SCON

Superconductor Technologies Inc. (SCON)

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Superconductor Technologies (SCON)

Q2 2013 Earnings Call

August 13, 2013 11:00 am ET

Executives

Cathy Mattison

Jeffrey A. Quiram - Chief Executive Officer, President, Director and Member of Stock Option Committee

William J. Buchanan - Chief Financial Officer, Principal Accounting Officer, Vice President, Controller and Assistant Secretary

Analysts

James Stephen Collins

Presentation

Operator

Ladies and gentleman, thank you for standing by. Welcome to the STI Second Quarter 2013 Conference Call. [Operator Instructions] This conference is being recorded today, Tuesday, August 13, 2013.

I would now like to turn the call over to Cathy Mattison. Please go ahead.

Cathy Mattison

Thank you, Marrissa. Good morning, everyone, and thank you for joining us for STI's second quarter conference call. By now, you should have received the copy of the press release. If you have not, please feel free to contact LHA at (415) 433-3777, and we will get that out to you right away.

With us from management today are Jeff Quiram, President and Chief Executive Officer; and Bill Buchanan, Chief Financial Officer. I will review the Safe Harbor provisions of this conference call, and then I will turn the call over to Jeff. Various comments regarding management's beliefs, expectations and plans for the future are forward-looking statements and are made in reliance upon the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and are subject to various risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ from those expressed in the forward-looking statements, and those differences could be material. Forward-looking statements can be affected by many other factors, including those described in the Risk Factors and the MD&A sections of STI's 2012 annual report on Form 10-K. These documents are available online at STI's website, www.suptech.com, or through the SEC website, www.sec.gov. Forward-looking statements are based on information presently available to senior management, and STI has not assumed any duty to update forward-looking statements.

And now, I would like to turn the call over to Jeff. Please go ahead.

Jeffrey A. Quiram

Thank you, Cathy, and thank you, all, for joining us today. I will provide an update on our Conductus Wire program, and then Bill will review the financials.

I'm pleased to report that last week, we completed a very successful public offering of our stock. Our goal for this offering was to raise the necessary capital to fully execute on our business plan, which is to produce Conductus Wire in sufficient quantity for STI to achieve positive cash flow from operations in the second half of 2014. This offering was sized to achieve that goal even though it required us to raise a large amount of capital relative to the prevailing market value of STI.

This offering was well received by both existing and new investors, and we were able to raise the entire amount of capital we desired. In fact, we had indications of interest from investors that far exceeded the amount of capital we wished to raise.

As a result of this successful offering, we are now positioned financially to attack an HTS wire market that continues to be extremely attractive. As we have discussed in the past, there are simply not enough HTS wire to supply the market's needs. Companies with plans to bring superconducting products to market must secure a supply of HTS wire for 2014 and beyond. We intend to be a significant and successful wire supplier to help fulfill this industry demand beginning next year.

During the second quarter of 2013, we made great progress in the ongoing production ramp of our pilot RCE machine. We also attained the important milestone of shipping Conductus wire against 3 existing purchase orders from industry-leading multinational companies. The shipments consisted of Conductus wire that attained critical current performance between 250 and 400 amps per centimeter width for the various specific customer application. Our wire is undergoing qualification for use in devices such as Superconducting Fault Current Limiters and high-field magnets.

I'm happy to report that since mid-July, when we provided an update, we have shipped additional Conductus wire as we continue to fulfill these existing purchase orders.

In the last several weeks, we have also been preparing to ship Conductus wire to a new customer that is performing a detailed technical evaluation for a new application. Since we believe that our wire will meet the stated technical performance requirements, this new first-stage customer may be the latest to place a purchase order for the Conductus wire necessary to complete qualification in their device.

These wire shipments are notable for several reasons: first, they indicate serious market interest in Conductus wire; second, these shipments deliver the first wire revenue for STI in the second quarter, which is very satisfying for our team.

While the amount of revenue is very modest at this point, we are extremely pleased with the ongoing customer qualification efforts. We believe that very soon, these companies will require significant quantities of HTS wire at various lengths to successfully complete upcoming smart grid projects.

Our intent is to secure business with these customers as we transition from pilot to full production in preparation for the availability of commercial quantities of Conductus wire in 2014.

As we continue to make great strides in our wire program, the electrical device industry continues to pursue projects that represent significant opportunities for STI. The industry is adopting high-temperature superconducting technology to address problems unsolvable by conventional means. In fact, the majority of our purchase orders are from industry-leading multinational industrial companies with product development teams in place. Many have pipelines of products they plan to launch using the game-changing technology of HTS wire. To do so, they need a reliable supply of that wire.

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