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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, 2005

                         Commission File Number: 0-31641

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

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              OHIO                                                31-1210318
(State or other jurisdiction of                                (I.R.S. Employer
 incorporation or organization)                              Identification No.)
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                              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 issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. [ ]

     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
    -----    -----

Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

Yes       No   X
    -----    -----

     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, 2005, were
$3,457,182.

     The aggregate market value of the Registrant's common equity held by
non-affiliates of the Registrant was approximately $8,141,153 on March 22, 2006.

     There were 3,425,915 shares of the Registrant's Common Stock outstanding on
March 22, 2006.

     Transitional Small Business Disclosure Format (check one):

Yes       No   X
    -----    -----

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of our Proxy Statement for the 2006 Annual Meeting of Stockholders
are incorporated by reference in Part III.

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                                TABLE OF CONTENTS

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                                     PART I

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 ......    13
Item 7.  Financial Statements ...........................................    17
Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure ...........................................    17
Item 8A. Controls and Procedures ........................................    18
Item 8B. Other Information ..............................................    18

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act ..............    18
Item 10. Executive Compensation .........................................    18
Item 11. Security Ownership of Certain Beneficial Owners and Management
         and Related Stockholder Matters ................................    18
Item 12. Certain Relationships and Related Transactions .................    19
Item 13. Exhibits .......................................................    19
Item 14. Principal Accountant Fees and Services .........................    21
         Signatures .....................................................    22
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NOTE REGARDING FORWARD-LOOKING STATEMENTS

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


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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 HTS materials was the initial focus of the
Company's operations and these materials continue to be a 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 materials. The Company
began to focus on the market for superconducting thin films made from the
Company's powders. A sputtering target is a metal, alloy or sintered ceramic
that is specifically 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 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 increase 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
Physical Vapor Deposition (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 achieved ISO 9001:2000 certification during the second quarter
of 2005. This immediately resulted in the return of a major customer and the
addition of a major customer and helped to increase the Company's customer base
in 2005. Orders received in 2005 were $3,459,083, an increase of $1,441,023, or
71.4% over 2004.

     The Company had total annual revenues of $3,457,182, $2,172,864, and
$2,268,488 in the fiscal years ended December 31, 2005, 2004, and 2003,
respectively. During early 2004 the Company relocated to a modern facility,
which caused a decrease in production during the relocation process. The Company
also intentionally withdrew from low margin products.


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     Principal suppliers to the Company in 2005 were Lattice Materials
Corporation, Engelhard Corporation and Johnson Matthey. In every case, the
Company believes that suitable substitute vendors can be found. As the Company's
volume grows, the Company may make alliances or purchasing contracts with these
or other vendors.

     The Company's largest customer represented over 20% percent of total
revenues in 2005. The Company had $289,439 and $257,132 in contract research
revenue, representing 8.4% and 11.8%, for the years ending December 31, 2005 and
2004, 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 in 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, 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. 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 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. The Company bonds the targets to
the backing plates for application in the PVD 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 PVD materials.

COMPETITION

     The Company has a number of domestic and international competitors in both
the ceramic and metal fields, many of whom have resources far in excess of the
Company's. Williams Advanced Materials 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 metal targets, Tosoh,
Williams Advanced Materials, Kurt Lesker and Plasmaterials are competing
suppliers.

RESEARCH AND DEVELOPMENT

     The Company is developing sputtering targets which could be used to produce
high K dielectric films via PVD processing. These materials could find
applications in semiconductors. The Company focuses its research and development
efforts in areas that build on its expertise in multi-component ceramic oxides.


                                       4

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     In June 2005, the Company received notification from the Department of
Energy of a Notice of Financial Assistance Award that will provide support for
Phase I of a Small Business Innovation Research (SBIR) grant entitled
"Feasibility of Cost Effective, Long Length, BSCCO 2212 Round Wires, for Very
High Field Magnets Beyond 12 Tesla at 4.2 Kelvin." The award, in an amount of
$99,793, is for the nine months ending March 26, 2006. Revenues of $57,700 were
recognized during 2005 for this award.

     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 with potential for medical MRI imaging. The success
of the project enabled the 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. Revenues of $231,739 and $224,488 were
recognized in 2005 and 2004, respectively. The Company has been awarded a no
cost extension until March 31, 2006 to allow the Company's partners to complete
their work.

     The Company became a member of a team led by Oxford Instrument
Superconducting Technology in 2004, 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
$42,092 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 as 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 PVD materials and patents covering some HTS
products.

NEW PRODUCT INITIATIVES

     During 2005, the Company improved its production processes related to the
manufacturing of ruthenium targets. These improvements have led to increased
revenues.

     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 PVD sputtering targets with five or
more thin layers. These batteries are often one centimeter square but only 15
microns thick.

     Presently, there are approximately five manufacturers of Thin Film
Batteries in the country, each in various stages of development from prototype
to small scale production. 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, portable
electronics, and medical implant devices. 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 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
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


                                       5

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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 were used to procure capital
equipment required to commercialize the manufacturing process 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 was two
years. An extension has been approved and the program is expected to be
completed by December 31, 2006. 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 its
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, 2005. 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 the small amount
of hazardous waste materials generated by the Company.

COLLECTIONS AND WRITE-OFFS

     The Company collected its receivables in an average of 35 days in 2005. 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.


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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 $8,161,355 at December 31, 2005.

     We have financed the losses primarily from additional investments and loans
by our major shareholders and private offerings of common stock and warrants to
purchase common stock in 2004 and 2005. 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 in
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 2005, which
could require us to 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.

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 Advanced Materials and Honeywell, 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 provide assurance 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 their option. 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


                                       7

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could result in the termination of government contracts. The termination of our
government contracts or the adoption of new or modified procurement regulations
or practices could adversely affect us.

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

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

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

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

     We have received from the United States Patent and Trademark Office a
patent for Fine-Particle Bi-Sr-Ca-Cu-O Having High Phase Purity made by a
Chemical Precipitation and Low-Pressure Calcination method, and have also
received a patent for a 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 sputtering 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.


                                       8

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

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

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

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

     Our stock price and our listing may make it more difficult for our
shareholders to resell shares when desired or at attractive prices. In 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.

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 affect 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 may 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. The Company
intends to retain future earnings for use in the business.


                                       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
believes these facilities are in good condition and will be adequate for our
needs for the foreseeable future.

     The Company is current on all operating lease liabilities.

ITEM 3. LEGAL PROCEEDINGS.

     Not applicable.

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." 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 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

FISCAL 2005
   Quarter Ended March 31, 2005        2.50    1.75
   Quarter Ended June 30, 2005         3.12    1.75
   Quarter Ended September 30, 2005    2.95    2.25
   Quarter Ended December 31, 2005     5.50    2.25
</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 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
affect the liquidity and/or price of the Company's common stock, and impede the
sale of the Company's stock.

HOLDERS OF RECORD

     As of December 31, 2005, there were approximately 468 holders of record of
the common stock of the Company and 3,425,915 shares outstanding. There were
approximately 46 holders of Series B Preferred and as of December 31, 2005 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.

EQUITY COMPENSATION PLAN INFORMATION

     The following table sets forth additional information as of December 31,
2005, concerning shares of the Company's common stock that may be issued upon
the exercise of options and other rights under the Company's existing equity
compensation plans and arrangements, divided between plans approved by the
Company's shareholders and plans or arrangements not submitted to the Company's
shareholders for approval. The information includes the number of shares covered
by, and the weighted average exercise price of, outstanding options and other
rights and the number of shares remaining available for future grants excluding
the shares to be issued upon exercise of outstanding options, warrants, and
other rights.

<TABLE>
<CAPTION>
                                                                                                          NUMBER OF SECURITIES
                                                                                                         REMAINING AVAILABLE FOR
                                            NUMBER OF SECURITIES TO BE                                    ISSUANCE UNDER EQUITY
                                               ISSUED UPON EXERCISE        WEIGHTED-AVERAGE EXERCISE       COMPENSATION PLANS
                                              OF OUTSTANDING OPTIONS,        PRICE OF OUTSTANDING         (EXCLUDING SECURITIES
                                                WARRANTS AND RIGHTS      OPTIONS, WARRANTS AND RIGHTS   REFLECTED IN COLUMN (A))
                                                        (A)                           (B)                         (C)
                                            --------------------------   ----------------------------   ------------------------
<S>                                         <C>                          <C>                            <C>
Equity compensation plans
   approved by security holders (1)                   590,250                        $2.18                       280,450

Equity compensation plans not approved by
   security holders (2)                                17,500                        $2.88                            --
                                                      -------                        -----                       -------
Total                                                 607,750                        $2.20                       280,450
                                                      =======                        =====                       =======
</TABLE>

----------
(1) Equity compensation plans approved by shareholders include the Company's
    1995 Stock Option Plan.

(2) Includes 17,500 stock purchase warrants that can be acquired to purchase
    17,500 shares of the Company's common stock, which were issued by the
    Company in exchange for consideration in the form of goods and services.


                                       12
<PAGE>

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 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, 2005, the Company had revenues of
$3,457,182. This represented the highest revenue since 2001. This was an
increase of $1,284,318, or 59.1%, over 2004. Revenues for the last six months of
2005 were $2,168,589, which included consecutive quarters of more than
$1,000,000 in total revenue. The fourth quarter of 2005 included $1,103,621 in
product revenue, which was the first quarter that product revenue exceeded
$1,000,000. For the year ended December 31, 2005, the Company incurred a net
loss applicable to common shares of $358,405 compared to a net loss of
$1,125,007 for 2004. Non-cash expenses totaled $121,672 and $205,367 in 2005 and
2004, respectively.

     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 increased in 2005, as the Company has been able to provide product
with more reasonable lead times. The Company expects improvement in its gross
margins as the sales mix moves to higher margin products. The Thin Film Battery
market is poised for growth beginning in 2006.

     The Company achieved ISO 9001:2000 certification during the second quarter
of 2005. This immediately resulted in the return of a major customer and helped
to increase the Company's customer base in 2005. Orders received in 2005 were
$3,459,083, an increase of $1,441,023, or 71.4% over 2004.

     During 2005, the Company received equity funding of $1,386,000 as part of a
private placement to accredited investors. This totaled 693,000 shares of common
stock issued and also warrants to purchase 173,250 shares of the Company's
common stock exercisable until October 2010. In addition, $587,110 of
indebtedness was converted to 293,555 shares of common stock during 2005 and
also warrants to purchase 73,389 shares of the Company's common stock
exercisable until October 2010. These transactions increased outstanding shares
of common stock from 2,439,360 at December 31, 2004 to 3,425,915 shares at
December 31, 2005.

     The Company received notification from the Department of Energy of a Notice
of Financial Assistance Award that will provide support for Phase I of an SBIR
entitled "Feasibility of Cost Effective, Long Length, BSCCO 2212 Round Wires,
for Very High Field Magnets Beyond 12 Tesla at 4.2 Kelvin." The award, in an
amount of $99,793, is for the nine months ending March 26, 2006. Revenues of
$57,700 were recognized during 2005 for this award.

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, 2005 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


                                       13

<PAGE>

collectibility of specific customer accounts and the aging of the accounts
receivable. If there is a deterioration of a major customer's credit worthiness
or actual defaults are higher than our historical experience, our estimates of
the recoverability of amounts due us could be adversely affected. Inventory
purchases and commitments are based upon future demand forecasts. If there is a
sudden and significant decrease in demand for our products or there is a higher
risk of inventory obsolescence because of rapidly changing technology and
customer requirements, we may be required to increase our inventory allowances
and our gross margin could be adversely affected. 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 2005 As Compared to Fiscal Year 2004

     Revenues

     Revenues increased by 59.1% in fiscal 2005 to $3,457,182 from the fiscal
2004 level of $2,172,864.

     Product sales increased to $3,167,743 in 2005 from $1,915,732 in 2004 or an
increase of 65.4%. The increase in revenues was due to the return of a major
customer and the addition of another major customer as a direct result of the
ISO 9001:2000 certification, as well as the addition of other new customers.

     In 2005, total contract research revenues were $289,439 as compared to
$257,132 in 2004. Government development contract revenue was $289,439, or 8.4%
of total revenues in 2005 and $239,448 or 11.0% of total revenues in 2004. 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 2005 and 2004, accounting for 8.4% and 11.0% of the Company's
revenues, respectively. Significant loss of government funding could have an
adverse effect on the Company's financial condition and results of operations.

     During 2005, the Company received notification from the Department of
Energy of a Notice of Financial Assistance Award that provides support for Phase
I of an SBIR entitled "Feasibility of Cost Effective, Long Length, BSCCO 2212
Round Wires, for Very High Field Magnets Beyond 12 Tesla at 4.2 Kelvin." The
award, in an amount of $99,793, is for the nine months ending March 26, 2006.
Revenues of $57,700 were recognized during 2005 for this award.

     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 $231,739 and $239,448 in revenues in 2005 and 2004,
respectively.

     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 in revenues in 2004. 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 2005 was $741,310 or 21.4% of total revenue as
compared to $226,372 or 10.4% in 2004. The primary reason for the increase was
due to higher sales, which resulted from increased production that led to
improved operating efficiencies.

     Gross margin on product revenue was 23.5% in 2005 versus 12.5% in 2004,
primarily due to the increase in product sales. Gross margin on contract
research revenue was -0.6% for 2005 compared to -5.3% in 2004. The higher
negative gross margin in 2004 was due to the Company's cost share of a contract
that was reimbursed at 50%, which ended in 2004.

     Gross margin 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 margin will improve as sales grow. The


                                       14

<PAGE>

Company expects improved volume in 2006 as the efforts of the Sales Manager led
to new sales opportunities with 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 2006 are expected
to 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. Reductions in this reserve were $26,269 and $28,923 for
the years ended December 31, 2005, and 2004, respectively. Management deems the
inventory reserve, after its assessment of obsolete inventory, at December 31,
2005, of $89,261 to be adequate for excess inventory and a lower of
cost-or-market analysis. The decrease in the reserve for 2005 is a result of the
reduction of a portion of obsolete inventory sold at reduced prices.

     Selling Expense

     Selling expense in 2005 increased to $237,569 from $236,235 in 2004, an
increase of $1,334, or 0.6%. This slight increase was due to an increase in
wages, which was primarily offset by a reduction in travel expense.

     General and Administrative Expense

     General and administrative expense in 2005 decreased to $770,600, from
$884,000 in 2004, a decrease of $113,400, or 12.8%. The decrease 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. Also, in 2004, non-employee stock
warrants were granted as compensation for consulting services, for which $26,690
was expensed.

     Research and Development Expenses

     Research and development costs for 2005 were $187,818 compared to $149,411
in 2004, an increase of 25.7%. This is due to an increase in wages, which
includes non-cash compensation expense of $7,060 for the acceleration of stock
options and Ruthenium and High K dielectric material and process developments.

     Interest Expense

     Interest expense was $75,624, or 2.2% of Company revenues in 2005, an
increase of 161.9% from $28,877 in 2004. Interest expense for 2005 includes
$70,684 for related party interest expense. The increase was due to the interest
incurred as a result of the notes payable to a director.

LOSS APPLICABLE TO COMMON SHARES

     Net loss per common share based on the loss applicable to common shares was
$0.13 and $0.51 per common share for the years ended December 31, 2005 and 2004,
respectively. The loss applicable to common shares includes the net loss from
operations and the accretion of Series B preferred stock dividends. The net loss
per common share before dividends on preferred stock was $0.13 and $0.50 for the
years ended December 31, 2005 and 2004, respectively. The difference between the
net loss from operations and the loss applicable to common shares of $0.00 and
$(0.01) 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. Annual Dividends on the Series B preferred stock were
$25,185 in, 2005 and 2004.

LIQUIDITY AND WORKING CAPITAL

     At December 31, 2005, working capital was $1,443,380 compared to $(282,782)
at December 31, 2004. The Company utilized cash from operations for the year
ended December 31, 2005, of $365,357. The Company utilized cash from operations
for the year ended December 31, 2004, of $413,516. Significant non-cash items,
including depreciation, inventory reserve on excess and obsolete inventory,
warrants issued from consulting and debt, acceleration of stock options, debt
conversion expense, and allowance for doubtful accounts, were approximately
$248,000 and $371,000 for the years ended December 31, 2005 and 2004,
respectively. Accounts receivable, inventory and prepaids increased by
approximately $172,000 while there was a decrease in accounts payable and
accrued expenses by approximately $106,000 for the year ended December 31, 2005.
Accounts payable and accrued expenses increased in excess of accounts
receivable, inventory, and prepaids by approximately $314,000 as a result of an
increase in accrued contract expenses and deferred contract revenue for the year
ended December 31, 2004.


                                       15

<PAGE>

     For investing activities, the Company used cash of approximately $75,000
and $436,000 for the years ended December 31, 2005, and 2004, respectively. The
amounts invested in 2005 and 2004 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 $2,250
and $1,602 for the years ended December 31, 2005 and 2004, respectively.

     For financing activities for the year ended December 31, 2005, the Company
provided cash of approximately $1,412,000. Cash payments to third parties for
principal payments on capital lease obligations approximated $37,000. Proceeds
from notes payable to shareholders totaled $300,000. Principal payments on notes
payable to shareholders totaled $200,000. Net proceeds from sale of common stock
were approximately $1,349,000.

     For financing activities for the year ended December 31, 2004, the Company
provided cash of approximately $773,000. Cash payments to third parties for
principal payments on capital lease obligations approximated $38,000. Proceeds
from notes payable to 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.

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

     During 2003, the Company completed two private financing transactions,
which included the following: (i) in exchange for $600,000 of cash from
accredited investors, the Company issued convertible promissory notes in the
aggregate amount of $600,000 and 122,000 warrants to purchase shares of common
stock at $1.00 per share exercisable until June 30, 2008; and (ii) in exchange
for the redemption of the Company's entire issuance of Series A redeemable
convertible preferred stock held by the Estate of Edward R. Funk, the Company
issued a convertible promissory note in the aggregate amount of $129,355 and
26,302 warrants to purchase shares of common stock at $1.00 per share
exercisable until June 30, 2008. The terms of the promissory notes provided that
the notes would automatically convert to common stock if the Company completed
additional equity financing of more than $500,000 prior to June 30, 2004, with
conversion on the same terms as the new equity financing. The Company used
$100,000 of the financing 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.

     In May 2004, the Company received $720,202 in a private equity placement to
accredited investors in exchange for 300,084 shares of its common stock ($2.40
per share) and warrants to purchase 60,017 shares of the Company's common stock
at a purchase price of $2.88 per share exercisable until May 31, 2009. Because
this completed an equity financing of more than $500,000 prior to June 30, 2004,
$754,846 of principal and accrued interest on the convertible promissory notes
issued in 2003 (as described in the preceding paragraph) converted to equity on
the same terms as the May 2004 financing. Thus, the promissory notes converted
to 314,519 shares of common stock at a rate of $2.40 per share and 62,904
warrants to purchase shares of common stock at $2.88 per share exercisable
until May 31, 2009.

     In November 2004, a director agreed to loan the Company up to $200,000 for
working capital, to be drawn by the Company in increments of $50,000. The
interest rate was Huntington National Bank's prime rate plus 2%, accruing and
compounding monthly. The loan was secured by a first lien on substantially all
of the Company's assets. For each $50,000 increment drawn on the loan, the
director received 5,000 warrants to purchase the Company's common stock at a
purchase price of $2.50 per share exercisable until November 1, 2009. The loan
was drawn based on the following schedule: November 3, 2004, $100,000, January
7, 2005, $50,000; and April 1, 2005, $50,000. The entire loan balance (principal
and accrued interest) was repaid in October 2005.

     In April 2005, the same director who agreed to provide a secured loan for
$200,000 to the Company in November 2004, agreed to provide an additional
$200,000 secured loan to the Company for working capital. The interest rate was
10%, accruing and compounding monthly. On April 14, 2005, $100,000 was drawn on
this loan. $100,000 was also drawn on the loan on May 20, 2005. By the terms of
the loan, because the Company completed an equity financing of at least $500,000
during 2005, the principal and accrued interest on this loan totaling $209,110
automatically converted on the same basis as the new financing to 104,555 shares
of common stock ($2.00 per share)


                                       16

<PAGE>

and warrants to purchase an aggregate of 26,139 shares of the Company's common
stock at a purchase price of $3.00 per share exercisable until October 2010.

     In the fourth quarter of 2005, the Company completed a private placement to
accredited investors. The investors purchased 986,555 shares of common stock at
a price of $2.00 per share and warrants to purchase an additional 246,639 shares
of common stock at $3.00 per share until October 14, 2010. The Company received
$1,386,000 in cash from certain investors for 693,000 shares of common stock and
warrants to purchase 173,250 shares of Common Stock. Four other investors
cancelled indebtedness owed by the Company in the aggregate amount of $587,110
in exchange for 293,555 shares of common stock and warrants to purchase 73,389
shares of common stock. The indebtedness cancelled was as follows: (i) the
Estate of Edward R. Funk cancelled indebtedness of $188,411.71 in exchange for
94,000 shares of common stock, warrants to purchase 23,500 shares of common
stock at $3.00 per share exercisable until October 2010, and payment of $411.71;
(ii) the Estate of Ingeborg V. Funk cancelled $100,000 of indebtedness in
exchange for 50,000 shares of common stock, warrants to purchase 12,500 shares
of common stock at $3.00 per share exercisable until October 2010, and payment
of $980.21; (iii) Porter, Wright, Morris & Arthur LLP (PWMA) cancelled $90,000
of indebtedness for legal fees in exchange for 45,000 shares of common stock and
warrants to purchase an additional 11,250 shares of common stock at $3.00 per
share exercisable until October 2010; and (iv) a director cancelled $209,110 of
a secured loan in exchange for 104,555 shares of common stock and warrants to
purchase an additional 26,139 shares of common stock at $3.00 per share
exercisable until October 2010 (as described in preceding paragraph).

INFLATION

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

FUTURE OPERATING RESULTS

     The Company 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 2006 and greater in 2007 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.

     During 2004 and 2005, 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.

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, 2005, and the related statements of
operations, stockholders' equity and cash flows for the two years ended December
31, 2005 and 2004, together with the independent certified public accountants'
report thereon appear on Pages F-1 through F-23 hereof.

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

     None.


                                       17

<PAGE>

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.

                                    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 2006
Annual Meeting of Shareholders to be held on June 9, 2006, 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 2006 Annual
Meeting of Shareholders to be held on June 9, 2006, 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 2006 Annual Meeting of Shareholders to be held on June 9, 2006, and is
incorporated herein by reference.


                                       18
<PAGE>

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 2006 Annual Meeting of Shareholders to be held on June 9, 2006, and is
incorporated herein by reference.

ITEM 13. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT   EXHIBIT
 NUMBER   DESCRIPTION
-------   -----------
<S>       <C>
3(a)      Certificate of Second Amended and Restated Articles of Incorporation
          of Superconductive Components, Inc. (Incorporated by reference to
          Exhibit 3(a) to the Company's initial Form 10-SB, filed on September
          28, 2000)

3(b)      Restated Code of Regulations of Superconductive Components, Inc.
          (Incorporated by reference to Exhibit 3(b) to the Company's initial
          Form 10-SB, filed on September 28, 2000)

10(a)     Employment Agreement entered into as of February 26, 2002, between
          Daniel Rooney and the Company (Incorporated by reference to Exhibit
          10(a) to the Company's Registration Statement on Form SB-2
          (Registration No. 333-131605), filed on February 6, 2006, and amended
          by Pre-effective Amendment No. 1 filed March 23, 2006)

10(b)     Lease Agreement between Superconductive Components, Inc. and Duke
          Realty Ohio dated as of September 29, 2003, with Letter of
          Understanding dated February 17, 2004 (Incorporated by reference to
          Exhibit 10(a) to the Company's Quarterly Report on Form 10-QSB, filed
          on March 31, 2004)

10(c)     Fourth Amended and Restated 1995 Stock Option Plan (Incorporated by
          reference to Exhibit 4(a) to the Company's Registration Statement on
          Form S-8 (Registration No. 333-97583), filed on August 2, 2002)

10(d)     License Agreement with Sandia Corporation dated February 26, 1996
          (Incorporated by reference to Exhibit 10(f) to the Company's Form
          10-SB Amendment No. 1, filed on January 3, 2001)

10(e)     Nonexclusive License with The University of Chicago (as Operator of
          Argonne National Laboratory) dated October 12, 1995 (Incorporated by
          reference to Exhibit 10(g) to the Company's Form 10-SB Amendment No.
          1, filed on January 3, 2001)

10(f)     Nonexclusive License with The University of Chicago (as Operator of
          Argonne National Laboratory) dated October 12, 1995 (Incorporated by
          reference to Exhibit 10(h) to the Company's Form 10-SB Amendment No.
          1, filed on January 3, 2001)

10(g)     Department of Energy Award dated January 17, 2003 (Incorporated by
          reference to Exhibit 10(a) to the Company's Quarterly Report on Form
          10-QSB, filed on November 12, 2003)

10(h)     Department of Energy Award dated June 24, 2003 (Incorporated by
          reference to Exhibit 10(b) to the Company's Quarterly Report on Form
          10-QSB, filed on November 12, 2003)
</TABLE>


                                       19

<PAGE>

<TABLE>
<S>       <C>
10(i)     Department of Energy Award dated September 29, 2003 (Incorporated by
          reference to Exhibit 10(c) to the Company's Quarterly Report on Form
          10-QSB, filed on November 12, 2003)

10(j)     Department of Energy Award dated July 21, 2005 (Incorporated by
          reference to Exhibit 10(k) to the Company's Registration Statement on
          Form SB-2 (Registration No. 333-131605), filed on February 6, 2006,
          and amended by Pre-effective Amendment No. 1 filed March 23, 2006)

10(k)     Ohio Department of Development Third Frontier Action Fund Award dated
          February 20, 2004 (Incorporated by reference to Exhibit 10(o) to the
          Company's Annual Report on Form 10-KSB, filed on March 30, 2004)

10(l)     Description of the Material Terms of the Superconductive Components,
          Inc. 2005 Executive Bonus Plan (Incorporated by reference to Exhibit
          10 to the Company's Current Report on Form 8-K, filed on April 20,
          2005)

10(m)     Form of Non-Statutory Stock Option Agreement Under the Superconductive
          Components, Inc. Fourth Amended and Restated 1995 Stock Option Plan
          (Incorporated by reference to Exhibit 10.1 to the Company's Current
          Report on Form 8-K, filed on December 22, 2005)

10(n)     Subscription Agreement between the Company and the Estate of Edward R.
          Funk, dated October 14, 2005 (Incorporated by reference to Exhibit
          10(o) to the Company's Registration Statement on Form SB-2
          (Registration No. 333-131605), filed on February 6, 2006, and amended
          by Pre-effective Amendment No. 1 filed March 23, 2006)

10(o)     Subscription Agreement between the Company and the Estate of Ingeborg
          V. Funk, dated October 14, 2005 (Incorporated by reference to Exhibit
          10(p) to the Company's Registration Statement on Form SB-2
          (Registration No. 333-131605), filed on February 6, 2006, and amended
          by Pre-effective Amendment No. 1 filed March 23, 2006)

10(p)     Subscription Agreement between the Company and Robert H. Peitz, dated
          October 14, 2005 (Incorporated by reference to Exhibit 10(q) to the
          Company's Registration Statement on Form SB-2 (Registration No.
          333-131605), filed on February 6, 2006, and amended by Pre-effective
          Amendment No. 1 filed March 23, 2006)

10(q)     Warrant to purchase common stock of Superconductive Components, Inc.
          issued to the Estate of Edward R. Funk, dated October 19, 2005
          (Incorporated by reference to Exhibit 10(r) to the Company's
          Registration Statement Form on SB-2 (Registration No. 333-131605),
          filed on February 6, 2006, and amended by Pre-effective Amendment No.
          1 filed March 23, 2006)

10(r)     Warrant to purchase common stock of Superconductive Components, Inc.
          issued to the Estate of Ingeborg V. Funk, dated October 19, 2005
          (Incorporated by reference to Exhibit 10(s) to the Company's
          Registration Statement on Form SB-2 (Registration No. 333-131605),
          filed on February 6, 2006, and amended by Pre-effective Amendment No.
          1 filed March 23, 2006)
</TABLE>


                                       20

<PAGE>

<TABLE>
<S>       <C>
10(s)     Warrant to purchase common stock of Superconductive Components, Inc.
          issued to Robert H. Peitz, effective October 19, 2005 (Incorporated by
          reference to Exhibit 10(t) to the Company's Registration Statement on
          Form SB-2 (Registration No. 333-131605), filed on February 6, 2006,
          and amended by Pre-effective Amendment No. 1 filed March 23, 2006)

10(t)     Conversion Agreement between the Company and the Estate of Edward R.
          Funk, dated October 14, 2005 (Incorporated by reference to Exhibit
          10(u) to the Company's Registration Statement on Form SB-2
          (Registration No. 333-131605), filed on February 6, 2006, and amended
          by Pre-effective Amendment No. 1 filed March 23, 2006)

10(u)     Conversion Agreement between the Company and the Estate of Ingeborg V.
          Funk, dated October 14, 2005 (Incorporated by reference to Exhibit
          10(v) to the Company's Registration Statement on Form SB-2
          (Registration No. 333-131605), filed on February 6, 2006, and amended
          by Pre-effective Amendment No. 1 filed March 23, 2006)

23   *    Consent of Independent Registered Accounting Firm

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 herewith

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
2006 Annual Meeting of Shareholders to be held on June 9, 2006 and is
incorporated herein by reference.


                                       21

<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 23, 2006                    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 23rd day of March 2006.

<TABLE>
<CAPTION>
Signature                                            Title
---------                                            -----
<S>                              <C>


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


/s/ Gerald S. Blaskie            Vice President and Chief Financial Officer
------------------------------   (principal financial officer and principal
Gerald S. Blaskie                accounting officer)


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


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


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


Walter J. Doyle*                 Director
------------------------------
Walter J. Doyle
</TABLE>


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


                                       22
<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-8-23
</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, 2005, and the related statements of
operations, shareholders' equity (deficit) and cash flows for each of the two
years in the period ended December 31, 2005. 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, 2005, 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.


                                        /s/ HAUSSER + TAYLOR LLC

Columbus, Ohio
February 8, 2006


                                       F-1

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                        SUPERCONDUCTIVE COMPONENTS, INC.

                                  BALANCE SHEET

                                DECEMBER 31, 2005

                                     ASSETS

<TABLE>
<S>                                                            <C>
CURRENT ASSETS
   Cash                                                        $ 1,161,369
   Accounts Receivable
      Trade, less allowance for doubtful accounts of $25,000       243,130
      Contract                                                      50,710
      Employees                                                        290
      Other                                                         13,459
   Inventories                                                     584,140
   Prepaid expenses                                                 11,748
                                                               -----------
         Total current assets                                    2,064,846
                                                               -----------
PROPERTY AND EQUIPMENT, AT COST
   Machinery and equipment                                       2,221,298
   Furniture and fixtures                                           23,643
   Leasehold improvements                                          284,072
   Construction in process                                         101,075
                                                               -----------
                                                                 2,630,088
   Less accumulated depreciation                                (1,814,959)
                                                               -----------
                                                                   815,129
                                                               -----------
OTHER ASSETS
   Deposits                                                         10,765
   Intangibles                                                      33,982
                                                               -----------
                                                                    44,747
                                                               -----------
TOTAL ASSETS                                                   $ 2,924,722
                                                               ===========
</TABLE>

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


                                       F-2
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                                 BALANCE SHEET

                               DECEMBER 31, 2005

                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<S>                                                               <C>
CURRENT LIABILITIES
   Capital lease obligation, current portion                      $    39,949
   Accounts payable                                                   295,640
   Accrued contract expenses                                          145,104
   Accrued personal property taxes                                     35,000
   Accrued expenses                                                   105,773
                                                                  -----------
      Total current liabilities                                       621,466
                                                                  -----------
CAPITAL LEASE OBLIGATION, NET OF CURRENT PORTION                       71,381
                                                                  -----------
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        334,961
   Common stock, no par value, authorized 15,000,000
      shares; 3,425,915 shares issued and outstanding               9,047,550
   Additional paid-in capital                                       1,010,719
   Accumulated deficit                                             (8,161,355)
                                                                  -----------
                                                                    2,231,875
                                                                  -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                        $ 2,924,722
                                                                  ===========
</TABLE>

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


                                       F-3

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                            STATEMENTS OF OPERATIONS

                     YEARS ENDED DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                             2005          2004
                                          ----------   -----------
<S>                                       <C>          <C>
SALES REVENUE                             $3,167,743   $ 1,915,732
CONTRACT RESEARCH REVENUE                    289,439       257,132
                                          ----------   -----------
                                           3,457,182     2,172,864
                                          ----------   -----------
COST OF SALES REVENUE                      2,424,554     1,675,729
COST OF CONTRACT RESEARCH                    291,318       270,763
                                          ----------   -----------
                                           2,715,872     1,946,492
                                          ----------   -----------
GROSS MARGIN                                 741,310       226,372

GENERAL AND ADMINISTRATIVE EXPENSES          770,600       884,000

SALES AND PROMOTIONAL EXPENSES               237,569       236,235
                                          ----------   -----------
LOSS FROM OPERATIONS                        (266,859)     (893,863)
                                          ----------   -----------
OTHER INCOME (EXPENSE)
   Interest income                             9,843         2,299
   Interest expense                          (75,624)      (28,877)
   Debt conversion expense (note 6)               --      (175,362)
   Gain/(loss) on disposal of equipment        2,250        (2,140)
   Miscellaneous, net                         (2,830)       (1,879)
                                          ----------   -----------
                                             (66,361)     (205,959)
                                          ----------   -----------
LOSS BEFORE PROVISION FOR INCOME TAX        (333,220)   (1,099,822)

INCOME TAX EXPENSE                                --            --
                                          ----------   -----------
NET LOSS                                    (333,220)   (1,099,822)

DIVIDENDS ON PREFERRED STOCK                 (25,185)      (25,185)
                                          ----------   -----------
LOSS APPLICABLE TO COMMON SHARES          $ (358,405)  $(1,125,007)
                                          ==========   ===========
EARNINGS PER SHARE - BASIC AND DILUTED
   (Note 2)

NET LOSS PER COMMON SHARE BEFORE
   DIVIDENDS ON PREFERRED STOCK
   Basic                                  $    (0.13)  $     (0.50)
                                          ==========   ===========
   Diluted                                $    (0.13)  $     (0.50)
                                          ==========   ===========
NET LOSS PER COMMON SHARE AFTER
   DIVIDENDS ON PREFERRED STOCK
   Basic                                  $    (0.13)  $     (0.51)
                                          ==========   ===========
   Diluted                                $    (0.13)  $     (0.51)
                                          ==========   ===========
WEIGHTED AVERAGE SHARES OUTSTANDING
   Basic                                   2,665,078     2,212,884
                                          ==========   ===========
   Diluted                                 2,665,078     2,212,884
                                          ==========   ===========
</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, 2005 AND 2004

<TABLE>
<CAPTION>
                                                       CONVERTIBLE                  ADDITIONAL
                                                    PREFERRED STOCK,     COMMON       PAID-IN    ACCUMULATED
                                                        SERIES B          STOCK       CAPITAL      DEFICIT        TOTAL
                                                    ----------------   ----------   ----------   -----------   -----------
<S>                                                 <C>                <C>          <C>          <C>           <C>
BALANCE 12/31/03                                        $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 6)             --          596,207      110,908            --       707,115
Conversion of debt to common stock (Note 6)                   --          563,730      366,478            --       930,208
Common stock warrants issued with debt (Note 5)               --               --       19,890            --        19,890
Common stock warrants issued for consulting
   services (Note 6)                                          --               --       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
Accretion of cumulative dividends                         25,185               --      (25,185)           --            --
Common stock warrants issued with debt (Note 5)               --               --       19,890            --        19,890
Conversion of debt to common stock (Note 6)                   --          461,469      125,641            --       587,110
Stock option acceleration (Note 7)                            --               --       27,215            --        27,215
Proceeds from sale of common stock (net) (Note 6)             --        1,044,428      304,484            --     1,348,912
Net loss                                                      --               --           --      (333,220)     (333,220)
                                                        --------       ----------   ----------   -----------   -----------
BALANCE 12/31/05                                        $334,961       $9,047,550   $1,010,719   $(8,161,355)  $ 2,231,875
                                                        ========       ==========   ==========   ===========   ===========
</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, 2005 AND 2004

<TABLE>
<CAPTION>
                                                              2005          2004
                                                           ----------   -----------
<S>                                                        <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                $ (333,220)  $(1,099,822)
                                                           ----------   -----------
   Adjustments to reconcile net loss to net cash
      used in operating activities:
      Depreciation                                            199,415       199,283
      Amortization and accretion                                3,088         3,088
      Warrants issued for consulting and debt                  36,465        30,005
      Acceleration of stock options                            27,215            --
      Debt conversion expense                                      --       175,362
      (Gain) loss on sale of equipment                         (2,250)        2,141
      Decrease in inventory reserve                           (26,269)      (28,923)
      Change in allowance for doubtful accounts                (8,176)        8,176
      Changes in operating assets and liabilities:
      (Increase) decrease in assets:
         Accounts receivable                                 (131,919)      (48,990)
         Inventories                                          (22,700)       (5,716)
         Prepaid expenses                                         878        17,572
         Other assets                                          (2,010)         (892)
      Increase (decrease) in liabilities:
         Accounts payable                                     155,543         7,980
         Accrued expenses                                    (261,417)      327,220
                                                           ----------   -----------
            Total adjustments                                 (32,137)      686,306
                                                           ----------   -----------
               Net cash used in operating activities         (365,357)     (413,516)
                                                           ----------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds on sale of equipment                                2,250         1,602
   Purchases of property and equipment                        (77,472)     (437,820)
                                                           ----------   -----------
               Net cash used in investing activities          (75,222)     (436,218)
                                                           ----------   -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from note payable, shareholders                   300,000       250,000
   Principal payments on notes payable, shareholders         (200,000)     (150,000)
   Proceeds from exercise of common stock options                  --         3,500
   Proceeds from sale of common stock (net)                 1,348,912       707,115
   Principal payments on capital lease obligations            (37,027)      (37,758)
                                                           ----------   -----------
               Net cash provided by financing activities    1,411,885       772,857
                                                           ----------   -----------
</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, 2005 AND 2004

<TABLE>
<CAPTION>
                                                                                   2005        2004
                                                                                ----------   --------
<S>                                                                             <C>          <C>
NET INCREASE (DECREASE) IN CASH                                                 $  971,306   $(76,877)

CASH - Beginning of period                                                         190,063    266,940
                                                                                ----------   --------

CASH - End of period                                                            $1,161,369   $190,063
                                                                                ==========   ========

SUPPLEMENTAL DISCLOSURES OF CASH
   FLOW INFORMATION

   Cash paid during the years for:
      Interest, net                                                             $   19,749   $  6,749
      Income taxes                                                              $       --   $     --

SUPPLEMENTAL DISCLOSURES OF NONCASH
   FINANCING ACTIVITIES

   Property and equipment purchased by capital lease                            $   75,900   $ 46,494

   Note payable converted to equity                                             $  488,000   $729,700

   Accrued interest converted to equity                                         $    9,110   $ 25,491

   Accounts payable converted to equity                                         $   90,000   $     --

   Machinery & Equipment and accrued asset retirement obligation                $    2,410   $ 12,330

</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 $26,269 and $28,923
     during 2005 and 2004, respectively. The decrease in the reserve 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 $241,000 at December 31, 2005. 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.

C.   Research and Development - Internal research and development costs are
     expensed as incurred. Research and development expenses for the years ended
     December 31, 2005 and 2004 were $187,818 and $149,411, respectively. The
     increase is due to an increase in wages, which includes non-cash
     compensation expense of $7,060 for the acceleration of stock options and
     Ruthenium and High K dielectric material and process developments.

D.   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.


                                       F-8

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

     During 2005 and 2004, the Company earned $289,439 and $257,132,
     respectively, in contract revenue. There is accounts receivable-contract of
     $50,710 at December 31, 2005.

     During 2003 the Company was awarded a twenty-four month contract in the
     amount of $523,612 that began June 27, 2003. This contract was granted a no
     cost extension until March 31, 2006.

     During 2005, the Company was awarded a nine-month contract in the amount of
     $99,793 that ends March 26, 2006.

E.   Equipment - In 2004, 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 was reduced with no revenue recognized or fixed asset
     recorded on the balance sheet. As of December 31, 2005, the Company had
     disbursed the entire amount received. The Company has purchased equipment
     in the amount of $25,945 that has not been reimbursed by TFAF. This amount
     is included in current assets at December 31, 2005. 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.

F.   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, 2005 are $21,000 and $12,713,
     respectively. Amortization expense was $1,259 for the years ended December
     31, 2005 and 2004. Amortization expense is estimated to be $1,259 for each
     of the next five years.

G.   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, 2005 are $36,473 and $10,777, respectively.
     Amortization expense was $1,830 for the years ended December 31, 2005 and
     December 31, 2004. Amortization expense is estimated to be $1,830 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)

H.   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.

I.   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, 2005
     and 2004 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 2005 and 2004 results as reported to the results
     had the Company adopted the expense recognition provisions of FASB #123.

<TABLE>
<CAPTION>
                                           2005         2004
                                        ---------   -----------
<S>                                     <C>         <C>
Net loss applicable to
   common shares:
   As reported                          $(358,405)  $(1,125,007)
   Stock-based compensation, net of
      Tax for pro forma                   (22,068)       (6,237)
                                        ---------   -----------
   Pro forma net loss under SFAS #123   $(380,473)  $(1,131,244)

Basic and diluted loss per share:
   As reported                          $   (0.13)  $     (0.51)
   Pro forma under SFAS #123                (0.14)  $     (0.51)
</TABLE>

     For the years ended December 31, 2005 and 2004, there was $27,215 and $0,
     respectively, of stock-based employee compensation cost included in the
     determination of net loss as reported.


                                      F-10

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

J.   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 2005 and 2004, 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.

K.   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.

L.   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 a global investment banking group, 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 three major customers in 2005 and 2004, which accounted for
     approximately $1,375,000 and $243,000, respectively, of the total revenue
     and $106,000 of the trade accounts receivable at December 31, 2005.

M.   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.

N.   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 11).

O.   Revenue Recognition - Revenue from product sales is recognized upon
     shipment to customers. Provisions for discounts and rework costs for
     returns are established when products are shipped based on historical
     experience. Deferred revenues represents cash received in advance of the
     contract revenues earned. Revenue from contract research provided for third
     parties is recognized on the percentage of completion method.


                                      F-11

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

P.   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 $17,665 and $0 of
     net receivables for the years ended December 31, 2005 and 2004,
     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 of net receivables for the years ended
     December 31, 2005 and 2004 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 was $25,000
     and $33,176 as of December 31, 2005 and 2004, 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
     $2,337 and $26,498 was recognized for the years ended December 31, 2005 and
     2004, 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, 2005 and 2004 totaled $11,000 and $18,000 respectively. $6,000
     in 2004 was for a former employee.

Q.   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, 2005 and 2004.

R.   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. 123R is to record
     the additional compensation expenses on the financial statements that is
     currently disclosed in Note 2I. There was $27,215 of additional
     compensation expense included in 2005 as a result of the acceleration of
     employee incentive stock options.


                                      F-12

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 3. INVENTORIES

     Inventories consist of the following at December 31, 2005:

<TABLE>
<S>                                   <C>
Raw materials                         $286,089
Work-in-process                        201,441
Finished goods                         185,871
                                      --------
                                       673,401
Less reserve for obsolete inventory     89,261
                                      --------
                                      $584,140
                                      ========
</TABLE>

NOTE 4. 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, 2005 and 2004, totaled $151,920 and $138,910, respectively. Future
     minimum lease payments at December 31, 2005 are as follows:

<TABLE>
<S>               <C>
      2006        $100,138
      2007          94,362
      2008          94,362
      2009         106,635
      2010         108,484
2011 and beyond    393,402
                  --------
                  $897,383
                  ========
</TABLE>


                                      F-13

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 4. LEASE OBLIGATIONS (CONTINUED)

     CAPITAL

     The Company also leases certain equipment under capital leases. The future
     minimum lease payments, by year, with the present value of such payments,
     as of December 31, 2005 is as follows:

<TABLE>
<S>                                       <C>
2006                                      $ 47,676
2007                                        33,416
2008                                        31,683
2009                                        24,683
                                          --------
Total minimum lease payments               137,458
Less amount representing interest           26,128
                                          --------
Present value of minimum lease payments    111,330
Less current portion                        39,949
                                          --------
Long-term capital lease obligations       $ 71,381
                                          ========
</TABLE>

     The equipment under capital lease at December 31, 2005 is included in the
     accompanying balance sheet under the following captions:

<TABLE>
<S>                                       <C>
Machinery and equipment                   $220,306
Less accumulated depreciation               76,360
                                          --------
Net book value                            $143,946
                                          ========
</TABLE>

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

     Depreciation expense totaled $23,322 and $18,070 for the years ended
     December 31, 2005 and 2004, respectively.

NOTE 5. RELATED PARTY NOTES PAYABLE

     During 2005, the Company entered into an agreement with the Estates of
     Edward R. Funk and Ingeborg V. Funk. The Company was indebted to the
     Estates in the amount of $289,391.92. The Estate agreed to cancel $288,000
     of the indebtedness in exchange for 144,000 shares of common stock and
     warrants to purchase an additional 36,000 shares of common stock at $3.00
     per share exercisable until October 2010. The Company transferred to the
     Estates $1,391.92 in full satisfaction of the remaining amount of the
     indebtedness.


                                      F-14

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 5. RELATED PARTY NOTES PAYABLE (CONTINUED)

     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 at $1.00 per share, above market value.

     Prior to June 30, 2004, the Company completed equity financing of at least
     $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.
     As a result of the conversion of the promissory notes on May 13, 2004, no
     additional vesting of warrants occurred and the holders of the notes
     received 84,930 warrants to purchase the Company's common stock, without
     par value, at a purchase price of $1.00 and exercisable until June 2008.

     Therefore, the Company 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 2004.

     In November of 2004 a director agreed to loan the Company up to $200,000
     for working capital, to be drawn by the Company in increments of $50,000.
     The interest rate was Huntington National Bank's prime rate plus 2%, which
     accrued and compounded monthly. The loan was secured by the Company's
     assets and perfected by the filing of a UCC-1 financing statement. For each
     $50,000 increment drawn on the loan the director received 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 loan was
     drawn on the following schedule: November 3, 2004, $100,000; January 7,
     2005, $50,000; and April 1, 2005, $50,000. The loan balance (principal and
     accrued interest) was repaid in October 2005 and the UCC-1 financing
     statement was terminated.

     In April of 2005, the same director who agreed to provide a loan to the
     Company in November 2004, agreed to provide an additional $200,000
     convertible secured loan to the Company for working capital. The interest
     rate of 10% accrued and compounded monthly. The loan was drawn on the
     following schedule: April 14, 2005, $100,000; and May 20, 2005, $100,000.
     Because the Company completed equity financing of at least $500,000 during
     the fourth quarter of 2005, the principal and accrued interest totaling
     $209,110 automatically converted on the same basis as the new financing to
     104,555 shares of common stock ($2.00 per share) and warrants to purchase
     an aggregate of 26,139 shares of the Company's common stock at a purchase
     price of $3.00 per share exercisable until October 2010.


                                      F-15

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 6. COMMON AND PREFERRED STOCK

     COMMON STOCK

     In 2005, the Company, in a private placement to seven accredited investors
     sold 693,000 shares of its common stock, without par value, at a purchase
     price of $2.00 per share. As part of the private placement, the accredited
     investors also received warrants to purchase 173,250 shares of the
     Company's common stock, without par value, at a purchase price of $3.00 per
     share exercisable until October 2010. The net proceeds received from the
     sale of common stock were $1,348,912. Of the net proceeds, the warrants
     were valued at $304,484, which was recorded as additional paid-in capital.

     In April of 2005, as mentioned in note 5, a director agreed to provide a
     $200,000 convertible secured loan to the Company for working capital.
     Because the Company completed equity financing of at least $500,000 during
     2005, the principal and accrued interest totaling $209,110 automatically
     converted on the same basis as the new financing to 104,555 shares of
     common stock ($2.00 per share) and warrants to purchase 26,139 shares of
     the Company's common stock at a purchase price of $3.00 per share
     exercisable until October 2010.

     During 2005, the Company entered into an agreement with the Estate of
     Edward R. Funk. The Company was indebted to the Estate in the amount of
     $188,411.71. The Estate agreed to cancel $188,000 of the indebtedness in
     exchange for 94,000 shares of common stock and warrants to purchase an
     additional 23,500 shares of common stock at $3.00 per share exercisable
     until October 2010. The Company transferred to the Estate $411.71 in full
     satisfaction of the remaining amount of the indebtedness.

     Also, during 2005, the Company entered into an agreement with the Estate of
     Ingeborg V. Funk. The Company was indebted to the Estate in the amount of
     $100,980.21. The Estate agreed to cancel $100,000 of the indebtedness in
     exchange for 50,000 shares of common stock and warrants to purchase an
     additional 12,500 shares of common stock at $3.00 per share exercisable
     until October 2010. The Company transferred to the Estate $980.21 in full
     satisfaction of the remaining amount of the indebtedness.

     In addition, during 2005, the Company entered into an agreement with
     Porter, Wright, Morris & Arthur LLP (PWMA). The Company was indebted to
     PWMA for legal services rendered to the Company. PWMA agreed to cancel
     $90,000 of the indebtedness in exchange for 45,000 shares of common stock
     and warrants to purchase an additional 11,250 shares of common stock at
     $3.00 per share exercisable until October 2010.

     In 2004, the Company, in a private placement to eight accredited investors
     sold 300,084 shares of its common stock, without par value, at a purchase
     price of $2.40 per share. The total offering price paid in cash was
     $720,000. As part of the private placement, the accredited investors also
     received warrants to purchase 60,017 shares of the Company's common stock,
     without par value, at a purchase price of $2.88 per share exercisable until
     May 2009.

     The related party debt described in Note 5 had a conversion feature if the
     Company completed an equity financing of $500,000. With the above sale,
     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


                                      F-16

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 6. COMMON AND PREFERRED STOCK (CONTINUED)

     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 $175,362. 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. These warrants expire May 2009.

     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 and expire May 2009. 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.

     PREFERRED STOCK

     Shares of preferred stock authorized and outstanding at December 31, 2005
     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, 2005.

     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.


                                      F-17
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 6. COMMON AND PREFERRED STOCK (CONTINUED)

     The Company redeemed the Series A preferred stock in 2003 (see note 5).
     During 2005 and 2004, no Series B cash dividends were paid. At December 31,
     2005 the Company has accrued dividends on Series B preferred stock of
     $75,555, which is included in convertible preferred stock, Series B on the
     balance sheet at December 31, 2005.

     EARNINGS PER SHARE

     At December 31, 2005 and 2004, 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,
                         2005           2004
                     ------------   ------------
<S>                  <C>            <C>
Options                  590,250       475,250
Warrants                 651,987       392,648
Preferred Series B        50,370        50,370
                       ---------       -------
                       1,292,607       918,268
                       =========       =======
</TABLE>

     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>
                                                   2005          2004
                                                ----------   -----------
<S>                                             <C>          <C>
Loss applicable to common shareholders
   used in basic EPS and diluted EPS            $ (358,405)  $(1,125,007)
                                                ==========   ===========

Weighted average number of common shares
   used in EPS                                   2,665,078     2,212,884

Effect of dilutive securities:
Stock options and warrants                              --            --
                                                ----------   -----------

Weighted number of common shares and dilutive
   potential common stock used in diluted EPS    2,665,078     2,212,884
                                                ==========   ===========
</TABLE>

NOTE 7. 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.


                                      F-18

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 7. STOCK OPTION PLANS (CONTINUED)

     The Company elected to accelerate the vesting of incentive stock options on
     149,500 shares of its common stock. The decision to accelerate vesting of
     these stock options was made primarily to allow the Company to avoid
     recognizing compensation cost on future financial statements, as required
     by a new accounting rule. Because these options had exercise prices below
     the market value at the time of acceleration the Company recognized
     non-compensation expense of $27,215 in 2005.

     The cumulative status at December 31, 2005 and 2004 of options granted and
     outstanding, as well as options which became exercisable in connection with
     the Stock Option Plans is summarized as follows:

     EMPLOYEE STOCK OPTIONS

<TABLE>
<CAPTION>
                                                              AVERAGE
                                          STOCK OPTIONS   EXERCISE PRICE
                                          -------------   --------------
<S>                                       <C>             <C>
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
   Granted                                    40,000            2.40
   Exercised                                      --              --
   Expired                                   (23,000)           2.00
   Forfeited                                      --              --
                                             -------           -----
Outstanding at December 31, 2005             328,250           $1.95
                                             =======           =====
Shares exercisable at December 31, 2004      149,100           $1.73
Shares exercisable at December 31, 2005      328,250           $1.95
</TABLE>


                                      F-19

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 7. STOCK OPTION PLANS (CONTINUED)

     NON-EMPLOYEE DIRECTOR STOCK OPTIONS

<TABLE>
<CAPTION>
                                                             WEIGHTED
                                                              AVERAGE
                                          STOCK OPTIONS   EXERCISE PRICE
                                          -------------   --------------
<S>                                       <C>             <C>
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
   Granted                                   100,000            3.20
   Exercised                                      --              --
   Expired                                   (17,000)           2.11
   Forfeited                                      --              --
                                             -------           -----
Outstanding at December 31, 2005             247,000           $2.48
                                             =======           =====
Shares exercisable at December 31, 2004      131,000           $1.87
Shares exercisable at December 31, 2005      197,000           $2.10
</TABLE>

     Exercise prices for options range from $1.00 to $4.00 for options at
     December 31, 2005. The weighted average option price for all options
     outstanding is $2.18 with a weighted average remaining contractual life of
     7.0 years.

     The weighted average fair values at date of grant for options granted
     during 2005 and 2004 were $2.75 and $2.73, respectively, and were estimated
     using the Black-Scholes option valuation model with the following weighted
     average assumptions:

<TABLE>
<CAPTION>
                          2005     2004
                         ------   ------
<S>                      <C>      <C>
Expected life in years      7.0      6.9
Interest rate                 5%       5%
Volatility               110.77%  106.27%
Dividend yield                0%       0%
</TABLE>


                                      F-20
<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 8. WARRANTS ISSUED AND VESTED

     The cumulative status at December 31, 2005 of warrants issued and vested is
     summarized as follows:

<TABLE>
<CAPTION>
                                                     Issue   Expiration   Warrant
 Issued      Vested          Consideration           Date       Date       Price
 ------     -------   ---------------------------   ------   ----------   -------
<S>         <C>       <C>                           <C>      <C>          <C>
150,000     150,000    Subordinated Notes Payable   Jan-00     Jan-10     $2.50(c)
148,302(a)   84,930   Convertible Promissory Note   Jun-03     Jun-08     $1.00(d)
 10,000(b)    9,100         Lease Guarantee         Jun-03     Jun-08     $1.00(d)
122,918     122,918     Private Equity Offering     May-04     May-09     $2.88(d)
 17,500      17,500       Consulting Services       May-04     May-09     $2.88(d)
 20,000      20,000    Revolving Promissory Note    Nov-04     Nov-09     $2.50(d)
246,639     246,639     Private Equity Offering     Oct-05     Oct-10     $3.00(d)
</TABLE>

(a) - The Company issued 148,302 warrants to purchase common stock of the
      Company subject to vesting. 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 is fixed at
      84,930.

(b) - The Company issued 10,000 warrants to purchase common stock of the Company
      subject to vesting. The warrants vested according to the following
      schedule: (i) 4,600 on the date of grant; and (ii) up to 5,400 vesting at
      a rate of 150 per month for up to 36 months. As of December 31, 2005,
      9,100 shares of common stock had vested.

(c) - At fair market value.

(d) - Above fair market value.

NOTE 9. 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>
                                        2005
                                     ----------
<S>                                  <C>
Deferred tax assets
   NOL Carryforward                  $2,465,000
   UNICAP                                29,000
   Allowance for doubtful accounts       10,000
   Reserve for obsolete inventory        34,000
   Property and equipment               (21,000)
                                     ----------
                                      2,517,000
Valuation allowance                   2,517,000
                                     ----------
Net                                  $       --
                                     ==========
</TABLE>


                                      F-21

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 9. INCOME TAXES (CONTINUED)

     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
     $2,517,000 and $2,652,000 at December 31, 2005 and 2004, respectively.

     The Company has net operating loss carryovers available for federal and
     state tax purposes of approximately $6,486,000, which expire in varying
     amounts through 2025.

     For the years ended December 31, 2005 and 2004, a reconciliation of the
     statutory rate and effective rate for the provisions for income taxes
     consists of the following:

<TABLE>
<CAPTION>
                           PERCENTAGE
                         -------------
                          2005    2004
                         -----   -----
<S>                      <C>     <C>
Federal statutory rate   (34.0)  (34.0)
Valuation allowance       34.0    34.0
                         -----   -----
Effective rate              --%     --%
                         =====   =====
</TABLE>

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

<TABLE>
<CAPTION>
                      2005   2004
                      ----   ----
<S>                   <C>    <C>
Current expense        $--    $--
Deferred expense        --     --
                       ---    ---
Total                  $--    $--
                       ---    ---
</TABLE>

NOTE 10. RELATED PARTY TRANSACTIONS

     The Company had trade payables, shareholders of $7,920 at December 31,
     2004, pertaining to reimbursement for purchase of goods and services
     obtained for Company purposes. The Estate of the shareholder agreed to
     cancel the indebtedness in exchange for 3,960 shares of common stock and
     warrants to purchase an additional 990 shares of common stock at $3.00 per
     share exercisable until October 2010.

     Interest expense, shareholders was $70,684 and $22,407 for the years ended
     December 31, 2005 and 2004, respectively.

     For additional information regarding related party transactions, see Notes
     5, 6 and 8.

NOTE 11. 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.


                                      F-22

<PAGE>

                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

     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 11.4%.

NOTE 12. 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 and the current
     facility. The Company moved to its current facility in first quarter 2004.

<TABLE>
<S>                                                    <C>
Balance at December 31, 2004                           $ 12,330
   Increase in present value of the obligation
      (accretion expense in the corresponding amount
      charged against earnings)                           3,312
      Liabilities settled                               (13,232)
                                                       --------
Balance at December 31, 2005                           $  2,410
                                                       ========
</TABLE>


                                      F-23