Superconductor Technologies, Inc. ("Superconductor" or the Company) develops and sells high temperature superconductor materials and technologies.

The original Complaint charges Defendants with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between the class period, thereby artificially inflating the price of Superconductor's common stock. The Complaint charges the Company and certain of its officers and directors for violations of the federal securities laws. During the Class Period, it is alleged that the Company projected first quarter 2004 revenues to be in the range of 10 to 13 million dollars. However, in actuality, first quarter revenues were later announced to be closer to 4 million dollars, due to changes in demand made by two of the Company’s customers.

The Complaint further alleges that the Company and its officers and directors knew of this decreased demand for its product well in advance of this previous allegedly inflated revenue projection. Specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to Defendants or recklessly disregarded by them: (1) that the Company could not meet its projected first quarter revenues of $10 million and $13 million due to changes in demand made by two of the Company's customers; (2) that the Defendants knew of the decreased demand for its product well in advance; and (3) that, as a result of the foregoing, Defendants lacked a reasonable basis for their positive statements about the Company and their earnings projections. On March 1, 2004, Superconductor announced that it expected first quarter 2004 total net revenues to be $4 million to $5 million. News of this shocked the market. Shares of Superconductor fell $1.86 per share, or 45.4 percent to close at $2.23 per share.

According to the Company’s FORM 10-Q for the quarterly period ended October 1, 2005, the Company and certain of its officers were named as Defendants in several substantially identical class action lawsuits filed in the United States District Court for the Central District of California in April 2004. The cases were consolidated in August 2004, and the Plaintiffs filed an amended consolidated Complaint in October 2004. The Plaintiffs allege securities law violations by the Company and certain of its officers and directors under Rule 10b-5 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended. The Complaint was filed on behalf of a purported class of people who purchased our stock during the period between January 9, 2004 and March 1, 2004 and seeks unspecified damages. The Plaintiffs base their allegations primarily on the fact that the Company did not achieve its forecasted revenue guidance of $10 to $13 million for the first quarter of 2004.

As disclosed by the same SEC filing, in February 2005 the Company settled with the lead Plaintiffs appointed by the District Court to handle this matter. Under the terms of the settlement, the Company’s insurers will pay $4.0 million into a settlement fund, and the Company will pay up to $50,000 of the costs of providing notice of the settlement to settlement class members. The Company recorded a liability in its December 31, 2004 consolidated financial statements for the proposed amount of the settlement of $4,050,000. Because the insurance carrier involved in this suit agreed to pay $4.0 million of the settlement amount, and therefore recovery from the insurance carrier was probable, a receivable was also recorded for that amount. These amounts were paid into the settlement fund in April 2005. The District Court approved the settlement on August 8, 2005, and the Company does not expect any further legal action related to this matter.