10-Q

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 July 2, 2016

¨ 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.)

9101 Wall Street, Suite 1300, Austin, Texas 78754

(Address of principal executive offices & zip code)

(512) 334-8900

(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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

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

Large Accelerated Filer	¨	Accelerated Filer	¨
Non-Accelerated Filer	¨  (do not check if smaller reporting company)	Smaller reporting company	x

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

We had 3,276,818 shares of our common stock outstanding as of the close of business on August 5, 2016.

SUPERCONDUCTOR TECHNOLOGIES INC.

INDEX TO FORM 10-Q

Three Months Ended July 2, 2016

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS		1
PART I -	FINANCIAL INFORMATION
	ITEM 1. Financial Statements	2
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Interim Condensed Consolidated Financial Statements	5
	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	21
	ITEM 4. Controls and Procedures	21
PART II -	OTHER INFORMATION
	ITEM 1. Legal Proceedings	21
	ITEM 1A. Risk Factors	22
	ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	22
	ITEM 3. Defaults Upon Senior Securities	22
	ITEM 4. Mine Safety Disclosures	22
	ITEM 5. Other Information	23
	ITEM 6. Exhibits	23
SIGNATURES		24

i

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report (“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 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 beliefs and 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.

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 limited cash and a history of losses;

• our need to materially grow our revenues from commercial operations and/or to raise additional capital (which financing may not be available on acceptable terms or at all) over the next 12-months to implement our current business plan and maintain our viability;

• the performance and use of our equipment to produce wire in accordance with our timetable;

• overcoming technical challenges in attaining milestones to develop and manufacture commercial lengths of our high temperature superconducting (HTS) wire;

• the possibility of delays in customer evaluation and acceptance of our HTS wire;

• the limited number of potential customers and customer pressures on the selling prices of our products;

• the limited number of suppliers for some of our components and our HTS wire;

• there being no significant backlog from quarter to quarter;

• our market being characterized by rapidly advancing technology;

• the impact of competitive products, technologies and pricing;

• manufacturing capacity constraints and difficulties;

• 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; and

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

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 for 2015.

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.

1

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

SUPERCONDUCTOR TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Six Months Ended
	July 2, 2016			June 27, 2015			July 2, 2016			June 27, 2015
Net revenues	$	11,000		$	71,000		$	100,000		$	126,000
Costs and expenses:
Cost of revenues		971,000			689,000			1,835,000			1,445,000
Research and development		701,000			1,017,000			1,417,000			2,474,000
Selling, general and administrative		1,420,000			1,318,000			2,583,000			2,845,000
Total costs and expenses		3,092,000			3,024,000			5,835,000			6,764,000
Loss from operations		(3,081,000	)		(2,953,000	)		(5,735,000	)		(6,638,000	)
Other Income and Expense:
Adjustments to fair value of warrant derivatives		—			752,000			21,000			3,383,000
Adjustments to warrant exercise price		—			—			—			(367,000	)
Other (expense) income		3,000			(208,000	)		6,000			(208,000	)
Net loss	$	(3,078,000	)	$	(2,409,000	)	$	(5,708,000	)	$	(3,830,000	)
Basic and diluted net loss per common share	$	(1.14	)	$	(2.11	)	$	(2.14	)	$	(3.71	)
Basic and diluted weighted average number of common shares outstanding		2,711,697			1,143,138			2,668,799			1,031,238

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

2

SUPERCONDUCTOR TECHNOLOGIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	July 2,			December 31,
	2016			2015
	(Unaudited)			(See Note)
ASSETS
Current Assets:
Cash and cash equivalents	$	3,417,000		$	7,469,000
Accounts receivable, net		16,000			38,000
Inventory, net		62,000			121,000
Prepaid expenses and other current assets		183,000			122,000
Total Current Assets		3,678,000			7,750,000
Property and equipment, net of accumulated depreciation of $8,410,000 and $7,290,000, respectively		4,431,000			5,551,000
Patents, licenses and purchased technology, net of accumulated amortization of $907,000 and $869,000, respectively		994,000			938,000
Other assets		97,000			126,000
Total Assets	$	9,200,000		$	14,365,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	246,000		$	432,000
Accrued expenses		791,000			418,000
Total Current Liabilities		1,037,000			850,000
Other long-term liabilities		230,000			393,000
Total Liabilities		1,267,000			1,243,000
Commitments and contingencies-Notes 5 and 6
Stockholders’ Equity:
Preferred stock, $.001 par value, 2,000,000 shares authorized, 330,124 and 330,873 shares issued and outstanding, respectively		—			—
Common stock, $.001 par value, 250,000,000 shares authorized, 2,783,214 and 2,640,547 shares issued and outstanding, respectively		3,000			3,000
Capital in excess of par value		304,608,000			304,089,000
Accumulated deficit		(296,678,000	)		(290,970,000	)
Total Stockholders’ Equity		7,933,000			13,122,000
Total Liabilities and Stockholders’ Equity	$	9,200,000		$	14,365,000

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

Note – December 31, 2015 balances were derived from audited financial statements.

3

SUPERCONDUCTOR TECHNOLOGIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	July 2, 2016			June 27, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(5,708,000	)	$	(3,830,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,157,000			1,249,000
Stock-based compensation expense		519,000			1,085,000
Adjustments to fair value of warrant derivatives		21,000			(3,383,000	)
Adjustments to warrant exercise price		—			367,000
Provision for excess or obsolete inventory		—			58,000
Gain on disposal of property and equipment		—			(1,000	)
Changes in assets and liabilities:
Accounts receivable		22,000			47,000
Inventories		59,000			16,000
Prepaid expenses and other current assets		(61,000	)		26,000
Patents, licenses and purchased technology		(94,000	)		(38,000	)
Other assets		30,000			124,000
Accounts payable, accrued expenses and other current liabilities		3,000			(346,000	)
Net cash used in operating activities		(4,052,000	)		(4,626,000	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		—			(141,000	)
Net proceeds from the sale of property and equipment		—			1,000
Net cash used in investing activities		—			(140,000	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the sale of common stock		—			4,596,000
Net proceeds from the exercise of outstanding warrants		—			1,687,000
Net cash provided by financing activities		—			6,283,000
Net increase (decrease) in cash and cash equivalents		(4,052,000	)		1,517,000
Cash and cash equivalents at beginning of period		7,469,000			1,238,000
Cash and cash equivalents at end of period	$	3,417,000		$	2,755,000
Supplemental non-cash financing disclosure:
Warrant liability converted to capital in excess of par	$	—		$	669,000

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

4

SUPERCONDUCTOR TECHNOLOGIES INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. General

Superconductor Technologies Inc. (together with our subsidiaries, “we” or “us”) was incorporated in Delaware on May 11, 1987. We develop and produce high temperature superconducting (HTS) materials and associated technologies. We have generated more than 100 patents as well as proprietary trade secrets and manufacturing expertise. We are now leveraging our key enabling technologies in HTS materials and cryogenics, to pursue emerging opportunities in the electrical grid and in equipment platforms that utilize electrical circuits. In January 2012, we took possession of a facility in Austin, Texas and have moved our HTS wire processes and our research and development to Austin. We intend to close our Santa Barbara, California facility this year and consolidate all our operations in our Austin, Texas facility.

Our initial superconducting products were completed in 1998, and we began delivery to a number of wireless network providers. In the following 13 years, our cost reducing efforts led to the invention of our proprietary, high-yield and high throughput HTS material deposition manufacturing process.

In the last several years we have focused our research and development efforts on adapting our successful HTS materials deposition techniques to the production of our HTS Conductus^® wire for next generation power applications. While most of our current commercial product revenues come from the sale of our legacy high performance wireless communications infrastructure products, production of our Conductus wire is our principal opportunity to grow our future revenue.

The unaudited condensed consolidated financial information furnished herein has been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are necessary for a fair statement of the results of operations for the periods presented.

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Our ability to realize our investment in infrastructure is dependent on market acceptance and realization of significant revenues from Conductus wire products. Our independent registered public accounting firm has included in its audit reports for 2015 and 2014 an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. Actual results could differ from those estimates and such differences may be material to the condensed consolidated financial statements. This quarterly report on Form 10-Q should be read in conjunction with our Form 10-K for 2015 (See Note 2. Summary of Significant Accounting Policies – Basis of Presentation). The results of operations for the six months ended July 2, 2016 are not necessarily indicative of the results for all of 2016.

2. Summary of Significant Accounting Policies

Basis of Presentation

We have incurred significant net losses since our inception and have an accumulated deficit of $296.7 million. In 2015, we incurred a net loss of $8.6 million and had negative cash flows from operations of $8.5 million. At July 2, 2016, we had $3.4 million in cash compared to $7.5 million in cash and cash equivalents as of December 31, 2015. Our cash resources will not be sufficient to fund our business for the next 12 months. We will need to grow our revenues from commercial operations and/or raise additional funds over the next 12 months to meet our working capital needs. On August 2, 2016, we closed a registered offering of our common stock, Series C preferred stock along with a concurrent private placement of warrants to purchase 0.75 of a share of our common stock that provided gross proceeds of $2.2 million and net proceeds to us, after deducting fees and our estimated offering expenses, of $1.9 million. (See Note 8. Subsequent Events in this Report) 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. If we cannot raise any needed funds, we might be forced to make further substantial reductions in our operating expenses, which could adversely affect our ability to implement our current business plan and ultimately our viability as a company. These factors raise substantial doubt about our ability to continue as a going concern.

5

Our plans regarding improving our future liquidity will require us to successfully use our expertise and our technology to generate revenues in various ways, including commercial operations, joint ventures and licenses. We have invested and will continue to invest in our Austin, Texas manufacturing facility to enable us to produce our Conductus wire products. Delays in the timing of our ability to, including but not limited to, raise additional capital, unexpected production delays, and our ability to sell our Conductus wire products in large scale could substantially impact our estimates used in the determination of expected future cash flows and/or expected future profitability. If we fail to increase our revenues, we may not achieve and may not maintain profitability and we may not realize our investment in infrastructure. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of the uncertainties set forth above.

On July 18, 2016, we effected a 1-for-15 reverse stock split of our common stock, or the Reverse Stock Split. As a result of the Reverse Stock Split, every fifteen shares of our pre-Reverse Stock Split common stock were combined and reclassified into one share of our common stock. The Reverse Stock Split did not change the authorized number of shares or the par value of our common stock. Certain of the information contained in the documents incorporated into this Report present information on our common stock on a pre-Reverse Split basis. Share and per share data included herein has been retroactively restated for the effect of the Reverse Stock Split. 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 2015. We have not made any material changes to these policies.

We have reviewed recently issued Financial Accounting Standards Board pronouncements and do not believe they will have a material impact on our condensed consolidated financial statements.

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 from time to time 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 collectibility. Account 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

Our revenues have principally been derived from the sale of our wireless communications products, and to an increasing extent our Conductus wire, and 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.

Shipping and Handling Fees and Costs

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

6

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 research and development expense as incurred and include salary, facility, depreciation and material expenses.

Inventories

Inventories were stated at the lower of cost or market, 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 July 2, 2016 net inventory value was $62,000 compared to a December 31, 2015 value of $121,000. 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 (minimal sales in the current quarter and year to date, and no backlog of sales orders as of July 2, 2016 related to our wireless business), or the estimated forecast of product demand and production requirements. Costs associated with idle capacity are charged to expense immediately.

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 seven years. Leasehold improvements and assets financed under capital leases are amortized over the shorter of their useful 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. In the first six months of 2016 and 2015, there were no retirements or disposals and we realized gains of $0 and $1,000, respectively, from sale of previously retired equipment.

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.

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. The analyses necessarily involve significant management judgment. Market acceptance and significant revenues from our new Conductus wire is a key assumption in realization of our investment in long-lived assets. 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 for recoverability during 2015 and determined there was no impairment. We believe there have been no triggering events in the six months ended July 2, 2016 that would cause us to retest the recoverability of these long-lived assets.

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. The costs of our defense in such matters are expensed as incurred. Insurance proceeds recoverable are recorded when deemed probable.

7

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 further clarifies 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. The adoption of this guidance has not had a material impact on our consolidated financial statements as we concluded our tax positions are highly certain of being settled at 100% of the benefit claimed. Guidance is also provided on the accounting for the related interest and penalties, financial statement and disclosure. We are currently not under examination by any taxing authority nor have we been notified of an impending examination. The oldest California and federal tax years that remain open to possible evaluation and interpretation of our tax position are 2011 and 2012, respectively.

As of December 31, 2015, we had net operating loss carryforwards for federal and state income tax purposes of $334.7 million and $150.5 million, respectively, which expire in the years 2018 through 2035. However, during 2015, we concluded that under the Internal Revenue Code change of control limitations, a maximum of $38.3 million and $37.7 million, respectively, 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 six months ended July 2, 2016 and June 27, 2015.

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. Potential common shares are not included in the calculation of diluted loss per share because their effect is anti-dilutive.

Stock-based Compensation

We grant both restricted stock awards and stock options to our key employees, directors and consultants. For the three and six months ended July 2, 2016 and June 27, 2015 no options or awards were granted.

The following table presents details of total stock-based compensation expense that is included in each functional line item on our condensed consolidated statements of operations:

	Three months ended				Six months ended
	July 2, 2016		June 27, 2015		July 2, 2016		June 27, 2015
Cost of revenue	$	2,000	$	1,000	$	3,000	$	1,000
Research and development		37,000		78,000		74,000		169,000
Selling, general and administrative		219,000		454,000		442,000		915,000
Total stock-based compensation expense	$	258,000	$	533,000	$	519,000	$	1,085,000

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, estimated provisions for warranty costs, fair value of warrant derivatives, stock-based compensation, 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.

8

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, accounts receivable, and other current liabilities as of July 2, 2016 approximate fair value.

The fair value of our warrant derivative liability was estimated using the Binomial Lattice option valuation model.

Fair value for financial reporting purposes is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date, ASC 820, “Fair Value Measurement and Disclosures”, also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The fair value of our warrant liabilities was determined based on level 3 inputs. These derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as Adjustments to fair value of derivatives. See Note 3 — Stockholders’ Equity: Warrants.

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. As discussed in this Report, we are adapting our unique HTS material deposition techniques to produce our energy efficient, cost-effective and high performance Conductus wire. We expect commercial level sales of our Conductus wire products later this year.

Certain Risks and Uncertainties

Our long-term prospects are dependent upon the successful commercialization and market acceptance of our Conductus wire products. We do not currently have a customer buying significant amounts of our wire products.

Current sales of our wireless products are to wireless network operators in the United States and our product sales have historically been concentrated in a small number of customers. For the six months ended July 2, 2016, AT&T and Verizon Wireless represented 88% of total net revenues. For the three and six months ended June 27, 2015, these customers represented 100% and 93%, respectively, of total net revenues. The loss of or reduction in sales, or the inability to collect outstanding accounts receivable, from any of these customers could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We currently rely on a limited number of suppliers for key components of our products. The loss of any of these suppliers could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In connection with the sales of our commercial products, we indemnify, without limit or term, our customers 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 indemnity obligations because of the uncertainty as to whether a claim might arise and how much it might total.

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3. Stockholders’ Equity

The following is a summary of stockholders’ equity transactions for the six months ended July 2, 2016:

	Convertible									Capital in
	Preferred Stock					Common Stock				Excess of		Accumulated
	Shares			Amount		Shares		Amount		Par Value		Deficit			Total
Balance at December 31, 2015		330,873		$	—		2,640,547	$	3,000	$	304,089,000	$	(290,970,000	)	$	13,122,000
Conversion of Series B preferred stock to common stock		(749	)		—		142,667		—		—					—
Stock-based compensation											519,000					519,000
Net loss													(5,708,000	)		(5,708,000	)
Balance at July 2, 2016		330,124		$	—		2,783,214	$	3,000	$	304,608,000	$	(296,678,000	)	$	7, 933,000

Stock Options

At July 2, 2016, 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 six months ended July 2, 2016 or during the three and six months ended June 27, 2015.

The impact to the condensed consolidated statements of operations for the three and six months ended July 2, 2016 on net loss was $95,000 and $194,000 and $0.04 and $0.07 on basic and diluted net loss per common share, respectively, compared to $93,000 and $205,000 and $0.08 and $0.20 on basic and diluted net loss per common share for the three and six months ended June 27, 2015. No stock compensation cost was capitalized during either period. The total compensation cost related to nonvested stock options not yet recognized was $0.6 million and the weighted-average period over which the cost is expected to be recognized was 1 year at July 2, 2016.

The following is a summary of stock option transactions under our Stock Option Plan at July 2, 2016:

	Number of Shares			Price Per Share		Weighted Average Exercise Price		Number of Options Exercisable		Weighted Average Exercise Price
Balance at December 31, 2015		131,573		$	3.30 - $ 936.00	$	38.10		71,351	$	66.15
Granted		—					—
Exercised		—					—
Canceled		(369	)		498.60 – 936.00		711.75
Balance at July 2, 2016		131,204		$	3.30 - $921.60	$	36.14		72,093	$	62.46

The outstanding options expire on various dates through the end of November 2024. The weighted-average contractual term of options outstanding is 8.1 years and the weighted-average contractual term of stock options currently exercisable is 7.2 years. The exercise prices for these options range from $3.30 to $921.60 per share, for an aggregate exercise price of $4.7 million. At July 2, 2016, 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 four years. Some of our grants also have performance conditions. The following is a summary of our restricted stock award transactions at July 2, 2016:

	Number of Shares			Weighted Average Grant Date Fair Value
Balance nonvested at December 31, 2015		34,153		$	41.55
Granted		—			—
Vested		(555	)		41.40
Forfeited		—			—
Balance nonvested at July 2, 2016		33,598		$	41.55

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The impact to the condensed consolidated statements of operations was $163,000 and $325,000 and $0.06 and $0.12, respectively, on basic and diluted net loss per common share for the three and six months ended July 2, 2016, respectively, and $440,000 and $880,000 and $0.38 and $0.85 on basic and diluted net loss per common share for the three and six months ended June 27, 2015, respectively. No stock compensation cost was capitalized during the period. The total compensation cost related to nonvested awards not yet recognized was $282,000 and the weighted-average period over which the cost is expected to be recognized was 7 months.

Warrants

The following is a summary of outstanding warrants at July 2, 2016:

		Common Shares
		Total		Currently Exercisable		Price per Share		Expiration Date
(1)	Warrants related to February 2012 financing		27,963		27,963	$	243.00	February 22, 2017
(2)	Warrants related to November 2012 financing		556		556	$	67.50	November 26, 2016
(3)	Warrants related to December 2012 financing		1,042		1,042	$	67.50	December 18, 2016
(4)	Warrants related to April 2013 financing		17,127		17,127	$	81.75	April 26, 2019
(5)	Warrants related to August 2013 financing		7,845		7,845	$	33.73	August 5, 2016
(6)	Warrants related to August 2013 financing		407,825		407,825	$	5.25	August 9, 2018
(7)	Warrants related to February 2015 agreement		3,056		3,056	$	45.05	February 13, 2020
(8)	Warrants related to March 2015 financing		102,093		102,093	$	24.49	September 24, 2020
(9)	Warrants related to March 2015 financing		10,209		10,209	$	30.61	March 20, 2020
(10)	Warrants related to October 2015 financing		1,355,171		1,355,171	$	6.00	October 14, 2020
(11)	Warrants related to October 2015 financing		90,345		90,345	$	6.56	October 14, 2020

Warrants (1)-(5) and (7)-(11) 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.

On July 27, 2016, we entered into a Securities Purchase Agreement (“Purchase Agreement”) with certain investors (the “Purchasers”), pursuant to which we agreed to issue to the Purchasers, in a registered offering, (i) an aggregate of 293,604 shares of our common stock at a price of $3.08375 per share and (ii) to Purchasers, whose purchase of our common stock would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this offering, an aggregate of 1,294.595255 shares of our Series C Convertible Preferred Stock (the “Series C Preferred”). The Series C Preferred have a stated value of $1,000 and are convertible into shares of our common stock at $3.08375 per share, the public offering price of the shares of our common stock. Subject to certain prohibitions on conversion, the 1,294.595255 shares of Series C Preferred would be convertible into an aggregate of 419,812 shares of our common stock.

In a concurrent private placement on July 27, 2016, each Purchaser also received warrants to purchase 0.75 of a share of common stock for each share of common stock (or common stock underlying the Series C Preferred) purchased in the registered offering, or up to an aggregate of 535,062 warrants. The warrants have an exercise price of $3.00 per share and are exercisable during the period following the six month anniversary of the date of issuance of the warrants until the five and a half year anniversary of the date of issuance. The warrants are exercisable for cash or, solely in the absence of an effective registration statement or prospectus, by cashless exercise. The sale of these shares reset the exercise price of warrants (6) to $3.00. In addition, we granted the placement agent in the registered offering and concurrent private placement, an aggregate of 49,939 five-year warrants to purchase our common shares at $3.855.

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On October 14, 2015, in a registered direct offering, we sold 902,132 Class A Units (consisting of one share of our common stock, a six-month Series A warrant to purchase one share of our common stock at an exercise price equal to $5.25, (“Series A warrant”), and a five-year Series B warrant to purchase 0.75 of a share of our common stock at an exercise price equal to $6.00 per share, (“Series B warrant”)). We also sold to purchasers, whose purchase of Class A Units in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this offering, 4,750.0005 Class B Units. Each Class B Unit consisted of one share of our Class B Convertible Preferred Stock, or the Series B Preferred, with a stated value of $1,000 and convertible into shares of our common stock at $0.35 per share, the public offering price of the Class A Units, together with the equivalent number of Series A warrants and Series B warrants as would have been issued to such purchaser if they had purchased Class A Units based on the public offering price. As a result, Series A warrants to purchase 1,806,894 shares of our common stock and Series B warrants to purchase 1,355,171 shares of our common stock were issued with the sale of these Class A and Class B Units. In addition, we granted the placement agent 90,345 five-year warrants to purchase our common shares at $6.5625. The sale of these shares reset the exercise price of warrants (6) to $5.25. The shares of common stock, Series B Preferred, Series A warrants and Series B warrants were immediately separable and were issued separately in this offering.

On March 25, 2015, in a registered direct offering, we sold 204,186 shares of our common stock, and 102,093 warrants to purchase additional shares over the next 5.5 years, at a price of $24.49 per share. The sale of these shares reset the exercise price of warrants (6) to $24.49. The placement agent received 10,209 five-year warrants at an exercise price of $30.61.

On February 14, 2015, we entered into Warrant Exercise Agreements with certain holders of our outstanding warrants to purchase an aggregate of 61,123 shares of our common stock. The warrants were originally issued as part of an underwritten public offering that we closed on August 9, 2013. Pursuant to the terms of the Warrant Exercise Agreements, the exercise price of the warrants being exercised was adjusted, immediately prior to their exercise, to $30.00 per share down from the previously agreed $38.55. In connection with the adjustment to the warrant exercise price, we charged to expense $0.4 million under the following fair value assumptions: expected life of six months; risk free interest rates of 0.07%; expected volatility of 33.6% and; dividend yield of 0%. In connection with the warrants exercised, we reclassified $669,000 relating to the fair value of the warrant derivative liability to capital in excess of par. Additionally, the underwriter received a five-year warrant to purchase 3,056 shares at a per share exercise price of $45.05.

We have determined that warrants (6) are not considered indexed to our common shares under ASC 815-40, and require separate accounting as derivative instruments with changes in fair value recognized in earnings each period. The warrants contain a provision whereby the warrant exercise price would be decreased in the event that future common stock issuances are made at a price less than the then exercise price. Due to the potential variability of their exercise price, these warrants do not qualify for equity treatment, and therefore are recognized as a liability. The warrant liability is adjusted to fair value each reporting period, and any change in value is recognized in the statement of operations. Their initial August 9, 2013 valuation was determined using the binomial lattice valuation model, including an equal probabilities tree and early exercise factor of 30%, the significant weighted average assumptions for estimating the fair value of these warrants were, respectively, as follows: expected life of five years and two years; risk free interest rates of 1.36% and 0.32%; expected volatility of 111% and 116% and; dividend yield of 0% and 0%. The initial fair value at August 9, 2013 was estimated to be approximately $4.2 million.

Using the binomial lattice valuation model, including an equal probabilities tree and early exercise factor of 30%, the significant weighted average assumptions for estimating the fair value of warrants (6) at December 31, 2015 was as follows: expected life of 2.6 years; risk free interest rates of 1.24% expected volatility of 88% and; dividend yield of 0% and the December 31, 2015 fair value of these warrants was estimated to be $245,000.

Using the binomial lattice valuation model, including an equal probabilities tree and early exercise factor of 30%, the significant weighted average assumptions for estimating the fair value of warrants (6) at July 2, 2016 was as follows: expected life of 2.1 years; risk free interest rates of 0.73% expected volatility of 96% and; dividend yield of 0% and the July 2, 2016 fair value of these warrants was estimated to be $224,000. The fair value of warrants accounted for as derivative liabilities was reduced by $21,000 from December 31, 2015 to July 2, 2016.

4. Earnings Per Share

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

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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:

	July 2, 2016		June 27, 2015
Outstanding stock options		131,204		75,480
Unvested restricted stock awards		33,598		67,196
Outstanding warrants		2,023,232		670,370
Total		2,188,034		813,046

Also, the Series A and Series B preferred stock convertible into 246,606 shares of common stock was not included since its impact would be anti-dilutive.

5. Commitments and Contingencies

Operating Leases

We lease our offices and production facilities under non-cancelable operating leases in Santa Barbara, CA and Austin, TX that expire in November 2016 and March 2017, respectively. The leases contain minimum rent escalation clauses that require additional rental amounts after the first year. Rent expense for these leases with minimum annual rent escalation is recognized on a straight line basis over the minimum lease term. These leases also require us to pay utilities, insurance, taxes and other operating expenses and contain one five-year renewal option. During the three months ended July 2, 2016 we decided not to renew our Santa Barbara lease at the end of November 2016 and consolidate all our operations in our Austin, TX facility by the year end. As a result of this pending consolidation, we accrued $184,000 in the three months ended July 2, 2016 for moving expenses, building restoration expenses and employee transition expenses.

For the three and six months ended July 2, 2016 rent expense was $167,000 and $319,000, respectively, and for the three and six months ended June 27, 2015 rent expense was $(13,000) and $190,000, respectively. For the quarter ended June 27, 2015, our negative rent expense resulted from the reversal of expense accruals subsequent to our Santa Barbara building lease amendments.

Patents and Licenses

We have entered into various licensing agreements requiring royalty payments ranging from 0.13% to 2.5% of specified product sales. Certain of these agreements contain provisions for the payment of guaranteed or minimum royalty amounts. In the event that we fail to pay minimum annual royalties, these licenses may automatically become non-exclusive or be terminated. These royalty obligations terminate at various times from 2016 to 2020. For the three and six months ended July 2, 2016 royalty expense totaled $11,000 and $23,000, respectively, compared to an expense of $13,000 and $20,000, respectively, for the three and six months ended June 27, 2015. 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 future audit adjustments to be significant.

The minimum lease payments under operating leases and license obligations as of July 2, 2016 are as follows:

Years ending December 31,	Licenses		Operating Leases
Remainder of 2016	$	—	$	672,000
2017		45,000		292,000
2018		45,000		40,000
2019		45,000		27,000
2020		—		—
Thereafter		—		—
Total payments	$	135,000	$	1,031,000

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.

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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.

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 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

Balance Sheet Data:

	July 2, 2016			December 31, 2015
Accounts receivable:
Accounts receivable-trade	$	21 ,000		$	43,000
Less: allowance for doubtful accounts		(5,000	)		(5,000	)
	$	16 ,000		$	38,000
	July 2, 2016			December 31, 2015
Inventories:
Raw materials	$	610,000		$	651,000
Less: Raw material reserves		(548,000	)		(578,000	)
Work-in-process		29,000			28,000
Less: Work-in-process reserves		(29,000	)		(28,000	)
Finished goods		162,000			216,000
Less: Finished goods reserves		(162,000	)		(168,000	)
	$	62,000		$	121,000

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	July 2, 2016			December 31, 2015
Property and Equipment:
Equipment	$	11,571,000		$	11,571,000
Leasehold improvements		1,065,000			1,065,000
Furniture and fixtures		205,000			205,000
		12,841,000			12,841,000
Less: accumulated depreciation and amortization		(8,410,000	)		(7,290,000	)
	$	4,431,000		$	5,551,000

Depreciation expense amounted to $559,000 and $1.1 million, respectively, for the three and six months ended July 2, 2016 and $502,000 and $1.2 million, respectively, for the three and six months ended June 27, 2015.

	July 2, 2016			December 31, 2015
Patents and Licenses:
Patents pending	$	529,000		$	555,000
Patents issued		1,372,000			1,252,000
Less accumulated amortization		(907,000	)		(869,000	)
Net patents issued		465,000			383,000
	$	994 ,000		$	938,000

Amortization expense related to these items totaled $19,000 and $38,000, respectively, for the three and six months ended July 2, 2016 and $19,000 and $37,000, respectively, for the three and six months ended June 27, 2015. Amortization expenses are expected to total $37,000 for the remainder of 2016 and $74,000 for 2017 and 2018.

	July 2, 2016			December 31, 2015
Accrued Expenses and Other Long Term Liabilities:
Salaries Payable	$	94,000		$	98,000
Compensated Absences		210,000			197,000
Compensation related		90,000			38,000
Warranty reserve		8,000			23,000
Deferred rent		82,000			132,000
Santa Barbara facility closure		184,000			—
Other		129,000			78,000
Fair value of warrant derivatives		224,000			245,000
		1,021,000			811,000
Less current portion		(791,000	)		(418,000	)
Long term portion	$	230,000		$	393,000

	For the six months ended,
	July 2, 2016			June 27, 2015
Warranty Reserve Activity:
Beginning balance	$	23,000		$	38,000
Additions		—			—
Deductions		(15,000	)		(3,000	)
Ending balance	$	8,000		$	35,000

8. Subsequent Events

On July 18, 2016 we effected a one-for-fifteen (1:15) reverse split of our common stock, or the Reverse Stock Split. The Reverse Stock Split, which was authorized by our Board of Directors, was approved by our stockholders on June 23, 2016 at a Special Meeting of the Stockholders. Upon market open July 19, 2016, our common stock continued trading under the symbol SCON on a split-adjusted basis with a new CUSIP number. We implemented the Reverse Stock Split for the

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purpose of regaining compliance with the Nasdaq Stock Market’s listing maintenance standard that requires us to maintain at least a $1.00 per share minimum bid price. The Reverse Stock Split reduced the number of our outstanding shares common stock from approximately 41,748,218 shares as of July 18, 2016 to approximately 2,783,214 shares outstanding post-Reverse Stock Split. Correspondingly, the initial trading price of our common stock was proportionately increased immediately following the Reverse Stock Split. Share and per share data included herein has been retroactively restated for the effect of the Reverse Stock Split.

On August 2, 2016, we were notified by Nasdaq that for the last 10 consecutive business days, from July 19, 2016 to August 1, 2016, the closing bid price of our common stock had been at $1.00 per share or greater. Accordingly, we have regained compliance with Listing Rule 5550(a)(2) and this matter is now closed. However, other factors may adversely affect the price of our common stock and there can be no assurance that the Reverse Stock Split will allow us to maintain compliance with the Nasdaq Stock Market’s listing maintenance standard.

On July 27, 2016, we entered into a Securities Purchase Agreement (“Purchase Agreement”) with certain investors (the “Purchasers”), pursuant to which we agreed to issue to the Purchasers, in a registered offering, (i) an aggregate of 293,604 shares of our common stock at a price of $3.08375 per share and (ii) to Purchasers, whose purchase of our common stock would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this offering, an aggregate of 1,294.595255 shares of our Series C Convertible Preferred Stock (the “Series C Preferred”). The Series C Preferred have a stated value of $1,000 and are convertible into shares of our common stock at $3.08375 per share, the public offering price of the shares of our common stock. Subject to certain prohibitions on conversion, the 1,294.595255 shares of Series C Preferred would be convertible into an aggregate of 419,812 shares of our common stock.

In a concurrent private placement, each Purchaser also received warrants to purchase 0.75 of a share of common stock for each share of common stock (or common stock underlying the Series C Preferred) purchased in the registered offering, or up to an aggregate of 535,062 warrants. The Warrants have an exercise price of $3.00 per share and are exercisable during the period following the six month anniversary of the date of issuance of the warrants until the five and a half year anniversary of the date of issuance. The warrants are exercisable for cash or, solely in the absence of an effective registration statement or prospectus, by cashless exercise.

The closing of this registered offering and the concurrent private placement occurred on August 2, 2016 and provided gross proceeds of $2.2 million and net proceeds to us, after deducting fees and our estimated offering expenses, of $1.9 million.

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

General

We are a leading company in developing and commercializing high temperature superconductor (“HTS”) materials and related technologies. HTS materials can substantially improve the performance characteristics of electrical systems, reducing power loss, lowering heat generation, and decreasing electrical noise.

Commercialization

Our development efforts over the last 28 years have yielded an extensive patent portfolio as well as critical trade secrets, unpatented technology and proprietary knowledge. Our strategic plan is to utilize our core proprietary technology in superconductivity and leverage our proprietary manufacturing processes to build Conductus wire for use in electrical power devices. We are adapting our unique HTS material deposition techniques to produce our energy efficient, cost-effective and high performance Conductus wire technology for next generation power applications. We have identified several large initial target markets for superconducting wire including energy (wind turbines, cables, fault current limiters), medical (NMR (nuclear magnetic resonance) and MRI (magnetic resonance imaging)), science (high performance magnets) and industrial (motors, generators) applications. We are working with leading industry device manufacturers to complete qualification and acceptance testing of Conductus wire. We expect to complete qualification orders of our commercial Conductus wire in late 2016.

Our development efforts (including those described under “Our Future Business” below) can take a significant number of years to commercialize, and we must overcome significant technical barriers and deal with other significant risks, some of which are set out in our public filings, including in particular the “Risk Factors” included in Item 1A of our Annual Report on Form 10-K for 2015.

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Our Future Business

We have created several unique capabilities and HTS manufacturing systems related to our Conductus wire platform that we are seeking to produce by leveraging our leadership in superconducting technologies, extensive intellectual property and HTS manufacturing expertise.

HTS Wire Platform

Our Conductus wire product development is focused on large markets where the advantages of HTS wire are recognized by the industry. Our initial product roadmap targets three important applications: superconducting high power transmission cable, superconducting fault current limiters (SFCL) and high field magnets.

Superconducting High Power Transmission Cable:

Superconducting high power transmission and distribution cable transmit 5 to 10 times the electrical current of traditional copper or aluminum cables with significantly improved efficiency. HTS power cable systems consist of the cable, which is comprised of 100’s of strands of HTS wire wrapped around a copper core, and the cryogenic cooling system to maintain proper operating conditions. HTS power cables are particularly suited to high load areas such as the dense urban business districts of large cities, where purchases of easements and construction costs for traditional low capacity cables may be cost prohibitive. The primary application for HTS cables is medium voltage feeds to load pockets in dense urban areas. In these high demand zones the grid is often saturated with aging infrastructure. HTS technology brings a considerable amount of power to new locations where the construction of additional transmission to distribution substations, with major transformer assets, is not feasible. Another potential use of HTS power cable is to improve grid power transmission by connecting two existing substations. In dense urban environments many substations often reach capacity limits and require redundant transformer capacity; to improve reliability HTS cables can tie these existing stations together, avoiding very costly transformer upgrades and construction costs.

Superconducting Fault Current Limiter (SFCL):

With power demand on the rise and new power generation sources being added, the grid has become overcrowded and vulnerable to catastrophic faults. Faults are abnormal flows of electrical current like a short circuit. As the grid is stressed, faults and power blackouts increase in frequency and severity. SFCLs act like powerful surge protectors, preventing harmful faults from taking down substation equipment by reducing the fault current to a safer level (20 – 50% reduction) so that the existing switchgear can still protect the grid. Currently, electrical-utilities use massive 80kA circuit breakers, oversized transformers and fuses to prevent faults from damaging their equipment and protecting against surges. However, once a fault has occurred, standard circuit breakers suffer destructive failure and need to be replaced before service can be restored. In addition, Smart Grid and embedded alternative energy generation enhancements will increase the need for SCFLs. Grid operators face a major challenge in moving power safely and efficiently, from generators to consumers, through several stages of voltage transformation step downs and step ups. At each stage, valuable energy is lost in the form of waste heat. Moreover, while demands are continually rising, space for transformers and substations - especially in dense urban areas - is severely limited. Conventional oil-cooled transformers pose a fire and environmental hazard. Compact, efficient superconducting transformers, by contrast, are cooled by safe, abundant and environmentally benign liquid nitrogen. As an additional benefit, these actively-cooled devices will offer the capability of operating in overload, to twice the nameplate rating, without any loss of life to meet occasional utility peak load demands.

Superconducting High Field magnets:

There are a variety of applications that utilize superconducting magnets in order to capitalize on their unique ability to create extremely high magnetic fields. The NMR (Nuclear Magnetic Resonance) and MRI (Magnetic Resonance Imaging) machines of today utilize such superconducting magnets for this very reason. Currently, high-field superconducting magnets are manufactured using commercially available superconducting wire such as niobium-titanium (NbTi) or niobium-tin (Nb3Sn). NMR and MRI device manufacturers look towards advances in superconducting technologies to improve the overall performance of their systems by dramatically increasing the magnetic fields while reducing size. High demand for a robust, high performance and low cost superconducting wire has spurred rapid development of a next generation alternative. In the last 10 years, new second generation (2G) Rare Earth, Barium, Copper Oxide (ReBCO) superconducting materials have been proven to drastically increase magnetic field strengths, especially at low temperatures. These advanced ReBCO based superconductors now provide an excellent alternative to NbTi and Nb3Sn based materials.

Results of Operations

Three and six months ended July 2, 2016 compared to the three and six months ended June 27, 2015

17

Net revenues decreased by $60,000, or 85%, to $11,000 in the second quarter of 2016 from $71,000 in the second quarter of 2015. Total net revenues decreased by $26,000, or 20%, to $100,000 in the first six months of 2016 from $126,000 in the same period of 2015. The decrease is the result of lower sales volume for our wireless communications products as we concentrate our efforts on our HTS wire products. We sell this legacy wireless product to large North American wireless operators whose spending on 3G data networks, where our products are deployed, has become a secondary priority. Sales prices for these wireless products were essentially unchanged. Our largest customer accounted for 68% and 87%, respectively, of our net commercial revenues in the first six months of 2016 and 2015. This customer generally purchased products through non-binding commitments with minimal lead-times. Consequently, our commercial product revenues can fluctuate dramatically from quarter to quarter based on changes in our customers’ capital spending patterns. Certain customer testing of our new Conductus wire was not completed in the first six months of 2016 and no sales of our Conductus wire were recorded.

Cost of revenues includes all direct costs, manufacturing overhead and provision for excess and obsolete inventories. The cost of revenues increased to $971,000 in the second quarter of 2016 compared to $689,000 for the second quarter of 2015, an increase of $282,000 or 41%. The cost of revenues increased by $390,000, or 27%, to $1,835,000 in the first six months of 2016 from $1,445,000 in the same period of 2015. Our cost of revenues includes both variable and fixed cost components. The variable component consists primarily of materials, assembly and test labor, overhead, which includes equipment and facility depreciation, transportation costs and warranty costs. The fixed component includes test equipment and facility depreciation, purchasing and procurement expenses and quality assurance costs. Given the fixed nature of such costs, the absorption of our production overhead costs into inventory decreases and the amount of production overhead variances charged to cost of sales increases as production volumes decline since we have fewer units to absorb our overhead costs against. Conversely, the absorption of our production overhead costs into inventory increases and the amount of production overhead variances expensed to cost of sales decreases as production volumes increase since we have more units to absorb our overhead costs against. As a result, our gross profit margins generally 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 generally 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 profit and margins:

Dollars in thousands	Three Months Ended										Six Months Ended
	July 2, 2016					June 27, 2015					July 2, 2016					June 27, 2015
Net commercial product sales	$	11		100	%	$	71		100	%	$	100		100	%	$	126		100	%
Cost of commercial product sales		971		8,827	%		689		970	%		1,835		1,835	%		1,445		1,147	%
Gross (loss)	$	(960	)	(8,727	)%	$	(618	)	(870	)%	$	(1,735	)	(1,735	)%	$	(1,319	)	(1,047	)%

We had a gross loss of $960,000 in the second quarter of 2016 from the sale of our products compared to a gross loss of $618,000 in the second quarter of 2015. We experienced a gross loss in the three and six months ended July 2, 2016 due to: increases in equipment depreciation, as we bring new Conductus wire equipment into service; our increased manufacturing efforts to bring our Conductus wire production to market; poor yields; and our sales being insufficient to cover our overhead. To further reduce our costs, in February 2015, we reduced our workforce and implemented certain other cost cutting measures. We also increased our legacy wireless inventory reserve by $58,000 during the first six months of 2015, thus reducing this legacy inventory value to zero.

Research and development expenses relate to development of new Conductus wire products and new wire products manufacturing processes. These expenses totaled $0.7 million and $1.4 million, respectively, in the three and six months ended July 2, 2016 compared to $1.0 million and $2.5 million, respectively, in the three and six month period ended June 27, 2015. These expenses were lower in the current three and six month period compared to the same three and six month period in 2015 as a result of our cost saving efforts as we transition our new HTS wire products to manufacturing.

Selling, general and administrative expenses totaled $1.4 million, and $2.6 million, respectively, in the three and six months ended July 2, 2016 compared to $1.3 million and $2.8 million in the three and six months ended June 27, 2015. Lower, non-cash stock award expenses were the principal cause of this decrease for the six months ended July 2, 2016 and the increase in the three months ended July 2, 2016, included a $184,000 expense for anticipated consolidation of our Santa Barbara facility into our Austin, Texas facility later this year.

We had income from the adjustment to the fair value of our warrant derivatives of $0 and $21,000, respectively, in the three months and six months ended July 2, 2016 and income of $0.8 million and $3.4 million, respectively, in the three and six months ended June 27, 2015. The primary reason for the gain was the drop in our stock price. In 2015 this gain was partially offset by a $0.4 million expense from the revaluation of warrants just prior to their exercise due to a decrease in their exercise price. This warrant liability is adjusted to fair value each reporting period, and any change in value is recognized in the statement of operations. See Note 3 — Stockholders’ Equity: Warrants.

18

Other expense and income in the three months and six months ended July 2, 2016, was interest income of $3,000 and $6,000, respectively. Our 2015 expense was for early termination charges associated with part of our Santa Barbara facilities lease.

We had a net loss of $3.1 million for the quarter ended July 2, 2016, compared to a net loss of $2.4 million in the second quarter of 2015. Our second quarter 2015 loss included income of $752,000 from the fair value adjustment to our warrant derivatives compared to no income in the current period. Our loss from operations for the three months ended July 2, 2016 and June 27, 2015, respectively, was $2.9 million and $3.0 million. For the six months ended July 2, 2016 our loss totaled $5.7 million compared to a net loss of $3.8 million for the six months ended June 27, 2015. Our year to date 2015 loss included income of $3.0 million from fair value and price adjustments to our warrant derivatives compared to $21,000 income in the current six month period. Our loss from operations for the six months ended July 2, 2016 and June 27, 2015, respectively, was $5.6 million and $6.6 million. Our 2016 reduced loss from operations was due to early 2015 headcount reductions and other cost saving efforts, and our lower 2016 non-cash stock award expenses.

The net loss available to common stockholders totaled $1.14 per common share in the quarter ended July 2, 2016, compared to a net loss of $2.11 per common share in the same period of 2015. The net loss available to common stockholders totaled $2.14 per common share in the first half of 2016, compared to $3.71 per common share in the first half of 2015.

Liquidity and Capital Resources

Cash Flow Analysis

As of July 2, 2016, we had working capital of $2.6 million, including $3.4 million in cash and cash equivalents, compared to working capital of $6.9 million at December 31, 2015, which included $7.5 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 decreased by $4.1 million from $7.5 million at December 31, 2015 to $3.4 million at July 2, 2016. In the first six months of 2016, cash was used exclusively in operations.

Cash used in operations totaled $4.1 million in the first six months of 2016. We used $4.0 million to fund the cash portion of our net loss and $0.1 million was used in changes in our working capital.

No net cash was used in investing activities in the first six months of 2016. Our Conductus wire initiative used $141,000 and there was $1,000 in equipment sales in the first six months of 2015.

No net cash was used in or provided by financing activities in the first six months of 2016. Net cash provided by financing activities in the first six months of 2015 was $6.3 million. Cash provided by the exercise of 61,123 outstanding warrants issued in connection with our August 2013 underwritten public offering was $1.7 million and an additional $4.6 million was provided by the registered direct sale of 204,186 shares of our common stock and 102,093 warrants.

Financing Activities

We have historically financed our operations through a combination of cash on hand, cash provided from operations, equipment lease financings, available borrowings under bank lines of credit and both private and public equity offerings. There were no financing activities in the first half of 2016.

On August 2, 2016 we completed a definitive securities purchase agreement with a single institutional investor providing for total gross proceeds of $2.2 million and net proceeds of $1.9 million. See Note 8 - Subsequent Events.

19

Contractual Obligations and Commercial Commitments

We lease all of our properties. All of our operations, including our manufacturing facilities, are located in industrial complexes in Santa Barbara, California and Austin, Texas. We occupy 14,000 square feet in Santa Barbara, California and 94,000 square feet in Austin, Texas under long-term leases that expire in November 2016 and April 2017, respectively. During the current period ended July 2, 2016, we decided not to renew our Santa Barbara lease and will consolidate our operations in our Austin facility. Although we currently have excess capacity, we believe these facilities can be managed in a flexible and cost effective manner and are adequate to meet current and reasonably anticipated needs for the next two years. Both leases contain renewal options.

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 2015.

Capital Expenditures

We have made no investments for fixed assets in the first six months of 2016 and we plan to invest $400,000 in fixed assets during the remainder of 2016 provided that customer orders require additional production capacity. These amounts, and the amounts spent in 2015, are for the purchase of equipment and facilities improvements for our Conductus wire initiative. We do not plan any additional fixed asset expenditures in 2016 for our existing legacy wireless business.

Future Liquidity

For the first six months of 2016, we incurred a net loss of $5.7 million and had negative cash flows from operations of $4.1 million. In the full 2015 year, we incurred a net loss of $8.6 million and had negative cash flows from operations of $8.5 million. Our ability to realize our investment in infrastructure is dependent on market acceptance and realization of significant revenues from Conductus wire products. Our independent registered public accounting firm has included in its audit reports for 2015 and 2014 an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern.

At July 2, 2016, we had $3.4 million in cash and cash equivalents. We believe our current cash resources will not be sufficient to fund our business for the next twelve months. We believe the key factors to our future liquidity will be our ability to successfully use our expertise and our technology to generate revenues in various ways, including commercial operations, joint ventures, licenses and we plan to leverage our leadership in superconducting technologies, extensive intellectual property, and HTS manufacturing expertise to develop and produce Conductus wire. On August 2, 2016 we completed a definitive securities purchase agreement with a single institutional investor providing for total gross proceeds of $2.2 million and net proceeds of $1.9 million. See Note 8 - Subsequent Events. Because of the expected timing and uncertainty of these factors, we may need to raise funds to meet our working capital needs.

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. If we cannot raise any needed funds, we might be forced to make further substantial reductions in our operating expenses, which could adversely affect our ability to implement our current business plan and ultimately our viability as a company.

Net Operating Loss Carryforward

As of December 31, 2015, we had net operating loss carryforwards for federal and state income tax purposes of $334.7 million and $150.5 million, respectively, which expire in the years 2018 through 2034. However, during 2015, we concluded that under the Internal Revenue Code change of control limitations, a maximum of $38.3 million and $37.7 million, respectively, 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 balance sheets.

20

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. 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.

In addition, we identified certain critical accounting policies which affect certain of our more significant estimates and assumptions used in preparing our consolidated financial statements in our Annual Report on Form 10-K for 2015. We have not made any material changes to these policies.

Backlog

Our commercial backlog consists of accepted product purchase orders with scheduled delivery dates during the next twelve months. We had commercial backlog of $53,000 at July 2, 2016, compared to $58,000 at December 31, 2015.

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 July 2, 2016 compared with our market risk exposure on December 31, 2015. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk” in our Annual Report on Form 10-K for 2015.

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 July 2, 2016 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 error 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.

21

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 2015 filed with the Securities and Exchange Commission on March 30, 2016. We are not aware of any material changes to those risk factors other than as set forth below:

We need to raise additional capital. If we are unable to raise capital our ability to implement our current business plan and ultimately our viability as a company could be adversely affected.

At July 2, 2016 and December 31, 2015, we had $3.4 million and $7.5 million, respectively, in cash and cash equivalents. While we completed an equity financing on August 2, 2016 which raised net proceeds of $1.9 million, our current forecast is that our cash resources will not be sufficient to fund our business for the next 12-months. Therefore, unless we can materially grow our revenues from commercial operations prior to our cash reserves being depleted (which reserves are currently expected to be sufficient into the first quarter of 2017) and generally over the next 12-months to implement our current business plan and maintain our viability, we will need to raise additional capital during the next 12-months to implement our current business plan and maintain our viability. Therefore, depending on whether we can materially grow our revenues from commercial operations, we likely need to raise additional capital to implement our current business plan and maintain the viability of the Company.

We believe the key factors to our future liquidity will be our ability to successfully use our expertise and our technology to generate revenues in various ways, including commercial operations, joint ventures and licenses. Because of the expected timing and uncertainty of these factors, we will need to raise funds to meet our working capital needs.

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 and could also require that we issue warrants in connection with sales of our stock. If we cannot raise any needed funds to grow our commercial resources, we might be forced to make changes to, or delay aspects of, our business plan which could adversely affect our ability to implement our current business plan and ultimately our viability as a company.

If we fail to maintain the listing of our common stock with a U.S. national securities exchange, the liquidity of our common stock could be adversely affected.

As previously disclosed, on October 30, 2015, we received a letter from the Listing Qualifications Department of the Nasdaq Stock Market notifying us that the minimum bid price per share for our common stock fell below $1.00 for a period of 30 consecutive business days and therefore we did not meet the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2). We were initially provided 180 calendar days, or until April 27, 2016, to regain compliance with the minimum bid price requirement. On April 28, 2016, Nasdaq granted us an extension of 180 days (until October 24, 2016) to regain compliance with the minimum bid price requirement. In accordance with Rule 5810(c)(3)(A), we could regain compliance if at any time during such 180-day period the closing bid price of our common stock was at least $1.00 for a minimum of 10 consecutive business days.

We value our listing on the Nasdaq Stock Market and we held a special meeting of shareholders on June 23, 2016 and received shareholder authority for our board of directors to effect a reverse stock split, and on July 18, 2016 we effected a 1-for-15 reverse stock split. On August 2, 2016, we received written confirmation from the Listing Qualifications Department of the Nasdaq Stock Market notifying us that we had regained compliance with the minimum bid price requirement.

While this reverse stock split brought us back into compliance, there can be no assurance that any increase in the market price for our common stock resulting from the reverse stock split will be sustainable due to the numerous factors and contingencies that could affect such price. If we fail to maintain our listing on the Nasdaq Stock Market or an equivalent stock exchange it would likely result in it being more difficult for us to raise additional capital through the public or private sale of equity securities and for investors to dispose of, or obtain accurate quotations as to the market value of, our common stock. See Note 8 – Subsequent Events.

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.

22

Item 5. Other Information.

None.

Item 6. Exhibits.

Number	Description of Document
31.1	Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2	Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1	Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
32.2	Certification 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.

23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SUPERCONDUCTOR TECHNOLOGIES INC.
Dated: August 15, 2016	/s/ William J. Buchanan
	William J. Buchanan
	Chief Financial Officer
	/s/ Jeffrey A. Quiram
	Jeffrey A. Quiram
	President and Chief Executive Officer

24

EX-31.1

EXHIBIT 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by

Principal Executive Officer and Principal Financial Officer

Regarding Facts and Circumstances Relating to Exchange Act Filings

I, Jeffrey A. Quiram, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Superconductor Technologies Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 15, 2016

/s/ Jeffrey A. Quiram

Jeffrey A. Quiram

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 by

Principal Executive Officer and Principal Financial Officer

Regarding Facts and Circumstances Relating to Exchange Act Filings

I, William J. Buchanan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Superconductor Technologies Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 15, 2016

/s/ William J. Buchanan

William J. Buchanan

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification Pursuant to Section 906 the Sarbanes-Oxley Act of 2002

By

Principal Executive Officer and Principal Financial Officer

Regarding Facts and Circumstances Relating to Exchange Act Filings

Dated: August 15, 2016

I, Jeffrey A. Quiram, Chief Executive Officer of Superconductor Technologies Inc, hereby certify, to my knowledge, that:

1. the accompanying Quarterly Report on Form 10-Q of Superconductor Technologies for the period ended July 2, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities and Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Superconductor Technologies Inc.

IN WITNESS WHEREOF, the undersigned has executed this Certification as of the date first written above.

/s/ Jeffrey A. Quiram

Jeffrey A. Quiram

President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

Certification Pursuant to Section 906 the Sarbanes-Oxley Act of 2002

By

Principal Executive Officer and Principal Financial Officer

Regarding Facts and Circumstances Relating to Exchange Act Filings

Dated: August 15, 2016

I, William J. Buchanan, Chief Financial Officer of Superconductor Technologies Inc, hereby certify, to my knowledge, that:

1. the accompanying Quarterly Report on Form 10-Q of Superconductor Technologies for the period ended July 2, 2016 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities and Exchange Act of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Superconductor Technologies Inc.

IN WITNESS WHEREOF, the undersigned has executed this Certification as of the date first written above.

/s/ William J. Buchanan

William J. Buchanan

Chief Financial Officer

XML

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	Jul. 02, 2016	Aug. 05, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 02, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Trading Symbol	SCON
Entity Registrant Name	SUPERCONDUCTOR TECHNOLOGIES INC
Entity Central Index Key	0000895665
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		3,276,818

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jun. 27, 2015	Jul. 02, 2016	Jun. 27, 2015
Income Statement [Abstract]
Net revenues	$ 11,000	$ 71,000	$ 100,000	$ 126,000
Costs and expenses:
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Research and development	701,000	1,017,000	1,417,000	2,474,000
Selling, general and administrative	1,420,000	1,318,000	2,583,000	2,845,000
Total costs and expenses	3,092,000	3,024,000	5,835,000	6,764,000
Loss from operations	(3,081,000)	(2,953,000)	(5,735,000)	(6,638,000)
Other Income and Expense:
Adjustments to fair value of warrant derivatives		752,000	21,000	3,383,000
Adjustments to warrant exercise price				(367,000)
Other (expense) income	3,000	(208,000)	6,000	(208,000)
Net loss	$ (3,078,000)	$ (2,409,000)	$ (5,708,000)	$ (3,830,000)
Basic and diluted net loss per common share	$ (1.14)	$ (2.11)	$ (2.14)	$ (3.71)
Basic and diluted weighted average number of common shares outstanding	2,711,697	1,143,138	2,668,799	1,031,238

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Condensed Consolidated Balance Sheets - USD ($)	Jul. 02, 2016	Dec. 31, 2015
Current Assets:
Cash and cash equivalents	$ 3,417,000	$ 7,469,000
Accounts receivable, net	16,000	38,000
Inventory, net	62,000	121,000
Prepaid expenses and other current assets	183,000	122,000
Total Current Assets	3,678,000	7,750,000
Property and equipment, net of accumulated depreciation of $8,410,000 and $7,290,000, respectively	4,431,000	5,551,000
Patents, licenses and purchased technology, net of accumulated amortization of $907,000 and $869,000, respectively	994,000	938,000
Other assets	97,000	126,000
Total Assets	9,200,000	14,365,000
Current Liabilities:
Accounts payable	246,000	432,000
Accrued expenses	791,000	418,000
Total Current Liabilities	1,037,000	850,000
Other long-term liabilities	230,000	393,000
Total Liabilities	1,267,000	1,243,000
Commitments and contingencies-Notes 5 and 6
Stockholders' Equity:
Preferred stock, $.001 par value, 2,000,000 shares authorized, 330,124 and 330,873 shares issued and outstanding, respectively
Common stock, $.001 par value, 250,000,000 shares authorized, 2,783,214 and 2,640,547 shares issued and outstanding, respectively	3,000	3,000
Capital in excess of par value	304,608,000	304,089,000
Accumulated deficit	(296,678,000)	(290,970,000)
Total Stockholders' Equity	7,933,000	13,122,000
Total Liabilities and Stockholders' Equity	$ 9,200,000	$ 14,365,000

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Jul. 02, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Accumulated depreciation on property and equipment	$ 8,410,000	$ 7,290,000
Accumulated amortization on Patents, licenses and purchased technology	$ 907,000	$ 869,000
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	330,124	330,873
Preferred stock, shares outstanding	330,124	330,873
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	2,783,214	2,640,547
Common stock, shares outstanding	2,783,214	2,640,547

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jul. 02, 2016	Jun. 27, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (5,708,000)	$ (3,830,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,157,000	1,249,000
Stock-based compensation expense	519,000	1,085,000
Adjustments to fair value of warrant derivatives	(21,000)	(3,383,000)
Adjustments to warrant exercise price		367,000
Provision for excess or obsolete inventory		58,000
Gain on disposal of property and equipment		(1,000)
Changes in assets and liabilities:
Accounts receivable	22,000	47,000
Inventories	59,000	16,000
Prepaid expenses and other current assets	(61,000)	26,000
Patents, licenses and purchased technology	(94,000)	(38,000)
Other assets	30,000	124,000
Accounts payable, accrued expenses and other current liabilities	3,000	(346,000)
Net cash used in operating activities	(4,052,000)	(4,626,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(141,000)
Net proceeds from the sale of property and equipment		1,000
Net cash used in investing activities		(140,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the sale of common stock		4,596,000
Net proceeds from the exercise of outstanding warrants		1,687,000
Net cash provided by financing activities		6,283,000
Net increase (decrease) in cash and cash equivalents	(4,052,000)	1,517,000
Cash and cash equivalents at beginning of period	7,469,000	1,238,000
Cash and cash equivalents at end of period	$ 3,417,000	2,755,000
Supplemental non-cash financing disclosure:
Warrant liability converted to capital in excess of par		$ 669,000

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General

6 Months Ended

Jul. 02, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

1. General

Superconductor Technologies Inc. (together with our subsidiaries, “we” or “us”) was incorporated in Delaware on May 11, 1987. We develop and produce high temperature superconducting (HTS) materials and associated technologies. We have generated more than 100 patents as well as proprietary trade secrets and manufacturing expertise. We are now leveraging our key enabling technologies in HTS materials and cryogenics, to pursue emerging opportunities in the electrical grid and in equipment platforms that utilize electrical circuits. In January 2012, we took possession of a facility in Austin, Texas and have moved our HTS wire processes and our research and development to Austin. We intend to close our Santa Barbara, California facility this year and consolidate all our operations in our Austin, Texas facility.

Our initial superconducting products were completed in 1998, and we began delivery to a number of wireless network providers. In the following 13 years, our cost reducing efforts led to the invention of our proprietary, high-yield and high throughput HTS material deposition manufacturing process.

In the last several years we have focused our research and development efforts on adapting our successful HTS materials deposition techniques to the production of our HTS Conductus^® wire for next generation power applications. While most of our current commercial product revenues come from the sale of our legacy high performance wireless communications infrastructure products, production of our Conductus wire is our principal opportunity to grow our future revenue.

The unaudited condensed consolidated financial information furnished herein has been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are necessary for a fair statement of the results of operations for the periods presented.

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Our ability to realize our investment in infrastructure is dependent on market acceptance and realization of significant revenues from Conductus wire products. Our independent registered public accounting firm has included in its audit reports for 2015 and 2014 an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. Actual results could differ from those estimates and such differences may be material to the condensed consolidated financial statements. This quarterly report on Form 10-Q should be read in conjunction with our Form 10-K for 2015 (See Note 2. Summary of Significant Accounting Policies – Basis of Presentation). The results of operations for the six months ended July 2, 2016 are not necessarily indicative of the results for all of 2016.

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Summary of Significant Accounting Policies

6 Months Ended

Jul. 02, 2016

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

We have incurred significant net losses since our inception and have an accumulated deficit of $296.7 million. In 2015, we incurred a net loss of $8.6 million and had negative cash flows from operations of $8.5 million. At July 2, 2016, we had $3.4 million in cash compared to $7.5 million in cash and cash equivalents as of December 31, 2015. Our cash resources will not be sufficient to fund our business for the next 12 months. We will need to grow our revenues from commercial operations and/or raise additional funds over the next 12 months to meet our working capital needs. On August 2, 2016, we closed a registered offering of our common stock, Series C preferred stock along with a concurrent private placement of warrants to purchase 0.75 of a share of our common stock that provided gross proceeds of $2.2 million and net proceeds to us, after deducting fees and our estimated offering expenses, of $1.9 million. (See Note 8. Subsequent Events in this Report) 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. If we cannot raise any needed funds, we might be forced to make further substantial reductions in our operating expenses, which could adversely affect our ability to implement our current business plan and ultimately our viability as a company. 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 use our expertise and our technology to generate revenues in various ways, including commercial operations, joint ventures and licenses. We have invested and will continue to invest in our Austin, Texas manufacturing facility to enable us to produce our Conductus wire products. Delays in the timing of our ability to, including but not limited to, raise additional capital, unexpected production delays, and our ability to sell our Conductus wire products in large scale could substantially impact our estimates used in the determination of expected future cash flows and/or expected future profitability. If we fail to increase our revenues, we may not achieve and may not maintain profitability and we may not realize our investment in infrastructure. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of the uncertainties set forth above.

On July 18, 2016, we effected a 1-for-15 reverse stock split of our common stock, or the Reverse Stock Split. As a result of the Reverse Stock Split, every fifteen shares of our pre-Reverse Stock Split common stock were combined and reclassified into one share of our common stock. The Reverse Stock Split did not change the authorized number of shares or the par value of our common stock. Certain of the information contained in the documents incorporated into this Report present information on our common stock on a pre-Reverse Split basis. Share and per share data included herein has been retroactively restated for the effect of the Reverse Stock Split. 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 2015. We have not made any material changes to these policies.

We have reviewed recently issued Financial Accounting Standards Board pronouncements and do not believe they will have a material impact on our condensed consolidated financial statements.

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 from time to time 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 collectibility. Account 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

Our revenues have principally been derived from the sale of our wireless communications products, and to an increasing extent our Conductus wire, and 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.

Shipping and Handling Fees and Costs

Shipping and handling fees billed to customers are included in net commercial product revenues. Shipping and handling fees associated with freight are generally included in cost of commercial product 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 product 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 research and development expense as incurred and include salary, facility, depreciation and material expenses.

Inventories

Inventories were stated at the lower of cost or market, 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 July 2, 2016 net inventory value was $62,000 compared to a December 31, 2015 value of $121,000. 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 (minimal sales in the current quarter and year to date, and no backlog of sales orders as of July 2, 2016 related to our wireless business), or the estimated forecast of product demand and production requirements. Costs associated with idle capacity are charged to expense immediately.

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 seven years. Leasehold improvements and assets financed under capital leases are amortized over the shorter of their useful 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. In the first six months of 2016 and 2015, there were no retirements or disposals and we realized gains of $0 and $1,000, respectively, from sale of previously retired equipment.

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.

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. The analyses necessarily involve significant management judgment. Market acceptance and significant revenues from our new Conductus wire is a key assumption in realization of our investment in long-lived assets. 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 for recoverability during 2015 and determined there was no impairment. We believe there have been no triggering events in the six months ended July 2, 2016 that would cause us to retest the recoverability of these long-lived assets.

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. The costs of our defense in such matters are expensed 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 further clarifies 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. The adoption of this guidance has not had a material impact on our consolidated financial statements as we concluded our tax positions are highly certain of being settled at 100% of the benefit claimed. Guidance is also provided on the accounting for the related interest and penalties, financial statement and disclosure. We are currently not under examination by any taxing authority nor have we been notified of an impending examination. The oldest California and federal tax years that remain open to possible evaluation and interpretation of our tax position are 2011 and 2012, respectively.

As of December 31, 2015, we had net operating loss carryforwards for federal and state income tax purposes of $334.7 million and $150.5 million, respectively, which expire in the years 2018 through 2035. However, during 2015, we concluded that under the Internal Revenue Code change of control limitations, a maximum of $38.3 million and $37.7 million, respectively, 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 six months ended July 2, 2016 and June 27, 2015.

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. Potential common shares are not included in the calculation of diluted loss per share because their effect is anti-dilutive.

Stock-based Compensation

We grant both restricted stock awards and stock options to our key employees, directors and consultants. For the three and six months ended July 2, 2016 and June 27, 2015 no options or awards were granted.

The following table presents details of total stock-based compensation expense that is included in each functional line item on our condensed consolidated statements of operations:

	Three months ended				Six months ended
	July 2, 2016		June 27, 2015		July 2, 2016		June 27, 2015
Cost of revenue	$	2,000	$	1,000	$	3,000	$	1,000
Research and development		37,000		78,000		74,000		169,000
Selling, general and administrative		219,000		454,000		442,000		915,000
Total stock-based compensation expense	$	258,000	$	533,000	$	519,000	$	1,085,000

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, estimated provisions for warranty costs, fair value of warrant derivatives, stock-based compensation, 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, accounts receivable, and other current liabilities as of July 2, 2016 approximate fair value.

The fair value of our warrant derivative liability was estimated using the Binomial Lattice option valuation model.

Fair value for financial reporting purposes is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date, ASC 820, “Fair Value Measurement and Disclosures”, also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The fair value of our warrant liabilities was determined based on level 3 inputs. These derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as Adjustments to fair value of derivatives. See Note 3 — Stockholders’ Equity: Warrants.

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. As discussed in this Report, we are adapting our unique HTS material deposition techniques to produce our energy efficient, cost-effective and high performance Conductus wire. We expect commercial level sales of our Conductus wire products later this year.

Certain Risks and Uncertainties

Our long-term prospects are dependent upon the successful commercialization and market acceptance of our Conductus wire products. We do not currently have a customer buying significant amounts of our wire products.

Current sales of our wireless products are to wireless network operators in the United States and our product sales have historically been concentrated in a small number of customers. For the six months ended July 2, 2016, AT&T and Verizon Wireless represented 88% of total net revenues. For the three and six months ended June 27, 2015, these customers represented 100% and 93%, respectively, of total net revenues. The loss of or reduction in sales, or the inability to collect outstanding accounts receivable, from any of these customers could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We currently rely on a limited number of suppliers for key components of our products. The loss of any of these suppliers could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In connection with the sales of our commercial products, we indemnify, without limit or term, our customers 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 indemnity obligations because of the uncertainty as to whether a claim might arise and how much it might total.

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Stockholders' Equity

6 Months Ended

Jul. 02, 2016

Equity [Abstract]

Stockholders' Equity

3. Stockholders’ Equity

The following is a summary of stockholders’ equity transactions for the six months ended July 2, 2016:

	Convertible									Capital in
	Preferred Stock					Common Stock				Excess of		Accumulated
	Shares			Amount		Shares		Amount		Par Value		Deficit			Total
Balance at December 31, 2015		330,873		$	—		2,640,547	$	3,000	$	304,089,000	$	(290,970,000	)	$	13,122,000
Conversion of Series B preferred stock to common stock		(749	)		—		142,667		—		—					—
Stock-based compensation											519,000					519,000
Net loss													(5,708,000	)		(5,708,000	)
Balance at July 2, 2016		330,124		$	—		2,783,214	$	3,000	$	304,608,000	$	(296,678,000	)	$	7, 933,000

Stock Options

At July 2, 2016, 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 six months ended July 2, 2016 or during the three and six months ended June 27, 2015.

The impact to the condensed consolidated statements of operations for the three and six months ended July 2, 2016 on net loss was $95,000 and $194,000 and $0.04 and $0.07 on basic and diluted net loss per common share, respectively, compared to $93,000 and $205,000 and $0.08 and $0.20 on basic and diluted net loss per common share for the three and six months ended June 27, 2015. No stock compensation cost was capitalized during either period. The total compensation cost related to nonvested stock options not yet recognized was $0.6 million and the weighted-average period over which the cost is expected to be recognized was 1 year at July 2, 2016.

The following is a summary of stock option transactions under our Stock Option Plan at July 2, 2016:

	Number of Shares			Price Per Share		Weighted Average Exercise Price		Number of Options Exercisable		Weighted Average Exercise Price
Balance at December 31, 2015		131,573		$	3.30 - $ 936.00	$	38.10		71,351	$	66.15
Granted		—					—
Exercised		—					—
Canceled		(369	)		498.60 – 936.00		711.75
Balance at July 2, 2016		131,204		$	3.30 - $921.60	$	36.14		72,093	$	62.46

The outstanding options expire on various dates through the end of November 2024. The weighted-average contractual term of options outstanding is 8.1 years and the weighted-average contractual term of stock options currently exercisable is 7.2 years. The exercise prices for these options range from $3.30 to $921.60 per share, for an aggregate exercise price of $4.7 million. At July 2, 2016, 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 four years. Some of our grants also have performance conditions. The following is a summary of our restricted stock award transactions at July 2, 2016:

	Number of Shares			Weighted Average Grant Date Fair Value
Balance nonvested at December 31, 2015		34,153		$	41.55
Granted		—			—
Vested		(555	)		41.40
Forfeited		—			—
Balance nonvested at July 2, 2016		33,598		$	41.55

The impact to the condensed consolidated statements of operations was $163,000 and $325,000 and $0.06 and $0.12, respectively, on basic and diluted net loss per common share for the three and six months ended July 2, 2016, respectively, and $440,000 and $880,000 and $0.38 and $0.85 on basic and diluted net loss per common share for the three and six months ended June 27, 2015, respectively. No stock compensation cost was capitalized during the period. The total compensation cost related to nonvested awards not yet recognized was $282,000 and the weighted-average period over which the cost is expected to be recognized was 7 months.

Warrants

The following is a summary of outstanding warrants at July 2, 2016:

		Common Shares
		Total		Currently Exercisable		Price per Share		Expiration Date
(1)	Warrants related to February 2012 financing		27,963		27,963	$	243.00	February 22, 2017
(2)	Warrants related to November 2012 financing		556		556	$	67.50	November 26, 2016
(3)	Warrants related to December 2012 financing		1,042		1,042	$	67.50	December 18, 2016
(4)	Warrants related to April 2013 financing		17,127		17,127	$	81.75	April 26, 2019
(5)	Warrants related to August 2013 financing		7,845		7,845	$	33.73	August 5, 2016
(6)	Warrants related to August 2013 financing		407,825		407,825	$	5.25	August 9, 2018
(7)	Warrants related to February 2015 agreement		3,056		3,056	$	45.05	February 13, 2020
(8)	Warrants related to March 2015 financing		102,093		102,093	$	24.49	September 24, 2020
(9)	Warrants related to March 2015 financing		10,209		10,209	$	30.61	March 20, 2020
(10)	Warrants related to October 2015 financing		1,355,171		1,355,171	$	6.00	October 14, 2020
(11)	Warrants related to October 2015 financing		90,345		90,345	$	6.56	October 14, 2020

Warrants (1)-(5) and (7)-(11) 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.

On July 27, 2016, we entered into a Securities Purchase Agreement (“Purchase Agreement”) with certain investors (the “Purchasers”), pursuant to which we agreed to issue to the Purchasers, in a registered offering, (i) an aggregate of 293,604 shares of our common stock at a price of $3.08375 per share and (ii) to Purchasers, whose purchase of our common stock would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this offering, an aggregate of 1,294.595255 shares of our Series C Convertible Preferred Stock (the “Series C Preferred”). The Series C Preferred have a stated value of $1,000 and are convertible into shares of our common stock at $3.08375 per share, the public offering price of the shares of our common stock. Subject to certain prohibitions on conversion, the 1,294.595255 shares of Series C Preferred would be convertible into an aggregate of 419,812 shares of our common stock.

In a concurrent private placement on July 27, 2016, each Purchaser also received warrants to purchase 0.75 of a share of common stock for each share of common stock (or common stock underlying the Series C Preferred) purchased in the registered offering, or up to an aggregate of 535,062 warrants. The warrants have an exercise price of $3.00 per share and are exercisable during the period following the six month anniversary of the date of issuance of the warrants until the five and a half year anniversary of the date of issuance. The warrants are exercisable for cash or, solely in the absence of an effective registration statement or prospectus, by cashless exercise. The sale of these shares reset the exercise price of warrants (6) to $3.00. In addition, we granted the placement agent in the registered offering and concurrent private placement, an aggregate of 49,939 five-year warrants to purchase our common shares at $3.855.

On October 14, 2015, in a registered direct offering, we sold 902,132 Class A Units (consisting of one share of our common stock, a six-month Series A warrant to purchase one share of our common stock at an exercise price equal to $5.25, (“Series A warrant”), and a five-year Series B warrant to purchase 0.75 of a share of our common stock at an exercise price equal to $6.00 per share, (“Series B warrant”)). We also sold to purchasers, whose purchase of Class A Units in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this offering, 4,750.0005 Class B Units. Each Class B Unit consisted of one share of our Class B Convertible Preferred Stock, or the Series B Preferred, with a stated value of $1,000 and convertible into shares of our common stock at $0.35 per share, the public offering price of the Class A Units, together with the equivalent number of Series A warrants and Series B warrants as would have been issued to such purchaser if they had purchased Class A Units based on the public offering price. As a result, Series A warrants to purchase 1,806,894 shares of our common stock and Series B warrants to purchase 1,355,171 shares of our common stock were issued with the sale of these Class A and Class B Units. In addition, we granted the placement agent 90,345 five-year warrants to purchase our common shares at $6.5625. The sale of these shares reset the exercise price of warrants (6) to $5.25. The shares of common stock, Series B Preferred, Series A warrants and Series B warrants were immediately separable and were issued separately in this offering.

On March 25, 2015, in a registered direct offering, we sold 204,186 shares of our common stock, and 102,093 warrants to purchase additional shares over the next 5.5 years, at a price of $24.49 per share. The sale of these shares reset the exercise price of warrants (6) to $24.49. The placement agent received 10,209 five-year warrants at an exercise price of $30.61.

On February 14, 2015, we entered into Warrant Exercise Agreements with certain holders of our outstanding warrants to purchase an aggregate of 61,123 shares of our common stock. The warrants were originally issued as part of an underwritten public offering that we closed on August 9, 2013. Pursuant to the terms of the Warrant Exercise Agreements, the exercise price of the warrants being exercised was adjusted, immediately prior to their exercise, to $30.00 per share down from the previously agreed $38.55. In connection with the adjustment to the warrant exercise price, we charged to expense $0.4 million under the following fair value assumptions: expected life of six months; risk free interest rates of 0.07%; expected volatility of 33.6% and; dividend yield of 0%. In connection with the warrants exercised, we reclassified $669,000 relating to the fair value of the warrant derivative liability to capital in excess of par. Additionally, the underwriter received a five-year warrant to purchase 3,056 shares at a per share exercise price of $45.05.

We have determined that warrants (6) are not considered indexed to our common shares under ASC 815-40, and require separate accounting as derivative instruments with changes in fair value recognized in earnings each period. The warrants contain a provision whereby the warrant exercise price would be decreased in the event that future common stock issuances are made at a price less than the then exercise price. Due to the potential variability of their exercise price, these warrants do not qualify for equity treatment, and therefore are recognized as a liability. The warrant liability is adjusted to fair value each reporting period, and any change in value is recognized in the statement of operations. Their initial August 9, 2013 valuation was determined using the binomial lattice valuation model, including an equal probabilities tree and early exercise factor of 30%, the significant weighted average assumptions for estimating the fair value of these warrants were, respectively, as follows: expected life of five years and two years; risk free interest rates of 1.36% and 0.32%; expected volatility of 111% and 116% and; dividend yield of 0% and 0%. The initial fair value at August 9, 2013 was estimated to be approximately $4.2 million.

Using the binomial lattice valuation model, including an equal probabilities tree and early exercise factor of 30%, the significant weighted average assumptions for estimating the fair value of warrants (6) at December 31, 2015 was as follows: expected life of 2.6 years; risk free interest rates of 1.24% expected volatility of 88% and; dividend yield of 0% and the December 31, 2015 fair value of these warrants was estimated to be $245,000.

Using the binomial lattice valuation model, including an equal probabilities tree and early exercise factor of 30%, the significant weighted average assumptions for estimating the fair value of warrants (6) at July 2, 2016 was as follows: expected life of 2.1 years; risk free interest rates of 0.73% expected volatility of 96% and; dividend yield of 0% and the July 2, 2016 fair value of these warrants was estimated to be $224,000. The fair value of warrants accounted for as derivative liabilities was reduced by $21,000 from December 31, 2015 to July 2, 2016.

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Earnings Per Share

6 Months Ended

Jul. 02, 2016

Earnings Per Share [Abstract]

Earnings Per Share

4. Earnings Per Share

Basic and diluted net earnings (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:

	July 2, 2016		June 27, 2015
Outstanding stock options		131,204		75,480
Unvested restricted stock awards		33,598		67,196
Outstanding warrants		2,023,232		670,370
Total		2,188,034		813,046

Also, the Series A and Series B preferred stock convertible into 246,606 shares of common stock was not included since its impact would be anti-dilutive.

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Commitments and Contingencies

6 Months Ended

Jul. 02, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

5. Commitments and Contingencies

Operating Leases

We lease our offices and production facilities under non-cancelable operating leases in Santa Barbara, CA and Austin, TX that expire in November 2016 and March 2017, respectively. The leases contain minimum rent escalation clauses that require additional rental amounts after the first year. Rent expense for these leases with minimum annual rent escalation is recognized on a straight line basis over the minimum lease term. These leases also require us to pay utilities, insurance, taxes and other operating expenses and contain one five-year renewal option. During the three months ended July 2, 2016 we decided not to renew our Santa Barbara lease at the end of November 2016 and consolidate all our operations in our Austin, TX facility by the year end. As a result of this pending consolidation, we accrued $184,000 in the three months ended July 2, 2016 for moving expenses, building restoration expenses and employee transition expenses.

For the three and six months ended July 2, 2016 rent expense was $167,000 and $319,000, respectively, and for the three and six months ended June 27, 2015 rent expense was $(13,000) and $190,000, respectively. For the quarter ended June 27, 2015, our negative rent expense resulted from the reversal of expense accruals subsequent to our Santa Barbara building lease amendments.

Patents and Licenses

We have entered into various licensing agreements requiring royalty payments ranging from 0.13% to 2.5% of specified product sales. Certain of these agreements contain provisions for the payment of guaranteed or minimum royalty amounts. In the event that we fail to pay minimum annual royalties, these licenses may automatically become non-exclusive or be terminated. These royalty obligations terminate at various times from 2016 to 2020. For the three and six months ended July 2, 2016 royalty expense totaled $11,000 and $23,000, respectively, compared to an expense of $13,000 and $20,000, respectively, for the three and six months ended June 27, 2015. 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 future audit adjustments to be significant.

The minimum lease payments under operating leases and license obligations as of July 2, 2016 are as follows:

Years ending December 31,	Licenses		Operating Leases
Remainder of 2016	$	—	$	672,000
2017		45,000		292,000
2018		45,000		40,000
2019		45,000		27,000
2020		—		—
Thereafter		—		—
Total payments	$	135,000	$	1,031,000

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Contractual Guarantees and Indemnities

6 Months Ended

Jul. 02, 2016

Text Block [Abstract]

Contractual Guarantees and Indemnities

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.

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 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.

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

6 Months Ended

Jul. 02, 2016

Text Block [Abstract]

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

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

Balance Sheet Data:

	July 2, 2016			December 31, 2015
Accounts receivable:
Accounts receivable-trade	$	21 ,000		$	43,000
Less: allowance for doubtful accounts		(5,000	)		(5,000	)
	$	16 ,000		$	38,000
	July 2, 2016			December 31, 2015
Inventories:
Raw materials	$	610,000		$	651,000
Less: Raw material reserves		(548,000	)		(578,000	)
Work-in-process		29,000			28,000
Less: Work-in-process reserves		(29,000	)		(28,000	)
Finished goods		162,000			216,000
Less: Finished goods reserves		(162,000	)		(168,000	)
	$	62,000		$	121,000

	July 2, 2016			December 31, 2015
Property and Equipment:
Equipment	$	11,571,000		$	11,571,000
Leasehold improvements		1,065,000			1,065,000
Furniture and fixtures		205,000			205,000
		12,841,000			12,841,000
Less: accumulated depreciation and amortization		(8,410,000	)		(7,290,000	)
	$	4,431,000		$	5,551,000

Depreciation expense amounted to $559,000 and $1.1 million, respectively, for the three and six months ended July 2, 2016 and $502,000 and $1.2 million, respectively, for the three and six months ended June 27, 2015.

	July 2, 2016			December 31, 2015
Patents and Licenses:
Patents pending	$	529,000		$	555,000
Patents issued		1,372,000			1,252,000
Less accumulated amortization		(907,000	)		(869,000	)
Net patents issued		465,000			383,000
	$	994 ,000		$	938,000

Amortization expense related to these items totaled $19,000 and $38,000, respectively, for the three and six months ended July 2, 2016 and $19,000 and $37,000, respectively, for the three and six months ended June 27, 2015. Amortization expenses are expected to total $37,000 for the remainder of 2016 and $74,000 for 2017 and 2018.

	July 2, 2016			December 31, 2015
Accrued Expenses and Other Long Term Liabilities:
Salaries Payable	$	94,000		$	98,000
Compensated Absences		210,000			197,000
Compensation related		90,000			38,000
Warranty reserve		8,000			23,000
Deferred rent		82,000			132,000
Santa Barbara facility closure		184,000			—
Other		129,000			78,000
Fair value of warrant derivatives		224,000			245,000
		1,021,000			811,000
Less current portion		(791,000	)		(418,000	)
Long term portion	$	230,000		$	393,000

	For the six months ended,
	July 2, 2016			June 27, 2015
Warranty Reserve Activity:
Beginning balance	$	23,000		$	38,000
Additions		—			—
Deductions		(15,000	)		(3,000	)
Ending balance	$	8,000		$	35,000

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Subsequent Events

6 Months Ended

Jul. 02, 2016

Subsequent Events [Abstract]

Subsequent Events

8. Subsequent Events

On July 18, 2016 we effected a one-for-fifteen (1:15) reverse split of our common stock, or the Reverse Stock Split. The Reverse Stock Split, which was authorized by our Board of Directors, was approved by our stockholders on June 23, 2016 at a Special Meeting of the Stockholders. Upon market open July 19, 2016, our common stock continued trading under the symbol SCON on a split-adjusted basis with a new CUSIP number. We implemented the Reverse Stock Split for the purpose of regaining compliance with the Nasdaq Stock Market’s listing maintenance standard that requires us to maintain at least a $1.00 per share minimum bid price. The Reverse Stock Split reduced the number of our outstanding shares common stock from approximately 41,748,218 shares as of July 18, 2016 to approximately 2,783,214 shares outstanding post-Reverse Stock Split. Correspondingly, the initial trading price of our common stock was proportionately increased immediately following the Reverse Stock Split. Share and per share data included herein has been retroactively restated for the effect of the Reverse Stock Split.

On August 2, 2016, we were notified by Nasdaq that for the last 10 consecutive business days, from July 19, 2016 to August 1, 2016, the closing bid price of our common stock had been at $1.00 per share or greater. Accordingly, we have regained compliance with Listing Rule 5550(a)(2) and this matter is now closed. However, other factors may adversely affect the price of our common stock and there can be no assurance that the Reverse Stock Split will allow us to maintain compliance with the Nasdaq Stock Market’s listing maintenance standard.

On July 27, 2016, we entered into a Securities Purchase Agreement (“Purchase Agreement”) with certain investors (the “Purchasers”), pursuant to which we agreed to issue to the Purchasers, in a registered offering, (i) an aggregate of 293,604 shares of our common stock at a price of $3.08375 per share and (ii) to Purchasers, whose purchase of our common stock would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this offering, an aggregate of 1,294.595255 shares of our Series C Convertible Preferred Stock (the “Series C Preferred”). The Series C Preferred have a stated value of $1,000 and are convertible into shares of our common stock at $3.08375 per share, the public offering price of the shares of our common stock. Subject to certain prohibitions on conversion, the 1,294.595255 shares of Series C Preferred would be convertible into an aggregate of 419,812 shares of our common stock.

In a concurrent private placement, each Purchaser also received warrants to purchase 0.75 of a share of common stock for each share of common stock (or common stock underlying the Series C Preferred) purchased in the registered offering, or up to an aggregate of 535,062 warrants. The Warrants have an exercise price of $3.00 per share and are exercisable during the period following the six month anniversary of the date of issuance of the warrants until the five and a half year anniversary of the date of issuance. The warrants are exercisable for cash or, solely in the absence of an effective registration statement or prospectus, by cashless exercise.

The closing of this registered offering and the concurrent private placement occurred on August 2, 2016 and provided gross proceeds of $2.2 million and net proceeds to us, after deducting fees and our estimated offering expenses, of $1.9 million.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jul. 02, 2016

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

We have incurred significant net losses since our inception and have an accumulated deficit of $296.7 million. In 2015, we incurred a net loss of $8.6 million and had negative cash flows from operations of $8.5 million. At July 2, 2016, we had $3.4 million in cash compared to $7.5 million in cash and cash equivalents as of December 31, 2015. Our cash resources will not be sufficient to fund our business for the next 12 months. We will need to grow our revenues from commercial operations and/or raise additional funds over the next 12 months to meet our working capital needs. On August 2, 2016, we closed a registered offering of our common stock, Series C preferred stock along with a concurrent private placement of warrants to purchase 0.75 of a share of our common stock that provided gross proceeds of $2.2 million and net proceeds to us, after deducting fees and our estimated offering expenses, of $1.9 million. (See Note 8. Subsequent Events in this Report) 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. If we cannot raise any needed funds, we might be forced to make further substantial reductions in our operating expenses, which could adversely affect our ability to implement our current business plan and ultimately our viability as a company. 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 use our expertise and our technology to generate revenues in various ways, including commercial operations, joint ventures and licenses. We have invested and will continue to invest in our Austin, Texas manufacturing facility to enable us to produce our Conductus wire products. Delays in the timing of our ability to, including but not limited to, raise additional capital, unexpected production delays, and our ability to sell our Conductus wire products in large scale could substantially impact our estimates used in the determination of expected future cash flows and/or expected future profitability. If we fail to increase our revenues, we may not achieve and may not maintain profitability and we may not realize our investment in infrastructure. The accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of the uncertainties set forth above.

On July 18, 2016, we effected a 1-for-15 reverse stock split of our common stock, or the Reverse Stock Split. As a result of the Reverse Stock Split, every fifteen shares of our pre-Reverse Stock Split common stock were combined and reclassified into one share of our common stock. The Reverse Stock Split did not change the authorized number of shares or the par value of our common stock. Certain of the information contained in the documents incorporated into this Report present information on our common stock on a pre-Reverse Split basis. Share and per share data included herein has been retroactively restated for the effect of the Reverse Stock Split. 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 2015. We have not made any material changes to these policies.

We have reviewed recently issued Financial Accounting Standards Board pronouncements and do not believe they will have a material impact on our condensed consolidated financial statements.

Principles of Consolidation

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

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 from time to time exceed FDIC limits. Historically, we have not experienced any losses due to such concentration of credit risk.

Accounts Receivable

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 collectibility. Account 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

Revenue Recognition

Our revenues have principally been derived from the sale of our wireless communications products, and to an increasing extent our Conductus wire, and 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.

Shipping and Handling Fees and Costs

Shipping and Handling Fees and Costs

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

Warranties

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 product 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

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

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

Inventories

Inventories

Inventories were stated at the lower of cost or market, 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 July 2, 2016 net inventory value was $62,000 compared to a December 31, 2015 value of $121,000. 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 (minimal sales in the current quarter and year to date, and no backlog of sales orders as of July 2, 2016 related to our wireless business), or the estimated forecast of product demand and production requirements. Costs associated with idle capacity are charged to expense immediately.

Property and Equipment

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 seven years. Leasehold improvements and assets financed under capital leases are amortized over the shorter of their useful 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. In the first six months of 2016 and 2015, there were no retirements or disposals and we realized gains of $0 and $1,000, respectively, from sale of previously retired equipment.

Patents, Licenses and Purchased Technology

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.

Other Assets and Investments

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. The analyses necessarily involve significant management judgment. Market acceptance and significant revenues from our new Conductus wire is a key assumption in realization of our investment in long-lived assets. 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 for recoverability during 2015 and determined there was no impairment. We believe there have been no triggering events in the six months ended July 2, 2016 that would cause us to retest the recoverability of these long-lived assets.

Loss Contingencies

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. The costs of our defense in such matters are expensed as incurred. Insurance proceeds recoverable are recorded when deemed probable.

Income Taxes

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 further clarifies 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. The adoption of this guidance has not had a material impact on our consolidated financial statements as we concluded our tax positions are highly certain of being settled at 100% of the benefit claimed. Guidance is also provided on the accounting for the related interest and penalties, financial statement and disclosure. We are currently not under examination by any taxing authority nor have we been notified of an impending examination. The oldest California and federal tax years that remain open to possible evaluation and interpretation of our tax position are 2011 and 2012, respectively.

As of December 31, 2015, we had net operating loss carryforwards for federal and state income tax purposes of $334.7 million and $150.5 million, respectively, which expire in the years 2018 through 2035. However, during 2015, we concluded that under the Internal Revenue Code change of control limitations, a maximum of $38.3 million and $37.7 million, respectively, 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

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 six months ended July 2, 2016 and June 27, 2015.

Net Loss Per Share

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. Potential common shares are not included in the calculation of diluted loss per share because their effect is anti-dilutive.

Stock-based Compensation

Stock-based Compensation

We grant both restricted stock awards and stock options to our key employees, directors and consultants. For the three and six months ended July 2, 2016 and June 27, 2015 no options or awards were granted.

The following table presents details of total stock-based compensation expense that is included in each functional line item on our condensed consolidated statements of operations:

	Three months ended				Six months ended
	July 2, 2016		June 27, 2015		July 2, 2016		June 27, 2015
Cost of revenue	$	2,000	$	1,000	$	3,000	$	1,000
Research and development		37,000		78,000		74,000		169,000
Selling, general and administrative		219,000		454,000		442,000		915,000
Total stock-based compensation expense	$	258,000	$	533,000	$	519,000	$	1,085,000

Use of Estimates

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, estimated provisions for warranty costs, fair value of warrant derivatives, stock-based compensation, 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

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, accounts receivable, and other current liabilities as of July 2, 2016 approximate fair value.

The fair value of our warrant derivative liability was estimated using the Binomial Lattice option valuation model.

Fair value for financial reporting purposes is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date, ASC 820, “Fair Value Measurement and Disclosures”, also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The fair value of our warrant liabilities was determined based on level 3 inputs. These derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as Adjustments to fair value of derivatives. See Note 3 — Stockholders’ Equity: Warrants.

Comprehensive Income

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

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. As discussed in this Report, we are adapting our unique HTS material deposition techniques to produce our energy efficient, cost-effective and high performance Conductus wire. We expect commercial level sales of our Conductus wire products later this year.

Certain Risks and Uncertainties

Certain Risks and Uncertainties

Our long-term prospects are dependent upon the successful commercialization and market acceptance of our Conductus wire products. We do not currently have a customer buying significant amounts of our wire products.

Current sales of our wireless products are to wireless network operators in the United States and our product sales have historically been concentrated in a small number of customers. For the six months ended July 2, 2016, AT&T and Verizon Wireless represented 88% of total net revenues. For the three and six months ended June 27, 2015, these customers represented 100% and 93%, respectively, of total net revenues. The loss of or reduction in sales, or the inability to collect outstanding accounts receivable, from any of these customers could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We currently rely on a limited number of suppliers for key components of our products. The loss of any of these suppliers could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In connection with the sales of our commercial products, we indemnify, without limit or term, our customers 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 indemnity obligations because of the uncertainty as to whether a claim might arise and how much it might total.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jul. 02, 2016

Accounting Policies [Abstract]

Total Stock-Based Compensation Expense

The following table presents details of total stock-based compensation expense that is included in each functional line item on our condensed consolidated statements of operations:

	Three months ended				Six months ended
	July 2, 2016		June 27, 2015		July 2, 2016		June 27, 2015
Cost of revenue	$	2,000	$	1,000	$	3,000	$	1,000
Research and development		37,000		78,000		74,000		169,000
Selling, general and administrative		219,000		454,000		442,000		915,000
Total stock-based compensation expense	$	258,000	$	533,000	$	519,000	$	1,085,000

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Stockholders' Equity (Tables)

6 Months Ended

Jul. 02, 2016

Equity [Abstract]

Summary of Stockholders' Equity Transactions

The following is a summary of stockholders’ equity transactions for the six months ended July 2, 2016:

	Convertible									Capital in
	Preferred Stock					Common Stock				Excess of		Accumulated
	Shares			Amount		Shares		Amount		Par Value		Deficit			Total
Balance at December 31, 2015		330,873		$	—		2,640,547	$	3,000	$	304,089,000	$	(290,970,000	)	$	13,122,000
Conversion of Series B preferred stock to common stock		(749	)		—		142,667		—		—					—
Stock-based compensation											519,000					519,000
Net loss													(5,708,000	)		(5,708,000	)
Balance at July 2, 2016		330,124		$	—		2,783,214	$	3,000	$	304,608,000	$	(296,678,000	)	$	7, 933,000

Summary of Stock Option Transactions under Stock Option Plan

The following is a summary of stock option transactions under our Stock Option Plan at July 2, 2016:

	Number of Shares			Price Per Share		Weighted Average Exercise Price		Number of Options Exercisable		Weighted Average Exercise Price
Balance at December 31, 2015		131,573		$	3.30 - $ 936.00	$	38.10		71,351	$	66.15
Granted		—					—
Exercised		—					—
Canceled		(369	)		498.60 – 936.00		711.75
Balance at July 2, 2016		131,204		$	3.30 - $921.60	$	36.14		72,093	$	62.46

Summary of Restricted Stock Award Transactions

The following is a summary of our restricted stock award transactions at July 2, 2016:

	Number of Shares			Weighted Average Grant Date Fair Value
Balance nonvested at December 31, 2015		34,153		$	41.55
Granted		—			—
Vested		(555	)		41.40
Forfeited		—			—
Balance nonvested at July 2, 2016		33,598		$	41.55

Summary of Outstanding Warrants

The following is a summary of outstanding warrants at July 2, 2016:

		Common Shares
		Total		Currently Exercisable		Price per Share		Expiration Date
(1)	Warrants related to February 2012 financing		27,963		27,963	$	243.00	February 22, 2017
(2)	Warrants related to November 2012 financing		556		556	$	67.50	November 26, 2016
(3)	Warrants related to December 2012 financing		1,042		1,042	$	67.50	December 18, 2016
(4)	Warrants related to April 2013 financing		17,127		17,127	$	81.75	April 26, 2019
(5)	Warrants related to August 2013 financing		7,845		7,845	$	33.73	August 5, 2016
(6)	Warrants related to August 2013 financing		407,825		407,825	$	5.25	August 9, 2018
(7)	Warrants related to February 2015 agreement		3,056		3,056	$	45.05	February 13, 2020
(8)	Warrants related to March 2015 financing		102,093		102,093	$	24.49	September 24, 2020
(9)	Warrants related to March 2015 financing		10,209		10,209	$	30.61	March 20, 2020
(10)	Warrants related to October 2015 financing		1,355,171		1,355,171	$	6.00	October 14, 2020
(11)	Warrants related to October 2015 financing		90,345		90,345	$	6.56	October 14, 2020

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Earnings Per Share (Tables)

6 Months Ended

Jul. 02, 2016

Earnings Per Share [Abstract]

Schedule of Antidilutive Shares Exercise or Vesting Excluded from Computation of Earnings Per Share

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:

	July 2, 2016		June 27, 2015
Outstanding stock options		131,204		75,480
Unvested restricted stock awards		33,598		67,196
Outstanding warrants		2,023,232		670,370
Total		2,188,034		813,046

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Commitments and Contingencies (Tables)

6 Months Ended

Jul. 02, 2016

Commitments and Contingencies Disclosure [Abstract]

Minimum Lease Payments under Operating Leases and License Obligations

The minimum lease payments under operating leases and license obligations as of July 2, 2016 are as follows:

Years ending December 31,	Licenses		Operating Leases
Remainder of 2016	$	—	$	672,000
2017		45,000		292,000
2018		45,000		40,000
2019		45,000		27,000
2020		—		—
Thereafter		—		—
Total payments	$	135,000	$	1,031,000

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Details of Certain Financial Statement Components and Supplemental Disclosures of Cash Flow Information and Non-Cash Activities (Tables)

6 Months Ended

Jul. 02, 2016

Text Block [Abstract]

Components of Accounts Receivable

Balance Sheet Data:

	July 2, 2016			December 31, 2015
Accounts receivable:
Accounts receivable-trade	$	21 ,000		$	43,000
Less: allowance for doubtful accounts		(5,000	)		(5,000	)
	$	16 ,000		$	38,000

Components of Inventories

	July 2, 2016			December 31, 2015
Inventories:
Raw materials	$	610,000		$	651,000
Less: Raw material reserves		(548,000	)		(578,000	)
Work-in-process		29,000			28,000
Less: Work-in-process reserves		(29,000	)		(28,000	)
Finished goods		162,000			216,000
Less: Finished goods reserves		(162,000	)		(168,000	)
	$	62,000		$	121,000

Components of Property and Equipment

	July 2, 2016			December 31, 2015
Property and Equipment:
Equipment	$	11,571,000		$	11,571,000
Leasehold improvements		1,065,000			1,065,000
Furniture and fixtures		205,000			205,000
		12,841,000			12,841,000
Less: accumulated depreciation and amortization		(8,410,000	)		(7,290,000	)
	$	4,431,000		$	5,551,000

Components of Patents, Licenses and Purchased Technology

	July 2, 2016			December 31, 2015
Patents and Licenses:
Patents pending	$	529,000		$	555,000
Patents issued		1,372,000			1,252,000
Less accumulated amortization		(907,000	)		(869,000	)
Net patents issued		465,000			383,000
	$	994 ,000		$	938,000

Components of Accrued Expenses and Other Long Term Liabilities

	July 2, 2016			December 31, 2015
Accrued Expenses and Other Long Term Liabilities:
Salaries Payable	$	94,000		$	98,000
Compensated Absences		210,000			197,000
Compensation related		90,000			38,000
Warranty reserve		8,000			23,000
Deferred rent		82,000			132,000
Santa Barbara facility closure		184,000			—
Other		129,000			78,000
Fair value of warrant derivatives		224,000			245,000
		1,021,000			811,000
Less current portion		(791,000	)		(418,000	)
Long term portion	$	230,000		$	393,000

Schedule of Warranty Reserve Activity

	For the six months ended,
	July 2, 2016			June 27, 2015
Warranty Reserve Activity:
Beginning balance	$	23,000		$	38,000
Additions		—			—
Deductions		(15,000	)		(3,000	)
Ending balance	$	8,000		$	35,000

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General - Additional Information (Detail)	Jul. 02, 2016 Patents
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of patents generated	100

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Summary of Significant Accounting Policies - Additional Information (Detail)			3 Months Ended		6 Months Ended		12 Months Ended
	Aug. 02, 2016 USD ($) shares	Jul. 18, 2016	Jul. 02, 2016 USD ($)	Jun. 27, 2015 USD ($)	Jul. 02, 2016 USD ($)	Jun. 27, 2015 USD ($)	Dec. 31, 2015 USD ($)	Jul. 27, 2016 shares	Dec. 31, 2014 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Accumulated deficit			$ (296,678,000)		$ (296,678,000)		$ (290,970,000)
Incurred net loss			3,078,000	$ 2,409,000	5,708,000	$ 3,830,000	8,600,000
Negative cash flows from operations					(4,052,000)	(4,626,000)	(8,500,000)
Cash and cash equivalents			3,417,000	$ 2,755,000	$ 3,417,000	2,755,000	7,469,000		$ 1,238,000
Reverse split					1-for-15
Cash and cash equivalents maximum original maturity					3 months
Product warranty period, Minimum					1 year
Product warranty period, Maximum					5 years
Inventory, net			$ 62,000		$ 62,000		121,000
Gain on sale of property and equipment					0	1,000
Selling, general and administration expenses disposals					0	$ 1,000
Impairment of patents					$ 0
Minimum percentage of tax benefit realized					50.00%
Percentage of tax benefit claimed					100.00%
Federal [Member]
Summary Of Significant Accounting Policies [Line Items]
Net operating loss carryforwards							334,700,000
State [Member]
Summary Of Significant Accounting Policies [Line Items]
Net operating loss carryforwards							150,500,000
Furniture and Fixtures [Member]
Summary Of Significant Accounting Policies [Line Items]
Property, plant and equipment useful life					7 years
Customer Concentration Risk [Member] | Sales Revenue, Net [Member] | AT&T and Verizon Wireless [Member]
Summary Of Significant Accounting Policies [Line Items]
Customer concentration risk percentage				100.00%	88.00%	93.00%
Minimum [Member] | Equipment [Member]
Summary Of Significant Accounting Policies [Line Items]
Property, plant and equipment useful life					3 years
Maximum [Member] | Federal [Member]
Summary Of Significant Accounting Policies [Line Items]
Reduction of taxable income							38,300,000
Maximum [Member] | State [Member]
Summary Of Significant Accounting Policies [Line Items]
Reduction of taxable income							$ 37,700,000
Maximum [Member] | Equipment [Member]
Summary Of Significant Accounting Policies [Line Items]
Property, plant and equipment useful life					7 years
Subsequent Events [Member]
Summary Of Significant Accounting Policies [Line Items]
Gross proceeds from registered offering and private placement	$ 2,200,000
Net proceeds from registered offering and private placement	$ 1,900,000
Reverse split conversion ratio		0.0667
Subsequent Events [Member] | Private Placement [Member]
Summary Of Significant Accounting Policies [Line Items]
Number of shares of common stock can be purchased with each warrant | shares	0.75							0.75
Earliest Tax Year [Member]
Summary Of Significant Accounting Policies [Line Items]
Operating loss carryforwards expiration period					2018
Latest Tax Year [Member]
Summary Of Significant Accounting Policies [Line Items]
Operating loss carryforwards expiration period					2035
Patents and Licenses [Member]
Summary Of Significant Accounting Policies [Line Items]
Estimated useful lives					17 years

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Summary of Significant Accounting Policies - Total Stock-Based Compensation Expense (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jun. 27, 2015	Jul. 02, 2016	Jun. 27, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 258,000	$ 533,000	$ 519,000	$ 1,085,000
Cost of Revenue [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	2,000	1,000	3,000	1,000
Research and Development [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	37,000	78,000	74,000	169,000
Selling, General and Administrative [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 219,000	$ 454,000	$ 442,000	$ 915,000

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Stockholders' Equity - Summary of Stockholders' Equity Transactions (Detail) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jul. 02, 2016	Jun. 27, 2015	Jul. 02, 2016	Jun. 27, 2015	Dec. 31, 2015
Beginning balance			$ 13,122,000
Conversion of Series B preferred stock to common stock			0
Stock-based compensation			519,000
Net loss	$ (3,078,000)	$ (2,409,000)	(5,708,000)	$ (3,830,000)	$ (8,600,000)
Ending balance	7,933,000		7,933,000		13,122,000
Common Stock [Member]
Beginning balance			$ 3,000
Beginning balance, Shares			2,640,547
Conversion of Series B preferred stock to common stock			$ 0
Conversion of Series B preferred stock to common stock , Shares			142,667
Ending balance	$ 3,000		$ 3,000		$ 3,000
Ending balance, Shares	2,783,214		2,783,214		2,640,547
Capital in Excess of Par Value [Member]
Beginning balance			$ 304,089,000
Conversion of Series B preferred stock to common stock			0
Stock-based compensation			519,000
Ending balance	$ 304,608,000		304,608,000		$ 304,089,000
Accumulated Deficit [Member]
Beginning balance			(290,970,000)
Conversion of Series B preferred stock to common stock			0
Net loss			(5,708,000)
Ending balance	$ (296,678,000)		$ (296,678,000)		$ (290,970,000)
Convertible Preferred Stock [Member]
Beginning balance, Shares			330,873
Conversion of Series B preferred stock to common stock			$ 0
Conversion of Series B preferred stock to common stock , Shares			(749)
Ending balance, Shares	330,124		330,124		330,873

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Stockholders' Equity - Additional Information (Detail)						3 Months Ended		6 Months Ended		12 Months Ended
	Jul. 27, 2016 USD ($) $ / shares shares	Oct. 14, 2015 USD ($) $ / shares shares	Mar. 25, 2015 $ / shares shares	Feb. 14, 2015 USD ($) $ / shares shares	Aug. 09, 2013 USD ($)	Jul. 02, 2016 USD ($) $ / shares shares	Jun. 27, 2015 USD ($) $ / shares shares	Jul. 02, 2016 USD ($) OptionPlan $ / shares shares	Jun. 27, 2015 USD ($) $ / shares shares	Dec. 31, 2015 USD ($)	Aug. 02, 2016 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Preferred stock, stated value | $
Warrants outstanding				61,123
Common shares, price per share | $ / shares				$ 30.00
Adjustment to warrant exercise price | $				$ 400,000					$ 367,000
Fair value assumptions, expected life				6 months				2 years 1 month 6 days		2 years 7 months 6 days
Fair value assumptions, risk free interest rates				0.07%				0.73%		1.24%
Fair value assumptions, expected volatility				33.60%				96.00%		88.00%
Fair value assumptions, dividend yield				0.00%				0.00%		0.00%
Reclassification of warrant liability upon exercise | $				$ 669,000					669,000
Percentage of early exercise factor								30.00%		30.00%
Estimated fair value of warrants | $						$ 224,000		$ 224,000		$ 245,000
Adjustments to fair value of warrant derivatives | $							$ 752,000	$ 21,000	$ 3,383,000
Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity award option plans | OptionPlan								2
Number of Shares, Exercised						0	0	0	0
Impact on net loss | $						$ (95,000)	$ (93,000)	$ (194,000)	$ (205,000)
Impact on basic and diluted net loss per share | $ / shares						$ 0.04	$ 0.08	$ 0.07	$ 0.20
Stock compensation cost | $						$ 0	$ 0	$ 0	$ 0
Total compensation cost related to nonvested awards not yet recognized | $						$ 600,000		$ 600,000
Weighted-average period over which the cost is expected to be recognized								1 year
(6) Warrants Related to August 2013 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding						407,825		407,825
Common shares, price per share | $ / shares		$ 5.25	$ 24.49			$ 5.25		$ 5.25
Fair value assumptions, expected life					5 years
Fair value assumptions, risk free interest rates					1.36%
Fair value assumptions, expected volatility					111.00%
Fair value assumptions, dividend yield					0.00%
Percentage of early exercise factor					30.00%
Estimated fair value of warrants | $					$ 4,200,000
Two year warrants related to August 2013 financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value assumptions, expected life					2 years
Fair value assumptions, risk free interest rates					0.32%
Fair value assumptions, expected volatility					116.00%
Fair value assumptions, dividend yield					0.00%
(8) Warrants Related to March 2015 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding			102,093			102,093		102,093
Common shares, price per share | $ / shares			$ 24.49			$ 24.49		$ 24.49
Warrants exercisable period			5 years 6 months
(9) Warrants Related to March 2015 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding			10,209			10,209		10,209
Common shares, price per share | $ / shares			$ 30.61			$ 30.61		$ 30.61
Warrants exercisable period			5 years
(7) Warrants Related to February 2015 Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding				3,056		3,056		3,056
Common shares, price per share | $ / shares				$ 45.05		$ 45.05		$ 45.05
Warrants exercisable period				5 years
(10) Warrants Related to October 2015 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding		1,806,894				1,355,171		1,355,171
Common shares, price per share | $ / shares						$ 6.00		$ 6.00
(11) Warrants Related to October 2015 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding		1,355,171				90,345		90,345
Common shares, price per share | $ / shares						$ 6.56		$ 6.56
(12) Warrants Related to October 2015 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding		90,345
Common shares, price per share | $ / shares		$ 6.5625
Restricted Stock [Member] | Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Impact on net loss | $						$ (163,000)	$ (440,000)	$ (325,000)	$ (880,000)
Impact on basic and diluted net loss per share | $ / shares						$ 0.06	$ 0.38	$ 0.12	$ 0.85
Total compensation cost related to nonvested awards not yet recognized | $						$ 282,000		$ 282,000
Weighted-average period over which the cost is expected to be recognized								7 months
Stock compensation cost capitalized | $								$ 0
Restricted Stock [Member] | Minimum [Member] | Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of restricted stock under awards all have service conditions and vest over								1 year
Restricted Stock [Member] | Maximum [Member] | Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of restricted stock under awards all have service conditions and vest over								4 years
Stock Options [Member] | Stock Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Exercised								0
Weighted-average contractual term of options outstanding								8 years 1 month 6 days
Weighted-average contractual term of stock options currently exercisable								7 years 2 months 12 days
Exercisable options with an exercise price less than the current market value						0		0
Outstanding options expiration date								Nov. 30, 2024
Aggregate exercise price of options | $								$ 4,700,000
Minimum exercise price of options | $ / shares								$ 3.30
Maximum exercise price of options | $ / shares								$ 921.60
Capital Unit, Class A [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of outstanding common stock on units purchased		4.99%
Number of units sold		902,132
Number of shares of common stock		1
Capital Unit, Class A [Member] | Seriesa Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common shares, price per share | $ / shares		$ 5.25
Number of shares of common stock can be purchased with each warrant		1
Capital Unit, Class A [Member] | Series B Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common shares, price per share | $ / shares		$ 6.00
Number of shares of common stock can be purchased with each warrant		0.75
Capital Unit, Class B [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of units sold		4,750.0005
Capital Unit, Class B [Member] | Series B Preferred Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Preferred stock, stated value | $		$ 1,000
Preferred stock convertible into shares of common stock, price per share | $ / shares		$ 0.35
Number of shares of convertible preferred stock in each unit		1
Subsequent Events [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of outstanding common stock on units purchased	4.99%
Subsequent Events [Member] | Series C Preferred Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares issued	1,294.595255
Preferred stock, stated value | $	$ 1,000
Preferred stock convertible into shares of common stock, price per share | $ / shares	$ 3.08375
Conversion of preferred stock to common stock	419,812
Subsequent Events [Member] | (6) Warrants Related to August 2013 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common shares, price per share | $ / shares	$ 3.00
Subsequent Events [Member] | Private Placement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares of common stock can be purchased with each warrant	0.75										0.75
Warrants outstanding	535,062
Common shares, price per share | $ / shares	$ 3.00
Subsequent Events [Member] | Private Placement [Member] | Placement Agent Warrants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	49,939
Common shares, price per share | $ / shares	$ 3.855
Warrants exercisable period	5 years
Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares issued			204,186
Common Stock [Member] | Subsequent Events [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares issued	293,604
Issuance price per share | $ / shares	$ 3.08375
Previously Reported [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common shares, price per share | $ / shares				$ 38.55

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Stockholders' Equity - Summary of Stock Option Transactions under Stock Option Plan (Detail) - Stock Option Plan [Member] - $ / shares	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jun. 27, 2015	Jul. 02, 2016	Jun. 27, 2015	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Exercised	0	0	0	0
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Beginning balance			131,573
Number of Shares, Granted			0
Number of Shares, Exercised			0
Number of Shares, Canceled			(369)
Number of Shares, Ending balance	131,204		131,204
Weighted Average Exercise Price, Beginning Balance			$ 38.10
Weighted Average Exercise Price, Granted			0
Weighted Average Exercise Price, Exercised			0
Weighted Average Exercise Price, Canceled			711.75
Weighted Average Exercise Price, Ending Balance	$ 36.14		$ 36.14
Number of Options Exercisable	72,093		72,093		71,351
Weighted Average Exercise Price Exercisable	$ 62.46		$ 62.46		$ 66.15
Stock Options [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Price Per Share, Beginning balance			3.30
Price Per Share, Canceled			498.60
Price Per Share, Ending balance	3.30		3.30
Stock Options [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Price Per Share, Beginning balance			936.00
Price Per Share, Canceled			936.00
Price Per Share, Ending balance	$ 921.60		$ 921.60

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Stockholders' Equity - Summary of Restricted Stock Award Transactions (Detail) - Stock Option Plan [Member] - Restricted Stock [Member]	6 Months Ended
	Jul. 02, 2016 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares, Beginning balance | shares	34,153
Number of Shares, Granted | shares	0
Number of Shares, Vested | shares	(555)
Number of Shares, Forfeited | shares	0
Number of Shares, Ending balance | shares	33,598
Weighted Average Grant Date Fair Value, Beginning balance | $ / shares	$ 41.55
Weighted Average Grant Date Fair Value, Granted | $ / shares	0
Weighted Average Grant Date Fair Value, Vested | $ / shares	41.40
Weighted Average Grant Date Fair Value, Forfeited | $ / shares	0
Weighted Average Grant Date Fair Value, Ending balance | $ / shares	$ 41.55

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Stockholders' Equity - Summary of Outstanding Warrants (Detail) - $ / shares	6 Months Ended
	Jul. 02, 2016	Oct. 14, 2015	Mar. 25, 2015	Feb. 14, 2015
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding				61,123
Common shares, price per share				$ 30.00
(1) Warrants Related to February 2012 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	27,963
Common Shares, Currently Exercisable	27,963
Common shares, price per share	$ 243.00
Common Shares, Expiration Date	Feb. 22, 2017
(2) Warrants Related to November 2012 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	556
Common Shares, Currently Exercisable	556
Common shares, price per share	$ 67.50
Common Shares, Expiration Date	Nov. 26, 2016
(3) Warrants Related to December 2012 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	1,042
Common Shares, Currently Exercisable	1,042
Common shares, price per share	$ 67.50
Common Shares, Expiration Date	Dec. 18, 2016
(4) Warrants Related to April 2013 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	17,127
Common Shares, Currently Exercisable	17,127
Common shares, price per share	$ 81.75
Common Shares, Expiration Date	Apr. 26, 2019
(5) Warrants Related to August 2013 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	7,845
Common Shares, Currently Exercisable	7,845
Common shares, price per share	$ 33.73
Common Shares, Expiration Date	Aug. 05, 2016
(6) Warrants Related to August 2013 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	407,825
Common Shares, Currently Exercisable	407,825
Common shares, price per share	$ 5.25	$ 5.25	$ 24.49
Common Shares, Expiration Date	Aug. 09, 2018
(7) Warrants Related to February 2015 Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	3,056			3,056
Common Shares, Currently Exercisable	3,056
Common shares, price per share	$ 45.05			$ 45.05
Common Shares, Expiration Date	Feb. 13, 2020
(8) Warrants Related to March 2015 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	102,093		102,093
Common Shares, Currently Exercisable	102,093
Common shares, price per share	$ 24.49		$ 24.49
Common Shares, Expiration Date	Sep. 24, 2020
(9) Warrants Related to March 2015 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	10,209		10,209
Common Shares, Currently Exercisable	10,209
Common shares, price per share	$ 30.61		$ 30.61
Common Shares, Expiration Date	Mar. 20, 2020
(10) Warrants Related to October 2015 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	1,355,171	1,806,894
Common Shares, Currently Exercisable	1,355,171
Common shares, price per share	$ 6.00
Common Shares, Expiration Date	Oct. 14, 2020
(11) Warrants Related to October 2015 Financing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Warrants outstanding	90,345	1,355,171
Common Shares, Currently Exercisable	90,345
Common shares, price per share	$ 6.56
Common Shares, Expiration Date	Oct. 14, 2020

XML

Earnings Per Share - Schedule of Antidilutive Shares Exercise or Vesting Excluded from Computation of Earnings Per Share (Detail) - shares	6 Months Ended
	Jul. 02, 2016	Jun. 27, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	2,188,034	813,046
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	131,204	75,480
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	33,598	67,196
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	2,023,232	670,370

XML

Earnings Per Share - Additional Information (Detail) - shares	6 Months Ended
	Jul. 02, 2016	Jun. 27, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Conversion of preferred stock to common stock	2,188,034	813,046
Series A and B Preferred Stock Convertible [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Conversion of preferred stock to common stock	246,606

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Commitments and Contingencies - Additional Information (Detail)	3 Months Ended		6 Months Ended
	Jul. 02, 2016 USD ($)	Jun. 27, 2015 USD ($)	Jul. 02, 2016 USD ($) Renewals	Jun. 27, 2015 USD ($)
Other Commitments [Line Items]
Accrued expense on operating lease renewal	$ 184,000		$ 184,000
Rent expense	167,000	$ (13,000)	$ 319,000	$ 190,000
Percentage of minimum royalty payment			0.13%
Percentage of maximum royalty payment			2.50%
Royalty expense	$ 11,000	$ 13,000	$ 23,000	$ 20,000
Minimum [Member]
Other Commitments [Line Items]
Royalty obligations termination period			2016
Maximum [Member]
Other Commitments [Line Items]
Royalty obligations termination period			2020
Santa Barbara [Member]
Other Commitments [Line Items]
Lease facility expires			2016-11
Renewal period of operating lease			5 years
Number of five-year renewal option | Renewals			1
Austin, Texas [Member]
Other Commitments [Line Items]
Lease facility expires			2017-03
Renewal period of operating lease			5 years
Number of five-year renewal option | Renewals			1

XML

Commitments and Contingencies - Minimum Lease Payments under Operating Leases and License Obligations (Detail)	Jul. 02, 2016 USD ($)
Leases [Abstract]
Remainder of 2016	$ 0
2017	45,000
2018	45,000
2019	45,000
2020	0
Thereafter	0
Total payments	135,000
Remainder of 2016	672,000
2017	292,000
2018	40,000
2019	27,000
2020	0
Thereafter	0
Total payments	$ 1,031,000

XML

Details of Certain Financial Statement Components and Supplemental Disclosures of Cash Flow Information and Non-Cash Activities - Components of Accounts Receivable (Detail) - USD ($)	Jul. 02, 2016	Dec. 31, 2015
Receivables [Abstract]
Accounts receivable-trade	$ 21,000	$ 43,000
Less: allowance for doubtful accounts	(5,000)	(5,000)
Accounts receivable, net	$ 16,000	$ 38,000

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Details of Certain Financial Statement Components and Supplemental Disclosures of Cash Flow Information and Non-Cash Activities - Components of Inventories (Detail) - USD ($)	Jul. 02, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 610,000	$ 651,000
Less: Raw material reserves	(548,000)	(578,000)
Work-in-process	29,000	28,000
Less: Work-in-process reserves	(29,000)	(28,000)
Finished goods	162,000	216,000
Less: Finished goods reserves	(162,000)	(168,000)
Inventories, net	$ 62,000	$ 121,000

XML

Details of Certain Financial Statement Components and Supplemental Disclosures of Cash Flow Information and Non-Cash Activities - Components of Property and Equipment (Detail) - USD ($)	Jul. 02, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Property and Equipment, Gross	$ 12,841,000	$ 12,841,000
Less: accumulated depreciation and amortization	(8,410,000)	(7,290,000)
Property and Equipment, Net	4,431,000	5,551,000
Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Gross	11,571,000	11,571,000
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Gross	1,065,000	1,065,000
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Gross	$ 205,000	$ 205,000

XML

Details of Certain Financial Statement Components and Supplemental Disclosures of Cash Flow Information and Non-Cash Activities - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jul. 02, 2016	Jun. 27, 2015	Jul. 02, 2016	Jun. 27, 2015
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 559,000	$ 502,000	$ 1,100,000	$ 1,200,000
Amortization expense	19,000	$ 19,000	38,000	$ 37,000
Amortization expense expected for remainder of 2016	37,000		37,000
Amortization expense expected in 2017	74,000		74,000
Amortization expense expected in 2018	$ 74,000		$ 74,000

XML

Details of Certain Financial Statement Components and Supplemental Disclosures of Cash Flow Information and Non-Cash Activities - Components of Patents, Licenses and Purchased Technology (Detail) - USD ($)	Jul. 02, 2016	Dec. 31, 2015
Patents and Licenses:
Less accumulated amortization	$ (907,000)	$ (869,000)
Patents, licenses and purchased technology, net	994,000	938,000
Patent Pending [Member]
Patents and Licenses:
Patents, licenses and purchased technology, gross	529,000	555,000
Patents Issued [Member]
Patents and Licenses:
Patents, licenses and purchased technology, gross	1,372,000	1,252,000
Less accumulated amortization	(907,000)	(869,000)
Patents, licenses and purchased technology, net	$ 465,000	$ 383,000

XML

Details of Certain Financial Statement Components and Supplemental Disclosures of Cash Flow Information and Non-Cash Activities - Components of Accrued Expenses and Other Long Term Liabilities (Detail) - USD ($)	Jul. 02, 2016	Dec. 31, 2015	Jun. 27, 2015	Dec. 31, 2014
Accrued Expenses and Other Long Term Liabilities:
Salaries Payable	$ 94,000	$ 98,000
Compensated Absences	210,000	197,000
Compensation related	90,000	38,000
Warranty reserve	8,000	23,000	$ 35,000	$ 38,000
Deferred rent	82,000	132,000
Santa Barbara facility closure	184,000
Other	129,000	78,000
Fair value of warrant derivatives	224,000	245,000
Total	1,021,000	811,000
Less current portion	(791,000)	(418,000)
Long-term portion	230,000	393,000
Total	$ 1,021,000	$ 811,000

XML

Details of Certain Financial Statement Components and Supplemental Disclosures of Cash Flow Information and Non-Cash Activities - Schedule of Warranty Reserve Activity (Detail) - USD ($)	6 Months Ended
	Jul. 02, 2016	Jun. 27, 2015
Product Warranties Disclosures [Abstract]
Beginning balance	$ 23,000	$ 38,000
Additions	0	0
Deductions	(15,000)	(3,000)
Ending balance	$ 8,000	$ 35,000

XML

Subsequent Events - Additional Information (Detail)					6 Months Ended
	Aug. 02, 2016 USD ($) $ / shares shares	Jul. 27, 2016 USD ($) $ / shares shares	Jul. 18, 2016 $ / shares shares	Mar. 25, 2015 shares	Jul. 02, 2016 USD ($) shares	Jul. 17, 2016 shares	Dec. 31, 2015 USD ($) shares	Feb. 14, 2015 $ / shares shares
Subsequent Event [Line Items]
Reverse split					1-for-15
Common stock, shares outstanding					2,783,214		2,640,547
Preferred stock, stated value | $
Warrants outstanding								61,123
Exercise price of warrants | $ / shares								$ 30.00
Common Stock [Member]
Subsequent Event [Line Items]
Number of shares issued				204,186
Subsequent Events [Member]
Subsequent Event [Line Items]
Reverse split conversion ratio			0.0667
Common stock, shares outstanding			2,783,214			41,748,218
Consecutive business period to closing bid price	10 days
Regain compliance with listing qualifications common stock minimum bid price | $ / shares	$ 1.00
Percentage of outstanding common stock on units purchased		4.99%
Gross proceeds from registered offering and private placement | $	$ 2,200,000
Net proceeds from registered offering and private placement | $	$ 1,900,000
Subsequent Events [Member] | Series C Preferred Stock [Member]
Subsequent Event [Line Items]
Number of shares issued		1,294.595255
Preferred stock convertible into shares of common stock, price per share | $ / shares		$ 3.08375
Preferred stock, stated value | $		$ 1,000
Conversion of preferred stock to common stock		419,812
Subsequent Events [Member] | Private Placement [Member]
Subsequent Event [Line Items]
Number of shares of common stock can be purchased with each warrant	0.75	0.75
Warrants outstanding		535,062
Exercise price of warrants | $ / shares		$ 3.00
Subsequent Events [Member] | Common Stock [Member]
Subsequent Event [Line Items]
Number of shares issued		293,604
Issuance price per share | $ / shares		$ 3.08375
Subsequent Events [Member] | Minimum [Member]
Subsequent Event [Line Items]
Reverse stock split share, minimum bid price | $ / shares			$ 1.00