bears  interest at
                  8% per annum.

                  The  Company  has  trade  payables,   shareholders  of  $7,920
                  pertaining to reimbursement for purchase of goods and services
                  obtained for Company purposes.

                  Interest expense,  shareholder was $15,428 and $10,961 for the
                  years ended December 31, 2002 and 2001, respectively.

                  The  Company  retained a related  party to provide  management
                  assistance  for a fee of $14,550 per month  beginning  January
                  15, 2002. This agreement was terminated after three (3) months
                  and all fees have been paid.

                  For   additional    information    regarding   related   party
                  transactions, see Notes 4, 6 and 9.

NOTE 12.          FAIR VALUE OF FINANCIAL INSTRUMENTS

                  The fair value of financial instruments  represents the amount
                  at which  the  instrument  could  be  exchanged  in a  current
                  transaction  between willing  parties,  other than in a forced
                  sale or liquidation. Significant differences can arise between
                  the fair value and carrying  amount of  financial  instruments
                  that are recognized at historical cost amounts.

                  The following methods and assumptions were used by the Company
                  in   estimating   fair   value   disclosures   for   financial
                  instruments:

                  o    Cash and cash  equivalents,  short-term  debt and current
                       maturities  of long-term  debt:  Amounts  reported in the
                       balance  sheet  approximate  fair market value due to the
                       short maturity of these instruments.

                  o    Long-term capital lease obligations:  Amounts reported in
                       the balance sheet  approximate fair value as the interest
                       rates on these obligations range from 6% to 9.9%.

                  o    Note payable shareholder: Amounts reported in the balance
                       sheet  represent  debt  to a major  shareholder.  Amounts
                       reported in the  balance  sheet  approximate  fair market
                       value, as the interest rate is prime.

                  o    Redeemable  convertible preferred stock: Amounts reported
                       in the balance  sheet are in excess of fair market  value
                       as the  conversion  price is $6.00 per share and  average
                       market  price  at  December  31,  2002  was  $0.40  for a
                       difference  of fair  value of $5.60  per share or a total
                       difference of $92,400 at December 31, 2002.


                                      F-23
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 13.          FOURTH QUARTER ADJUSTMENTS

                  The   Statement  of   Operations   includes   fourth   quarter
                  adjustments  for the inventory  write-down  of $190,881.  This
                  adjustment  contains  two  components.  Inventory  for one raw
                  material item was reduced to the lower of cost or market for a
                  reduction  of  pricing  that  began  declining  in the  second
                  quarter  of  2002.  The  lower  of cost or  market  adjustment
                  totaled $88,334.

                  Additionally,   management  in  the  fourth  quarter  reviewed
                  inventory for obsolete  items and inventory  items that are no
                  longer used in the manufacturing  process. This review process
                  was in  excess  of the  inventory  reserve  on the  books  and
                  resulted in an inventory write-down of $102,547.






                                      F-24