SALT LAKE CITY--(BUSINESS WIRE)--Feb. 18, 2000--Pluvia Securities
Research Initiates Coverage of Superconductor Technologies Inc.
(Nasdaq:SCON.O) with a Sell Recommendation.
According to SEC filings made by SCON on February 11, 2000, SCON
sold 2,473,701 shares of common stock at the discounted price of $3.25
per share. In that filing, SCON promises to deliver the shares bought
at $3.25 "on or about February 9, 2000", noting the price of SCON
stock closed the day prior -- on February 8, at $12.00 per share.
According to the same February 11 SEC filing, the sale of the
$3.25 stock included 153,846 shares of stock; "offered in exchange for
short-term indebtedness of $500,000". Using the SCON stock price of
$12.00 we calculate SCON paid approx. $1.86 million of stock to
extinguish the $500,000 debt.
In addition to the sale of 2.47 million shares of $3.25 stock,
SCON's February 11 filing reports; "The holder of all of the series
A-2, A-3 and C preferred stock are converting all of that preferred
stock into 2,458,491 shares of common stock..." It continues; "This
conversion is conditioned upon and will occur concurrently with the
consummation of this offering." Combined, SCON's February 11,
registration allows approx. 4.9 million new shares of stock to be sold
-- all purchased at approx. $2-$4 per share.
In addition to the 4.9 million new shares of stock, the same
February 11 SEC filing reports 1,962,488 warrants are outstanding and
convertible to common at prices between $3.00 and $5.30.
SCON's dilutive, discounted stock offerings may continue
according to theses SCON admissions in the same February SEC filing;
"We need additional debt or equity financing to fully implement our
business plan", and; "In addition, to obtain benefits without spending
cash, we have in the past and may in the future offer stock to parties
in connection with debt, leasing, supply agreements or similar
arrangements. In those cases, we may issue warrants or other
securities providing for the purchase of common stock. These future
financing and operating arrangements will likely result in the
eventual issuance common stock that may dilute the interests of the
current holders of common stock."
After announcing a purchase order of 27 "Superfilters" on
Tuesday, SCON's stock ran from 13 1/8 to a Thursday high of 45 1/2.
But SCON's "Superfilter" is not new and faces competition from several
similar products. According to Phil Denning from SCON's PR firm, SCON
started selling their "Superfilter" product in 1997. SCON reports
total sales of their commercial filter products, from introduction in
1997 to October of 1999, were only $3.39 million. From 1998 to 1999
SCON reports improving 9-month sales by only $234,000, to a total of
$1.27 million, even though SCON offered their biggest customer a
warrant to purchase 1 million shares of SCON stock at $4 per share as
an incentive to execute a purchase order during that same period.
Meanwhile, the source of the majority of SCON historic revenue is
down. SCON reports; "91% of our past net revenues have been from
research and development contract sales directly to the government or
to resellers to the government." A review of SCON SEC filed financials
show "Government Contract Revenues" declining approx. 30% for the
comparable nine months period from 1998 to 1999, with a similar 26%
drop in year to year revenue from 1997-1998.
In summary, we issue this sell recommendation for SCON stock at
$40, with a 6 month target of $15 based on:
1. Concern regarding the effect of approx. 4.9 million shares of
SCON stock purchased at $3-$5 that became available for sale on
or about February 11, 2000, and 1.96 million warrants convertible
to common stock between $3-5.30;
2. SCON's significant continued losses; small year to year sales
revenue; small revenue growth in commercial "Superfilter" sales;
and, declining year to year Government Contract Revenue;
3. SCON's need for ongoing financing that will likely cause
additional future dilution.
Pluvia Securities Research, their agents, associates, and or
employees have investment positions consistent with the above-stated
investment opinion.
--30--MC/se*
CONTACT: Pluvia Securities Research
Steve Pluvia, 801/554-6898
e-mail pluvia2@aol.com
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