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No. of Recommendations: 14
I did a very modest amount of DD on these three companies and they are still a long way from mass adoption. ISCO has no institutional support and is woefully undercapitalized. Somewhere in there most recent 10-Q it was mentioned that they would only be solvent for another year or so if they can't get some more capital ASAP. Expect a secondary offering very soon, given the recent run-up in their stock.

The financial picture is better at the other two, particulary CDTS, which just raised $30 million and has some big backers in HP and its recent spin-off, Agilent. If anybody were to acquire CDTS, my guess is it would be those guys. SCON will almost certainly offer more stock soon, since they are cash poor, though not as severely as ISCO.

My understanding of the technology (and, believe it or not, in a not-so-distant former life I actually did my Ph.D. thesis on high temperature superconductors) is that the fabrication of these puppies is no piece of cake. Every single one of the companies warned in their 10-Q that there is no guarantee that they would be able to meet a surge in demand in the near term. SCON claims to be the most ready to meet higher production goals, but you've gotta like that $30 million that CDTS just raised to help get them off the ground.

Almost all of these companies' revenue to date has been from government grants, and I get the impression these are ramping down. So they need to generate some meaningful revenue from other sources pretty soon.

As far as the potential for this technology tornadoing, I would have to agree that the possible market is tremendous. Remember, however, that the enemy of mass adoption is complexity. These are not simple systems to add to existing infrastructure, and in particular, the additional complication of dealing with a cryogenic coolant is going to hold people back for a while.

I will conclude by saying that I think there is real potential here, but IMHO we're a long way from a tornado and I think there is a heck of a lot of raw momentum and speculation built into the price of these things at present. I took a small position in SCON and CDTS (the poor financial condition of ISCO scared me off) just for fun, but I would definitely put it in the "mad money" category.

-DeepBlue
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