<PAGE>

                                                                      EXHIBIT 99

                 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

         This Annual Report on Form 10-K and our other filings with the
Securities and Exchange Commission contain forward-looking statements that
involve risks and uncertainties. We have made these statements in reliance on
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Our forward-looking statements relate to future events or our future
performance and include, but are not limited to, statements concerning our
future profitability, revenues, market growth, capital requirements and new
product introductions. Other statements contained in our filings 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 similar words.

         Forward-looking statements are not guarantees of future performance and
are subject to various risks, uncertainties and assumptions that are difficult
to predict. Therefore, actual results may differ materially from those expressed
in forward-looking statements. They can be affected by many factors, including,
those listed in this Annual Report on Form 10-K under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Forward Looking Statements." This exhibit describes some of the additional
uncertainties and factors that may affect our forward-looking statements.
Forward-looking statements are based on the beliefs, estimates made by, and
information presently available to senior management. We do not assume any duty
to update our forward-looking statements.

         Unless otherwise noted, the terms "we," "us," and "our," refer to the
combined and ongoing business operations of Superconductor and its subsidiaries.

RISKS RELATED TO OUR BUSINESS

WE HAVE A HISTORY OF LOSSES AND MAY NEVER BECOME PROFITABLE.

         In each of our last five years, we have experienced significant net
losses and negative cash flows from operations. If we fail to increase our
revenues, specifically revenues in connection with our SuperLink(TM) products,
we may not achieve and maintain profitability and may not meet our expectations.

WE NEED TO RAISE ADDITIONAL CAPITAL, AND OUR INABILITY TO RAISE CAPITAL WOULD
ADVERSELY AFFECT OUR ABILITY TO IMPLEMENT OUR CURRENT BUSINESS PLAN AND
ULTIMATELY OUR VIABILITY AS A COMPANY.

         Our auditors have included in their report for 2003 an explanatory
paragraph expressing doubt about our ability to continue as a going concern due
to past losses and negative cash flows. They included a similar explanatory
paragraph in their audit report for 2002. During 2003, we incurred a net loss of
$11.3 million and negative cash flows from operations of $18.5 million. We are
also experiencing lower than expected revenues in the first quarter of 2004. We
had cash and cash equivalents of $11.1 million at December 31, 2003. We do not
believe this is a sufficient amount of capital, and we will need additional
financing in the short term.

         We cannot give assurance that additional financing (public or private)
will be available on acceptable terms or at all. If we issue additional equity
securities to raise funds, the ownership percentage of its 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 would also be forced to make further substantial reductions in
its operating expenses, which could adversely affect our ability to implement
our current business plan and ultimately our viability as a company.

WE RELY UPON A FEW CUSTOMERS FOR THE MAJORITY OF OUR COMMERCIAL REVENUES AND THE
LOSS OF ANY ONE OF THESE CUSTOMERS, OR A SIGNIFICANT LOSS, REDUCTION OR
RESCHEDULING OF ORDERS FROM ANY OF THESE CUSTOMERS, WOULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

         We sell most of our products to a small number of wireless carriers,
and we expect that this will continue. We derived 85% of our commercial product
revenues from Alltel and Verizon Wireless in 2003 and 92% of our commercial
product revenues from Alltel and U.S. Cellular in 2002. Our future success is
dependent upon the continued purchases of our products by wireless carriers and
any fluctuations in demand from such customers would negatively impact our
results of

                                      99-1
<PAGE>

operations. Unanticipated demand fluctuations can have a negative impact on our
revenues and business and an adverse effect on our results of operations and
financial condition. In addition, our dependence on a small number of major
customers exposes us to numerous other risks, including:

         -        a slowdown or delay in the deployment, upgrading or
                  improvement of wireless networks by any one customer could
                  significantly reduce demand for our products;

         -        reductions in a single customer's forecasts and demand could
                  result in excess inventories;

         -        each of our customers have significant purchasing leverage
                  over us to require changes in sales terms including pricing,
                  payment terms and product delivery schedules;

         -        concentration of accounts receivable credit risk, which could
                  have a material adverse effect on our liquidity and financial
                  condition if one of our major customers declared bankruptcy or
                  delayed payment of their receivables.

         Many of our customers also provide minimal lead-time prior to the
release of their purchase orders and have non-binding commitments to purchase
from us. This further impacts our ability to forecast future revenue.

THE WIRELESS COMMUNICATION INDUSTRY IS HIGHLY CONCENTRATED, WHICH LIMITS THE
NUMBER OF POTENTIAL CUSTOMERS, AND FURTHER INDUSTRY CONSOLIDATION COULD RESULT
IN THE LOSS OF KEY CUSTOMERS.

         The wireless communication industry is highly concentrated in nature
and may become more concentrated due to anticipated industry consolidation. As a
result, we believe that the number of potential customers for our products will
be limited. We also face significant risks in the event any of our key customers
is acquired by a company that has not adopted our technology or not adopted it
to the same extent. In that event, we could face a significant decline in our
sales to the acquired customer. For example, we believe that one customer has
stopped work temporarily on certain infrastructure projects because of its
acquisition. Some of these projects involved our products. We cannot predict the
impact the acquisition will have on the capital spending plans of this customer,
and the acquisition could adversely affect our ability to convert this customer
into a significant customer.

WE EXPECT SIGNIFICANT FLUCTUATIONS IN SALES AND OPERATING RESULTS FROM QUARTER
TO QUARTER.

         Our quarterly results fluctuate due to a number of factors, including:

         -        the lack of any obligation by our customers to purchase their
                  forecasted demand for our products;

         -        variations in the timing, cancellation, or rescheduling of
                  customer orders and shipments;

         -        high fixed expenses that may disproportionately impact
                  operating expenses, especially during a quarter with a sales
                  shortfall; and

         -        discounts given to certain customers for large volume
                  purchases.

         We have regularly generated a large percentage of our revenues in the
last month of a quarter. Since we attempt to ship products quickly after we
receive orders, we may not always have a significant backlog of unfilled orders
at the start of each quarter and we may be required to book a substantial
portion of our orders during the quarter in which such orders ship. Our major
customers generally have no obligation to purchase forecasted amounts and may
cancel orders, change delivery schedules or change the mix of products ordered
with minimal notice and without penalty. As a result, we may not be able to
accurately predict our quarterly sales. Any shortfall in sales relative to our
quarterly expectations or any delay of customer orders would adversely affect
our revenues and results of operations.

         Order deferrals and cancellations by our customers, declining average
sales prices, changes in the mix of products sold, delays in the introduction of
new products and longer than anticipated sales cycles for our products have, in
the past, adversely affected our results of operations. Despite these factors,
we maintain significant finished goods, work-in-progress and raw materials
inventory to meet estimated order forecasts. If our customers purchase less than
the forecasted amounts or cancel or delay existing purchase orders, there will
be higher levels of inventory that face a greater risk of obsolescence. If

                                      99-2
<PAGE>

our customers desire to purchase products in excess of the forecasted amounts or
in a different product mix, there may not be enough inventory or manufacturing
capacity to fill their orders.

         Our expense levels and expansion plans, including plans to increase
research and development efforts, manufacturing capacity and sales and marketing
efforts, are based in large part on expectations of future revenue. These items
of expense are relatively fixed in the short-term. We may be unable to adjust
spending in a timely manner to compensate for any unexpected revenue shortfall.
Consequently, operating results in any given period are likely to be
disproportionately harmed if revenue in that period falls below expectations.

         Due to these and other factors, our past results are not reliable
indicators of our future performance. Future revenues and operating results may
not meet the expectations of stock analysts and investors. In either case, the
price of our common stock could be materially adversely affected.

WE DEPEND ON THE CAPITAL SPENDING PATTERNS OF WIRELESS NETWORK OPERATORS, AND IF
CAPITAL SPENDING IS DECREASED OR DELAYED, OUR BUSINESS MAY BE HARMED.

         Because we rely on wireless network operators for product purchases,
any substantial decrease or delay in capital spending patterns in the wireless
communication industry may harm our business. Demand from customers for our
products depends to a significant degree upon the magnitude and timing of
capital spending by these customers for constructing, rebuilding or upgrading
their systems. The capital spending patterns of wireless network operators
depend on a variety of factors, including access to financing, the status of
federal, local and foreign government regulation and deregulation, changing
standards for wireless technology, overall demand for wireless services,
competitive pressures and general economic conditions. In addition, capital
spending patterns in the wireless industry can be subject to some degree of
seasonality, with lower levels of spending in the third calendar quarter, based
on annual budget cycles.

OUR RELIANCE ON A LIMITED NUMBER OF SUPPLIERS AND THE LONG LEAD TIME OF
COMPONENTS FOR OUR SUPERLINK(TM) PRODUCTS COULD IMPAIR OUR ABILITY TO
MANUFACTURE AND DELIVER OUR SYSTEMS ON A TIMELY BASIS.

         We currently purchase substrates for growth of high-temperature
superconductor thin-films from two suppliers because of the quality of its
substrates. A thin film is a thin layer of high-temperature superconductor
material. There are additional components that we source from a single vendor
due to the present volume. Our reliance on sole or limited source suppliers
involves certain risks and uncertainties, most of which are beyond our control.
These include the possibility of a shortage or the discontinuation of certain
key components. Any reduced availability of these parts or components when
required could impair our ability to manufacture and deliver our systems on a
timely basis and result in the cancellation of orders, which could harm our
business.

         In addition, the purchase of some of our key components involves long
lead times and, in the event of unanticipated increases in demand for our
SuperLink products, we may be unable to obtain these components in sufficient
quantities to meet our customers' requirements. We do not have guaranteed supply
arrangements with any of these suppliers, do not maintain an extensive inventory
of parts or components and customarily purchase sole or limited source parts and
components pursuant to purchase orders. Business disruptions, quality issues,
production shortfalls or financial difficulties of a sole or limited source
supplier could materially and adversely affect us by increasing product costs,
or eliminating or delaying the availability of such parts or components. In such
events, our inability to develop alternative sources of supply quickly and on a
cost-effective basis could impair our ability to manufacture and deliver our
systems on a timely basis and could harm our business.

WE ANTICIPATE DECREASES IN AVERAGE SELLING PRICES, REQUIRING US TO REDUCE COSTS
AND INTRODUCE NEW SYSTEMS IN ORDER TO ACHIEVE AND MAINTAIN PROFITABILITY.

         In 2002, there was a reduction in average selling prices of
SuperLink(TM) products. This followed the discount on a large order of
Superconductor products in December 2001. We will need to further reduce our
manufacturing costs through engineering improvements and economies of scale in
production and purchasing in order to achieve adequate gross margins. We may not
be able to achieve the required cost savings at a rate needed to keep pace with
competitive pricing pressure. Additionally, we may be forced to discount future
orders. If we fail to reach our cost saving objectives or we are required to
offer future discounts, our business may be harmed.

                                      99-3
<PAGE>

CHANGES IN THE MIX OF OUR SALES CHANNELS COULD CAUSE FLUCTUATIONS IN FUTURE
OPERATING RESULTS.

         We currently sell most of our products directly to wireless network
operators in the United States. We plan, however, to expand our business in
international markets by increasing our direct sales force and selling through
resellers or directly through original equipment manufacturers. If and when
changes in the mix of our sales channels occur, our gross profit and operating
margins may fluctuate significantly.

WE CANNOT PREDICT WHETHER OUR PRODUCTS WILL BE COMMERCIALLY ACCEPTED, BECAUSE
COMMERCIAL APPLICATION OF SUPERCONDUCTIVE ELECTRONICS TECHNOLOGY HAS BEEN
LIMITED TO DATE.

         Although a number of commercial superconductive electronic products
have been introduced by us to date, a significant portion of our aggregate
revenue to date has been derived from government research and development
contracts. New products or product enhancements may or may not be successfully
developed, introduced and marketed. Any new products or product enhancements
that are marketed may not be well received in the marketplace or achieve any
significant degree of commercial acceptance.

OUR ABILITY TO PROTECT OUR PATENTS AND OTHER PROPRIETARY RIGHTS IS UNCERTAIN,
EXPOSING US TO POSSIBLE LOSSES OF COMPETITIVE ADVANTAGE.

         Our efforts to protect our proprietary rights may not succeed in
preventing infringement by others or ensure that these rights will provide us
with a competitive advantage. Pending patent applications may not result in
issued patents and the validity of issued patents may be subject to challenge.
Third parties may also be able to design around the patented aspects of the
products. Additionally, certain of the issued patents and patent applications
are owned jointly with third parties. Because any owner or co-owner of a patent
can license its rights under jointly-owned patents or applications, inventions
made by us jointly with others are not subject to our exclusive control. Any of
these possible events could result in losses of competitive advantage.

INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US COULD MATERIALLY HARM
RESULTS OF OPERATIONS.

         Our products incorporate a number of technologies, including high
temperature superconductor technology, technology related to other materials,
and electronics technologies. Our patent positions, and that of other companies
using high-temperature superconductor technology, is uncertain and there is
significant risk that others, including our competitors or potential
competitors, have obtained or will obtain patents relating to our products or
technologies or products or technologies planned to be introduced by us.

         We believe that patents may be or have been issued, or applications may
be pending, claiming various compositions of matter used in our products. We may
need to secure one or more licenses of these patents. There can be no assurances
that such licenses could be obtained on commercially reasonable terms, or at
all. We may be required to expend significant resources to develop alternatives
that would not infringe such patents or to obtain licenses to the related
technology. We may not be able to successfully design around these patents or
obtain licenses to them and may have to defend ourselves at substantial cost
against allegations of infringement of third party patents or other rights to
intellectual property. In those circumstances, we could face significant
liabilities and also be forced to cease the use of key technology.

         We are engaged in a patent dispute with ISCO International, Inc.
relating to U.S. Patent No. 6,263,215 entitled "Cryoelectronically Cooled
Receiver Front End for Mobile Radio Systems." ISCO filed a complaint on July 17,
2001 in the United States District Court for the District of Delaware against us
and our wholly-owned subsidiary, Conductus, Inc. The ISCO complaint alleged that
our SuperFilter product and Conductus' ClearSite(R) product infringe ISCO's
patent. The matter went to trial on March 17, 2003.

         On April 3, 2003, the jury returned a unanimous verdict that our
SuperFilter III product does not infringe the patent in question, and that
ISCO's patent is invalid and unenforceable. The jury also awarded us $3.8
million in compensatory damages based upon a finding that ISCO engaged in unfair
competition and acted in bad faith by issuing press releases and contacting our
customers asserting rights under this patent.

         On April 17, 2003, we filed a Motion for Attorneys' Fees and
Disbursements, in which we asked the court to award us our attorneys' fees and
other expenses. On the same date, ISCO filed a motion, asking the court to
overturn the verdict and

                                      99-4
<PAGE>

grant a new trial. In August 2003, the court rejected ISCO's request to overturn
the jury's verdict that the patent is invalid and not infringed by the
SuperFilter III product, and accepted the jury's verdict that the patent is
unenforceable because of inequitable conduct committed by one of the alleged
inventors. ISCO subsequently filed a notice of appeal as to this portion of the
court's decision. The court overturned the jury's verdict of unfair competition
and bad faith on the part of ISCO and the related $3.8 million compensatory
damage award to us, and also denied our request for reimbursement of our legal
fees associated with the case. We have filed a notice of appeal as to this
portion of the court's decision.

         If the appellate court overturns the jury's verdict and grants ISCO a
new trial, there is a risk that we may not prevail in a second trial. If this
should happen, we could be subject to significant liabilities and be required to
cease using key technology. In any case, the cost of defending continued
litigation by ISCO, or any other intellectual property lawsuit, could constitute
a major financial burden and materially and adversely affect our results of
operations.

WE DEPEND ON SPECIFIC PATENTS AND LICENSES TO TECHNOLOGIES, AND WE WILL LIKELY
NEED ADDITIONAL TECHNOLOGIES IN THE FUTURE THAT WE MAY NOT BE ABLE TO UTILIZE.

         We utilize technologies under licenses of patents from others for our
products. These patents may be subject to challenge, which may result in
significant litigation expense (which may or may not be recoverable against
future royalty obligations). Additionally, we continually try to develop new
products, and, in the course of doing so, we may be required to utilize
intellectual property rights owned by others and may seek licenses to do so.
Such licenses may not be obtainable on commercially reasonable terms, or at all.
It is also possible that we may inadvertently utilize intellectual property
rights held by others, which could result in substantial claims.

OTHER PARTIES MAY HAVE THE RIGHT TO UTILIZE TECHNOLOGY IMPORTANT TO OUR
BUSINESS.

         We utilize certain intellectual property rights under non-exclusive
licenses or have granted to others the right to utilize certain intellectual
property rights licensed from a third party. Because we may not have the
exclusive rights to utilize such intellectual property, other parties may be
able to compete with us, which may harm our business.

BECAUSE COMPETITION FOR TARGET EMPLOYEES IS INTENSE, WE MAY BE SUBJECT TO CLAIMS
OF UNFAIR HIRING PRACTICES, TRADE SECRETS MISAPPROPRIATION OR OTHER RELATED
CLAIMS.

         Companies in the wireless telecommunications industry whose employees
accept positions with competitors frequently claim that competitors have engaged
in unfair hiring practices, trade secrets misappropriation or other related
claims. We may be subject to such claims in the future as we seek to hire
qualified personnel, and such claims may result in material litigation. If this
should occur, we could incur substantial costs in defending against these
claims, regardless of their merits.

OUR FAILURE TO ANTICIPATE AND RESPOND TO DEVELOPMENTS IN THE WIRELESS
TELECOMMUNICATIONS MARKET COULD SUBSTANTIALLY HARM OUR business.

         Our efforts are focused on the wireless telecommunications market,
including the 2G, 2.5G and 3G markets. The concentration of our resources on the
wireless telecommunications market makes us potentially vulnerable to changes in
this market, such as new technologies, future competition, changes in
availability of capital resources or regulatory changes that could affect the
competitive position and rate of growth of the wireless industry.

WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY IN THE SUPERCONDUCTIVE ELECTRONICS
INDUSTRY OR AGAINST ALTERNATIVE TECHNOLOGIES.

         Our products compete with a number of alternative approaches and
technologies that increase the capacity and improve the quality of wireless
networks. Some of these alternatives may be more cost effective or offer better
performance than our products. Wireless network operators may opt to increase
the number of transmission stations, increase tower heights, install filters and
amplifiers at the top of antennas or use advanced antenna technology in lieu of
purchasing our products. We may not succeed in competing with these
alternatives.

         The market for superconductive electronics currently is small and in
the early stages of commercialization. As superconductive electronics emerge as
a viable alternative to current solutions, the market will become intensively
competitive. A number of large companies with substantially greater financial
resources and capabilities are engaged in

                                      99-5
<PAGE>

programs to develop and commercialize products that may compete with those
offered by us, or promote alternative solutions to meet the needs of the
wireless network operators. For example, Dupont exhibited a tower top HTS
front-end unit at a trade show in March 2002. Small companies, including ISCO
International and CryoDevices, Inc., are also developing and commercializing
superconductive electronic products for the telecommunications industry.
Furthermore, academic institutions, governmental agencies and other public and
private research organizations are engaged in development programs that may lead
to commercial superconductive electronic products. Our success will depend on
our ability to develop and maintain our technological leadership while managing
the various risks described in this document.

WE DEPEND UPON GOVERNMENT CONTRACTS FOR A SUBSTANTIAL PORTION OF REVENUE, AND
OUR BUSINESS MAY SUFFER IF SIGNIFICANT CONTRACTS ARE TERMINATED OR ADVERSELY
MODIFIED OR WE ARE UNABLE TO WIN NEW CONTRACTS.

         We derive a portion of our revenue from a few large contracts with the
U.S. government. As a result, a reduction in, or discontinuance of, the
government's commitment to current or future programs could materially reduce
government contract revenue. Furthermore, Conductus' license agreement with one
company, General Dynamics Electronic Systems, Inc., prevents Conductus from
competing with General Dynamics for certain hardware research and development
government contracts. If future government research and development projects
were limited to areas in which General Dynamics may prevent our Conductus
subsidiary from competing, our financial condition could be significantly
harmed.

         Contracts involving the U.S. government may include various risks,
including:

         -        Termination by the government;

         -        Reduction or modification in the event of changes in the
                  government's requirements or budgetary constraints;

         -        Increased or unexpected costs causing losses or reduced
                  profits under contracts where prices are fixed or unallowable
                  costs under contracts where the government reimburses for
                  costs and pays an additional premium;

         -        Risks of potential disclosure of confidential information to
                  third parties;

         -        The failure or inability of the main contractor to perform its
                  contract in circumstances where either Superconductor or
                  Conductus is a subcontractor;

         -        The failure of the government to exercise options for
                  additional work provided for in the contracts; and

         -        The government's right in certain circumstances to freely use
                  technology developed under these contracts.

         The programs in which we participate may extend for several years, but
are normally funded on an annual basis. The U.S. government may not continue to
fund programs under which we have entered into contracts. Even if funding is
continued, we may fail to compete successfully to obtain funding pursuant to
such programs.

         All costs for services under government contracts are subject to audit,
and the acceptance of such costs as allowable and allocable is subject to
federal regulatory guidelines. We record contract revenues in amounts which we
expect to be realized upon final audit settlement. Any disallowance of costs by
the government could have an adverse effect on our business, operating results
and financial condition. We cannot assure you that audits and adjustments will
not result in decreased revenues and net income for those years. Additionally,
because of our participation in government contracts, we are subject to audit
from time to time for our compliance with government regulations by various
agencies. Government agencies may conduct inquiries or investigations that may
cover a broad range of activity. Responding to any such audits, inquiries or
investigations may involve significant expense and divert management's
attention. In addition, an adverse finding in any such audit, inquiry or
investigation could involve penalties that may harm our business.

WE CURRENTLY RELY ON SPECIFIC TECHNOLOGIES AND MAY NOT SUCCESSFULLY ADJUST TO
THE RAPIDLY CHANGING SUPERCONDUCTIVE ELECTRONICS market.

         The field of superconductivity is characterized by rapidly advancing
technology. Our success depends upon our ability to keep pace with advancing
superconductive technology, including materials, processes and industry
standards. Our development efforts to date have been focused principally on
thallium barium calcium copper oxide, in the case of

                                      99-6
<PAGE>

Superconductor, and yttrium barium copper oxide, in the case of Conductus.
However, these materials may not ultimately prove commercially competitive
against other currently known materials or materials that may be discovered in
the future.

         We will have to continue to develop and integrate advances in
technology for the fabrication of electronic circuits and devices and
manufacture of commercial quantities of products. We will also need to continue
to develop and integrate advances in complementary technologies. We cannot
assure you that our development efforts will not be rendered obsolete by
research efforts and technological advances made by others or that materials
other than those currently used by us will not prove more advantageous for the
commercialization of superconductive electronic products.

OUR SALES CYCLES ARE UNPREDICTABLE AND MAY BE LONG, MAKING FUTURE PERFORMANCE
UNPREDICTABLE.

         Our experience with the sales cycle for telecommunications products is
limited. The sales cycle includes identification of decision makers within the
customers' organizations, development of an understanding of customer-specific
performance and economic issues, convincing the customer through field trial
reports of the benefits of systems offered, negotiation of purchase orders and
deployment.

         Because customers who purchase our systems must commit a significant
amount of capital and other resources, sales are subject to delays beyond our
control. Our customers must consider budgetary constraints, comply with internal
procedures for approving large expenditures and complete whatever testing is
necessary for them to integrate new technologies that will affect our key
operations. While the sales cycle for an initial order typically has been 12 to
24 months, we may experience longer sales cycles in the future. Such delays or
lengthened sales cycles could have a material adverse effect on our business.

THE SUPPLIER FOR OUR SUPERLINK(TM) TX LINE OF POWER AMPLIFIERS WAS ACQUIRED BY A
COMPETITOR IN 2003, AND THE LOSS OF THIS PRODUCT LINE COULD ADVERSELY AFFECT THE
FUTURE GROWTH OF OUR COMMERCIAL REVENUES.

         During 2002 and 2003, we were marketing a power amplifier product
called the SuperLink Tx manufactured by another company. The SuperLink Tx was
for wireless networks that suffer from insufficient transmit power on the
downlink signal path. This problem is particularly prevalent after the uplink
has been improved by using SuperLink Rx. Our supplier for this product was
acquired by a competitor of ours in November 2003. We have not had significant
sales of the SuperLink Tx product to date, but we consider it an important part
of our overall business strategy of marketing SuperLink Solutions to maximize
the performance of wireless networks. We are evaluating whether we can and
should develop an alternative source of power amplifiers. The absence of a power
amplifier from our product line could adversely affect our SuperLink Solutions
business strategy and adversely affect our strategy for increasing commercial
revenues.

OUR FAILURE TO SUCCESSFULLY DEVELOP COLLABORATIVE RELATIONSHIPS WITH GOVERNMENT
AGENCIES, RESEARCH INSTITUTIONS AND OTHER COMPANIES COULD HARM OUR BUSINESS.

         We have established and continue to seek collaborative arrangements
with corporate partners, government agencies and public and private research
institutions to develop, manufacture and market superconductive electronic
products. Our success depends on the development and success of these
collaborative arrangements. However, we may not be able to enter into
collaborative arrangements on commercially reasonable terms, and even if
established, these arrangements may not succeed. If these programs are
successful, our collaborative partners may seek to manufacture jointly developed
products themselves or obtain them from alternative sources, rather than
purchase them from us. Finally, these programs:

         -        May require us to share control over our development,
                  manufacturing and marketing programs and relinquish rights to
                  our technology;

         -        May be subject to termination at the discretion of the
                  collaborative partners; and

         -        May restrict our ability to engage in certain areas of product
                  development, manufacturing and marketing.

WE NEED TO INCREASE OUR MANUFACTURING CAPACITY TO MEET OUR PLANNED PRODUCTION
VOLUMES, AND OUR FAILURE TO DO SO WOULD HAMPER OUR GROWTH AND LONG-TERM SUCCESS.

         We need to increase our manufacturing capabilities to meet planned
production volumes, and our failure to do so would hamper our growth and
long-term success. Currently, we have only limited production facilities. To
date, we have

                                      99-7
<PAGE>

focused primarily on developing fabrication processes and producing limited
quantities of products. Although our processing technology derives principally
from semiconductor manufacturing technology, the fabrication of high-temperature
superconductor components is especially difficult because of specific properties
unique to high-temperature superconductor materials.

         We cannot assure you that we can develop the necessary manufacturing
capability to attain yields sufficient to meet the demand for our products at a
cost that will allow us to provide a price/performance advantage to customers in
comparison with other alternatives. While we have established limited production
facilities for our products, we may not be able to expand our processing,
production control, assembly, testing and quality assurance capabilities to
produce existing or planned superconductive electronic products in adequate
commercial quantities.

         Even if our products meet performance standards acceptable to the
superconductive electronics market, we cannot assure you that any such products
will offer price/performance advantages in comparison with other alternatives
sufficient to achieve market acceptance, or that production costs will be low
enough to operate profitably.

WE NEED TO SIMPLIFY OUR FABRICATION PROCESS FOR OUR RADIO FREQUENCY FILTERS IN
ORDER TO COST-EFFECTIVELY MANUFACTURE THE SUPERLINK RX, OUR KEY PRODUCT, IN HIGH
VOLUMES.

         We manufacture or "fabricate" the radio frequency filters in our
SuperLink Rx, our key product, using integrated circuit manufacturing
technology, and the cost of manufacturing the filters constitutes a significant
part of the total product cost. We need a simpler and less costly fabrication
process to manufacture large volumes of the SuperLink Rx in a cost effective
manner. We are currently transitioning to a simpler and more scalable
fabrication process acquired in our acquisition of Conductus, Inc. in December
2002. While the process has been tested and is currently used in the production
of our PCS models, we could encounter significant problems implementing the
process with newly designed equipment and on a larger scale. This could
significantly delay the timing of our expansion plans, reduce the expected cost
savings of manufacturing in high volumes and adversely affect our ability to
price the SuperLink Rx competitively with competing technologies.

IF WE ARE UNABLE TO FORECAST OUR INVENTORY NEEDS ACCURATELY, WE MAY BE UNABLE TO
OBTAIN EFFICIENT MANUFACTURING CAPACITY OR MAY INCUR UNNECESSARY COSTS AND
PRODUCE EXCESS INVENTORY.

         We forecast our inventory needs base on anticipated product orders to
determine manufacturing requirements. If we overestimate our requirements, we
may have excess inventory, and our suppliers may as well, which could increase
our costs. If we underestimate our requirements, our suppliers may have
inadequate inventory, which could interrupt manufacturing and result in delays
in shipments and recognition of revenues. In addition, lead times for ordering
materials and components vary significantly and depend on factors such as the
specific supplier, contract terms and demand for each component at a given time.
Accordingly, if we inaccurately forecast demand, we may be unable to obtain
adequate manufacturing capacity from our suppliers to meet customers' delivery
requirements, which would harm our business.

OUR SUCCESS DEPENDS ON THE ATTRACTION AND RETENTION OF SENIOR MANAGEMENT AND
TECHNICAL PERSONNEL WITH RELEVANT EXPERTISE.

         As a competitor in a highly technical market, we depend heavily upon
the efforts of our existing senior management and technical teams. The loss of
the services of one or more members of these teams could slow product
development and commercialization objectives. Due to the specialized nature of
high-temperature superconductors, we also depend upon our ability to attract and
retain qualified technical personnel with substantial industry knowledge and
expertise. Competition for qualified personnel is intense and we may not be able
to continue to attract and retain qualified personnel necessary for the
development of our business.

REGULATORY CHANGES NEGATIVELY AFFECTING WIRELESS COMMUNICATIONS COMPANIES COULD
SUBSTANTIALLY HARM OUR BUSINESS.

         The Federal Communications Commission strictly regulates the operation
of wireless base stations in the United States. Other countries also regulate
the operation of base stations within their territories. Base stations and
equipment marketed for use in base stations must meet specific technical
standards. Our ability to sell our high-temperature superconductor filter
subsystems will depend upon the rate of deployment of other new wireless digital
services, the ability of base station equipment manufacturers and of base
station operators to obtain and retain the necessary approvals and licenses,

                                      99-8
<PAGE>

and changes in regulations that may impact the product requirements. Any failure
or delay of base station manufacturers or operators in obtaining necessary
approvals could harm our business.

WE ARE DEPENDING ON INTERNATIONAL SALES FOR A SIGNIFICANT PORTION OF OUR FUTURE
REVENUE GROWTH, AND OUR INTERNATIONAL BUSINESS ACTIVITIES WILL SUBJECT US TO
RISKS THAT COULD CAUSE DEMAND FOR OUR PRODUCTS TO FALL SHORT OF EXPECTATIONS AND
INCREASE OUR OPERATING EXPENSES.

         A significant part of our long-term business strategy involves the
pursuit of growth opportunities in a number of international markets, including
China, Japan, Korea, Europe and Latin America. In many international markets,
barriers to entry are the result of long-standing relationships between
potential customers and our local suppliers and protective regulations,
including local content and service requirements. In addition, pursuit of
international growth opportunities may require significant investments for an
extended period before any returns are realized by us from our investment.

         Our business in international markets could be adversely affected by:

         -        Different technology standards and design requirements;

         -        Difficulty in attracting qualified personnel;

         -        Longer payment cycles for and greater difficulties collecting
                  accounts receivable;

         -        Export controls, tariffs and other barriers;

         -        Fluctuations in currency exchange rates;

         -        Nationalization, expropriation and limitations on repatriation
                  of cash;

         -        Social, economic, banking and political risks;

         -        Taxation;

         -        Changes in U.S. laws and policies affecting trade, foreign
                  investment and loans; and

         -        Cultural differences in the conduct of business.

WE MAY ACQUIRE OR MAKE INVESTMENTS IN COMPANIES OR TECHNOLOGIES THAT COULD CAUSE
LOSS OF VALUE TO STOCKHOLDERS AND DISRUPTION OF BUSINESS.

         We intend to explore opportunities to acquire companies or technologies
in the future. Entering into an acquisition entails many risks, any of which
could adversely affect our business, including:

         -        Failure to integrate the acquired assets and/or companies with
                  current business;

         -        The price paid may exceed the value eventually realized;

         -        Loss of share value to existing stockholders as a result of
                  issuing equity securities as part or the entire purchase
                  price;

         -        Potential loss of key employees from either our then current
                  business or any acquired business;

         -        Entering into markets in which we have little or no prior
                  experience;

         -        Diversion of financial resources and management's attention
                  from other business concerns;

         -        Assumption of unanticipated liabilities related to the
                  acquired assets; and

         -        The business or technologies acquired or invested in may have
                  limited operating histories and may be subjected to many of
                  the same risks to which we are exposed.

IF WE ACQUIRE ANY COMPANIES OR TECHNOLOGIES IN THE FUTURE, THEY COULD PROVE
DIFFICULT TO INTEGRATE, COULD DISRUPT BUSINESS, DILUTE STOCKHOLDER VALUE OR
ADVERSELY AFFECT OUR OPERATING RESULTS.

                                      99-9
<PAGE>

         We may acquire or make investments in complementary companies, services
and technologies in the future. Other than the recent acquisition of Conductus,
we have not made any such acquisitions or investments to date and, therefore,
our ability as an organization to make acquisitions or investments is unproven.

         Acquisitions and investments involve numerous risks, including:

         -        difficulties in integrating operations, technologies, services
                  and personnel;

         -        diversion of financial and management resources from existing
                  operations;

         -        risk of entering new markets;

         -        potential loss of key employees; and

         -        inability to generate sufficient revenues to offset
                  acquisition or investment costs.

         In addition, future acquisitions could result in potentially dilutive
issuances of equity securities, or the incurrence of debt, contingent
liabilities or amortization expenses or charges related to goodwill or other
intangible assets, any of which could harm our business. As a result, if we fail
to properly evaluate and execute acquisitions or investments, our business and
prospects may be seriously harmed.

IF WE ARE UNABLE TO IMPLEMENT APPROPRIATE CONTROLS AND PROCEDURES TO MANAGE OUR
EXPECTED GROWTH, WE MAY NOT BE ABLE TO SUCCESSFULLY OFFER OUR PRODUCTS AND
IMPLEMENT OUR BUSINESS PLAN.

         Our ability to successfully offer our products and implement our
business plan in a rapidly evolving market requires an effective planning and
management process. Anticipated growth in future operations will continue to
place, a significant strain on management systems and resources. We expect that
we will need to continue to improve our financial and managerial controls,
reporting systems and procedures, and will need to continue to expand, train and
manage our work force worldwide. Furthermore, we expect that we will be required
to manage multiple relationships with various customers and other third parties.

COMPLIANCE WITH ENVIRONMENTAL REGULATIONS COULD BE ESPECIALLY COSTLY DUE TO THE
HAZARDOUS MATERIALS USED IN THE MANUFACTURING process.

         We are subject to a number of federal, state and local governmental
regulations related to the use, storage, discharge and disposal of toxic,
volatile or otherwise hazardous chemicals used in our business. Any failure to
comply with present or future regulations could result in fines being imposed,
suspension of production or interruption of operations. In addition, these
regulations could restrict our ability to expand or could require us to acquire
costly equipment or incur other significant expense to comply with environmental
regulations or to clean up prior discharges.

TERRORISM AND THE DECLARATION OF WAR BY THE UNITED STATES AGAINST TERRORISM MAY
HAVE ADVERSELY AFFECTED, AND MAY IN THE FUTURE ADVERSELY AFFECT, OUR BUSINESS.

         The terrorist attacks in the United States on September 11, 2001, the
declaration of war by the United States against terrorism and the war with Iraq
have created significant instability and uncertainty in the world, which may
have had, and may in the future have, a material adverse effect on world
financial markets, including financial markets in the United States. In
addition, such adverse political events may have had, and may in the future
have, an adverse impact on economic conditions in the United States. Unfavorable
economic conditions in the United States may have had, and may in the future
have, an adverse affect on us, including, but not limited to, our ability to
expand the market for our products, obtain financing as needed, enter into
strategic relationships and effectively compete in the information exchange and
knowledge exchange markets.

THE RELIABILITY OF MARKET DATA INCLUDED IN OUR PUBLIC FILINGS IS UNCERTAIN.

         Since we are relatively new to the commercial market and operate in a
rapidly changing market, we have in the past, and may from time to time in the
future, include market data from industry publications and our own internal
estimates in some of the documents we file with the Securities Exchange
Commission. The reliability of this data cannot be assured.

                                     99-10
<PAGE>
Industry publications generally state that the information contained in these
publications has been obtained from sources believed to be reliable, but that
its accuracy and completeness is not guaranteed. Although we believe that the
market data used in our SEC filings is and will be reliable, it has not been
independently verified. Similarly, internal company estimates, while believed by
us to be reliable, have not been verified by any independent sources.

RISKS RELATED TO OUR COMMON STOCK

OUR COMMON STOCK MAY CONTINUE TO BE VOLATILE, AND WE MAY BE EXPOSED TO COSTLY
SECURITIES CLASS ACTION LAWSUITS.

         The market price and trading volume of our common stock has been and is
likely to continue to be highly volatile. Our common stock may be significantly
affected by the following factors:

         -        Actual or anticipated fluctuations in operating results;

         -        Announcements of technological innovations;

         -        Announcements of new products or new contracts by us or our
                  competitors;

         -        Conditions and trends in the telecommunications and other
                  technology industries; and

         -        Changes in estimates of our future financial results or
                  recommendations by securities analysts.

         It is possible that the price of the common stock will decline below
current prices, and that you would lose all or part of your investment. Equity
markets continue to experience significant price and volume fluctuations that
are unrelated to the operating performance of individual companies. This is
particularly true for technology companies. Broad market fluctuations may cause
the market price of our common stock to decline.

         In the past, securities class action lawsuits have often been brought
against such companies following periods of stock price volatility. We may be
affected by similar litigation in the future, which could result in substantial
costs and cause a diversion of management's attention and resources. This could
significantly harm our business, operating results or financial condition.

YOUR ABILITY TO SELL SHARES OF OUR COMMON STOCK MAY DEPEND UPON US MAINTAINING
OUR NASDAQ LISTING.

         Our common stock is listed on the Nasdaq National Market. We cannot
assure you that it will always be listed. The Nasdaq National Market has rules
for maintaining a listing, including a minimum stock price of $1 per share.
Although we currently meet these requirements, we may not meet all of them in
the future, particularly if the price of our common stock declines. For example,
as recently as March 2003, our stock price was close to falling below $1 per
share. If our common stock is not listed with Nasdaq, it may be difficult or
impossible to sell it.

OUR CORPORATE GOVERNANCE STRUCTURE MAY PREVENT OUR ACQUISITION BY ANOTHER
COMPANY AT A PREMIUM OVER THE PUBLIC TRADING PRICE OF SUPERCONDUCTOR SHARES.

         It is possible that the acquisition of a majority of our outstanding
voting stock by another company could result in Superconductor's stockholders
receiving a premium over the public trading price for our shares. Provisions of
our restated certificate of incorporation and bylaws and of Delaware corporate
law could delay or make more difficult an acquisition of our company by merger,
tender offer or proxy contest, even if it would create an immediate benefit to
our stockholders. For example, our restated certificate of incorporation does
not permit stockholders to act by written consent and our bylaws generally
require ninety (90) days advance notice of any matters to be brought before the
stockholders at an annual or special meeting.

         In addition, our board of directors has the authority to issue up to
2,000,000 shares of preferred stock and to determine the terms, rights and
preferences of this preferred stock, including voting rights of those shares,
without any further vote or action by the stockholders. The rights of the
holders of common stock may be subordinate to, and adversely affected by, the
rights of holders of preferred sock that may be issued in the future. The
issuance of preferred stock could also make it

                                     99-11
<PAGE>

more difficult for a third party to acquire a majority of our outstanding voting
stock, even at a premium over our public trading price.

         Further, our certificate of incorporation also provides for a
classified board of directors with directors divided into three classes serving
staggered terms. These provisions may have the effect of delaying or preventing
a change in control of Superconductor without action by our stockholders and,
therefore, could adversely affect the price of our stock or the possibility of
sale of shares to an acquiring person.

                                     99-12