##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the quarterly period ended September 30, 2006
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 0-31641
 SUPERCONDUCTIVE COMPONENTS, INC.
  Ohio
    
    31-1210318(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 2839 Charter Street, Columbus, Ohio 43228
  (614) 486-0261
  Not Applicable
  þ o
 o þ
  o þ




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##### Table of Contents



FORM 10-QSB
 SUPERCONDUCTIVE COMPONENTS, INC.
 Table of Contents
 Page No.PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsBalance Sheets as of September 30, 2006 (unaudited) and December 31, 2005
    
    
    3Statements of Operations For the Three Months and Nine Months Ended September 30, 2006 and 2005 (unaudited)
    
    
    5Statements of Cash Flows For the Nine Months Ended September 30, 2006 and 2005 (unaudited)
    
    
    6Notes to Financial Statements (unaudited)
    
    
    8Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3.
    
    Controls and Procedures
    
    
    22PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    N/AItem 2.
    
    Changes in Securities and Small Business Issuer Purchases of Equity Securities
    
    
    N/AItem 3.
    
    Defaults Upon Senior Securities
    
    
    N/AItem 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    N/AItem 5.
    
    Other Information
    
    
    N/AItem 6.
    
    Exhibits
    
    
    22Signatures



    
    
    22EX-31.1EX-31.2EX-32.1EX-32.2EX-99.1
 2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 SUPERCONDUCTIVE COMPONENTS, INC.
 BALANCE SHEETS
 September 30,
    
    
    December 31,2006
    
    
    2005(UNAUDITED)ASSETSCURRENT ASSETSCash
    
    $
    1,368,743
    
    
    
    1,161,369Accounts receivableTrade, less allowance for doubtful accounts of $25,000
    
    
    388,783
    
    
    
    243,130Contract
    
    
    52,760
    
    
    
    50,710Other
    
    
    2,074
    
    
    
    13,749Inventories
    
    
    675,713
    
    
    
    584,140Prepaid expenses
    
    
    33,872
    
    
    
    11,748Total current assets
    
    
    2,521,945
    
    
    
    2,064,846PROPERTY AND EQUIPMENT,
AT COSTMachinery and equipment
    
    
    2,599,148
    
    
    
    2,221,298Furniture and fixtures
    
    
    23,643
    
    
    
    23,643Leasehold improvements
    
    
    290,979
    
    
    
    284,072Construction in progress
    
    
    741
    
    
    
    101,0752,914,511
    
    
    
    2,630,088Less accumulated depreciation
    
    
    (1,956,484
    )
    
    
    (1,814,959
    )958,027
    
    
    
    815,129OTHER ASSETSDeposits
    
    
    15,031
    
    
    
    10,765Intangibles
    
    
    31,666
    
    
    
    33,982Total other assets
    
    
    46,697
    
    
    
    44,747TOTAL ASSETS
    
    $
    3,526,669
    
    
    
    2,924,722
  3




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##### Table of Contents



SUPERCONDUCTIVE COMPONENTS, INC.
 BALANCE SHEETS
 LIABILITIES AND SHAREHOLDERS EQUITY
 September 30,
    
    
    December 31,2006
    
    
    2005(UNAUDITED)CURRENT LIABILITIESCapital lease obligation, current portion
    
    $
    63,618
    
    
    $
    39,949Accounts payable
    
    
    320,597
    
    
    
    295,640Accrued contract expenses
    
    
    94,300
    
    
    
    145,104Accrued personal property taxes
    
    
    18,000
    
    
    
    35,000Deferred revenue
    
    
    581,759
    
    
    
    Accrued expenses
    
    
    96,209
    
    
    
    105,773Total current liabilities
    
    
    1,174,483
    
    
    
    621,466CAPITAL LEASE OBLIGATION, NET OF
CURRENT PORTION
    
    
    136,147
    
    
    
    71,381COMMITMENTS AND CONTINGENCIES
    
    
    
    
    
    
    SHAREHOLDERS EQUITYConvertible preferred stock, Series B, 10% cumulative,
nonvoting, no par value, $10 stated value, optional
redemption at 103%; 25,185 issued and outstanding
    
    
    353,850
    
    
    
    334,961Common stock, no par value, authorized 15,000,000 shares;
3,427,115 and 3,425,915 shares issued and outstanding
    
    
    8,998,619
    
    
    
    9,047,550Additional paid-in capital
    
    
    997,574
    
    
    
    1,010,719Accumulated deficit
    
    
    (8,134,004
    )
    
    
    (8,161,355
    )2,216,039
    
    
    
    2,231,875TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    3,526,669
    
    
    $
    2,924,722
  4




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SUPERCONDUCTIVE COMPONENTS, INC.
 STATEMENTS OF OPERATIONS
 THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 AND
NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(UNAUDITED)
 THREE MONTHS ENDED
    
    
    NINE MONTHS ENDED2006
    
    
    2005
    
    
    2006
    
    
    2005SALES REVENUE
    
    $
    2,064,497
    
    
    $
    953,494
    
    
    $
    4,381,462
    
    
    $
    2,064,122CONTRACT RESEARCH REVENUE
    
    
    
    
    
    
    67,717
    
    
    
    42,092
    
    
    
    245,6832,064,497
    
    
    
    1,021,211
    
    
    
    4,423,554
    
    
    
    2,309,805COST OF SALES REVENUE
    
    
    1,595,490
    
    
    
    736,336
    
    
    
    3,383,627
    
    
    
    1,586,752COST OF CONTRACT RESEARCH
    
    
    
    
    
    
    8,466
    
    
    
    17,407
    
    
    
    82,5561,595,490
    
    
    
    744,802
    
    
    
    3,401,034
    
    
    
    1,669,308GROSS MARGIN
    
    
    469,007
    
    
    
    276,409
    
    
    
    1,022,520
    
    
    
    640,497GENERAL AND ADMINISTRATIVE EXPENSES
    
    
    221,759
    
    
    
    184,743
    
    
    
    667,013
    
    
    
    560,487RESEARCH AND DEVELOPMENT EXPENSES
    
    
    58,582
    
    
    
    46,481
    
    
    
    144,974
    
    
    
    146,817SALES AND PROMOTIONAL EXPENSES
    
    
    76,066
    
    
    
    56,584
    
    
    
    210,162
    
    
    
    167,518INCOME (LOSS) FROM OPERATIONS
    
    
    112,600
    
    
    
    (11,399
    )
    
    
    371
    
    
    
    (234,325
    )OTHER INCOME (EXPENSE)Interest income
    
    
    11,448
    
    
    
    803
    
    
    
    32,501
    
    
    
    1,473Interest expense
    
    
    (4,861
    )
    
    
    (27,193
    )
    
    
    (10,367
    )
    
    
    (67,402
    )Gain (loss) on disposal of equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250Miscellaneous, net
    
    
    (2,655
    )
    
    
    (234
    )
    
    
    4,846
    
    
    
    (702
    )3,932
    
    
    
    (26,624
    )
    
    
    26,980
    
    
    
    (66,381
    )INCOME (LOSS) BEFORE PROVISION FOR INCOME TAX
    
    
    116,532
    
    
    
    (38,023
    )
    
    
    27,351
    
    
    
    (300,706
    )INCOME TAX EXPENSE
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME (LOSS)
    
    
    116,532
    
    
    
    (38,023
    )
    
    
    27,351
    
    
    
    (300,706
    )DIVIDENDS ON PREFERRED STOCK
    
    
    (6,296
    )
    
    
    (6,297
    )
    
    
    (18,888
    )
    
    
    (18,889
    )INCOME (LOSS) APPLICABLE TO COMMON SHARES
    
    $
    110,236
    
    
    $
    (44,320
    )
    
    $
    8,463
    
    
    $
    (319,595
    )EARNINGS PER SHARE  BASIC AND DILUTED(Note 5)NET INCOME (LOSS) PER COMMON SHARE BEFORE
DIVIDENDS ON PREFERRED STOCKBasic
    
    $
    0.03
    
    
    $
    (0.02
    )
    
    $
    0.01
    
    
    $
    (0.12
    )Diluted
    
    $
    0.03
    
    
    $
    (0.02
    )
    
    $
    0.01
    
    
    $
    (0.12
    )NET INCOME (LOSS) PER COMMON SHARE AFTER
DIVIDENDS ON PREFERRED STOCKBasic
    
    $
    0.03
    
    
    $
    (0.02
    )
    
    $
    0.00
    
    
    $
    (0.13
    )Diluted
    
    $
    0.03
    
    
    $
    (0.02
    )
    
    $
    0.00
    
    
    $
    (0.13
    )WEIGHTED AVERAGE SHARES OUTSTANDINGBasic
    
    
    3,425,980
    
    
    
    2,467,686
    
    
    
    3,425,937
    
    
    
    2,448,906Diluted
    
    
    3,907,837
    
    
    
    2,467,686
    
    
    
    3,946,035
    
    
    
    2,448,906
  5




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SUPERCONDUCTIVE COMPONENTS, INC.
 
 STATEMENTS OF CASH FLOWS
 NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
 (UNAUDITED)
 2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    27,351
    
    
    $
    (300,706
    )Adjustments to reconcile net income (loss) to net cash
used in operating activities:Depreciation and accretion
    
    
    158,009
    
    
    
    151,798Amortization
    
    
    2,316
    
    
    
    2,316Stock based compensation expense
    
    
    5,744
    
    
    
    Gain on disposal of equipment
    
    
    
    
    
    
    (250
    )Inventory reserve
    
    
    (410
    )
    
    
    (9,968
    )Provision for doubtful accounts
    
    
    
    
    
    
    10,513Changes in operating assets and liabilities:(Increase) decrease in assets:Accounts receivable
    
    
    (136,027
    )
    
    
    (129,983
    )Inventories
    
    
    (91,163
    )
    
    
    (52,361
    )Prepaid expenses
    
    
    (22,124
    )
    
    
    (19,725
    )Other assets
    
    
    (4,266
    )
    
    
    Increase (decrease) in liabilities:Accounts payable
    
    
    24,957
    
    
    
    194,163Accrued expenses and deferred revenue
    
    
    501,907
    
    
    
    (193,145
    )Total adjustments
    
    
    438,943
    
    
    
    (46,642
    )Net cash provided by (used by) operating activities
    
    
    466,294
    
    
    
    (347,348
    )CASH FLOWS FROM INVESTING ACTIVITIESProceeds on sale of equipment
    
    
    
    
    
    
    250Purchases of property and equipment
    
    
    (164,155
    )
    
    
    (43,648
    )Net cash used in investing activities
    
    
    (164,155
    )
    
    
    (43,398
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from note payable
    
    
    
    
    
    
    300,000Payments related to registration of common stock
    
    
    (50,131
    )
    
    
    Proceeds from exercise of common stock options
    
    
    1,200
    
    
    
    Proceeds from sale of common stock
    
    
    
    
    
    
    136,000Principal payments on capital lease obligations
    
    
    (45,834
    )
    
    
    (24,973
    )Net cash (used in) provided by financing activities
    
    
    (94,765
    )
    
    
    411,027
  6




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SUPERCONDUCTIVE COMPONENTS, INC.
 STATEMENTS OF CASH FLOWS (CONTINUED)
 NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
 2006
    
    
    2005NET INCREASE IN CASH
    
    $
    207,374
    
    
    $
    20,281CASH- Beginning of period
    
    
    1,161,369
    
    
    
    190,063CASH- End of period
    
    $
    1,368,743
    
    
    $
    210,344SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATIONCash paid during the years for:Interest, net
    
    $
    10,367
    
    
    $
    3,140Income taxes
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NONCASH
FINANCING ACTIVITIESProperty and equipment purchased by capital lease
    
    $
    134,268
    
    
    $
    
  7




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SUPERCONDUCTIVE COMPONENTS, INC.
NOTES TO FINANCIAL STATEMENTS
 Note 1. Business Organization and Purpose
  Note 2. Summary of Significant Accounting Policies
   Equipment purchased with grant funding
  Reclassification
  8




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SUPERCONDUCTIVE COMPONENTS, INC.
NOTES TO FINANCIAL STATEMENTS
 Note 2. Summary of Significant Accounting Policies (continued)
 Stock Based Compensation
   For the nine months ended Sept. 30,2006
    
    
    2005Net income (loss) applicable to
common shares:As reported
    
    $
    8,463
    
    
    $
    (319,595
    )Deduct: total stock-based compensation expense
determined under the fair value method for all
awards, net of related tax benefits
    
    
    
    
    
    
    (9,514
    )Pro forma net income (loss) under SFAS #123
    
    $
    8,463
    
    
    $
    (329,109
    )Basic and diluted income (loss) per share:As reported
    
    $
    0.00
    
    
    $
    (0.13
    )Pro forma under SFAS 123
    
    $
    0.00
    
    
    $
    (0.13
    )
   9




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SUPERCONDUCTIVE COMPONENTS, INC.
NOTES TO FINANCIAL STATEMENTS
 Note 2. Summary of Significant Accounting Policies (continued)
   Note 3. Common Stock and Stock Options
  Grant Date
    
    # Options Granted
    
    
    Option PriceJune 19, 2006
    
    
    42,500
    
    
    $
    3.25
  Employee Stock Options
 AverageStock Options
    
    
    Exercise PriceOutstanding at December 31, 2004
    
    
    311,250
    
    
    $
    1.89Granted
    
    
    40,000
    
    
    
    2.40Forfeited
    
    
    (23,000
    )
    
    
    2.00Outstanding at September 30, 2005
    
    
    328,250
    
    
    $
    1.95Outstanding at December 31, 2005
    
    
    328,250
    
    
    $
    1.95Granted
    
    
    42,500
    
    
    
    3.25Exercised
    
    
    (1,200
    )
    
    
    1.00Forfeited
    
    
    (15,000
    )
    
    
    2.13Outstanding at September 30, 2006
    
    
    354,550
    
    
    $
    2.10
 10




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SUPERCONDUCTIVE COMPONENTS, INC.
NOTES TO FINANCIAL STATEMENTS
 Note 3. Common Stock and Stock Options (continued)
 Non-Employee Director Stock Options
 AverageStock Options
    
    
    Exercise PriceOutstanding at December 31, 2004
    
    
    164,000
    
    
    $
    2.01Granted
    
    
    50,000
    
    
    
    2.40Expired
    
    
    (17,000
    )
    
    
    2.11Outstanding at September 30, 2005
    
    
    197,000
    
    
    
    2.10Outstanding at December 31, 2005
    
    
    247,000
    
    
    
    2.48Outstanding at September 30, 2006
    
    
    247,000
    
    
    $
    2.48
   2006
    
    
    2005Expected life in years
    
    
    10.0
    
    
    
    10.0Interest rate
    
    
    5
    %
    
    
    5
    %Volatility
    
    
    110.76
    %
    
    
    116.63
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
  Note 4. Inventory
  Sept. 30,
    
    
    December 31,2006
    
    
    2005(unaudited)Raw materials
    
    $
    392,096
    
    
    $
    286,089Work-in-progress
    
    
    184,945
    
    
    
    201,441Finished goods
    
    
    187,523
    
    
    
    185,871Inventory reserve
    
    
    (88,851
    )
    
    
    (89,261
    )$
    675,713
    
    
    $
    584,140
 11




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SUPERCONDUCTIVE COMPONENTS, INC.
NOTES TO FINANCIAL STATEMENTS
 Note 5. Earnings Per Share
  Three months ended Sept. 30,
    
    
    Nine months ended Sept. 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Income (loss) applicable
to common shares
    
    $
    110,236
    
    
    $
    (44,320
    )
    
    $
    8,463
    
    
    $
    (319,595
    )Weighted average
common shares
outstanding  basic
    
    
    3,425,980
    
    
    
    2,467,686
    
    
    
    3,425,937
    
    
    
    2,448,906Effect of dilutions -
stock options /warrants
    
    
    481,857
    
    
    
    
    
    
    
    520,098
    
    
    
    Weighted average
shares outstanding 
diluted
    
    
    3,907,837
    
    
    
    2,467,686
    
    
    
    3,946,035
    
    
    
    2,448,906
 Note 6. Capital Requirements
   12




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SUPERCONDUCTIVE COMPONENTS, INC.
NOTES TO FINANCIAL STATEMENTS
 Note 6. Capital Requirements (continued)
    13




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SUPERCONDUCTIVE COMPONENTS, INC.
NOTES TO FINANCIAL STATEMENTS
 Note 6. Capital Requirements (continued)
  14




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Part I. Financial Information
 
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    Overview
  15




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
      RESULTS OF OPERATIONS
 Nine months ended September 30, 2006 (unaudited) compared to nine months ended September 30,
2005 (unaudited):
 Revenues
    16




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
   Gross Margin
  Selling Expense
  General and Administrative Expense
  Research and Development Expense
  Interest Income and Expense
   17




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
 INCOME (LOSS) APPLICABLE TO COMMON SHARES
      Options and
    
    
    PotentialWarrants
    
    
    Sharesdue to expire
    
    
    Outstanding2006
    
    
    
    
    
    
    3,427,1152007
    
    
    
    
    
    
    3,427,1152008
    
    
    94,930
    
    
    
    3,522,0452009
    
    
    160,418
    
    
    
    3,682,4632010
    
    
    459,389
    
    
    
    4,141,8522011
    
    
    80,000
    
    
    
    4,221,8522012
    
    
    170,000
    
    
    
    4,391,8522013
    
    
    31,300
    
    
    
    4,423,1522014
    
    
    90,000
    
    
    
    4,513,1522015
    
    
    140,000
    
    
    
    4,653,1522016
    
    
    42,500
    
    
    
    4,695,652
 18




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
(continued)
 LIQUIDITY AND WORKING CAPITAL
       19




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations (continued)
    Risk Factors
  20




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Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations (continued)
  We have experienced significant operating losses in the past
and may continue to do so in the future.
   Critical Accounting Policies
 .
 Off Balance Sheet Arrangements
  21




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Item 3.
    
    Controls and Procedures
   
 Part II. Other Information
 
 Item 6. Exhibits.
 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. *99.1
    
    Press Release dated November 1, 2006, entitled Superconductive
Components, Inc. Reports Record Third Quarter Revenue. *
 
 *
    
    Filed with this report 
 Signatures
  SUPERCONDUCTIVE COMPONENTS, INC.Date: November 1, 2006
    /s/ Daniel RooneyDaniel Rooney, President and Chief Executive Officer(Principal Executive Officer)/s/ Gerald S. BlaskieGerald S. Blaskie, Vice President and Chief Financial Officer(Principal Financial Officer) 22