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, 2001

                         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)
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<S>                                                         <C>
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)
</TABLE>


       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, 2001, were
$3,663,488.

       The aggregate market value of the Registrant's common equity held by
non-affiliates of the Registrant was approximately $698,942 on March 25, 2002.

       There were 1,823,256 shares of the Registrant's Common Stock outstanding
on March 25, 2002.

       Transitional Small Business Disclosure Format (check one): Yes    No  X
                                                                     ----   ----
                       DOCUMENTS INCORPORATED BY REFERENCE

       Portions of our Proxy Statement for the 2002 Annual Meeting of
Stockholders are incorporated by reference in Part III.



<PAGE>




                                TABLE OF CONTENTS


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                                                                                                              Page
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<S>               <C>                                                                                          <C>
                                      PART I

Item 1.           Description of Business.................................................................      3

Item 2.           Description of Property.................................................................     24

Item 3.           Legal Proceedings.......................................................................     24

Item 4.           Submission of Matters to a Vote of Security Holders.....................................     24


                                     PART II

Item 5.           Market for Common Equity and Related Stockholder Matters................................     25

Item 6.           Management's Discussion and Analysis or Plan of Operation...............................     26

Item 7.           Financial Statements....................................................................     30

Item 8.           Changes in and Disagreements with Accountants on Accounting and
                  Financial Disclosure....................................................................     54


                                    PART III

Item 9.           Directors, Executive Officers, Promoters and Control Persons; Compliance with Section
                  16(a) of the Exchange Act...............................................................     54

Item 10.          Executive Compensation..................................................................     54

Item 11.          Security Ownership of Certain Beneficial Owners and Management..........................     54

Item 12.          Certain Relationships and Related Transactions..........................................     54

Item 13.          Exhibits and Reports on Form 8-K........................................................     54


Signatures................................................................................................     57

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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. 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 strategy of the Company has been to find commercially viable
applications for HTS materials and, subsequently, other ceramic and metal
materials. The Company's objective has been to stay intellectually current with
the advancing technology in HTS materials, and search out commercially viable
applications by being in the market place. This objective has been widened to
include other perovskites, as well as other metals and alloys, in materials
other than HTS materials.

         Until 1998, the Company relied primarily on its own resources for the
research and development necessary to stay current with HTS technology and also
to develop products for other applications. In 1998, the Company engaged in
sponsored research for Nanophase Technology Corporation, Inc. and also received
several awards for research from two United States government agencies, the
National Aeronautics and Space Administration and the National Science
Foundation. The Company's sponsored research programs are discussed more fully
at Pages 12 through 14 of this Report with respect to their revenues and time
lines. The following table summarizes this information:

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                   SPONSOR                 PROGRAM TYPE           AWARD         START DATE     END DATE
         <S>                               <C>                  <C>               <C>          <C>

         National Aeronautics and          SBIR Phase II        $  585,000        4/1/99        3/31/01
           Space Administration

         National Science Foundation       SBIR Phase II        $  399,000        9/1/99        8/31/01

         National Science                  SBIR Phase II        $  300,000        9/1/01        8/31/02
           Foundation

         National Science Foundation       STTR Phase I         $  100,000        7/1/99        6/30/00

         National Science Foundation       SBIR Phase I         $  100,000        1/1/01        6/31/01

         Cambridge Research and            Private Contract     $   25,000        9/1/99       12/31/00
           Instrumentation

         Ceramphysics, Inc.                Private Contract     $   20,500        9/1/99       12/31/00

                               TOTAL:                           $1,529,500


</TABLE>


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

                                      -3-

<PAGE>


         With the exception of processes and devices being developed under
federal or private research grants (which are discussed more fully in "The SCI
Division - Sponsored Product Development Programs within the SCI Division"), the
Company's products are fully developed and currently are being sold in the
marketplace. The Company supplies materials to customers who are engaged in
product or process development themselves, but such customers purchase the
Company's products based on clear specifications for a fixed price.

         The Company currently does not have any export restrictions on foreign
sales of its products.

         As of December 31, 2001, the total amount of accumulated deficit the
Company has generated since its inception in 1987 was $5,600,395.

BACKGROUND OF SUPERCONDUCTIVITY AND ADVANTAGES OF HIGH TEMPERATURE
SUPERCONDUCTIVITY

         A superconductor is an element, inert-metallic alloy, or compound that
will conduct electricity without resistance when cooled below a certain critical
temperature. For the types of superconductors that the Company manufactures,
this critical temperature is -196(degree) Centigrade. This phenomenon was
discovered in 1911 in the metal Mercury when it was cooled with liquid Helium to
-273(degree) Centigrade. This cooling enables the material to carry electrical
currents without loss of energy and, due to the increased current the metals can
carry, be used to generate very large magnetic fields. Scientists realized that
the phenomenon of superconductivity raised the possibility of less expensive
electrical generation and transmission, powerful magnets and levitation. In the
past, the only way to achieve this phenomenon was to submerge the metals in
liquid Helium. Because of Helium's inherent instability in liquid form and cost
issues, the well-known use of superconductors in commercial applications was
impractical. These metals, now known as Low Temperature Superconductors ("LTS"),
are superconductive at temperatures from absolute zero up to as high as
23(degree) Kelvin.

         Kelvin is the temperature scale used to identify the extremely cold
conditions required for superconductivity. The Kelvin scale starts at "absolute
zero," which is the equivalent of -273(degree) Centigrade, and is the coldest
theoretical temperature attainable. The unit of measure on this temperature
scale is called a Kelvin ("K") and is equal to a single degree on the Centigrade
scale ("C").

         With the discovery of new ceramic compounds in 1986, superconductivity
can now be accomplished at higher temperatures by using liquid Nitrogen for
cooling. The boiling point of Liquid Nitrogen is 77(degree) K, which is
equivalent to -196(degree) C. These new ceramics bring superconductivity into
the realm of the practical since liquid Nitrogen is inexpensive, stable,
long-lasting, and the largest component in our atmosphere and environmentally
friendly. These materials are known as HTS materials.

         HTS materials provide the potential for significant increases in
performance of electrical systems. Every electrical application delivers
electricity from its source to a user through the use of "conductors." However,
conventional conductors, such as Copper, exhibit some performance disadvantages.
These performance disadvantages include resistance to electric current, causing
power loss, heat generation, interference and noise, each of which can
significantly decrease the performance of electrical systems. Additionally, the
ceramic superconductors manufactured by the Company must overcome several
hurdles if they are to gain wide spread commercial application. These include
problems associated with making flexible structures such as wire from brittle
materials such as ceramics, the limited performance of these materials at what
are considered practical temperatures, such as the boiling point of liquid
Nitrogen (77(degree) K), and the cost of any device based on these materials.
The scientific community has been working on these and other difficulties with
HTS materials since 1987. There is no assurance that all of these difficulties
can be overcome.

         Superconductors have the ability to conduct electrical current with
zero resistance, no power loss, and no generation of heat below some critical
current. The performance advantages of HTS materials in electronics applications
include reduced component size and weight, increased operating speeds and, in
transmission applications, include lower line losses. HTS materials exhibit
these properties when cooled to 77(degree) K, a process easily obtainable with
inexpensive liquid Nitrogen. LTS materials require cooling to as cold as
4(degree) K or -269(degree) C , with the use of the more expensive liquid
Helium.

                                      -4-

<PAGE>


         The problem of system-wide cooling is being addressed by several of the
Company's customers and others. While this problem must be solved for the
success of large area applications, such as power transmission lines, high
performance applications such as superconductive magnets for medical
applications have been widely demonstrated.

         The required use of liquid Helium has made widespread applications of
LTS superconductors impractical in many applications. The higher operating
temperatures of HTS superconductors have reduced the operating costs for HTS
products since the required liquid Nitrogen is inexpensive and readily
available. However, the HTS material itself, as a ceramic, is more difficult to
form into products than the metallic LTS materials. For example, with wire and
cables, the HTS material requires considerably more processing steps and
possibly a higher degree of processing precision in order to manufacture a
useful product. In many respects these processes are still in development by the
Company's customers and others.

         Because of these difficulties, it has been necessary to develop a
number of new or modified processes to achieve satisfactory results with the HTS
materials. The Company's process development in this area is being sponsored by
the National Science Foundation through a Phase II SBIR grant. This two year
program is intended to produce a fine grained superconductive powder which can
be manufactured in large batches. The Company is on schedule with its
development plans and continues to make sales based on the enhanced powder
products that have resulted from this research.

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 HTS materials for commercial
applications of the newly-discovered superconducting ceramics. The Company's
initial efforts were directed toward mastering the manufacturing process for
making high temperature superconducting ceramic powders, as discussed in further
detail below. 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.
Ceramic powders sold in such forms were used primarily in research applications.

         Subsequently, the Company began to develop other forms of HTS
materials. A broad commercial market for products using HTS superconducting
materials has not yet developed, although small niche markets have emerged for
some products. In the second half of 1989, 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 pressed and sintered ceramic pellet
which has been sized to fit into a special coating device called a sputtering
system.

         These HTS sputtering targets are used by customers of the Company in a
vapor deposition process to make thin films of the target material. This process
operates in 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.

         The Company's HTS products are produced and marketed by its SCI
Division. Additionally, the Target Materials, Inc. ("TMI") Division of the
Company is marketing some of the non-superconducting products that the Company
has developed. The Company established the TMI Division in 1992 and began to
market sputtering targets of materials other than superconductors for thin film
deposition. This division is located within the headquarters of the Company in
Columbus, Ohio and shares facilities and staff with the SCI Division. For
additional information, see "The TMI Division."

         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. However, new applications for advanced
mixed metal oxide materials are often sold into thin film applications. The SCI
and TMI divisions require the same manufacturing equipment for significant
portions of each business. It is management's opinion that a single streamlined
company will benefit 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.

                                      -5-

<PAGE>


         The following chart summarizes the annual revenues and percentage of
total consolidated sales for the fiscal years ended December 31, 1999, 2000, and
2001 respectively, for each class of products that the Company produces.

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                                              12/31/99                 12/31/00                  12/31/01
                                              --------                 --------                  --------

                                       Annual      % of Total   Annual      % of Total    Annual      % of Total
PRODUCT CLASS                          Revenue       Sales      Revenue        Sales      Revenue        Sales
-------------                          -------       -----      -------        -----      -------        -----
<S>                                  <C>             <C>       <C>             <C>        <C>           <C>

Superconductive Powders              $  107,277       4.01%    $   47,886       1.49%        46,408       1.27%

Nonsuperconductive Powders               18,003       0.67%        24,698       0.77%        39,644       1.08%

Superconductive Targets                  85,386       3.19%        55,981       1.75%        72,752       1.99%

Nonsuperconductive Targets(1)         1,079,133      40.29%     1,340,411      41.82%     1,454,454      39.70%

Buy & Resell(2)                         552,663      20.63%       781,377      24.38%       845,814      23.09%

Bonding and Backing Plates(3)           163,200       6.09%       210,474       6.57%       313,490       8.56%

Demonstration Kits                       15,141       0.57%        20,961       0.65%        22,206       0.60%

Levitators                               11,245       0.42%        26,000       0.81%        14,628       0.40%

Contract Research                       425,153      15.87%       525,566      16.40%       415,141      11.33%

Other(4)                                221,161       8.26%       171,809       5.36%       438,951      11.98%
                                     ----------                ----------                ----------

                                     $2,678,362                $3,205,163                $3,663,488
                                     ==========                ==========                ==========
</TABLE>


(1)     Includes nonsuperconductive targets from the SCI division and ceramic
        and metal targets from the TMI Division.
(2)     Includes buy and resell of precious metals, buy/resell targets and other
        miscellaneous items.
(3)     Includes sales from the SCI and TMI divisions.
(4)     Includes scrap inventory sales, as well as shipping and packaging
        charges on the Company's products.


Original Company Focus in HTS Products

         The Company's original focus was to offer HTS powders in various
chemical mixture ratios and bulk solid state forms of HTS materials, including:

         o    sputtering targets;
         o    Levitators(R), which produce a large oriented grain useful for its
              high levitation forces, ability to trap magnetic flux, and carry
              large currents;
         o    magnetic shields; and
         o    various kits, support equipment and other materials.

         Superconductors can be used as magnetic shields because of their unique
diamagnetic properties. Diamagnetism is the ability of a material to repel a
magnetic field. Many naturally-occurring substances, such as water, wood, and
paraffin, exhibit weak diamagnetism. Superconductors exhibit strong diamagnetism
below their Tc, which represents the critical transition temperature below which
a material begins to superconduct. The sudden loss of resistance in a
superconductive medium may occur across a range as small as twenty millionths of
a degree Centigrade.

         The market for all HTS products, although small, has historically been
represented by groups seeking to establish a fundamental understanding of the
properties, principles and theory of these materials and also groups focused on
applications of high temperature superconductivity. The ratio of fundamental to
applications research continues to shift toward commercialization of the
technology as demonstrated by the increasing number of "beta prototype" programs
in the industry. A beta prototype is a device or system in a pre-commercial
stage of development, which has been tested in a laboratory as an alpha
prototype, and then further developed to be tested in an actual customer site in
a typical operating environment. Operating experience and customer feedback in
the beta test phase can be used in the design of an initial commercial product.

                                      -6-

<PAGE>


         The Company provides the basic building blocks for many HTS products,
since nearly all applications of HTS start with powder that is subsequently
processed into products such as wire, sputtering targets, or large single
crystals, which, in turn, can be used to manufacture transmission cables,
superconductive magnets, sensors, radio frequency ("Rf") filters for wireless
communications, and frictionless bearing systems for linear or rotating system
applications. A frictionless bearing system is a non-contact device that
utilizes the diamagnetic characteristics of a superconductor to stably levitate
or suspend a load which may be in rotational or linear motion. The system
overcomes normal frictions which limit conventional mechanical bearings by
eliminating physical contact between the components. This bearing design has
been used in energy storage systems under development by Boeing, among others.

         The Company has a suite of proprietary processes that are utilized in
the production of its products. As discussed later, the Company also has
licenses of patents and its own patent and patent applications in this field.
See the section of this document entitled "Intellectual Property" for additional
information.

         The Company's proprietary ceramic powder and powder densification
processes have been successfully adapted to other electronic ceramics that
exhibit unique, non-superconductive characteristics. Some of these materials are
also in transition from fundamental to applications oriented development and may
be the source of significant revenues in the Company's future. These materials
can be categorized as ionic or electronic conductors and materials with unique
magnetic properties such as the ceramics used in non-volatile computer memories.


Expansion into Other Materials and the Creation of the TMI Division

         By early 1990, it was clear to the Company that the market for HTS
superconducting powder, targets and other HTS products was still too small
(about $1 to $2 million annually) to assure survival and growth of the Company.
Accordingly, the Company expanded its product line to include sputtering targets
made of non-superconducting ceramics, metals and metal alloys. As the demand for
these products grew it became evident that this new product line could expand
more rapidly if it were managed as a focused, non-superconductive, effort. The
metal, metals alloy and simple ceramic sputtering targets were then packaged
into the newly created TMI Division. The Company's non-superconductive products
are marketed and identified under the TMI name.

         The total market for non-superconducting metal, metal alloy and simple
ceramic targets for the thin film industry is estimated at $720 million globally
based on a Business Communications Company ("BCC") report dated August 26, 1999.
The Company, through its TMI Division, also embarked on a program to move
selected products developed for research and development applications into
production applications. Through continuing relationships with equipment
manufacturers and potential customers, TMI is able to compete in the production
markets with existing products both on a technical and price basis. There are
new materials being continuously investigated, and these new ceramics and metal
alloys sometimes develop rapidly into significant markets. The Company believes
that it has positioned itself well in the marketplace to move quickly as these
materials move from research and development into production usage. In 2001,
approximately 79% of the Company's target shipments were classified by the
Company as production, and 21% were classified as research and development. This
is a marked change from 100% classification as research and development
shipments in 1995. The Company's objective has been to achieve and maintain an
80% to 20% ratio of production to research and development shipments.

         The Company has continually added production processes and testing
equipment for the many product compositions that can be used as sputtering
targets. The TMI Division standard products, as listed in its catalogue, now
include nearly 200 items of ceramic materials and metals and alloys available in
various sizes and shapes. TMI shipments were 68.7% of total Company revenues in
2001.

         The Company offers a wide range of HTS products to the marketplace. The
Company has competitors for all of its various products. In general, the
Company's HTS products are distinct in the marketplace due to the molecular
level mixing achieved through the Company's patented and proprietary chemical
precipitation processes for ceramic powders, the chemical purity achievable by
these processes, and the high level of characterization and customization the
Company performs for each client. Accordingly, the Company intends to be price
competitive on its products but not the low price leader.


                                      -7-

<PAGE>



THE SCI DIVISION

         The SCI Division primarily produces and markets the Company's various
HTS products, which include both superconducting and non-superconducting
products. The most significant of the Company's HTS products are discussed
below.

Superconducting Products

         High Temperature Superconductive Powders. HTS powders are the building
blocks for most applications of high temperature superconductivity. The Company
offers a wide variety of HTS powders. Powders are manufactured using
conventional solid state and wet chemistry, as well as proprietary processes
developed or licensed by the Company. Wet chemistry refers to a mixing technique
using liquid precursors from the Company's processes which utilize dry blending
of chemical precursors. Superconducting powders represented approximately 1.3%
of Company revenues in 2001, 1.5% in 2000, and 4.0% in 1999. The Company's HTS
powder production is also used internally to make Levitators(R), HTS sputtering
targets and other ceramic components.

         Customers in the SCI Division have included several manufacturers of
superconducting wire, wherein the powder is put into a tube and drawn and
redrawn to very fine size. Such wire is now available from our customers and
others in lengths sufficient to make superconducting magnets, motors, and power
transmission lines. This market for the Company's HTS powder is expected to grow
as these applications transition from research to prototype to production use.
Some of these applications are now in the engineering-prototype stage, and are
being evaluated with respect to their conventional counterparts. There currently
are several highly-publicized prototype devices or systems based on HTS
materials, most of which in the United States are sponsored by the Department of
Energy through its Strategic Partnership Initiatives, including:

         o    Fault Current Limiter
         o    Transformer
         o    Transmission Line
         o    Flywheel Energy Storage System

         The purpose of the engineering prototypes now in evaluation is to
determine the technical and economic feasibility of the specific applications.
Although it is unlikely that all of the initially configured prototypes now in
testing will be economically viable, there are a number of applications being
tested, and the Company believes that some of these will move into production in
the next several years, although in most cases the time lines for development
are unclear. Specifically, the development of Ittrium Barium Copper Oxide
("YBCO") wires based on the coated conductor approach still has several
technical and financial hurdles to overcome, and at this time it is unclear when
such wires will move into production phase. In addition, because much higher
currents can be carried in HTS cables for a given volume, there may be savings
realized through the minimization of the disruption to dense cityscapes as the
transmission and distribution grid is refitted to accommodate the increase in
demand for electric power.

         Encouraging results are also being shown by companies other than SCI
that make superconductive Rf filters for the distributed base stations which
support the national wireless communication network. Rf filters are used in
wireless communication systems to enable the selection of desired radio
frequencies and the exclusion of undesired signals. Such applications of HTS
promise to reduce noise level, decrease signal interference, and reduce the
number of dropped calls. Additionally, some HTS equipped cellular base stations
extend the range of the station.

         Another promising application of HTS is fast response fuses, sometimes
called fault current limiters. In this case, the very short (fraction of a
cycle) response time of HTS material to voltage surges on electric transmission
and distribution networks may reduce downtime and capital expenditures for
utilities. HTS fault current limiters are self-resetting and, unlike
conventional fuses, are not destroyed by a voltage surge. The Company currently
has an alliance with Argonne National Laboratory in the development of this
device. This product has not yet reached the prototype test stage.

                                      -8-

<PAGE>


         The major market for LTS wire is in magnets for medical Magnetic
Resonance Imaging ("MRI") systems. Recent tests conducted by Siemens show that
HTS wire may have an economic and technical advantage for this application. Cost
advantages may be achieved in new systems by the elimination of liquid Helium
cooling. Technical advantages may be achieved through the higher fields
obtainable by using HTS materials at very low temperatures. The Siemens tests
were not conducted with wire containing the Company's HTS materials, but with
wire of similar composition produced by the Company's competitors. At this time,
the Company's HTS products have not been tested in an MRI system.

         The Company makes the raw materials that are used by the manufacturers
of the above mentioned products, and actively solicits the business of those
making such products.

         Superconducting Sputtering Targets. The Company converts its powders
into dense, precisely machined ceramic components which are used as sputtering
targets by its customers for the manufacture of superconductive thin films.
These thin films can then be etched in patterns to produce electrical devices
such as superconductive quantum interference devices that are extremely
sensitive to small electric and magnet fields, such as brain waves, a passing
submarine, or certain electric and magnetic signatures of ore or oil deposits.
This market was 0.2% of Company revenues in 2001, 1.7% in 2000 and 3.2% in 1999.

         HTS materials, as thin and thick films both as sputtering targets and
powder are currently used in Rf filters microwave applications such as in
cellular base stations. At this time, there are several companies whose
superconductive Rf filters are going into limited production. These companies
include: Superconductor Technologies, Inc., Conductus, Inc., and Illinois
Superconductor Corp. Other companies are thought to be developing such products
based on HTS materials. The Company is a potential supplier to these producers
for both HTS powder and sputtering targets, although it has not sold these
products to such producers as of yet.

         The "next generation" of HTS wires and cables is expected to be based
on a structure called a "coated conductor." In this case the conductor, YBCO, is
deposited using a thin film technique onto a metal tape or foil which has been
modified so that the area receiving the superconductor is specifically aligned
or "textured" to promote optimal performance of the coating. Thin film
deposition is a method of fabricating ceramic superconductors to more precisely
control the growth of the crystalline structure to eliminate grain boundaries
and achieve a desired T(c). The deposition of the YBCO conductor is being
pursued in the United States and Japan by use of the Company's sputtering
targets. While this application is expected to take several years to develop,
for now it enables the Company to participate in near term applications of HTS
wire through its Bismuth, Strontium, Calcium, Copper and Oxygen ("BSCCO")
materials, and future requirements through its YBCO ceramic components.

         "Levitators(R)." The Company has a non-exclusive license from Argonne
National Laboratories for producing seeded and melt textured YBCO large single
domains for which the Company has been issued the trademark "Levitators(R)." In
a typical melt processing method, YBCO is heated above its peritectic point
where it melts incongruently into Y(2)BaCuO(5) and a Ba- and Cu- rich liquid.
The semi-solid melt is cooled slowly to obtain aligned grains of YBCO or
domains. In order to achieve high levitation forces, large domain size and high
critical current density ("J(c,)") are desirable. One way to increase the domain
size is by initiating grain growth by using a seed crystal. In the presence of a
favorable temperature gradient, the seed not only ensures a single nucleation
site but also permits controlled orientation of the grains. The seeding
technique along with a controlled temperature gradient enable growth of YBCO
domains as large as that of the sample size.

         A superconducting Levitator(R) is a compact of the Company's
superconductive powders which have been processed to form a large C-axis
oriented grain that exhibits a high critical current density and considerable
diamagnetism. The Company has advanced its technology well beyond the original
Argonne licenses, and has applied for and expects to be issued a patent for its
own proprietary processes to manufacture Levitators(R). At this time, the
Company's large domain Levitators(R) ("LDL"), made from its superconducting
powders, exceed 30 Newtons of separating force when used with certain magnets.
This value is high enough to make practical several applications, including near
frictionless bearing systems, flywheels energy storage devices (so called
frictionless flywheels), and linear transportation devices (e.g., Maglev
trains).

                                      -9-

<PAGE>


         In 1996 the Company supplied approximately 1,600 Levitators(R) to
Commonwealth Edison for a prototype frictionless flywheel energy storage
("FFES") device. The FFES device is a flywheel that rotates in an evacuated
chamber and is supported by HTS Levitators(R) so that there are no mechanical
bearings. The friction factor is more than 1,000,000 times less than the best
mechanical bearings. Under these conditions, very little energy is lost to
friction. Energy is applied to the flywheel to spin it up, and energy is
withdrawn at nearly 90.0% efficiency as needed.

         At this time, Commonwealth Edison has placed the development of FFES
units on hold. The prototype for which the Company supplied for the
Levitators(R) is said to have demonstrated the feasibility of HTS levitated
frictionless bearings for this application. The Levitators(R) supplied by the
Company for this program were tested by Argonne National Laboratory.

         The Company has engaged in further research and development on its
Levitators(R), with a view toward enhancing their performance capability and
reducing the costs of production. The Company has focused its efforts on
identifying a suitable replacement for Platinum Oxide, which is one of the most
expensive components of its basic powder mix for Levitators(R). If successful,
levitator production costs will be substantially reduced. Currently the Company
is exploring the use of Cerium as a substitute for Platinum Oxide with some
success.

         The Company continues to collaborate with Argonne National Laboratory
through a Creative Research and Development Agreement in order to advance the
technology and broaden the range of applications for which Levitators(R) are
applicable. Improvements in performance, combined with a significant reduction
in manufacturing costs, are expected to result from this multi-year, cost
sharing program.

         The United States electric power industry is scheduled for deregulation
in the near future. This could force competition to occur between power
providers well beyond their current regional boundaries. Commonwealth Edison,
which purchased the Company's LDLs in 1996, at that time supplied approximately
5% of the electrical power used in the United States. Officials at the utility
have advised the Company that they view the development of the FFES system as a
key component of their competitive strategy. Other utilities may also use these
systems in their competitive strategies. There are also programs to develop
similar energy storage devices in Japan, the United Kingdom, Korea and Germany.
Currently Boeing Corporation, which is one of the Company's competitors, is
developing a competitive FFES system that uses HTS materials as an enabling
component of the bearing system.

         Superconducting Accessories. The Company provides certain accessory
superconducting products that are needed, in addition to the Company's core HTS
materials, to support its customers' research or manufacturing programs. The
Company does not manufacture accessory superconducting products, but rather it
purchases such products for resale to the Company's customers.

         Demonstration Kits, Instrumentation Accessories for Superconductivity
Education. Demonstration kits were the first products sold by the Company in
significant volume. Packaged for the educational community, the Company
continues to manufacture a family of laboratory demonstration kits designed to
exhibit the key features of perfect conduction, diamagnetism and flux trapping
that are unique to HTS materials. These kits are marketed directly by the
Company and also through a network of educational product distributors which
include Edmund Scientific, Arbor Scientific, Beckly Cardy and others. The
instrumentation and accessories offered by the Company include a wide range of
discs, dies, rare earth magnets, vacuum jars, box furnaces, digital volt meters,
dewars and flasks, and related items. These combined categories represented
approximately 0.6% of Company revenues in 2001, 0.7% in 2000 and 0.6% in 1999.

Non-Superconducting Products

         Beginning in 1996, the SCI Division of the Company manufactured and
sold non-superconducting, as well as HTS products for commercial use which can
be categorized as engineered powders, engineered parts, and engineered
components.

         Engineered Ceramic Powders. The Company has adapted its proprietary
Ceramic Oxide powder production processes for the manufacture of fine,
ultra-fine and nano-crystalline powders of non-superconductive materials to

                                      -10-

<PAGE>


support a variety of expanding applications requiring electronic ceramics. These
powders are used by customers of the Company in the development or manufacture
of:



         o    solid oxide fuel cells;
         o    ceramic membranes for the separation of natural gas from its
              contaminants;
         o    Lithium ion batteries;
         o    ceramic electrodes for harsh environments;
         o    ceramic electrodes as a replacement for precious metals; and
         o    capacitors.

         Engineered ceramic powders were 1.1% of Company revenues in 2001, 0.8%
in 2000, and 0.7% in 1999.

         Ceramic Sputtering Targets. The Company has adapted its proprietary
ceramic powder densification processes to manufacture a variety of sputtering
targets from its line of electronic ceramic powders. The energy storage and
optical industries are working to utilize the unique properties of electronic
ceramics to enhance the performance or reduce the cost of their products.

         Sputtering targets composed of complex ceramic oxides for applications
such as non-volatile memory, thin film capacitors, thin film electrodes, and
transparent electronic conductors are an emerging product line for the SCI
Division, comprising 10.2% of the revenues in 2001, 10.2% in 2000 and 5.9% in
1999. The hope of the Company is that materials developed to supply customers'
research requirements will grow into large scale production orders with the
commercial success of the next generation of thin-film-based electronic devices.
The Company has certain proprietary knowledge and trade secrets related to the
manufacturing of these non-superconductive ceramic oxide sputtering targets.

Sensors

         The sensors are no longer a material part of the business. A proposal
to the National Science Foundation was not awarded to the Company.

Strategic Alliances, Major Suppliers and Customers

         The Company attempts to do most development work in the SCI Division in
cooperation with partners who will ultimately consume, or may serve as a channel
to market, the Company's products and technology. In this way, the Company
remains focused on providing value-added materials solutions for a range of
commercial applications. No customer accounted for more than 10% of total
revenues.

         Most of the Company's products are manufactured from component
chemicals and metals supplied by various vendors. The SCI Division is dependent
upon ultra 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.

         Principle suppliers to the SCI Division in 2001 were MTI Corp., Romex,
and Sputtering Materials Inc. In every case, the Company believes that suitable
substitute vendors could be found. Also, as the Company's volume grows, the
Company may make alliances or purchasing contracts with these or other vendors.


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
sponsored by the National Science Foundation, large and specially formulated
YBCO discs and rotation/levitation apparatus for gravity modification research
sponsored by NASA.

                                      -11-

<PAGE>


         The Company's initial focus on HTS was shifted upon the realization
that the market for that technology would take several years to develop, and
that the Company's talents and capital base could also be used to provide
materials solutions in a wide range of other industries. While according to a
study commissioned by the United States Department of Energy, HTS is expected to
develop into a multi-billion dollar industry in the first decade of this
century, the Company has diversified its efforts to concurrently participate in
other materials markets. The emphasis of the SCI Division's research has been
broadened to include engineered ceramic oxide materials.

         The SCI Division of the Company remains focused on the development of
materials, processes and devices based on its core skills in:

         o    ceramic powder fabrication;
         o    powder densification;
         o    thin film technology, a device fabrication technique where
              individual layers of the device are less than one micron thick and
              are typically constructed using specialized coating techniques
              that can utilize the Company's sputtering targets; and
         o    thick film technology, a device fabrication technique where
              individual layers of the device are more than one micron thick and
              are typically constructed using specialized coating processes like
              tape casting, which can utilize the Company's ceramic powders.

         These developments are realized through partnerships with the Company's
many customer collaborators. The Company's reliance on a commercial customer
collaborator optimizes its development expenditures by focusing on the projects
where customers have identified markets and agree to provide future revenue
streams based on the successful completion of the project.

         Company Sponsored Research and Development. The Company often
undertakes commitments in the ordinary course of business that require the
Company to develop methods or processes that expand the Company's skill set. In
general, the Company does not initiate a formal development program to
accomplish these tasks, but does absorb any expenses which may exceed the
revenues provided by clients, as part of its internal development costs.

Sponsored Product Development Programs within the SCI Division

         The Company has a number of research programs, including two Phase II
SBIRs that are sponsored by government agencies. These programs are being
conducted within the SCI Division. These programs are all believed to have
significant commercial potential if the respective technologies can be fully
developed. The research program sponsored by NASA involved various experiments
to determine the proper composition and crystal structure of a specialized
ceramic material which, when used in conjunction with a superconductive YBCO
layer, and the assembly is both cooled and rotated at high speeds, may shield
the effects of gravity. Another research program sponsored by the National
Science Foundation as a Phase II SBIR involves the automation of the chemical
precipitation and also the scale up and automation of the low pressure
calcination process for the Company's BSCCO 2-2-1-2 superconductor powder.
Experiments are being performed to determine the reliability of the automated
process, and the effects of the larger batch size on quality in the calcination
step. The Company's subcontractor, Oxford Superconducting Technologies, was also
using selected powder samples to make multi-filament superconductive wire and
also developing a process for the continuous heat treatment of long lengths of
HTS wire. The Phase I STTR program, also sponsored by NSF, included experiments
using various combinations of the Company's ceramic substrates and powders to
determine which pairing showed the most sensitivity to NOx gases at temperatures
in the range of 700-1000(degree) C. SBIRs and sponsored research and development
contracts accounted for 11.3% of the Company revenues in 2001, 16.4% in 2000,
and 15.9% in 1999.

         Several public and privately funded programs currently support
continued product, process and component development within the SCI Division.

                                      -12-

<PAGE>


         Sponsored programs include:

         o    National Aeronautics and Space Administration ("NASA"), beginning
              on April 1, 1999, funded a Phase II SBIR for a $580,000 program
              over two years to demonstrate the feasibility of manufacturing a
              large, bi-layered superconductive toroid (ring) and related
              levitation/rotation system for gravity modification experiment in
              cooperation with Argonne National Laboratories and Wright State
              University. The Company's share for in-house work on this project
              was $310,000 over two years. We were given a one year, "no cost"
              extension on the contract. The extension will expire in May 2002.

         o    The National Science Foundation ("NSF"), beginning on September 1,
              1999, funded a Phase II SBIR program over two years for $400,000
              for advanced manufacturing of BSCCO superconductive powders for
              low cost, continuous HTS wire fabrication, with partner
              Intermagnetics General Corporation, Advanced Superconductor
              Division. Pursuant to the terms of an award letter from NSF dated
              August 26, 1999, the Company's share of this funding was $200,000
              over two years. The grant is subject to the NSF SBIR Phase II
              grant general conditions and to the NSF SBIR/STTR Phase I Program
              Solicitation and Phase II Instructions. These conditions require,
              among other things, that the Company submit semiannual progress
              reports and a final report to NSF as a condition to payment of the
              award amounts. The Company may subcontract portions of the work to
              be performed under the grant, although the Company itself must
              perform at least one-half of the research and analytical effort.
              The Company may retain rights in technical data developed under
              the grant, except that the U.S. federal government will have the
              right to use such data for government purposes. The Company may
              also retain all rights, title and interest in any patentable
              invention or discovery conceived or reduced to practice in
              performance of work under the grant, provided that it discloses
              the invention or discovery to NSF, notifies NSF in writing of its
              intent to retain title to the invention or discovery, and takes
              appropriate action under applicable U.S. federal patent laws. If
              the Company fails to follow these procedures, it may lose title
              and rights to the invention or discovery to the U.S. federal
              government. The contract was extended for an additional twelve
              months of research. The contract was originally planned to
              finalize in August 2001. However, with the generous extension by
              NSF, based on a competitive review our progress in the first two
              phases of the SBIR program, we were awarded $300,000. This program
              will expire on August 31, 2002.

         o    NSF, beginning on July 1, 1999, funded a Phase I Small Business
              Technology Transfer Program ("STTR") for $100,000 for the
              development and technology transfer of a sensor for oxides of
              Nitrogen gas to be used in harsh environments, i.e. an automobile
              exhaust stream, with the Center for Industrial Sensors and
              Measurement at The Ohio State University as a partner. Pursuant to
              the terms of an award letter from NSF dated June 25, 1999, the
              grant is a fixed amount grant. The Company's in-house share of
              this funding is $50,000. This program expired on June 30, 2000,
              although work continues on the device in preparation of a Phase II
              grant application, which was submitted in February 2002.

         o    NSF, beginning on January 1, 2001, funded a Phase I SBIR for
              $100,000 for a project entitled "New Coordination Complexes for
              the Synthesis of Nanocrystalline SrRuO3," with Oklahoma State
              University as a partner. Pursuant to the terms of an award letter
              from NSF dated November 27, 2000, the grant is a fixed amount
              grant that expired on June 30, 2001. The Company was required to
              file a Phase I Final Report within 15 days of the date the grant
              expired. The grant is subject to the NSF SBIR/STTR Programs
              FY-2000 and Phase I Grant General Conditions, which required,
              among other things, that the Company timely submit the final
              report to NSF to receive full payment of the grant. The Company
              could subcontract portions of the work to be performed under the
              grant, although it was required to perform at least two-thirds of
              the research and analytical effort itself. The Company may retain
              rights in technical data developed under the grant, except that
              the U.S. federal government will have the right to use such data
              for government purposes. The Company may also retain all rights,
              title and interest in any patentable invention or discovery
              conceived or reduced to practice in performance of work under the
              grant, provided that it discloses the invention or discovery to
              NSF, notifies NSF in writing of its intent to retain title to the
              invention or discovery, and takes appropriate action under
              applicable U.S. federal patent laws. If the Company fails to
              follow these procedures, it may lose title and rights to the
              invention to the U.S. federal government.

                                      -13-

<PAGE>


         All of the sponsored research and development contracts can be
cancelled at the sponsor's option, with accrued costs being paid. The Company
currently had $59,976 of funding from government sponsored research and
development programs that could be cancelled at any time.

         To date, federal funding has been directly or indirectly responsible
for an estimated 80.0% of the developmental funding of the HTS industry. Such
funding plummeted in 1992 and 1993 when the Supercollider project was
terminated. Federal funding has rebounded somewhat in recent years. Management
of the Company anticipates that any increase in funding for superconductivity
research may benefit the Company indirectly, since many of its customers'
research and development efforts receive government funding. However, while the
Company continues to submit proposals to federal and private funding
organizations, there is no assurance that the Company will be awarded similar
contracts in the future.

Competition in the HTS Industry

         The Company has a number of domestic and international competitors in
the HTS field, many of whom have resources far in excess of the Company's
resources. After more than a decade of intensive development work, commercial
prototypes of various large scale HTS applications are now reaching prototype
test stage. It is anticipated that as commercial devices based on HTS technology
begin to gain wide spread acceptance, and the attractiveness of the industry
improves, new competitors for powders, sputtering targets and large
superconductive single crystals will emerge. A major United States competitor of
the SCI Division is The Surface Science Division of Praxair Corporation. In
Europe, the SCI Division competes principally with a spin-off of Aventis
(f.k.a., Hoechst), a division of Aliatec Corporation of France. In Japan, the
SCI Division's principal competitor is the DOWA Chemical Company. Some of the
developers of HTS based products, such as American Superconductor Corporation,
have also chosen to internally manufacture the HTS powders that they require,
and therefore compete with the Company in some cases, or foreclose themselves as
potential customers of the Company.

Marketing and Sales

         The SCI Division markets its products by direct sale in the United
States. Most of the Division's orders are in response to requests for
quotations. The SCI Division distributes a catalogue of its products, exhibits
at the several relevant tradeshows, and engages in direct mailings. The Company
also has an operating website at www.superconductivecomp.com. The Company
intends to intensify its marketing efforts in the future.

         The SCI Division also sells its products through distributors in some
foreign markets. On March 2, 2000, the Company announced that Earth Chemicals in
Japan was selected as the exclusive distributor for Japan. The Company has
non-exclusive distributors in Europe, Korea, Taiwan, Israel and Singapore.

         The global acceptance of the Internet has greatly increased the SCI
Division's ability to promote itself to the entire scientific community, and
thereby facilitated direct sales, engineering and customer support from the
Company's Columbus, Ohio facility. Notwithstanding an increasing number of
distributors, more than 75% of the SCI Division's international sales are
handled directly by the Company's in-house sales staff.

         In addition to distributors and representatives around the world and
its Internet website, the Company maintains a modest print advertising program,
which includes the magazines Physics Today, Superconductor, Cryo-electronics and
the Thomas Register of Manufacturers. The Company publishes technical articles
in scientific journals and presents technical papers at technology-based
conferences, workshops and symposia.

         The Company has sold HTS products to customers in 42 countries
worldwide. The total number of customers served by the Company was 269 in 2001,
235 in 2000, and 185 in 1999.

         No single customer accounts for more than 10.0% of total SCI Division
sales.

Production Capacity

         The SCI Division has a current HTS powder production capacity of
approximately 700 kilograms per year, but is expected to increase to 1,000
kilograms per year in the year 2002. The Company was able to maintain its
production

                                      -14-

<PAGE>


capacity in the year 2001 to keep pace with customer demand. The cost of this
expansion was supported by grants from NSF and by additional investment in
equipment by the Company. Currently, the Company is on track to meet future
demand. Generally, the Company has not had instances where it was unable to meet
demand, although delivery times have been extended by a few weeks in some cases
without any loss of sales. Increasingly, however, the customers of the SCI
Division are inquiring about the production capacity of the Company for their
future production requirements. Based on this experience and occasional loss of
customers to larger competitors, management views the expansion of HTS capacity
in the SCI Division as a primary objective in the near future.

Quality Control

         The Company uses a network of trusted and qualified suppliers, backed
up by the Company's internal and contracted analytical capabilities. Incoming
raw materials are tested, when required, for suitability using techniques such
as X-ray diffraction ("XRD"), inductivity coupled plasma ("ICP") spectrometry,
particle size analysis, and other methods. In addition to these tests, sample
lots of the Company's complex ceramics are often fabricated to determine if a
new supplier and/or new lot of input materials can be used to make a product to
specification.

         The quality assurance processes for Company products include critical
temperature, carbon content, or packing density. The Company certifies its
products for phase purity by XRD, for major and trace elemental composition by
ICP, and mechanical tolerances using certified calipers and micrometers.

         The amount of rejected product during internal processing was 0.8% of
revenues in 2001, 1.5% in 2000 and 4.5% in 1999. Customer returns of SCI
Division products were 0.7% of revenues in 2001, 1.5% in 2000 and 0.1% in 1999.

         The Company owns its quality control equipment and also selectively
contracts with a network of domestic vendors for additional analytical
capabilities. The Company's in-house analytical instruments include:

         o    ICP manufactured by Leeman Laboratories, Inc.;
         o    particle size analyzer manufactured by Toshiba Corporation.;
         o    XRD manufactured by Rigaku Corporation;
         o    electronic dispersive X-ray spectrometer manufactured by Edax;
         o    differential thermal analyzer manufactured by Perkin Elmer
              Corporation;
         o    scanning electron microscope manufactured by ISI Corporation;
         o    various digital calipers, analog calipers, digital and analog
              micrometers, routinely calibrated against National Institute of
              Standards ("NIST") traceable standards; and
         o    various digital weight scales that are routinely calibrated
              against NIST traccable standards.

Intellectual Property

         The Company has developed or acquired intellectual property in the form
of patents, patent applications, and licenses on patents. The Company currently
is not aware of any litigation involving its products or processes, nor has the
Company been contacted by any potential litigants regarding the same.

         Patents and Patent Applications. The Company has applied for and
received from the United States Patent and Trademark Office patent # 5,863,867
dated January 26, 1999, for Fine-Particle Bi-Sr-Ca-Cu-O Having High Phase Purity
made by a Chemical Precipitation and Low-Pressure Calcination method. This
patent will expire on October 28, 2016.

         The Company has applied and received from the United States Patent and
Trademark Office patent #6,258,754 dated July 10, 2001 for a new process to join
two individual strongly linked super-conductors utilizing a melt processing
technique. This patent will expire July 15, 2018.

         Several other patents have been or may be filed covering various
aspects of the HTS field, including the basic concepts, the powder composition,
processing, and products. Industry wide, it has been reported that over 4,000
applications exist for HTS materials, processes and applications. The Company
does not have a license or patents covering all products that it makes and
markets in the HTS field.

                                      -15-

<PAGE>


         The Company may not be able to obtain licenses for manufacturing from
the patent holders. Furthermore, the Company may have a liability, which cannot
be determined at this time, for products produced prior to the issuance of the
patents. The Company may not have the resources to defend itself in the event of
a patent lawsuit, although the Company is not currently a party to any ongoing
patent dispute or litigation and knows of no circumstances at this time that
would give rise to such a dispute or litigation.

         The Company's patent attorneys are Standley and Gilcrest of Columbus,
Ohio and Hudak and Shunk of Akron, Ohio. Ms. Laura Shunk, a partner in that
firm, is the daughter of Dr. Edward R. Funk, Chairman of the Board of Directors
of the Company.

         Trademarks. The Company has a federally registered trademark on the
word "Levitator(R)," which is used to describe the SCI Division's line of large
domain YBCO seeded and melt-textured monoliths.

         Non-Exclusive Licenses. The Company has the following non-exclusive
licenses:

         o    Sandia National Laboratories - Sandia Chemical Prep Process for
              line YBCO superconductive powders, license #95-000131, based on
              U.S. patent #4,839,339, dated June 13, 1989. The Company's license
              to use this patent is governed by the terms of a Nonexclusive
              License Agreement between the Company and Sandia Corporation,
              which operates Sandia National Laboratories, effective February
              26, 1996. Pursuant to this Agreement, the Company has a
              non-transferable, non-exclusive right and license to make, sell,
              lease and transfer products that are operated under any claim of
              Sandia patent rights for patent # 4,439,339. In exchange
              therefore, and in addition to an initial fee paid on the effective
              date of the Agreement, the Company currently pays Sandia a royalty
              equal to 5% of the net sales price of the licensed product sold,
              leased or transferred. The Nonexclusive License Agreement is
              effective until the earliest to occur of: (1) January 1, 2015, (2)
              expiration of the subject patent rights, or (3) a default by the
              Company on a royalty payment or other breach by the Company of the
              Agreement that is not cured within 60 days after written notice
              from Sandia of such default. Sandia may also terminate the
              Agreement upon the Company's dissolution, insolvency, bankruptcy,
              or similar event.

         o    Argonne National Laboratory Low Pressure Calcination process for
              low Carbon HTS material. License # ANL-IN-89-030, based on U.S.
              patent #5,086,034. This license is subject to the terms of a
              Nonexclusive License Agreement between the Company and The
              University of Chicago as operator of Argonne National Laboratory,
              effective as of October 12, 1995. Pursuant to this Agreement, the
              Company has a nonexclusive license to use U.S. patent #5,086,034
              and all extensions thereof in the processing of HTS powders. In
              exchange therefore, and in addition to an initial non-refundable
              license fee, the Company currently pays a royalty equal to 1.25%
              of its gross sales of products made within the scope of any claim
              of the subject patent. The Agreement is effective for as long as
              the patent is effective, except that the Company may terminate at
              any time, with or without cause, upon written notice to the
              University, and the University may terminate if the Company has
              breached a material term of the Agreement and has failed to cure
              the same within 90 days of receiving written notice of such breach
              from the University. The Company may assign the Agreement only
              with the University's consent, which the University may not
              unreasonably withhold.

         o    Argonne National Laboratory Levitator Package. Licenses #
              ANL-IN-93-008, ANL-IN-93-130, ANL-IN-93-134 based on U.S. patents
              #5,504,060 (Method of Harvesting Rare Earth Barium Copper Oxide
              Single Crystals), #5,549,748 (Method of Harvesting Single Crystals
              from a Peritectic Melt), and #5776,864 (Large Domain 123 Material
              Produced by Seeding with Single Crystal Rare Earth Barium Copper
              Oxide Single Crystals). This license is subject to the terms of a
              Nonexclusive License Agreement between the Company and The
              University of Chicago as operator of the Argonne National
              Laboratory, effective as of October 12, 1995. Pursuant to this
              Agreement, the Company has a nonexclusive license to use the
              foregoing patents in levitator materials and seeds for inducing
              phase control in levitator materials during melt processing. In
              exchange therefore, and in addition to non-refundable license fees
              already paid, the Company currently pays a royalty equal to 5.0%
              of its gross sales of products made within the scope of

                                      -16-

<PAGE>


              any claim of the subject patents. The Agreement is effective for
              as long as the patents are effective, except that the Company may
              terminate at any time, with or without cause, upon written notice
              to the University, and the University may terminate if the Company
              has breached a material term of the Agreement and has failed to
              cure the same within 90 days of receiving written notice of such
              breach from the University. The Company may assign the Agreement
              only with the University's consent, which the University may not
              unreasonably withhold.

         The Company's license agreements with Argonne and Sandia National
Laboratories form the core of its technology base in HTS powder and device
fabrication. The Company acquired these licenses for less cost than it could
have developed similar technology internally, and was able, based on the speed
at which the Company was able to commercialize the resulting HTS products, to
create a revenue stream within a few months of license acquisition dates.
Subsequently, the Company has built on these licenses to create its own
intellectual property in the form of patents, patent applications, and
industrial knowledge.

         Licensed Powder Processing Technologies. The processes used by the
Company to manufacture high temperature ceramic (superconductive) powder were
invented at various national research laboratories operated by the Department of
Energy. The Company has licensed these processes from the Department of Energy,
which gives the Company the legal right to practice the technology in exchange
for a small royalty on sales. The powders are then used to make pressed shapes
which can become sputtering targets or Levitators(R) or they can be sold without
further processing to customers who will combine them with other materials to
make superconductive products.

         Trade Secrets. The Company uses the following trade secrets in the
manufacture of its SCI Division products:

         o    powder fabrication in non-SC powders;
         o    powder densification in YBCO and non-SC material;
         o    fabrication of BI-layer structure of YBCO for use in gravity
              modification; and
         o    fabrication of nano-materials.

THE TMI DIVISION

         The TMI Division manufactures and markets source materials, both
ceramics and metals, for the thin film physical vacuum deposition industry. The
TMI Division has served over 950 customers worldwide in 40 foreign countries
over the past five years.

         While serving as critical raw materials for the fabrication of a
variety of highly engineered thin film products -- from integrated circuits to
window coatings -- sputtering targets are themselves high-value-added advanced
materials.

The Sputtering Targets Industry

         A number of technological changes are occurring within the sputtering
industry. For example, higher purity sputtering targets and new target materials
are emerging to improve the performance of thin film products for certain
applications. Also, sputtering target fabrication methods and cathode designs
are being refined and optimized to improve target material utilization and
process efficiency.

         A Business Communications, Inc. Report, dated August 26, 1999,
summarizes sputtering target consumption as follows:


                                      -17-

<PAGE>

                     SPUTTERED FILMS AND SPUTTERING TARGETS
<TABLE>
<CAPTION>


         -------------------------------------------------------------------------------------
                                                                                        AAGR*
         WORLD MARKET                                         1999          2004        (%)
                                                              EST'D         EST'D       EST'D
         -------------------------------------------------------------------------------------
         <S>                                                  <C>           <C>          <C>

         Total film area (in millions of meters squared)      363            764         16.0
         Target consumption (in millions of kilograms)        2.9            3.9          6.0
         Target consumption (in millions of pounds)           6.4            8.5          6.0
         Approx. target units consumed (in thousands)         374            510          6.4
         Value of material consumed (in millions of dollars)  720           1100          8.8

</TABLE>

             Source: Business Communications Co. Inc., Norwalk, Connecticut
             * Average Annual Growth Rate

         This projection shows that, worldwide, the production of sputtered
films will increase at an average annual growth rate ("AAGR") of 16.0% from 1999
to 2004, reaching 764 million square meters of sputter-deposited films in 2004.

         Applications of sputtering targets include the following products:

              o      optical filters;
              o      flat panel displays;
              o      photovoltaic cells;
              o      electronic switches;
              o      thin film resistors;
              o      decorative coatings;
              o      thin film batteries; and
              o      tool coating for wear resistance, non-glare glass and
                     mirrors and semi-conductors.

TMI Division Products

         Sputtering Targets. The Company has chosen to focus on production
applications in industries other than the semi-conductor industry. Thus, the
focus of the Company is on the use of sputtering targets in industrial
applications. Sputtering targets are offered in an extensive line of materials,
including most ceramic materials and various metals and alloys. Customers in the
solar panel, tool coating, decorative coating, electronic, optical and research
industries use these targets. Non-superconducting targets (including buy/resell
targets, buy/resell of precious metals, and other miscellaneous items)
represented approximately 68.7% of Company revenues in 2001, 66.2% in 2000, and
60.9% in 1999. In addition to the TMI Division, the SCI Division of the Company
also makes and markets sputtering targets. The SCI Division sputtering targets,
however, are made of more complex ceramics which require specialized processing.

         Bonding and Backing Plates. Bonding is the process of adhering a
sputtering target to a backing plate to prepare the target for use in the
physical vapor deposition process. Physical vapor deposition processes are
coating techniques that deposit thin metal, ceramic or other materials onto a
substrate, and include sputtering, laser ablation, evaporation, and ion beam
deposition. The Company offers bonding on its own, or customer supplied, backing
plates with metallic solder or silver epoxy. High purity copper backing plates
can also be used in thicknesses ranging from .125" to 1" with widths from 1" to
12" and rectangles to 72" long. Bonding services generated approximately 8.6% of
Company revenues in 2001, 6.6% in 2000 and 6.1% in 1999. In earlier years, TMI
had the bonding done through an outside source.

Process Knowledge

         Since its inception, the TMI Division has invested heavily in practical
in-house research and development. Each item of the nearly 200 items now offered
in the TMI Division's catalogue has required some degree of development,
including finding vendors, developing the manufacturing processes and methods of
control and standardization. The process knowledge is captured in written
specifications, process set cards, logs, operating procedures and other means.

Competition

         The market for sputtering targets is very competitive. The Company has
numerous competitors, most of which are larger and have greater financial
resources than the Company. Domestically, the Company views Puretech, Inc., a
division of Williams Advanced Materials, itself a division of Wellman
Corporation, and Cerac Corporation as primary competitors over the entire line
of manufactured products, although as many as 30 competitors exist and compete
for different portions of the sputtering target market. Further, some primary
metal suppliers also produce sputtering targets.

                                      -18-

<PAGE>


         Additionally, the Company competes with several other companies
producing sputtering targets and thin-film deposition materials for foreign
markets. Management believes that Tosoh Corp. has the largest worldwide market
share, followed by MRC Corporation (a division of Praxair Corp.), VMC
Corporation, Johnson Mathey Corporation, Nippon Mining Corporation, Puretech
Inc., and Cerac Inc. All enjoy vastly superior resources than those possessed by
the Company. However, few of these competitors focus their marketing efforts on
the research segment of the market, due to the low volumes that characterize
this market niche.

         The Company believes that the principal competitive factors in this
market are price, service, quality, reliability, reproducibility, availability
of technical information, and timely deliveries.

         The Company strives to differentiate itself from its competitors by
providing a full line of manufacturing capabilities, maintaining an excellent
quality rating by achieving quick turnaround on manufactured orders, and by
providing personalized customer service.

         Although TMI's objective is to achieve an 80.0% to 20.0% ratio of
shipments for production to research and development, at this time, the ratio is
approximately 70.0% production to 30.0% research and development. Obtaining
production business requires submitting samples, meeting the customer
specifications, and developing the confidence of the customer for reliability
and reproducibility. Management believes that the needs of its customers
generally progress from research and development quantities to pilot production
to full scale production. The length of time this cycle requires varies widely.
The TMI Division now has the equipment and capacity to supply production
quantities to customers who have moved out of the development phase to the
production of any new product. Management believes that it will be able to
capture a larger portion of production type orders in the future from these
customers based on on-going sales and marketing programs and long-term
relationships that have been developed with current and prospective customers.

Marketing and Sales

         The TMI Division markets and sells its products worldwide,
concentrating on the research and development and industrial production markets.
Domestic sales account for approximately 83% of the Company's sales, compared to
17% export sales. All sales are conducted in United States dollars.

         In the United States, the TMI Division markets and sells through its
internal sales staff, and through independent manufacturer's representative
groups located strategically around the country. Either party may terminate the
Company's contracts with its representatives on 60 days notice. Commission rates
vary according to materials and other factors. A typical commission rate is 8%
of gross sales dollars.

         In Asia, the TMI division markets and sells through several
non-exclusive distributors. Sales in this region consist primarily of research
and development accounts. TMI currently is seeking representation in the
European market.

Production Capacity

         In the TMI Division, the production equipment currently on hand will
accommodate a throughput of $4.0 million or greater per year, depending on
product mix and the addition of a second shift operation.

Major Suppliers and Customers

         The TMI Division buys raw materials, components and chemicals used in
the manufacture and assembly of the Company's products. If these materials are
not received in a timely manner, it may seriously affect the Company's
production schedule. The Company, however, has designed its products using
widely-available standard items and components, and has identified alternative
vendors it may use in order to avoid production delays. The Company is not
experiencing difficulty in maintaining its inventory of such components,
although purchase commitments are, at times, limited by cash flow.

                                      -19-

<PAGE>


         The TMI Division purchases various types of ceramic powder as well as
metal for the production of ceramic or metal sputtering targets. These materials
are purchased to Company specifications. In such cases, the price per unit of
weight of the material depends primarily on the volumes purchased. In some
cases, the materials are very costly. The quantities purchased and price per
unit weight paid by the Company varies widely, based upon cash flow
considerations and inventory levels.

         The Company has established supplier relations with a number of
companies, some of which are importers of metals from other countries, including
China and Russia. Delivery schedules are often unpredictable for these supplies,
requiring the Company to maintain considerable inventory levels to avoid
shortages.

         The Company does not manufacture sputtering targets made from gold,
platinum, palladium or other materials considered in the market as precious
metals. As a service to its customers who require such materials, TMI buys
finished targets from one of several suppliers and resells these targets. The
approximate percent of the Company's overall revenues consisting of precious
metals was 8.6% in 2001, 10.9% in 2000 and 7.9% in 1999. The Company sells
precious metals on a net-10 day basis, while all other sales are net-30 days.

         Principle suppliers to the TMI Division in 2001 were Achemetal,
Williams Advanced and Lattice. In every case, the Company believes that suitable
substitute vendors could be found. The Company buys primarily based on quality,
price and delivery to its specifications.

         TMI Division has one customer that accounts for more than 10.0% of the
total TMI revenue in 2001.

Research and Development

         The TMI Division has no government support, preferring to invest in and
control its research and development program in a commercial market-oriented
customer-driven manner.

Quality Control

         The Company strives for world class quality in its products. The
Company has experienced quality control problems in the past. Consequently, the
Company in recent years has invested funds in the development and implementation
of a quality assurance program to insure that each process in the manufacturing,
materials purchasing and order-entry functions are more tightly controlled.

         The Company has also invested in quality control equipment. The Company
is currently able to perform in-house testing of its ceramic products and metals
and alloys via scanning electron microscopy, Edax, differential thermal
analysis, electrical resistivity, particle size analysis, ICP, spectagraph
equipment and XRD.

         The quality control efforts have included preparation for certification
for ISO 9000, the international standard of quality performance, as well as
investment in training of personnel, preparation of specifications, purchasing
and installation of equipment, purchasing of software, on-going calibration and
maintenance of advanced measuring and composition analysis equipment. These
efforts have produced a significant improvement in the product produced by the
Company. Total returns were 5.5% in 2001, 2.2% in 2000 and 1.7% in 1999. The
increase in 2001 was due to a temporary equipment problem, which has since been
resolved. The Company has not requested the required examination by the
controlling authorities for ISO 9000 and does not plan to do so in fiscal year
2002.

EMPLOYEES

         The Company currently has 22 full-time and 2 part-time employees. Three
of the Company's employees have a Ph.D. in Chemistry or Materials Science. Ten
employees work primarily for the TMI Division of the Company, while the
remainder work primarily for the SCI Division. In the case of shared employees,
charges are assigned in accordance with the ratio of shipped dollars.

                                      -20-

<PAGE>


         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. The Company has been inspected from time to time by local EPA
authorities 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. The TMI Division also
does not offer products made from "hazardous materials" (as defined by the MSDS,
for the materials).

COLLECTIONS AND WRITE-OFFS

         The Company collected its receivables in an average of 37 days in 2001.
The Company has occasionally been forced to write-off a few small invoices as
uncollectible. The Company considers credit management critical 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.

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 $5,600,395 at December 31, 2001.

         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 the our business, it
may be difficult to locate and hire qualified personnel. The loss of services of
one 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.

                                      -21-

<PAGE>


WE MAY NEED TO SEEK ADDITIONAL CAPITAL IN THE FUTURE, WHICH MAY REDUCE THE VALUE
OF OUR COMMON STOCK.

         The Company has incurred substantial operating losses prior to 2001,
and numerous factors could require that the Company seek additional capital in
the future. Unless the Company increases sales in the near future, additional
capital may be needed, and there is no assurance that the it will be available
or that it will be available on the terms that will not result in substantial
dilution or reduction in value of the Company's common stock.

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

         The superconductive industry is in its early formative state and there
is substantial competition in the current market for superconductors, including
superconductive ceramic materials and related products. While we believe that
our superconductive 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.

WE DEPEND ON GOVERNMENT SPONSORED RESEARCH AND DEVELOPMENT CONTRACTS FOR A
SIGNIFICANT AMOUNT OF REVENUE.

         We are, and expect to continue to be in the near term, dependent on
government funding for our research and development projects. Government
contracts may be reduced or eliminated at any time, and receipt of all or any
part of the funds under any of our existing government contracts not yet
performed is not guaranteed. If we fail to increase revenues from commercial
sales, a significant loss of government funding would severally harm us.

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 WHICH 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.

                                      -22-

<PAGE>


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 aspects of
the HTS field. 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.

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

         The field of superconductivity is characterized by rapidly advancing
technology. Our success depends on our ability to keep pace with advancing
superconductor technology, including superconducting materials and processes and
industry standards. To date, we have focused our development efforts on HTS
superconducting powders and targets, as well as sputtering targets made of
non-superconducting ceramics, metals and metal alloys. 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 for the commercialization of
high-temperature superconductor products.

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, 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
purchases 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.

                                      -23-

<PAGE>


         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.

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 expires on May 31, 2002, and the Company intends
to relocate during 2002. The Company is currently negotiating for a suitable
20,000 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.


                                      -24-

<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 National Quotation Bureau, except for the quarters ended March 31, 2000
and December 31, 2001, which set forth the high and low bid quotations for the
Company's common stock as reported on the OTC Bulletin Board.

                                                      HIGH           LOW
                                                      ----           ---

FISCAL 2000

         Quarter ended March 31, 2000                $29.00         $1.50

         Quarter ended June 30, 2000                   5.00          2.00

         Quarter ended September 30, 2000              3.60          1.75

         Quarter ended December 31, 2000               3.75          1.00

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


         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, 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

                                      -25-

<PAGE>


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, 2001, there were approximately 734 holders of record
of the common stock of the Company and 1,823,256 shares outstanding, and
approximately 64 holders of Series B Preferred and one holder of Series A
Preferred stock. The Company has come to have approximately 734 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 shares into shares of common stock. There is no public market for the
Series A and B preferred shares.

         The Company's 64 Series B Preferred holders acquired their Series B
Preferred Stock in a private offering by the Company that was completed in 1996.
The total amount of this offering was $700,000. The Company issued the Series B
Preferred Shares in reliance on an exemption pursuant to Rule 504 of Regulation
D under the Securities Act of 1933, and the offering was registered by
qualification in the State of Ohio under Section 1707.09 of the Ohio Revised
Code. As of December 31, 2001, there were 99 shares of Series A Preferred
outstanding and 25,185 Series B Preferred Shares outstanding.

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 in 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
require 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. It is management's opinion that a single streamlined
company will benefit 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. Thus, the Company
will no longer report financial results separate for the two divisions beginning
in 2002.

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-K for the year ended
December 31, 2001 describes the significant accounting policies and methods used
in the preparation of the Financial Statements. Estimates are used for, but not


                                      -26-

<PAGE>

limited to, the accounting for the allowance for doubtful accounts and inventory
allowances. 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 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.

         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 $5,600,395 from inception to December
31, 2001.

Fiscal Year 2001 As Compared to Fiscal Year 2000

         Revenues

         Revenues in fiscal 2001 increased by 14.3% to $3,663,488 from the
fiscal 2000 level of $3,205,163. Contract research revenue in fiscal 2001 was
$415,141 compared to $525,566 in fiscal 2000, a decrease of 21.0%.

         TMI Division sales increased to $2,518,458 in 2001 from $2,069,895 in
2000 or an increase of 21.7%. SCI Division sales for product sales increased to
$729,890 from $609,702 or an increase of 19.7%. Increase in sales is credited to
increased sales of existing customers, efforts by management to expand into
additional markets creating new customers and the continued growth in the
ceramic sputtering target business.

         In 2001, total contract research revenues were $415,141 as compared to
$525,566 in 2000. Government development contract revenue was $402,462, or 11.0%
of total revenues in 2001 and $494,373 or 15.4% of total revenues in 2000. The
research contract for NASA has been extended due to a no-charge one year
extension granted by the government. The Company was awarded a $100,000 Small
Business Innovation Research Phase I grant from the National Science Foundation
in January 2001. The purpose of this grant was to develop a novel method for
making ultra-fine particles of phase pure (nanocrystalline) strontium ruthenate
(SrRuO3) utilizing new coordination compounds. The initial grant ended in third
quarter 2001.

         During third quarter 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 is to develop an advanced method to manufacture
continuous reacted lengths of High Tc Superconductor: Bismuth Strontium Calcium
Copper Oxide - 2212 Wire. This contract generated $115,385 in revenues in the
third and fourth quarters of this year. National Science Foundation was the
Company's largest contract customer, accounting for 9.1% and 7.2% of the
Company's revenues in fiscal 2001 and 2000, respectively. Significant loss of
government funding would have a material adverse effect on the Company's
financial condition and results of operations.

         Gross Margin

         Total gross margin in 2001 was $1,199,998 or 32.8% of total revenue as
compared to $771,745 or 24.1% in 2000.

         Gross margin on sales revenue for the TMI Division was 37.2% in 2001
versus 27.5% in 2000. The improvement in gross margin is due primarily to
increased sales and better utilization of production capacity.

         Gross margin on sales revenue for the SCI Division product sales was
25.9% for 2001 compared to 16.5% in 2000. The change is due to a change in
product mix driven by an increase in sales of ceramic targets.

         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.

                                      -27-

<PAGE>


         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 to cost of goods sold or reduce inventory
and approximated $23,211 and $122,500 for the years ended December 31, 2001, and
2000, respectively. Management deems the inventory reserve, after its assessment
of obsolete inventory, at December 31, 2001,of $37,789 to be adequate for excess
inventory and a lower of cost-or-market analysis.

         Gross margin on contract research revenue reported in the SCI Division
in segment reporting was 17.7% for 2001 compared to 31.1% for 2000. The decrease
in gross margin on contract research revenue was due primarily to a $100,000
credit obtained from a third party subcontractor in 2000 which resulted in the
higher margins.

         Selling Expense

         Selling expense in fiscal 2001 decreased to $233,570 from $309,969 in
fiscal 2000, a decrease of $76,399, or 24.6%. This decrease is primarily a
result of a reduction in staff and a reassignment of sales personnel to General
and Administrative expenses in 2001.

         General and Administrative Expense

         General and Administrative expense in fiscal 2001 increased to
$898,622, from $560,653 in fiscal 2000, an increase of $337,969, or 60.3%. The
increase in these costs related to the expansion of the Company infrastructure.
Legal and accounting expenses increased $63,141 from fiscal 2000 and were
related to the audit of financial statements and preparation for regulatory
filings. The reassignment of sales personnel also contributed to the increase.

         Research and Development Expenses

         Internal research and development costs are expensed as incurred.
Research and development costs, including testing, for 2001 were $48,915
compared to $17,623 in 2000. Internal research and development costs increased
due to additions to staff.

         Interest Expense.

         Interest expense was $22,935, or 0.6% of Company revenues in fiscal
2001, down 60.4% from $57,901 in fiscal 2000. There were no borrowings on a bank
line of credit in 2001.

INCOME (LOSS) APPLICABLE TO COMMON SHARES

         Net income (loss) per common share based on the income (loss)
applicable to common shares was $0.00 and $(0.15) per common share for the years
ended December 31, 2001 and 2000, 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 and B preferred stock.
The net income (loss) per common share from operations was $0.03 and $(0.10),
for the years ended December 31, 2001 and 2000, respectively. The difference
between the net income (loss) from operations and the income (loss) applicable
to common shares of $(0.03) and $(0.05), 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
$9,900 and $8,668 for the years ended December 31, 2001 and 2000, respectively.
Dividends on the Series B preferred stock totaled $27,542 and $76,637, for the
years ended December 31, 2001 and 2000, 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 $13,618 and $11,713 for the years ended
December 31, 2001 and 2000, respectively.

                                      -28-

<PAGE>


         The Series B preferred stock accretion represents a discount of $5.00
per share at the time of issuance of these shares. The original discount totaled
$350,000. The discount is being accreted to gain (loss) applicable to common
shares and additional paid-in capital through the period that the Series B
preferred stock can be converted to common stock which is after the third
anniversary. The discount was fully amortized at December 31, 1998.

LIQUIDITY AND WORKING CAPITAL

         At December 31, 2001, working capital was $691,403 compared to $760,595
at December 31, 2000. The decrease in working capital of $69,192 was due mainly
to the reduction in cash used to purchase production equipment. The Company
provided (used) cash from operations for the years ended December 31, 2001, and
2000 of $213,045 and $(95,370), respectively. Significant non-cash expenses
included depreciation, amortization and inventory reserve on excess and obsolete
inventory approximate $197,000 and $281,000, respectively, for the years ended
December 31, 2001, and 2000. Overall, accounts receivable, inventory and
prepaids increased in excess of increases in accounts payable and accrued
expenses by approximately $24,000 and $226,000,for the years ended December 31,
2001 and 2000, respectively, 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
$227,000 and $107,000 for the years ended December 31, 2001, and 2000,
respectively. The amounts invested in 2001 and 2000 were used to purchase
machinery and equipment for increased production capacity.

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

         For financing activities for the year ended December 31, 2000, the
Company provided cash of approximately $405,000. Cash payments to third parties
for debt and capital lease obligations approximated $106,000. Cash payments for
accrued cumulative dividends on Series A and B preferred stock approximated
$27,000. Proceeds from the sale of common stock and warrants totaled $528,000.
Proceeds from the exercise of common stock options totaled $80,000. The proceeds
from these were used to redeem $70,000 of Series A preferred stock and accrued
dividends.

         During fourth quarter 2000, the Company received proceeds from the sale
of common stock totaling $500,000 for 200,000 shares of common stock and $28,000
for the sale of warrants to purchase 140,000 shares of common stock at $3.50 per
share. Additionally, the Company has available $100,000 on a bank line of
credit. In conjunction with the sale of common stock and common stock warrants,
Dr. and Mrs. Funk converted approximately $506,000 of subordinated notes to
common stock.

         Bank debt is guaranteed by Dr. Funk, the Chairman of the Board of
Directors and majority shareholder of the Company. There was no outstanding
balance at December 31, 2001.

         Dr. Funk held all of the outstanding Series A preferred stock as of
December 31, 2001. Additionally, Dr. and Mrs. Funk have pledged collateral as
security for the payment of Series B preferred stock dividends, which stock is
held by third parties. The Series B preferred shareholders have the option to
force the sale of the secured collateral in the event of default.

         While officers 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. However, the Company believes the
combination of increased capital from these two common stock transactions and
the reduction of debt by the conversion to equity allows management to pursue
its current plans. 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.

                                      -29-

<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

         The Company has improved cash provided from operations in 2001. During
2001, the Company used cash to increase inventory levels and purchase production
equipment. The Company is currently looking to relocate from its present
facilities in 2002. The relocation will provide the Company with the space to
expand its production facilities and improve productivity.

         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 2002 and greater in 2003 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.

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 HTS products.

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

         The following financial statements are included in this Report in
response to this Item:

         o    Independent Auditors' Report.

         o    Balance Sheet as of December 31, 2001.

         o    Statements of Operations for the two years ended December 31,
              2001.

         o    Statements of Stockholders' Equity for the two years ended
              December 31, 2001.

         o    Statements of Cash Flows for the two years ended December 31,
              2001.

         o    Notes to the Financial Statements.


                                      -30-


<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, 2001, and the related statements of
operations, shareholders' equity and cash flows for the two years ended December
31, 2001. 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, 2001, 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, 2002








                                      -31-


<PAGE>

                         SUPERCONDUCTIVE COMPONENTS, INC.

                                   BALANCE SHEET

                           YEAR ENDED DECEMBER 31, 2001
                           ----------------------------


                                     ASSETS
                                     ------

                                                                          2001
                                                                          ----
CURRENT ASSETS
  Cash                                                                $  118,083
  Accounts and notes receivable
    Trade, less allowance for doubtful accounts of $13,000               365,141
    Related party receivables                                              4,616
    Employees                                                             15,625
    Other                                                                 20,814
 Inventories                                                             857,992
 Prepaid expenses                                                         12,851
                                                                      ----------
       Total current assets                                            1,395,122
                                                                      ----------



PROPERTY AND EQUIPMENT,
 AT COST
  Machinery and equipment                                              2,306,128
  Furniture and fixtures                                                  20,424
  Leasehold improvements                                                 346,823
                                                                      ----------
                                                                       2,673,375
  Less accumulated depreciation                                        1,919,358
                                                                      ----------

                                                                         754,017
                                                                      ----------


OTHER ASSETS
  Intangibles                                                             43,992
                                                                      ----------


TOTAL ASSETS                                                          $2,193,131
                                                                      ==========



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

                                      -32-

<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                                  BALANCE SHEET

                          YEAR ENDED DECEMBER 31, 2001
                          ----------------------------


                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------

                                                                         2001
                                                                         ----
CURRENT LIABILITIES
  Capital lease obligation, current portion                         $    41,596
  Capital lease obligation, shareholder, current portion                 25,161
  Note payable shareholders, current portion                             34,000
  Accounts payable                                                      318,954
  Accounts payable, shareholders                                          7,426
  Accrued contract expenses                                             179,748
  Accrued personal property taxes                                        54,384
  Accrued expenses                                                       42,450
                                                                    -----------
        Total current liabilities                                       703,719
                                                                    -----------

CAPITAL LEASE OBLIGATION, NET OF
 CURRENT PORTION                                                        103,865
                                                                    -----------

CAPITAL LEASE OBLIGATION, SHAREHOLDER, NET OF
 CURRENT PORTION                                                         43,267
                                                                    -----------

NOTE PAYABLE SHAREHOLDERS, NET OF CURRENT
 PORTION                                                                 84,270
                                                                    -----------

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 $278.20 per share                                     111,176
                                                                    -----------

COMMITMENTS AND CONTINGENCIES                                              --
                                                                    -----------

SHAREHOLDERS' EQUITY
  Convertible preferred stock, Series B, 10% cumulative,
     nonvoting, no par value, $10 stated value, optional
      redemption at 103%                                                333,136
  Common stock, no par value, authorized 15,000,000
     shares; 1,823,256 and 1,821,926 shares issued and
     outstanding, respectively                                        6,366,966
  Additional paid-in capital                                             47,127
  Accumulated deficit                                                (5,600,395)
                                                                    -----------
                                                                      1,146,834
                                                                    -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          $ 2,193,131
                                                                    ===========




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

                                      -33-

<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                            STATEMENTS OF OPERATIONS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------

<TABLE>
<CAPTION>


                                                                     2001                         2000
                                                                     ----                         ----
<S>                                                              <C>                          <C>

SALES REVENUE                                                    $ 3,248,347                  $ 2,679,597
CONTRACT RESEARCH REVENUE                                            415,141                      525,566
                                                                 -----------                  -----------
                                                                   3,663,488                    3,205,163
                                                                 -----------                  -----------

COST OF SALES REVENUE                                              2,121,658                    2,071,309
COST OF CONTRACT RESEARCH                                            341,832                      362,109
                                                                 -----------                  -----------
                                                                   2,463,490                    2,433,418
                                                                 -----------                  -----------

GROSS MARGIN                                                       1,199,998                      771,745

GENERAL AND ADMINISTRATIVE EXPENSES                                  898,622                      560,653

SALES AND PROMOTIONAL EXPENSES                                       233,570                      309,969
                                                                 -----------                  -----------

INCOME (LOSS) FROM OPERATIONS                                         67,806                      (98,877)
                                                                 -----------                  -----------

OTHER INCOME (EXPENSE)
  Interest, net                                                      (17,460)                     (57,901)
  Miscellaneous, net                                                   9,535                        3,084
                                                                 -----------                  -----------
                                                                      (7,925)                     (54,817)
                                                                 -----------                  -----------

INCOME (LOSS) BEFORE INCOME TAX                                       59,881                     (153,694)

INCOME TAX EXPENSE                                                      --                           --
                                                                 -----------                  -----------

NET INCOME (LOSS)                                                     59,881                     (153,694)

DIVIDENDS ON PREFERRED STOCK                                         (37,442)                     (60,783)

ACCRETION OF REDEEMABLE CONVERTIBLE
 PREFERRED (SERIES A)                                                (13,618)                     (11,713)
                                                                 -----------                  -----------

INCOME (LOSS) APPLICABLE TO COMMON
 SHARES                                                          $     8,821                  $  (226,190)
                                                                 ===========                  ===========

EARNINGS PER SHARE - BASIC AND DILUTIVE
 (Note 2)

NET INCOME (LOSS) PER COMMON SHARE
  Basic                                                          $      0.00                  $     (0.15)
                                                                 ===========                  ===========
  Dilutive                                                       $      0.00                  $     (0.15)
                                                                 ===========                  ===========

WEIGHTED AVERAGE SHARES OUTSTANDING
  Basic                                                            1,821,175                    1,471,456
                                                                 ===========                  ===========
  Dilutive                                                         1,822,774                    1,471,456
                                                                 ===========                  ===========

</TABLE>




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

                                      -34-


<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                       STATEMENTS OF SHAREHOLDERS' EQUITY

                     YEARS ENDED DECEMBER 31, 2000 AND 2001
                     --------------------------------------

<TABLE>
<CAPTION>


                                                     CONVERTIBLE
                                                      PREFERRED                      ADDITIONAL
                                                       STOCK,          COMMON          PAID-IN        ACCUMULATED
                                                      SERIES B         STOCK           CAPITAL          DEFICIT            TOTAL
                                                      --------         -----           -------          -------            -----
<S>                                                 <C>              <C>             <C>              <C>              <C>

BALANCE - DECEMBER 31, 1999                         $   691,672      $ 4,861,373     $   142,683      $(5,506,582)     $   189,146

Accretion of cumulative dividends                        52,115             --           (60,783)            --             (8,668)

Accretion of Series A offering costs                       --               --           (11,713)            --            (11,713)

Exercise of options (31,920 shares)                        --             79,800            --               --             79,800

Conversion of Series A preferred (1,379 shares)            --              8,275            --               --              8,275

Conversion of Series B preferred (113,418 shares)      (378,715)         378,715            --               --               --

Payment of cumulative dividends                         (26,648)            --              --               --            (26,648)

Issuance of stock (200,000 shares)                         --            500,000            --               --            500,000

Conversion of subordinated notes payable to equity
 (202,613 shares)                                          --            506,533            --               --            506,533

Issuance of warrants (Note 7)                              --               --            28,000             --             28,000

Net loss                                                   --               --              --           (153,694)        (153,694)
                                                    -----------      -----------     -----------      -----------      -----------

BALANCE - DECEMBER 31, 2000                             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 - DECEMBER 31, 2001                         $   333,136      $ 6,366,966     $    47,127      $(5,600,395)     $ 1,146,834
                                                    ===========      ===========     ===========      ===========      ===========

</TABLE>


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

                                      -35-

<PAGE>



                        SUPERCONDUCTIVE COMPONENTS, INC.

                            STATEMENTS OF CASH FLOWS

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------


<TABLE>
<CAPTION>

                                                                                       2001                 2000
                                                                                       ----                 ----
<S>                                                                                  <C>                 <C>

CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                                                  $  59,881           $(153,694)
                                                                                     ---------           ---------
  Adjustments to reconcile net income (loss) to net cash
   provided by (used in) operating activities:
    Depreciation                                                                       218,208             260,819
    Amortization                                                                         2,451               2,463
    Inventory reserve                                                                  (23,211)             17,431
    Provision for doubtful accounts                                                    (13,000)              2,000
    Changes in operating assets and liabilities:
      (Increase) decrease in assets:
        Accounts receivable                                                              1,404             (66,766)
        Inventories                                                                   (217,313)           (103,218)
        Prepaid expenses                                                                26,915             (18,962)
        Other assets                                                                    (7,755)               --
      Increase (decrease) in liabilities:
        Accounts payable                                                                49,549              76,563
        Accrued expenses                                                               119,666            (112,006)
                                                                                     ---------           ---------
          Total adjustments                                                            156,914              58,324
                                                                                     ---------           ---------
              Net cash provided by (used in) operating activities                      216,795             (95,370)
                                                                                     ---------           ---------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment                                                 (227,114)           (107,073)
                                                                                     ---------           ---------
              Net cash used in investing activities                                   (227,114)           (107,073)
                                                                                     ---------           ---------

CASH FLOWS FROM FINANCING ACTIVITIES
  Bank overdraft                                                                          --               (30,735)
  Principal repayments on notes payable, bank                                             --                (5,617)
  Principal repayments on note payable, shareholders                                   (14,000)               --
  Principal payments on capital lease obligations                                      (34,066)            (69,801)
  Principal payments on capital lease obligations, related party                        (2,628)               --
  Proceeds from exercise of common stock options                                         1,875              79,800
  Proceeds from the sale of common stock                                                  --               500,000
  Proceeds from sale of common stock warrants                                             --                28,000
  Payment of cummulative dividends                                                     (25,185)            (26,648)
  Redemption of Series A preferred stock                                                  --               (70,150)
                                                                                     ---------           ---------
              Net cash provided by (used in) financing activities                      (74,004)            404,849
                                                                                     ---------           ---------


</TABLE>



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

                                      -36-

<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                      STATEMENTS OF CASH FLOWS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 2001 AND 2000
                     --------------------------------------

<TABLE>
<CAPTION>


                                                                                     2001                   2000
                                                                                     ----                   ----
<S>                                                                                <C>                    <C>

NET INCREASE (DECREASE) IN CASH                                                      (84,323)               202,406


CASH - Beginning of period                                                           202,406                   --
                                                                                   ---------              ---------

CASH - End of period                                                               $ 118,083              $ 202,406
                                                                                   =========              =========

SUPPLEMENTAL DISCLOSURES OF CASH
 FLOW INFORMATION
  Cash paid during the years for:
    Interest                                                                       $  22,935              $  69,614
    Income taxes                                                                   $    --                $    --

SUPPLEMENTAL DISCLOSURES OF NONCASH
 INVESTING AND FINANCING ACTIVITIES

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

  Subordinated debt was issued to a shareholder as reimbursement
   for the shareholders paying accounts payable of the Company and
   for accrued interest payable                                                    $    --                $ 132,270

  Property and equipment was purchased by capital lease                            $ 166,339                   --

  Preferred stock, Series A converted to common stock                              $    --                $   8,275

  Subordinate debt was issued to a shareholder as reimbursement for
  the shareholder's paying a notes payable to the Company                          $    --                $  89,408

  Subordinated debt was converted into common stock                                $    --                $ 506,533

  Reduction of inventory and inventory reserve                                     $    --                $ 105,075

</TABLE>


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

                                      -37-

<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 research,
                  education, electronics and computer 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 and applied overhead. Inventory
                  reserves are established for obsolete inventory and excess
                  inventory quantities based on management's estimate of net
                  realizable value.

                  The Company enters into cancelable purchase commitment
                  arrangements for some suppliers. Estimated purchase
                  commitments to these suppliers approximate $50,000 for 2001.
                  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.




                                      -38-

<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, including testing, for the years ended December 31,
                  2001 and 2000 were $48,915 and $17,623, 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 2001 and 2000, the Company earned $415,141 and
                  $525,566, respectively, in contract revenue. At December 31,
                  2001, there were no outstanding accounts receivable from
                  contract research revenue.

                  During 2000, the Company was awarded a new six-month contract
                  in the amount of $100,000, to begin January 1, 2001.

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

     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, 2001 are $21,000 and $7,678, respectively.

     E.           Patent - The Company has secured patents for a 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, 2001 are $34,246 and $3,577, respectively.

     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 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.



                                      -39-

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     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 2000, 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 a 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 2001, which accounted
                  for approximately $538,000 of the total revenue and $68,409 of
                  the trade accounts receivable.

     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.

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




                                     -40-


<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     N.           Recent Accounting Pronouncements - 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 will not have an
                  effect on the Company's operating results or financial
                  condition.

                  In August 2001, the FASB issued SFAS No.144, "Accounting for
                  the Impairment or Disposal of Long-Lived Assets" which
                  excludes the assets addressed in SFAS No. 142. The adoption of
                  SFAS No. 144 in 2002 will not have an impact on the Company's
                  financial statements.

NOTE 3.           INVENTORIES

                  Inventories consist of the following at December 31, 2001:

                  Raw materials                        $ 562,327
                  Work-in-process                        121,908
                  Finished goods                         211,546
                                                       ---------
                                                         895,781
                  Less reserve for obsolete inventory     37,789
                                                       ---------

                                                       $ 857,992
                                                       =========


NOTE 4.           NOTES PAYABLE - BANK

                  The Company has a bank line of credit in the amount of
                  $100,000, interest at prime, (4.5% at December 31, 2001),
                  maturing June 30, 2002. As of December 31, 2001, $0 has been
                  drawn on this line of credit. No collateral, other than the
                  personal guarantee by an officer and major shareholder of the
                  Company, collateralizes the bank line of credit.




                                      -41-

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 5.           LEASE OBLIGATIONS

                  OPERATING
                  ---------

                  The Company leases certain office equipment and a building
                  under agreements classified as operating leases expiring
                  through 2003. Rent expense which includes various monthly
                  rentals for the years ended December 31, 2001 and 2000,
                  totaled $77,983 and $59,818, respectively. Future minimum
                  lease payments at December 31, 2001 are as follows:


                                           2002       $  6,293
                                           2003          4,658
                                                      --------
                                                      $ 10,951
                                                      ========

                  CAPITAL
                  -------

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

<TABLE>
<CAPTION>


                                                               RELATED
                                                                PARTY        OTHER
                                                              --------     --------
                  <S>                                         <C>          <C>

                  2002                                        $ 29,143     $ 52,551
                  2003                                          24,980       48,350
                  2004                                          20,817       35,933
                  2005                                            --         23,891
                  2006                                            --          9,782
                                                              --------     --------
                  Total minimum lease payments                  74,940      170,507
                  Less amount representing interest              6,512       25,046
                                                              --------     --------
                  Present value of minimum lease payments       68,428      145,461
                  Less current portion                          25,161       41,596
                                                              --------     --------
                  Long-term capital lease obligations         $ 43,267     $103,865
                                                              ========     ========

</TABLE>



                  The equipment under capital lease at December 31, 2001 is
                  included in the accompanying balance sheet under the following
                  captions:

<TABLE>
<CAPTION>


                                                               Related
                                                                Party        Other
                                                              --------     --------
                  <S>                                         <C>          <C>


                  Machinery and equipment                     $ 68,428     $211,355
                  Less accumulated depreciation                  4,888       54,667
                                                              --------     --------
                  Net book value                              $ 63,540     $156,688
                                                              ========     ========

</TABLE>



                                     -42-

<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 $28,087 and $36,544 for the years
                  ended December 31, 2001 and 2000, respectively.

NOTE 6.           RELATED PARTY NOTES PAYABLE

                  SUBORDINATED NOTES PAYABLE
                  --------------------------

                  An officer and two major shareholders have loaned funds to the
                  Company from September 30, 1991 through December 31, 2000 for
                  working capital. These subordinated notes payable are due on
                  December 31, 2009. The notes payable bear interest at 10% per
                  annum and are subordinate to other senior indebtedness, as
                  defined in the agreement.

                  The Board of Directors authorized that the subordinated notes
                  payable can be converted to shares of common stock at $2.50
                  per share. On October 10, 2000 the subordinated notes payable
                  totaling $506,533 were converted to common stock at $2.50 per
                  share which totaled 202,613 shares of common stock.

                  Interest expense totaled $-0- and $36,439 for the years ended
                  December 31, 2001 and 2000, respectively.

                  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 Dr. Edward and Ingeborg Funk. The warrants
                  are 100% vested and expire in ten years from the date of grant
                  of January 7, 2000.

                  NOTES PAYABLE SHAREHOLDERS
                  --------------------------

                  Effective December 31, 2000, the Company converted accounts
                  payable and accrued interest payable to an officer and two
                  major shareholders totaling $132,270 to a note payable
                  shareholders. 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. The note bears interest
                  at prime (4.75% at December 31, 2001). Interest expense on
                  this note charged to operations was $9,663 for the year ended
                  December 31, 2001.

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

                                   2002        $  34,000
                                   2003           48,000
                                   2004           36,270
                                               ---------
                                                 118,270
                                  Current         34,000
                                               ---------
                                  Long-term    $  84,270
                                               =========


                                      -43-

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 7.           COMMON AND PREFERRED STOCK

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

                  During 2001, Series B preferred stock was converted to common
                  stock totaling 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.

                  On October 10, 2000, the Company issued 200,000 shares of
                  common stock at $2.50 per share for total proceeds of
                  $500,000. The same investors were issued warrants for the
                  purchase of up to an additional 140,000 shares of common stock
                  for an aggregate purchase price of $28,000, or $.20 for each
                  warrant, exercisable at $3.50 per share for a period of twelve
                  months from the date of issuance.

                  In conjunction with the sale of common stock and common stock
                  warrants on October 10, 2000, Dr. and Mrs. Funk converted
                  their subordinated notes payable totaling $506,533 to 202,613
                  shares of common stock at a conversion rate of $2.50 per
                  share.

                  During 2000, Series A and B preferred stock was converted to
                  common stock totaling 1,379 and 113,418 shares of common
                  stock, respectively. Additionally, stock options were
                  exercised for a total of 31,920 shares of common stock with
                  total proceeds of $79,800.

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

                  Shares of preferred stock authorized and outstanding at
                  December 31, 2001 are as follows:


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

                  SERIES A
                  --------
                  10% Convertible/voting      10,000                --


                  10% Convertible/nonvoting      215                  99

                  SERIES B
                  --------
                  Nonvoting                  125,000              25,185

                  Voting                     125,000                --
                                             -------              ------
                                             260,215              25,284
                                             =======              ======


                                      -44-

<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.

                  Series A has a mandatory redemption at 25% annually of the
                  issued Series A shares at their stated value plus accrued and
                  unpaid dividends commencing on the fourth anniversary date. 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 (Cross) (formerly known as Cross
                  Medical Products, Inc.).

                  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 is $9,727. The
                  amortized (accreted) amount is reflected in income (loss)
                  applicable to common shares and additional paid-in-capital.
                  The annual accretion totaled $13,618 and $11,713 for the years
                  ended December 31, 2001 and 2000, respectively.

                  Series B preferred stock was originally issued with a $5.00
                  per share discount which has been recorded as a reduction of
                  Series B preferred stock. The original discount totaled
                  $350,000. The discount is being accreted to income (loss)
                  applicable to common shares and additional paid-in capital
                  through the period that the Series B preferred stock can be
                  converted to common stock which is after the third anniversary
                  date. The discount was fully amortized at December 31, 1998.

                  As security for cash dividends on the Series B preferred
                  shares, Dr. and Mrs. Funk pledged an aggregate 131,000 shares
                  of $.01 par value common stock of Cross. Issue costs of
                  approximately $116,110 on Series B were netted against the
                  proceeds of that issue.

                  Cumulative dividends in arrears on Series A preferred stock
                  are $27,542 ($278.20 per share) at December 31, 2001.

                  During 2001 and 2000, Series B cash dividends totaling $25,185
                  and $26,648 were paid, respectively. Additionally, preferred
                  stock was converted to 1,529 and 113,418 shares of common
                  stock, respectively.

                  During 2000, a Series A preferred stockholder converted 8.275
                  shares of preferred stock for 1,379 shares of common stock.
                  Additionally, Series A preferred stockholders holding 54.45
                  shares of preferred stock were redeemed for cash of $70,125
                  (principal - $54,150, accrued dividends - $15,650).

                                      -45-

<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, 2000, 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. Common stock equivalents that were excluded in
                  the diluted loss per share calculation were as follows:



                                                           DECEMBER 31,
                                                              2000
                                                              ----

                  Options                                   111,790
                  Warrants                                  150,000
                  Preferred Series A                          --
                  Preferred Series B                          --
                                                            -------
                                                            261,790
                                                            =======



                  Additionally, common stock equivalents were not "in-the-money"
                  and, therefore, not included as a common stock equivalent.
                  They are as follows:

                                         DECEMBER 31,      DECEMBER 31,
                                            2001              2000
                                            ----              ----

                  Options                  449,700          345,410

                  Warrants                 160,000          165,000

                  Preferred Series A        16,500           16,500

                  Preferred Series B        50,370           53,296
                                           -------          -------
                                           676,570          580,206
                                           =======          =======





                                      -46-

<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.

<TABLE>
<CAPTION>


                                                                         2001            2000
                                                                         ----            ----
                  <S>                                                <C>             <C>

                  Income (loss) available to common shareholders
                    used in basic EPS and diluted EPS                $     8,821     $  (226,190)
                                                                     ===========     ===========

                  Weighted average number of common shares
                    used in EPS                                        1,821,175       1,471,456

                  Effect of dilutive securities:
                  Stock options and warrants                               1,599            --
                                                                     -----------     -----------


                  Weighted number of common shares and dilutive
                    potential common stock used in diluted EPS         1,822,774       1,471,456
                                                                     ===========     ===========

</TABLE>


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. 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.




                                     -47-

<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 600,000 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, 2001 and 2000 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, 1999             188,100         $   2.42
                    Granted                                    148,700             2.51
                    Exercised                                  (35,000)            2.36
                    Forfeited                                   (2,100)            2.50
                                                               -------         --------
                  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
                                                               =======         ========

                  Shares exercisable at December 31, 2000       62,290             2.43
                  Shares exercisable at December 31, 2001       80,510             2.35


</TABLE>


                                      -48-



<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>

                  Outstanding at December 31, 1999              91,250            $   2.50
                    Granted                                     72,000                2.55
                    Exercised                                   (5,750)               2.17
                    Forfeited                                     --                 --
                                                               -------            --------
                  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
                                                               =======            ========

                  Shares exercisable at December 31, 2000       49,500                2.43
                  Shares exercisable at December 31, 2001      115,500                2.46

</TABLE>

                  Exercise prices for options range from $1.30 to $3.00 for
                  options at December 31, 2001. The weighted average option
                  price for all options outstanding is $2.22 with a weighted
                  average remaining contractual life of 6.0 years.

                  The exercise price for all options exercisable at December 31,
                  2001 range from $1.30 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 2001 and 2000 were $1.65 and $2.52,
                  respectively, and were estimated using the Black-Scholes
                  option valuation model with the following weighted average
                  assumptions:


                                                  2001        2000
                                                  ----        ----

                  Expected life in years          6.71        7.06
                  Interest rate                      6%          6%
                  Volatility                    111.25%      105.7%
                  Dividend yield                     0%          0%




                                      -49-


<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, 2001 and 2000 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 2001 and 2000 results as reported to
                  the results had the Company adopted the expense recognition
                  provisions of FSAB #123.

<TABLE>
<CAPTION>


                                                                        2001           2000
                                                                        ----           ----
                  <S>                                                <C>           <C>

                  Net income (loss) applicable to common shares:
                    As reported                                      $   8,821     $  (226,190)
                    Pro forma under SFAS #123                            2,480        (232,140)
                  Basic and diluted income (loss) per share:
                    As reported                                      $    0.00     $     (0.15)
                    Pro forma under SFAS #123                             0.00           (0.16)
                  Diluted income (loss) per share:
                    As reported                                      $    0.00     $     (0.15)
                    Pro forma under SFAS #123                             0.00           (0.16)


</TABLE>

NOTE 9.           WARRANTS ISSUED

                  Warrants unexercised at December 31, 2001, 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>






                                      -50-



<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:

                                                            2001
                                                            ----

                  Deferred tax assets
                    NOL Carryforward                    $1,606,000
                    UNICAP                                  65,000
                    Allowance for doubtful accounts          4,000
                    Reserve for obsolete inventory          13,000
                    Property and equipment                  40,000
                                                        ----------
                                                         1,728,000

                  Valuation allowance                    1,728,000
                                                        ----------

                  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 $1,728,000 and
                  $1,729,000 at December 31, 2001 and 2000, respectively.

                  The Company has net operating loss carryovers available for
                  federal and state tax purposes of approximately $4,723,000,
                  which expire in varying amounts from 2003 through 2020.

                  For the years ended December 31, 2001 and 2000, 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                           $  --              $  --
                                                  =====              =====





                                      -51-



<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 11.          RELATED PARTY TRANSACTIONS

                  Sales to a related party amounted to $12,224 and $17,423
                  during 2001 and 2000, respectively. At December 31, 2001 and
                  2000, $0 and $17,423 were written off as bad debt expense,
                  related to sales of inventory, rent and reimbursement of
                  expenses.

                  The Company has notes receivable from employees of the Company
                  in the amount of $15,625. The notes bear interest at 8% per
                  annum.

                  The Company has trade payables, shareholders of $7,426
                  pertaining to reimbursement for purchase of goods and services
                  obtained for Company purposes and accrued interest on capital
                  lease and note payable.

                  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 shareholders: Amounts reported in the balance
                      sheet represent debt to officers and two major
                      shareholders. 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, 2001 was $1.20 for difference in
                      fair value of $19,800 at December 31, 2001.




                                      -52-


<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS


NOTE 13.          SEGMENT INFORMATION

                  The Company utilizes FASB Statement No. 131, "Disclosures
                  about Segments of a Business Enterprise and Related
                  Information". The Company is managed in two operating
                  segments: TMI and SCI.

                  Corporate operations include administrative and sales
                  functions. Corporate assets include cash and general fixed
                  assets.

                  The following is a summary of key segment information for the
                  years ended December ended December 31, 2001 and 2000.
                  International sales data is not available for the year ended
                  December 31, 2000.

<TABLE>
<CAPTION>


                                                           SCI             TMI         CORPORATE          TOTAL
                                                           ---             ---         ---------          -----
                  <S>                                 <C>             <C>             <C>              <C>

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

                  Revenues
                    US                                $   956,255     $ 2,134,568     $      --        $ 3,090,823
                    International                         188,776         383,889            --            572,665
                                                      -----------     -----------     -----------      -----------
                                                        1,145,031       2,518,457            --          3,663,488
                  Segment profit (loss)                    98,858         629,477        (668,454)          59,881
                  Interest expense                           --              --            22,935           22,935
                  Depreciation and amortization            65,396          46,288         108,975          220,659
                  Segment assets                          590,488       1,270,445         332,198        2,193,131

                  Expenditures for segment assets          61,321         116,055          49,738          227,114

                  DECEMBER 31, 2000
                  -----------------

                  Revenues                            $ 1,135,268     $ 2,069,895     $      --        $ 3,205,163

                  Segment profit (loss)                   232,933         243,597        (630,224)        (153,694)

                  Interest expense                           --              --            57,901           57,901
                  Depreciation and amortization            51,271          96,067         115,944          263,282
                  Segment assets                          570,599         912,068         385,283        1,867,950

                  Expenditures for segment assets          67,429          27,237          12,407          107,073



</TABLE>










                                     -53-




<PAGE>



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

         None.


                                    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 relating to our 2002
Annual Meeting of Shareholders to be held on May 9, 2002, 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," and "OWNERSHIP
OF COMMON STOCK BY PRINCIPAL SHAREHOLDERS" 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.


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, 2001.

                      Statements of Operations for the two years ended
                      December 31, 2001.

                      Statements of Stockholders' Equity for the two years
                      ended December 31, 2001.

                      Statements of Cash Flows for the two years ended
                      December 31, 2001.

                      Notes to the Financial Statements.


                                      -54-
<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

23            Consent of Hausser & Taylor LLP

24            Powers of Attorney.

--------------

*   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.


         (b) REPORTS ON FORM 8-K

             None.

                                      -55-


<PAGE>


         (c) EXHIBITS

              The exhibits to this report follow the Signature Page.



















































                                      -56-

<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 29, 2002                           By: /s/ Daniel Rooney
                                                    ----------------------------
                                                    Daniel Rooney, 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 25th day of March 2002.

<TABLE>
<CAPTION>

         Signature                                             Title

<S>                                      <C>
         /s/ Daniel Rooney               President, Chief Executive Officer, and Director
-----------------------------------      (principal executive officer)
         Daniel Rooney

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


         Edward R. Funk*                 Chairman of the Board of Directors
-----------------------------------
         Edward R. Funk

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

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



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

</TABLE>


                                      -57-