<PAGE>


                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                 Washington, DC 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 THREE MONTH PERIOD ENDED SEPTEMBER 30, 1997 OR

|_| 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  #0-11915

                                   CONDUCTUS, INC.
                (Exact name of registrant as specified in its charter)
                                            
    Delaware                                                   77-0162388
     (State or other jurisdiction of                        (I.R.S. Employer
     Incorporation or organization)                        Identification No.) 
     
     969 W. Maude Avenue, Sunnyvale, California                       94086
     (Address of principal executive offices)                       (Zip Code)
                                           
                                    (408) 523-9950
                 (Registrant's Telephone Number, including area code)
                                           
                                    Not Applicable
      (Former name, former address and former fiscal year, if changed since last
report)
                                           
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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  ___

                        APPLICABLE ONLY TO CORPORATE ISSUERS:
                                           
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.

Common shares outstanding at November 4, 1997: 6,955,400
                                                                          
                                       Total pages: 17
                                       Index to Exhibits to be found on page 16
                                           

<PAGE>
                                           
                                   CONDUCTUS, INC.
                                        Index
                                           
PART I:   FINANCIAL INFORMATION                                        PAGE

          ITEM 1.   FINANCIAL STATEMENTS
          Condensed Balance Sheets at September 30, 1997 
             and December 31, 1996                                       3
          Condensed Statements of Operations
             for the Three and Nine Months Ended
             September 30, 1997 and 1996                                 4
          Condensed Statements of Cash Flows
             for the Nine Months Ended 
             September 30, 1997 and 1996                                 5
          Notes to Financial Statements                                  6
               
          ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS 
                       OF FINANCIAL CONDITION AND RESULTS 
                       OF OPERATIONS.                                    9


PART II: OTHER INFORMATION

          ITEM 1:   LEGAL PROCEEDINGS                                   14
          ITEM 2:   CHANGES IN SECURITIES                               14
          ITEM 3:   DEFAULTS UPON SENIOR SECURITIES                     14
          ITEM 4:   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                    HOLDERS                                             14
          ITEM 5:   OTHER INFORMATION                                   14
          ITEM 6:   EXHIBITS AND REPORTS ON FORM 8-K                    14
        
Signatures                                                              15
         
Exhibit Index                                                           16
        
        
                                     -2-

<PAGE>

PART I: FINANCIAL INFORMATION
Item 1: Financial Statements



                                 CONDUCTUS, INC.
                             CONDENSED BALANCE SHEETS

                                             September 30,          December 31,
                                                 1997                   1996
                                             -------------          ------------
                                              (Unaudited)

ASSETS

Current assets:
   Cash and cash equivalents                   $1,076,977            $1,119,991
   Short-term investments                       3,342,971             6,516,401
   Accounts receivable, net                     2,042,900             3,756,586
   Inventories, net                               541,279             1,220,873
   Prepaid and other assets                       313,830               397,556
                                             -------------          ------------
      Total current assets                      7,317,957            13,011,407
   Property, plant and equipment, net           2,824,563             2,941,685
   Other assets                                    87,760               127,763
                                             -------------          ------------
      Total assets                            $10,230,280           $16,080,855
                                             -------------          ------------
                                             -------------          ------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities   
   Current portion of long-term debt           $1,018,666            $1,119,330
   Accounts payable                             1,400,442             1,710,762
   Other accrued liabilities                      931,850             1,045,916
                                             -------------          ------------
      Total current liabilities                 3,350,958             3,876,008
Long-term debt, net of current portion            652,683             1,021,781
                                             -------------          ------------
   Total liabilities                            4,003,641             4,897,789

Stockholders' equity:
   Common Stock                                       707                   683
   Additional paid-in capital                  40,695,878            40,405,381
   Unrealized gain on investments, net                  0                 3,808
   Accumulated deficit                        (34,469,946)          (29,226,806)
                                             -------------          ------------
      Total stockholders' equity                6,226,639            11,183,066
                                             -------------          ------------
Total liabilities and stockholders' equity    $10,230,280           $16,080,855
                                             -------------          ------------
                                             -------------          ------------


                      See accompanying notes.


                                            -3-

<PAGE>



                                 CONDUCTUS, INC.
                        CONDENSED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                   Three Months Ended September 30,     Nine Months Ended September 30,
                                                       1997               1996             1997               1996
                                                   ------------       ------------     ------------       ------------
<S>                                               <C>               <C>               <C>               <C>
Revenues:                                                                            
   Contract                                          $1,723,182         $2,468,688       $5,834,080         $7,089,201
   Product                                              148,560            804,355        1,662,605          1,805,947
                                                   ------------       ------------     ------------       ------------
      Total revenues                                  1,871,742          3,273,043        7,496,685          8,895,148
                                                   ------------       ------------     ------------       ------------
Operating expenses:                                                                  
   Cost of product                                       82,084            552,147        1,363,130          1,215,831
   Research and Development                           2,339,401          3,010,620        8,215,618          8,724,483
   Selling, general and adminstrative                 1,026,167          1,016,553        3,172,178          2,974,267
   Writedown of property, plant & equipment                   0                             100,000                  0
   Gain on product line disposals                       (93,135)                            (93,135)                 0
                                                   ------------       ------------     ------------       ------------
      Total operating expenses                        3,354,517          4,579,320       12,757,791         12,914,581
                                                   ------------       ------------     ------------       ------------
      Loss from operations                           (1,482,775)        (1,306,277)      (5,261,106)        (4,019,433)
                                                                                     
Interest income                                          50,828            108,638          226,981            157,981
Other income (expense)                                  (37,835)               200          (63,228)            25,042
Interest expense                                        (20,728)           (46,659)        (145,787)          (133,337)
                                                   ------------       ------------     ------------       ------------
      Net loss                                      $(1,490,510)       $(1,244,098)     $(5,243,140)       $(3,969,747)
                                                   ------------       ------------     ------------       ------------
                                                   ------------       ------------     ------------       ------------
Net loss per common share                                $(0.22)            $(0.18)          $(0.77)            $(0.65)
                                                   ------------       ------------     ------------       ------------
                                                   ------------       ------------     ------------       ------------
Shares used in computing per share amounts (000's)        6,901              6,782            6,853              6,084
                                                   ------------       ------------     ------------       ------------
                                                   ------------       ------------     ------------       ------------

                See accompanying notes.


</TABLE>

                                          -4-

<PAGE>


                              CONDUCTUS, INC.
                     CONDENSED STATEMENTS OF CASH FLOWS
                               (UNAUDITED)

<TABLE>

                                                         FOR THE NINE MONTHS ENDED
                                                       ----------------------------
                                                       SEPTEMBER 30    SEPTEMBER 30
                                                           1997            1996
                                                       ------------    ------------
<S>                                                    <C>             <C>
Cash flows from operating activities:
   Net loss                                             $(5,243,140)    $(3,969,747)
   Adjustments to reconcile net loss to net cash used
      in operating activities:
      Depreciation and amortization                         601,298         759,203
      (Increase) decrease in:
         Accounts receivable                              1,713,686        (504,048)
         Inventories                                        679,594        (636,139)
         Prepaid expenses, other current assets,
           and other assets                                 123,729        (167,327)
      Increase (decrease) in:
         Accounts payable and other accrued liabilities    (424,386)        730,109
                                                       ------------    ------------
           Net cash used in operating activities         (2,549,219)     (3,787,949)
                                                       ------------    ------------
Cash flows from investing activities:
   Proceeds from sales of short-term investments         20,625,154      30,582,373
   Purchases of short-term investments                  (17,455,532)    (35,937,773)
   Acquisition of property and equipment                   (652,910)     (1,048,867)
   Net book value of assets sold                            168,734          29,195

                                                       ------------    ------------
      Net cash provided by investing activities           2,685,446      (6,375,072)
                                                       ------------    ------------
Cash flows from financing activities:
   Proceeds from borrowings                                 410,133       1,064,938
   Net proceeds from issuance of common stock               290,521      10,165,773
   Principal payments on long-term debt                    (879,895)       (656,247)
   Principal payments under capital lease obligations             0         (37,894)
                                                       ------------    ------------
      Net cash used in financing activities                (179,241)     10,536,570

      Net decrease in cash and cash equivalents             (43,014)        373,549

Cash and cash equivalents at beginning of period          1,119,991         272,410
                                                       ------------    ------------
Cash and cash equivalents at end of period              $ 1,076,977        $645,959
                                                       ------------    ------------
                                                       ------------    ------------

</TABLE>
                            See accompanying notes.

                                     -5-

<PAGE>






CONDUCTUS, INC. 
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

    FISCAL YEAR:

    The Company uses a 52-53 week fiscal year ending on the last Friday of the
year.  For convenience of presentation, the accompanying financial statements
have been shown as ending on the last day of the calendar month of each
applicable period.

    UNAUDITED INTERIM FINANCIAL INFORMATION:

         The accompanying unaudited interim financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission.  Certain information and footnote disclosures normally included in
the financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are adequate to
make the information presented not misleading.  The unaudited financial
statements as of September 30, 1997 and for the three and nine months ended
September 30, 1997 and 1996 include, in the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the financial information set herein.  The results of operations for the
interim periods are not necessarily indicative of the results to be expected for
an entire year.  The December 31, 1996 balance sheet was derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles.

    INVENTORIES:

         Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market.  Appropriate consideration is given to obsolescence,
excessive levels and other factors in evaluating net realizable value. 

    COMPUTATION OF NET LOSS PER COMMON SHARE:

         Net loss per common share is based upon the weighted average number of
common and common equivalent shares outstanding.  Common equivalent shares are
included in the per share calculations where the effect of their inclusion would
be dilutive.

    RECENT PRONOUNCEMENTS:

         During February of 1997, the Financial Accounting Standards Board
issued Statement No. 128 (SFAS 128) "Earnings Per Share", and in March issued
Statement No. 129 (SFAS 129) "Disclosures of Information about Capital
Structure", both of which specify the computation, presentation and disclosure
requirements for Earnings per Share. SFAS 128 and SFAS 129 will become effective
for the first quarter of fiscal 1998.

         In June 1997, the Financial Accounting Standards Board issued 
Statement No. 130 (SFAS 130) "Reporting Comprehensive Income".  SFAS No. 130 

                                     -6-
<PAGE>

establishes standards for the reporting and display of comprehensive income 
and its components in a full set of general purpose financial statements. 
Comprehensive income is defined as the change in equity of a business 
enterprise during a period from transactions and other events and 
circumstances from nonowner sources.  SFAS 130 will become effective for the 
Company's 1998 fiscal year.

         In June 1997, the Financial Accounting Standards Board issued
Statement No. 131 (SFAS 131) "Disclosures about Segments of an Enterprise and
Other Information".  SFAS No. 131 requires publicly-held companies to report
financial and other information about key revenue-producing segments of the
entity for which such information is available and is utilized by the chief
operation decision makers.  Specific information to be reported for individual
segments includes profit and loss, certain revenue and expense items and total
assets.  A reconciliation of segment financial information to amounts reported
in the financial statements would be provided.  SFAS 131 will become effective
for the Company's 1998 fiscal year.  

         The Company is currently studying the implications of these statements
and has not yet determined the impact of their adoption.

2.  INVESTMENTS:

         Investments are summarized below:
                                 SEPTEMBER 30, 1997       DECEMBER 31, 1996
                                 ------------------       -----------------
                                 Cost       Market     Cost           Market
                                 Basis      Value      Basis           Value
                               ---------   --------   ----------     ----------
    Debt securities:
       Corporate bonds          $500,056    $500,056  $2,356,259     $2,359,453
       Preferred bonds                 -          -    2,000,000      2,000,000
       Commercial paper        2,819,316   2,819,316   2,078,596      2,079,210
       Accrued interest            8,408       8,408      59,193         59,193
       Other                      15,191      15,191      18,545         18,545
                               ---------   ---------   ---------     ----------
    Total                      3,342,971   3,342,971   6,512,593      6,516,401
    Allowance for 
       unrealized gain                 -          -        3,808              -
                               ---------   --------   ----------     ----------
    Total                     $3,342,971  $3,342,971  $6,516,401     $6,516,401
                               ---------   --------   ----------     ----------
                               ---------   --------   ----------     ----------

3.  INVENTORIES:

    Inventories, net of reserves of $183,845 at September 30, 1997 and $81,000
at December 31, 1996, comprise:
                                     September 30, 1997    December 31, 1996
                                     ------------------    -----------------
    Raw materials                         $   -               $393,464  
    Work in process                        541,279             728,603  
    Finished goods                            -                 98,806
                                          --------          ----------
                                          $541,279          $1,220,873
                                          --------          ----------
                                          --------          ----------
                              


                                     -7-
<PAGE>



4.  LONG TERM DEBT:
               
               The Company has a term loan credit facility with a financial 
institution primarily to finance costs associated with the acquisition of 
equipment. Borrowings are at the bank's prime rate plus 1.0%, (9.5% at 
September 30, 1997) with interest paid monthly, and are collateralized by the 
related equipment. Principal installments are scheduled over a thirty month 
period.  At September 30, 1997, there are no further amounts available under 
that credit facility.  In addition, the Company has a line of credit facility 
that provides for borrowings up to the lesser of $1,000,000 or 75% of 
eligible receivables.  Borrowings under this agreement bear interest at the 
bank's prime rate plus 1%, and are collateralized by accounts receivable, 
equipment and other assets of the Company.  At September 30, 1997, there were 
no borrowings under this facility. The Company received a waiver in November 
1997 from the institution with respect to default that occurred in the third 
quarter of fiscal 1997 on certain financial covenants.

5.  ASSET WRITEDOWN:

                    In connection with the decision to dispose of most of the 
assets of its Instrument and Systems Division, the Company has recorded a 
$500,000 charge in the second quarter of 1997 to writedown certain 
receivables ($100,000), inventories ($300,000), and property, plant, and 
equipment ($100,000) of the division to estimated net realizable value.  
Certain fixed assets were transferred to the Conductus Sunnyvale, California 
location.  During the third quarter of 1997, the Instrument and Systems 
Division has been closed, and the NMR product line was sold to Bruker.

                                     -8-
<PAGE>



ITEM 2:                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
                         FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIS REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE 
RISKS AND UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY 
FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.  FACTORS THAT 
MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE 
DISCUSSED IN "RISK FACTORS" IN PART 1 OF THE COMPANY'S ANNUAL REPORT ON FORM 
10K AT AND FOR THE YEAR ENDED DECEMBER 31, 1996 AND IN THE FINAL PROSPECTUS 
DATED JUNE 26, 1996 INCLUDED AS PART OF THE COMPANY'S REGISTRATION STATEMENT 
ON FORM S-1 (NO. 333-3815).  THE FOLLOWING DISCUSSION SHOULD BE READ IN 
CONJUNCTION WITH THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING 
ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

                     Conductus develops, manufactures and markets electronic 
components and systems based on superconductors for applications in the 
communications and healthcare markets. As of September 30, 1997, Conductus 
had accumulated losses of $34,469,946 and expects to incur additional losses 
at least during 1997.  Conductus, alone or with collaborative partners, must 
successfully develop, manufacture, introduce and market its potential 
products in order to achieve profitability.  Conductus does not expect to 
recognize meaningful product sales until it successfully develops and 
commercializes superconductive components, systems and subsystems that 
address significant market needs.  In the third quarter of 1997, Conductus 
completed the disposal of its Instrument and Systems Division,and NMR product 
line, and realized a gain as discussed below.

RESULTS OF OPERATIONS FOR THE PERIODS ENDED SEPTEMBER 30, 1997 AND 1996 

                    The Company's total revenues decreased to $1,872,000 for 
the third quarter of 1997, a 43% decrease from $3,273,000 for the same period 
in 1996. For the nine month period ended September 30, 1997, total revenues 
were $7,497,000, a decrease of 16% from $8,895,000 for the same period in the 
prior year.  Total revenue consists primarily of contract revenue and, to a 
lesser extent, product sales.  Revenues under U.S. government research and 
development contracts were $1,723,000 for the third quarter of 1997, a 
decrease of 30% from $2,469,000 in the same period in the prior year.  For 
the nine months ended September 30, 1997, contract revenue was $5,834,000 a 
decrease of 18% from $7,089,000 for the prior year period.  These decreases 
were also due to the completion of several contracts.  At September 30, 1997, 
Conductus had a backlog of $1,594,000 under existing U.S. Government 
contracts, most of which is to be performed in the next 12 months, and 
$6,445,000 in awards from U. S. Government agencies for which such agencies 
had not yet entered into research contracts with the Company.  The Company 
does not anticipate that contract revenues for the fourth quarter of 1997 
will exceed those of the third quarter of 1997, although there can be no 
assurance as to the level of contract revenue in any future period.  The 
recognition of revenue and receipt of payment pursuant to these contracts and 
awards are subject to numerous risks.

                                     -9-

<PAGE>


                     Product revenues decreased to $149,000 in the third 
quarter of 1997, a 81% decrease from $804,000 of product sales in same period 
in the prior year. The decrease in product revenues resulted primarily from 
decreased shipments of products from the Instrument and Systems Division, 
which the Company disposed of during the third quarter of 1997.  For the nine 
months ended September 30, 1997, product revenues were $1,663,000, a decrease 
of 8% from the prior year period, due primarily to lower volume of sales from 
the Instrument and Systems division and NMR product lines, offset somewhat by 
increased sales of superconducting sensors in the first quarter of 1997. 
Conductus does not expect to recognize significant product sales until it  
successfully develops and commercializes superconductive components and 
systems addressing significant markets.

                    Cost of product sales decreased to $82,000 for the third 
quarter of 1997, an 85% decrease over the same period in 1996, primarily due 
to decreased product sales.  Gross margins increased to 45% in the third 
quarter of 1997 from 31% in the prior year, reflecting changes in commercial 
product mix for both quarters.  For the nine months ended September 30, 1997, 
cost of product sales was $1,363,000, an increase of 12% over the same period 
in 1996.  This increase was primarily due to the inventory writedown  
recorded in the second quarter of 1997 related to the disposal of the 
Instrument and Systems Division, offset somewhat by the lower volume of 
product sales.  Gross margins were 18% and 33% for the nine months ended 
September 30, 1997 and 1996, respectively, with the lower gross margins 
related to the inventory writedown in the second quarter of 1997, offset 
somewhat by changes in the commercial product mix.  Margins are expected to 
improve to the extent unit volumes increase. Costs of contract revenues are 
included in research and development expenses.

                    Research and development expenses decreased to $2,339,000 
in the third quarter of 1997, a 22% decrease from $3,011,000 for the same 
period in 1996. The decrease is primarily attributable to decreased headcount 
and expenditures for the Instruments and Systems Division and NMR product 
lines, partially offset by increases in headcount and expenditures for the 
communications product areas.  For the nine months ended September 30, 1997, 
research and development expenses were $8,216,000, a decrease of 6% from the 
same period in 1996. This decrease was primarily due to decreased headcount 
and expenditures for the Instrument and Systems Division offset somewhat by 
increased spending in the communications product development area.  The 
Company expects to continue to incur significant research and development 
expenses as it seeks to develop and market additional products.

                    Selling, general and administrative expenses increased to 
$1,026,000 for the third quarter period of 1997, a 1% increase over the same 
period in 1996.  For the nine months ended September 30, 1997, selling, 
general, and administrative expenses were $3,172,000, an increase of 7% from 
the same period in 1996.  These increases were primarily due to increased 
spending for sales and marketing, recruiting, and consulting costs for 
business development and the receivable writedown in the second quarter of 
1997, offset somewhat by lower expenditures for the Instrument and Systems 
Division.  Total headcount decreased to 91 at September 30, 1997 from 127 at 
September 30, 1996, reflecting reductions in personnel in the Instrument and 
Systems Division and the NMR product line, partially offset by increases in 
the communications product area.  As the Company begins to market commercial 
products, there will be additional sales and marketing costs above those 
incurred in 1996.

                                     -10-

<PAGE>

                    In the third quarter of 1997, the Company completed the 
disposal of its Instrument and Systems Division and NMR product line. The 
Company recognized a net gain of approximately $93,000 in the third quarter 
of 1997 on the final shutdown and disposal of these businesses.

                    The Company's total operating expenses were $3,355,000 
for the third quarter period in 1997, a 27% decrease from the $4,579,000 for 
the same period in 1996 for the reasons described above.  For the nine months 
ended September 30, 1997, total operating expenses were $12,758,000 a 
decrease of 1% from the same period of the prior year for the reasons 
described above. 
                    
                    Interest income was $51,000 in the third quarter period 
of 1997 compared to $109,000 during the same period in 1996.  The decrease is 
due to decreased amounts of cash and investments.  Interest charges decreased 
on the Company's debt financing to approximately $21,000 in the third quarter 
period of 1997 compared to  $47,000 for the same period in 1996, due to lower 
interest rates and lower levels of borrowing. For the nine months ended 
September 30, 1997, interest income was $227,000, a increase of 44% from the 
same period in 1996.  This increase was primarily due to investments 
resulting from the Company's financing activities in 1996.  Interest expense 
for the first nine months of 1997 was $146,000, an increase of 9% from the 
same period in 1996 due to higher average borrowings to finance purchases of 
capital equipment. 

               The Company's loss from operations for the nine months ended 
September 30, 1997 was substantially higher due to much higher than 
anticipated losses associated with its Instrument and Systems Division.  In 
the nine months ended September 30, 1997, this division incurred losses of 
approximately $1,463,000. The Company completed the disposal of this division 
during the third quarter of 1997.  

                    The Company has not paid income taxes since inception due 
to its cumulative operating losses.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations since inception primarily through 
$13,251,000 in net proceeds from its initial public offering of Common Stock 
in August 1993, $9,892,000 in net proceeds from its follow-on public offering 
of Common Stock in June 1996, $14,645,000 raised in private placement 
financings, $38,839,000 from U.S. government contracts, $6,056,000 in     
aggregate borrowings under equipment lease lines of credit and equipment term 
loans and $3,646,000 in interest income.  As of September 30, 1997, the 
Company's aggregate cash, cash equivalents and short-term investments totaled 
$4,420,000.

                                     -11-
<PAGE>

               Net cash used in operations was $2,549,000 for the first nine 
months of 1997 as compared to $3,788,000 for the same period in 1996.  The 
decrease in net cash used in operating activities in the first nine months of 
1997 was primarily due to decreases in accounts receivable and inventories, 
offset partially by the increase in net loss, and the decrease in accounts 
payable and other accrued liabilities.  The Company anticipates that its 
accounts receivable and inventories may increase during 1997 as a result of 
increased working capital requirements to support communications product 
areas.  Such increases will result in the use of additional cash in operating 
activities.

               Net cash provided by investing activities was $2,685,000 for 
the first nine  months of 1997 compared to net cash used of ($6,375,000) for 
the first nine months of 1996.  In 1997, net cash was provided by net 
reductions in short-term investments, offset to some extent by purchases of 
property and equipment. In 1996, net cash was primarily used to purchase 
short term investments from the proceeds of the Company's equity offering in 
June 1996.

               Net cash used in financing activities was $(179,000) for the 
first nine months of 1997 compared to net cash provided of $10,537,000 in the 
first nine months of the prior year. Net cash used in financing activities in 
the first nine months of 1997 was primarily for principal payments on long 
term debt, offset partially by net proceeds from borrowings and from the 
issuance of Common Stock. In the first nine months of 1996, net cash provided 
by financing activities was primarily from the Company's equity offering, and 
net proceeds of borrowings.

               The Company to date has received limited revenues from product 
sales. The development of the Company's potential products will require a 
commitment of substantial funds to conduct further research and development 
and testing of its potential products, to establish commercial-scale 
manufacturing and to market any resulting product.  The actual amount of the 
Company's future capital requirements will depend on many factors that 
affects its business. 
 
              Conductus anticipates that its existing available cash should 
be adequate to fund the Company's operations at least through 1997.  There 
can be no assurance that additional funding will be available on acceptable 
terms or at all, if required.

              During February of 1997, the Financial Accounting Standards 
Board issued Statement No. 128 (SFAS 128) "Earnings Per Share", and in March 
issued Statement No. 129 (SFAS 129) "Disclosures of Information about Capital 
Structure", both of which specify the computation, presentation and 
disclosure requirements for Earnings per Share. SFAS 128 and SFAS 129 will 
become effective for the first quarter of fiscal 1998.

              In June 1997, the Financial Accounting Standards Board issued 
Statement No. 130 (SFAS 130) "Reporting Comprehensive Income".  SFAS No. 
130 establishes standards for the reporting and display of comprehensive 
income and its components in a full set of general purpose financial 
statements. Comprehensive income is defined as the change in equity of a 
business enterprise during a period from transactions and other events and 
circumstances from nonowner sources.  SFAS 130 will become effective for the 
Company's 1998 fiscal year.

              In June 1997, the Financial Accounting Standards Board issued 
Statement No. 131 (SFAS 131) "Disclosures about Segments of an Enterprise and 
Other Information."  SFAS No. 131 requires publicly-held companies to report 
financial and other information about key revenue-producing segments of the 
entity for which such information is available and is utilized by the chief 
operation decision makers.  Specific information to be reported for 
individual segments includes profit and loss, certain revenue and expense 

                                     -12-
<PAGE>

items and total assets.  A reconciliation of segment financial information to 
amounts reported in the financial statements would be provided.  SFAS 131 
will become effective for the Company's 1998 fiscal year.  

                    The Company is currently studying the implications of 
these statements and has not yet determined the impact of their adoption.


                                     -13-
<PAGE>

PART II:  OTHER INFORMATION

ITEM 1:   LEGAL PROCEEDINGS - NOT APPLICABLE.

ITEM 2:   CHANGES IN SECURITIES - NOT APPLICABLE.

ITEM 3:   DEFAULTS UPON SENIOR SECURITIES - NOT APPLICABLE.

ITEM 4:   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. - NOT APPLICABLE.
                    
ITEM 5:   OTHER INFORMATION - NOT APPLICABLE.

ITEM 6:   EXHIBITS AND REPORTS ON FORM 8-K.
          (A) EXHIBITS - SEE BELOW.
          (B) REPORTS ON FORM 8-K - NOT APPLICABLE.


                                     -14-
<PAGE>

                                      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.

                                          CONDUCTUS, INC.
                                          Registrant


Dated:  November 13, 1997                  /S/ Donald F. DePascal
                                           -----------------------
                                           Principal Accounting Officer
                                           Donald F. DePascal
                                           Duly Authorized Officer


                                           /S/ Charles E. Shalvoy
                                           -----------------------
                                           Charles E. Shalvoy
                                           President and Chief Executive Officer
                                           and Duly Authorized Officer




                                     -15-
<PAGE>


                                 EXHIBIT INDEX 
                                           
                                                        Sequential
Exhibits                                                Page Number
--------                                                -----------
11.01          Statements of Computation of
                    Loss Per Share



                                     -16-