\/2H>d 1$&%*''SUPERCONDUCTIVE COMPONENTS, INC.'BALANCE SHEETS^SEPTEMBER 30,^DECEMBER 31, 'ASSETS ^2001 ^2000^(UNAUDITED)'CURRENT ASSETS 'Cash"$ 292,418"$ 202,406$'Accounts and notes receivableA 'Trade, less allowance for doubtful accounts of $17,000 and '$26,000, respectively "379,844 "386,567 'Related party receivables  "--  "4,283- 'Contract research receivables, current  "33,334  "-- 'Employees  "15,638  "-- 'Other "12,086 "--'Inventories"881,164"617,468'Prepaid expenses "11,149 "39,766'Total current assets"1,625,633"1,250,490'PROPERTY AND EQUIPMENT,'AT COST'Machinery and equipment"2,173,038"1,959,086'Furniture and fixtures "18,122 "15,250'Leasehold improvements"338,406"305,586"2,529,566"2,279,922$'Less accumulated depreciation"1,857,322"1,701,150"672,244"578,772"'OTHER ASSETS#'Intangibles #"41,400 #"38,688''TOTAL ASSETS'"$2,339,277'"$1,867,950Q*'The accompanying notes are an integral part of these financial statements.','SUPERCONDUCTIVE COMPONENTS, INC.-'BALANCE SHEETS/^SEPTEMBER 30,/^DECEMBER 31,+0'LIABILITIES AND SHAREHOLDERS' EQUITY 0^2001 0^20001^(UNAUDITED)2'CURRENT LIABILITIES03'Capital lease obligation, current portion3"$ 40,7653"$ 26,27914'Note payable shareholders, current portion 4"28,000 4"10,8695'Accounts payable5"395,7505"294,028%6'Accounts payable, shareholders 6"6,013 6"1,8037'Accrued expenses7"280,8817"156,916 9'Total current liabilities9"751,4099"489,895'>'CAPITAL LEASE OBLIGATION, NET OF?'CURRENT PORTION?"114,917 ?"57,9650B'NOTE PAYABLE SHAREHOLDERS, NET OF CURRENTC'PORTION C"90,270C"121,401'F'REDEEMABLE CONVERTIBLE PREFERREDG'STOCK (Series A)=H'10% cumulative, nonvoting, no par value, $1,000 stated5I'value, liquidation and mandatory redemption at9J'stated value per share plus unpaid and accumulated1K'dividends $75.00 and $260.96, respectivelyK"104,820 K"87,658N'SHAREHOLDERS' EQUITY=O'Convertible preferred stock, Series B, 10% cumulative,P'nonvoting, no par(Q'value, $10 stated value, optionalR'redemption at 103%R"358,085R"338,4248S'Common stock, no par value, authorized 15,000,000ET'shares; 1,821,926 and 1,816,977 shares issued and outstanding,U'respectivelyU"6,358,816U"6,334,696!V'Additional paid-in capital V"60,369 V"98,187W'Accumulated deficitW"(5,499,409)W"(5,660,276)Y"1,277,861Y"1,111,0311\'TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY\"$ 2,339,277\"$ 1,867,950Q_'The accompanying notes are an integral part of these financial statements.'a'SUPERCONDUCTIVE COMPONENTS, INC.b'STATEMENTS OF OPERATIONSKd'THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 AND NINE MONTHS ENDED"e'SEPTEMBER 30, 2001 AND 2000f'(UNAUDITED)h^THREE MONTHS ENDEDh^THREE MONTHS ENDEDh^NINE MONTHS ENDEDh^NINE MONTHS ENDEDi^SEPT. 30 ,i^SEPT. 30 ,i^SEPT. 30 ,i^SEPT. 30 , j^2001 j^2000 j^2001 j^2000l'SALES REVENUEl"$ 820,044l"$ 679,635l"$ 2,511,154l"$ 1,877,313 m'CONTRACT RESEARCH REVENUE m"71,769m"115,042m"345,910m"417,079o"891,813o"794,677o"2,857,064o"2,294,392r'COST OF SALES REVENUEr"513,250r"525,102r"1,585,659r"1,484,707(s'COST OF CONTRACT RESEARCH REVENUE s"42,369 s"83,715s"266,055s"322,143u"555,619u"608,817u"1,851,714u"1,806,850x'GROSS MARGINx"336,194x"185,860x"1,005,350x"487,542*z'GENERAL AND ADMINISTRATIVE EXPENSESz"244,708z"128,807z"652,320z"352,018%|'SALES AND PROMOTIONAL EXPENSES |"52,249 |"86,896|"178,344|"219,131$'INCOME (LOSS) FROM OPERATIONS "39,237"(29,843)"174,686"(83,607)'OTHER INCOME (EXPENSE)'Interest, net"(3,291)"(16,438)"(13,571)"(50,071)'Miscellaneous, net "(298)"(4,295) "(249) "1,409"(3,589)"(20,733)"(13,820)"(48,662)&'INCOME (LOSS) BEFORE INCOME TAX "35,648"(50,576)"160,866"(132,269)'INCOME TAX EXPENSE "-- "-- "-- "--'NET INCOME (LOSS) "35,648"(50,576)"160,866"(132,269)#'DIVIDENDS ON PREFERRED STOCK"(9,360)"(1,017)"(28,081)"(52,688)*'ACCRETION OF REDEEMABLE CONVERTIBLE'PREFERRED (SERIES A)"(3,881)"(2,929)"(9,737)"(8,785)0'INCOME (LOSS) APPLICABLE TO COMMON SHARES"$ 22,407"$ (54,522)"$ 123,048"$ (193,742)7'EARNINGS PER SHARE - BASIC AND DILUTIVE (Note 2))'NET INCOME (LOSS) PER COMMON SHARE 'Basic"$ 0.01"$ (0.04)"$ 0.07"$ (0.14)'Diluted"$ 0.01"$ (0.04)"$ 0.07"$ (0.14)*'WEIGHTED AVERAGE SHARES OUTSTANDING 'Basic"1,821,926"1,363,050"1,820,618"1,361,879'Diluted"1,821,926"1,363,050"1,820,618"1,361,879Q'The accompanying notes are an integral part of these financial statements.''SUPERCONDUCTIVE COMPONENTS, INC.'STATEMENTS OF CASH FLOWS4'NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000'(UNAUDITED)^SEPTEMBER 30,^SEPTEMBER 30 ^2001 ^2000+'CASH FLOWS FROM OPERATING ACTIVITIES'Net income (loss)"$ 160,866"(132,269)I'Adjustments to reconcile net income (loss) to net cash provided by'operating activities:'Depreciation"156,171"219,739'Amortization "1,838 "--'Inventory reserve"(20,059) "51,427&'Provision for doubtful accounts"(9,000) "19,5893'Changes in operating assets and liabilities:%'(Increase) decrease in assets:'Accounts receivable"(41,052)'Inventories"(243,637)"(46,799)'Prepaid expenses "28,617"(126,086)'Other assets"(4,550)"(43,690)*'Increase (decrease) in liabilities: "(498)'Accounts payable"124,932"147,626'Accrued expenses"123,966 "(664)'Total adjustments"117,226"220,6440'Net cash provided by operating activities"278,092 "88,375+'CASH FLOWS FROM INVESTING ACTIVITIES*'Purchases of property and equipment"(151,732)"(62,205),'Net cash used in investing activities"(151,732)"(62,205)+'CASH FLOWS FROM FINANCING ACTIVITIES'Bank overdraft "--"(30,735)&'Proceeds on notes payable, bank "-- "75,0002'Principal repayments on notes payable, bank "--"(95,025):'Principal repayments on long-term debt, shareholder"(14,000) "--/'Proceeds from subordinated notes payable "-- "89,4085'Principal payments on capital lease obligation"(26,473)"(60,031)5'Proceeds from exercise of common stock options "4,125 "---'Proceeds from the sale of common stock "-- "79,800-'Redemption of Series A preferred stock "--"(70,125),'Net cash used in financing activities"(36,348)"(11,708)Q'The accompanying notes are an integral part of these financial statements.''SUPERCONDUCTIVE COMPONENTS, INC.+'STATEMENTS OF CASH FLOWS (CONTINUED)4'NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000'(UNAUDITED)^SEPTEMBER 30,^SEPTEMBER 30, ^2001 ^2000'NET INCREASE IN CASH "90,012 "14,462!'CASH - Beginning of period"202,406 "--'CASH - End of period"$292,418"$ 14,462''SUPPLEMENTAL DISCLOSURES OF CASH'FLOW INFORMATION''Cash paid during the period for:'Interest"$ 16,767"$ 12,903'Income taxes"$ --"$ --*'SUPPLEMENTAL DISCLOSURES OF NONCASH)'INVESTING AND FINANCING ACTIVITIESF'Common stock was issued as partial payment for accounts payable"$ 19,000"$ --:'Preferred stock, series A converted to common stock"$ --"$ 8,275<'Property and equipment was purchased by capital lease"$ 97,911 "--Q'The accompanying notes are an integral part of these financial statements.