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Technology Stocks : Superconductor Technologies : SCON -- Ignore unavailable to you. Want to Upgrade?

To: John Finley who wrote (312)	2/18/2000 7:59:00 AM
From: SEAN007	Read Replies (3) \| Respond to of 903

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