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                                  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, 2004

                         Commission File Number: 0-31641

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

          OHIO                                        31-1210318
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                    Identification No.)

                               2839 CHARTER STREET
                              COLUMBUS, OHIO 43228
                    (Address of principal executive offices,
                               including zip code)

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

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

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

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

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

      The issuer's revenues for the fiscal year ended December 31, 2004, were
$2,172,864.

      The aggregate market value of the Registrant's common equity held by
non-affiliates of the Registrant was approximately $2,713,651 on March 2, 2005.

      There were 2,439,360 shares of the Registrant's Common Stock outstanding
on March 2, 2005.

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

                       DOCUMENTS INCORPORATED BY REFERENCE
      Portions of our Proxy Statement for the 2005 Annual Meeting of
Stockholders are incorporated by reference in Part III.

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                              PART I
                                                                                                                          Page
<S>                                                                                                                       <C>
Item   1.     Description of Business................................................................................       3
Item   2.     Description of Property................................................................................      10
Item   3.     Legal Proceedings......................................................................................      10
Item   4.     Submission of Matters to a Vote of Security Holders....................................................      10

                                                              PART II

Item   5.     Market for Common Equity and Related Stockholder Matters...............................................      11
Item   6.     Management's Discussion and Analysis or Plan of Operation..............................................      12
Item   7.     Financial Statements...................................................................................      16
Item   8.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................      16
Item  8A.     Controls and Procedures................................................................................      16
Item  8B.     Other Information......................................................................................      16

                                                             PART III

Item   9.     Directors, Executive Officers, Promoters and Control Persons; Compliance with Section
              16(a) of the Exchange Act..............................................................................      17
Item  10.     Executive Compensation.................................................................................      17
Item  11.     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ........      17
Item  12.     Certain Relationships and Related Transactions.........................................................      17
Item  13.     Exhibits ..............................................................................................      17
Item  14.     Principal Accountant Fees and Services.................................................................      18
              Signatures.............................................................................................      19
</TABLE>

NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

INTRODUCTION

      Superconductive Components, Inc. ("SCI" or the "Company"), an Ohio
corporation, was incorporated in 1987, to develop, manufacture and market
products based on or incorporating high temperature superconductive ("HTS")
materials. The company presents itself to the market as SCI Engineered
Materials, an operating unit of Superconductive Components, Inc. The company
controls the manufacturing process and measures performance in terms of sales,
in two categories - Ceramics and Metals. The performance measurements made in
these two categories are, however, not conducive to segment reporting as there
are many shared operating expenses relating to the production of both Ceramics
and Metals that cannot be attributed solely to one or the other. The company
views its business as supplying ceramic and metal materials to a variety of
industrial applications including: HTS, Photonics/Optical, and Thin Film
Batteries. The production and sale of High Temperature Superconducting (HTS)
materials was the initial focus of the company's operations and these materials
continue to be a significant part of the Company's development efforts.
Photonics/Optical currently represents the Company's largest market for its
materials. Thin Film Battery materials is a developing market where
manufacturers of batteries use these materials to produce very small power
supplies, with small quantities of stored energy.

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, including
sputtering targets and ceramic powders for commercial applications of the newly
discovered superconducting ceramics.

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

BUSINESS:

      The company views its business as supplying ceramic and metal materials to
a variety of industrial applications including: HTS, Photonics/Optical, and Thin
Film Batteries.

      The production and sale of HTS materials was the initial focus of the
company's operations and these materials continue to be a significant part of
the Company's development efforts. The Company continues to work with private
companies and government agencies to develop new and improved products for
future applications.

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

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

      The Company had total annual revenues of $2,172,864, $2,268,488, and
$2,958,544 in the fiscal years ended December 31, 2004, 2003 and 2002,
respectively. During early 2004 the Company relocated to a modern facility,
which caused a decrease in production. The Company also intentionally withdrew
from low margin products.

      Principal suppliers to the Company in 2004 were Lattice Materials
Corporation, Engelhard Corporation and MCP Metalspecialties. In every case, the
Company believes that suitable substitute vendors can be found. Also, as the
Company's volume grows, the Company may make alliances or purchasing contracts
with these or other vendors.

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      The Company's largest customer represented over 10% percent of total
revenues in 2004. The Company had $257,132 and $246,835 in government contracts
for the years ending December 31, 2004 and 2003, respectively, representing
11.8% and 10.9% of total revenues in 2004 and 2003, respectively.

MARKETING AND SALES

      The Company uses various distribution channels to reach end user markets
including, direct sales by Company sales persons, independent manufacturers'
representatives in the United States, and independent distributors for
international markets. The Internet provides tremendous reach for new customers
to be able to identify the Company as a source of their product needs. The
Company has an operating website www.sciengineeredmaterials.com. In addition, a
sales manager was added to the organization on January 1, 2004 to drive the
Company's sales efforts and manage the Company's external representatives.

CERAMICS

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

      Most of the Company's products are manufactured from component chemicals
and metals supplied by various vendors. Production of HTS is dependent upon high
purity Yttrium. 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. 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.

METALS

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

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

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

      The Company has continually added production processes and testing
equipment for the many product compositions that can be used as Physical Vapor
Deposition materials.

COMPETITION

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

RESEARCH AND DEVELOPMENT

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

      During 2003 the Company successfully completed the development work on a
Department of Energy SBIR Phase I sponsored project for optimizing BSCCO 2-2-1-2
ceramic powders for use in the production of long length HTS wires for high
energy physics applications and spin-off potential for medical MRI imaging. The
success of the project enabled the

                                       4
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Company to obtain a $600,000 Phase II grant for pre-commercialization process
development of the powder production process. The Company's partners in this
two-year effort are Oxford Superconducting Technologies and Los Alamos National
Lab.

      The Company became a member of a team led by Oxford Instrument
Superconducting Technology, which was awarded a grant from the Department of
Energy Superconductivity Partnership Initiative (SPI) Program. Revenues of
$17,684 were generated in 2004. A member of the team determined that the
technology is not as suitable for the MRI market segment as originally projected
in 2001. In 2004, this member decided to withdraw from the program. Due to the
unexpected change in market potential, the Company also removed itself from this
Department of Energy SPI.

      All of the sponsored research and development contracts can be cancelled
at the sponsor's option, with accrued costs being paid. The Company currently
has $231,747 of funding from government sponsored research and development
programs that could be cancelled at any time.

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

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

NEW PRODUCT INITIATIVES

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

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

      The Company currently faces competition from other producers of materials
used in connection with the manufacture of Thin Film Batteries. The biggest
competitors are Cerac and Williams International. The Company believes that it
has certain competitive advantages in terms of quality, but acknowledges that it
is currently at a disadvantage in terms of funding. The Company intends to
actively market its materials to Thin Film Battery producers in the upcoming
year in order to gain a strong presence in this market.

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

      In October of 2003, the Company was awarded a $1.2 million grant from the
State of Ohio's Third Frontier Action Fund. The Company has teamed with Lithchem
Inc. to produce raw materials for the Company's Lithium Thin Film Battery
sputtering target manufacturing process. The funds are being used to procure
capital equipment required to commercialize the manufacturing process and also
for Lithchem's process to produce raw materials for target manufacturing. In
addition, three manufacturers of Lithium Thin Film Batteries have agreed to
participate in the program and will provide testing and manufacturing
qualification evaluations of targets produced using the commercial scale
processes developed during the grant period. The term of the grant is two years
and both the

                                       5
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Company and Lithchem is expected to have installed and qualified commercial
scale manufacturing facilities by the end of the term. The Company has received
and installed its equipment funded by this grant.

INTELLECTUAL PROPERTY

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

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

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

EMPLOYEES

      The Company had 20 full-time employees as of December 31, 2004. Of these
employees one held a PhD in Material Science. The Company has never experienced
work stoppage and considers its relations with employees to be good. The
employees do not have a bargaining unit.

ENVIRONMENTAL MATTERS

      The Company handles all materials according to Federal, State and Local
environmental regulations and includes Material Safety Data Sheets (MSDS) with
all shipments to customers. The Company maintains a collection of MSDS sheets
for all raw materials used in the manufacture of products and maintenance of
equipment and insures that all personnel follow the handling instructions
contained in the MSDS for each material. The Company contracts with a reputable
fully permitted hazardous waste disposal company to dispose of waste materials
generated by the Company.

COLLECTIONS AND WRITE-OFFS

      The Company collected its receivables in an average of 34 days in 2004.
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 $7,828,135 at December 31, 2004.

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      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; (iii) a private offering of common stock and warrants to
purchase common stock in October 2000; and (iv) a private offering of common
stock and warrants to purchase common stock in 2004. 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. We hired a full time sales manager
effective January 1, 2004.

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

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

WE 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 through 2004, which
could require that the Company seek additional capital in the future. There is
no assurance that new capital will be available or that it will be available on
terms that will not result in substantial dilution or reduction in value of the
Company's common stock. Additional capital may be needed in order to continue
the Company's operations.

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

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

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.

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

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

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

      We have received from the United States Patent and Trademark Office a
patent for Fine-Particle Bi-Sr-Ca-Cu-O Having High Phase Purity made by a
Chemical Precipitation and Low-Pressure Calcination method, and have also
received a patent for a process to join two individual strongly linked
super-conductors utilizing a melt processing technique. In the future, we may
submit additional patent applications covering various applications. 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 Thin Film Market is characterized by rapidly advancing technology. Our
success depends on our ability to keep pace with advancing technology and
processes and industry standards. To date, we have focused our development
efforts on powders and targets. We intend to continue to develop and integrate
advances in the thin film coatings industry. However, our development efforts
may be rendered obsolete by research efforts and technological advances made by
others, and materials other than those we currently use may prove more
advantageous.

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

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

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

                                       8
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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. In September
2001, our stock 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.

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

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

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

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

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

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

      Our Articles of Incorporation authorize us to issue up to 260,000 shares
of preferred stock. The issuance of preferred stock in the future could create
additional securities which would have dividend and liquidation preferences
prior in right to the outstanding shares of common stock. These provisions could
also impede a non-negotiated change in control.

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

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

                                       9
<PAGE>

ITEM 2.   DESCRIPTION OF PROPERTY.

      The Company's current office and manufacturing facilities are located at
2839 Charter Street, Columbus, Ohio, where it occupies approximately 32,000
square feet. The Company moved its operations into this facility in March 2004.
The Company's lease on the property expires on August 16, 2014.

      The Company is current on all operating lease liabilities.

ITEM 3.   LEGAL PROCEEDINGS.

      On October 29, 2004 a complaint was filed in the Franklin County Court of
Common Pleas against the Company by Mr. Cavin Carmell, dba University Area
Rentals ("University Area Rentals"). The complaint alleges that the Company left
its former leased premises in disrepair and violated the terms of its lease. The
case is in the early stages of discovery and trial is set for October 2005.
Based upon the informal discovery provided by University Area Rentals, an
estimate of damages claimed is between $50,000 and $100,000. The Company intends
to vigorously defend itself against the claim.

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

      Not applicable.

                                       10
<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." The following table sets forth for the periods
indicated the high and low bid quotations for the Company's common stock.

<TABLE>
<CAPTION>
                                                    HIGH       LOW
                                                    -----     -----
<S>                                                 <C>       <C>
FISCAL 2003

           Quarter Ended March 31, 2003             $1.00     $0.30

           Quarter Ended June 30, 2003               1.20      0.40

           Quarter Ended September 30, 2003          1.50      0.40

           Quarter Ended December 31, 2003           3.85      1.10

FISCAL 2004

           Quarter Ended March 31, 2004              4.05      2.30

           Quarter Ended June 30, 2004               3.00      2.30

           Quarter Ended September 30, 2004          2.90      2.43

           Quarter Ended December 31, 2004           2.90      2.40
</TABLE>

      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 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.

                                       11
<PAGE>

      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, 2004, there were approximately 391 holders of record of
the common stock of the Company and 2,439,360 shares outstanding. There were
approximately 43 holders of Series B Preferred and as of December 31, 2004 there
were 25,185 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 OR PLAN OF OPERATION.

Overview

      Superconductive Components, Inc. ("SCI" or the "Company"), an Ohio
corporation, was incorporated in 1987, to develop, manufacture and market
products based on or incorporating high temperature superconductive ("HTS")
materials. The Company presents itself to the market as SCI Engineered
Materials, an operating unit of Superconductive Components, Inc. The Company
controls the manufacturing process and measures performance in terms of sales,
in two categories - Ceramics and Metals. The Company views its business as
supplying ceramic and metal materials to a variety of industrial applications
including: HTS, Photonics/Optical, and Thin Film Batteries. The production and
sale of High Temperature Superconducting (HTS) materials was the initial focus
of the Company's operations and these materials continue to be a significant
part of the Company's development efforts. Photonics/Optical currently
represents the Company's largest market for its materials. Thin Film Battery
materials is a developing market where manufacturers of batteries use these
materials to produce very small power supplies, with small quantities of stored
energy.

Executive Summary

      For the year ended December 31, 2004, the Company incurred a net loss of
$1,099,822. During 2004 the Company relocated its manufacturing to a new, modern
facility. During this relocation the Company had significant down time. The
Company was quoting long lead times prior to, during and shortly after the move.
These long lead times contributed to a reduction in orders. The Company's
shipments are expected to increase in 2005, as the Company is able to provide
product with more reasonable lead times. The Company also expects gross margins
to improve as sales grow. In addition, increased sales to the thin film battery
market are expected to improve the Company's overall gross margin over time. The
thin film battery market is poised for significant growth beginning in
late-2005.

Results of Operations

Critical Accounting Policies

      The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires management to make judgments, assumptions and estimates that affect the
amounts reported in the Financial statements and accompanying notes. Note 2 to
the Financial Statements in the Annual Report on Form 10-KSB for the year ended
December 31, 2004 describes the significant accounting policies and methods used
in the preparation of the Financial Statements. Estimates are used for, but not
limited to, the accounting for the allowance for doubtful accounts, inventory
allowances, property and equipment depreciable lives, patents and licenses
useful lives and assessing changes in which impairment of certain long-lived
assets may occur. Actual results could differ from these estimates. The
following critical accounting policies are impacted significantly by judgments,
assumptions and estimates used in the preparation of the Financial Statements.
The allowance for doubtful accounts is 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

                                       12
<PAGE>

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. Depreciable and useful lives estimated for property
and equipment, licenses and patents are based on initial expectations of the
period of time these assets and intangibles will provide benefit to our Company.
Changes in circumstances related to a change in our business, change in
technology or other factors could result in these assets becoming impaired,
which could adversely affect the value of these assets.

Fiscal Year 2004 As Compared to Fiscal Year 2003

      Revenues

      Revenues in fiscal 2004 decreased by 4.2% to $2,172,864 from the fiscal
2003 level of $2,268,488.

      Product sales decreased to $1,915,732 in 2004 from $2,021,653 in 2003 or a
decrease of 5.2%. Two factors contributed to the down turn in revenue. During
2004 the Company relocated its manufacturing to a new space. During this
relocation the Company had significant down time in its ceramics manufacturing
area. The Company was quoting long lead times prior to, during and shortly after
the move. These long lead times contributed to a reduction in orders. A second
factor contributing to the down turn in orders was the Company's intentional
withdrawal from low margin products. During 2004, the Company increased prices
in several of these formulations. Management believes that shipments are
expected to increase in 2005, as the Company is able to provide product with
more reasonable lead times.

      In 2004, total contract research revenues were $257,132 as compared to
$246,835 in 2003. Government development contract revenue was $239,448, or 11.0%
of total revenues in 2004 and $169,371 or 7.5% of total revenues in 2003. The
increase is due to a Phase II SBIR grant from the Department of Energy that
began in 2003. The Department of Energy was the Company's largest contract
customer in 2004 and 2003, accounting for 11.0% and 7.5% of the Company's
revenues, respectively. Significant loss of government funding would have a
material adverse effect on the Company's financial condition and results of
operations.

      During 2003 the Company was awarded a Phase II Small Business Innovation
Research grant for $523,612 from the Department of Energy. This award was to
develop an advanced method to manufacture continuous reacted lengths of High Tc
Superconductor: Bismuth Strontium Calcium Copper Oxide - 2212 Wire. This
contract generated $239,448 and $124,925 in revenues in 2004 and 2003,
respectively.

      The Company was awarded a $100,000 Phase I SBIR from the Department of
Energy in 2002. This grant was completed during 2003. This contract generated $0
and $44,445 in revenues in 2004 and 2003, respectively. This award was for the
development of processes to tailor the particle size distribution of ceramic
superconductor powders to improve the manufacturing of ceramic superconductor
wire.

      The Company became a member of a team led by Oxford Instruments
Superconducting Technology, which was awarded a grant from the Department of
Energy Superconductivity Partnership Initiative (SPI) Program. This program
recognized $17,684 and $77,464 in revenues in 2004 and 2003, respectively. A
member of the team determined that the technology is not as suitable for the
future Magnetic Resonance Imaging market segment as originally projected in
2001. As a result in 2004, this member withdrew from the program. Due to the
unexpected change in market potential the Company also removed itself from this
SPI.

      Gross Margin

      Total gross margin in 2004 was $226,372 or 10.4% of total revenue as
compared to $302,656 or 13.3% in 2003. The primary reason for the reduction is
the decrease in sales. The decrease in sales is a result of the Company's move
to a new facility in 2004, which caused significant down time in its ceramics
manufacturing area. Included in 2003 was an inventory write-down of $133,015.
This included a write-down of $64,537 due to the lower of cost or market.

      Gross margin on product revenue was 12.5% in 2004 versus 17.0% in 2003,
primarily due to a decrease in product sales. The lower volume through
manufacturing caused by the factory relocation had a negative impact on the
absorption of manufacturing overhead which led to lower gross margins. Gross
margin on contract research revenue was -5.3% for 2004 compared to 37.5% in
2003. The decrease in gross margin on contract research revenue was due to the
acquisition of equipment that was partially funded by a research contract in
2003.

                                       13
<PAGE>

      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
Company expects that gross margins will improve as sales grow. The company
expects improved volume during 2005 as the efforts of the Sales Manager added in
early 2004 lead to new sales opportunities at new customers. This added volume
is expected to improve manufacturing overhead absorption yielding improved gross
margins. In addition, increased sales to the thin film battery market in 2005
are expected improve the gross margin mix, leading to improved gross margins.

      Inventory reserves are established for obsolete inventory, excess
inventory quantities based on management's estimate of net realizable value and
for lower-of-cost or market. Changes in this reserve are expensed or reduce
inventory and approximated $28,923 (decrease) and $18,330 (increase) for the
years ended December 31, 2004, and 2003, respectively. Management deems the
inventory reserve, after its assessment of obsolete inventory, at December 31,
2004, of $115,530 to be adequate for excess inventory and a lower of
cost-or-market analysis. The decrease in the reserve for 2004 is a result of the
reduction of a portion of obsolete inventory sold at reduced prices.

      Selling Expense

      Selling expense in fiscal 2004 increased to $236,235 from $214,691 in
fiscal 2003, an increase of $21,544, or 10.0%. This increase was due to the
hiring of a sales manager in 2004.

General and Administrative Expense

      General and Administrative expense in fiscal 2004 increased to $884,000,
from $778,758 in fiscal 2003, an increase of $105,242, or 13.5%. The increase in
these costs was due primarily to the relocation of the Company's facility in
2004, of which $80,863 was expensed for this purpose. Rent expense increased
from $66,594 to $133,424, or 100.4% due to the relocation. Also, non-employee
stock warrants were granted as compensation for consulting services, for which
$26,690 was expensed in 2004.

      Research and Development Expenses

      Internal research and development costs are expensed as incurred. Research
and development costs for 2004 were $30,862 compared to $93,096 in 2003, a
decrease of 66.8%. Internal research and development costs decreased due to the
Department of Energy's SBIR Phase II revenue that helped offset expenses.

Interest Expense

      Interest expense was $28,877, or 1.3% of Company revenues in fiscal 2004,
down 15.1% from $34,003 in fiscal 2003. Interest expense includes $22,407 for
related party interest expense.

LOSS APPLICABLE TO COMMON SHARES

      Net loss per common share based on the loss applicable to common shares
was $0.51 and $0.41 per common share for the years ended December 31, 2004 and
2003, respectively. The loss applicable to common shares includes the net loss
from operations, Series B preferred stock dividends and the accretion of Series
B preferred stock and the cumulative effect of the change in accounting for the
year ended December 31, 2003. The net loss per common share from operations was
$0.50 and $0.39, for the years ended December 31, 2004 and 2003, respectively.
The difference between the net loss from operations and the loss applicable to
common shares of $(0.01) and $(0.02), respectively, is a result of the preferred
position that the preferred shareholders have in comparison to the common
shareholders.

      Dividends on the Series B preferred stock accrue at 10% annually on the
outstanding shares. Dividends on the Series B preferred stock totaled $50,370
and $25,185 at December 31, 2004 and 2003, respectively.

LIQUIDITY AND WORKING CAPITAL

      At December 31, 2004, working capital was $(282,782) compared to $171,883
at December 31, 2003. The Company utilized cash from operations for the year
ended December 31, 2004, of $413,516. The Company utilized cash from operations
for the year ended December 31, 2003, of $190,561. Significant non-cash items,
including depreciation, inventory reserve on excess and obsolete inventory,
warrants issued from consulting and debt, debt conversion expense, allowance for
doubtful accounts and the cumulative effect of the change in accounting, were
approximately $371,000 and $256,000 for the years ended December 31, 2004 and
2003, respectively. Overall, accounts payable and accrued expenses increased in
excess of accounts receivable, inventory, and prepaids by

                                       14
<PAGE>

approximately $314,000 as a result of an increase in accrued contract expenses
and deferred contract revenue. Accounts receivable, inventory, and prepaids
decreased by approximately $265,000 while there was an increase in accounts
payable and accrued expenses by approximately $23,000 for the year ended
December 31, 2003.

      For investing activities, the Company used cash of approximately $436,000
and $151,000 for the years ended December 31, 2004, and 2003, respectively. The
amounts invested in 2004 and 2003 were used to purchase machinery and equipment
for increased production capacity, new product lines and for leasehold
improvements for the new facility. Proceeds on sale of equipment totaled $1,602
and $6,157 for the years ended December 31, 2004 and 2003, respectively.

      For financing activities for the year ended December 31, 2004, the Company
provided cash of approximately $773,000. Cash payments to third parties for debt
and capital lease obligations approximated $38,000. Proceeds from notes payable
from shareholders totaled $250,000. Principal payments on notes payable to
shareholders totaled $150,000. Proceeds from exercise of common stock options
were $3,500. Net proceeds from sale of common stock were approximately $707,000.

      For financing activities for the year ended December 31, 2003, the Company
provided cash of approximately $560,000. Cash payments to third parties for
capital lease obligations approximated $40,000. Proceeds from notes payable to
shareholders were $600,000.

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

      In November of 2004 a director agreed to loan the Company up to $200,000
for working capital, which may be drawn by the Company in increments of $50,000.
The loan is repayable on November 1, 2005, and may be repaid earlier without
prepayment penalty upon 15 days prior written notice. The interest rate is
Huntington National Bank's prime rate plus two percentage points and interest
will accrue and compound monthly. The loan is secured by the Company's assets.
The director will receive 5,000 warrants to purchase the Company's common stock,
without par value, at a purchase price of $2.50 per share and exercisable until
November 1, 2009, for each $50,000 increment drawn on the loan. The director has
the option to convert the loan balance (principal and accrued and unpaid
interest) to equity at any time before repayment, at the same price and terms as
any equity financing of the Company equal to or in excess of $200,000. On
November 3, 2004, $100,000 was drawn on the loan. On January 7, 2005, $50,000
was drawn on the loan. A total of $150,000 has been drawn on the loan. The
Company expects to draw the remaining $50,000 during the first half of 2005 and
continue to seek equity funding to fund operations in 2005.

      The Company completed two private financing transactions in 2003 including
(i) the issuance of convertible promissory notes in the aggregate amount of
$600,000 and 122,000 warrants to purchase shares of common stock in exchange for
$600,000 in cash and (ii) the redemption of the Company's entire $129,770
obligation on its Series A redeemable convertible preferred stock in exchange
for convertible promissory notes in the aggregate amount of $129,770, which
represented the face amount of the preferred stock plus accrued and unpaid
dividends and interest, and 26,302 warrants to purchase shares of common stock.
Four present shareholders invested the $600,000 of new money in the Company.
$500,000 in cash and the redemption of the Series A redeemable preferred stock
was received and recorded on June 30, 2003. $100,000 in cash was received and
recorded on July 1, 2003. The Company used $100,000 of the note proceeds to pay
off its bank line of credit which terminated on June 30, 2003, and the remainder
to finance its move to the new facility and general corporate purposes.

      Prior to June 30, 2004, the Company completed equity financing of more
than $500,000, thereby requiring the principal and accrued interest on the
convertible promissory notes totaling $754,846 to convert to equity. Pursuant to
the terms of the promissory notes, the promissory notes converted to common
stock, without par value, at a rate of $2.40 per share, and entitled the holders
of the promissory notes to receive 62,900 warrants under the same terms as
provided in the 2004 equity financing.

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.

                                       15
<PAGE>

FUTURE OPERATING RESULTS

      During 2004, the Company used cash to purchase production equipment. The
Company relocated its operations to a new facility in March of 2004. 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 2005 and greater in 2006 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. The Company has purchased manufacturing
equipment from the funds received from the State of Ohio Third Frontier Grant
which totals approximately $518,000.

      While the Company has approximately $47,000 of non-restricted cash on hand
at year-end and received additional debt financing of $50,000 subsequent to
year-end, these funds are required to fund operations in first quarter 2005.
Management is investigating additional equity funding from several sources to
fund its operations for 2005. The Company also plans to raise equity capital in
2005 to fund a portion of its planned growth.

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

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

ITEM 7.   FINANCIAL STATEMENTS

      Our balance sheet as of December 31, 2004, and the related statements of
operations, stockholders' equity and cash flows for the two years ended December
31, 2004 and 2003, together with the independent certified public accountants'
report thereon appear on Pages F-1 through F-24 hereof.

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

      None.

ITEM 8A.  CONTROLS AND PROCEDURES.

      As of the end of the period covered by this report, the Company's Chief
Executive Officer and Chief Financial Officer evaluated the effectiveness of the
design and operation of the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities
Exchange Act of 1934). Based upon this evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that the disclosure controls and
procedures were effective as of the period covered by this report in ensuring
that information required to be disclosed by the Company in the reports that it
files or submits under the Securities and Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time period specified by
the Securities and Exchange Commission's rules and forms.

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

ITEM 8B.  OTHER INFORMATION

      None.

                                       16
<PAGE>

                                    PART III

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

      The information required by this item is included under the captions,
"ELECTION OF DIRECTORS," "EXECUTIVE OFFICERS" and "SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE" in our proxy statement relating to our 2005
Annual Meeting of Shareholders to be held on June 10, 2005, and is incorporated
herein by reference.

      The Company has a Business Conduct Policy applicable to all employees of
the Company. Additionally, the Chief Executive Officer ("CEO") and all senior
financial officers, including the principal financial officer, the principal
accounting officer or controller, or any person performing a similar function
(collectively, the "Senior Financial Officers") are bound by the provisions of
the newly adopted code of ethics relating to ethical conduct, conflicts of
interest, and compliance with the law. The code of ethics is posted on the
Company's website at http://www.sciengineeredmaterials.com/cg/ethicscode.htm.

      The Company intends to satisfy the disclosure requirement under Item 10 of
Form 8-K regarding any amendment to, waiver of, any provision of this code of
ethics by posting such information on our website at the address and location
specified above.

ITEM 10.  EXECUTIVE COMPENSATION.

      The information required by this item is included under the caption
"EXECUTIVE COMPENSATION" in our proxy statement relating to our 2005 Annual
Meeting of Shareholders to be held on June 10, 2005 and is incorporated herein
by reference.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER 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 relating to
our 2005 Annual Meeting of Shareholders to be held on June 10, 2005 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 relating
to our 2005 Annual Meeting of Shareholders to be held on June 10, 2005 and is
incorporated herein by reference.

ITEM 13.   EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT                                EXHIBIT
NUMBER                               DESCRIPTION
-------                              -----------
<S>              <C>
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.
</TABLE>

                                    17
<PAGE>

<TABLE>
<S>              <C>
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)       ***  Letter Agreement with Oxford Superconducting
                 Technology dated October 23, 2002.

10(j)       ***  Department of Energy Award dated July 29,
                 2002.

10(k)       +    Department of Energy Award dated January 17,
                 2003.

10(l)       +    Department of Energy Award dated June 24, 2003.

10(m)       +    Department of Energy Award dated September 29,
                 2003.

10(n)       ***  Ohio Department of Development Third Frontier Action Fund
                 Award dated February 20, 2004.

10(o)       ++   Revolving Promissory Note dated November 3,
                 2004 by and between the Company and Mr. Robert H. Peitz

23               Consent of Hausser & Taylor LLC.

24               Powers of Attorney.

31.1             Rule 13a-14(a) Certification of Principal Executive Officer.

31.2             Rule 13a-14(a) Certification of Principal Financial Officer.

32.1        +++  Section 1350 Certification of Principal Executive Officer.

32.2        +++  Section 1350 Certification of Principal Financial Officer.
</TABLE>

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

* Filed with the Company's initial Form 10-SB on September 28, 2000, and
incorporated herein by reference.

** Filed with the Company's Form 10-SB Amendment No. 1 on January 3, 2001, and
incorporated herein by reference.

*** Filed with Company's Form 10-KSB on March 28, 2003 and incorporated herein
by reference.

+ Filed with Company's Form 10-QSB on November 12, 2003 and incorporated herein
by reference.

++ Filed with Company's Form 8-K on November 9, 2004 and incorporated herein by
reference.

+++ Furnished with this Annual Report on Form 10-KSB.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

      The information required by this item is included under the caption
"PRINCIPAL ACCOUNTANT FEES AND SERVICES" in our proxy statement relating to our
2005 Annual Meeting of Shareholders to be held on June 10, 2005 and is
incorporated herein by reference.

                                       18
<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 30, 2005                          By: /s/ Daniel Rooney
                                                  ------------------------------
                                              Daniel Rooney, Chairman of the
                                              Board of Directors, President
                                              and Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 30th day of March 2005.

<TABLE>
<CAPTION>
                Signature                          Title
<S>                                       <C>
/s/ Daniel Rooney                         Chairman of the Board of
------------------------------------      Directors, President,
                                          and Chief Executive Officer
                                          (principal executive officer)

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

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

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

 Robert H. Peitz*                         Director
 -----------------------------------
 Robert H. Peitz

                                          Director
 -----------------------------------
 Walter J. Doyle

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

                                       19
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                                                                   Page
                                                                  ------
<S>                                                               <C>
Report of Independent Registered Public Accounting Firm              F-1

Balance Sheet                                                      F-2-3

Statements of Operations                                             F-4

Statements of Shareholders' Equity                                   F-5

Statements of Cash Flows                                           F-6-7

Notes to Financial Statements                                     F-8-24
</TABLE>

<PAGE>

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

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

      We have audited the accompanying balance sheet of Superconductive
Components, Inc. as of December 31, 2004, and the related statements of
operations, shareholders' equity (deficit) and cash flows for each of the two
years in the period ended December 31, 2004. 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. 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, 2004, and the results of its operations and its cash
flows for each of the two years in the period then ended in conformity with
accounting principles generally accepted in the United States of America.

      The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 16 to the
financial statements, the Company has experienced recurring losses from
operations, negative cash flow from operations and liquidity shortfall all of
which raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to this are also described in Note 16. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

                                                     /s/ HAUSSER + TAYLOR LLC
Columbus, Ohio
February 23, 2005

                                      F-1

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                        SUPERCONDUCTIVE COMPONENTS, INC.

                                  BALANCE SHEET

                                DECEMBER 31, 2004

                                     ASSETS

<TABLE>
<S>                                                                <C>
CURRENT ASSETS
  Cash                                                             $    47,095
  Cash, restricted for equipment                                       142,968
  Accounts Receivable
    Trade, less allowance for doubtful accounts of $33,176             167,394
    Employees                                                              100
 Inventories                                                           535,171
 Prepaid expenses                                                       12,626
                                                                   -----------
       Total current assets                                            905,354
                                                                   -----------
PROPERTY AND EQUIPMENT,
 AT COST
  Machinery and equipment                                            2,143,791
  Furniture and fixtures                                                22,586
  Leasehold improvements                                               280,791
  Construction In Process                                               52,048
                                                                   -----------
                                                                     2,499,216
  Less accumulated depreciation                                     (1,641,356)
                                                                   -----------
                                                                       857,860
                                                                   -----------
OTHER ASSETS
  Deposits                                                               8,755
  Intangibles                                                           37,070
                                                                   -----------
                                                                        45,825
                                                                   -----------
TOTAL ASSETS                                                       $ 1,809,039
                                                                   ===========
</TABLE>

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

                                      F-2
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                                  BALANCE SHEET

                                DECEMBER 31, 2004

                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<S>                                                                             <C>
CURRENT LIABILITIES
  Capital lease obligation, current portion                                     $    33,522
  Capital lease obligation, shareholder, current portion                             68,428
  Note payable shareholders, current portion                                        252,886
  Accounts payable                                                                  230,097
  Accounts payable, shareholders                                                      7,920
  Accrued contract expenses, restricted for equipment                               142,968
  Accrued contract expenses                                                         175,971
  Accrued personal property taxes                                                    47,671
  Accrued interest, shareholders                                                     31,891
  Deferred contract revenue                                                          83,739
  Accrued expenses                                                                  113,043
                                                                                -----------
        Total current liabilities                                                 1,188,136
                                                                                -----------
CAPITAL LEASE OBLIGATION, NET OF
 CURRENT PORTION                                                                     38,935
                                                                                -----------

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

SHAREHOLDERS' EQUITY
  Convertible preferred stock, Series B, 10% cumulative, nonvoting, no par
     value, $10 stated value, optional redemption at 103%;  25,185
      shares issued and outstanding                                                 309,776
  Common stock, no par value, authorized 15,000,000
     shares; 2,439,360 shares issued and outstanding                              7,541,653
  Additional paid-in capital                                                        558,674
  Accumulated deficit                                                            (7,828,135)
                                                                                -----------
                                                                                    581,968
                                                                                -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                      $ 1,809,039
                                                                                ===========
</TABLE>

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

                                      F-3
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                             STATEMENT OF OPERATIONS

                     YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                      2004                 2003
                                                   -----------         ------------
<S>                                                <C>                 <C>
SALES REVENUE                                      $ 1,915,732         $  2,021,653
CONTRACT RESEARCH REVENUE                              257,132              246,835
                                                   -----------         ------------
                                                     2,172,864            2,268,488
                                                   -----------         ------------

COST OF SALES REVENUE                                1,675,729            1,678,454
INVENTORY WRITE-DOWN                                         -              133,015
COST OF CONTRACT RESEARCH                              270,763              154,363
                                                   -----------         ------------
                                                     1,946,492            1,965,832
                                                   -----------         ------------

GROSS MARGIN                                           226,372              302,656

GENERAL AND ADMINISTRATIVE EXPENSES                    884,000              778,758

SALES AND PROMOTIONAL EXPENSES                         236,235              214,691
                                                   -----------         ------------

LOSS FROM OPERATIONS                                  (893,863)            (690,793)
                                                   -----------         ------------

OTHER INCOME (EXPENSE)
  Interest income                                        2,299                2,499
  Interest expense                                     (28,877)             (34,002)
  Debt conversion expense (note 6)                    (175,362)                   -
  Gain/(loss) on disposal of equipment                  (2,140)               6,157
  Miscellaneous, net                                    (1,879)              11,149
                                                   -----------         ------------
                                                      (205,959)             (14,197)
                                                   -----------         ------------

LOSS BEFORE PROVISION FOR INCOME TAX                (1,099,822)            (704,990)

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

NET LOSS BEFORE CUMULATIVE EFFECT OF A
 CHANGE IN ACCOUNTING                               (1,099,822)            (704,990)

CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING                   -             (15,886)
                                                   -----------         ------------

NET LOSS                                            (1,099,822)            (720,876)

DIVIDENDS ON PREFERRED STOCK                           (25,185)             (25,185)
                                                   -----------         ------------

LOSS APPLICABLE TO COMMON SHARES                   $(1,125,007)        $   (746,061)
                                                   ===========         ============

EARNINGS PER SHARE - BASIC AND DILUTED
 (Note 2)

NET LOSS PER COMMON SHARE BEFORE CUMULATIVE
 EFFECT OF A CHANGE IN ACCOUNTING
  Basic                                            $     (0.50)        $      (0.39)
                                                   ===========         ============
  Diluted                                          $     (0.50)        $      (0.39)
                                                   ===========         ============

NET LOSS PER COMMON SHARE AFTER CUMULATIVE
 EFFECT OF A CHANGE IN ACCOUNTING

  Basic                                            $     (0.51)        $      (0.41)
                                                   ===========         ============
  Diluted                                          $     (0.51)        $      (0.41)
                                                   ===========         ============

WEIGHTED AVERAGE SHARES OUTSTANDING

  Basic                                              2,212,884            1,823,256
                                                   ===========         ============
  Diluted                                            2,212,884            1,823,256
                                                   ===========         ============
</TABLE>

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

                                      F-4
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                   STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)

                     YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                CONVERTIBLE                 ADDITIONAL
                                                              PREFERRED STOCK,    COMMON      PAID-IN    ACCUMULATED
                                                                  SERIES B        STOCK       CAPITAL       DEFICIT      TOTAL
                                                              ----------------  ----------  ----------   -----------   ------------
<S>                                                           <C>               <C>         <C>          <C>           <C>
Balance 12/31/02                                              $        259,406  $6,378,216  $   85,078   $(6,007,437)  $    715,263

Accretion of cumulative dividends                                       25,185           -     (25,185)            -              -

Net loss                                                                     -           -           -      (720,876)      (720,876)
                                                              ----------------  ----------  ----------   -----------   ------------

BALANCE 12/31/03                                                       284,591   6,378,216      59,893    (6,728,313)        (5,613)
Accretion of cumulative dividends                                       25,185           -     (25,185)            -              -
Proceeds from exercise of common stock options                               -       3,500           -             -          3,500
Proceeds from sale of common stock (net) (Note 7)                            -     596,207     110,908             -        707,115
Conversion of debt to common stock (Note 7)                                  -     563,730     366,478             -        930,208
Common stock warrants issued with debt (Note 6)                              -           -      19,890             -         19,890
Common stock warrants issued for consulting services
(Note 7)                                                                     -           -      26,690             -         26,690
Net loss                                                                     -           -           -    (1,099,822)    (1,099,822)
                                                              ----------------  ----------  ----------   -----------   ------------
BALANCE 12/31/04                                              $        309,776  $7,541,653  $  558,674   $(7,828,135)  $    581,968
                                                              ================  ==========  ==========   ===========   ============
</TABLE>

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

                                      F-5
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                            STATEMENTS OF CASH FLOWS

                     YEARS ENDED DECEMBER 31, 2004 AND 2003
<TABLE>
<CAPTION>
                                                                                    2004          2003
                                                                                -----------     ---------
<S>                                                                             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                                      $(1,099,822)    $(720,876)
                                                                                -----------     ---------
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Depreciation                                                                    199,283       212,031
    Amortization and accretion                                                        3,088         3,088
    Warrants issued for consulting and debt                                          30,005             -
    Debt conversion expense                                                         175,362             -
    Cumulative effect of a change in accounting                                           -        15,886
    (Gain) Loss on sale of equipment                                                  2,141        (6,157)
    Inventory reserve                                                               (28,923)       18,330
    Provision for doubtful accounts                                                  (8,176)        7,000
    Changes in operating assets and liabilities:
      (Increase) decrease in assets:
        Accounts receivable                                                         (32,638)      124,530
        Inventories                                                                  (5,716)      136,570
        Prepaid expenses                                                             17,572         3,736
        Other assets                                                                   (892)      (7,863)
      Increase (decrease) in liabilities:
        Accounts payable                                                              7,980      (107,576)
        Accrued expenses                                                            327,220       130,740
                                                                                -----------     ---------
          Total adjustments                                                         686,306       530,315
                                                                                -----------     ---------
              Net cash used in operating activities                                (413,516)     (190,561)
                                                                                -----------     ---------

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds on sale of equipment                                                       1,602         6,157
  Purchases of property and equipment                                              (437,820)     (157,419)
                                                                                -----------     ---------
              Net cash used in investing activities                                (436,218)     (151,262)
                                                                                -----------     ---------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from note payable, shareholders                                          250,000       600,000
  Principal payments on notes payable, shareholders                                (150,000)            -
  Proceeds from exercise of common stock options                                      3,500             -
  Proceeds from sale of common stock (net)                                          707,115             -
  Principal payments on capital lease obligations                                   (37,758)      (40,144)
                                                                                -----------     ---------
              Net cash provided by financing activities                             772,857       559,856
                                                                                -----------     ---------
</TABLE>

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

                                      F-6
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                      STATEMENTS OF CASH FLOWS (CONTINUED)

                     YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>
                                                                                   2004         2003
                                                                                ----------   ---------
<S>                                                                             <C>          <C>
NET INCREASE  (DECREASE) IN CASH                                                   (76,877)    218,032

CASH - Beginning of period                                                         266,940      48,908
                                                                                ----------   ---------

CASH - End of period                                                            $  190,063   $ 266,940
                                                                                ==========   =========

SUPPLEMENTAL DISCLOSURES OF CASH  FLOW INFORMATION
  Cash paid during the years for:
    Interest, net                                                               $    6,749   $   7,295
    Income taxes                                                                $        -   $       -

SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING ACTIVITIES

  Property and equipment was purchased by capital lease                         $   46,494   $       -

  Note payable converted to equity                                              $  729,700   $       -

  Accrued interest converted to equity                                          $   25,491   $       -

  Machinery & Equipment and accrued asset retirement obligation                 $   12,330   $  30,236

  Series A Redeemable Convertible Preferred stock converted to
    Notes Payable, Shareholders                                                 $        -   $ 121,770

  Accrued interest converted to notes payable, shareholder                      $        -   $   7,585
</TABLE>

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

                                      F-7
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1.     BUSINESS ORGANIZATION AND PURPOSE

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

NOTE 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      A.    Inventories - Inventories are stated at the lower of cost or market
            on an acquired or internally produced lot basis, and consist of raw
            materials, work-in-process and finished goods. Cost includes
            material, labor, freight and applied overhead. Inventory reserves
            are established for obsolete inventory and excess inventory
            quantities based on management's estimate of net realizable value.
            The inventory reserve decreased $28,923 during 2004 and increased
            $18,330 during 2003. The decrease in the reserve for 2004 is a
            result of a portion of obsolete inventory sold at reduced prices.

            The Company enters into cancelable purchase commitment arrangements
            with some suppliers. Estimated purchase commitments to these
            suppliers approximate $221,000 at December 31, 2004. 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 and
            leasehold improvements to three years on computer equipment.
            Expenditures for renewals and betterments are capitalized and
            expenditures for repairs and maintenance are charged to operations
            as incurred.

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

                                      F-8
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      C.    Research and Development - Internal research and development costs
            are expensed as incurred. Research and development expenses for the
            years ended December 31, 2004 and 2003 were $30,862 and $93,096,
            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 months to three years 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 2004 and 2003, the Company earned $257,132 and $246,835,
            respectively, in contract revenue. There is deferred revenue of
            $83,739 at December 31, 2004.

            During 2003 the Company was awarded a twenty-four month contract in
            the amount of $523,612 that began June 27, 2003.

      D.    Equipment - The Company received funds of $517,935 from the Ohio
            Department of Development's Third Frontier Action Fund (TFAF) for
            the purpose of equipment related to the grant's purpose.
            Additionally, the Company received $27,500 as part of its contract
            with the Department of Energy for the purchase of equipment related
            to the contract's purpose. The Company has elected to record the
            funds disbursed as a contra asset; therefore, the assets are not
            reflected in the Company's financial statements. As assets are
            purchased, the liability initially created when the cash was
            received is reduced with no revenue recognized or fixed asset
            recorded on the balance sheet. At, December 31, 2004, the Company
            has disbursed $374,967 of the funds received from TFAF. Funds
            received and not disbursed totaling $142,968 is included in current
            liabilities at December 31, 2004. The grant and contract both
            provide that as long as the Company performs in compliance with the
            grant/contract, the Company retains the rights to the equipment.
            Management states that the Company will be in compliance with the
            requirements and, therefore, will retain the equipment at the end of
            the grant/contract.

      E.    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, 2004 are
            $21,000 and $11,454, respectively. Amortization expense was $1,259
            for the years ended December 31, 2004 and 2003. Amortization expense
            is estimated to be $1,259 for each of the next five years.

                                      F-9
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      F.    Patent - The Company has secured patents for manufacturing processes
            used in its operations. Costs incurred to secure the patents have
            been capitalized, included in "Other Assets" on the balance sheet,
            and are being amortized over the life of the patents. Cost and
            accumulated amortization of the patent at December 31, 2004 are
            $36,473 and $8,948, respectively. Amortization expense was $1,830
            and $1,830 for the years ended December 31, 2004 and December 31,
            2003, respectively. Amortization expense is estimated to be $1,830
            for each of the next five years.

      G.    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.

      H.    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. For stock based
            compensation other than employees, the Company utilizes the fair
            value method as provided for in FASB #123.

            The Company's pro forma information for the years ended December 31,
            2004 and 2003 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 2004 and 2003
            results as reported to the results had the Company adopted the
            expense recognition provisions of FASB #123.

<TABLE>
<CAPTION>
                                                          2004           2003
                                                       -----------     ---------
<S>                                                    <C>             <C>
Net loss applicable to
 common shares:
  As reported                                          $(1,125,007)    $(746,061)
  Stock-based compensation, net of
     Tax for pro forma                                      (6,237)       (4,983)
                                                       -----------     ---------
  Pro forma net loss under SFAS #123                   $(1,131,244)    $(751,044)

Basic and diluted loss per share:
  As reported                                          $     (0.51)    $   (0.41)
  Pro forma under SFAS #123                                  (0.51)    $   (0.41)
</TABLE>

                                      F-10
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

            For the years ended December 31, 2004 and 2003, there was no
            stock-based employee compensation cost included in the determination
            of net loss as reported.

      I.    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 2004 and 2003, 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.

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

      K.    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 2004 and 2003, which accounted
            for approximately $243,000 and $428,000, respectively, of the total
            revenue and $10,000 of the trade accounts receivable at December 31,
            2004.

      L.    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.

      M.    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).

      N.    Revenue Recognition - Revenue from product sales is recognized upon
            shipment to customers. Provisions for discounts, returns and other
            adjustments are provided for in the same period as the related sales
            are recorded. Deferred revenues represents cash received in advance
            of the contract revenues earned. Revenue from contract research
            provided for third parties is recognized when the contracted work
            has been performed or as milestone results have been achieved.

                                      F-11
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      O.    Accounts Receivable - The Company extends unsecured credit to
            customers under normal trade agreements, which require payment
            within 30 days. Accounts greater than 90 days past due, which
            amounted to $0 and $0 of net receivables for the years ended
            December 31, 2004 and 2003, respectively are considered delinquent.
            The Company does not charge interest on delinquent trade accounts
            receivable. Accounts greater than one year past due, which amount to
            $0 and $0 of net receivables for the years ended December 31, 2004
            and 2003 are placed on non-accrual status. Unless specified by the
            customer, payments are applied to the oldest unpaid invoice.
            Accounts receivable are presented at the amount billed.

            Management estimates an allowance for doubtful accounts, which were
            $33,176 and $25,000 as of December 31, 2004 and 2003, respectively.
            The estimate is based upon management's review of delinquent
            accounts and an assessment of the Company's historical evidence of
            collections. Bad debt expense of $26,498 and $0 was recognized for
            the years ended December 31, 2004 and 2003, respectively as a result
            of this estimate. Specific accounts are charged directly to the
            reserve when management obtains evidence of a customer's insolvency
            or otherwise determines that the account is uncollectible.
            Charge-offs of specific accounts for the years ended December 31,
            2004 and 2003 totaled $18,000 and $35,000 respectively. $6,000 in
            2004 was for a former employee and $35,000 in 2003 was for a related
            party.

      P.    Intangible Assets - In July 2001, the FASB issued Statement of
            Financial Accounting Standards No. 142, "Goodwill and Other
            Intangible Assets" ("SFAS 142"). SFAS 142 requires certain
            intangible assets to be tested for impairment under certain
            circumstances, and written off when impaired, rather than being
            amortized as previous standards required. There were no impairment
            adjustments for the years ended December 31, 2004 and 2003.

      Q.    Recently Issued Accounting Standards - In December 2004, the FASB
            issued SFAS No. 123 (Revised), Shared Based Payment. SFAS No. 123R
            replaces SFAS No. 123, Accounting for Stock Based Compensation, and
            supersedes APB Opinion No. 25, Accounting for Stock Issued to
            Employees. SFAS No. 123R requires compensation costs related to
            share-based payment transactions to be recognized in the financial
            statements. Compensation costs will be recognized over the vesting
            period of the award. SFAS No. 123R is effective as of the beginning
            of the first interim or annual reporting period that begins after
            December 15, 2005. The impact of SFAS No. 123 is to record the
            additional compensation expenses on the financial statements that is
            currently disclosed in Note 2H.

                                      F-12
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 3.     INVENTORIES

            Inventories consist of the following at December 31, 2004:

<TABLE>
<S>                                                <C>
Raw materials                                      $ 340,148
Work-in-process                                      142,390
Finished goods                                       168,163
                                                   ---------
                                                     650,701
Less reserve for obsolete inventory                  115,530
                                                   ---------
                                                   $ 535,171
                                                   =========
</TABLE>

NOTE 4.     NOTES PAYABLE - BANK

            The Company had a bank line of credit in the amount of $100,000,
            interest at prime. This line of credit matured June 30, 2003 and was
            not renewed.

NOTE 5.     LEASE OBLIGATIONS

            OPERATING

            The Company leases its facilities and certain office equipment under
            agreements classified as operating leases expiring through 2014.
            Rent expense which includes various monthly rentals for the years
            ended December 31, 2004 and 2003, totaled $138,910 and $73,438,
            respectively. Future minimum lease payments at December 31, 2004 are
            as follows:

<TABLE>
<S>                   <C>
     2005             $100,575
     2006              100,330
     2007               94,362
     2008               94,362
     2009              106,635
2010 and beyond        501,886
                      --------
                      $998,150
                      ========
</TABLE>

                                      F-13
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 5.     LEASE OBLIGATIONS (CONTINUED)

            CAPITAL

            The Company also leases certain equipment under capital leases
            including the lease with a major shareholder entered into in 2001.
            The future minimum lease payments, by year, with the present value
            of such payments, as of December 31, 2004 is as follows:

<TABLE>
<CAPTION>
                                                   RELATED
                                                    PARTY      OTHER
                                                   -------    -------
<S>                                                <C>        <C>
2005                                               $75,790    $37,485
2006                                                     -     23,375
2007                                                     -      9,288
2008                                                     -      7,555
2009                                                     -      5,037
                                                     -----    -------
Total minimum lease payments                        75,790     82,740
Less amount representing interest                    7,362     10,284
                                                   -------    -------
Present value of minimum lease payments             68,428     72,456
Less current portion                                68,428     33,522
                                                   -------    -------
Long-term capital lease obligations                $     -    $38,934
                                                   =======    =======
</TABLE>

            The equipment under capital lease at December 31, 2004 is included
            in the accompanying balance sheet under the following captions:

<TABLE>
<CAPTION>
                                                   RELATED
                                                    PARTY      OTHER
                                                   -------    -------
<S>                                                <C>        <C>
Machinery and equipment                            $68,428    $144,406
Less accumulated depreciation                       34,214      53,038
                                                   -------    --------
Net book value                                     $34,214    $ 91,368
                                                   =======    ========
</TABLE>

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

            Amortization expense totaled $18,070 and $13,987 for the years ended
            December 31, 2004 and 2003, respectively.

NOTE 6.     RELATED PARTY NOTES PAYABLE

            Effective December 31, 2000, the Company converted accounts payable
            and accrued interest payable to a certain major shareholder totaling
            $132,270 to a note payable shareholder. The same shareholder
            converted $50,000 of accounts payable in March 2002 to the note
            payable. The note provides for monthly payments of principal of
            $2,000 per month for the period of February 1, 2001 through December
            1, 2002 and, thereafter, in monthly installments of $4,000 for
            principal until the entire outstanding balance is paid

                                      F-14
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 6.     RELATED PARTY NOTES PAYABLE (CONTINUED)

            in full. The balance of the note was $168,270 at December 31, 2004.
            There was $4,000 paid in 2001 and there were no principal payments
            made on this note after 2001. Interest is based upon the Prime
            Commercial Rate. Prime was 5.25% and 4.00% at December 31, 2004, and
            2003, respectively. Interest expense on this note charged to
            operations was $5,143 and $6,456 for the years ended December 31,
            2004 and 2003, respectively.

            The Company completed two private financing transactions in 2003
            including (i) the issuance of convertible promissory notes in the
            aggregate amount of $600,000 and 122,000 warrants to purchase shares
            of common stock in exchange for $600,000 in cash and (ii) the
            redemption of the Company's entire $129,770 obligation on its Series
            A redeemable convertible preferred stock in exchange for convertible
            promissory notes in the aggregate amount of $129,770, which
            represented the face amount of the preferred stock plus accrued and
            unpaid dividends and interest, and 26,302 warrants to purchase
            shares of common stock. Four present shareholders invested the
            $600,000 of new money in the Company. $500,000 in cash and the
            redemption of the Series A redeemable preferred stock was received
            and recorded on June 30, 2003. $100,000 in cash was received and
            recorded on July 1, 2003. The Company used $100,000 of the note
            proceeds to pay off its bank line of credit which terminated on June
            30, 2003, and the remainder to finance its move to the new facility
            and general corporate purposes.

            During second quarter 2004, the Company completed equity financing
            of at least $500,000 prior to June 30, 2004, thereby requiring the
            principal and accrued interest on the convertible promissory notes
            totaling $754,846 to convert to equity. Pursuant to the terms of the
            promissory notes the promissory notes converted to common stock,
            without par value, at a rate of $2.40 per share and entitled the
            holders of the promissory notes to receive warrants under the same
            terms as provided in the 2004 private equity financing.

            Therefore, the Company has recorded the debt conversion in
            accordance with SFAS #84 - "Induced Conversions of Convertible Debt"
            which requires recognition of an expense equal to the fair value of
            the additional securities issued with conversion. The Company
            expensed $175,362 of debt conversion expense in the second quarter
            2004.

            In November of 2004 a director agreed to loan the Company up to
            $200,000 for working capital, which may be drawn by the Company in
            increments of $50,000. The loan is repayable on November 1, 2005,
            and may be repaid earlier without prepayment penalty upon 15 days
            prior written notice. The interest rate is Huntington National
            Bank's prime rate plus two percentage points and interest will
            accrue and compound monthly. The loan is secured by the Company's
            assets and is perfected by the filing of a UCC-1 financing
            statement. The director will receive 5,000 warrants to purchase the
            Company's common stock, without par value, at a purchase price of
            $2.50 per share and exercisable until November 1, 2009, for each
            $50,000 increment drawn on the loan. The director has the option to
            convert the loan balance (principal and accrued and unpaid interest)
            to equity at any time before repayment, at the same price and terms
            as any equity financing of the Company equal to or in excess of
            $200,000. On November 3, 2004, $100,000 was drawn on the loan. On
            January 7, 2005, an additional $50,000 was drawn on the loan. Due to
            the debt issued with common stock warrants, $19,860 was assigned to
            the warrants and allocated to additional paid-in capital. Accretion
            expense of $3,315 is included in interest expense in the Statement
            of Operations.

                                      F-15
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 7.     COMMON AND PREFERRED STOCK

            COMMON STOCK

            During 2004 the Company raised $707,115 in net proceeds for the
            issuance of common stock through the sale of approximately 300
            units. A unit consisted of 1,000 shares of the Company's common
            stock without par value and a warrant to purchase 200 shares of
            Common Stock at $2.88 per share until May 31, 2009. The units were
            offered to accredited investors at a price of $2,400 per unit. Of
            the net proceeds, the warrants were valued at $110,908, which was
            recorded as additional paid-in capital. 300,084 shares of common
            stock and 60,017 common stock warrants valued at $2.88 were issued
            for the sale of these units.

            The related party debt described in Note 6 had a conversion feature
            if the Company completed an equity financing of $500,000. With the
            above sale of units, debt and accrued interest totaling $754,846 was
            converted to equity during 2004. Pursuant to the terms of the
            promissory notes the promissory notes converted to common stock,
            without par value, at a rate of $2.40 per share and entitled the
            holders of the promissory notes to receive warrants under the same
            terms as provided in the 2004 private equity financing. With the
            change in terms of the debt when converted to equity, the Company
            recorded the debt conversion in accordance with SFAS #84 - "Induced
            Conversions of Convertible Debt" which required recognition of an
            expense equal to the fair value of the additional securities issued
            with conversion, which totaled $175,363. Of the total debt converted
            as repriced for the conversion, $563,730 was allocated to common
            stock and $366,478 was allocated to additional paid-in capital.
            314,520 shares of common stock and 62,900 common stock warrants
            valued at $2.88 were issued for the debt and accrued interest.

            During 2004, 17,500 warrants valued at $2.88 were issued to a third
            party consultant for services rendered during the year. The warrants
            were valued at $35,586. Of the total value, $26,690 was allocated to
            additional paid-in capital for consulting services rendered during
            2004 and $8,896 was netted against the proceeds raised in the sale
            of the units in 2004.

            During 2004, 1,500 stock options were exercised resulting in
            proceeds of $3,500. The exercise price for these options ranged from
            $2.00 to $2.50.

                                      F-16
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 7.     COMMON AND PREFERRED STOCK (CONTINUED)

            PREFERRED STOCK

            Shares of preferred stock authorized and outstanding at December 31,
            2004 are as follows:

<TABLE>
<CAPTION>
                              SHARES      SHARES
                            AUTHORIZED  OUTSTANDING
                            ----------  -----------
<S>                         <C>         <C>
Cumulative Preferred Stock   10,000           -

Voting Preferred Stock      125,000           -

Non-Voting Preferred Stock  125,000(a)   25,185(b)
</TABLE>

            (a) Includes 700 shares of Series A Preferred Stock and 100,000
            shares of Series B Preferred Stock authorized for issuance.

            (b) Includes 25,185 shares of Series B Preferred Stock outstanding
            at December 31, 2004.

            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. The Series A shares are convertible to
            common shares at the rate of $6.00 per share and Series B shares at
            the rate of $5.00 per share. At the Company's option, Series A and
            Series B shares are redeemable at 103% after the respective third
            anniversary dates.

            The Company redeemed the Series A preferred stock in 2003 (see note
            6). During 2004 and 2003, no Series B cash dividends were paid. At
            December 31, 2004 the Company has accrued dividends on Series B
            preferred stock of $50,370, which is included in convertible
            preferred stock, Series B on the balance sheet at December 31, 2004.

            EARNINGS PER SHARE

            At December 31, 2004 and 2003, all outstanding common stock
            equivalents which include preferred stock, Series B, employee and
            director stock options and warrants are antidilutive due to the net
            loss.

<TABLE>
<CAPTION>
                    DECEMBER 31,  DECEMBER 31,
                        2004         2003
                    ------------  ------------
<S>                 <C>           <C>
Options               475,250       395,500
Warrants              392,648       308,302
Preferred Series B     50,370        50,370
                      -------       -------
                      918,268       754,172
                      =======       =======
</TABLE>

                                      F-17

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 7.     COMMON AND PREFERRED STOCK (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>
                                                  2004          2003
                                               -----------   -----------
<S>                                            <C>           <C>
Loss applicable to common shareholders
  used in basic EPS and diluted EPS            $(1,125,007)  $  (746,061)
                                               ===========   ===========
Weighted average number of common shares
  used in EPS                                    2,212,884     1,823,256

Effect of dilutive securities:
Stock options and warrants                               -             -
                                               -----------   -----------
Weighted number of common shares and dilutive
  potential common stock used in diluted EPS     2,212,884     1,823,256
                                               ===========   ===========
</TABLE>

NOTE 8.     STOCK OPTION PLANS

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

            The cumulative status at December 31, 2004 and 2003 of options
            granted and outstanding, as well as options which became exercisable
            in connection with the Stock Option Plans is summarized as follows:

                                      F-18

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 8.     STOCK OPTION PLANS (CONTINUED)

            EMPLOYEE STOCK OPTIONS

<TABLE>
<CAPTION>
                                                          WEIGHTED
                                                           AVERAGE
                                         STOCK OPTIONS  EXERCISE PRICE
                                         -------------  --------------
<S>                                      <C>            <C>
Outstanding at December 31, 2002            397,550     $         1.94
  Granted                                    10,000               1.00
  Exercised                                       -                  -
  Expired                                   (54,700)              2.96
  Forfeited                                 (94,350)              1.86
                                            -------     --------------
Outstanding at December 31, 2003            258,500               1.67
  Granted                                    70,000               2.78
  Exercised                                       -                  -
  Expired                                         -                  -
  Forfeited                                 (17,250)              2.17
                                            -------     --------------
Outstanding at December 31, 2004            311,250     $         1.89
                                            =======     ==============
Shares exercisable at December 31, 2003     150,850     $         1.68
Shares exercisable at December 31, 2004     149,100     $         1.73
</TABLE>

            NON-EMPLOYEE DIRECTOR STOCK OPTIONS

<TABLE>
<CAPTION>
                                                           AVERAGE
                                         STOCK OPTIONS  EXERCISE PRICE
                                         -------------  --------------
<S>                                      <C>            <C>
Outstanding at December 31, 2002            107,000     $         2.14
  Granted                                    30,000               1.00
  Exercised                                       -                  -
  Expired                                         -                  -
  Forfeited                                       -                  -
                                            -------     --------------
Outstanding at December 31, 2003            137,000               1.89
  Granted                                    30,000               2.60
  Exercised                                  (1,500)              2.33
  Expired                                    (1,500)              2.50
  Forfeited                                       -                  -
                                            -------     --------------
Outstanding at December 31, 2004            164,000     $         2.01
                                            =======     ==============
Shares exercisable at December 31, 2003     101,000     $         2.14
Shares exercisable at December 31, 2004     131,000     $         1.87
</TABLE>

                                      F-19

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 8.     STOCK OPTION PLANS (CONTINUED)

            Exercise prices for options range from $1.00 to $3.00 for options at
            December 31, 2004. The weighted average option price for all options
            outstanding is $1.93 with a weighted average remaining contractual
            life of 6.9 years.

            The weighted average fair values at date of grant for options
            granted during 2004 and 2003 were $2.73 and $1.00, respectively, and
            were estimated using the Black-Scholes option valuation model with
            the following weighted average assumptions:

<TABLE>
<CAPTION>
                         2004    2003
                        ------   ------
<S>                     <C>      <C>
Expected life in years     6.9      7.3
Interest rate                5%       5%
Volatility              106.27%  110.67%
Dividend yield               0%       0%
</TABLE>

NOTE 9.     WARRANTS ISSUED

            The Company issued warrants to purchase common stock of the Company
            at $2.50 (fair market value at date of grant) per common share for
            150,000 shares of common stock in connection with subordinated notes
            issued to certain shareholders. The warrants are 100% vested and
            expire on January 7, 2010, ten years from the date of grant

            The Company issued 148,302 warrants to purchase common stock of the
            Company at $1.00 (above fair market value at date of grant) per
            common share to purchase 148,302 shares of common stock, subject to
            vesting, in connection with promissory notes payable issued to
            certain shareholders. As a result of the conversion of the
            promissory notes on May 13, 2004, no additional vesting accrues and
            the number of shares of common stock issuable under the warrants was
            fixed at 84,930. The warrants expire on June 30, 2008, five years
            from the date of grant.

            The Company issued 10,000 warrants to purchase common stock of the
            Company at $1.00 (above fair market value at date of grant) per
            common share for 10,000 shares of common stock related to a lease
            guarantee provided to the Company by a shareholder. The warrants
            vest according to the following schedule: (1) 4,600 vest on the date
            of grant; and (2) 5,400 vest 150 per month for 36 months. As of
            December 31, 2004, 7,300 warrants to purchase 7,300 shares of common
            stock had vested. The warrants expire on June 30, 2008, five years
            from the date of grant.

            The Company issued 122,918 warrants to purchase common stock of the
            Company at $2.88 (above fair market value at date of grant) per
            common share for 122,918 shares of common stock to certain
            shareholders in connection with equity financing received by the
            Company in a private equity offering between May 13, 2004 and August
            2, 2004. The warrants expire on May 31, 2009.

            The Company issued 17,500 warrants to purchase common stock of the
            Company at $2.88 (above fair market value at date of grant) per
            common share for 17,500 shares of common stock to a consultant in
            consideration for business development and strategic planning
            services provided to the Company. The warrants expire on May 31,
            2009.

                                      F-20

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 9.     WARRANTS ISSUED (CONTINUED)

            The Company issued 20,000 warrants to purchase common stock of the
            Company at $2.50 (above fair market value at date of grant) per
            common share for 20,000 shares of common stock, subject to vesting,
            to a certain director of the Company in connection with a revolving
            promissory note for $200,000 issued on November 3, 2004. The
            warrants vest in increments of 5,000 for every $50,000 increment
            drawn on the revolving promissory note. As of December 31, 2004,
            10,000 warrants to purchase 10,000 shares of common stock had
            vested. The warrants expire on November 1, 2009.

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:

<TABLE>
<CAPTION>
                                           2004
                                       -----------
<S>                                    <C>
Deferred tax assets
  NOL Carryforward                     $ 2,607,000
  UNICAP                                    31,000
  Allowance for doubtful accounts           13,000
  Reserve for obsolete inventory            44,000
  Property and equipment                   (43,000)
                                       -----------
                                         2,652,000
Valuation allowance                      2,652,000
                                       -----------
Net                                    $         -
                                       ===========
</TABLE>

            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 $2,652,000 and $2,328,000 at December 31, 2004 and
            2003, respectively.

            The Company has net operating loss carryovers available for federal
            and state tax purposes of approximately $6,859,000, which expire in
            varying amounts through 2024

            For the years ended December 31, 2004 and 2003, a reconciliation of
            the statutory rate and effective rate for the provisions for income
            taxes consists of the following:

<TABLE>
<CAPTION>
                            PERCENTAGE
                          --------------
                           2004     2003
                          -----    -----
<S>                       <C>      <C>
Federal statutory rate    (34.0)   (34.0)
Valuation allowance        34.0     34.0
                          -----    -----

Effective rate                -%       -%
                          =====    =====
</TABLE>

                                      F-21

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 10.    INCOME TAXES (CONTINUED)

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

<TABLE>
<CAPTION>
                         2004           2003
                      -----------    -----------
<S>                   <C>            <C>
  Current expense     $         -    $         -
  Deferred expense              -              -
                      -----------    -----------

  Total               $         -    $         -
                      -----------    -----------
</TABLE>

NOTE 11.    RELATED PARTY TRANSACTIONS

            Sales to a related party amounted to $0 and $17,999 during 2004 and
            2003, respectively.

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

            Interest expense, shareholders was $22,407 and $23,206 for the years
            ended December 31, 2004 and 2003, respectively.

            For additional information regarding related party transactions, see
            Notes 5, 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:

            -     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.

            -     Long-term capital lease obligations: Amounts reported in the
                  balance sheet approximate fair value as the interest rates on
                  these obligations range from 4.5% to 8.0%.

            -     Note payable shareholders: Amounts reported in the balance
                  sheet represent debt to major shareholders. Amounts reported
                  in the balance sheet approximate fair market value, as the
                  interest rates range from prime to prime plus two percentage
                  points.

NOTE 13.    FOURTH QUARTER ADJUSTMENTS

            The Statement of Operations includes adjustments for the fourth
            quarter of 2003 for an inventory write-down of $133,015. This
            adjustment contains two components. Inventory for some finished
            goods and work-in-process were reduced to the lower of cost or
            market for a reduction of pricing that began declining in 2003. The
            lower of cost or market

                                      F-22

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 13.    FOURTH QUARTER ADJUSTMENTS (CONTINUED)

            adjustment totaled $64,537. Additionally, management, in the fourth
            quarter of 2003, reviewed inventory for obsolete items and inventory
            items that are no longer used in the manufacturing process. This
            review process was in excess of the inventory reserve on the books
            and resulted in an inventory write-down of $68,488.

NOTE 14.    SUBSEQUENT EVENT PROMISSORY NOTE DRAW

            The Company drew $50,000 on a promissory note from a director in the
            amount of $50,000 on January 7, 2005. The principal sum and any
            accrued and unpaid interest is payable in full on November 1, 2005.
            The interest rate is equal to two percentage points (2%) in excess
            of the Prime Commercial Rate. The director will receive 5,000
            warrants to purchase the Company's common stock, without par value,
            at a purchase price of $2.50 per share and exercisable until
            November 1, 2009. The director has the option to convert the loan
            balance (principal and accrued and unpaid interest) to equity at any
            time before repayment, at the same price and terms as any equity
            financing of the Company equal to or in excess of $200,000.

NOTE 15.    ASSET RETIREMENT OBLIGATION

            Included in machinery and equipment is various production equipment,
            which per the Company's building lease, is required to be removed
            upon termination of the lease. Included in accrued expenses in the
            accompanying balance sheet is the asset retirement obligation that
            represents the expected present value of the liability to remove
            this equipment. There are no assets that are legally restricted for
            purposes of settling this asset retirement obligation.

            The Company recorded a cumulative effect of a change in accounting
            as a charge to loss from operations of $15,866 on January 1, 2003
            for amortization of the related asset recorded for these costs.
            Following is a reconciliation of the aggregate retirement liability
            associated with the Company's obligation to dismantle and remove the
            machinery and equipment associated with its lease of its previous
            facility. The Company moved from this facility in first quarter
            2004.

<TABLE>
<S>                                                   <C>
Balance at December 31, 2003                          $ 30,236
 Increase in present value of the obligation
    (accretion expense in the corresponding amount
    charged against earnings)                            3,312
    Liabilities settled                                (21,218)
                                                      --------
Balance at December 31, 2004                          $ 12,330
                                                      ========
</TABLE>

                                      F-23

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 16.    GOING CONCERN

            The accompanying financial statements have been prepared in
            conformity with accounting principles generally accepted in the
            United States of America, which contemplates continuation of the
            Company as a going concern. However, the Company has sustained
            recurring losses from operations and negative cash flow from
            operations, which raise substantial doubt of ability to continue as
            a going concern. The Company has approximately $47,000 of
            unrestricted cash on hand at December 31, 2004 and received
            additional debt financing of $50,000 subsequent to year-end. These
            funds are required for operations in first quarter 2005. The Company
            expects to draw the remaining $50,000 during the first half of 2005
            to fund operations. Management is investigating additional equity
            funding from several sources to fund its operations for the balance
            of 2005. The Company plans to raise equity capital through a private
            placement beginning in 2005 to fund operations and planned growth.

            In view of these matters, realization of a major portion of the
            assets in the accompanying balance sheet is dependent upon continued
            operations of the Company, which in turn is dependent upon the
            Company's ability to find additional source of funds and the success
            of future operations. Management believes that actions presently
            being taken to revise the Company's operating and financial
            requirements provide the opportunity for the Company to continue as
            a going concern.

NOTE 17.    CONTINGENCY

            On October 29, 2004 a complaint was filed in the Franklin County
            Court of Common Pleas against the Company by Mr. Cavin Carmell, dba
            University Area Rentals ("University Area Rentals"). The complaint
            alleges that the Company left its former leased premises in
            disrepair and violated the terms of its lease. The case is in the
            early stages of discovery and trial is set for October 2005. Based
            upon the informal discovery provided by University Area Rentals, an
            estimate of damages claimed is between $50,000 and $100,000. The
            Company intends to vigorously defend itself against the claim.

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