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, 2003

                         Commission File Number: 0-31641

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

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

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

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

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

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

         Check whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to the filing requirements for at
least the past 90 days.

Yes  X    No
    ---      ---

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

         The issuer's revenues for the fiscal year ended December 31, 2003, were
$2,268,488.

         The aggregate market value of the Registrant's common equity held by
non-affiliates of the Registrant was approximately $285,837 on March 17, 2004.

         There were 1,824,756 shares of the Registrant's Common Stock
outstanding on March 17, 2004.

         Transitional Small Business Disclosure Format (check one):

 Yes     No  X
     ---    ---

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of our Proxy Statement for the 2004 Annual Meeting of
Stockholders are incorporated by reference in Part III.

<PAGE>

                                TABLE OF CONTENTS
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<TABLE>
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<S>          <C>                                                                              <C>
                                PART I

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

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

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

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

                                PART II

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

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

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

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

Item 8A.     Controls and Procedures.......................................................     18

                               PART III

Item 9.      Directors, Executive Officers, Promoters and Control Persons; Compliance
             with Section 16(a) of the Exchange Act........................................     19

Item 10.     Executive Compensation........................................................     19

Item 11.     Security Ownership of Certain Beneficial Owners and Management................     19

Item 12.     Certain Relationships and Related Transactions................................     19

                                PART IV

Item 13.     Exhibits and Reports on Form 8-K..............................................     20

Item 14.     Principal Accountant Fees and Services........................................     21

Signatures.................................................................................     22
</TABLE>

NOTE REGARDING FORWARD-LOOKING STATEMENTS

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


                                       2

<PAGE>

                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

INTRODUCTION

         Superconductive Components, Inc. ("SCI" or the "Company"), an Ohio
corporation, was incorporated on May 29, 1987, to develop, manufacture and
market products based on or incorporating high temperature superconductive
("HTS") materials. HTS materials are complex metal oxides - ceramics - of
certain stoichiometries (chemical mixture ratios), which exhibit superconducting
phenomena when cooled to at least -196(degree) Centigrade. These complex metal
oxides are identified as members of the Perovskite family of ceramic materials.
Perovskites are a large family of crystalline ceramics that derive their name
from the perovskite mineral. The perovskite minerals are the most abundant
minerals on earth and have approximately a 2:3 metal-to-oxygen ratio.
Copper-oxide superconductors are layered perovskites.

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

HISTORY OF THE COMPANY

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

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

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

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


                                       3

<PAGE>

business focused in 3 primary areas: High Temperature Superconductive Materials,
Photonic/Optical Coating and Thin Film Battery materials. These three market
areas are connected in that the applications use Physical Vapor Deposition (PVD)
as a manufacturing technique to produce their products. The company now sells
over 80% of its products into PVD applications. In the near term the company
sees this percentage growing to 90%.

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

BUSINESS:

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

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

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

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

         The Company had total annual revenues of $2,268,488, $2,958,544 and
$3,663,488 in the fiscal years ended December 31, 2003, 2002 and 2001,
respectively.

         Principle suppliers to the Company in 2003 were Lattice Materials
Corporation, Williams Advanced Materials and Standard Resources. In every case,
the Company believes that suitable substitute vendors can be found. Also, as the
Company's volume grows, the Company may make alliances or purchasing contracts
with these or other vendors

         The Company's largest customer represented over 10% percent of total
revenues in 2003. The Company had $246,835 and $254,462 in government contracts
for the years ending December 31, 2003 and 2002, respectively, representing
10.9% and 8.6% of total revenues in 2003 and 2002, respectively.

MARKETING AND SALES

         Most of the Company's orders are in response to requests for
quotations. The Company distributes a catalogue of its products and exhibits at
several relevant tradeshows. The Company's catalogue lists 208 products. The
Company also has an operating website www.sciengineeredmaterials.com. The
Company has intensified its marketing efforts by increasing the number of
manufacturing representatives representing the Company in 2003. In addition, a
sales manager was added to the organization on January 1, 2004.

         The Company uses various distribution channels to reach end user
markets including: directs sales, manufacturers representatives and
internationally through distributors. The internet provides


                                       4

<PAGE>

tremendous reach for new customers to be able to identify the Company as a
source of their product needs. In 2003 the company sold product to 363
customers.

CERAMICS

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

         Most of the Company's products are manufactured from component
chemicals and metals supplied by various vendors. Production of HTS is dependent
upon high purity Yttrium to manufacture its superconducting products. Several
suppliers currently satisfy the Company's requirements for this material. If the
Company suddenly lost the services of such suppliers, there could be a
disruption in its manufacturing process until the suppliers were replaced, but
the Company has identified several other firms as potential back-up suppliers
who would be capable of supplying this material to the Company as necessary. To
date, the Company has not experienced an interruption of raw material supplies.
Ceramic shipments were 60.2% and 35.5% of product revenues in 2003 and 2002,
respectively.

METALS

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

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

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

         The Company has continually added production processes and testing
equipment for the many product compositions that can be used as Physical Vapor
Deposition materials. Metal shipments were 39.8% and 64.5% of product revenues
in 2003 and 2002, respectively.

COMPETITION

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

RESEARCH AND DEVELOPMENT

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

         During 2003 the Company successfully completed the development work on
a Department of Energy SBIR Phase I sponsored project for optimizing BSCCO
2-2-1-2 ceramic powders for using in the production of long length HTS wires for
high energy physics applications and spin-off potential for medical MRI imaging.
The success of the project enabled the Company to obtain a $600,000 Phase II
grant for pre-commercialization process development of the powder production
process. The Company's partners in this two-year effort are Oxford
Superconducting Technologies and Los Alamos National Lab.

         The Company also continued to be a subcontractor to Oxford
Superconducting Technology for a SPI from the Department of Energy. At present,
the Company has completed 90% of its assigned tasks and


                                       5
<PAGE>

remains on schedule. This program will ultimately put HTS materials in Siemens
Magnetic Resonance Imagining (MRI) equipment. The program started in 2002 and
will not be completed until 2005.

         All of the sponsored research and development contracts can be
cancelled at the sponsor's option, with accrued costs being paid. The Company
currently has $390,055 of funding from government sponsored research and
development programs that could be cancelled at any time.

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

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

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

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

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

NEW PRODUCT INITIATIVES

         In 2002, the Company began more actively developing and marketing its
existing products for use in the Thin Film Battery and Fuel Cell production
market. In addition, the Company has undertaken research and development
opportunities with respect to new and innovative materials and processes to be
used in connection with the production of Thin Film Batteries and Fuel Cells.
Thin Film Battery materials is a developing market. Manufacturers of batteries
use these materials to produce very small power supplies with small quantities
of stored energy. A typical Thin Film Battery would be produced via Physical
Vapor Deposition with five (5) or more thin layers. These batteries are often
one (1) centimeter square but only fifteen (15) microns thick.

         Presently, there are approximately five (5) manufacturers of Thin Film
Batteries in the country, each in various stages of prototyping, with production
capacities ranging from a few batteries to several thousand batteries per week.
In addition there are several firms and research institutes conducting tests on
Thin Film Batteries. Management believes this market may potentially become very
large with significant growth expected during the next two (2) years. There are
numerous applications for Thin Film Batteries, including, but not limited to:
active RFID tags, battery on chip and portable electronics. Given the many
potential uses for Thin Film Batteries, the Company anticipates that the market
for materials necessary to produce Thin Film Batteries will grow in direct
correlation to the Thin Film Battery market itself.


                                       6
<PAGE>

         The Company currently faces some competition from other producers of
materials used in connection with the manufacture of Thin Film Batteries. Our
biggest competitors are Cerac and PureTech. The Company believes that it has
certain competitive advantages in terms of quality, but acknowledges that it is
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. The Company's President, Technical
Director and Customer Service Manager are personally handling the marketing to
achieve this goal.

         At present, the Company has several customers for the materials it
produces for Thin Film Batteries, including seven (7) domestic customers. Since
we have begun producing materials for the Thin Film Battery market, we have
experienced no problems securing the supplies we need to produce the materials.
We do not anticipate there being supply problems in the near future. However,
changes in production methods and advancing technologies could render our
current products obsolete and the new production protocols may require supplies
that are less available in the marketplace, which may cause a slowing or
complete halt to production as well as expanding costs which we may or may not
be able to pass on to our customers.

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

INTELLECTUAL PROPERTY

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

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

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

EMPLOYEES

         The Company had 20 employees as of December 31, 2003, of which 18 were
full-time employees. 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


                                       7
<PAGE>

the MSDS for each material. The Company contracts with a reputable fully
permitted hazardous waste disposal company to dispose of waste materials
generated by the Company.

COLLECTIONS AND WRITE-OFFS

         The Company collected its receivables in an average of 47 days in 2003.
The Company has occasionally been forced to write-off a few small invoices as
uncollectible. The Company considers credit management critical to its success.

SEASONAL TRENDS

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

RISK FACTORS

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

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

         We commenced business in May of 1987. Our accumulated deficit since
inception was $6,728,313 at December 31, 2003.

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

WE HAVE LIMITED MARKETING AND SALES CAPABILITIES.

         To successfully market our products, we must continue to develop
appropriate marketing, sales, technical, customer service and distribution
capabilities, or enter into agreements with third parties to provide these
services. Our failure to develop these capabilities or obtain third-party
agreements could adversely affect us. We have hired a full time sales manager
effective January 1, 2004.

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

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

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

         The Company has incurred substantial operating losses through 2003 and
numerous factors could require that the Company seek additional capital in the
future. There is no assurance that new capital will be available or that it will
be available on terms that will not result in substantial dilution or reduction
in value of the Company's common stock. The Company continues to lose money and
will continue to do so unless the Company increases sales in the near future. As
a result, additional capital may be needed in order to continue the Company's
operations.


                                       8
<PAGE>

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

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

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

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

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

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

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

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

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

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


                                       9
<PAGE>

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

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

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

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

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

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

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

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

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

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


                                       10
<PAGE>

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

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

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

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

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

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

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

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

ITEM 2.  DESCRIPTION OF PROPERTY.

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

         The Company is current on all operating lease liabilities.

ITEM 3.  LEGAL PROCEEDINGS.

         There are no known legal proceedings against the Company.

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

         Not applicable.


                                       11
<PAGE>

                                     PART II

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

MARKET FOR COMMON STOCK

         The Company's common stock currently trades on the OTC Bulletin Board
under the symbol "SCCI (OTC BB)." The following table sets forth for the periods
indicated the high and low bid quotations for the Company's common stock on the
National Quotation Bureau.

                                                           HIGH            LOW
                                                           ----            ---

FISCAL 2002
         Quarter Ended March 31, 2002                     $2.00           $0.90
         Quarter Ended June 30, 2002                       1.95            1.00
         Quarter Ended September 30, 2002                  1.05            0.50
         Quarter Ended December 31, 2002                   1.00            0.30

FISCAL 2003
         Quarter Ended March 31, 2003                      1.00            0.30
         Quarter Ended June 30, 2003                       1.20            0.40
         Quarter Ended September 30, 2003                  1.50            0.40
         Quarter Ended December 31, 2003                   3.85            1.10

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

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

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

         Under the penny stock regulations, a broker-dealer selling penny stock
to anyone other than an established customer or "accredited investor,"
generally, an individual with net worth in excess of $1,000,000 or an annual
income exceeding $200,000, or $300,000 together with his or her spouse, must
make a special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the
broker-dealer or the transaction is otherwise exempt. In addition, the penny
stock regulations require the broker-dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Commission
relating to the penny stock market, unless the broker-dealer or the transaction
is otherwise exempt. A broker-dealer is also required to disclose commissions
payable to the broker-dealer and the registered representative and current
quotations for the


                                       12
<PAGE>


securities. Finally, a broker-dealer is required to send monthly statements
disclosing recent price information with respect to the penny stock held in a
customer's account and information with respect to the limited market in penny
stocks.

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

HOLDERS OF RECORD

         As of December 31, 2003, there were approximately 688 holders of record
of the common stock of the Company and 1,823,256 shares outstanding, and
approximately 45 holders of Series B Preferred. The Company has come to have
approximately 688 registered holders of common stock as a result of various
unregistered exempt private offerings of its common stock since the Company's
inception in 1987, including issuances of stock options to employees and to
members of the Company's board of directors, and subsequent trading of the
common stock on the OTC Bulletin Board and over the counter through the National
Quotation Bureau. The number of holders of common stock has also increased due
to conversions of Series B preferred shares into shares of common stock. There
is no public market for the Series B preferred stock.

         The Company's 45 Series B Preferred holders acquired their Series B
Preferred Stock in a private offering by the Company that was completed in 1996.
The total amount of this offering was $700,000. The Company issued the Series B
Preferred Shares in reliance on an exemption pursuant to Rule 504 of Regulation
D under the Securities Act of 1933, and the offering was registered by
qualification in the State of Ohio under Section 1707.09 of the Ohio Revised
Code. As of December 31, 2003 there were 25,185 Series B Preferred Shares
outstanding.

DIVIDENDS

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

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

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, 2003 describes the significant accounting policies and methods used
in the preparation of the Financial Statements. Estimates are used for, but not
limited to, the accounting for the allowance for doubtful accounts, inventory
allowances, property and equipment depreciable lives, patents and licenses
useful lives and assessing changes in which impairment of certain long-lived
assets may occur. Actual results could differ from these estimates. The
following critical accounting policies are impacted significantly by judgments,
assumptions and estimates used in the preparation of the Financial Statements.
The allowance for doubtful accounts is based on our assessment of the
collectibility of specific customer accounts and the aging of the accounts
receivable. If there is a deterioration of a major customer's credit worthiness
or actual defaults are higher than our historical experience, our estimates of
the recoverability of amounts due us could be adversely affected. Inventory
purchases and commitments are based upon future demand forecasts. If there is a
sudden and significant decrease in demand for our products or there is a higher
risk of inventory 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.


                                       13
<PAGE>


         To date, the Company has received revenue predominantly from commercial
sales, government research contracts and non-government research contracts. The
Company has incurred cumulative losses of $6,728,313 from inception to December
31, 2003.

Fiscal Year 2003 As Compared to Fiscal Year 2002

         Revenues

         Revenues in fiscal 2003 decreased by 23.3% to $2,268,488 from the
fiscal 2002 level of $2,958,544.

         Product sales decreased to $2,021,653 in 2003 from $2,704,082 in 2002
or a decrease of 25.2%. The decrease in sales is a result of a reduction in
sales in the Company's metal side of the business and by a reduction in a
ceramic application by a customer producing solar cells. The reduction was in
part due to a continuing slowing in sectors of the economy served by the Company
and in certain cases changing technology.

         In 2003, total contract research revenues were $246,835 as compared to
$254,462 in 2002. Government development contract revenue was $169,371, or 7.5%
of total revenues in 2003 and $249,677 or 8.4% of total revenues in 2002. The
decrease is due to a Phase II SBIR grant from the National Science Foundation
that expired in 2002. Revenues of $184,616 from this grant are included in 2002
revenues. National Science Foundation was the Company's largest contract
customer in 2002 accounting for 6.2% of the Company's revenues. Department of
Energy was the Company's largest contract customer in 2003 accounting for 7.5%
of the Company's revenues. Significant loss of government funding would have a
material adverse effect on the Company's financial condition and results of
operations.

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

         The Company was awarded a $100,000 Phase I SBIR from the Department of
Energy in 2002. This contract generated $44,445 and $55,555 in revenues in 2003
and 2002, respectively. This award was for the development of processes to
tailor the particle size distribution of ceramic superconductor powders to
improve the manufacturing of ceramic superconductor wire.

         The Company became a member of a team led by Oxford Instruments
Superconducting Technology that was awarded a grant from the Department of
Energy Superconductivity Partnership Initiative Program. This program recognized
$77,464 and $4,785 in revenues in 2003 and 2002, respectively. The Company's
share of the grant is expected to result in $131,736 in revenues. The purpose of
this program is the scale-up of ceramic superconductor powder production to meet
the future demands for ceramic superconductor wire production for the
fabrication of next generation MRI equipment.

         Gross Margin

         Total gross margin in 2003 was $302,656 or 13.3% of total revenue as
compared to $617,815 or 20.9% in 2002. The primary reason for the reduction is
the decrease in sales. The decrease in sales is a result of a reduction in sales
in the Company's metal side of the business and by a reduction in a ceramic
application. The reduction was in part due to a continuing slowing in sectors of
the economy served by the Company and in certain cases changing technology. In
addition, there was an inventory write-down of $133,015. This included a
write-down of $64,537 due to lower of cost or market. There was an inventory
write-down of $190,881 in 2002. Included in 2002 was a write-down of $88,334 due
to a reduction in raw material due to lower of cost or market.

         Gross margin on product revenue was 17.0% in 2003 versus 29.4% in 2002,
primarily due to a decrease in product sales. The decrease in sales is a result
of a reduction in sales in the Company's metal side of the business and by a
reduction in a ceramic application by a customer producing solar cells. Gross
margin on contract research revenue was 37.5% for 2003 compared to 5.2% in 2002.
The increase in gross margin on contract research revenue was due to the
acquisition of equipment that was partially funded by Oxford.


                                       14
<PAGE>


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

         Inventory reserves are established for obsolete inventory, excess
inventory quantities based on management's estimate of net realizable value and
for lower-of-cost or market. Changes in this reserve are expensed or reduce
inventory and approximated $18,330 and $88,334 for the years ended December 31,
2003, and 2002, respectively. Management deems the inventory reserve, after its
assessment of obsolete inventory, at December 31, 2003, of $144,453 to be
adequate for excess inventory and a lower of cost-or-market analysis. The
increase in the reserve for 2003 is a result of the reduction of a portion of
inventory to the lower of cost-or-market method.

         Selling Expense

         Selling expense in fiscal 2003 increased to $214,691 from $210,730 in
fiscal 2002, an increase of $3,961, or 1.9%. This increase was due to the hiring
of a sales consultant in 2003. This was offset primarily by a reduction in
travel.

         General and Administrative Expense

         General and Administrative expense in fiscal 2003 decreased to
$778,758, from $868,005 in fiscal 2002, a decrease of $89,247, or 10.3%. The
decrease in these costs was due primarily to a reduction in administrative staff
and a reduction of consulting services for management assistance and for the use
of production utilization consultants and implementation of their suggestions
for lean manufacturing. Some of these savings were offset by expenses incurred
in the initial stages for the relocation of the facilities. These expenses
totaled $40,875 in 2003.

         Research and Development Expenses

         Internal research and development costs are expensed as incurred.
Research and development costs for 2003 were $93,096 compared to $43,885 in
2002, an increase of 112.1%. Internal research and development costs increased
due to less contract revenue recognized which is used to offset internal labor.

         Interest Expense

         Interest expense was $34,003, or 1.5% of Company revenues in fiscal
2003, up 29.1% from $26,341 in fiscal 2002. Interest expense includes $3,501 of
accrued dividends payable to the sole shareholder of our Series A stock and
$23,206 for related party interest expense.

LOSS APPLICABLE TO COMMON SHARES

         Net loss per common share based on the loss applicable to common shares
was $0.41 and $0.24 per common share for the years ended December 31, 2003 and
2002, respectively. The loss applicable to common shares includes the net loss
from operations, Series A and B preferred stock dividends and the accretion of
Series A and B preferred stock. The net loss per common share from operations
was $0.39 and $0.22, for the years ended December 31, 2003 and 2002,
respectively. The difference between the net loss from operations and the loss
applicable to common shares of $(0.02) and $(0.02), respectively, is a result of
the preferred position that the preferred shareholders have in comparison to the
common shareholders.

         Dividends on the Series A and B preferred stock accrue at 10% annually
on the outstanding shares. The 99 shares of Series A were redeemable at May 31,
2002 and the Company began accruing interest expense June 1, 2002 until the
stock was exchanged for convertible promissory notes on June 30, 2003. Dividends
on the Series B preferred stock totaled $25,185 and $27,541 for the years ended
December 31, 2003 and 2002 respectively.

         The accretion of Series A preferred stock represents issue costs of
$70,277 that were netted against the proceeds of Series A preferred stock. The
issue costs were amortized over the payout period of seven years of income
(loss) applicable to common shares and additional paid-in capital. The annual
accretion totaled $0 and $6,469 for the years ended December 31, 2003 and 2002,
respectively.


                                       15
<PAGE>


Liquidity and Working Capital

         At December 31, 2003, working capital was $171,883 compared to $349,938
at December 31, 2002. The Company utilized cash from operations for the year
ended December 31, 2003, of $190,561. The Company provided cash from operations
for the year ended December 31, 2002, of $72. Significant non-cash items
including depreciation, inventory reserve on excess and obsolete inventory,
allowance for doubtful accounts and the cumulative effect of the change in
accounting were approximately $249,000 and $320,000 for the years ended December
31, 2003 and 2002, respectively. Overall, accounts receivable, inventory, and
prepaids decreased by approximately $271,000 while there was an increase in
accounts payable and accrued expenses by approximately $23,000 for the year
ended December 31, 2003. Accounts receivable, inventory, and prepaids decreased
in excess of decreases in accounts payable and accrued expenses by approximately
$119,000 for the year ended December 31, 2002, as a result of timing of receipt
of inventory versus required scheduled payments on this inventory and increased
prepaid expenses.

         For investing activities, the Company used cash of approximately
$151,000 and $52,000 for the years ended December 31, 2003, and 2002,
respectively. The amounts invested in 2003 and 2002 were used to purchase
machinery and equipment for increased production capacity. Proceeds on sale of
equipment totaled $6,157 and $36,500 for the years ended December 31, 2003 and
2002, respectively.

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

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

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

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

         The principal and interest on the $729,770 of new convertible
promissory notes are payable June 30, 2006. If the Company completes an equity
financing for at least $500,000 prior to June 30, 2004, the notes shall
automatically convert to common stock at the same per share price as the equity
financing and thereafter the notes shall convert to common stock at the option
of the holders at $2.00 per share.

         The Company used $100,000 of the note proceeds to pay off its bank line
of credit which terminated on June 30, 2003, and plans to use approximately
$300,000 to finance its move to a new facility and approximately $200,000 for
general corporate purposes.

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.


                                       16
<PAGE>


FUTURE OPERATING RESULTS

         During 2003, the Company used cash to purchase production equipment.
The Company relocated its operations to a new facility in March of 2004. The
relocation will provide the Company with the space to expand its production
facilities and improve productivity.

         The Company plans to place some of its larger purchase commitments on
an annualized basis for raw materials that can be purchased in larger quantities
at reduced prices. In general, the Company attempts to limit inventory price
increases by making an annual commitment, and drawing the material either as
required, or on a monthly or quarterly basis. Such annual commitments may reach
$500,000 in 2004 and greater in 2005 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 committed $512,000 towards
the purchase of manufacturing equipment from the funds received from the State
of Ohio Third Frontier Grant.

         While the Company has approximately $267,000 of cash on hand at
year-end and received additional debt financing of $150,000 subsequent to
year-end, these funds are required to finance the company's move of its
facilities in March 2004 and funding operations in first quarter 2004.
Management is investigating additional equity funding from several sources to
fund its operations for 2004. In March 2004 the Company received $512,848 from
the State of Ohio's Third Frontier Action Fund to begin purchasing capital
equipment required to commercialize the Company's Lithium Thin Film Battery
sputtering target manufacturing process. Also, in March 2004 the Company was
approved by the Ohio Department of Development's Industrial Technology
Enterprise Advisory Council Committee as an eligible entity for the Technology
Investment Tax Credit program. The program is intended to benefit small
Ohio-based research and development and technology-oriented companies. This
approval permits individuals and businesses to receive state tax incentives for
up to twenty-five percent of their qualified investments in the Company until
September 2004. The Company plans to raise equity capital beginning in March
2004 to fund a portion of our planned growth. On March 26, 2004 the Company
received a $51,000 investment as a result of the Technology Investment Tax
Credit program.

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, 2003, and the related statements
of operations, stockholders' equity and cash flows for the two years ended
December 31, 2003 and 2002, together with the independent certified public
accountants' report thereon appear on Pages F-1 through F-24 hereof.

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

         None.


                                       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.


                                       18
<PAGE>


                                    PART III

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

         The information required by this item is included under the captions,
"ELECTION OF DIRECTORS," "EXECUTIVE OFFICERS" and "SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE" in our proxy statement relating to our 2004
Annual Meeting of Shareholders to be held on May 20, 2004, 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.scienginneredmaterials.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 2004 Annual
Meeting of Shareholders to be held on May 20, 2004 and is incorporated herein by
reference.

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

         The information required by this item is included under the captions
"OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS," and "OWNERSHIP
OF COMMON STOCK BY PRINCIPAL SHAREHOLDERS" in our proxy statement relating to
our 2004 Annual Meeting of Shareholders to be held on May 20, 2004 and is
incorporated herein by reference.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this item is included under the caption
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" in our proxy statement relating
to our 2004 Annual Meeting of Shareholders to be held on May 20, 2004 and is
incorporated herein by reference.


                                       19
<PAGE>


                                     PART IV

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

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

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

                 Independent Auditors' Report

                 Balance Sheet

                 Statements of Operations

                 Statements of Stockholders' Equity (Deficit)

                 Statements of Cash Flows

                 Notes to the Financial Statements

             (2) Exhibits:

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

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

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

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

10(c)    *        1987 Incentive Stock Option Plan.

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

10(e)    *        1995 Stock Option Plan.

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

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

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

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

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


                                       20
<PAGE>


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

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

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

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

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

23                Consent of Hausser & Taylor LLC.

24                Powers of Attorney.

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

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

32.1     ++       Section 1350 Certification of Principal Executive Officer.

32.2     ++       Section 1350 Certification of Principal Financial Officer.

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

* Filed with the Company's initial Form 10-SB on September 28, 2000, and
incorporated hereinby reference.
** Filed with the Company's Form 10-SB Amendment No. 1 on January 3, 2001, and
incorporated herein by reference.
*** Filed with Company's Form 10-KSB on March 28, 2003 and incorporated herein
by reference.
+ Filed with Company's Form 10-QSB on November 12, 2003 and incorporated herein
by reference.
++ Furnished with this Annual Report on Form 10-KSB.

         (B)      REPORTS ON FORM 8-K

                  On December 8, 2003, the Company filed a current report on
Form 8-K (Items 5 and 7), dated December 8, 2003, regarding the decision by the
Company not to pay a dividend on the Series B Non-Voting Preferred Stock.

         (C)      EXHIBITS

                  The exhibits to this report follow the Signature Page.

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
2004 Annual Meeting of Shareholders to be held on May 20, 2004 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 26, 2004                   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 26th day of March 2004.

     Signature                                             Title


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

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

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

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


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


                                       22
<PAGE>


                          INDEX TO FINANCIAL STATEMENTS

                                                                         Page
                                                                         ----

                  Independent Auditors Report                            F-1

                  Balance Sheet                                          F-2-3

                  Statements of Operations                               F-4

                  Statements of Shareholders' Equity (Deficit)           F-5

                  Statements of Cash Flows                               F-6-7

                  Notes to Financial Statements                          F-8-24
<PAGE>


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

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

         We have audited the accompanying balance sheet of Superconductive
Components, Inc. as of December 31, 2003, and the related statements of
operations, shareholders' equity (deficit) and cash flows for each of the two
years in the period ended December 31, 2003. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Superconductive
Components, Inc. as of December 31, 2003, and the results of its operations and
its cash flows for each of the two years in the period then ended in conformity
with accounting principles generally accepted in the United States of America.

         The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 17 to the
financial statements, the Company has experienced recurring losses from
operations, negative cash flow from operations and shareholders' deficit all of
which raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to this are also described in Note 17. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.


                                             /s/ HAUSSER + TAYLOR LLC

Columbus, Ohio
February 23, 2004, except for Note 14, as to which the date is March 4, 2004


                                      F-1
<PAGE>


                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                        SUPERCONDUCTIVE COMPONENTS, INC.

                                  BALANCE SHEET

                                DECEMBER 31, 2003

                                     ASSETS
                                     ------

CURRENT ASSETS
  Cash                                                          $   266,940
  Accounts and notes receivable
    Trade, less allowance for doubtful accounts of $25,000          119,566
    Employees                                                         6,995
    Other                                                               119
 Inventories                                                        500,533
 Prepaid expenses                                                    30,198
                                                                -----------
       Total current assets                                         924,351
                                                                -----------

PROPERTY AND EQUIPMENT,
 AT COST
  Machinery and equipment                                         2,031,437
  Furniture and fixtures                                             22,124
  Leasehold improvements                                            347,349
                                                                -----------
                                                                  2,400,910
  Less accumulated depreciation                                  (1,827,076)
                                                                -----------
                                                                    573,834
                                                                -----------

OTHER ASSETS
  Deposit                                                             7,863
  Intangibles                                                        40,159
                                                                -----------
       Total other assets                                            48,022
                                                                -----------
TOTAL ASSETS                                                    $ 1,546,207
                                                                ===========


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


                                       F-2
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                                  BALANCE SHEET

                                DECEMBER 31, 2003

                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------

CURRENT LIABILITIES
  Capital lease obligation, current portion                   $    31,994
  Capital lease obligation, shareholder, current portion           68,428
  Note payable shareholders, current portion                      130,000
  Accounts payable                                                222,117
  Accounts payable, shareholders                                    7,920
  Accrued contract expenses                                        86,049
  Accrued personal property taxes                                  43,263
  Accrued interest, shareholders                                   39,760
  Deferred contract revenue                                        50,742
  Accrued expenses                                                 72,195
                                                              -----------
        Total current liabilities                                 752,468
                                                              -----------

CAPITAL LEASE OBLIGATION, NET OF
 CURRENT PORTION                                                   31,727
                                                              -----------

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

NOTE PAYABLE SHAREHOLDERS, NET OF CURRENT
 PORTION                                                          767,625
                                                              -----------

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

SHAREHOLDERS' EQUITY (DEFICIT)
  Convertible preferred stock, Series B, 10% cumulative,
     nonvoting, no par value, $10 stated value, optional
     redemption at 103%; 25,185 issued and outstanding            284,591
  Common stock, no par value, authorized 15,000,000
     shares; 1,823,256 shares issued and outstanding            6,378,216
  Additional paid-in capital                                       59,893
  Accumulated deficit                                          (6,728,313)
                                                              -----------
                                                                   (5,613)
                                                              -----------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)          $ 1,546,207
                                                              ===========


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


                                       F-3
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                            STATEMENTS OF OPERATIONS

                     YEARS ENDED DECEMBER 31, 2003 AND 2002

                                                      2003              2002
                                                      ----              ----

SALES REVENUE                                     $ 2,021,653       $ 2,704,082
CONTRACT RESEARCH REVENUE                             246,835           254,462
                                                  -----------       -----------
                                                    2,268,488         2,958,544
                                                  -----------       -----------

COST OF SALES REVENUE                               1,678,454         1,908,693
INVENTORY WRITE-DOWN                                  133,015           190,881
COST OF CONTRACT RESEARCH                             154,363           241,155
                                                  -----------       -----------
                                                    1,965,832         2,340,729
                                                  -----------       -----------

GROSS MARGIN                                          302,656           617,815

GENERAL AND ADMINISTRATIVE EXPENSES                   778,758           868,005

SALES AND PROMOTIONAL EXPENSES                        214,691           210,730
                                                  -----------       -----------

LOSS FROM OPERATIONS                                 (690,793)         (460,920)
                                                  -----------       -----------

OTHER INCOME (EXPENSE)
  Interest income                                       2,499             4,636
  Interest expense                                    (34,002)          (26,341)
  Insurance proceeds                                       --            39,083
  Gain on sale of equipment                             6,157            36,500
  Miscellaneous, net                                   11,149                --
                                                  -----------       -----------
                                                      (14,197)           53,878
                                                  -----------       -----------

LOSS BEFORE PROVISION FOR INCOME TAX                 (704,990)         (407,042)

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

NET LOSS BEFORE CUMULATIVE EFFECT
 OF A CHANGE IN ACCOUNTING                           (704,990)         (407,042)

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

NET LOSS                                             (720,876)         (407,042)

DIVIDENDS ON PREFERRED STOCK                          (25,185)          (31,666)

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

LOSS APPLICABLE TO COMMON SHARES                  $  (746,061)      $  (445,177)
                                                  ===========       ===========

EARNINGS PER SHARE - BASIC AND DILUTED
 (Note 2)

NET LOSS PER COMMON SHARE BEFORE
 CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
  Basic                                           $     (0.39)      $     (0.22)
                                                  ===========       ===========
  Diluted                                         $     (0.39)      $     (0.22)
                                                  ===========       ===========

NET LOSS PER COMMON SHARE AFTER CUMULATIVE
 EFFECT OF A CHANGE IN ACCOUNTING
  Basic                                           $     (0.41)      $     (0.24)
                                                  ===========       ===========
  Diluted                                         $     (0.41)      $     (0.24)
                                                  ===========       ===========

WEIGHTED AVERAGE SHARES OUTSTANDING
  Basic                                             1,823,256         1,823,256
                                                  ===========       ===========
  Diluted                                           1,823,256         1,823,256
                                                  ===========       ===========


   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, 2003 AND 2002
                     --------------------------------------

<TABLE>
<CAPTION>

                                         CONVERTIBLE                   ADDITIONAL
                                       PREFERRED STOCK,     COMMON       PAID-IN    ACCUMULATED
                                           SERIES B         STOCK        CAPITAL       DEFICIT       TOTAL
                                       ----------------   ----------   ----------   -----------    ----------
<S>                                       <C>             <C>          <C>          <C>            <C>
BALANCE 12/31/01                          $  333,136      $6,366,966   $   47,127   $(5,600,395)   $1,146,834
Equity reclassification (Note 16)            (76,086)                      76,086                          --
Accretion of cumulative dividends             27,541                      (31,666)                     (4,125)
Accretion of Series A offering costs                                       (6,469)                     (6,469)
Issuance of stock                                             11,250                                   11,250
Payment of cumulative dividends              (25,185)                                                 (25,185)
Net loss                                                                               (407,042)     (407,042)
                                          ----------      ----------   ----------   -----------    ----------
BALANCE 12/31/02                             259,406       6,378,216       85,078    (6,007,437)      715,263
Accretion of cumulative dividends             25,185                      (25,185)                         --
Net loss                                                                               (720,876)     (720,876)
                                          ----------      ----------   ----------   -----------    ----------
BALANCE 12/31/03                          $  284,591      $6,378,216   $   59,893   $(6,728,313)   $   (5,613)
                                          ==========      ==========   ==========   ===========    ==========
</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, 2003 AND 2002
                     --------------------------------------

<TABLE>
<CAPTION>

                                                                          2003            2002
                                                                          ----            ----
<S>                                                                    <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                             $(720,876)      $(407,042)
                                                                       ---------       ---------
  Adjustments to reconcile net loss to net cash
   provided by (used in) operating activities:
    Depreciation                                                         212,031         228,888
    Amortization and accretion                                             3,088           2,971
    Cumulative effect of a change in accounting                           15,886              --
    Gain on sale of equipment                                             (6,157)        (36,500)
    Inventory reserve                                                     18,330          88,334
    Provision for doubtful accounts                                        7,000           5,000
    Changes in operating assets and liabilities:
      (Increase) decrease in assets:
        Accounts receivable                                              124,530         154,235
        Inventories                                                      136,570         114,226
        Prepaid expenses                                                   3,736         (21,083)
        Other assets                                                      (7,863)         (2,226)
      Increase (decrease) in liabilities:
        Accounts payable                                                (107,576)         11,233
        Accrued expenses and deferred revenue                            130,740        (137,964)
                                                                       ---------       ---------
          Total adjustments                                              530,315         407,114
                                                                       ---------       ---------
              Net cash provided by (used in) operating activities       (190,561)             72
                                                                       ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds on sale of equipment                                            6,157          36,500
  Purchases of property and equipment                                   (157,419)        (88,967)
                                                                       ---------       ---------
              Net cash used in investing activities                     (151,262)        (52,467)
                                                                       ---------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from note payable, shareholders                               600,000          50,000
  Principal payments on capital lease obligations                        (40,144)        (41,595)
  Payment of cummulative dividends                                            --         (25,185)
                                                                       ---------       ---------
              Net cash provided by (used in) financing activities        559,856         (16,780)
                                                                       ---------       ---------
</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, 2003 AND 2002
                     --------------------------------------

<TABLE>
<CAPTION>

                                                                       2003           2002
                                                                       ----           ----
<S>                                                                 <C>            <C>
NET INCREASE (DECREASE) IN CASH                                       218,032        (69,175)

CASH - Beginning of period                                             48,908        118,083
                                                                    ---------      ---------

CASH - End of period                                                $ 266,940      $  48,908
                                                                    =========      =========

SUPPLEMENTAL DISCLOSURES OF CASH
 FLOW INFORMATION
  Cash paid during the years for:
    Interest, net                                                   $   7,295         10,905
    Income taxes                                                    $      --             --

SUPPLEMENTAL DISCLOSURES OF NONCASH
 FINANCING ACTIVITIES
   In second quarter 2003, $121,770 of Redeemable Convertible
    Preferred stock, Series A, was converted to Notes Payable,
    Shareholders
   In second quarter 2003, $7,585 of accrued interest
    was transferred to Notes Payable Shareholders
   Machinery & Equipment and expenses for asset retirement
    obligations of $30,236 are accrued
</TABLE>


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


                                       F-7
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1.           BUSINESS ORGANIZATION AND PURPOSE

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

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A.           Inventories - Inventories are stated at the lower of cost or
                  market on an acquired or internally produced lot basis, and
                  consist of raw materials, work-in-process and finished goods.
                  Cost includes material, labor, freight and applied overhead.
                  Inventory reserves are established for obsolete inventory and
                  excess inventory quantities based on management's estimate of
                  net realizable value. The inventory reserve increased $18,330
                  during 2003. This was due to a reduction in some finished
                  goods and work in process due to lower of cost or market in
                  the amount of $64,537. This amount was charged to cost of
                  goods sold. In addition, $68,478 of obsolete inventory was
                  written off the books and charged to cost of goods sold in
                  2003. These amounts were partially offset by sales of a raw
                  material throughout the year that was reduced to lower of cost
                  or market in 2002.

                  The Company enters into cancelable purchase commitment
                  arrangements with some suppliers. Estimated purchase
                  commitments to these suppliers approximate $45,000 for 2003.
                  The Company can cancel these commitments at the Company's
                  discretion without penalty.

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

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


                                       F-8
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     C.           Research and Development - Internal research and development
                  costs are expensed as incurred. Research and development
                  expenses for the years ended December 31, 2003 and 2002 were
                  $93,096 and $43,885, respectively.

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

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

                  During 2003 and 2002, the Company earned $246,835 and
                  $254,462, respectively, in contract revenue. At December 31,
                  2003, there was an outstanding accounts receivable from
                  contract research revenue of $9,991. There is deferred revenue
                  of $50,742 at December 31, 2003.

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

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

     D.           Licenses - The Company has secured licenses to produce various
                  superconductive materials for periods up to the expiration of
                  the applicable patents. The license fees, included in "Other
                  Assets" on the balance sheet, are being amortized over the
                  expected life of the agreement or applicable patent, which is
                  seventeen years. Cost and accumulated amortization of licenses
                  at December 31, 2003 are $21,000 and $10,196, respectively.
                  Amortization expense was $1,259 for the years ended December
                  31, 2003 and 2002. Amortization expense is estimated to be
                  $1,259 for each of the next five years.

     E.           Patent - The Company has secured patents for manufacturing
                  processes used in its operations. Costs incurred to secure the
                  patents have been capitalized, included in "Other Assets" on
                  the balance sheet, and are being amortized over the life of
                  the patents. Cost and accumulated amortization of the patent
                  at December 31, 2003 are $36,473 and $7,118, respectively.
                  Amortization expense was $1,830 and $1,712 for the years ended
                  December 31, 2003 and December 31, 2002, respectively.
                  Amortization expense is estimated to be $1,830 for each of the
                  next five years.

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


                                       F-9
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

     G.           Stock Based Compensation - The Company utilizes the provisions
                  of Accounting Principles Board ("APB") No. 25, "Accounting for
                  Stock Issued to Employees" which utilized a fair value based
                  method. The Financial Accounting Standards Board ("FASB")
                  Statement No. 123, "Accounting for Stock-Based Compensation",
                  utilized a fair value based method. The FASB requires
                  disclosure for new employee stock options of the impact to the
                  financial statements of utilizing the intrinsic value versus
                  the fair value based method. 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, 2003 and 2002 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 2003 and 2002 results as reported to
                  the results had the Company adopted the expense recognition
                  provisions of FASB #123.

                                                       2003            2002
                                                       ----            ----
          Net loss applicable to
            common shares:
            As reported                             $(746,061)      $(445,177)
            Stock-based compensation, net of
               Tax for pro forma                       (4,983)         (2,183)
                                                    ---------       ---------
            Pro forma net loss under SFAS #123      $(751,044)      $(447,360)

          Basic and diluted loss per share:
            As reported                             $   (0.41)      $   (0.24)
            Pro forma under SFAS #123                   (0.41)      $   (0.25)

                  For the years ended December 31, 2003 and 2002, there was no
                  stock-based employee compensation cost included in the
                  determination of net loss as reported.

     H.           Income (Loss) Per Common Share - Income (loss) per common
                  share amounts are based on the weighted average number of
                  shares outstanding. Due to the net loss in 2003 and 2002, the
                  assumed conversion of preferred stock and exercise of stock
                  options and warrants are anti-dilutive and have not been
                  considered in the calculation of per share amounts.

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


                                      F-10
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

                  The Company had one major customer in 2003 and 2002, which
                  accounted for approximately $428,000 and $519,000,
                  respectively, of the total revenue and $15,000 of the trade
                  accounts receivable at December 31, 2003.

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

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

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

     N.           Accounts Receivable - The Company extends unsecured credit to
                  customers under normal trade agreements, which require payment
                  within 30 days. Accounts greater than 90 days past due, which
                  amounted to $0 and $11,000 of net receivables for the years
                  ended December 31, 2003 and 2002, respectively are considered
                  delinquent. The Company does not charge interest on delinquent
                  trade accounts receivable. Accounts greater than one year past
                  due, which amount to $0 and $0 of net receivables for the
                  years ended December 31, 2003 and 2002 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 $18,000 as of December 31, 2003 and 2002,
                  respectively. The estimate is based upon management's review
                  of delinquent accounts and an assessment of the Company's
                  historical evidence of collections. Bad debt expense of $0 and
                  $0 was recognized for the years ended December 31, 2003 and
                  2002, 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, 2003 and
                  2002 totaled $35,000 and $2,000 respectively. The $35,000 in
                  2003 was for a related party.


                                      F-11
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     O.           Intangible Assets - In July 2001, the FASB issued Statement of
                  Financial Accounting Standards No. 142, "Goodwill and Other
                  Intangible Assets" ("SFAS 142"). SFAS 142 requires certain
                  intangible assets to be tested for impairment under certain
                  circumstances, and written off when impaired, rather than
                  being amortized as previous standards required. There were no
                  impairment adjustments for the years ended December 31, 2003
                  and 2002.

NOTE 3.           INVENTORIES

                  Inventories consist of the following at December 31, 2003:

                  Raw materials                            $361,238
                  Work-in-process                           101,274
                  Finished goods                            182,474
                                                           --------
                                                            644,986
                  Less reserve for obsolete inventory       144,453
                                                           --------
                                                           $500,533
                                                           ========

NOTE 4.           NOTES PAYABLE - BANK

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


                                      F-12
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 5.           LEASE OBLIGATIONS

                  OPERATING
                  ---------

                  The Company leases its facilities and certain office equipment
                  under agreements classified as operating leases expiring
                  through 2014. Rent expense which includes various monthly
                  rentals for the years ended December 31, 2003 and 2002,
                  totaled $73,438 and $73,420, respectively. Future minimum
                  lease payments at December 31, 2003 are as follows:

                             2004            $   37,667
                             2005               100,575
                             2006               100,330
                             2007                94,362
                             2008                94,362
                        2009 and beyond         608,521
                                             ----------
                                             $1,035,817
                                             ==========

                  CAPITAL
                  -------

                  The Company also leases certain equipment under capital leases
                  including the lease with a major shareholder entered into in
                  2001. The future minimum lease payments by year with the
                  present value of such payments, as of December 31, 2003 is as
                  follows:

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

                  2004                                       $74,940    $35,933
                  2005                                            --     23,891
                  2006                                            --      9,782
                                                             -------    -------
                  Total minimum lease payments                74,940     69,606
                  Less amount representing interest            6,512      5,885
                                                             -------    -------
                  Present value of minimum lease payments     68,428     63,721
                  Less current portion                        68,428     31,994
                                                             -------    -------
                  Long-term capital lease obligations        $    --    $31,727
                                                             =======    =======

                  The equipment under capital lease at December 31, 2003 is
                  included in the accompanying balance sheet under the following
                  captions:

                                                             RELATED
                                                              PARTY       OTHER
                                                             -------    --------
                  Machinery and equipment                    $68,428    $211,355
                  Less accumulated depreciation               24,439     135,545
                                                             -------    --------
                  Net book value                             $43,989    $ 75,810
                                                             =======    ========


                                      F-13
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 5.           LEASE OBLIGATIONS (CONTINUED)

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

                  Amortization expense totaled $39,969 for the years ended
                  December 31, 2003 and 2002.

NOTE 6.           RELATED PARTY NOTES PAYABLE

                  Effective December 31, 2000, the Company converted accounts
                  payable and accrued interest payable to certain major
                  shareholders totaling $132,270 to a note payable shareholders.
                  The same shareholder converted $50,000 of accounts payable in
                  March 2002 to the note payable. The note provides for monthly
                  payments of principal of $2,000 per month for the period of
                  February 1, 2001 through December 1, 2002 and, thereafter, in
                  monthly installments of $4,000 for principal until the entire
                  outstanding balance is paid in full. The balance of the note
                  was $178,270 at December 31, 2003. There was $4,000 paid in
                  2001 and there were no principal payments made on this note
                  during 2003 and 2002. Interest is based upon the Prime
                  Commercial Rate. Prime was 4.0% and 4.25% at December 31,
                  2003, and 2002, respectively. Interest expense on this note
                  charged to operations was $6,456 and $8,037 for the years
                  ended December 31, 2003 and 2002, respectively.

                  The Company completed two private financing transactions in
                  2003 including (i) the issuance of convertible promissory
                  notes in the aggregate amount of $600,000 and 122,000 warrants
                  to purchase shares of common stock in exchange for $600,000 in
                  cash and (ii) the redemption of the Company's entire $129,770
                  obligation on its Series A redeemable convertible preferred
                  stock in exchange for convertible promissory notes in the
                  aggregate amount of $129,770, which represented the face
                  amount of the preferred stock plus accrued and unpaid
                  dividends and interest, and 26,302 warrants to purchase shares
                  of common stock. Four present shareholders invested the
                  $600,000. See Note 9 for warrant information.

                  The principal and interest, at prime, on the $729,770 of new
                  convertible promissory notes are payable June 30, 2006. If the
                  Company completes an equity financing for at least $500,000
                  prior to June 30, 2004, the notes shall automatically convert
                  to common stock at the same per share price as the equity
                  financing and thereafter the notes shall convert to common
                  stock at the option of the holders at $2.00 per share.

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

                  2004              $130,000
                  2005                38,270
                  2006               729,355
                                    --------
                                     897,625
                  Current            130,000
                                    --------
                  Long-term         $767,625
                                    ========


                                      F-14
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 7.           COMMON AND PREFERRED STOCK

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

                  Shares of preferred stock authorized and outstanding at
                  December 31, 2003 are as follows:

                                                    SHARES        SHARES
                                                  AUTHORIZED    OUTSTANDING
                                                  ----------    -----------
                  Cumulative Preferred Stock       10,000            --

                  Voting Preferred Stock          125,000            --

                  Non-Voting Preferred Stock      125,000 (a)    25,185 (b)

                  (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, 2003.

                  In June 1995, the Company completed an offering of 215 shares
                  of $1,000 stated value 1995 Series A 10% non-voting
                  convertible preferred stock. In January 1996, the Company
                  completed an offering of 70,000 shares of $10 stated value
                  1995 Series B 10% non-voting convertible preferred stock. The
                  Series A shares are convertible to common shares at the rate
                  of $6.00 per share and Series B shares at the rate of $5.00
                  per share. At the Company's option, Series A and Series B
                  shares are redeemable at 103% after the respective third
                  anniversary dates.

                  The Company redeemed the Series A preferred stock in 2003 (see
                  note 6).

                  As security for cash dividends on the Series B preferred
                  shares, related party shareholders had pledged an aggregate
                  131,000 shares of $.01 par value common stock of another
                  entity. In December 2002, the pledged shares were released in
                  accordance with the terms of the pledge agreement.

                  During 2003 and 2002, Series B cash dividends totaling $0 and
                  $25,185 were paid, respectively. At December 31, 2003 the
                  Company has accrued dividends on Series B preferred stock of
                  $25,185, which is included in convertible preferred stock,
                  Series B on the balance sheet at December 31, 2003.


                                      F-15
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 7.           COMMON AND PREFERRED STOCK (CONTINUED)

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

                  At December 31, 2003 and 2002, all outstanding common stock
                  equivalents which include preferred stock, Series A (for 2002)
                  and B, employee and director stock options and warrants are
                  antidilutive due to the net loss.

                                       DECEMBER 31, DECEMBER 31,
                                           2003         2002
                                           ----         ----

                  Options                 395,500      504,550
                  Warrants                308,302      160,000
                  Preferred Series A           --       16,500
                  Preferred Series B       50,370       50,370
                                          -------      -------
                                          754,172      731,420
                                          =======      =======

                  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.

                                                       2003             2002
                                                       ----             ----

Loss applicable to common shareholders
  used in basic EPS and diluted EPS                $  (746,061)     $  (445,177)
                                                   ===========      ===========

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

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

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


                                      F-16
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 8.           INCENTIVE STOCK OPTION PLANS

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

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

                  The cumulative status at December 31, 2003 and 2002 of options
                  granted and outstanding, as well as options which became
                  exercisable in connection with the Incentive Plan is
                  summarized as follows:

                  EMPLOYEE STOCK OPTION PLANS
                  ---------------------------

<TABLE>
<CAPTION>

                                                                                     WEIGHTED
                                                                                      AVERAGE
                                                                STOCK OPTIONS     EXERCISE PRICE
                                                                -------------     --------------
                  <S>                                              <C>                <C>
                  Outstanding at December 31, 2001                 263,200            $  2.22
                    Granted                                        190,000               1.55
                    Exercised                                           --                 --
                    Expired                                         (5,950)              2.50
                    Forfeited                                      (49,700)              2.94
                                                                   -------            -------
                  Outstanding at December 31, 2002                 397,550               1.94
                    Granted                                         10,000               1.00
                    Exercised                                           --              --
                    Expired                                        (54,700)              2.96
                    Forfeited                                      (94,350)              1.86
                                                                   -------            -------
                  Outstanding at December 31, 2003                 258,500            $  1.67
                                                                   =======            =======
                  Shares exercisable at December 31, 2002          123,200               2.42

                  Shares exercisable at December 31, 2003          150,850               1.68
</TABLE>


                                      F-17
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 8.           INCENTIVE STOCK OPTION PLANS (CONTINUED)

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

<TABLE>
<CAPTION>

                                                                                     WEIGHTED
                                                                                      AVERAGE
                                                                STOCK OPTIONS      EXERCISE PRICE
                                                                -------------      --------------
                  <S>                                              <C>                <C>
                  Outstanding at December 31, 2001                 196,500            $  2.22
                    Granted                                             --                 --
                    Exercised                                           --                 --
                    Expired                                        (89,500)              2.00
                    Forfeited                                           --                 --
                                                                   -------            -------
                  Outstanding at December 31, 2002                 107,000               2.14
                    Granted                                         30,000               1.00
                    Exercised                                           --                 --
                    Expired                                             --                 --
                    Forfeited                                           --                 --
                                                                   -------            -------
                  Outstanding at December 31, 2003                 137,000            $  1.89
                                                                   =======            =======
                  Shares exercisable at December 31, 2002           98,000               2.14
                  Shares exercisable at December 31, 2003          101,000               2.14
</TABLE>

                  Exercise prices for options range from $1.00 to $3.00 for
                  options at December 31, 2003. The weighted average option
                  price for all options outstanding is $1.75 with a weighted
                  average remaining contractual life of 7.3 years.

                  The exercise price for all options exercisable at December 31,
                  2003 range from $1.30 to $3.00.

                  The weighted average fair values at date of grant for options
                  granted during 2003 and 2002 were $1.00 and $1.45,
                  respectively, and were estimated using the Black-Scholes
                  option valuation model with the following weighted average
                  assumptions:

                                                  2003          2002
                                                  ----          ----
                  Expected life in years           7.3          6.89
                  Interest rate                    5%           5%
                  Volatility                     110.67%      110.67%
                  Dividend yield                   0%           0%


                                      F-18
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                         NOTES TO FINANCIAL STATEMENTS.

NOTE 9.           WARRANTS ISSUED

                  Warrants unexercised at December 31, 2003 issued to related
                  parties are as follows:

<TABLE>
<CAPTION>

# of Common                                                               Issue                Exercise
  Shares          Issued To                  Consideration                 Date   Expiration     Price
  ------          ---------                  -------------                 ----   ----------     -----
<S>               <C>                        <C>                           <C>       <C>        <C>
Related Parties
---------------
75,000            Edward Funk                Subordinated notes payable    1-00      1-10       $ 2.50
75,000            Ingeborg Funk              Subordinated notes payable    1-00      1-10       $ 2.50
20,333            Windcom Investments, SA    Convertible promissory note   6-03      6-08       $ 1.00
10,000            Estate of Edward R. Funk   Lease Guarantee               6-03      6-08       $ 1.00
33,889            Laura Shunk                Convertible promissory note   6-03      6-08       $ 1.00
33,889            Daniel A. Funk             Convertible promissory note   6-03      6-08       $ 1.00
13,151            Laura Shunk                Stock redemption agreement    6-03      6-08       $ 1.00
13,151            Daniel A. Funk             Stock redemption agreement    6-03      6-08       $ 1.00
33,889            Robert H. Peitz            Convertible promissory note   6-03      6-08       $ 1.00
</TABLE>

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

                  The Company issued 20,333 common stock purchase warrants of
                  $1.00 (above fair market value at date of grant) per common
                  share for 20,333 shares of common stock related to the
                  promissory note payable to Windom Investments, SA. The
                  warrants vest according to the following schedule: (1) 8,333
                  vest on the date of grant; and (2) 12,000 vest 333 per month
                  for 32 months, then 336 per month for four months.

                  The Company issued 10,000 common stock purchase warrants of
                  $1.00 (above fair market value at date of grant) per common
                  share for 10,000 shares of common stock related to lease
                  guarantee by the Estate of Edward R. Funk. The warrants vest
                  according to the following schedule: (1) 4,600 vest on the
                  date of grant; and (2) 5,400 vest 150 per month for 36 months.

                  The Company issued 33,889 common stock purchase warrants of
                  $1.00 (above fair market value at date of grant) per common
                  share for 33,889 shares of common stock related to the
                  promissory note payable to Laura Shunk. The warrants vest
                  according to the following schedule: (1) 13,889 vest on the
                  date of grant; and (2) 20,000 vest 556 per month for 32
                  months, then 552 per month for four months.

                  The Company issued 33,889 common stock purchase warrants of
                  $1.00 (above fair market value at date of grant) per common
                  share for 33,889 shares of common stock related to the
                  promissory note payable to Daniel A. Funk. The warrants vest
                  according to the following schedule: (1) 13,889 vest on the
                  date of grant; and (2) 20,000 vest 556 per month for 32
                  months, then 552 per month for four months.


                                      F-19
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 9.           WARRANTS ISSUED (CONTINUED)

                  The Company issued 13,151 common stock purchase warrants of
                  $1.00 (above fair market value at date of grant) per common
                  share for 13,151 shares of common stock to Laura Shunk related
                  to the Series A Preferred Stock Redemption. The warrants vest
                  according to the following schedule: (1) 5,260 vest on the
                  date of grant; and (2) 7,891 vest 220 per month for 35 months,
                  then 191 per month for one month.

                  The Company issued 13,151 common stock purchase warrants of
                  $1.00 (above fair market value at date of grant) per common
                  share for 13,151 shares of common stock to Daniel A. Funk
                  related to the Series A Preferred Stock Redemption. The
                  warrants vest according to the following schedule: (1) 5,260
                  vest on the date of grant; and (2) 7,891 vest 220 per month
                  for 35 months, then 191 per month for one month.

                  The Company issued 33,889 common stock purchase warrants of
                  $1.00 (above fair market value at date of grant) per common
                  share for 33,889 shares of common stock related to the
                  promissory note payable to Robert H. Peitz. The warrants vest
                  according to the following schedule: (1) 13,889 vest on the
                  date of grant; and (2) 20,000 vest 556 per month for 32
                  months, then 552 per month for four months.

NOTE 10.          INCOME TAXES

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

                                                            2003
                                                            ----
                  Deferred tax assets
                    NOL Carryforward                     $2,174,000
                    UNICAP                                   40,000
                    Allowance for doubtful accounts           9,000
                    Reserve for obsolete inventory           55,000
                    Property and equipment                   50,000
                                                         ----------
                                                          2,328,000

                  Valuation allowance                     2,328,000
                                                         ----------

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

                  A valuation allowance has been recorded against the
                  realizability of the net deferred tax asset, such that no
                  value is recorded for the asset in the accompanying financial
                  statements. The valuation allowance totaled $2,328,000 and
                  $1,813,000 at December 31, 2003 and 2002, respectively.

                  The Company has net operating loss carryovers available for
                  federal and state tax purposes of approximately $5,721,000,
                  which expire in varying amounts from 2004 through 2023.


                                      F-20
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 10.          INCOME TAXES (CONTINUED)

                  For the years ended December 31, 2003 and 2002, a
                  reconciliation of the statutory rate and effective rate for
                  the provisions for income taxes consists of the following:

                                                   Percentage
                                               ------------------
                                                2003       2002
                                                ----       ----
                  Federal statutory rate       (34.0)     (34.0)
                  Valuation allowance           34.0       34.0
                                               -----      -----

                  Effective rate                  -- %       -- %
                                               =====      =====

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

                                            2003       2002
                                            ----       ----
                    Current expense       $   --      $  --
                    Deferred expense          --         --
                                          ------      -----

                  Total                   $   --      $  --
                                          ======      =====

NOTE 11.          RELATED PARTY TRANSACTIONS

                  Sales to a related party amounted to $17,999 and $20,812
                  during 2003 and 2002, respectively.

                  The Company has a note receivable from an ex-employee of the
                  Company in the amount of $6,805. The note bears interest at 8%
                  per annum.

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

                  Interest expense, shareholders was $23,206 and $15,428 for the
                  years ended December 31, 2003 and 2002, respectively.

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

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


                                      F-21
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 12.          FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

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

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

NOTE 13.          FOURTH QUARTER ADJUSTMENTS

                  The Statement of Operations includes fourth quarter
                  adjustments for the inventory write-down of $133,015. This
                  adjustment contains two components. Inventory for some
                  finished goods and work-in-process were reduced to the lower
                  of cost or market for a reduction of pricing that began
                  declining in 2003. The lower of cost or market adjustment
                  totaled $64,537.

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

NOTE 14.          SUBSEQUENT EVENT PROMISSORY NOTE

                  The Company issued a promissory note in the amount of $150,000
                  on March 4, 2004. The principal sum and any accrued and unpaid
                  interest is payable in full on May 31, 2004. The interest rate
                  is equal to two percentage points (2%) in excess of the Prime
                  Commercial Rate.


                                      F-22
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 15.          ASSET RETIREMENT OBLIGATION

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

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

                  Balance at December 31, 2002                           $     0

                  Liability incurred prior to 2003                        27,158
                  Increase in present value of the obligation
                      (accretion expense in the corresponding amount
                      charged against earnings)                            3,078
                      Liabilities settled                                      0
                                                                         -------
                  Balance at December 31, 2003                           $30,236
                                                                         =======

                  The Company's pro forma information if the change in
                  accounting was implemented on December 31, 2002 is as follows
                  for the liability:

                  Balance at December 31, 2002 (as reported)             $     0

                  Liability incurred prior to 2002                        24,080
                  Increase in present value of the obligation
                      (accretion expense in the corresponding amount
                      charged against earnings)                            3,078
                      Liabilities settled                                      0
                                                                         -------
                  Balance at December 31, 2002                           $27,158
                                                                         =======

                  The following summarizes the pro forma information for the
                  statement of operations for the years ended December 31, 2002:

                  Loss applicable to common shares, as reported       $(445,177)
                  Accretion expense                                      (3,078)
                  Depreciation expense                                   (3,936)
                                                                      ---------
                  Loss applicable to common shares - restated         $(452,191)
                                                                      =========

                  Earnings per share - basic and diluted, as reported $   (0.24)
                                                                      =========

                  Earnings per share - basic and diluted, restated    $   (0.25)
                                                                      =========


                                      F-23
<PAGE>


                        SUPERCONDUCTIVE COMPONENTS, INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 16.          EQUITY RECLASSIFICATION

                  The Company recomputed outstanding Series B convertible
                  preferred stock and determined that certain amounts required
                  reclassification at December 31, 2001 and 2002 as follows:

<TABLE>
<CAPTION>

                                    2001                              2002
                       As previously   As reclassified   As previously   As reclassified
                         reported                          reported
                       -------------   ---------------   -------------   ---------------
<S>                      <C>              <C>              <C>               <C>
Convertible preferred
Stock, Series B          $333,136         $257,050         $335,492          $259,406

Additional paid-in
Capital                  $ 47,127         $123,113         $  8,992          $ 85,078
</TABLE>

NOTE 17.          GOING CONCERN

                  The accompanying financial statements have been prepared in
                  conformity with accounting principles generally accepted in
                  the United States of America, which contemplates continuation
                  of the Company as a going concern. However, the Company has
                  sustained recurring losses from operations, negative cash flow
                  from operations and shareholders' deficit of $5,613, all of
                  which raise substantial doubt of ability to continue as a
                  going concern. While the Company has approximately $267,000 of
                  cash on hand at December 31, 2003 and received additional debt
                  financing of $150,000 subsequent to year-end, these funds are
                  required to finance the company's move of it facilities in
                  March 2004 and funding operations in first quarter 2004.
                  Management is investigating additional equity funding from
                  several sources to fund its operations for 2004. In March 2004
                  the Company received $512,848 from the State of Ohio's Third
                  Frontier Action Fund to begin purchasing capital equipment
                  required to commercialize the Company's Lithium Thin Film
                  Battery sputtering target manufacturing process. Also, in
                  March 2004 the Company was approved by the Ohio Department of
                  Development's Industrial Technology Enterprise Advisory
                  Council Committee as an eligible entity for the Technology
                  Investment Tax Credit program. The program is intended to
                  benefit small Ohio-based research and development and
                  technology-oriented companies. This approval permits
                  individuals and businesses to receive state tax incentives for
                  up to twenty-five percent of their qualified investments in
                  the Company through September 2004. The Company plans to raise
                  equity capital beginning in April 2004 to fund a portion of
                  its planned growth.

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


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