<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10-Q/A
(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, 1998

                                        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 Identification No.)
Incorporation or organization)

969 W. Maude Ave., 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 10, 1998: 7,126,349
                                                ----------

Total pages: 17
Index to Exhibits to be found on page 17

<PAGE>

                                 CONDUCTUS, INC.
                                      Index

<TABLE>
<S>                                                                                    <C>
PART I : FINANCIAL INFORMATION...........................................................3
         ITEM 1 : FINANCIAL STATEMENTS...................................................3
         CONDENSED BALANCE SHEETS AT SEPTEMBER 30, 1998 AND DECEMBER 31, 1997............3
         CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED 
           SEPTEMBER 30, 1998 AND 1997...................................................4
         CONDENSED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 
           1998 AND 1997.................................................................5
         NOTES TO CONDENSED FINANCIAL STATEMENTS.........................................6

         ITEM 2 : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
                    RESULTS OF OPERATIONS................................................9
         ITEM 3 : QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............14


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

</TABLE>

                                       2

<PAGE>

PART I: FINANCIAL INFORMATION
Item 1: Financial Statements


                                 CONDUCTUS, INC.
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                      SEPTEMBER 30,          DECEMBER 31,
                                                           1998                  1997
                                                           ----                  ----
                                                       (Unaudited)
<S>                                                  <C>                    <C>
ASSETS
Current assets:
Cash and cash equivalents                               $4,506,566            $2,111,560
Restricted cash                                             -                  500,000
Short-term investments                                      -                  556,633
Accounts receivable, net                                1,315,444             2,055,255
Inventories, net                                         872,619               610,367
Prepaid and other assets                                 108,270               139,479
                                                         -------               -------
Total current assets                                    6,802,899             5,973,294
                                                        ---------             ---------

Property, plant and equipment, net                      2,221,859             2,700,594
Other assets                                              82,266                87,762
                                                          ------                ------
Total assets                                            $9,107,024            $8,761,650
                                                        ----------            ----------
                                                        ----------            ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable                                         $822,178             $1,539,590
Other accrued liabilities                                865,194              1,063,721
Current portion of long-term debt                        978,625              1,547,507
                                                         -------              ---------
Total current liabilities                               2,665,997             4,150,818
Long-term debt, net of current portion                  1,559,626              309,681
                                                        ---------              -------
Total liabilities                                       4,225,623             4,460,499
                                                        ---------             ---------
Stockholders' equity:
Preferred Stock                                         6,374,511                 0
Common stock                                               728                   702
Additional paid-in capital                              41,476,772            41,070,636
Accumulated deficit                                    (42,970,610)          (36,770,187)
                                                       ------------          ------------
Total stockholders' equity                              4,881,401             4,301,151
                                                        ---------             ---------
Total liabilities and stockholders' equity              $9,107,024            $8,761,650
                                                        ----------            ----------
                                                        ----------            ----------

</TABLE>

                             See accompanying notes.

                                        3

<PAGE>

                                 CONDUCTUS, INC.
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                THREE MONTHS ENDED SEPTEMBER 30,               NINE MONTHS ENDED SEPTEMBER 30,
                                                ---------------------------------              -------------------------------
                                                   1998                     1997                 1998                  1997
                                                 -------                  -------               -------             ---------
<S>                                           <C>                     <C>                    <C>                  <C>
REVENUES:

Contract                                       $ 1,078,270              $ 1,723,182           $ 2,808,395          $ 5,834,080

Product                                          186,312                  148,560               623,675             1,662,605
                                                 -------                  -------               -------             ---------
Total revenues                                   1,264,582                1,871,742            3,432,070             7,496,685

OPERATING EXPENSES:

Cost of product                                  528,562                  400,386              1,994,417            1,899,203

Research and development                        1,266,399                2,021,099             4,468,949            7,679,545

Selling, general & administrative                812,565                 1,026,167             2,777,036            3,172,178

Gain on product line disposals                      -                     (93,135)                 -                 (93,135)

Writedown of property, plant, & equipment           -                        -                     -                 100,000
                                                                             -                                       -------
Total operating expenses                        2,607,526                3,354,517             9,240,402            12,757,791
                                                ---------                ---------             ---------            ----------

Loss from operations                           (1,342,944)              (1,482,775)           (5,808,332)          (5,261,106)

Interest income                                   13,671                   50,828               56,445               226,981
Other income (expense)                              -                     (37,835)                 -                 (63,228)
Interest expense                                (304,035)                 (20,728)             (448,535)            (145,787)
                                                ---------                 --------             ---------            ---------

Net loss                                      $ (1,633,308)            $ (1,490,510)         $ (6,200,423)        $ (5,243,140)
                                              -------------            -------------         -------------        -------------
                                              -------------            -------------         -------------        -------------

Net loss per basic and diluted common
share
                                                 $ (0.23)                 $ (0.22)             $ (0.88)              $ (0.77)
                                                 --------                 --------             --------              --------
                                                 --------                 --------             --------              --------
Shares used in computing per share
amounts
                                                7,117,000                6,901,000             7,077,000            6,853,000
                                                ---------                ---------             ---------            ---------
                                                ---------                ---------             ---------            ---------

</TABLE>

                             See accompanying notes.

                                        4

<PAGE>

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

<TABLE>
<CAPTION>

                                                                                  NINE MONTHS ENDED
                                                                                    SEPTEMBER 30,
                                                                             -----------------------------
                                                                             1998                     1997
                                                                             ----                     ----
<S>                                                                    <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                           $ (6,200,423)            $ (5,243,140)
Adjustments to reconcile net loss to net cash used in operating
activities:
     Depreciation and amortization                                         684,570                  601,298
     Provision for excess and obsolete inventory                            96,176                     -
     Compensation associated with warrant grants                           146,575                     -
Changes in:
     Accounts receivable                                                   739,811                 1,713,686
     Inventories                                                          (358,428)                 679,594
     Prepaid and other assets                                               36,705                  123,729
     Accounts payable and other accrued liabilities                       (915,939)                (424,386)
                                                                          ---------                ---------
 Net cash used in operating activities                                   (5,770,953)              (2,549,219)
                                                                         -----------              -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from sales of short-term investments                         556,633                 20,625,154
     Purchases of short-term investments                                      -                   (17,455,532)
     Acquisition of property and equipment                                (205,835)                (652,910)
     Net book value of assets sold                                            -                     168,734
                                                                           -------                 ---------
Net cash provided by investing activities                                  350,798                 2,685,446
                                                                           -------                 ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Net proceeds from borrowings                                         4,450,000                 410,133
     Net proceeds from issuance of preferred stock                        6,374,511                    -
     Net proceeds from issuance of common stock                             225,052                 290,521
     Principal payments on long-term debt                                (3,734,402)               (879,895)
                                                                         -----------               ---------
Net cash provided by (used in) financing activities                       7,315,161                (179,241)
                                                                          ---------                ---------
Net increase (decrease) in cash and cash equivalents                      1,895,006                 (43,014)
Cash and cash equivalents at beginning of period                          2,611,560                1,119,991
                                                                          ---------                ---------
Cash and cash equivalents at end of period                                $4,506,566               $1,076,977
                                                                          ----------               ----------
                                                                          ----------               ----------

</TABLE>

                             See accompanying notes.

                                        5

<PAGE>

CONDUCTUS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

         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. The unaudited financial statements as of
     September 30, 1998 and for the three and nine months ended September 30,
     1998 and 1997 include, in the opinion of management, all adjustments,
     consisting of normal recurring adjustments, necessary to present fairly the
     financial information set forth 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, 1997 balance sheet was
     derived from audited financial statements, but does not include all
     disclosures required by generally accepted accounting principles.

         CASH, CASH EQUIVALENTS, AND INVESTMENTS:

          At September 30, 1998, all of Conductus, Inc.'s (the "Company" or
     "Conductus") highly liquid investments had original maturities of less than
     ninety days, and accordingly are considered cash equivalents.

         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.

         BASIC AND DILUTED LOSS PER SHARE:

          In accordance with the disclosure requirements of Statement of
     Financial Accounting Standards No. 128 (SFAS 128) "Earnings Per Share", a
     reconciliation of the numerator and denominator of the basic and diluted
     EPS is provided as follows:

<TABLE>
<CAPTION>

     -----------------------------------------------------------------------------------------------------------------
                                                 Three months ended September 30,  Nine months ended September 30,
     -----------------------------------------------------------------------------------------------------------------
                                                       1998             1997             1998             1997
     -----------------------------------------------------------------------------------------------------------------
     <S>                                         <C>               <C>              <C>              <C>              
          Numerator - basic and diluted EPS:
     -----------------------------------------------------------------------------------------------------------------
               Net loss                            $ (1,633,308)    $ (1,490,510)    $ (6,200,423)    $ (5,243,140)
     -----------------------------------------------------------------------------------------------------------------
          Denominator - basic and diluted EPS:
     -----------------------------------------------------------------------------------------------------------------
               Common Stock outstanding              7,117,000        6,901,000        7,077,000        6,853,000
     -----------------------------------------------------------------------------------------------------------------
          Basic loss per share                        $(0.23)          $(0.22)          $(0.88)          $(0.77)
                                                      -------          -------          -------          -------
                                                      -------          -------          -------          -------
     -----------------------------------------------------------------------------------------------------------------
          Diluted loss per share                      $(0.23)          $(0.22)          $(0.88)          $(0.77)
                                                      -------          -------          -------          -------
                                                      -------          -------          -------          -------
     -----------------------------------------------------------------------------------------------------------------

</TABLE>

                                        6

<PAGE>

     In the above computations, common equivalent shares are excluded from the
     basic and diluted loss per share as their effect is anti-dilutive. Common
     equivalent shares including options, warrants and convertible preferred 
     stock that could potentially dilute basic earnings per share in the 
     future and that were not included in the computations of diluted loss 
     per share because of anti-dilution were approximately 552,725 and 
     225,852 for the three months ended September 30, 1998 and 1997 
     respectively, and approximately 344,670 and 330,029 for the nine months 
     ended September 30, 1998 and 1997 respectively.

         RECLASSIFICATIONS:

          Certain amounts in the prior periods statements of operations have 
     been reclassified to conform to the September 30, 1998 presentation. 
     These reclassifications had no effect on previously reported results of 
     operations.

     RECENT PRONOUNCEMENTS:

         COMPREHENSIVE INCOME

          The Company has adopted the provisions of Statement of Financial
     Accounting Standards No. 130, "Reporting Comprehensive Income," effective
     January 1, 1998. This statement requires the disclosure of comprehensive
     income and its components in a full set of general-purpose financial
     statements. Comprehensive income is defined as net income plus revenues,
     expenses, gains and losses that, under generally accepted accounting
     principles, are excluded from net loss. The component of comprehensive
     loss, which is excluded from net loss, is not significant and therefore, no
     separate statement of comprehensive income has been presented.

         SEGMENT REPORTING

          In June 1997, the Financial Accounting Standards Board issued
     Statement of Financial Accounting Standard No. 131, "Disclosure about
     Segments of an Enterprise and Related Information" ("SFAS 131"), which
     supersedes Statement of Financial Accounting Standards No. 14, "Financial
     Reporting for Segments of a Business Enterprise" ("SFAS 14"). SFAS 131
     changes current practice under SFAS 14 by establishing a new framework on
     which to base segment reporting and also requires interim reporting of
     segment information. This statement is effective for fiscal years beginning
     after December 15, 1997. The statement's interim reporting disclosures are
     not required until the first quarter immediately subsequent to the fiscal
     year in which SFAS 131 is effective.



2. ACCOUNTS RECEIVABLE :
Accounts receivable, net, consist of the following:

<TABLE>
<CAPTION>

                                           September 30, 1998             December 31, 1997
                                           ------------------             -----------------
<S>                                       <C>                            <C>
U. S. government contracts:
     Unbilled                                  $ 358,925                     $ 1,146,283
     Billed                                     991,565                        793,382
Commercial                                      257,589                        363,822
Reserves                                       (292,635)                      (248,232)
                                               ---------                      ---------
                                               $1,315,444                    $2,055,255
                                               ----------                    ----------
                                               ----------                    ----------

</TABLE>

3.  INVENTORIES:

Inventories, net, consist of the following:

<TABLE>
<CAPTION>

                                           September 30, 1998             December 31, 1997
                                           ------------------             -----------------
<S>                                       <C>                            <C>
Raw materials and purchased parts              $ 441,459                      $ 293,336
Work in process                                 315,940                        366,550

                                        7

<PAGE>


Finished goods                                  526,741                        231,326
Reserves                                       (411,521)                      (280,845)
                                               ---------                      ---------
                                               $ 872,619                      $ 610,367
                                               ---------                      ---------
                                               ---------                      ---------

</TABLE>

4.   LONG TERM DEBT:

          At September 30, 1998, the Company's credit facilities consisted of a
     note payable from a leasing company, two bank equipment term loans, a bank
     line of credit, and a lease line of credit for new equipment purchases.

          On April 23, 1998, the Company entered into a bridge loan credit
     facility agreement with its bank. The facility provided for borrowings of
     up to $2,000,000, with interest at the bank's prime rate plus 2%. The
     amounts owed were paid in full on September 15, 1998, and this facility is
     no longer available.

          The note payable from a leasing company is collateralized by the
     Company's property, plant and equipment. The effective interest rate is
     13.98% and there are certain reporting and financial covenants which the
     Company is required to satisfy. At September 30, 1998 the Company was in
     compliance with these covenants, the balance outstanding was $ 2, 241,624,
     and there were no further amounts available on this facility.

          The two equipment term loans bear interest at the bank's prime rate
     plus 2%, with principal and interest payments paid monthly. These term
     loans mature on the later of maturity dates set forth in each of the
     original term loan agreements or the date of completion of an equity
     financing transaction; provided, however, that if the Company chooses to
     collateralize the term loans with restricted cash deposits, then the
     maturity dates for the term loans shall remain as December 31, 1998 and 
     December 31, 1999. At September 30, 1998, there was approximately $418,723
     outstanding under these loans, and no further amounts were available.

          The bank line of credit agreement provides for borrowings of up to the
     lesser of $2,000,000 or 80% of eligible receivables. Borrowings under this
     facility bear interest at the bank's prime rate plus 2.0% and will be
     collateralized by accounts receivable, equipment and other assets of the
     Company. At September 30, 1998, there were no amounts outstanding under
     this facility.

          The lease line of credit for new equipment purchases provides for
     borrowings of up to $1,000,000, is collateralized by equipment purchases
     under the line, and has an effective interest rate of 14.04%. The Company
     also granted to the leasing company warrants to purchase up to 15,060
     shares of the Company's stock at a price equal to $3.32. The fair value of
     such warrants is approximately $35,000 and will be amortized over the three
     year term of the lease payments. This line of credit expires on September
     30, 1999.

          All the credit facilities contain reporting and financial covenants.
     In the event of default on any of these covenants, no further amounts would
     be advanced to the Company under any facility, the entire amounts
     outstanding could become due and payable immediately upon default, and
     those assets that are collateral could be seized, unless such default is
     waived by the lender.

5.   SERIES B PREFERRED STOCK:

          On September 11, 1998, and September 22, 1998, the Company sold and 
     issued an aggregate of 2,461,227 shares of its Series B Preferred Stock 
     at a price per share of $2.70 and issued warrants to purchase 492,242 
     shares of Common Stock at an exercise price of $2.70 per share in a 
     private placement of its equity securities in which Sutro & Co., Ins. 
     and Davenport and Co. acted as placement agents. The offering was not 
     underwritten and raised net proceeds of $6,375,000. Certain affiliates 
     of the Company and other institutional and accredited individual 
     investors purchased shares of Series B Preferred Stock and warrants in 
     such offering, which sales were exempt from the registration 
     requirements of the Securities Act of 1933, as amended (the "Act"), 
     pursuant to Rule 506 of Regulation D under the Act.

          The shares of Series B Preferred Stock are convertible on a 1-to-1 
     basis into Common Stock subject to anti-dilution protections. In 
     addition, the shares of Series B Preferred Stock have a cumulative stock 
     dividend of 6% and certain liquidation preferences over the shares of 
     Common Stock as set forth in the Certificate of Designation of Series B 
     Preferred Stock.

                                        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. Conductus Inc.'s (the "Company" or
     "Conductus") actual result's 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 10-K/A as of and
     for the year ended December 31, 1997. The following discussion should be
     read in conjunction with the financial statements and notes thereto
     appearing elsewhere in this report on Form 10-Q.

       OVERVIEW

          Conductus develops, manufactures and markets electronic components and
     systems based on superconductors for applications in the worldwide
     telecommunications markets. As of September 30, 1998, Conductus had
     accumulated losses of approximately $42,971,000 and expects to incur
     significant additional losses during 1998 and 1999. 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.

       RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
       1998 AND 1997

          The Company's total revenues decreased to $1,265,000 for the third
     quarter of 1998, a 32% decrease from $1,872,000 for the same period in
     1997. For the nine months ended September 30, 1998, the Company's total
     revenues decreased to $3,432,000, a 54% decrease from $7,497,000 for the
     same period in 1997. Total revenue consists primarily of contract revenue
     and, to a lesser extent, product sales. Revenues under U.S. government
     research and development contracts were $1,078,000 for the third quarter of
     1998, a decrease of 37% from $1,723,000 in the same period in the prior
     year. For the nine months ended September 30, 1998, revenues under U.S.
     government research and development contracts were $2,808,000, a decrease
     of 52% from $5,834,000 in the same period in the prior year. The 
     decreases in total revenues and contract revenues reflect the focus of 
     the Company's business on products for the wireless communications 
     market, following the disposal of the Instrument and System division and 
     the NMR product line in the third quarter of 1997, and an overall lower 
     level of federal Research and Development funding in the Company's 
     technology area. At September 30, 1998, Conductus had a backlog of 
     approximately $421,000 under existing U.S. government contracts, most of 
     which is to be performed in the next 12 months, and approximately 
     $7,000,000 in awards from U. S. government agencies for which such 
     agencies had not yet entered into research contracts with the Company. 
     Due to the expiration of several older contracts, the Company 
     anticipates that contract revenues for the fourth quarter of 1998 may be 
     less than contract revenues in the third quarter of 1998, 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.

          Product revenues increased to $186,000 in the third quarter of 1998, a
     25% increase from $149,000 of product sales in same period in the prior
     year. For the nine months ended September 30, 1998, product revenues
     decreased to $623,000, a 63% decrease from $1,663,000 of product sales in
     same period in the prior year. The increase in product revenues from the
     third quarter of 1997 was due to a higher volume of wireless products,
     offset by lower volumes of magnetic sensing products. The decrease in
     product revenues for the nine month period resulted primarily from
     decreased shipments of products from the 

                                        9

<PAGE>

     Instrument and Systems division and the NMR product line, which the 
     Company disposed of during the third quarter of 1997, and lower volumes 
     of other magnetic sensing products, offset somewhat by increased volume 
     of government and commercial wireless communication products, as shown 
     in the table below:

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
                                                Three months ended:                   Nine months ended:
---------------------------------------------------------------------------------------------------------------------
                                     September  September 30,    Change    September 30,   September      Change
                                     30, 1998        1997                       1998       30, 1997
                                                                (A) - (B)                               (C) - (D)
                                        (A)          (B)                        (C)           (D)
---------------------------------------------------------------------------------------------------------------------
<S>                                 <C>         <C>            <C>         <C>            <C>          <C>
  Wireless communication products    $176,000        $-0-       $176,000      $403,000       $-0-        $403,000
---------------------------------------------------------------------------------------------------------------------
  San Diego division products           -0-          -0-           -0-          -0-         596,000     (596,000)
---------------------------------------------------------------------------------------------------------------------
  Other magnetic sensing products     10,000       149,000      (139,000)     220,000      1,067,000    (847,000)
                                      ------       -------      ---------     -------      ---------    ---------
---------------------------------------------------------------------------------------------------------------------
  Total product sales                $186,000      $149,000      $37,000      $623,000    $1,663,000   $(1,040,000)
                                     --------      --------      -------      --------    ----------   ------------
                                     --------      --------      -------      --------    ----------   ------------
---------------------------------------------------------------------------------------------------------------------

</TABLE>

          Cost of product sales increased to $529,000 for the third quarter 
     of 1998, a 32% increase from $400,000 over the same period in 1997, 
     primarily due to higher production unit costs on wireless products. For 
     the nine months ended September 30, 1998, cost of product sales 
     increased to $1,994,000, a 5% increase from $1,899,000 over the same 
     period in 1997. This increase was due to higher unit production costs on 
     wireless. Gross margins decreased to -184% in the third quarter of 1998 
     from -170% in the same period in 1997, reflecting increased wireless 
     unit production costs and the change in product mix from higher margin 
     magnetic sensing products to lower margin wireless products. For the 
     nine months ended September 30, 1998, gross margins decreased to -220% 
     from -14% in the same period in 1997, primarily due to the higher 
     wireless unit production costs and decreased shipments of higher margin 
     magnetic sensing products. Margins will improve only if unit volumes 
     increase significantly, leading to lower per unit costs for purchased 
     materials and overhead. Costs of contract revenues are included in 
     research and development expenses.

          Research and development expenses decreased to $1,266,000 in the third
     quarter of 1998, a 37% decrease from $2,021,000 for the same period in
     1997. For the nine months ended September 30, 1998, research and
     development expenses decreased to $4,469,000, a 42% decrease from
     $7,680,000 for the same period in 1997. Both decreases are primarily
     attributable to lower levels of expenditures for government contracts,
     decreased headcount and expenditures related to the Instruments and Systems
     division and NMR product lines, partially offset by increases in
     expenditures for telecommunications product development. The Company 
     expects to continue to incur significant research and development 
     expenses as it seeks to develop and market additional products.

                                       10

<PAGE>

          Selling, general and administrative expenses decreased to $ 813,000
     for the third quarter of 1998, a 21% decrease from the same period in 1997
     and decreased to $2,777,000 for the nine months ended September 30, 1998, a
     12% decrease from the same period in 1997. This decrease reflects the
     disposal of the Instrument and System division, largely offset by higher
     spending in Sales and Marketing for wireless communications products. As
     the Company begins to market commercial products, the Company anticipates
     that there will be additional sales and marketing costs above those
     incurred in 1997.

          Total headcount decreased to 66 at September 30, 1998 from 91 at
     September 30, 1997, reflecting reductions in personnel in the Instrument
     and Systems division and the NMR product line and the lower level of
     government contract research work and resulting reduced headcount. The 
     headcount reductions are the result of the Company's continuing focus on 
     telecommunications market opportunities, as well as the need to conserve 
     cash and control expenses in line with anticipated revenue levels.

          The Company's total operating expenses were $2,608,000 for the third
     quarter of 1998, a 22% decrease from $3,354,000 for the same period in
     1997 and $9,240,000 for the nine months ended September 30, 1998, a 28%
     decrease from $12,758,000 for the same period in 1997 for the reasons
     described above.

          Net interest and other expense increased to $290,000 for the third 
     quarter of 1998, from $8000 for the same period in 1997. The increase in 
     net interest and other expense in the third quarter of 1998 reflected 
     lower cash balances throughout much of the quarter, higher debt levels, 
     and the fair value of the debt-related warrants granted. For the nine 
     month period ended September 30, 1998, net interest and other expense 
     increased substantially over the same period in 1997, again primarily 
     due to lower cash balances and higher debt levels. The Company has not 
     paid federal 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, $21,020,000 raised in private
     placement financings (including net proceeds of $6,375,000 raised in 
     September 1998), $43,080,000 from U.S. government contracts, $2,660,000 
     in aggregate borrowings under various lease and bank loan arrangements, 
     and $3,743,000 in interest income. As of September 30, 1998, the 
     Company's aggregate cash and cash equivalents totaled $4,507,000.

          During the third quarter of 1998, the Company raised a net amount of
     $6,375,000 in Series B Preferred Stock at $2.70 per share convertible on a
     1-1 basis into Common Stock. The Company also issued warrants to purchase
     492,242 shares of Common Stock at $2.70 per share. In addition, the Company
     has negotiated an equipment lease line in the amount of $1,000,000
     available for future equipment purchases, received $500,000 that was a 
     deposit released from a prior financing transaction, and has available a 
     bank line of credit which provides for borrowings of up to the lessor of 
     $2,000,000 or 80% of eligible receivables. See Note 4 for a further 
     description of the financing arrangements put in place during the third 
     quarter.

          Net cash used in operations was $5,771,000 for the first nine months
     of 1998 compared to $2,549,000 for the same period in 1997. The increase in
     net cash used in operating activities in the first nine months of 1998 was
     primarily due to the larger net loss for the period, an increase in
     inventories and a decrease in accounts payable and other accrued
     liabilities, offset partially by the decrease in accounts receivable
     (though somewhat less than the decrease in accounts receivable for the
     first nine months of 1997), and 

                                       11

<PAGE>

     depreciation and amortization (which was approximately at the same level 
     as the first nine months of 1997). The accounts receivable decrease was 
     due to lower levels of revenue, offset somewhat by slower than anticipated
     collections on certain receivables. The increase in inventories was 
     primarily in raw material and finished goods for wireless commercial 
     products. The decrease in accounts payable and other accrued liabilities 
     was primarily due to an acceleration of payments during the third quarter
     of 1998 after the Company had delayed payments during the first and second
     quarters of 1998 as the Company attempted to conserve cash while it 
     continued to negotiate various financings.

          The Company anticipates that it will incur significant additional net
     losses during the balance of 1998. The Company anticipates that its
     accounts receivable and inventories may increase during 1998 as a result of
     increased working capital requirements to support telecommunications
     products. As a result, the Company anticipates the use of additional cash
     in operating activities during the balance of 1998.

          Net cash provided by investing activities was $351,000 for the first
     nine months of 1998 compared to net cash provided by investing activities
     of $2,685,000 for the first nine months of 1997. In 1998, net cash was
     provided by net reductions in short-term investments, offset to some extent
     by purchases of property and equipment. In 1997, net cash was also
     primarily provided by net reductions in short term investments offset
     somewhat by purchases of property and equipment. The Company anticipates
     that its purchases of property and equipment for the remainder of 1998 may
     be somewhat lower than 1997 levels. The Company has negotiated a leasing
     facility to finance further purchases of property and equipment, during the
     remainder of 1998.

          Net cash provided by financing activities was $7,315,000 for the first
     nine months of 1998 compared to net cash used in financing activities of
     $179,000 in the first nine months of the prior year. Net cash provided by
     financing activities in the first nine months of 1998 was primarily
     proceeds from borrowings and the proceeds from the sale of preferred and 
     common stock as follows:

<TABLE>

          <S>                                                  <C>
           Note Payable                                         $ 4,450,000

           Issuance of Preferred Stock                            6,375,000

           Issuance of Common Stock                                 225,000
                                                                -----------
           Total proceeds from financings and borrowings        $11,050,000
                                                                -----------
                                                                -----------

</TABLE>

     The net cash provided by proceeds from borrowings, preferred stock and
     issuance of common stock was offset somewhat by principal payments on debt.
     In the first nine months of 1997, net cash used in financing activities was
     primarily principal payments on debt.

          Conductus anticipates that its existing available cash, other sources
     of liquidity and anticipated revenue, primarily from government contracts
     and wireless products, should be adequate to fund the Company's operations
     for at least the next nine months. There can be no assurance, however,
     that changes in the Company's plans or other events affecting the Company
     will not result in the expenditure of such resources before such time. The
     Company continues to explore additional equity financing alternatives.
     There can be no assurance that additional equity funding will be available
     on acceptable terms or at all.

          All of the Company's credit arrangements contain reporting and
     financial covenants which the Company is required to satisfy. There can be
     no assurance that the Company will satisfy all such covenants in the
     future. There can be no assurance that if the Company defaults on any of
     the covenants, waiver of such default could be obtained from the lender. In
     the event of default on any of these covenants, no further amounts would be
     advanced to the Company under any facility, the entire amounts outstanding
     could become 

                                       12

<PAGE>

     due and payable immediately upon default, and those assets that are 
     collateral could be seized, unless such default is waived by the lender.

          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.

       YEAR 2000 COMPLIANCE

          The Year 2000 issue is the result of computer programs being written
     using two digits rather than four to define the applicable year. Many
     computer systems and applications experience problems handling dates beyond
     the year 1999, and will need to be modified before the Year 2000 in order
     to remain functional. Any of the Company's computer programs that have
     date-sensitive software may recognize a date using "00" as the year 1900
     rather than the Year 2000. This could result in a system failure or
     miscalculations causing disruptions of operations, including, among other
     things, a temporary inability to process transactions, send invoices, or
     engage in similar normal business activities.

          The Company is currently expending resources to review its products,
     services and internal use software to identify those products, services and
     systems that are not Year 2000 compliant. The costs related to the Year
     2000 issue are expensed as incurred, and represent a reallocation of
     existing resources. The project comprises four phases: (1)
     identification of risks, (2) assessment of those risks, (3) development of
     remediation and contingency plan, and (4) implementation and testing. The
     Company's Year 2000 project is currently in the assessment phase, and the
     Company believes that its greatest risks are associated with its
     information systems and systems embedded in its operations and
     infrastructure.

          The Company presently believes that the conversion of its internal 
     systems will mitigate the Year 2000 Issue related to information 
     systems. Based upon a recent assessment of the Company's sales, 
     manufacturing and finance systems, the Company determined that it will 
     be required to replace these computer systems as they do not properly 
     utilize dates beyond December 31, 1999. The Company is in the early 
     phases of the conversion process, however if the conversion is not 
     completed in a timely manner, the Year 2000 Issue could have a material 
     adverse impact on the operations of the Company. The Company is 
     proceeding with the assessment of risk relating to its remaining 
     internal systems, and determining whether it has exposure to 
     contingencies related to the Year 2000 Issue for the products it has 
     sold.

          The Company estimates that the costs of the software and its
     implementation will not have a material financial impact on the Company.
     The Company is unable to estimate the remaining financial impact, if any,
     of the Year 2000 Issue until it completes the assessment of the potential
     impact of the Year 2000 Issue on its remaining internal systems, on third
     parties such as its suppliers and customers, on products it has sold, and
     on other factors that may come to the Company's attention.

          The Company has begun formal communications with its significant
     suppliers and large customers to determine the extent to which the Company
     is vulnerable to those third parties' failure to remediate their own Year
     2000 Issue. There can be no guarantee that the systems of other companies
     on which the Company's systems rely will be timely converted, or that a
     failure to convert by another company, or a conversion that is incompatible
     with the Company's systems, would not have material adverse effect on the
     Company.

                                        13

<PAGE>

          As the Year 2000 project continues, the Company may discover
     additional Year 2000 problems, may not be able to develop, implement, or
     test remediation or contingency plans, or may find that the costs of these
     activities exceed current expectations and become material. The Companies
     expectations as to the extent and timeliness of modifications required in
     order to achieve Year 2000 compliance is a forward-looking statement
     subject to risks and uncertainties.

ITEM 3 : QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK -- NOT
APPLICABLE.















                                       14

<PAGE>

PART II:  OTHER INFORMATION


ITEM 1:   LEGAL PROCEEDINGS - NOT APPLICABLE.

ITEM 2:   CHANGES IN SECURITIES
On September 11, 1998, and September 22, 1998, the Company sold and issued an 
aggregate of 2,461,227 shares of its Series B Preferred Stock at a price per 
share of $2.70 and issued warrants to purchase 492,242 shares of Common Stock 
at an exercise price of $2.70 per share in a private placement of its equity 
securities in which Sutro & Co., Inc. and Davenport and Co. acted as placement
agents. The offering was not underwritten and raised net proceeds of $6,375,000.
Certain affiliates of the Company and other institutional and accredited 
individual investors purchased shares of Series B Preferred Stock and warrants 
in such offering, which sales were exempt from the registration requirements of 
the Securities Act of 1933, as amended (the "Act"), pursuant to Rule 506 of 
Regulation D under the Act.

The shares of Series B Preferred Stock are convertible on a 1-to-1 basis into 
Common Stock subject to anti-dilution protections. In addition, the shares of 
Series B Preferred Stock have a cumulative stock dividend of 6% and certain 
liquidation preferences over the shares of Common Stock as set forth in the 
Certificate of Designation of Series B Preferred Stock.

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 
On May 18, 1998 the Company was notified by the Nasdaq Stock Market 
("Nasdaq") of Nasdaq's determination that the Company was not in compliance 
with the tangible net assets requirement for continued listing of its common 
stock on the Nasdaq National Market. The Company attended a Nasdaq hearing to 
discuss these compliance issues.  The Company has subsequently been notified 
that its stock would be removed from the Nasdaq National Market and traded on 
the Nasdaq SmallCap Market. Since November 10, 1998, the Company's common 
stock has been traded on the Nasdaq SmallCap Market under its current trading 
symbol , "CDTS". The Company has until November 18, 1998 to submit a listing 
application to the Nasdaq Stock Market which must be approved for the Company 
to continue listing on the Nasdaq SmallCap Market.

ITEM 6:   EXHIBITS AND REPORTS ON FORM 8-K.

(A) EXHIBITS - SEE BELOW.

(B) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K on September 29, 1998 describing the 
sale by the Company of shares of its Series B Preferred Stock to certain 
investors of the Company.









                                       15

<PAGE>





SIGNATURES

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

                                                                 CONDUCTUS, INC.

                                                                      Registrant





       Dated:  March 2, 1999                             /s/ Ronald Wilderink
                                                         -----------------------
                                                                Ronald Wilderink
                                                         Chief Financial Officer
                                                     and Duly Authorized Officer





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







                                        16

<PAGE>

EXHIBIT INDEX


<TABLE>
<CAPTION>

Exhibits
--------
<C>      <S>

 3.01*   Certificate of Designation of Series B Preferred Stock.

10.01+   Master Loan and Security Agreement between the Company and Transamerica
         Business Credit Corporation dated June 26, 1998.

10.02*   Stock Subscription Warrant Agreement between the Company and
         Transamerica Business Credit Corporation dated June 26, 1998.

10.03*   Master Lease Agreement between the Company and Leasing Technologies
         International, Inc. dated June 15, 1998.

10.04+   Engagement Letter between the Company and Sutro and Co. Inc. dated 
         March 24, 1998.

10.05*   Amendment to Engagement Letter between the Company and Sutro and Co.
         Inc. dated September 2, 1998.

10.06*   Engagement Letter between the Company and Davenport and Co. dated
         September 02, 1998.

10.07*   Form of Series B Preferred Stock and Warrant Purchase Agreement dated 
         September 11, 1998 and September 22, 1998 between the Company and 
         Series B Investors.

10.08*   Form of Warrant to Purchase Common Stock between the Company and 
         Series B Investors.

27.01*   Financial Data Schedule.

99.01*   Text of Press Release dated November 10, 1998.

</TABLE>
(+) Confidential Treatment has been requested as to certain portions of these 
documents.
* Previously Filed