UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For the quarterly period ended September 26, 2020~~

☐
	For the quarterly period ended April 3, 2021

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 0-21074

SUPERCONDUCTOR TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)


Delaware		77-0158076
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

15511 W State Hwy 71, Suite 110-105, Austin, Texas 78738

(Address of principal executive offices & zip code)

(512) 650-7775

(Registrant’s telephone number including area code)

Indicate by check mark 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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 ~~days. Yes ☒~~days.Yes [X] No ☐[ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒[X] No ☐[ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐[ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐[ ] or No ☒[X]

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, par value $0.001

SCON

OTCQB

We had 3,151,780 shares of our common stock outstanding as of the close of business on ~~November 2, 2020.~~May 11, 2021.

SUPERCONDUCTOR TECHNOLOGIES INC.

INDEX TO FORM 10-Q

Three ~~and nine~~ Months Ended ~~September 26, 2020~~April 3, 2021


SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS		1
	1

PART I -		FINANCIAL INFORMATION

		ITEM 1. Financial Statements (unaudited)
		Condensed Consolidated Statements of Operations	2
		2
		Condensed Consolidated Balance Sheets	3
		3
		Condensed Consolidated Statements of Cash Flows	4
		4
		Notes to Unaudited Condensed Consolidated Financial ~~Statements~~Statements.	5
		5
		ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
		18
		ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	18
		21
		ITEM 4. Controls and Procedures	18
		21

PART II -		OTHER INFORMATION			19

		ITEM 1. Legal Proceedings	19
		22
		ITEM 1A. Risk Factors	19
		22
		ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	19
		23
		ITEM 3. Defaults Upon Senior Securities	19
		23
		ITEM 4. Mine Safety Disclosures	19
		23
		ITEM 5. Other Information	19
	ITEM 6. Exhibits	2319

			~~ITEM 6. Exhibits~~		23

SIGNATURES				24	20

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We claim the protection of the safe harbor contained in the Private Securities Litigation Reform Act of 1995 for these forward-looking statements. Our forward-looking statements relate to future events or our future performance and include, but are not limited to, statements concerning our business strategy, future commercial revenues, market growth, capital requirements, new product introductions, expansion plans and the adequacy of our funding. Other statements contained in this Report that are not historical facts are also forward-looking statements. We have tried, wherever possible, to identify forward-looking statements by ~~using~~ terminology such as “may,” “will,” “could,” “should,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and other comparable terminology.

We caution investors that any forward-looking statements presented in this Report, or that we may make orally or in writing from time to time, are based on ~~our~~the beliefs ~~and~~of, assumptions made by, and information currently available to, us. Such statements are based on assumptions and the actual outcome will be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control or ability to predict. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. As a result, our actual future results can be expected to differ from our expectations, and those differences may be material. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends.

We have included disclosures throughout this Report that relate to our business as it was conducted prior to the planned merger and asset dispositions described below. Readers are cautioned that both historical and forward looking disclosures regarding our business must be read in conjunction with the information regarding the planned merger and asset dispositions, because some disclosures regarding historical operations may not be indicative of future or current operations and plans. In particular, but without limitation, the reference to our historical business operations regarding our HTS wire should not be viewed as a statement that such operations continue to this day. Please see “Our Future Business” for additional important information.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include the following:

•●

our planned merger with Allied Integral United, Inc. is subject to various uncertainties and risks and to conditions that have not yet been satisfied and there is no assurance the merger will be consummated;

	•
	●	if we fail to complete our merger with Allied Integral United, Inc. we will have limited business options available as we have sold significant portions of our operating ~~assets;~~assets, and will likely need to seek bankruptcy protection;

	•
	●	our limited cash and a history of losses;

	•
	●	our need to raise additional capital or complete a strategic alternative for the company. If we are unable to raise capital our ability to implement our current strategic plan and ultimately our viability as a company could be adversely affected;

	•
	●	the impact of any financing activity on the level of our stock price;

	•
	●	the dilutive impact of any issuances of securities to raise capital;

	•
	●	cost and uncertainty from compliance with environmental regulations;

	•
	●	the impact on the level of our stock price due to our September 10, 2020 1-for10 reverse stock split and the NASDAQ decision to ~~suspend trading in~~delist our common stock effective ~~September~~ ~~30, 2020;~~February 12, 2021; and

	•
	●	local, regional, national and international economic conditions and events, and the impact they may have on us and our customer.

For further discussion of these and other factors see, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” in ~~our Annual Report on Form~~ ~~10-K~~this Report. ~~for the fiscal year ended December 31, 2019.~~

This Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances after the date of this Report.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

SUPERCONDUCTOR TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

   Three Months Ended Nine Months Ended
   September 26,
2020 September 28,
2019 September 26,
2020 September 28,
2019
Commercial product revenues
   $ —   $ —   $ 10,000 $ —
Government contract revenues
   —   157,000 174,000 157,000


Total revenues
   —   157,000 184,000 157,000


Costs and expenses:

Cost of commercial product revenues
   —   943,000 190,000 2,688,000
Cost of government contract revenues
   —   10,000 71,000 27,000
Research and development
   —   622,000 178,000 1,875,000
Selling, general and administrative
   606,000 966,000 2,176,000 2,922,000


Total costs and expenses
   606,000 2,541,000 2,615,000 7,512,000


Loss from operations
   (606,000 ) (2,384,000 ) (2,431,000 ) (7,355,000 )
Other income and expense:

Other income
   —   9,000 2,000 54,000


Net loss
   $ (606,000 ) $ (2,375,000 ) $ (2,429,000 ) $ (7,301,000 )


Basic and diluted net loss per common share
   $ (0.19 ) $ (4.32 ) $ (0.97 ) $ (16.39 )


Basic and diluted weighted average number of common shares outstanding
   3,116,291 550,157 2,510,556 445,525

~~See accompanying notes to the unaudited condensed consolidated financial statements.~~

~~SUPERCONDUCTOR TECHNOLOGIES INC.~~

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~

	Three Months Ended
	April 3, 2021			March 28, 2020

Commercial product revenues	$	-		$	10,000
Government contract revenues		-			174,000
Total revenues		-			184,000

Costs and expenses:
Cost of commercial product revenues		-			190,000
Cost of government contract revenues		-			71,000
Research and development		-			178,000
Selling, general and administrative		569,000			825,000

Total costs and expenses		569,000			1,264,000

Loss from operations		(569,000	)		(1,080,000	)

Other Income and Expense:
Other income		-			1,000

Net loss	$	(569,000	)	$	(1,079,000	)

Basic and diluted net loss per common share	$	(0.18	)	$	(0.56	)

Basic and diluted weighted average number of common shares outstanding		3,151,780			1,927,279

   September 26,
2020 December 31,
2019
   (Unaudited) (See Note)
ASSETS

Current Assets:

Cash and cash equivalents
   $ 1,762,000 $ 713,000
Accounts receivable, net
   —   344,000
Inventories, net
   68,000 263,000
Prepaid expenses and other current assets
   134,000 76,000


Total Current Assets
   1,964,000 1,396,000
Preferred equity interest in real estate
   1,600,000 —
Property and equipment, net
   —   233,000
Patents, licenses and purchased technology, net
   —   641,000
Operating lease assets
   —   152,000
Other assets
   —   60,000


Total Assets
   $ 3,564,000 $ 2,482,000


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable
   $ 212,000 $ 527,000
Accrued expenses
   134,000 292,000
Current operating lease liabilities
   —   148,000


Total Current Liabilities
   346,000 967,000
Long term operating lease liabilities
   —   4,000
Other long term liabilities
   —   8,000


Total Liabilities
   346,000 979,000


Commitments and Contingencies (Notes 5 and 6)

Stockholders’ Equity:

Preferred stock, $.001 par value, 2,000,000 shares authorized, 328,925 and 328,925 shares issued and outstanding, respectively
   —   —
Common stock, $.001 par value, 25,000,000 shares authorized, 3,151,780 and 1,773,189 shares issued and outstanding, respectively
   3,000 2,000
Capital in excess of par value
   334,617,000 330,474,000
Accumulated deficit
   (331,402,000 ) (328,973,000 )


Total Stockholders’ Equity
   3,218,000 1,503,000


Total Liabilities and Stockholders’ Equity
   $ 3,564,000 $ 2,482,000

See accompanying notes to the unaudited condensed consolidated financial statements.

~~Note – December 31, 2019 balances were derived from audited financial statements.~~

SUPERCONDUCTOR TECHNOLOGIES INC.

CONDENSED CONSOLIDATED ~~STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~BALANCE SHEETS

   Nine Months Ended
   September 26, 2020 September 28, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss
   $ (2,429,000 ) $ (7,301,000 )
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization
   38,000 704,000
Stock-based compensation expense
   65,000 70,000
Gain from the sale of patents, property and equipment
   (510,000 ) —
Write-down of intangibles
   134,000 —
Obsolete inventory
   190,000 —
Changes in assets and liabilities:

Accounts receivable
   344,000 (157,000 )
Inventories
   5,000 26,000
Prepaid expenses and other current assets
   2,000 (86,000 )
Accounts payable, accrued expenses and other current liabilities
   (491,000 ) (18,000 )


Net cash used in operating activities
   (2,652,000 ) (6,762,000 )


CASH FLOWS FROM INVESTING ACTIVITIES:

Net proceeds from the sale of patents, property and equipment
   1,222,000 —


Net cash used in investing activities
   1,222,000 —


CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from the sale of common stock
   —   1,421,000
Net proceeds from the exercise of warrants
   2,479,000 —


Net cash provided by financing activities
   2,479,000 1,421,000


Net increase (decrease) in cash and cash equivalents
   1,049,000 (5,341,000 )
Cash and cash equivalents at beginning of period
   713,000 5,616,000


Cash and cash equivalents at end of period
   $ 1,762,000 $ 275,000


NONCASH INVESTING AND FINANCING ACTIVITIES:

Acquisition of preferred equity interest in real estate in exchange for common stock
   $ 1,600,000 $ —

	April 3,2021			December 31, 2020
	(Unaudited)			(See Note)
ASSETS

Current Assets:
Cash and cash equivalents	$	1,291,000		$	1,276,000
Inventories, net		68,000			68,000
Prepaid expenses and other current assets		19,000			76,000
Total Current Assets		1,378,000			1,420,000

Preferred interest in real estate		1,600,000			1,600,000
Total Assets	$	2,978,000			3,020,000

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	224,000		$	180,000
Accrued expenses		30,000			135,000
Total Current Liabilities		254,000			315,000
Long term debt		468,000			-
Total Liabilities		722,000			315,000

Commitments and Contingencies (Notes 5 and 6)

Stockholders’ Equity:
Preferred stock, $.001 par value, 2,000,000 shares authorized, 328,925 and 328,925 shares issued and outstanding, respectively		-			-
Common stock, $.001 par value, 25,000,000 shares authorized, 3,151,780 and 3,151,780 shares issued and outstanding, respectively		3,000			3,000
Capital in excess of par value		334,752,000			334,632,000
Accumulated deficit		(332,499,000	)		(331,930,000	)
Total Stockholders’ Equity		2,256,000			2,705,000
Total Liabilities and Stockholders’ Equity	$	2,978,000		$	3,020,000

See accompanying notes to the unaudited condensed consolidated financial statements.

Note – December 31, 2020 balances were derived from audited financial statements.

SUPERCONDUCTOR TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	April 3, 2021			March 28, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(569,000	)	$	(1,079,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		-			38,000
Stock-based compensation expense		-			21,000
Gain from sale of property and equipment		-			(510,000	)
Write-down of intangibles		-			134,000
Obsolete inventory		-			190,000
Changes in assets and liabilities:
Accounts receivable		-			(124,000	)
Inventories		-			5,000
Prepaid expenses and other current assets		(57,000	)		(58,000	)
Accounts payable, accrued expenses and other current liabilities		173,000			(87,000	)
Net cash used in operating activities		(453,000	)		(1,470,000	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from the sale of patents, property and equipment		-			1,212,000
Net cash provided by investing activities		-			1,212,000

CASH FLOWS FROM FINANCING ACTIVITIES:
Bank loan		468,000			-
Net proceeds from the exercise of warrants		-			1,388,000
Net cash provided by financing activities		468,000			1,388,000

Net increase in cash and cash equivalents		15,000			1,130,000
Cash and cash equivalents at beginning of period		1,276,000			713,000
Cash and cash equivalents at end of period	$	1,291,000		$	1,843,000

See accompanying notes to the unaudited condensed consolidated financial statements.

SUPERCONDUCTOR TECHNOLOGIES INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~1. General~~

1.General

Please see “Our Future Business” below regarding material information and updates tothat in many material respects superseded and modify the following general business description.

Superconductor Technologies ~~Inc.~~Inc (“STI” ~~and together with our subsidiaries, “we” or “us”~~) was ~~incorporated~~a leading company in ~~Delaware on May 11, 1987. We developed~~developing and ~~produced~~commercializing high temperature ~~superconducting (HTS)~~superconductor (“HTS”) materials and ~~associated~~related technologies. Superconductivity is the unique ability to conduct electricity with little or no resistance when cooled to “critical” temperatures. HTS materials are a family of elements that demonstrate superconducting properties at temperatures significantly warmer than previous superconducting materials. Electric currents that flow through conventional conductors encounter resistance. This resistance requires power to overcome and generates heat. HTS materials can substantially improve the performance characteristics of electrical systems, reduce power loss, and lower heat generation providing extremely high current carrying density and zero resistance to direct current.

We ~~have generated more than 100 patents as well as proprietary trade secrets~~were established in 1987 shortly after the discovery of HTS materials. Our stated objective was to develop products based on these materials for the commercial marketplace.

After analyzing the market opportunities available, we decided to develop products for the utility and ~~manufacturing expertise.~~telecommunications industries.

Our initial ~~superconducting products were~~product was completed in 1998 and we began delivery to a number of wireless network providers. In the following 1413 years, ~~our~~we continued to refine and improve the platform, with the primary focus on improving reliability, increasing performance and runtime, and most importantly, removing cost from the manufacturing process of the required subsystems. Our cost reducing efforts led to the invention of our proprietary, high-yield and high throughput HTS material deposition manufacturing process.

~~From 2010 through October 2019, we transitioned our research and development efforts to adapting our proprietary HTS material deposition techniques to the production of our HTS Conductus~~^® ~~wire for next generation power applications.~~

In November 2016, we were selected as the prime recipient of the $4.5 million program award provided by the U.S. Department of Energy’s (DOE) Office of Energy Efficiency and Renewable Energy (EERE), on behalf of the Advanced Manufacturing Office, for its Next Generation Electric Machines (NGEM) program and, in June 2017, the related contract was finalized and we have commenced work under that contract.

In early 2018, we announced the concentration of our future ~~Conductus~~HTS Conductus® wire product development efforts on NGEM to capitalize on several accelerating energy megatrends. This refined focus is very synergistic with our program with the Department of Energy (DOE) award for the development of superconducting wire to enable NGEM.

~~On October 29, 2019, we announced that our Board of Directors, supported by its management team, had commenced a process to explore strategic alternatives focused on maximizing shareholder value.~~

Strategic alternatives considered included, among others, a strategic investment financing which would allow the company to pursue its business plan to commercialize the Conductus wire platform, a business combination such as a merger with another party, or a sale of STI.

On January 28, 2020, we announced a cost reduction plan for the purpose of aligning our personnel needs and capital requirements as we explored strategic alternatives previously announced. We ~~are maintaining~~have maintained operations of our Sapphire Cryocooler cryogenics initiatives while ceasing additional manufacturing of our HTS Conductus^® ~~wire and ceasing work on our DOE contract mentioned above.~~ wire. The plan also included a 70% employee workforce reduction.

Subsequent to the announcement on January 28, 2020 about our cost reduction plan, we started the process of selling, in separate transactions, assets that we deemed non-essential going forward. The latest such transaction entered into on March 5, 2020, when considered in combination with the prior transactions since January 28, 2020, may be deemed a material definitive purchase agreement for sales of various production, R&D, and testing equipment and selected intellectual property related primarily to our superconducting wire initiative. The aggregate sales prices of the post January 28th transactions was approximately $1,075,000, all sold to purchasers having no affiliation with us.

As a result of these sales, we no longer have the ability to resume HTS wire operations without significant new investments and restructured operations and a new HTS wire business plan, neither of which we currently intend to pursue, as we instead focus our efforts on completing the Merger (as defined below).

Our Future Business

On February 26, 2020, we entered into a definitive merger agreement with Allied Integral United, Inc. ~~(“Clearday”~~(which will change its name to, and is therefore referred herein as, “Clearday”), a privately-held company dedicated to delivering next generation longevity care and wellness services, ~~(as amended, the “Merger Agreement”),~~ whereby aour wholly-owned subsidiary ~~of STI~~ will merge with and into Clearday in a stock-for-stock transaction with Clearday (the “Merger”), with Clearday surviving and becoming our wholly-owned subsidiary, we will then change our name to Clearday, Inc (the “Merger Agreement”).

OnAs previously disclosed, on May 12, 2020, the Merger Agreement was amended by the parties to (i) add a covenant that the parties shall use their commercially reasonable efforts to cause STI to at all times remain listed on the Nasdaq Capital Market (or higher tier) and that if STI ceases to be listed on the Nasdaq Capital Market then the parties shall (including after the closing of the Merger) use their commercially reasonable efforts to cause STI to become listed on either the Nasdaq Capital Market or the NYSE MKT as promptly as reasonably possible, (ii) remove the conditions to closing the Merger that Nasdaq must determine that all listing deficiencies have been cured and determine to approve the listing of STI’s common stock on the Nasdaq and remove any other provisions in the Merger Agreement of like effect, (iii) extend the “outside date” for the Merger to close until the close of business on September 21, 2020 and (iv) require a customary tax representation letter from STI as a closing ~~condition.~~

condition

As previously disclosed, due to our failure to comply with its listing conditions, the Nasdaq Stock Market notified us that it intended to complete the delisting of our common stock by filing a Form 25 Notification of Delisting with the U.S. Securities and Exchange Commission, which it did on February 2, 2021. Our common stock is no longer listed on a National Securities Exchange. Our stock trades on the OTC QB Market.

As also previously disclosed, we announced that, although the “outside date” of our Merger Agreement with Clearday has expired, both the Company and Clearday intended to finalize an amendment to the Merger Agreement or enter into a new merger agreement and proceed with a business combination. Clearday has informed us that the listing of our common stock on the Nasdaq would not be a condition to the closing of the merger. The parties are negotiating a new merger agreement (instead of an extension to the Merger Agreement) that would result in a similar all stock reverse acquisition of us. However, there is no assurance that the parties will complete such negotiation successfully or conclude the merger or any transaction at all.

Clearday has paid us $120,000 as a good faith, non-refundable, payment to provide us cash flow support as we negotiate a new merger agreement.

As discussed below, on February 26, 2021, we also obtained a Paycheck Protection Program loan of approximately $468,000. We believe these funds will be sufficient to conclude a merger with Clearday, if one can be negotiated and our shareholders approve the transaction by the third quarter of 2021. There is no assurance that this will occur and indeed there are significant risks that it will not occur.

If a merger is consummated with Clearday, of which there is no assurance, the merged company will focus on the development of Clearday’s non-residential daily care service model as well as the continued operation of Clearday’s existing Memory Care America residential memory care facilities. As part of plans to develop and expand its assortment of innovative, non-residential daily care services, Clearday intends to leverage ~~STI’s~~our existing Cryogenic Cooler as an enabling technology for one of its service offerings in the ~~home~~ healthcare market.

~~STI’s Current Report on Form~~ ~~8-K,~~ ~~filed on March 3, 2020, contains~~

If a summary of the Merger Agreement and attaches the entire Merger Agreement as an exhibit. Such Current Report and its attached copy of the Merger Agreement should be read in their entirety, as the following doesmerger is not ~~purport to be a summary of the Merger Agreement, but rather merely highlights a few provisions.~~

~~The completion of the Merger is subject to customary conditions, including (i) adoption of the Merger Agreement by each of STI and~~consummated with Clearday stockholders, (ii) Nasdaq approval of continued listing of STI Common Stock under its applicable rules, including the rules applicable to its change of control listing application, (iii) the registration statement on Form ~~S-4~~ being declared effective by the Securities and Exchange Commission (“SEC”) and (iv) the STI officers with severance rights entering waiver agreements. Each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (ii) subject to certain exceptions, performance by the other party of its obligations under the Merger Agreement, (iii) the absence of any Material Adverse Effect (as defined in the Merger Agreement) on the other party and (iv) the absence of any law, order, injunction, decree or other legal restraint preventing the completion of the Merger or making the completion of the Merger illegal. In addition, it is a condition to closing that STI’s adjusted net working capital computed in accordance with the terms of the Merger Agreementnear future, we will likely be not less than negative $250,000 as of immediately prior to the Effective Time (as defined in the Merger Agreement) and that all directors of STI, other than Jeffrey Quiram, STI’s current Chief Executive Officer, shall have resigned from the Board of Directors of STI; Mr. Quiram is expected to remain a member of the Board of Directors.

~~STI also has several rights to terminate the Merger Agreement without paying or receiving a~~ ~~break-up~~ fee, including if (i) Clearday’s financial statements for the fiscal years ended December 31, 2018 and December 31, 2019 have either (A) not been delivered to STI on or prior to close of business on March 31, 2020 or such other date that is agreed by STI and Clearday, or (B) not been audited by a PCAOB registered audit firm that is reasonably acceptable to STI and who provides an unqualified audit opinion with respect to such financial statements and such accounting firm provides their consent as experts with respect to such audited financial statements for inclusion in the Registration Statement, or (C) are not, in form or substance, reasonably satisfactory to STI and (ii) if the firm that STI has retained for the purposes of delivering a fairness opinion qualifies its report or analysis, or is unwilling to provide an affirmative opinion as to fairness from a financial point of view, on the basis of the financial information that is delivered by Clearday. The parties also have rights to terminate without paying a ~~break-up~~ ~~fee if their respective disclosure schedules are not timely delivered and are acceptable.~~

On April 1, 2020, the Company received notice that the Nasdaq Hearings Panel had determined to grant the Company’s request for continued listing in light of the Company’s planned merger with Clearday. The extension was subject to several conditions.

On June 30, 2020, the Company and a wholly-owned subsidiary of Clearday (“Clearday Sub”) entered into a Securities Purchase Agreement (the “Purchase Agreement”), which was consummated on July 6, 2020, pursuant to which STI issued four hundred thousand (400,000) shares of STI Common Stock (without any warrants) in exchange for a preferred equity interest in real estate (described in the related Current Report on Form ~~8-K)~~ ~~that the Company values at $1.6 million, implying a purchase price of $4.00 per share.~~

On July 22, 2020, as a result of the increase to the Company’s equity from the aforementioned preferred stock transaction, the Nasdaq Hearings Panel confirmed that we had regained compliance with the equity requirement under Nasdaq Listing Rule 5550(b)(1) (the “Equity Rule”).

~~Separately from compliance with the Equity Rule, we were still~~ required to ~~evidence compliance with the bid price requirement~~liquidate or declare bankruptcy, in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”) no later than September 18, 2020. Under Nasdaq rules, as adjusted for the April 2020 Nasdaq rule change to allow for the tolling of the compliance period for companies experiencing a deficiency regarding the Bid Price Rule, we had until September 18, 2020 to demonstrate compliance with the Bid Price Rule for 10 consecutive trading days. We called a special meeting of stockholders to be held on September 2, 2020, however, we had to adjourn the meeting several times and only obtained the requisite stockholder vote on September 9, 2020, and the reverse split became effective in the market on September 10, 2020, by which time we were unable to show compliance with the Bid Price Rule’s 10 consecutive trading day requirement on or before September 18, 2020. On September 28, 2020 we received a letter from the Nasdaq Hearing Panel (“Panel”) determining to delist our common stock from The Nasdaq Stock Market. As a result of the decision, suspension of trading in the shares was effective at the open of business on September 30, 2020. See ~~“Subsequent Events” for more information.~~

The Panel indicated that the Nasdaq Stock Market will complete the delisting by filing a Form 25 Notification of Delisting with the U.S. Securities and Exchange Commission, after applicable appeal periods have lapsed. Our common stock is currently quoted on the OTCQB.

We intend to satisfy the Bid Price Rule by taking appropriate action as needed, including through completion of the previously announced and pending merger with Allied Integral United, Inc. (a/k/a Clearday), althoughcase there ~~is no certainty that such actions will be completed in a timely manner or otherwise.~~

~~In addition, there is no assurance that the SEC will declare our planned Form~~ ~~S-4~~ effective at all or in a timely manner, nor is there any assurance that the various conditions to the Merger Agreement will be satisfied at all or in a timely manner. In particular, there is no assurance that the financial statements required of Clearday will be provided in a timely manner or that they will be reasonably satisfactory to us.

The Merger Agreement contains customary representations and warranties. The representations, warranties and covenants of each party set forth in the Merger Agreement have been made only for the purposes of, and were and are solely for the benefit of the parties to, the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Accordingly, the representations and warranties may not describe the actual state of affairs at the date they were made or at any other time, and investors should not rely on them as statements of fact. In addition, such representations and warranties (i) will not survive consummation of the Merger and (ii) were made only as of the date of the Merger Agreement or such other date as is specified in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures. Accordingly, the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger Agreement, and not to provide investors with any factual information regarding STI or Clearday, their respective affiliates or their respective businesses. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding the STI, Clearday, their respective affiliates or their respective businesses, the Merger Agreement and the Merger that will be contained in, or incorporated by reference into, the Registration Statement, as well as in the Forms ~~10-K,~~ ~~Forms~~ ~~10-Q~~ ~~and other filings that STI makes with the SEC.~~

~~In connection with the proposed transaction between STI and Clearday, the parties intend to file relevant materials with the SEC, including a STI registration statement on Form~~ ~~S-4~~ ~~that will contain a combined proxy statement/prospectus/information statement. See~~ ~~“Subsequent Events”~~ ~~below.~~

~~Subsequent to the announcement on January 28, 2020 about our cost reduction plan, we started the process of selling, in separate transactions, assets that we deemed~~ ~~non-essential~~ going forward. The latest such transaction entered into on March 5th, when considered in combination with the prior transactions since January 28, 2020, may be deemed a material definitive purchase agreement for sales of various production, R&D, and testing equipment and selected intellectual property related primarily to our superconducting wire initiative. The aggregate sales prices of the post January 28th transactions was $1.2 million, all sold to purchasers having no affiliation with us. When the transactions were completed we continue to hold production, R&D, and testing assets for our Sapphire cryocooler business, along with the of our intellectual property assets for that product and certain HTS patents. The proceeds from this series of transactions is expected to be sufficient, together with our other capital resources, for us to complete the Merger assuming it occurs without material additional delay. However, we would likely be ~~unable to complete the Merger~~no payments or continue operations if the Merger is not completed before the third quarter of 2021 unless we received additional financing, which is unlikely. If we do not proceed with the Merger, we would be likely to seek stockholder approval to sell our remaining assets and liquidate. Such a transaction, if it were to occur, would entail additional expenses and would likely leave minimal assetsvalue for ~~distribution.~~common stock holders.

2. Summary of Significant Accounting Policies

Basis of Presentation

We have incurred significant net losses since our inception and have an accumulated deficit of ~~$331.4~~$332.5 million. In ~~2019,~~the three months ended April 3, 2021, we incurred a net loss of ~~$9.2~~$569,000 and negative cash flows from operations of $453,000. In 2020, we incurred a net loss of $3.0 million and had negative cash flows from operations of ~~$8.8~~$3.1 million. In ~~the nine months ended September 26,~~ 2020, we ~~incurred~~had an accumulated deficit of $331.9 million, a net loss of ~~$2.4~~$9.2 million and ~~had~~ negative cash flows from operations of ~~$2.7~~$8.8 million. At ~~September 26,~~December 31, 2020, we had ~~$1.8~~$1.3 million in cash and cash equivalents compared to $0.7 million in cash and cash equivalents as of December 31, 2019. In the nine months ended September 26, 2020, 978,594 warrants were exercised for common shares of our stock in connection with our October 2019 financing, providing us with $2.5 million.cash. Our cash resources ~~will~~may therefore not be sufficient to fund our business through the end of the current fiscal ~~year, but not sufficient to fund our business for the next twelve months.~~year. Therefore, unless we can successfully implement our strategic alternatives plan including, among others, a strategic investment financing which would allow us to pursue our current business plan, a business combination such as our merger with Clearday, or a sale of STI, we ~~may~~will need to raise additional capital during this fiscal year ending December 31, 2021 to maintain our viability. Additional financing may not be available on acceptable terms or at all. If we issue additional equity securities to raise funds, the ownership percentage of our existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of common stock. These factors raise substantial doubt about our ability to continue as a going concern.

Our plans regarding improving our future liquidity will require us to successfully implement our strategic plan to explore strategic alternatives focused on maximizing shareholder value. Strategic alternatives considered included, among others, a strategic investment financing which would allow the company to pursue its current business plan, a business combination such as a merger with another party, or a sale of STI. On ~~September 10,~~January 28, 2020, we ~~effected~~announced a ~~1-for-10~~ ~~reverse stock split~~cost reduction plan for the purpose of aligning our personnel needs and capital requirements as we explored strategic alternatives previously announced. We will maintain operations of our ~~common stock (the “Reverse Stock Split”). As a result of the Reverse Stock Split, every ten shares~~Sapphire Cryocooler cryogenics initiatives while ceasing additional manufacturing of our ~~pre-Reverse~~ ~~Stock Split common stock were combined and reclassified into one share of our common stock.~~HTS Conductus® wire. The ~~Reverse Stock Split~~plan also ~~proportionately reduced the authorized number of shares of our common stock, but did not change the par value of our common stock. Share and per share data~~ included ~~herein has been retroactively restated for the effect of the reverse stock split as applicable.~~a 70% employee workforce reduction.

In 2019, we undertook steps to reduce our ongoing operating costs and we raised net cash proceeds of $3.9 million from the sale of our common and preferred shares and warrants.

On ~~July 24, 2018,~~September 9, 2020, we effected a 1-for-10 reverse stock split of our common stock, ~~(the “2019~~or the 2020 Reverse Stock ~~Split”).~~Split. As a result of the ~~2019~~2020 Reverse Stock Split, every ten shares of our ~~pre-2019~~pre-2020 Reverse Stock Split common stock were combined and reclassified into one share of our common stock. The ~~2019~~2020 Reverse Stock Split ~~did not change~~changed the authorized number of shares ~~or the~~from 250,000,000 to 25,000,000. The par value of our common ~~stock.~~stock remained $0.001.

~~The accompanying condensed consolidated financial statements do not include any adjustments that may result from~~

Share and per share data included in the ~~outcome~~Notes to Consolidated Financial Statements have been retroactively adjusted, as applicable, for the effect of the ~~uncertainties set forth above.~~reverse stock splits. Certain of the information contained in the documents incorporated by reference herein and therein present information on our common stock on a pre-reverse stock split basis.

Principles of Consolidation

The interim condensed consolidated financial statements include the accounts of Superconductor Technologies Inc. and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated from the condensed consolidated financial statements.

Cash and Cash Equivalents

Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less. Cash and cash equivalents are maintained with what we believe to be quality financial institutions and exceed FDIC limits. Historically, we have not experienced any losses due to such concentration of credit risk.

Accounts Receivable

We grant uncollateralized credit to our customers. We perform usual and customary credit evaluations of our customers before granting credit. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on historical write-off experience. Past due balances are reviewed for collectability. Accounts balances are charged off against the allowance when we deem it is probable the receivable will not be recovered. We do not have any off-balance sheet credit exposure related to our customers.

Revenue Recognition

On January 1, 2018, we adopted ASC Topic 606, Revenue from Contracts with Customers, and all of the related amendments (“ASC 606”) and applied it to all contracts. The adoption of ASC topic 606 has had no effect to our consolidated financial statements.

Commercial and government contract revenues are recognized once all of the following conditions have been met: a) an authorized purchase order has been received in writing, b) the customer’s credit worthiness has been established, c) shipment of the product has occurred, d) title has transferred, and e) if stipulated by the contract, customer acceptance has occurred and all significant vendor obligations, if any, have been satisfied.

Government contract revenues are principally generated under research and development contracts. Revenues from research-related activities are derived from contracts with agencies of the U.S. Government. Credit risk related to accounts receivable arising from such contracts is considered minimal. All payments to us for work performed on contracts with agencies of the U.S. Government are subject to adjustment upon audit by the Defense Contract Audit Agency. Based on historical experience and review of our current project in process, we believe that adjustments from open audits will not have an effect on our financial position, results of operations or cash flows. We are using the expected cost-plus-margin approach as the suitable method for allocating transaction price to the performance obligations in the contract under ASC 606.

~~Leases~~

At contract inception, we determine if an arrangement is a lease. Operating leases are included in “Operating lease assets”, “Current operating lease liabilities” and “Long term operating lease liabilities” on the condensed consolidated balance sheets. At March 31, 2020 all of our operating lease obligations had expired or were terminated. We have no finance leases. Leases with an initial term of 12 months or less were not recorded on the condensed consolidated balance sheets. Operating lease expense was recognized on a straight-line basis over the lease term. We had lease agreements with lease and ~~non-lease~~ ~~components and had elected to account for the lease and~~ ~~non-lease~~ ~~components as separate components.~~

Operating lease assets and liabilities were recognized at January 1, 2019, based on the present value of the future minimum lease payments over the lease term. One of our leases contained rent escalation clauses that were factored into our determination of lease payments. Our leases did not provide an implicit rate; we used its incremental borrowing rate based on the information available at the lease commencement date to discount payments to the present value. One of our operating leases contained a renewal option. The exercise of this option was at our discretion. Lease terms included options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Shipping and Handling Fees and Costs

Shipping and handling fees billed to customers are included in net revenues. Shipping and handling fees associated with freight are generally included in cost of revenues.

Warranties

We offer warranties generally ranging from one to five years, depending on the product and negotiated terms of purchase agreements with our customers. Such warranties require us to repair or replace defective products returned to us during such warranty period at no cost to the customer. An estimate by us for warranty related costs is recorded by us at the time of sale based on our actual historical product return rates and expected repair costs. Such costs have been within our expectations.

Indemnities

In connection with the sales and manufacturing of our commercial products, we indemnify, without limit or term, our customers and contract manufacturers against all claims, suits, demands, damages, liabilities, expenses, judgments, settlements and penalties arising from actual or alleged infringement or misappropriation of any intellectual property relating to our products or other claims arising from our products. We cannot reasonably develop an estimate of the maximum potential amount of payments that might be made under our indemnities because of the uncertainty as to whether a claim might arise and how much it might total. Historically, we have not incurred any expenses related to these indemnities.

Research and Development Costs

Research and development costs are charged to expense as incurred and include salary, facility, depreciation and material expenses. Research and development costs are charged to research and development expense.

Inventories

Inventories were stated at the lower of cost or net realizable value, with costs primarily determined using standard costs, which approximate actual costs utilizing the first-in, first-out method. We review inventory quantities on hand and on order and record, on a quarterly basis, a provision for excess and obsolete inventory and/or vendor cancellation charges related to purchase commitments. If the results of the review determine that a write-down is necessary, we recognize a loss in the period in which the loss is identified, whether or not the inventory is retained. Our ~~September 26,~~April 3, 2021 and December 31, 2020 net inventory value was ~~$68,000, compared to a December 31, 2019 value of $263,000.~~$68,000. During the three month period ending March 28, 2020 we

ceased production of our Conductus wire and expensed the remaining $190,000 of wire inventory. There were no additional inventory adjustments in the three or nine month period ending September 26, 2020. Our inventory reserves establish a new cost basis for inventory and are not reversed until we sell or dispose of the related inventory. Such provisions are established based on historical usage, adjusted for known changes in demands for such products, or the estimated forecast of product demand and production requirements. Costs associated with idle capacity are charged to expense immediately.

Preferred ~~equity~~ interest in real estate

We entered into a Securities Purchase Agreement with Clearday, which was consummated on July 6, 2020, pursuant to which we issued 400,000 shares of our common stock in exchange for a preferred ~~equity~~ interest in real estate we value at $1.6 million, implying a purchase price of $4.00 per ~~share. We determined~~share, based on the ~~valuation~~intraday stock trading price. The fair value of the real estate was based on the fact itthe building was acquired by Clearday in an arm’s-length all-cash purchase in November 2019 and a recent broker’s price report.

Property and Equipment

Property and equipment are recorded at cost. Equipment is depreciated using the straight-line method over their estimated useful lives ranging from three to five years. Leasehold improvements and assets financed under capital leases are amortized over the shorter of their useful ~~lives.~~lives or the lease term. Furniture and fixtures are depreciated over seven years. Expenditures for additions and major improvements are capitalized. Expenditures for minor tooling, repairs and maintenance and minor improvements are charged to expense as incurred. When property or equipment is retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts. Gains or losses from retirements and disposals are recorded in selling, general and administration expenses. During the three month period ending March 28, 2020 we ceased production of our Conductus wire and sold most of our production wire equipment for a gain of $510,000. ~~There was no additional gain or loss in the three or nine month period ending September 26, 2020.~~

Patents, Licenses and Purchased Technology

Patents and licenses are recorded at cost and are amortized using the straight-line method over the shorter of their estimated useful lives or seventeen years. During the three month period ending March 28, 2020 we ceased production of our Conductus wire and sold many Conductus wire patents for no gain or loss and we also recognized a $134,000 impairment of other patents. ~~There was no additional gain or loss in the three or nine month period ending September 26, 2020.~~

Other Assets and Investments

The realizability of long-lived assets is evaluated periodically as events or circumstances indicate a possible inability to recover the carrying amount. Long-lived assets that will no longer be used in the business are written off in the period identified since they will no longer be used in operations and generate any positive cash flows for us. Periodically, long-lived assets that will continue to be used by us will need to be evaluated for recoverability. Such evaluation is based on various analyses, including cash flow and profitability projections, as well as alternative uses, such as government contracts or awards. The analyses necessarily involve significant management judgment. In the event the projected undiscounted cash flows are less than net book value of the assets, the carrying value of the assets will be written down to their estimated fair value. We tested our long-lived assets at ~~September 26, 2020~~April 3, 2021 and none of our long-lived assets ~~were impaired.~~had book value.

Loss Contingencies

In the normal course of our business, we are subject to claims and litigation, including allegations of patent infringement. Liabilities relating to these claims are recorded when it is determined that a loss is probable and the amount of the loss can be reasonably estimated. Legal fees are recorded as services are provided. The costs of our defense in such matters are charged to operations as incurred. Insurance proceeds recoverable are recorded when deemed probable.

Income Taxes

We recognize deferred tax liabilities and assets based on the differences between the financial statement carrying amounts and the tax bases of assets and liabilities, using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit (expense) results from the change in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is more likely than not that some or all deferred tax assets will not be realized.The guidance furtherclarifies the accounting for uncertainty in income taxes and sets a consistent framework to determine the appropriate level of tax reserve to maintain for uncertain tax positions. This interpretation uses a two-step approach wherein a tax benefit is recognized if a position is more-likely-than-not to be sustained. The amount of the benefit is then measured to be the highest tax benefit that is greater than 50% likely to be realized and sets out disclosure requirements to enhance transparency of our tax reserves. Unrecognized tax positions, if ever recognized in the condensed consolidated financial statements, are recorded in the statement of operations as part of the income tax provision. Our policy is to recognize interest and penalties accrued on uncertain tax positions, if any, as part of the income tax provision.

No liabilities for uncertain tax positions were recorded in the current year. No interest or penalties on uncertain tax positions have been expensed to date. We are not under examination by any taxing authorities. Our federal statute of limitations for examination of us is open for 2016 and subsequent filings.

~~Due to our operating losses, the 2017 Tax Act has not impacted our operating results or income tax expense. The primary impact of the 2017 Tax Act was the~~ ~~re-measurement~~ of our deferred tax assets, based upon the new U.S. statutory corporate tax rate of 21% and the required change to the related valuation allowance. The effective rate adjustment to deferred tax assets, a discrete item for the quarter, is fully offset by a decrease in the valuation allowance. As such, there is no net effective rate impact in our financial statements. No income tax provision was required for the deemed repatriation tax or the global intangible low tax income (GILTI) tax, as our foreign subsidiaries had no cumulative positive earnings and profits.

As of December 31, ~~2019,~~2020, we had net operating loss carryforwards for federal and state income tax purposes. We concluded that under the Internal Revenue Code change of control limitations, a maximum of ~~$17.9~~$14.2 million of our ~~$342.4~~$297.9 net operating loss carryforwards, which expire in the years ~~2020~~2021 through 2038, would be available for reduction of taxable income and reduced both the deferred tax asset and valuation allowance accordingly. Due to the uncertainty surrounding their realization, we recorded a full valuation allowance against our net deferred tax assets. Accordingly, no deferred tax asset has been recorded in the accompanying condensed consolidated balance sheets.

Marketing Costs

All costs related to marketing and advertising our products are charged to expense as incurred or at the time the advertising takes place. Advertising costs were not material in each of the ~~three~~quarters ended April 3, 2021 and ~~nine months ended September 26, 2020 and September~~March 28, ~~2019.~~2020.

Net Loss Per Share

Basic and diluted net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding in each year. Net loss available to common stockholders is computed after deducting accumulated dividends on cumulative preferred stock, deemed dividends and accretion of redemption value on redeemable preferred stock for the period and beneficial conversion features on issuance of convertible preferred stock. Potential common shares are not included in the calculation of diluted loss per share because their effect is anti-dilutive.

Stock-based Compensation Expense

We grant both restricted stock awards and stock options to our key employees, directors and consultants. For the ~~three~~quarters ended April 3, 2021 and ~~nine months ended September 26,~~March 28, 2020, ~~and September 28, 2019,~~ no options or awards were granted. The following table presents details of total stock-based compensation expense that is includedin each functional line item on our condensed consolidated statements of operations:

									Three months ended
	Three months ended				Nine months ended				April 3, 2021		March 28, 2020
	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Cost of revenue	$	—	$	1,000	$	2,000	$	3,000
Cost of commercial product revenues									$	-	$	1,000
Research and development		3,000		2,000		7,000		7,000		-		2,000
Selling, general and administrative		19,000		20,000		56,000		60,000		-		18,000

Total stock-based compensation expense	$	22,000	$	23,000	$	65,000	$	70,000	$	-	$	21,000

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires us 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 periods. The significant estimates in the preparation of the financial statements relate to the assessment of the carrying amount of accounts receivable, fixed assets, intangibles, ~~preferred equity interest in real estate,~~ estimated provisions for warranty costs, fair value of warrant derivatives, income taxes and disclosures related to litigation. Actual results could differ from those estimates and such differences may be material to the condensed consolidated financial statements.

Fair Value of Financial Instruments

We have estimated the fair value amounts of our financial instruments using the available market information and valuation methodologies considered appropriate. We determined the book value of our cash and cash equivalents, and other current liabilities according to their approximate fair value as of ~~September 26, 2020 approximate fair value.~~April 3, 2021.

Comprehensive Income

We have no items of other comprehensive income in any period and consequently have not included a Statement of Comprehensive Income.

Segment Information

We have historically operated in a single business segment: the research, development, manufacture and marketing of high performance products used in cellular base stations. We derived net commercial product revenues primarily from the sales of our AmpLink and SuperPlex products which we sold directly to wireless network operators in the United States. Net revenues derived principally from government contracts are presented separately on the consolidated statements of operations for all periods presented. As discussed in this Report, we no longer have the ability to resume HTS wire operations without significant new investments and restructured operations and a new HTS wire business plan, neither of which we currently intend to pursue, as we instead focus our efforts on completing the Merger.

Certain Risks and Uncertainties

~~On October 29, 2019, we announced that our Board of Directors, supported by its management team, had commenced a process to explore strategic alternatives focused on maximizing shareholder value.~~

Strategic alternatives considered included, among others, a strategic investment financing which would allow the company to pursue its current business plan to commercialize the Conductus wire platform, a business combination such as a merger with another party, or a sale of STI.

On January 28, 2020, we announced a cost reduction plan for the purpose of aligning our personnel needs and capital requirements as we explored strategic alternatives previously announced. We will maintain operations of our Sapphire Cryocooler cryogenics initiatives while ceasing additional manufacturing of our HTS ~~Conductus~~^®Conductus® wire. The plan also included a 70% employee workforce reduction.

On February 26, 2020, we entered into a definitive merger agreement Clearday a privately-held company dedicated to delivering next generation longevity care and wellness services, whereby a wholly-owned subsidiary of STI will merge with and into Clearday in a stock-for-stock transaction with Clearday, with Clearday surviving and becoming a wholly-owned subsidiary of STI, which will then change its name to Clearday, Inc. See “Our Future Business” above~~and “Subsequent Events”~~ for more information.

3. Stockholders’ Equity

The following is a summary of stockholders’ equity transactions for the three ~~and nine~~ months ended ~~September 26, 2020:~~April 3, 2021:

   Convertible
Preferred Stock    Common Stock    Capital in
Excess of
Par Value    Accumulated
Deficit Total
   Shares    Amount    Shares Amount
Balance at June 27, 2020
   328,925    $ —      2,750,955 $ 3,000    $ 332,993,000    $ (330,796,000 ) $ 2,200,000
Issuance of common Stock for a preferred equity interest in real estate
         400,000 —      1,600,000    1,600,000
Warrant exercises
         828 —      2,000    2,000
Stock-based compensation
            22,000    22,000
Cancellation of shares from the reverse stock split
         (3 ) —
Net loss
               (606,000 ) (606,000 )










Balance at September 26, 2020
   328,925    $ —      3,151,780 $ 3,000    $ 334,617,000    $ (331,402,000 ) $ 3,218,000

   Convertible
Preferred Stock    Common Stock    Capital in
Excess of
Par Value    Accumulated
Deficit Total
   Shares    Amount    Shares Amount
Balance at December 31, 2019
   328,925    $ —      1,773,189 $ 2,000    $ 330,474,000    $ (328,973,000 ) $ 1,503,000
Issuance of common Stock for a preferred equity interest in real estate
         400,000 —      1,600,000    1,600,000
Warrant exercises
         978,594 1,000    2,478,000    2,479,000
Stock-based compensation
            65,000    65,000
Cancellation of shares from the reverse stock split
         (3 ) —
Net loss
               (2,429,000 ) (2,429,000 )










Balance at September 26, 2020
   328,925    $ —      3,151,780 $ 3,000    $ 334,617,000    $ (331,402,000 ) $ 3,218,000

	Convertible								Capital in
	Preferred Stock				Common Stock				Excess of		Accumulated
	Shares		Amount		Shares		Amount		Par Value		Deficit			Total
Balance at December 31, 2020		328,925	$	-		3,151,780	$	3,000	$	334,632,000	$	(331,930,000	)	$	2,705,000
Merger partner contribution				-		-		-		120,000					120,000
Net loss												(569,000	)		(569,000	)
Balance at April 3, 2021		328,925	$	-		3,151,780	$	3,000	$	334,752,000	$	(332,499,000	)	$	2,256,000

The following is a summary of stockholders’ equity transactions for the three ~~and nine~~ months ended ~~September~~March 28, ~~2019:~~2020:

   Convertible
Preferred Stock    Common Stock    Capital in
Excess of
Par Value    Accumulated
Deficit Total
   Shares    Amount    Shares    Amount
Balance at June 29, 2019
   328,925    $ —      550,260    $ 1,000    $ 327,956,000    $ (324,670,000 ) $ 3,287,000
Issuance of common stock (net of costs)
                  —
Stock-based compensation
               23,000    23,000
Net loss
                  (2,375,000 ) (2,375,000 )












Balance at September 28, 2019
   328,925    $ —      550,260    $ 1,000    $ 327,979,000    $ (327,045,000 ) $ 935,000

	Convertible								Capital in
	Preferred Stock				Common Stock				Excess of		Accumulated
	Shares		Amount		Shares		Amount		Par Value		Deficit			Total
Balance at December 31, 2019		328,925	$	-		1,773,189	$	2,000	$	330,474,000	$	(328,973,000	)	$	1,503,000
Warrant exercises				-		555,171		-		1,383,000					1,388,000
Stock-based compensation										21,000					21,000
Net loss												(1,079,000	)		(1,079,000	)
Balance at March 28, 2020		328,925	$	-		2,328,360	$	2,000	$	331,878,000	$	(330,052,000	)	$	1,833,000

   Convertible
Preferred Stock    Common Stock    Capital in
Excess of
Par Value    Accumulated
Deficit Total
   Shares Amount    Shares    Amount
Balance at December 31, 2018
   330,787 $ —      327,060    $ 1,000    $ 326,488,000    $ (319,744,000 ) $ 6,745,000
Conversion of Series E preferred stock to common stock
   (1,862 ) —      53,200    —      —      —
Issuance of common stock (net of costs)
      170,000    —      1,421,000    1,421,000
Stock-based compensation
            70,000    70,000
Net loss
               (7,301,000 ) (7,301,000 )










Balance at September 28, 2019
   328,925 $ —      550,260    $ 1,000    $ 327,979,000    $ (327,045,000 ) $ 935,000

Stock Options

At ~~September 26, 2020,~~April 3, 2021, we had two active equity award option plans, the 2003 Equity Incentive Plan and the 2013 Equity Incentive Plan (collectively, the “Stock Option Plan”), although we can only grant new options under the 2013 Equity Incentive Plan. Under our Stock Option Plan, stock awards were made to our directors, key employees, consultants, and non-employee directors and consisted of stock options, restricted stock awards, performance awards, and performance share awards. Stock options were granted at prices no less than the market value on the date of grant. There were no stock option exercises during the three ~~and nine~~ months ended ~~September 26, 2020~~April 3, 2021 or during the three ~~and nine~~ months ended ~~September~~March 28, ~~2019.~~2020.

The impact to the condensed consolidated statements of operations for the ~~three and nine months~~quarter ended ~~September 26, 2020~~April 3, 2021 on net loss was ~~$22,000~~$0 and ~~$63,000 and $0.01 and $0.03~~$0.00 on basic and diluted net loss per common share ~~respectively, compared to~~and for the quarter ended March 28, 2020 the impact was $20,000 and ~~$62,000 and $0.04 and $0.14~~$0.01 on basic and diluted net loss per common ~~share for the three and nine months ended September 28, 2019.~~share. No stock compensation cost was capitalized during either period. The total compensation cost related to nonvested awards not yet recognized was ~~$17,000 and the weighted-average period over which the cost is expected to be recognized was 3 months at September 26, 2020.~~$0.

The following is a summary of stock option transactions under our Stock Option Plans at ~~September 26, 2020:~~

April 3, 2021:

   Number of
Shares    Price Per Share    Weighted
Average
Exercise
Price    Number of
Options
Exercisable    Weighted
Average
Exercise
Price
Balance at December 31, 2019
   13,725    $ 19.20 - $51,480    $ 252.00    7,450    $ 448.10
Granted
   —
Exercised
   —
Canceled
   5,862    $ 19.20 - $51,480    246.80    3,162    441.10










Balance at September 26, 2020
   7,863    $ 19.20 - $28,440    $ 255.90    4,288    $ 453.30

	Number of Shares	Price Per Share		Weighted Average Exercise Price		Number of Options Exercisable		Weighted Average Exercise Price
Balance at December 31, 2020	7,863	$	19.20 - $ 28,440	$	255.90		7,863	$	255.90
Granted	-				-
Exercised	-				-
Canceled	12		28,440		28,440		12		28,440
Balance at April 3, 2021	7,851	$	19.20 - $ 26,280	$	211.24		7,851	$	211.24

The outstanding options expire on various dates through the end of October 2028. The weighted-average contractual term of options outstanding is ~~7.7~~7.2 years and the weighted-average contractual term of stock options currently exercisable is ~~7.4~~7.2 years. The exercise prices for these options range from $19.20 to ~~$28,440~~$26,280 per share, for ~~an aggregate~~a total weight-average exercise price of $2$1.7 million. At ~~September 26, 2020,~~April 3, 2021, no options had an exercise price less than the current market value.

Restricted Stock Awards

The grant date fair value of each share of our restricted stock awards is equal to the fair value of our common stock at the grant date. Shares of restricted stock under awards all have service conditions and vest over one to three years. ~~The following is a summary of our~~There were no restricted stock award transactions ~~at September 26, 2020:~~during the three months ended April 3, 2021.

   Number of
Shares    Weighted
Average Grant
Date Fair Value
Balance nonvested at December 31, 2019
   33    $ 105.00
Granted
   —      —
Vested
   —      —
Forfeited
   —      —




Balance nonvested at September 26, 2020
   33    $ 105.00

The impact to the condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 26,~~April 3, 2020 was $0 and ~~$2,000 and~~ $0.00 ~~and $0.00, respectively, and $3,000 and $8,000 and $0.01 and $0.02~~ on basic and diluted net loss per common share and for the ~~three~~quarter ended March 28, 2020 the impact was $1,000 and ~~nine months ended September 28, 2019, respectively.~~$0.00 on basic and diluted net loss per common share. No stock compensation cost was capitalized during the period. There was no total compensation cost related to nonvested awards not yet recognized at ~~September 26, 2020.~~April 3, 2021.

Warrants ~~and Common Stock~~

The following is a summary of outstanding warrants at ~~September 26, 2020:~~April 3, 2021:

   Common Shares
   Total    Currently
Exercisable    Price per
Share    Expiration Date
(1) Warrants related to October 2015 financing
   13,552    13,552    $ 600.00    October 14, 2020
(2) Warrants related to October 2015 financing
   903    903    $ 656.30    October 14, 2020
(3) Warrants related to August 2016 financing
   5,350    5,350    $ 300.00    February 2, 2022
(4) Warrants related to August 2016 financing
   500    500    $ 385.50    August 2, 2021
(5) Warrants related to December 2016 financing
   68,567    68,567    $ 200.00    December 14, 2021
(6) Warrants related to March 2018 financing
   15,810    15,810    $ 114.00    September 9, 2023
(7) Warrants related to March 2018 financing
   1,107    1,107    $ 158.00    March 6, 2023
(8) Warrants related to July 2018 financing
   257,143    257,143    $ 35.00    July 25, 2023
(9) Warrants related to July 2018 financing
   15,428    15,428    $ 43.75    July 25, 2023
(10) Warrants related to May 2019 financing
   11,900    11,900    $ 12.50    May 23, 2024
(11) Warrants related to October 2019 financing
   217,200    217,200    $ 2.50    October 10, 2024
(12) Warrants related to October 2019 financing
   30,916    30,916    $ 3.13    October 8, 2024

	Common Shares
	Total		Currently Exercisable		Price per Share		Expiration Date

Warrants related to August 2016 financing		5,350		5,350	$	300.00		February 2, 2022
Warrants related to August 2016 financing		500		500	$	385.50		August 2, 2021
Warrants related to December 2016 financing		68,567		68,567	$	200.00		December 14, 2021
Warrants related to March 2018 financing		15,810		15,810	$	114.00		September 9, 2023
Warrants related to March 2018 financing		1,107		1,107	$	158.00		March 6, 2023
Warrants related to July 2018 financing		257,143		257,143	$	35.00		July 25, 2023
Warrants related to July 2018 financing		15,428		15,428	$	43.75		July 25, 2023
Warrants related to May 2019 financing		11,900		11,900	$	12.50		May 23, 2024
Warrants related to October 2019 financing		217,200		217,200	$	2.50		October 10, 2024
Warrants related to October 2019 financing		30,916		30,916	$	3.13		October 8, 2024

On October 10, 2019 we completed a public offering of an aggregate of 1,183,400 shares of our common stock (or common stock equivalents) and warrants to purchase an aggregate of 1,183,400 shares of common stock with gross proceeds to us of approximately $3.0 million. The warrants are exercisable for five years at an exercise price equal to the public offering price. The offering was priced at ~~$2.50~~$0.25 per share of common stock. The net proceeds to us from the offering, after deducting the placement agent fees and our estimated offering expenses, was approximately $2.4 million. The placement agent received warrants to purchase 82,838 shares of common stock, at an exercise price of $3.125, that will expire October 8, 2024 and are subject to a six month lock-up. In the quarter ended December 31, 2019, 39,528 of these warrants were exercised, providing us with proceeds of $99,000. ~~For~~In the ~~three and nine months~~quarter ended ~~September 26,~~March 28, 2020, ~~828 and 978,594, respectively,~~an additional 555,171 of these warrants were exercised, providing us with proceeds of ~~$2,000 and $2.5 million, respectively.~~$1.4 million.

On May 23, 2019 we completed a public offering of an aggregate of 170,000 shares of our common stock with gross proceeds to us of $1.7 million. The offering was priced at ~~$10.00~~$10 per share of common stock. The net proceeds to us from the offering, after deducting the placement agent fees and our estimated offering expenses, was approximately $1.4 million. The placement agent received warrants to purchase 11,900 shares of common stock, at an exercise price of ~~$12.50,~~$1.25, that are subject to a ~~six~~nine month lock-up and will expire May 23, 2024.

On July 30, 2018 we completed a public offering of an aggregate of 257,142 shares of our common stock (or common stock equivalents initially in the form of Series E Preferred Stock) and warrants to purchase an aggregate of 257,142 shares of common stock with gross proceeds to us of $9.0 million. The net proceeds to us from the offering, after deducting the placement agent fees and our estimated offering expenses, was $7.98 million. The offering was priced at $35.00 per share of common stock (or common stock equivalent), with each share of common stock (or common stock equivalent) sold with one five-year warrant to purchase one share of common stock, at an exercise price of $35.00 per share. The placement agent also received warrants to purchase 15,428 shares of common stock, at an exercise price of $43.75, that are subject to a six month ~~lock-up~~ ~~and will expire July 25, 2023.~~

On March 7, 2018, we announced the pricing of a registered offering of common stock (and common stock equivalents) with total gross proceeds of approximately $2 million. The closing of the registered public offering was completed on March 9, 2018. The net proceeds to us from the registered offering, after deducting the placement agent fees and our estimated offering expenses, was $1.7 million. In a concurrent private placement, we issued to the investor in the registered offering, an unregistered warrant (the “Warrants”) to purchase one share of common stock for each share of common stock or ~~Pre-funded~~ Warrants purchased in the registered offering. The Warrants have an exercise price of $114.00 per share, shall be exercisable immediately and will expire five years and six months from the date of issuance.

Our warrants are exercisable by paying cash or, solely in the absence of an effective registration statement or prospectus, by cashless exercise for unregistered shares of common stock. The exercise price of the warrants is subject to standard antidilutive provision adjustment in the case of stock dividends or other distributions on shares of common stock or any other equity or equity equivalent securities payable in shares of common stock, stock splits, stock combinations, reclassifications or similar events affecting our common stock, and also, subject to limitations, upon any distribution of assets, including cash, stock or other property to our stockholders. The exercise price of the warrants is not subject to “price-based” anti-dilution adjustment. We have determined that these warrants related to issuance of common stock are subject to equity treatment because the warrant holder has no right to demand cash settlement and there are no unusual anti-dilution rights.

~~Securities Purchase Agreement~~

We entered into a Securities Purchase Agreement with Clearday, which was consummated on July 6, 2020, pursuant to which we issued 400,000 shares of our common stock in exchange for a preferred equity interest in real estate we value at $1.6 million, implying a purchase price of $4.00 per share. We determined the valuation of the real estate based on the fact it was acquired by Clearday in ~~an arm’s-length all-cash purchase~~ ~~in November 2019 and a recent broker’s price report.~~

4. Loss Per Share

Basic and diluted net loss per share is based on the weighted-average number of common shares outstanding.

Since their impact would be anti-dilutive, our net loss per common share does not include the effect of the assumed exercise or vesting of the following shares:

   September 26, 2020    September 28, 2019
Outstanding stock options
   7,863    13,782
Unvested restricted stock awards
   33    33
Outstanding warrants
   638,376    391,414




Total
   646,272    405,229

	April 3, 2021		March 28, 2020

Outstanding stock options		7,851		12,141
Unvested restricted stock awards		-		33
Outstanding warrants		623,921		1,062,819
Total		631,772		1,074,993

Also, the preferred stock convertible into 182 shares of common stock was not included since its impact would be anti-dilutive.

5. Commitments and Contingencies

Operating Leases

We leased all of our ~~offices and production facility under a~~ ~~non-cancelable~~ ~~operating lease~~properties. All of our operations, including our manufacturing facilities, comprising approximately 94,000 square feet, were located in an industrial complex in Austin, Texas that expired in March 31, 2020. ~~The~~We did not renew this lease as we ceased our Conductus wire manufacturing efforts to pursue our merger with Clearday. Our Austin lease contained ~~minimum rent escalation clauses that require additional rental amounts after~~a renewal option and also required us to pay utilities, insurance, taxes and other operating expenses.

For the ~~first year. This lease contained one five-year renewal option. We leased certain other, less significant, vehicles and equipment. Our~~three months ended April 3, 2021, operating lease expense was ~~recognized on a straight line basis over the lease terms.~~$0.

~~For the three and nine months ended September 26, 2020, operating lease expense was $0 and $143,000.~~

~~As of March 28, 2020 we had no remaining operating lease obligations.~~

Patents and Licenses

We had entered into various licensing agreements requiring royalty payments ranging from 0.13% to 2.5% of specified product sales. Certain of these agreements ~~contained~~contain provisions for the payment of guaranteed or minimum royalty amounts. ~~Our minimum license obligations were $10,000 per year through 2025.~~ In the event that we fail to pay any minimum annual royalties, these licenses may automatically ~~become~~ ~~non-exclusive~~ or be ~~terminated.~~ terminated. These royalty obligations ~~terminated at various times from 2020 to 2025.~~terminate in 2026. Royalty ~~expense~~expenses totaled $0 and $11,000 ~~and $0 and $10,000, respectively,~~ for the three ~~and nine~~ months ended ~~September 26, 2020~~April 3, 2021 and ~~September 28, 2019. During the three month period ending~~ March 28, 2020, ~~we ceased production of our Conductus wire and have not incurred addition royalty expense.~~respectively. Under the terms of certain royalty agreements, royalty payments made may be subject to audit. There have been no audits to date and we do not expect any possible future audit adjustments to be significant.

We have no minimum payments under operating leases and license obligations going forward.

6. Contractual Guarantees and Indemnities

During our normal course of business, we make certain contractual guarantees and indemnities pursuant to which we may be required to make future payments under specific circumstances. We have not recorded any liability for these contractual guarantees and indemnities in the accompanying condensed consolidated financial statements.

Warranties

We establish reserves for future product warranty costs that are expected to be incurred pursuant to specific warranty provisions with our customers. Our warranty reserves are established at the time of sale and updated throughout the warranty period based upon numerous factors including historical warranty return rates and expenses over various warranty periods.

Intellectual Property Indemnities

We indemnify certain customers and our contract manufacturers against liability arising from third-party claims of intellectual property rights infringement related to our products. These indemnities appear in development and supply agreements with our customers as well as manufacturing service agreements with our contract manufacturers, are not limited in amount or duration and generally survive the expiration of the contract. Given that the amount of potential liabilities related to such indemnities cannot be determined until an infringement claim has been made, we are unable to determine the maximum amount of losses that we could incur related to such ~~indemnities.~~indemnifications.

Director and Officer Indemnities and Contractual Guarantees

We have entered into indemnification agreements with our directors and executive officers which require us to indemnify such individuals to the fullest extent permitted by Delaware law. Our indemnification obligations under such agreements are not limited in amount or duration. Certain costs incurred in connection with such indemnities may be recovered under certain circumstances under various insurance policies. Given that the amount of any potential liabilities related to such indemnities cannot be determined until a lawsuit has been filed against a director or executive officer, we are unable to determine the maximum amount of losses that we could incur relating to such indemnities. Historically, any amounts payable pursuant to such director and officer indemnities have not had a material negative effect on our business, financial condition or results of operations.

We have also entered into severance and change in control agreements with certain of our executives. These agreements provide for the payment of specific compensation benefits to such executives upon the termination of their employment with us.

General Contractual Indemnities/Products Liability

During the normal course of business, we enter into contracts with customers where we agree to indemnify the other party for personal injury or property damage caused by our products. Our indemnification obligations under such agreements are not generally limited in amount or duration. Given that the amount of any potential liabilities related to such indemnities cannot be determined until a lawsuit has been filed, we are unable to determine the maximum amount of losses that we could incur relating to such indemnities. Historically, any amounts payable pursuant to such indemnities have not had a material negative effect on our business, financial condition or results of operations. We maintain general and product liability insurance as well as errors and omissions insurance which may provide a source of recovery to us in the event of an indemnification claim.

7. Details of Certain Financial Statement Components and Supplemental Disclosures of Cash Flow Information and Non-Cash Activities ~~Activities~~

Paycheck Protection Program Loan

During March 2021, we received loan proceeds in the amount of $468,000 under the Paycheck Protection Program (the “PPP”) of the CARES Act, which was enacted March 27, 2020. The PPP loan is evidenced by a promissory note in favor of the Lender, which bears interest at the rate of 1.00% per annum. No payments of principal or interest are due under the note until the date on which the amount of loan forgiveness (if any) under the CARES Act, which can be up to 10 months after the end of the related notes covered period (which is defined as 24 weeks after the date of the loan) (the “Deferral Period”). The note may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the PPP loan may be used only for payroll and related costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations that were incurred prior to February 15, 2020 (the “Qualifying Expenses”). Under the terms of the PPP loan, certain amounts thereunder may be forgiven if they are used for Qualifying Expenses as described in and in compliance with the CARES Act. The Company utilized the PPP loan proceeds exclusively for Qualifying Expenses during the 24-week coverage period and will submit its application for forgiveness in accordance with the terms of the CARES Act and related guidance. In the event the PPP loan or any portion thereof is forgiven, the amount forgiven is applied to the outstanding principal.

To the extent, if any, that any or all of the PPP loan is not forgiven, beginning one month following expiration of the Deferral Period, and continuing monthly until 24 months from the date of each applicable Note (the “Maturity Date”), the Company is obligated to make monthly payments of principal and interest to the Lender with respect to any unforgiven portion of the Note, in such equal amounts required to fully amortize the principal amount outstanding on such Note as of the last day of the applicable Deferral Period by the applicable Maturity Date. The Company accounts for this loan on the balance sheet as financial liabilities reported as the long-term bank debt in the amount of $468,000.

Balance Sheet Data:

   September 26,
2020    December 31,
2019
Accounts receivable:

Accounts receivable-commercial products
   $ —      $ 347,000
Less: allowance for doubtful accounts
   —      (3,000 )




   $ —      $ 344,000




   September 26,
2020    December 31,
2019
Inventories:

Raw materials
   $ —      $ 152,000
Work In Process
   68,000    111,000




   $ 68,000    $ 263,000




   September 26,
2020    December 31,
2019
Property and Equipment:

Equipment
   $ 316,000    $ 11,911,000
Leasehold improvements
   —      1,065,000
Furniture and fixtures
   —      205,000


��

   316,000    13,181,000
Less: accumulated depreciation and amortization
   (316,000 )    (12,948,000 )




   $ —      $ 233,000

	April 3, 2021		December 31, 2020
Inventories:
Work In Process		68,000		68,000
	$	68,000	$	68,000

	April 3, 2021		December 31, 2020
Property and Equipment:
Equipment	$	316,000	$	316,000
		-
Less: accumulated depreciation and amortization		316,000		(316,000	)
	$	-	$	-

Depreciation expense amounted to $0 and ~~$224,000, respectively,~~$27,000 for the three ~~and nine~~ month periods ended ~~September 26,~~April 3, 2021 and March 28, 2020, ~~and $224,000 and $671,000, respectively, for the three and nine months ended September 28, 2019.~~respectively.


	September 26, 2020			December 31, 2019			April 3, 2021			December 31, 2020
Patents and Licenses:
Patents pending	$	—		$	—
Patents issued		278,000			1,712,000			278,000			278,000
Less accumulated amortization		(278,000	)		(1,071,000	)		(278,000	)		(278,000	)

Net patents issued		—			641,000			-			-
							$	-		$	-
	$	—		$	641,000

Amortization expense related to these items totaled $0 and $11,000 ~~respectively,~~ for of the three month periods ended April 3, 2021 and ~~nine months ended September 26, 2020 and $11,000 and $33,000, respectively, for the three and nine months ended September~~March 28, ~~2019.~~2020. No amortization expense is expected for the remainder of ~~2020,~~ 2021, 2022 and ~~2022.~~2023.

   September 26,
2020    December 31,
2019
Accrued Expenses and Other Long Term Liabilities:

Salaries Payable
   $ 14,000    $ 23,000
Compensated absences
   90,000    211,000
Compensation related
   —      4,000
Warranty reserve
   —      8,000
Operating lease
   —      152,000
Other
   30,000    54,000




   134,000    452,000
Less current portion
   (134,000 )    (440,000 )




Long term portion
   $ —      $ 12,000

   For the nine months ended,
   September 26,
2020    September 28,
2019
Warranty Reserve Activity:

Beginning balance
   $ 8,000    $ 8,000
Additions
   —      —
Deductions
   8,000    —




Ending balance
   $ —      $ 8,000

	April 3, 2021			December 31, 2020
Accrued Expenses and Other Long Term Liabilities:
Salaries Payable	$	30,000		$	10,000
Compensated absences		-			125,000
		30,000			135,000
Less current portion		(30,000	)		(135,000	)
Long term portion	$	-		$	-

	For the three months ended,
	April 3, 2021		March 28, 2020
Warranty Reserve Activity:
Beginning balance	$	-	$	8,000
Additions		-		-
Deductions		-		-
Ending balance	$	-	$	8,000

8. Subsequent Events

On ~~September 30,~~May 14, 2021, the Company entered into an agreement and plan of merger with Allied Integral United, Inc. (known as “Clearday”) and a wholly-owned subsidiary of the Company. The agreement terminates the earlier merger agreement between the same parties, dated February 26, 2020, ~~we announced that we received~~without liability. Subject to satisfaction of the conditions to closing of the merger, which include customary conditions and a ~~letter from~~minimum net working capital condition, the ~~Nasdaq Hearing Panel (“Panel”) determining to delist our~~Company will issue common stock ~~from The Nasdaq Stock Market. As a result of the decision, suspension of trading in our shares was effective at the open of business on September 30, 2020.~~

~~As previously disclosed, we appealed~~ to the Panel on February 27, 2020 due to its failure to maintain compliance with Nasdaq’s minimum closing bid price rule (“Bid Price Rule”) and minimum $2.5 million in shareholder equity (“Shareholder Equity Rule”). We previously cured its Shareholder Equity Rule deficiency. Under Nasdaq rules, as adjusted for the April 2020 Nasdaq rule change to allow for the tollingshareholders of the compliance period for companies experiencing a deficiency regarding the Bid Price Rule, we had until September 18, 2020 to demonstrate compliance with the Bid Price Rule for 10 consecutive trading days. We called a special meeting of stockholders to be held on September 2, 2020, however, we had to adjourn the meeting several times and only obtained the requisite stockholder vote on September 9, 2020, and the reverse split became effective in the market on September 10, 2020, by which time we were unable to show compliance with the Bid Price Rule’s 10 consecutive trading day requirement on or before September 18, 2020.

~~The Panel indicated~~Clearday such that, the Nasdaq Stock Market will complete the delisting by filing a Form 25 Notification of Delisting with the U.S. Securities and Exchange Commission, after applicable appeal periods have lapsed. Our common stock is currently quoted on the OTCQB.

We also announced that, although the “outside date” of our merger agreement with Clearday has expired, both the Company and Clearday intend to finalize an extension to the merger agreement and proceed with the merger. Clearday has agreed that the listing of our common stock on the Nasdaq is not a condition toat the closing of the ~~merger. Although~~merger, the Company’s stockholders, and the Clearday stockholders would own, respectively, approximately 96.35% and 3.65% of the combined company’s outstanding shares. The merger agreement was approved by boards of directors of both companies and is subject to stockholder approval. Assuming satisfaction of conditions, the merger is expected to close in the third quarter of 2021. Clearday was incorporated on December 20, 2017 and commenced its business on December 31, 2018 when it acquired private funds that engaged in several businesses that have been conducted for the prior 15 years. Since December 2018, Clearday has ~~subsequent to September 30, 2020, delivered substantially final financial statements for its 2019 fiscal year~~been engaged in developing and providing the ~~six months ended June 30, 2020, which are being reviewed by us, there is no assurance that~~next generation of technology-enabled longevity care and wellness solutions, in alignment with the ~~parties will complete such negotiation successfully or conclude~~changing characteristics, expectations, and behaviors of the ~~merger.~~longevity consumer market.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~General~~

~~Please see “Our Future Business” above regarding material information~~General

On February 26, 2020, we entered into a definitive merger agreement (with Allied Integral United, Inc. (“Clearday”), a privately-held company dedicated to delivering next generation longevity care and ~~updates to~~wellness services (the”Merger Agreement”), whereby our wholly-owned subsidiary will merge with and into Clearday in a stock-for-stock transaction with Clearday the ~~information in this section.~~

“Merger”).
Results of Operations
~~Three and nine months ended September 26, 2020~~
Quarter Ended April 3, 2021 compared to the ~~three and nine months ended September~~Quarter Ended March 28, ~~2019~~2020
We had $0 ~~and $184,000~~ of ~~revenues~~revenue in the ~~three and nine months ended September 26, 2020 compared with $157,000 and $157,000~~first quarter 2021. Total revenues decreased from $184,000 in the ~~three and nine months ended September 28, 2019.~~first quarter of 2020 to $0 in the first quarter of 2021. As noted above in “Our Future ~~Business~~”Business” we ceased work on additional manufacturing of our HTS Conductus wire. We also ceased work on the second phase of our DOE contract after January 2020. In the three and nine months ended September 26, 2020, there was $0 and $174,000 government contract revenues compared to $157,000 and $157,000 government contract revenues in the three and nine months ended September 28, 2019. There were $0 and $10,000 of commercial product revenues in the three and nine months ended September 26, 2020, compared to no commercial product revenue in the three and nine months ended September 28, 2019. Commercial product revenues and government contract revenues are expected to remain near zero as we pursue our announced merger agreement.
Cost of ~~commercial product~~ revenues includes all direct costs, manufacturing overhead, preproduction process development and provision for excess and obsolete inventories. ~~These~~The cost of revenues decreased to $0 in the ~~third~~first quarter of ~~2020~~2021 compared to ~~$943,000~~$190,000 for the ~~third~~first quarter of ~~2019. The~~2020. Our cost of ~~commercial product~~ revenues ~~decreased by $2,498,000, or 93%, to $190,000 in the nine months ended September 26, 2020 from $2,688,000 in the same period of 2019. These costs included~~includes both variable and fixed cost components. The variable component consists primarily of materials, assembly and test labor, overhead, which includes utilities, transportation costs and warranty costs. The fixed component includes equipment and leasehold depreciation, purchasing expenses and quality assurance costs. As a result, our gross profit margins decrease as revenue and production volumes decline due to lower sales volume and higher amounts of production overhead variances expensed to cost of sales; and our gross profit margins increase as our revenue and production volumes increase due to higher sales volume and lower amounts of production overhead variances expensed to cost of sales.
The following is an analysis of our product gross loss:

For the quarters ended
   Three months ended    Nine months ended April 3, 2021 March 28 2020
Dollars in thousands    September 26,
2020    September 28,
2019    September 26,
2020    September 28,
2019
(Dollars in thousands)
Commercial product revenues
   $ —      $ 0    $ 10    $ 0 $ - $ 10
Cost of commercial product revenues
   —      943    190    2,688 - 190








Gross loss
   $ —      $ (943 )    $ (180 )    $ (2,688 ) $ - $ (180 )








We had no commercial revenue and no cost of commercial cost of revenue and, therefore, no gross ~~loss~~profit in the ~~three months ended September 26, 2020~~first quarter of 2021 from ~~the sale~~manufacturing of our commercial products compared to a gross loss of ~~$943,000~~$180,000 in the three months ended September 28, 2019. We experienced a gross loss in the nine months ended September 26, 2020 and in the nine months ended September 28, 2019 due to: our increased preproduction manufacturing efforts to bring our Conductus wire to market and; no significant revenue to cover our overhead. In the three and nine months ended September 26, 2020 ourfirst quarter of 2020. Our first quarter 2021 gross loss decreased due to our discontinued efforts to produce Conductus wire.
In June 2017, we finalized negotiations on a $4.5 million DOE contract and began work on this government contract. ~~Our goals under this contract are to increase current carrying capacity and reduce costs of our Conductus wire.~~ Funding for the second phase of this contact had been delayed until late 2019. ~~We also ceased work on the second phase of our DOE contract after January 2020. Therefore, in the three and nine months ended September 26, 2020 our~~Our first quarter 2021 government contract revenues were $0 and ~~$174,000, and~~ cost of government contract revenues ~~were~~was $0, compared to $174,000 and $71,000, respectively, ~~compared to $157,000 and $157,000 government contract revenue~~ in the ~~three and nine months ended September 28, 2019, and related costs~~first quarter of ~~governments contract revenue~~2020. Since we have ceased manufacturing of ~~$10,000 and $27,000, respectively.~~our Conductus wire, we have now concluded our efforts on this contract.
Research and development expenses ~~relate~~related to ~~the~~ development of new Conductus wire products and new wire products manufacturing processes. ~~These~~Total expenses totaled $0 and $178,000, ~~respectively,~~ in the ~~three~~first quarters of 2021 and ~~nine months ended September 26,~~ 2020, ~~compared~~respectively. Our 2021 expenses decreased to ~~$622,000 and $1,875,000, respectively, in the three and nine months ended September 28, 2019. Our 2020 expenses were lower compared to 2019~~$0 as we ceased these efforts at the end of January 2020 when we stopped work on our Conductus wire.
Selling, general and administrative expenses ~~totaled $0.6 million,~~were $569,000 and ~~$2.2 million, respectively,~~$825,000, in the ~~three~~first quarters of 2021 and ~~nine months ended September 26,~~ 2020, ~~compared to $1.0 million and $2.9 million, respectively, in the three and nine months ended September 28, 2019.~~respectively. These expenses were lower in ~~2020~~the first quarter of 2021 compared ~~to 2019~~with the first quarter of 2020 principally due to aour previously announced cost reduction ~~plan.~~plan and our reduced operations as we pursue our merger with Clearday.
Other income of $0 and ~~$9,000 for~~$1,000 in the ~~three months ended September 26,~~first quarters of 2021 and 2020, ~~and September 28, 2019, respectively, and other income of $2,000 and $54,000 for the nine months ended September 26, 2020 and September 28, 2019,~~ respectively, was from interest income.
We had a net loss of ~~$0.6 million~~$569,000 and ~~$2.4~~$1.1 million for ~~the three months~~quarters ended ~~September 26,~~April 3, 2021 and March 28, 2020, ~~and September 28, 2019,~~ respectively. The net loss available to common stockholders totaled ~~$0.19~~$0.18 per common share in the ~~three months ended~~
~~September 26, 2020,~~first quarter of 2021, compared to a net loss of ~~$4.32~~$0.56 per common share in the ~~three months ended September 28, 2019. For the nine months ended September 26, 2020 our net loss totaled $2.4 million compared to a net loss~~first quarter of $7.3 million for the nine months ended September 28, 2019. The net loss available to common stockholders totaled $0.97 per common share in the nine months ended September 26, 2020, compared to $16.39 per common share in the nine months ended September 28, 2019.2020. The per share loss in ~~2020~~2021 is lower due to our ~~ceased HTS~~terminated wire ~~operations,~~manufacturing efforts, our cost reduction plan and the increased number of common shares outstanding at ~~September 26, 2020~~April 3, 2021 compared to ~~September~~March 28, ~~2019.~~2020.
Liquidity and Capital Resources
Cash Flow Analysis
As of ~~September 26, 2020,~~April 3, 2021, we had working capital of ~~$1.6~~$1.1 million, including ~~$1.8~~$1.3 million in cash and cash equivalents, compared to working capital of ~~$0.4~~$1.1 million at December 31, ~~2019,~~2020, which included ~~$0.7~~$1.3 million in cash and cash equivalents. We currently invest our excess cash in short-term, investment-grade, money-market instruments with maturities of three months or less.
Cash and cash equivalents ~~increased by $1.1 million from $0.7~~was $1.3 million at April 3, 2021 and December 31, ~~2019 to $1.8 million at September 26, 2020.~~2019.
Cash used in operations totaled ~~$2.7 million~~$453,000 in the first ~~nine months~~quarter of ~~2020. We~~2021. This amount was used ~~$2.4 million~~ to fund the cash portion of our net loss with ~~$0.3 used~~virtually no changes in our working capital.
~~We had a gain of $510,000 from the sale of most of our wire manufacturing equipment~~
No cash was used in ~~the quarter ended March 28, 2020, with no additional sales~~or provided by investing activities in the three ~~and nine~~ months ended ~~September 26, 2020.~~April 3, 2021.
We determined that certain of our patents were impaired in the quarter ended March 28, 2020 and wrote-down $134,000, with no additional write-down in the three and nine months ended September 26, 2020.
We also determined that certain of our inventory was obsolete in the quarter ended March 28, 2020 and wrote-down $190,000, with no additional write-down in the three and nine months ended September 26, 2020.
In the three ~~and nine~~ months ended ~~September 26, 2020, 828 and 978,584, respectively,~~April 3, 2021, we received loan proceeds in the amount of ~~warrants were exercised, providing us with proceeds~~$468,000 under the Paycheck Protection Program (the “PPP”) of ~~$0.0 million and $2.5 million, respectively.~~the CARES Act, which was enacted March 27, 2020.
16
Contractual Obligations and Commercial Commitments
We leased all of our properties. All of our leases expired or were terminated in March 2020. ~~We continue to rent certain properties month to month.~~ All of our operations were located in Austin, Texas.
We have not had other material changes outside of the ordinary course of business in our contractual obligations as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020.
Capital Expenditures
We made no investments for fixed assets in the ~~three and nine months ended September 26, 2020~~first quarter of 2021 and we do not expect to make capital expenditures during the remainder of ~~2020.~~2021.
Future Liquidity
For the ~~nine months~~quarter ended ~~September 26, 2020,~~April 3, 2021, we incurred a net loss of ~~$2.4~~$569,000 and had negative cash flows from operations of $453,000. In the full 2020 year, we incurred a net loss of $3 million and had negative cash flows from operations of ~~$2.7 million. In the full 2019 year, we incurred a net loss of $9.2 million and had negative cash flows from operations of $8.8~~$3.1 million.
~~On October 29, 2019,~~
Clearday made a good faith payment to us of $120,000 in early February 2021, which is non-refundable, to assist with our operating expenses as we ~~announced that we had commenced~~negotiate a process to explore strategic alternatives focused on maximizing shareholder value. Strategic alternatives to consider would include, among others, a strategic investment financing which would allow the company to pursue its current business plan to continue to commercialize the Conductus wire platform, a business combination such as anew merger ~~with another party, or a sale of the company.~~agreement.
On February 26, ~~2020, STI, AIU Special Merger Company, Inc., a Delaware corporation and wholly-owned subsidiary of STI (“Merger Sub”), and Clearday,~~2021, we entered into an unsecured note evidencing our loan under the ~~Merger Agreement, pursuant~~Paycheck Protection Program (the “PPP Loan”) in the principal amount of approximately $468,000. Proceeds of our PPP Loan may be used for payroll costs, costs related to ~~which, among~~certain group health care benefits, rent payments, utility payments, mortgage interest payments, interest payments on other ~~matters,~~debt obligations. Our current plans are to seek partial loan forgiveness in the amount of approximately $150,000, as permitted under the PPP Loan, and ~~subject~~ to repay the ~~satisfaction or waiver~~remainder.
Our cash resources are not sufficient to fund our business through the end of the ~~conditions set forth in the Merger Agreement, Merger Sub will merge~~current fiscal year, however, we believe they are sufficient to fund our operations through approximately August 2021, during which time we intend to pursue merger negotiations and, if they are successful, shareholder approval for a merger with and into Clearday, with Clearday continuing as a wholly-owned subsidiary of STI, and STI would amend its certificate to effect a reverse stock split of its shares of common stock, par value $0.001 per share (“STI Common Stock”) and change its name to Clearday, Inc. The Merger is intended to qualify as a ~~tax-free~~ ~~reorganization for U.S. federal income tax purposes and has been approved by the boards of directors of STI and Clearday, respectively.~~Clearday. There is no assurance ~~the Merger~~that these negotiations will be ~~completed. See “Our Future Business”~~successful or that shareholder approval will be obtained, in ~~Note 1 to the Notes to Financial Statements in this Report for additional material information and updates regarding the status of the Merger and the rights and obligations in the Merger Agreement.~~
~~In the three and nine months ended September 26, 2020, 828 and 978,594, respectively, of warrants were exercised, providing us with proceeds of $0.0 million and $2.5 million, respectively.~~
~~Subsequent to the announcement on January 28, 2020 about our cost reduction plan,~~which case we ~~started the process of selling, in separate transactions, assets that we deemed~~ ~~non-essential~~ going forward. The latest such transaction entered into on March 5th, when considered in combination with the prior transactions since January 28, 2020, may be deemed a material definitive purchase agreement for sales of various production, R&D, and testing equipment and selected intellectual property related primarily to our superconducting wire initiative. The aggregate sales prices of the post January 28th transactions was $1.2 million, all sold to purchasers having no affiliation with us. When the transactions completed, we continue to hold production, R&D, and testing assets for our Sapphire cryocooler business, along with intellectual property assets. The proceeds from this series of transactions is expected to be sufficient, together with our other capital resources, for us to complete the Merger, assuming it occurs without material additional delay. However, we would likely be unable to complete the Merger or continue operations if the Merger is not completed before the third quarter of 2021 unless we received additional financing, which is unlikely. If we do not proceed with the Merger, we would be likelywill need to seek ~~stockholder approval to sell our remaining assets and liquidate. Such a transaction, if it were to occur, would entail additional expenses and would likely leave minimal assets for distribution.~~
Our independent registered public accounting firm has included in their audit reports for 2018 through 2019 an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.bankruptcy protection. These factors raise substantial doubt about our ability to continue as a going concern.
~~Our cash resources will be sufficient to fund our business through the end of the current fiscal year, but not sufficient to fund our business for the next twelve months.~~
Net Operating Loss Carryforward
As of December 31, ~~2019,~~2020, we had net operating loss carryforwards for federal and state income tax purposes. We concluded that under the Internal Revenue Code change of control limitations, a maximum of ~~$17.9~~$14.2 million of our ~~$342.4~~$297.4 million net operating loss carryforwards ~~of which $325 million expire in the years 2020 through 2038,~~ would be available for reduction of taxable income and reduced both the deferred tax asset and valuation allowance accordingly. Due to the uncertainty surrounding their realization, we recorded a full valuation allowance against our net deferred tax assets. Accordingly, no deferred tax asset has been recorded in the accompanying condensed consolidated balance sheets.
Critical Accounting Policies and Estimates
Our discussion and analysis of our historical financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United ~~States.~~States. The preparation of these condensed consolidated financial statements in conformity with those principles requires us to make estimates of certain items and judgments as to certain future events including for example those related to bad debts, inventories, recovery of long-lived assets (including intangible assets), income taxes, warranty obligations, and contingencies. These determinations, even though inherently subjective and subject to change, affect the reported amounts of our assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. While we believe that our estimates are based on reasonable assumptions and judgments at the time they are made, some of our assumptions, estimates and judgments will inevitably prove to be incorrect. As a result, actual outcomes will likely differ from our accruals, and those differences—positive or negative—could be material. Some of our accruals are subject to adjustment, as we believe appropriate, based on revised estimates and reconciliation to the actual results when ~~available.~~available
In addition, we identified certain critical accounting policies which affect certain of our more significant estimates and assumptions used in preparing our condensed consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020. We have not made any material changes to our other policies.
Backlog
Our commercial backlog consisted of accepted product purchase orders with scheduled delivery dates during the next twelve months. We had no commercial backlog at ~~September 26, 2020~~April 3, 2021 and at December 31, ~~2019.~~2020.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We do not believe that there was a material change in our exposure to market risk at ~~September 26, 2020~~April 3, 2021 compared with our market risk exposure on December 31, ~~2019.~~2020. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020.
Item 4. Controls and Procedures
We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). As of the end of the period covered by this report we carried out an
evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities and Exchange Act of 1934, as amended. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
There were no changes in our internal controls over financial reporting during the quarter ended ~~September 26, 2020~~April 3, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We do not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
PART II

OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. Excluding ordinary, routine litigation incidental to our business, we are not currently a party to any legal proceedings that we believe would reasonably be expected to have a material adverse effect on our business, financial condition or results of operation or cash flow.
Item 1A. Risk Factors
A description of the risk factors associated with our business is contained in Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019~~2020 filed with the Securities and Exchange Commission on March ~~30, 2020 and subsequently filed Quarterly Reports on~~ ~~Form 10-Q.~~ ~~In addition:~~31, 2021.
~~The Merger with Clearday is uncertain. If the Merger does not proceed in the near future, we will likely need to liquidate.~~
Although we intend to complete the Merger with Clearday, there is no assurance we will finalize an extension to the Merger Agreement or complete the Merger within a reasonable time. If for any reason we do not proceed with the Merger, or we are unable to complete the Merger prior to the third quarter of 2021, we will likely need to seek stockholder approval to sell our remaining assets and liquidate. There is no assurance such approval will be obtained, and even if it is, there would be additional expenses we incurred to operate and pursue the stockholder approval. We would be unlikely to be able to receive additional financing. As a result a liquidation may leave us with minimal assets for distribution to stockholders.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits.

Number Description of Document
~~2.1~~ Amendment No. 1 to Agreement and Plan of Merger, by and among Superconductor Technologies Inc., AIU Special Merger Company, Inc. and Allied Integral United, Inc., dated May 12, 2020 (Incorporated by reference to Exhibit 2.1 filed with the Registrant’s Form ~~8-K~~ ~~(File~~ ~~No. 000-21074~~ ~~filed on May 18, 2020))~~
31.1 Statement of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2 Statement of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1 Statement of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
32.2 Statement of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS XBRL Instance Document*
101.SCH XBRL Taxonomy Extension Schema Document*
101.CAL XBRL Calculation Linkbase Document*
101.DEF XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB XBRL Label Linkbase Document*
101.PRE XBRL Taxonomy Presentation Linkbase Document*

*
* Filed herewith.
**
~~Furnished, not filed.~~
** Furnished, not filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.

SUPERCONDUCTOR TECHNOLOGIES INC.

~~SUPERCONDUCTOR TECHNOLOGIES INC.~~
Dated: ~~November 10, 2020~~May 18, 2021
/s/ William J. Buchanan
William J. Buchanan
Chief Financial Officer
/s/ Jeffrey A. Quiram
Jeffrey A. Quiram
President and Chief Executive Officer

20
24


	Nine Months Ended
	September 26, 2020			September 28, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,429,000	)	$	(7,301,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		38,000			704,000
Stock-based compensation expense		65,000			70,000
Gain from the sale of patents, property and equipment		(510,000	)		—
Write-down of intangibles		134,000			—
Obsolete inventory		190,000			—
Changes in assets and liabilities:
Accounts receivable		344,000			(157,000	)
Inventories		5,000			26,000
Prepaid expenses and other current assets		2,000			(86,000	)
Accounts payable, accrued expenses and other current liabilities		(491,000	)		(18,000	)

Net cash used in operating activities		(2,652,000	)		(6,762,000	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from the sale of patents, property and equipment		1,222,000			—

Net cash used in investing activities		1,222,000			—

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the sale of common stock		—			1,421,000
Net proceeds from the exercise of warrants		2,479,000			—

Net cash provided by financing activities		2,479,000			1,421,000

Net increase (decrease) in cash and cash equivalents		1,049,000			(5,341,000	)
Cash and cash equivalents at beginning of period		713,000			5,616,000

Cash and cash equivalents at end of period	$	1,762,000		$	275,000


NONCASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of preferred equity interest in real estate in exchange for common stock	$	1,600,000		$	—


	Convertible Preferred Stock				Common Stock					Capital in Excess of Par Value		Accumulated Deficit			Total
	Shares		Amount		Shares			Amount		Capital in Excess of Par Value		Accumulated Deficit			Total
Balance at June 27, 2020		328,925	$	—		2,750,955		$	3,000	$	332,993,000	$	(330,796,000	)	$	2,200,000
Issuance of common Stock for a preferred equity interest in real estate						400,000			—		1,600,000					1,600,000
Warrant exercises						828			—		2,000					2,000
Stock-based compensation											22,000					22,000
Cancellation of shares from the reverse stock split						(3	)		—
Net loss													(606,000	)		(606,000	)

Balance at September 26, 2020		328,925	$	—		3,151,780		$	3,000	$	334,617,000	$	(331,402,000	)	$	3,218,000


	Convertible Preferred Stock				Common Stock					Capital in Excess of Par Value		Accumulated Deficit			Total
	Shares		Amount		Shares			Amount		Capital in Excess of Par Value		Accumulated Deficit			Total
Balance at December 31, 2019		328,925	$	—		1,773,189		$	2,000	$	330,474,000	$	(328,973,000	)	$	1,503,000
Issuance of common Stock for a preferred equity interest in real estate						400,000			—		1,600,000					1,600,000
Warrant exercises						978,594			1,000		2,478,000					2,479,000
Stock-based compensation											65,000					65,000
Cancellation of shares from the reverse stock split						(3	)		—
Net loss													(2,429,000	)		(2,429,000	)

Balance at September 26, 2020		328,925	$	—		3,151,780		$	3,000	$	334,617,000	$	(331,402,000	)	$	3,218,000


	Number of Shares		Price Per Share		Weighted Average Exercise Price		Number of Options Exercisable		Weighted Average Exercise Price
Balance at December 31, 2019		13,725	$	19.20 - $51,480	$	252.00		7,450	$	448.10
Granted		—
Exercised		—
Canceled		5,862	$	19.20 - $51,480		246.80		3,162		441.10

Balance at September 26, 2020		7,863	$	19.20 - $28,440	$	255.90		4,288	$	453.30


	Number of Shares		Weighted Average Grant Date Fair Value
Balance nonvested at December 31, 2019		33	$	105.00
Granted		—		—
Vested		—		—
Forfeited		—		—

Balance nonvested at September 26, 2020		33	$	105.00


	Common Shares
	Total		Currently Exercisable		Price per Share		Expiration Date
(1) Warrants related to October 2015 financing		13,552		13,552	$	600.00		October 14, 2020
(2) Warrants related to October 2015 financing		903		903	$	656.30		October 14, 2020
(3) Warrants related to August 2016 financing		5,350		5,350	$	300.00		February 2, 2022
(4) Warrants related to August 2016 financing		500		500	$	385.50		August 2, 2021
(5) Warrants related to December 2016 financing		68,567		68,567	$	200.00		December 14, 2021
(6) Warrants related to March 2018 financing		15,810		15,810	$	114.00		September 9, 2023
(7) Warrants related to March 2018 financing		1,107		1,107	$	158.00		March 6, 2023
(8) Warrants related to July 2018 financing		257,143		257,143	$	35.00		July 25, 2023
(9) Warrants related to July 2018 financing		15,428		15,428	$	43.75		July 25, 2023
(10) Warrants related to May 2019 financing		11,900		11,900	$	12.50		May 23, 2024
(11) Warrants related to October 2019 financing		217,200		217,200	$	2.50		October 10, 2024
(12) Warrants related to October 2019 financing		30,916		30,916	$	3.13		October 8, 2024


	September 26, 2020				December 31, 2019
Accounts receivable:
Accounts receivable-commercial products	$	—			$	347,000
Less: allowance for doubtful accounts		—				(3,000	)

	$	—			$	344,000


	September 26, 2020				December 31, 2019
Inventories:
Raw materials	$	—			$	152,000
Work In Process		68,000				111,000

	$	68,000			$	263,000


	September 26, 2020				December 31, 2019
Property and Equipment:
Equipment	$	316,000			$	11,911,000
Leasehold improvements		—				1,065,000
Furniture and fixtures		—				205,000
				��
		316,000				13,181,000
Less: accumulated depreciation and amortization		(316,000	)			(12,948,000	)

	$	—			$	233,000


	September 26, 2020			December 31, 2019
Accrued Expenses and Other Long Term Liabilities:
Salaries Payable	$	14,000		$	23,000
Compensated absences		90,000			211,000
Compensation related		—			4,000
Warranty reserve		—			8,000
Operating lease		—			152,000
Other		30,000			54,000

		134,000			452,000
Less current portion		(134,000	)		(440,000	)

Long term portion	$	—		$	12,000


	For the nine months ended,
	September 26, 2020		September 28, 2019
Warranty Reserve Activity:
Beginning balance	$	8,000	$	8,000
Additions		—		—
Deductions		8,000		—

Ending balance	$	—	$	8,000

												For the quarters ended
	Three months ended					Nine months ended						April 3, 2021		March 28 2020
Dollars in thousands	September 26, 2020		September 28, 2019			September 26, 2020			September 28, 2019
												(Dollars in thousands)
Commercial product revenues	$	—	$	0		$	10		$	0		$	-	$	10
Cost of commercial product revenues		—		943			190			2,688			-		190

Gross loss	$	—	$	(943	)	$	(180	)	$	(2,688	)	$	-	$	(180	)


Number		Description of Document

~~2.1~~		Amendment No. 1 to Agreement and Plan of Merger, by and among Superconductor Technologies Inc., AIU Special Merger Company, Inc. and Allied Integral United, Inc., dated May 12, 2020 (Incorporated by reference to Exhibit 2.1 filed with the Registrant’s Form ~~8-K~~ ~~(File~~ ~~No. 000-21074~~ ~~filed on May 18, 2020))~~

31.1		Statement of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2		Statement of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1		Statement of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

32.2		Statement of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

101.INS		XBRL Instance Document*

101.SCH		XBRL Taxonomy Extension Schema Document*

101.CAL		XBRL Calculation Linkbase Document*

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB		XBRL Label Linkbase Document*

101.PRE		XBRL Taxonomy Presentation Linkbase Document*

						SUPERCONDUCTOR TECHNOLOGIES INC.
						~~SUPERCONDUCTOR TECHNOLOGIES INC.~~

Dated: ~~November 10, 2020~~May 18, 2021						/s/ William J. Buchanan
						William J. Buchanan
						Chief Financial Officer

						/s/ Jeffrey A. Quiram
						Jeffrey A. Quiram
						President and Chief Executive Officer

Large accelerated filer

Accelerated filer [ ]

☐Non-accelerated filer [X]

~~Non-accelerated filer~~

Smaller reporting company [X]

Emerging growth company