UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                               AMENDMENT NO. 1 TO
                                   FORM 10-KSB

                                   (Mark one)

     [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

                  For the fiscal year ended September 30, 2004

   [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

         For the transition period from ______________ to _____________

                         Commission File Number: 0-10999

                        COMPOSITE TECHNOLOGY CORPORATION
        (Exact name of small business issuer as specified in its charter)


                          Nevada                59-2025386
                (State of incorporation) (IRS Employer ID Number)


                   2026 McGaw Avenue, Irvine, California 92614

               (Address of principal executive offices) (Zip Code)

                                 (949) 428-8500

                           (Issuer's telephone number)

      Securities registered under Section 12 (b) of the Exchange Act: None

  Securities registered under Section 12(g) of the Exchange Act: Common Stock:
                                $0.001 par value

Check whether the issuer has (1) filed all reports required to be files by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

The issuer's revenues for the fiscal year ended September 30, 2004 was
$2,500,000.

The aggregate market value of voting common equity held by non-affiliates as of
December 20, 2004 was approximately $655,575,351 using the closing price of the
Company's common stock of $5.78 per share on December 20, 2004.

As of December 20, 2004 there were 113,421,341 shares of Common Stock issued and
outstanding.

Transitional Small Business Disclosure Format : Yes [ ] No [X]

<PAGE>

COMPOSITE TECHNOLOGY CORPORATION

                                TABLE OF CONTENTS

                                                                           Page
                                                                          Number
                                                                          ------
PART I                                                                        3
  ITEM 1 - DESCRIPTION OF BUSINESS                                            3
    INTRODUCTION                                                              4
    CORPORATE HISTORY                                                         5
    PRINCIPAL PRODUCT                                                         5
    SUMMARY OF EVENTS & STATUS OF OUR PROGRESS DURING
     THIS PERIOD                                                              8
    SALES AND DISTRIBUTION                                                   10
    MANUFACTURING                                                            10
    INTELLECTUAL PROPERTY                                                    11
    MARKETABILITY                                                            12
    COMPETITION                                                              13
    GOVERNMENTAL REGULATION                                                  15
    RESEARCH AND DEVELOPMENT                                                 16
    EMPLOYEES                                                                16
    RISK FACTORS                                                             17
  ITEM 2 - DESCRIPTION OF PROPERTY                                           25
  ITEM 3 - LEGAL PROCEEDINGS                                                 26
  ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY                       28
            HOLDERS

PART II                                                                      30
  ITEM 5 - MARKET FOR THE COMPANY'S COMMON STOCK AND
             RELATED STOCKHOLDER MATTERS                                     30
           QUARTERLY COMMON STOCK PRICE RANGES                               30
           SALES OF UNREGISTERED SECURITIES                                  32
  ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
            OPERATION                                                        39
  ITEM 7 - FINANCIAL STATEMENTS                                              45
  ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
            ON ACCOUNTING AND FINANCIAL DISCLOSURES                          45
  ITEM 8A - CONTROLS AND PROCEDURES                                          45
  ITEM 8B - OTHER INFORMATION                                                46

PART III                                                                     47
  ITEM 9 - OFFICERS AND DIRECTORS                                            47
    BIOGRAPHICAL INFORMATION                                                 48
    SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE                  48
    CODE OF ETHICS                                                           48
  ITEM 10 - EXECUTIVE COMPENSATION                                           49
  ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
             AND MANAGEMENT                                                  52
  ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                   54

PART IV                                                                      54
  ITEM 13- EXHIBITS AND REPORTS ON FORM 8-K                                  54
    EXHIBITS                                                                 54
  ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES                           56
    AUDIT FEES                                                               56
    AUDIT RELATED FEES                                                       56
    TAX FEES                                                                 56
    ALL OTHER ACCOUNTANT FEES                                                56
FINANCIAL STATEMENTS                                                        F-1
SIGNATURES                                                                   57


                                        2

<PAGE>


CAUTION REGARDING FORWARD-LOOKING INFORMATION

All statements contained in this Form 10-KSB/A, other than statements of
historical facts, that address future activities, events or developments are
forward-looking statements, including, but not limited to, statements containing
the words "believe," "anticipate," "expect" and words of similar import. These
statements are based on certain assumptions and analyses made by us in light of
our experience and our assessment of historical trends, current conditions and
expected future developments as well as other factors we believe are appropriate
under the circumstances. However, whether actual results will conform to the
expectations and predictions of management is subject to a number of risks and
uncertainties that may cause actual results to differ materially.

Such risks include, among others, the following: international, national and
local general economic and market conditions: our ability to sustain, manage or
forecast our growth; raw material costs and availability; new product
development and introduction; existing government regulations and changes in, or
the failure to comply with, government regulations; adverse publicity;
competition; the loss of significant customers or suppliers; fluctuations and
difficulty in forecasting operating results; changes in business strategy or
development plans; business disruptions; the ability to attract and retain
qualified personnel; the ability to protect technology; and other factors
referenced in this and previous filings.

Consequently, all of the forward-looking statements made in this Form 10-KSB/A
are qualified by these cautionary statements and there can be no assurance that
the actual results anticipated by management will be realized or, even if
substantially realized, that they will have the expected consequences to or
effects on our business operations.

As used in this Form 10-KSB/A, unless the context requires otherwise, "we" or
"us" or the "Company" means Composite Technology Corporation and its
subsidiaries.

                                     PART I

ITEM 1 - DESCRIPTION OF BUSINESS

INTRODUCTION

We develop and market composite related products for the electric utility
industry, and provide engineering, product design, and other services related to
the design and installation of our products to the global electrical utility
industry that are designed to improve the performance and capacity of
transmission and distribution grids. Our principal product is our proprietary
patent pending composite reinforced conductor known as the Aluminum Conductor
Composite Core, or ACCC cable. Our ACCC cable is designed to transmit more power
than conventional cables of the same diameter, create energy savings through
less line losses under comparable operating conditions, and significantly reduce
sag caused by overheating due to power overloads. We believe that ACCC cable
enables utility companies, power producers and transmission or distribution
owners to easily replace transmission lines using standard installation
techniques and equipment without modification to existing towers, and in many
cases avoid the deployment of new towers and the establishment of easements, all
of which may be costly, time consuming, controversial and harmful to the
environment

                                        3

<PAGE>

ACCC cable is now commercially available from our subsidiary CTC Cable
Corporation, or CTC, on a limited basis and through strategic partnership with
General Cable Corporation, a cable manufacturer that is active in developing the
U.S. and Canadian markets. We are negotiating with cable manufacturers in
Europe, Mexico, China and in other parts of the world to wrap aluminum wires on
our ACCC core for sale in their local areas.

We were incorporated in Florida on February 26, 1980 and reincorporated in
Nevada on June 27, 2001. We maintain our principal offices at 2026 McGaw Avenue,
Irvine, California 92614. Our telephone number at that address is (949)
428-8500. Our website is www.compositetechcorp.com. The contents of this website
are not incorporated into this filing. Further, our reference to this website is
intended to be inactive textual reference only.

CORPORATE HISTORY

We were originally incorporated under the laws of the State of Florida on
February 26, 1980 as Eldorado Gold & Exploration, Inc. On January 13, 1987, we
amended our Articles of Incorporation to change the corporate name to Eldorado
Financial Group, Inc. and modified our capital structure to allow for the
issuance of up to 100,000,000 shares of common stock at $0.001 par value per
share.

On June 27, 2001 we changed our state of incorporation from Florida to Nevada,
by means of a merger with and into a Nevada corporation of the same name formed
solely for the purpose of effecting the reincorporation.

On November 3, 2001, we exchanged 60,000,000 shares of restricted, unregistered
common stock for 100% of the issued and outstanding common stock of Transmission
Technology Corporation, or TTC, a privately-owned Nevada corporation
incorporated on March 28, 2001. TTC had been originally formed to secure a
license agreement related to a composite reinforced electrical transmission
cable system that used composite core materials. As a result of the exchange,
TTC became our wholly owned subsidiary. The Bylaws of TTC became our Bylaws.

In conjunction with the November 3, 2001 transaction, we changed our corporate
name to Composite Technology Corporation and amended our Articles of
Incorporation to allow for the issuance of up to 5,000,000 shares of $0.001 par
value Preferred Stock from none previously authorized and for the issuance of up
to 200,000,000 shares of $0.001 par value Common Stock from the 100,000,000
shares previously authorized.

On December 28, 2001, our Board of Directors, and the Board of Directors for TTC
established an initial year-end of September 30 for TTC and, concurrently,
elected to change our fiscal year-end from December 31 to September 30. This
action was taken after an evaluation and review of the November 3, 2001
acquisition transaction, our operations and the operations of TTC.

Our acquisition of TTC effected a change in control and was accounted for as a
reverse acquisition whereby TTC is the accounting acquirer for financial
statement purposes. Accordingly, for all periods subsequent to the reset
year-end of September 30, 2001, the financial statements of the Company reflect
the historical financial statements of TTC from its inception on March 28, 2001
and our operations subsequent to September 30, 2001, as retroactively adjusted
for the transactions on November 3, 2001.

                                        4

<PAGE>


PRINCIPAL PRODUCT

Our principal product is our proprietary patent pending ACCC cable series which
has been developed over the past three years. These bare overhead conductor
cables have unique properties that provide them with significantly improved
product characteristics over traditional bare overhead conductor cables known as
ACSR.

The ACCC Cable:

o ACCC has an increased conductive aluminum cross section compared in weight to
conventional Aluminum Conductor Steel Reinforced , or ACSR, of the same diameter
and weight;

o ACCC composite core reduces high temperature conductor sag that occurs in a
transmission line conductor as it becomes hotter due to increasing power flows;

o ACCC is designed to provide energy savings resulting from less line losses
when compared with ACSR under the same conditions;

o ACCC has a rated operating temperature of 180 degrees C, with the temporary
ability to operate at 200 degrees C, which enables greater power transmission
capacity;

o ACCC does not exhibit bimetallic corrosion and resists degradation of its
strength core since it does not use a steel core;

o ACCC uses carbon fiber and glass composites which are favored by the latest
commercial airliner manufacturers for superior performance;

o ACCC's elimination of steel core reduces induction heating that occurs with a
conventional steel core;

o ACCC's composite core has self dampening properties that may reduce the need
for dampeners and other anti-vibration devices;

o ACCC uses standard installation techniques and equipment with little need to
retrain linesmen and reequip teams service vehicles;

o ACCC can easily be retrofitted on existing towers to upgrade energy
throughput;

o ACCC allows transmission and distribution owners to replace lines easily,
typically without modification to the poles and towers;

o ACCC can substitute for other cables that have greater tensioning on the older
towers to delay the need to replace down-rated aging towers, helping in the
management of infrastructure renovation programs;

o ACCC may eliminate the need to establish new rights of way that are costly,
time consuming, and environmentally controversial, since ACCC offers increased
throughput and enhanced safety without the necessity of constructing new lines.

                                        5

<PAGE>


Bare overhead electrical conductor is composed of conductive materials that must
hang in the air; but since conductive materials are typically not high strength,
the conductor portion of the cable is held in the air by a strong core.
Traditional Aluminum Conductor Steel Reinforced, or ACSR, uses aluminum to
conduct because aluminum conducts well and is light, with a steel core to
reinforce the cable to hold it up. Traditional cable designers have increased
the performance of their steel cored cables for the most part by increasing the
strength of the core with special steels that could operate at higher
temperatures and by increasing the quantity of aluminum by packing the wires
closer together with trapezoidal shapes. The result is a steel cored cable that
can handle more heat, but still has significant sag issues at higher
temperatures and if the version has trapezoidal shaped aluminum wires the
resulting cable will have greater weight for the same diameter cable and thus
require structures with greater tension capability.

Other companiess that are trying to find solutions to the requirements of
increased capacity more transmission and distribution have been developing
alternatives such as new underground superconductor cables. The fundamental
problem with these innovations, we believe, is that the costs are prohibitive
and the results uncertain. Recent industry research has nonetheless focused
significantly on superconductors, which require constant cooling to cryogenic
temperatures. While superconductors perform with low transmission losses, their
much higher price and increased maintenance constraints may make them suitable
only for select underground lines in highly congested metropolitan centers. We
do not believe that this technology will be used in overhead transmission or
distribution systems in the foreseeable future.

The solution provided by ACCC comes about by going back to essentials: engineer
the conductor to conduct more electricity at the lowest cost, engineer the core
to support the cable without higher temperature sag, and reduce corrosion while
minimizing all unnecessary side effects and problems. The result is the CTC
composite core that supports more aluminum within the same comparable diameter
cable, letting the aluminum carry the current while the high strength
non-corrosive core holds up the cable with minimal sag.

The most widely used bare overhead conductor in the world today is the ACSR. The
North American Electric Reliability Council predicts a demand increase for
electricity in the U.S. at 19.5% between 2001 and 2010. According to the Edison
Electric Institute bulletin titled "Expansion of the U.S. Transmission System is
Long Overdue", there will be a requirement of up-to $56 billion in the U.S.
transmission grid to maintain current levels of transmission reliability.
Further the bulletin shows that the investment in transmission systems to
maintain the year-2000 adequacy requires quadrupling. "Plunkett's Energy
Industry Almanac 2005" confirms these same investment requirements.

During the period from 2000 to 2010, according to the US DOE, Energy Information
Agency's "International Energy Outlook 2001", while the U.S. electrical
consumption grows by 28%, the developing world consumption rate grows by over
60%. The majority of this will consist of entirely new systems with
correspondingly high capital requirements for new line construction. The
developing word consumption will then be almost 50% greater than that of the
U.S. The total overhead line investments required to achieve these growth levels
outside the U.S. may exceed 10 times that of the annual U.S. expenditure. Our
goal is to replace ACSR cable with our ACCC cable by penetrating the portion of
the market that most requires a solution to an overloaded transmission and
distribution grid system.

                                        6

<PAGE>


In addition, the material properties of the composite core in our ACCC cable
reduce the problem of conductor sag due to higher temperatures. The cable is
therefore rated at an operating temperature of 180 degrees C and does not sag
appreciably up to that temperature. This compares favorably with the normal
operating temperature of standard ACSR which is 80 degrees celsius with a
maximum temporary operating temperature of about 100 degrees celsius as compared
to the equivalent in ACCC of 200 degrees celsius. The problem of line sag came
into prominence at the time of the 2003 blackouts in the Northeastern United
States. It appears that the problem originated with an overheating line sagging
too close to a tree causing an electrical short that stopped the electricity
transmission. This forced the electricity to immediately transfer to other
lines, making them operate at a higher temperature until they too shut down.
This resulted in the collapse of a major portion of the northeast electrical
grid that resulted in many hours of blackout for the city of New York and other
places within several states. ACCC does not sag appreciably with increased
temperature, because, unlike a metal core, our composite core exhibits much
lower thermal expansion properties. In practical terms, the ability to operate a
cable at higher temperatures is an advantage in that it creates a much greater
emergency reserve capacity.

Corrosion is another problem with the use of conventional transmission cables.
Corrosion damages metals, reducing strength. Salt and forms of airpollution can
result in corrosion of both the aluminum conductor and steel cores, including
galvanic corrosion due to contact between two different metals. Composites do
not have such problems, being engineered from non-metallic materials. The
non-metallic core is a major factor in the reliability of our ACCC cable.
Additionally, the ACCC core is not only resistant to corrosion and strong but
also not brittle or fragile, like some metal matrix composites proposed in the
market. Our ACCC core is wound around standard reels and handled in production
and in the field by workers and linesmen who do not need to be concerned about
snapping the composite core or shattering it with a sharp blow. Field
demonstrations show that it comes off the reel easily and goes through standard
pulleys, while being pulled to tension in the normal way. It can also cover much
greater spans than other cables pulled to the same tension, since ACCC exhibits
less sag.

                                        7

<PAGE>


The ability to substitute or replace ACSR and other cables with a stronger more
conductive ACCC cable brings other practical advantages that may benefit the
transmission owners, utility companies, and power producers. These advantages
fall into two important categories relating to: (i) existing line renovation and
refurbishment, making the existing asset function better, more efficiently and
deliver more power with less capital-expenditure; and (ii) new line construction
which could require fewer support structures since our cable has less sag.

We believe congestion can be relieved immediately because ACCC cable can be
installed and tensioned identically to ACSR cable allowing it to replace
existing overhead lines without structural modification of the supporting tower
systems, new permissions and prohibitive delays, therefore allowing more power
to be transmitted.

ACCC cable can be used to replace existing lines on towers that are older and
cannot safely support the high levels of tensioning required. This is due to its
limited thermal expansion, ACCC can be installed with less tensioning while
meeting required sag and safety standards. This is important to utilities that
are struggling with the need to replace their entire infrastructure by helping
in the management of their capital expenditure planning.

The fundamental advantage in using ACCC cable to upgrade existing lines is the
elimination of the need to construct new lines. It can eliminate the need to
establish new rights of way. This is costly, time consuming, uncertain,
controversial and may impact the environment.

SUMMARY OF EVENTS AND STATUS OF OUR PROGRESS DURING THIS PERIOD

During the fiscal period ended on September 30, 2004 we have made considerable
progress in our commercialization path culminating in the completion of product
and production development for the ACCC cable and its necessary accessories. We
are now operating a pilot commercial production successfully and are now
planning the launch of full scale production of ACCC.

Pivotal in this progress was the organization of the business at the new
facility in Irvine, California, the purchase of increasing numbers of production
machines and the addition of new personnel and managers.

The most important external events of the period may be summarized under four
major headings, as follows:

The first was the ongoing process of testing and demonstrations that continue to
date. Throughout the period, testing has continued, initially as an essential
part of refining product and production process design, and more recently to
validate the ACCC product. Announcements of the publication of important test
data regarding ACCC were made in the first quarter of fiscal 2004 and testing
and trials have continued throughout the year to underline the initial findings
made at that time. Contributions have been made by the University of Southern
California and most recently the field installation at the Electrical Power
Research Institute at a Haslet, Texas facility announced in September of this
year.

In February 2003, we retained EPRI Solutions, Inc. to develop work procedures
for the installation or our ACCC conductor on a test line located in Haslet,
Texas, and to monitor and collect performance data on this installation for two
years. Pursuant to the terms of the agreement, we agreed to pay EPRI a fixed fee
upon the completion of specified milestones. The term of this agreement is from
February 1, 2003 through January 1, 2008, unless EPRI's services are completed
or the agreement is terminated earlier. We or EPRI may terminate the agreement
at any time with prior written notice. The field installation of our ACCC
conductor was completed pursuant to this agreement in September 2004.

In June 2003, we retained the University of Southern California to study
properties of our fiber and resin composite core under various conditions,
including the core characteristics in our connecting hardware. The university's
composites team provides various analysis data and studies so that we can
predict the characteristics of the core under various loading conditions and
allow us to develop refinements to next generation designs. This agreement
terminates on May 31, 2005, unless terminated by USC or us upon prior written
notice.

                                        8

<PAGE>


The second was the announcement in May and July of the inclusion of the ACCC
family of cables in the Power Line Systems' design software program, which is
used by professionals in the electric utility industry. We believe that this
software program provides engineers with the tools necessary to include our
products in new power line project planning and design.

Third is the enabling breakthrough in our production plans created by the
execution through our subsidiary CTC Cable Corporation of the Distribution and
Purchase Agreements with General Cable Industries, Inc., principal U.S.
operating subsidiary of General Cable Corporation, a leading company in the
utility cable market, on October 2, 2004. General Cable produced the first ACCC
cable in the last quarter of our fiscal year ending September 30, 2004 and
September 30, 2003, and the relationship has become an important part of our
North American growth strategy.

General Cable is an important manufacturer in the utility cable industry. We
believe that the agreements:

      (i)   give us a firm basis to ensure that the ACCC cable will be produced
            when required;

      (ii)  give us significant openings with General Cable's preferred and
            regular customers;

      (iii) allows us to reduce a number of planned marketing costs;

      (iv)  allows us to sell our product through General Cable;

      (v)   provide a certain assurance to the market regarding security of
            supply since General Cable is one of the world's largest cable
            manufacturers and has the capacity to meet anticipated customer
            demand for the product; and

      (vi)  gives further impetus to the marketing efforts already undertaken by
            raising the profile of our company and products.

As referenced in the Purchase Agreement, General Cable has been granted
exclusive manufacturing rights to wrap, or apply aluminum strand around our ACCC
composite core, providing a finished ACCC conductor cable to be installed and
operated in the U.S. and Canada. The agreement terminates on December 31, 2007,
unless terminated earlier in the event General Cable is unable to supply
products or we are unable to accept delivery of products due to causes beyond
our or General Cable's control. Pursuant to the terms of this agreement, we have
agreed to purchase articles, materials, services or equipment from General Cable
for the manufacture of ACCC conductor cable at prices no higher than prices that
General Cable would provide to its best commercial customer, subject to General
Cable's right to modify prices upon material increases in any of General Cable's
raw material costs. General Cable has agreed to certify that its materials,
equipment and services covered by the purchase orders comply with the utility
cable industry standard specifications and manufacturing processes work as well
as our specifications. It also warrants for a time period of 12 months after
installation, excluding all other warrants, that the wrapped products sold under
the purchase orders will meet government approved specifications in the U.S. or
Canada and will comply with all specifications and standards agreed upon with
CTC in writing. This warranty is not effective more than 20 months from the date
of our invoice covering the products. Under the terms of this agreement, General
Cable's liability is limited to replacement of any wire or cable that does not
substantially meet the manufacturing specifications or fails during normal use
within one year from the date of installation and such failure was caused by
defects in material or workmanship at time of shipment. Our liability is limited
to replacement of products within the warranty period that are defective due to
failure of the core to meet applicable specifications or failure to perform as
part of a finished product.

Under the Distribution Agreement, General Cable is appointed a non-exclusive
distributor for the marketing and sale of all ACCC cable wrapped by General
Cable that conform with applicable industry standards for the U.S. and Canadian
markets only. Pursuant to the terms of the agreement, General Cable has agreed,
at its expense, to assist CTC in promotional and marketing activities in the
U.S. and Canada, coordinate its sales efforts with CTC and establish and
maintain a place of business as necessary to provide customer support and
marketing coverage in the U.S. and Canada. The agreement grants General Cable a
license to use trademarks and trade names used by CTC for the term of the
agreement. This agreement terminates on December 31, 2007 and automatically
renews from year to year, unless either party gives prior written notice of
non-renewal or earlier termination pursuant to the terms of the agreement.
General Cable has the right to terminate the agreement at any time without cause
upon 90-day prior written notice. General Cable or CTC may terminate the
agreement upon uncured breach by the other party or in the event General Cable
is unable to supply products or we are unable to accept delivery of products due
to causes beyond our or General Cable's control. The agreement automatically
terminates in the event of either party's bankruptcy or insolvency, or if
performance is impossible or commercially impracticable.

Finally, June 2004 brought us the announcement of the interest of FCI/Burndy in
manufacturing the accessories necessary for our ACCC core. In November 2003, we
entered into a joint development agreement with FCI SA, one of the world's
largest cable hardware manufacturers, to develop and protype accessories for use
on our ACCC conductor and to develop a global supply agreement for those
developments. Joint inventions under the terms of the agreement are jointly
owned by FCI and us, and prior written consent is required before a license may
be granted to a third party for the joint inventions. FCI and CTC, at their sole
expense, bear the costs of their respective obligations under the agreement. The
term of the agreement is for the duration of the development project, which we
will be completed and commercially available in fiscal 2005.

This fiscal year also saw the first commercial order for the ACCC cable for a
new transmission line in Kingman, Kansas during the first quarter and the first
completed commercial installation at Holland, Michigan during the last quarter
pursuant to a purchase order in connection with our arrangement with General
Cable. Pursuant to a letter agreement between us and the City of Kingman,
Kansas, dated November 11, 2003, we agreed to install approximately 21 circuit
miles of ACCC cable for pilot testing and provided services and hardware in this
connection for an aggregate fee of $2.5 million. The term of this agreement is
one year from the date of energization of the installed ACCC cable. During the
one-year term, the City of Kingman will collect data to determine satisfactory
performance. If our conductors fail to perform properly during this term, then
the City of Kingman has the right to terminate the agreement and require us to
pay for the removal of the conductors and purchase and install ACSR conductors.
We are responsible to provide, maintain, and repair, at our cost, all ACCC
conductors and hardware required for its installation or repair, equipment to
monitor the testing requirements, and design data on the ACCC conductors and
hardware being tested for the duration of the one-year term. We must also pay
for compliance with applicable federal and state laws and permits required for
this pilot test during the term. The City of Kingman is responsible, at its sole
expense, to pay for labor costs associated with the initial installation of the
ACCC conductors, obtain necessary permits for the installation of the ACCC
conductor and collect data from our monitoring equipment for the one-year term.
Although we cover the cost, at our sole expense, of the ACCC cable, the letter
agreement provides the following compensation for our services and products in
connection with the installation:

      (i)   an amount not to exceed $550,000 for engineering and construction
            services to design, engineer and supervise construction of the
            21-mile transmission line, subject to the City of Kingman's right to
            award part of the contract to the lowest qualified bidder;

      (ii)  an amount not to exceed $740,000 for our composite poles,
            cross-arms, installation hardware and installation services
            determined by final engineering specifications in connection with
            the construction of a 21-mile transmission corridor;

      (iii) an amount not to exceed $850,000 for cable installation services to
            supervise, manage and install 21-miles of ACCC transmission cable,
            subject to the City of Kingman's specifications; and

      (iv)  reserved funds not to exceed $535,000 for construction or
            installation of contingencies, including, but not limited to, tree
            trimmings or removals, unanticipated water or soil impediments, and
            unanticipated route changes required for pole installations, subject
            to final engineering.

                                        9

<PAGE>


SALES AND DISTRIBUTION

During the process of sales and distribution of ACCC, we have identified two
important phases: Market Trials and Accepted Usage. Essentially, sufficient
testing and trials have already been accomplished to stimulate interest among
utilities' engineers, but the industry is cautious. Field trials are usually
desired to evaluate the product. This can be accomplished with ACCC running
alone or in conjunction with other potential cables. We are ready to sell trial
quantities of ACCC cable to customers almost immediately for field trials
together with installation support and assistance. We anticipate receiving
access to data and trial results for potential customers to better evaluate its
ACCC product.

We use three principal strategies for the distribution of our products.

The first is direct sales of cable to utilities and distribution companies.
Manufactured core is wrapped by General Cable under contract and sold to the
utilities. These sales are arranged through field consultants and by our
personnel. We participate at trade shows and use our contacts to enable it to
present the advantages to decision makers at the utilities who might benefit
from our products. It is anticipated that these contacts will develop into an
arrangement whereby the utility will try our products in a test line; which in
turn will lead to acceptance and further purchases.

The second is sales of core to cable manufacturing partners. In North America
our contractual partner is General Cable. It is anticipated that General Cable
will sell the ACCC products to its customers as part of the General Cable range
of cables. This will lead to the sale of our cable, the essential ingredient in
ACCC cable.

The third is using consultants or intermediaries who have relationships with
governments, utilities, engineering companies, cable manufacturers and
interested purchasers. We are able to provide such intermediaries with an
interest in the sale of the products in return for sales into defined markets.

It is expected that the first two sales methods will be used extensively in the
developed markets with a greater reliance on intermediaries and the third method
of sales in certain other international markets where developing contacts with
particular individuals or organizations is an important entry barrier or
prerequisite to conducting successful business.

MANUFACTURING

CTC is now concentrating on the production of the composite core component of
its ACCC cable and allowing specialist cable manufacturers to wrap and
distribute the finished cable in their particular markets. Production for
accessories has also been organized to ensure that hardware supply will match
the cable sales.

The manufacture of the core uses a proprietary continuous process for
manufacturing composites that have a cross-sectional shape. This process allows
numerous glass and carbon filaments to be pre-tensioned, impregnated with high
performance resin systems, and then rapidly cured as the product emerges through
a heated die. The shape of the dies dictates the core configuration and
different designs are utilized for different cable sizes. The proprietary resin
formulations we use are highly resistant to temperature, impact, tensile and
bending stresses, as well as to the harsh environmental conditions encountered
in the field. The product is also designed to have a long life and a resistance
to high energy electrical fields.

                                       10

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At present the manufacture of the core is carried out at our facilities in
Irvine California. Although conceptual plans are underway to transfer production
to a separate facility when the order volume reaches a critical mass, no such
production facility has been identified. We can also manufacture using
subcontractors if required.

The ACCC core is then delivered to the cable manufacturer, General Cable in the
U.S. and Canada, for wrapping with aluminum. The core is shipped on round reels
and is received at the cable wrapping facility in much the same way as
traditional steel cores. Core is delivered in standard lengths to meet stranding
limits. The core is then stranded or wrapped with fully annealed or heated
aluminum wires drawn into trapezoidal shapes.

We plan to increase its capacity ahead of commercial orders to be in time for
delivery.

Machinery is currently acquired under lease and we have lease line financing in
place to fulfill further requirements.

Our principal raw materials in the production of the ACCC core are glass and
carbon fibers, combined with specific polymer resins. Our cable manufacturers
require raw aluminum rod materials usual in the production of bare overhead
cable. Accessories require primarily high grade aluminum and special steels. The
prices for these raw materials are subject to market variations. Glass and
resins can be acquired from several sources, however the preferred supplier for
the carbon is Toray Industries. While our preference will be to Toray, we are
currently qualifying alternative suppliers' carbon material in our production
path.

We are continuing the development of our new high-speed production equipment and
anticipate that this will be completed in the coming year.

INTELLECTUAL PROPERTY

We are continuing to pursue patent protection for all aspects of our composite
materials, products, and processing, including aspects of our product other than
the core.

We filed the following patent applications:

      (i)   PCT Application Serial No. PCT/US03/12520 on April 23, 2003, and
            United States Continuation-In-Part Applications Serial Nos.
            10/692304, filed October 23, 2003;

      (ii)  10/691447, filed October 22, 2003; 10/690839, filed October 22,
            2003, 10/911072, filed August 4, 2004, PCT Applications Serial Nos.
            PCT/US02/35199 filed October 22, 2004;

      (iii) PCT/US04/35201, filed October 22, 2004; and Provisional Applications
            Serial Nos. 60/537302, filed January 16, 2004; and

      (iv)  60/536164, filed January 13, 2004.

We are in the process of formally assigning these pending patent applications to
its wholly owned subsidiary, CTC Cable Corporation, a Nevada corporation, formed
December 5, 2003. We have also filed corresponding patent applications in over
60 countries worldwide to preserve and protect our potential market
opportunities. The inventors of record of all of our applications are Dr. Clem
Hiel, Mr. George Korzeniowski, and Mr. David Bryant. Dr. Hiel is world-renowned
in the field of composite materials engineering and design. Mr. Korzeniowski has
a long and distinguished career dealing directly with design, building and
operating processing equipment for composite products manufacturing. Mr. Bryant
is our Vice President, Product and Production Development and has extensive
experience with the design and production of novel composite products. Under
consulting agreements with Mr. Korzeniowski and Composite Support & Solutions,
Inc., of which Dr. Hiel is president, Mr. Korzeniowlski and Dr. Hiel have
assigned their rights to all intellectual property regarding the subject matter
of CTC to CTC. Mr. Bryant is employed by and is vice president of CTC. Under the
terms of a consulting agreement with Mr. Bryant and CTC, Mr. Bryant has assigned
his rights to all intellectual property regarding the subject matter of CTC to
CTC. Our patent applications deal with novel composite materials, a range of
materials for such composites, processing to produce composite materials, range
of operating characteristics, and various products made from such composite
materials. The primary products disclosed are electrical transmission conductors
that substitute the related composite materials in place of standard steel
reinforced cable. The composite materials are characterized by both chemistry
and physical properties, and particular examples are included. Product
characteristics such as ampacity, elevated operating temperatures, lower
electrical resistance, light-weight, high strength composite fiber packing
density, corrosion, stiffness, thermal expansion, toughness, fatigue life, creep
resistance, wear resistance and fiber strength are addressed. Novel
manufacturing processing techniques are also disclosed, which techniques are
applicable to both the conductor applications as well as other composite based
products. Numerous cross sectional cable designs are disclosed, as well as
various methods and designs for splicing composite cables. Transmission systems
incorporating our novel composite cables are also addressed.

                                       11

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Based on available information and after prior art searches by our patent
strategists, we believe our pending patent applications provide the basis for us
to, over time, be issued a number of separate and distinct patents. Our patent
applications will continue to be supplemented with new information based on our
prototype preparation and testing. Our patent applications specifically focus on
materials and conductors conforming to industry specifications and requirements,
as presently in place and as anticipated for the future.

We have also acquired licensing rights pursuant to a License Agreement dated
February 6, 2003, between W. Brandt Goldsworthy & Associates, Inc., or WBGA, and
the Company. The License Agreement grants us the exclusive use of any components
in our ACCC products that include items contained in patent claims granted to
WBGA by the U.S. Patent and Trademark Office, or USPTO. The License Agreement
also provides us a broader non-exclusive license for any other pultruded
composite core electrical cable designs characterized by WBGA as CRAC-1. The
License Agreement bears a 2% royalty on net sales revenues for that component of
ACCC using any patent claim issued to WBGA and a 1% royalty for any component of
the CRAC-1 technology, if any, used by us, provided WBGA is granted valid patent
Claims by USPTO. To date no such claims have been granted, and the USPTO issued
a final rejection of the patent application on October 18, 2004. WBGA or its
assigns has a six-month period to respond to the final rejection or appeal the
final rejection. We were notified that the rights to the License Agreement as
Licensor were transferred to James M. Dombroski pursuant to Mr. Dombroski's
execution of a lien on the asset dated December 29, 2003. Mr. Dombroski
subsequently transferred his rights to the License Agreement to GIFT
Technologies LP on April 13, 2004. The duration of the License Agreement is for
the life of any patent granted to WBGA by USPTO for the specific technologies
licensed herein.

We are currently pursuing patent protection for other composite based products
and applications. These additional patent applications generally relate to
composite-based towers and poles. We are currently preparing a number of
additional patent applications and it is anticipated that these will be filed in
the near future.

MARKETABILITY

The U.S. Department of Energy reported some years ago that much of the nation's
electrical transmission and distribution infrastructure is rapidly becoming
incapable of meeting the demands of our modern economy. This is the result of
the increasing demand for the consumption of electricity. I which has more than
doubled over the last 10 years, coupled with aging of the existing grid, which
is in need of replacement and is prone to failure.

Utilities have been adding to their electrical generation capacity. In the most
recent three years more generation capacity has been added than at any time
since 1945. However, during the same period the investment in delivery systems
for the new capacity, or the grid, has not significantly increased. This will
have to be rectified if the new generation capacity is to be efficiently
utilized. This translates into the necessity for a large increase in investment
into the bare overhead cable conductor systems that make up the electrical grid.
Our ACCC cable is a type of bare overhead cable conductor.

                                       12

<PAGE>


The currently available data projections for the size of the market for bare
overhead conductor are conflicting, with different sources assigning widely
different figures to the overall market size and to the markets for different
countries. This is probably due to the fact that analysts can easily confirm the
present size of the Grid and its required expansion but cannot adequately factor
in two important considerations. The first of these is that it is often unclear
how much of the existing grid must be replaced and how quickly. This information
is often confidential and in all cases sensitive with its combination of
considerations of safety, ecology and commercial impact. The second is that
while new capacity is required on the grid it is often assumed that this will
necessitate new lines. These are far from easy to arrange. Obtaining rights of
way and permissions sometimes takes years and is of uncertain outcome.

Introduction of our products may help to alleviate some of these issues since
ACCC enables providers to increase transmission capacity to handle expected load
increases without resorting to the uncertainties of relying on the permits for
and construction of new rights of way. More fundamentally, we believe that ACCC
is a replacement for existing lines that requires less tensioning and can
therefore be used on weaker towers.

Our ACCC product targets an industry which is mature in most industrialized
countries such as those in North America and Europe but developing in various
other countries around the world, such as China and in South America.

COMPETITION

The primary competing product to our ACCC in North America and in most parts of
the world is still traditional ACSR, a hundred year old technology. We believe
that ACSR cannot satisfy a number of requirements facing the modern grid and
distribution operator. Awareness of this issue has resulted in a number of
companies with various alternative products coming forward. These may be
summarized as follows:

o Widely used in Europe, certain cable manufacturers already produce variations
of Aluminum Conductor Strength Steel, ACSS. This aluminum conductor is
reinforced with higher strength steel alloys in the core that allow the use of
trapezoidal shaped wires. When compared with equivalent sized ACSR cables, the
trapezoidal ACSS cable is heavier and thus may require higher tensioning,
potentially resulting in tower modifications. Variations of ACSS also exist in
the shape of the aluminum stranding with both trapezoidal and `Z' shaped cables
offering less wind noise than traditional ACSR.

                                       13

<PAGE>


o 3M Company reports that they have developed Aluminum Conductor Composite
Reinforced, or ACCR, a conductor with a core composed of metal and ceramic
matrix composite wires with diameters ranging from 0.073 inches, or 1.9 mm, to
0.114 inches, or 2.9 mm, that appears to be wrapped in a thin adhesive backed
metal foil. 3M claims that their ACCR has increased ampacity over ACSR by 1.5 to
3 times at very high temperatures. Its price is reported to be seven to ten
times higher than ACSR.. 3M Company literature also indicates that some
modifications from the ACSR-norm in handling and installation procedures may be
required since the ACCR core is reportedly brittle and may snap or shatter if
handled incorrectly. 3M literature also notes that the conductivity of the
aluminum is lower than the aluminum in conventional ACSR. 3M claims to have made
commercial sales of the product.

o Korea Electric Power Corporation completed 24 overhead transmission line
upgrade projects between 1994 and 1997 where they replaced existing conductors
with higher ampacity conductors using existing towers and rights-of-way. They
used the Super Thermal Resistant Aluminum Alloy Conductor with Invar
Reinforcement, or STACIR, first introduced in 1994. The cable can operate to 210
degrees celsius with its ampacity approximately doubled. The cost of STACIR is
estimated to be four to seven times higher than ACSR and has slightly increased
line losses and weighs more than comparable sized ACSR. Limited market
acceptance of this product has occurred, although we believe that it is mainly
in Korea.

o A multi-sectioned cable known as the GAP cable has been introduced by
Sumitomo. This conductor has been used by a number of companies internationally
and has reportedly experienced mixed results in various applications. In
particular it is noted that when fitting the conductor it must be first hung
without significant tension to `relax' the cable, installation is difficult and
expensive with more frequent, costly terminations of the conductor required. The
term unreserved acceptance is defined as meaning the GAP cable design has not
been accepted throughout the utility industry as a standard, cost effective
replacement for existing cables. We believe that those companies using the GAP
cable are actively seeking an alternative. Our belief is based on our
discussions with EVE Transmission who developed the GAP design for the U.K.
market and who has been unable to gain market acceptance beyond a demonstration
site. We also believe that significant structural strengthening of towers is
required for its use.

o Several companies are in the preliminary stages of developing superconducting
technology in the form of liquid nitrogen-cooled superconductor power cables,
which are capable of conducting with very low losses. The disadvantage is that
the cost of such cables is expected to be up to fifty times the current price of
conventional underground systems. It would, therefore, only be practical in
specific short underground installations in densely populated downtown
metropolitan areas. Overhead use is not presently anticipated.

We believe our ACCC product is superior to the ACSR product in that it allows
greater ampacity, or electricity throughput on identically sized lines. Our ACCC
product is lighter, resulting in the requirement of fewer electrical towers per
mile of cable installed.

We believe our disadvantages to our competition consist primarily of two items.
First, our ACCC cable is a new product that incorporates technology that, while
proven in other industrial applications, has not been proven in the utility
markets. The ACSR product we anticipate replacing has been in existence for 100
years, is familiar with utility management and utility engineers and is proven
to work in real world conditions. Our product does not have this legacy in the
utility markets. Second, our product is more expensive than the ACSR cable for
the same sized cable. While we believe that installation of our product will
result in cost savings and increased efficiency of electrical transmission that
will offset the higher cost per foot of cable, we may not be able to convince
the purchasers of the cable of this contention.

                                       14

<PAGE>


The term composite covers a wide variety of materials from cements to metal
matrix composites, through carbon fiber and fiberglass. We are not the first
entity to attempt to develop a composite core for a transmission cable, and
cannot protect all conceivable composite cores by our patent applications.

We have also filed additional patent applications to address additional subject
matter complementary to the information set forth in our original patent
applications. This is intended to serve as an additional barrier to the
development of competing composite products. A company interested in developing
a competing product would be investing in composite core development knowing
that there were additional patent applications claiming subject matter that may
have been filed but not yet public.

We produce the composite core component of the ACCC cable. Any qualified cable
manufacturer should be able to apply the annealed or heated aluminum to the
outside of core to produce the finished product. Since we intend to enter into
agreement with cable manufacturers that are willing to wrap the core to produce
the ACCC final product, such manufacturers are not immediately our competitors,
although other products they produce may compete with the ACCC. Our strategy is
currently to make the production of ACCC available to cable manufacturers that
have an expanding market and are willing to invest in bringing ACCC into their
markets. In the United States market, however, we have signed an exclusive
manufacturing agreement with General Cable that establishes General Cable as the
only manufacturer of ACCC for the U.S and Canadian markets until late 2007.
There are three principal manufacturers of traditional bare overhead conductors,
which supply the United States market: Southwire Company, General Cable
Corporation and Alcan Cable. Given the current exclusive manufacturing
arrangement, General Cable's production of ACCC will be in competition with both
of the other key producers in the market.

Outside of the United States and Canadian markets, all the key manufacturers of
ACSR cable are the Company's potential partners. These include General Cable,
Nexans, Lamifil, Pirelli Cable and De Angeli Prodotti in Europe; Condumex IUSA
and CME in Mexico; Jaingsu Far East Group Company, Ltd., in China; Aberdare
Cables in South Africa; and numerous others.

GOVERNMENTAL REGULATION

We are not aware of any specific government regulations governing the design and
specifications of bare overhead conductors in the United States. We do not
believe the manufacture of ACCC cable is subject to any specific government
regulations other than those regulations that traditionally apply to
manufacturing activities such as the Occupational Safety and Health Act of 1970.

Our intended operations are generally subject to various federal, state, and
local laws and regulations relating to the protection of the environment. These
environmental laws and regulations, which have become increasingly stringent,
are implemented principally by the Environmental Protection Agency and
comparable state agencies, and govern the management of hazardous wastes, the
discharge of pollutants into the air and into surface and underground waters,
and the manufacture and disposal of certain substances. We anticipate, and to
date have had, no difficulty in meeting these standards.

                                       15

<PAGE>


Certain international markets may require government or type registration
approvals from leading companies or public or semi private bodies or
associations. It is our policy to examine these barriers to entry and to select
markets which will be able to introduce its products in this initial phase
without a significant, lengthy or costly registration or approval procedures.

RESEARCH AND DEVELOPMENT

We have spent considerable funds on research and development of our proprietary,
patent pending ACCC and related electrical system component technologies to the
point where the ACCC system is now commercially available. We continue to invest
in the further development of this product with a view to speeding up and
lowering the cost of production, as well as enhancing the product's properties
and characteristics. We also anticipate the need to continue spending
significant funds to protect the ACCC technologies.

In fiscal year 2004 we spent $3,258,055on development costs; in fiscal year 2003
we spent $3,243,475on development costs and $629,368 in fiscal year 2002.

EMPLOYEES

As of December 20, 2004, we had 48 full time employees and use the services of
18 consultants on a regular basis for a variety of tasks and responsibilities.
Additional consultants are employed as required for specific tasks. We have 3
corporate officers: two Executive Officers and the Corporate Secretary. The two
Executive Officers are the Chief Executive Officer and the Chief Operating
Officer.

There are five senior corporate departments: Operations, Finance, Intellectual
Property, Information Systems, and Investor Relations. These are directly
overseen by the CEO. The Operations Department is the responsibility of the COO.
In the Operations Department, the COO presides over 3 additional senior
operations departments: Product & Production Development, Business Development &
Sales, and Quality Assurance & Quality Control.

One senior manager, employed as a consultant, was appointed the corporate
secretary with the task of improving the efficiency of our operations and
preparing us for listing on an Exchange. He is also responsible for the
European, Middle Eastern and African Markets and resides in the UK.

As of fiscal year end 2004, the CEO was the acting Chief Financial Officer in
charge of the Finance Department. Subsequent to September 30, 2004, we have
employed the services of a consultant to assistant to Benton Wilcoxon, who has
remained our acting CFO. It is hoped that following a probationary period this
individual will be appointed to the position of CFO and become an officer of the
Company. We already employ a Controller and Accounting Manager in the Finance
Department,

                                       16

<PAGE>


As of year end, the COO was also our President in charge of the Business
Development and Sales Department. Three senior corporate managers handle,
respectively: Investor Relations, Quality Control and Assurance, and Product and
Production Development. Information Systems and Intellectual Property Strategy
are handled by outside consultants.

We employ 4 additional senior managers in its Product and Production Development
Department. and a total additional staff of 25 complete the Product and
Production Development Department and handle the current production of core and
accessories. The Business Development and Sales department is comprised
primarily of consultants with one senior field person and 2 field engineers
responsible for sales.. There are 4 corporate administrative assistants, 2
logistics personnel, one security officer and one maintenance person. We also
uses the services of part time employees as required.

To assist the COO in the performance of his duties we have appointed a senior
manager to the Office of the COO.

We have entered into at-will and as needed consulting contracts with various
marketing and business consultants and composite experts to provide us with the
necessary technical skills which are required to execute our business plan and
bring our products to market. Contracts also exist for legal, patent strategy
and accounting services. Recruiting efforts will continue as we bring our
products to market.

RISK FACTORS

AS A COMPANY IN THE EARLY STAGE OF COMMERCIALIZATION, OUR LIMITED HISTORY OF
OPERATIONS MAKES EVALUATION OF OUR BUSINESS AND FUTURE GROWTH PROSPECTS
DIFFICULT

Since our reorganization in 2001, we have had a limited operating history and
are at an early stage of commercialization of a new technology product to a
market unused to using new technologies. We began selling our ACCC cable and
entered into our first commercial agreement in 2003. Our technology is a
relatively new advance for the electrical utility industry technology and has
not yet achieved widespread adoption. We do not have enough experience in
selling our products at a level consistent with broad market acceptance and do
not know whether we can do so and generate a profit. As a result of these
factors, it is difficult to evaluate our prospects, and our future success is
more uncertain than if we had a longer or more proven history of operations.

WE EXPECT FUTURE LOSSES AND OUR FUTURE PROFITABILITY IS UNCERTAIN

Prior to acquiring Transmission Technology Corporation, or TTC, in November
2001, we were a shell corporation having no operating history, revenues from
operations, or assets since December 31, 1989. We have not had any bookable
revenues from operations subsequent to acquiring TTC through June 30, 2004. We
may experience significant quarterly and annual losses for the foreseeable
future.

We may not ever become profitable. If we do achieve profitability, we may not be
able to sustain or increase profitability on a quarterly or annual basis. We
expect the need to significantly increase our general administrative, product
prototype and equipment prototype production expenses, as necessary. As a
result, we will need to generate significant revenues to achieve and maintain
profitability.

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OUR INDEPENDENT AUDITORS HAVE ISSUED A QUALIFIED REPORT WITH RESPECT TO OUR
ABILITY TO CONTINUE AS A GOING CONCERN, AND WE MAY NEVER ACHIEVE PROFITABILITY.

In previous filings, our accountants have issued a report relating to our
audited financial statements which contains a qualification with respect to our
ability to continue as a going concern because, among other things, our ability
to continue as a going concern is dependent upon our ability to generate
profitable operations in the future or to obtain the necessary financing to meet
our obligations and repay our liabilities from normal business operations when
they come due. There is no guarantee that the product will be accepted or
provide a marketable advantage, and therefore, no guarantee that the
commercialization will ever be profitable.

For the fiscal year ended September 30, 2004, we had a net loss of $14,687,874
and negative cash flows from operations of $18,735,430. For the fiscal years
ended September 30, 2003 and 2002, we had net losses of $6,751,252and
$4,523,953, respectively. For the same periods, we had negative cash flows from
operations of $2,022,935 and $715,923, respectively.

We had an operating cash flow deficit of $18,735,430 as at September 30, 2004.
During fiscal 2004, by quarter, this operating cash flow deficit was $4,266,853
as of June 30, 2004, $3,112,739, as of March 31, 2004, and $1,224,719, as of
December 31, 2003. The operating cash flow deficit was $2,022,935, as of
September 30, 2003.

As of September 30, 2004, our accumulated deficit was $26,439,356.

OUR INABILITY TO RAISE ADDITIONAL WORKING CAPITAL AT ALL OR TO RAISE IT IN A
TIMELY MANNER COULD NEGATIVELY IMPACT OUR ABILITY TO FUND OUR OPERATIONS, TO
GENERATE REVENUES, AND TO OTHERWISE EXECUTE OUR BUSINESS PLAN, LEADING TO THE
REDUCTION OR SUSPENSION OF OUR OPERATIONS AND ULTIMATELY OUR GOING OUT OF
BUSINESS. SHOULD THIS OCCUR, THE VALUE OF YOUR INVESTMENT IN OUR COMMON STOCK
COULD BE ADVERSELY AFFECTED, AND YOU COULD EVEN LOSE YOUR ENTIRE INVESTMENT.

While we have raised significant capital through our debenture offering, we
anticipate that the sales of our ACCC cable will not be sufficient enough to
sustain our operations, and further anticipate that we will continue to incur
net losses due to our costs exceeding our revenues for an indefinite period of
time. For these reasons, we believe that we will need to raise additional
capital until such time, if any, as we become cash-flow positive. It is highly
likely that we will continue to seek to raise money through public or private
sales of our securities, debt financing or short-term loans, corporate
collaborations or a combination of the foregoing. Our ability to raise
additional funds in the public or private markets will be adversely affected if
the results of our business operations are not favorable, if any products
developed are not well-received or if our stock price or trading volume is low.
However, additional funding may not be available on favorable terms to us, or at
all. To the extent that money is raised through the sale of our securities, the
issuance of those securities could result in dilution to our existing
stockholders. If we raise money through debt financing, we may be required to
secure the financing with all of our business assets, which could be sold or
retained by the creditor should we default in our payment obligations. Should
the financing we require to sustain our working capital needs be unavailable or
prohibitively expensive when we require it, we may not be able to complete the
commercialization of any products that we may have developed. As a result, we
may be required to discontinue our operations without obtaining any value for
our products under development, which could eliminate stockholder equity, or we
could be forced to relinquish rights to some or all of our products in return
for an amount substantially less than we expended to develop such products.

                                       18

<PAGE>


IF OUR PRODUCT IS NOT ACCEPTED BY OUR POTENTIAL CUSTOMERS, IT IS UNLIKELY THAT
WE WILL EVER BECOME PROFITABLE.

The electrical utility industry has historically used a variety of technologies,
including a variety of technologies involving steel cable. Compared to these
conventional technologies, our technology is relatively new, and the number of
companies using our technology is limited. The commercial success of our product
will depend upon the widespread adoption of our technology as a preferred method
by major utility companies to transmit electricity. In order to be successful,
our product must meet the technical and cost requirements for electric
transmission within the electric utility industry. Market acceptance will depend
on many factors, including:

      (i)   the willingness and ability of customers to adopt new technologies;

      (ii)  our ability to convince prospective strategic partners and customers
            that our technology is an attractive alternative to conventional
            methods used by the electric utility industry;

      (iii) our ability to change our customers' evaluation of the economics of
            powerline construction, changing their focus on limiting initial
            capital costs to evaluating the cost and benefit of the full life of
            a line liberating capital funding to acquire our products that can
            overall reduce costs in power transmission; and

      (iv)  our ability to sell sufficient quantities of our products.

Because of these and other factors, our product may not gain market acceptance
or become the industry standard for the electrical utility industry. The failure
of utility companies to purchase our products would have a material adverse
effect on our business, results of operations and financial condition.

IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS COULD BE ADVERSELY
AFFECTED.

The transition from a small company focused on research and development of our
products to a company with the additional focus on commercial production,
marketing, and sales has placed and will continue to place a significant strain
on our managerial, operational, and financial resources. Although we rely
significantly on the General Cable sales force pursuant to the recent agreements
that we entered into with General Cable, the failure to manage our sales and
growth effectively could have a material adverse effect on our business, results
of operations and financial condition. Significant additional growth will be
necessary for us to achieve our plan of operation.

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<PAGE>


FAILURE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, COULD ENABLE THIRD
PARTIESTO USE OUR TECHNOLOGY, OR VERY SIMILAR TECHNOLOGY, AND COULD REDUCE OUR
ABILITY TO COMPETE IN THE MARKET, AND ANY PROPRIETARY RIGHTS LITIGATION COULD BE
TIME CONSUMING AND EXPENSIVE TO PROSECUTE AND DEFEND.

Due to the importance of proprietary technology in the electrical utility
industry, establishment of patents and other proprietary rights is important to
our success and our competitive position. Performance in the electrical utility
industry can depend, among other factors, on patent protection. Accordingly, we
have filed patent applications in the U.S. and internationally for all aspects
of our composite materials, products and processes, including aspects of our
product other than the core, and intend to devote substantial resources to the
establishment and protection of patents and other proprietary rights. Despite
our efforts to establish and protect our patents or other proprietary rights,
unauthorized parties may attempt to copy aspects of our technology or to obtain
and use information that we regard as proprietary. In addition, the laws of some
foreign countries do not protect our proprietary rights to as great an extent as
do the laws of the United States. Our means of establishing and protecting our
proprietary rights may not be adequate and our competitors may independently
develop similar technology, duplicate our products or design around our patents
or our other proprietary rights.

As a result, our business involves a risk of overlap with third party patents
and subsequent litigation with competitors or patent-holders. Any claims, with
or without merit, could be time-consuming, result in costly litigation, or cause
us to enter into licensing agreements.

WE OCCASIONALLY MAY BECOME SUBJECT TO LEGAL DISPUTES THAT COULD HARM OUR
BUSINESS.

We are currently the subject of, and may from time to time become engaged in,
legal disputes such as claims by consultants or other third parties. These
disputes could result in monetary damages or other remedies that could adversely
impact our financial position or operations. We believe these claims are without
merit and intend to vigorously defend against them. However, even if we prevail
in disputes such as this, the defense of these disputes will be expensive and
time-consuming and may distract our management from operating our business.

WE DEPEND ON KEY PERSONNEL IN A COMPETITIVE MARKET FOR SKILLED EMPLOYEES AND
FAILURE TO ATTRACT AND RETAIN QUALIFIED EMPLOYEES COULD SUBSTANTIALLY HARM OUR
BUSINESS.

We rely to a substantial extent on the management, marketing and product
development skills of our key employees, particularly Benton H Wilcoxon, our
Chief Executive Officer, and C. William Arrington, our President. If Mr.
Wilcoxon or Mr. Arrington were unable to provide services to us for whatever
reason, our business would be adversely affected. Neither Mr. Wilcoxon nor Mr.
Arrington has entered into employment agreements with the Company.

In addition, our ability to develop and market our products and to achieve
profitability will depend on our ability to attract and retain highly talented
personnel. We face intense competition for personnel from other companies in the
electrical utility industry. The loss of the services of our key personnel or
the inability to attract and retain the additional, highly-talented employees
required for the development and commercialization of our products, may
significantly delay or prevent the achievement of product development and could
have a material adverse effect on us.

A FAILURE TO ESTABLISH AND MAINTAIN RELATIONSHIPS WITH STRATEGIC PARTNERS MAY
HARM OUR BUSINESS.

We have entered into purchase and distribution agreements with General Cable to
manufacture and distribute our ACCC product in the United States and Canada. Our
success is dependent upon establishing and maintaining relationships with
strategic partners, such as our relationship with General Cable. We face
numerous risks in successfully obtaining suitable partners on terms consistent
with our business model, including, among others:

      (i)   we must typically undergo a lengthy and expensive process of
            building a relationship with a potential partner before there is any
            assurance of an agreement with such party;

      (ii)  we must persuade cable manufacturers with significant resources to
            rely on us for critical technology on an ongoing basis rather than
            trying to develop similar technology internally;

      (iii) we must persuade potential partners to bear retooling costs
            associated with producing our products; and

      (iv)  we must successfully transfer technical know-how to our partners.

Moreover, the success of our business model also depends on the acceptance of
our products by the utility companies who have historically been conservative in
their adoption of new products and technologies into their infrastructure.
Further, our partners will be selling our products that may compete with their
existing or future cable products. Our partners are not required to sell our
products and they are not prohibited from discounting the prices of their
products below our prices.

Our business could be seriously harmed if:

      (i)   we cannot obtain suitable partners;

      (ii)  our partners fail to achieve significant sales of ACCC cable or
            products incorporating our technology; or

      (iii) we otherwise fail to implement our business strategy successfully..

                                       20

<PAGE>

WE CANNOT CONTROL THE COST OF OUR RAW MATERIALS, WHICH MAY ADVERSELY AFFECT OUR
BUSINESS.

Our principal raw materials are glass and carbon fibers, plus various polymer
resins and aluminum. The prices for these raw materials are subject to market
forces largely beyond our control, including energy costs, organic chemical feed
stocks, market demand, and freight costs. The prices for these raw materials
have varied significantly and may vary significantly in the future. We may not
be able to adjust our product prices, especially in the short-term, to recover
the costs of increases in these raw materials. Our future profitability may be
adversely affected to the extent we are unable to pass on higher raw material
and energy costs to our customers.

INTERRUPTIONS OF SUPPLIES FROM OUR KEY SUPPLIERS MAY AFFECT OUR RESULTS OF
OPERATIONS AND FINANCIAL PERFORMANCE.

Interruptions or shortages of supplies from our key suppliers of raw materials
could disrupt production or impact our ability to increase production and sales.
We use a limited number of sources for most of the other raw materials that we
use. We do not have long-term or volume purchase agreements with most of our
suppliers, and may have limited options in the short-term for alternative supply
if these suppliers fail, for any reason, including their business failure or
financial difficulties, to continue the supply of materials or components.
Moreover, identifying and accessing alternative sources may increase our costs.

WE ARE CONTROLLED BY A SMALL NUMBER OF STOCKHOLDERS, WHOSE INTERESTS MAY DIFFER
FROM OTHER STOCKHOLDERS.

As at the date of this filing, Benton H Wilcoxon, our Chairman of the Board,
Chief Executive Officer and Acting Chief Financial Officer, and C. William
Arrington, our director, in the aggregate beneficially own or control
approximately 35% of the outstanding common stock. As a result, these persons
have controlling influence in determining the outcome of any corporate matters
submitted to our stockholders for approval, including mergers, consolidations
and the sale of all or substantially all of our assets, election of directors
and other significant corporate actions. They also have the power to prevent or
cause a change in control. The interests of these stockholders may differ from
the interests of the other stockholders, and may limit the ability of other
stockholders to affect our management and affairs.

See "Security Ownership of Certain Beneficial Owners and Management."

WE WILL LIKELY EXPERIENCE CUSTOMER CONCENTRATION, WHICH MAY EXPOSE US TO ALL OF
THE RISKS FACED BY OUR POTENTIAL MATERIAL CUSTOMERS.

Until and unless we secure multiple customer relationships, it is likely that we
will experience periods during which we will be highly dependent on one or a
limited number of customers. Dependence on a single or a few customers will make
it difficult to satisfactorily negotiate attractive prices for our products and
will expose us to the risk of substantial losses if a single dominant customer
stops conducting business with us. Moreover, to the extent that we may be
dependent on any single customer, we could be subject to the risks faced by that
customer to the extent that such risks impede the customer's ability to stay in
business and make timely payments to us.

OUR BUSINESS MAY BE SUBJECT TO INTERNATIONAL RISKS.

We are pursuing international business opportunities, including in China,
Mexico, Brazil, Europe, the Middle East, certain far eastern countries and
Africa. As to international business in the Middle East, our current target
markets include Saudi Arabia, Qatar, United Arab Emirates, Oman, Iraq,
Afghanistan and Jordan. Of these the only countries that we believe pose a
particular problem are Iraq and Afghanistan as a result of additional
instability. In Africa we are actively pursuing South Africa and Kenya as well
as engaging in discussions with engineering companies that bid on trans-African
projects. There are no special additional risks related to these countries that
are not disclosed in the list of risks affecting most international business. To
date, we have not engaged in any transactions on these countries. Our business
model has been implemented only in the United States and Canada where we produce
the ACCC core for delivery to General Cable under a manufacturing agreement.
Expansion internationally will depend on our adaptation of this model to
international markets and may be costly and time consuming. Risks inherent in
international operations in general include:

      (i)   unexpected changes in regulatory requirements, export restrictions,
            tariffs and other trade barriers;

      (ii)  challenges in staffing and managing foreign operations;

      (iii) differences in technology standards, employment laws and business
            practices;

      (iv)  longer payment cycles and problems in collecting accounts
            receivable;

      (v)   political instability;

      (vi)  changes in currency exchange rates;

      (vii) currency exchange controls; and

      (viii) potentially adverse tax consequences.

In particular, certain of our target markets in the Middle East include Iraq and
Afghanistan in which there is considerable violent instability that may affect
our ability to operate in those markets.

                                       21

<PAGE>

COMPLIANCE WITH ENVIRONMENTAL REGULATIONS COULD INCREASE OUR OPERATING COSTS,
WHICH WOULD ADVERSELY AFFECT THE COMMERCIALIZATION OF OUR TECHNOLOGY.

Our intended operations are subject to various federal, state, and local laws
and regulations relating to the protection of the environment. These
environmental laws and regulations, which have become increasingly stringent,
are implemented principally by the Environmental Protection Agency and
comparable state agencies, and govern the management of hazardous wastes, the
discharge of pollutants into the air and into surface and underground waters,
and the manufacture and disposal of certain substances. There are no material
environmental claims currently pending or, to our knowledge, threatened against
us. In addition, we believe our planned operations will be implemented in
compliance with the current laws and regulations. We estimate that any expenses
incurred in maintaining compliance with current laws and regulations will not
have a material effect on our earnings or capital expenditures. However, there
can be no assurance that current regulatory requirements will not change, that
currently unforeseen environmental incidents will not occur, or that past
non-compliance with environmental laws will not be discovered.

CHANGES IN INDUSTRY STANDARDS AND REGULATORY REQUIREMENTS MAY ADVERSELY AFFECT
OUR BUSINESS.

As a manufacturer and distributor of wire and cable products we are subject to a
number of industry standard-setting authorities, such as the Institute of
Electrical and Electronic Engineers, the European based International Council on
Large Electric Systems, the American Society of Testing and Materials and the
Canadian Standards Association. In addition, many of our products may become
subject to the requirements of federal, state and local or foreign regulatory
authorities. Changes in the standards and requirements imposed by such
authorities could have an adverse effect on us. In the event we are unable to
meet any such standards when adopted our business could be adversely affected.
In addition, changes in the legislative environment could affect the growth and
other aspects of important markets served by us. While certain legislative bills
and regulatory rulings are pending in the energy and telecommunications sectors
which could improve our markets, including energy bill H.R. 6 that passed both
the House and Senate in 2003 and the House Conference Committee, any delay or
failure to pass such legislation and regulatory rulings could adversely affect
our opportunities and anticipated prospects may not arise. Energy bill H.R. 6 is
a federal bill, that, if enacted, would cover energy conservation, research and
development and improvement of the energy infrastructure pursuant to a national
energy policy. We believe that this bill could improve our market opportunities
if, as a result, it enhances the willingness and ability of potential customers
to adopt new technologies in the electrical utility industry. This comprehensive
bill currently remains in conference committee in the Senate. It is not possible
at this time to predict the impact that any such legislation or regulation or
failure to enact any such legislation or regulation, or other changes in laws or
industry standards that may be adopted in the future, could have on our
financial results, cash flows or financial position.

WE EXPERIENCE COMPETITION FROM OTHER COMPANIES IN THE ELECTRICAL UTILITY
INDUSTRY, WHICH COULD RENDER OUR PRODUCTS OBSOLETE OR SUBSTANTIALLY LIMIT THE
VOLUME OF PRODUCTS THAT WE SELL. THIS WOULD LIMIT OUR ABILITY TO COMPETE AND
ACHIEVE PROFITABILITY.

The market in which we compete is intensely competitive. Our competitors include
makers of traditional bare overhead wire and other companies with
developmental-stage products may be marketing or developing products that
compete with our products or would compete with them if developed. There is no
certainty that unique technological advances won't be achieved by our
competition, with better capital resources, in the future, or that would render
our technologies and products obsolete. We believe our competitors will continue
to improve the design and performance of their products and to introduce new
products with competitive price and performance characteristics. We expect that
we will be required to continue to invest in product development, productivity
improvements and customer service and support in order to compete in our
markets. Such competitors could develop a more efficient product or undertake
more aggressive and costly marketing campaigns than us, which may adversely
affect our marketing strategies and could have a material adverse effect on our
business, results of operations or financial condition. In addition, as we
introduce new products, we will compete directly with a greater number of
companies. There can be no assurance that we can compete successfully against
current or future competitors nor can there be any assurance that competitive
pressures faced by us will not result in increased marketing costs, loss of
market share or otherwise will not materially adversely affect our business,
results of operations and financial condition. See "Competition" under the
section of this prospectus entitled "Description of Business."

                                       22

<PAGE>

RISKS RELATED TO INVESTMENT IN OUR SECURITIES

THERE IS CURRENTLY A LIMITED TRADING MARKET FOR OUR COMMON STOCK, SO YOU MAY BE
UNABLE TO LIQUIDATE YOUR SHARES IF YOU NEED MONEY.

Our common stock is traded in the OTC market through the OTC Bulletin Board.
There is currently an active trading market for the common stock; however there
can be no assurance that an active trading market will be maintained. Trading of
securities on the OTC Bulletin Board is generally limited and is effected on a
less regular basis than that effected on other exchanges or quotation systems,
such as the NASDAQ Stock Market, and accordingly investors who own or purchase
common stock will find that the liquidity or transferability of the common stock
is limited. Additionally, a stockholder may find it more difficult to dispose
of, or obtain accurate quotations as to the market value, of common stock. There
can be no assurance that the common stock will ever be included for trading on
any stock exchange or through any other quotation system, including, without
limitation, the NASDAQ Stock Market.

THE APPLICATION OF THE PENNY STOCK RULES COULD ADVERSELY EFFECT THE MARKET PRICE
OF OUR COMMON STOCK.

As long as the trading price of our common stock is below $5.00 per share, the
open-market trading of our common stock will be subject to the penny stock
rules. The penny stock rules impose additional sales practice requirements on
broker-dealers who sell securities to persons other than established customers
and accredited investors, generally those with assets in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 together with their spouse. For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of securities and have received the
purchaser's written consent to the transaction before the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
broker-dealer must deliver, before the transaction, a disclosure schedule
prescribed by the Securities and Exchange Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. These additional burdens
imposed on broker-dealers may restrict the ability of broker-dealers to sell the
common stock and may affect a stockholder's ability to resell the common stock.

                                       23

<PAGE>

Stockholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, dated April 17, 1991, the market for penny
stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include:

      (i) control of the market for the security by one or a few broker-dealers
      that are often related to the promoter or issuer;

      (ii) manipulation of prices through prearranged matching of purchases and
      sales and false and misleading press releases;

      (iii) boiler room practices involving high-pressure sales tactics and
      unrealistic price projections by inexperienced sales persons;

      (iv) excessive and undisclosed bid-ask differential and markups by selling
      broker-dealers; and

      (v) the wholesale dumping of the same securities by promoters and
      broker-dealers after prices have been manipulated to a desired level,
      along with the resulting inevitable collapse of those prices and with
      consequent investor losses.

THE PRICE OF OUR COMMON STOCK IS VOLATILE, WHICH MAY INCREASE IN THE FUTURE, AND
WHICH COULD AFFECT OUR ABILITY TO RAISE CAPITAL IN THE FUTURE OR MAKE IT
DIFFICULT FOR INVESTORS TO SELL THEIR SHARES.

The market price of our common stock may be subject to significant fluctuations
in response to our operating results, announcements of new products or market
expansions by us or our competitors, changes in general conditions in the
economy, the financial markets, the electrical power transmission and
distribution industry, or other developments and activities affecting us, our
customers, or our competitors, some of which may be unrelated to our
performance. The sale or attempted sale of a large amount of common stock into
the market may also have a significant impact on the trading price of our common
stock. During the last 12 months, the closing bid prices for the common stock
have fluctuated from a high of $5.25 to a low of $0.87. Fluctuations in the
trading price or liquidity of our common stock may adversely affect our ability
to raise capital through future equity financings.

WE DO NOT ANTICIPATE PAYING DIVIDENDS IN THE FORESEEABLE FUTURE, WHICH MAY
REDUCE YOUR RETURN ON AN INVESTMENT IN OUR COMMON STOCK.

We plan to use all of our earnings, to the extent we have earnings, to fund our
operations. We have not paid dividends on the common stock and do not anticipate
paying such dividends in the foreseeable future. We cannot guarantee that we
will, at any time, generate sufficient surplus cash that would be available for
distribution as a dividend to the holders of our common stock. Therefore, any
return on your investment would derive from an increase in the price of our
stock, which may or may not occur.

In the past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted. If a
securities class action suit is filed against us, we would incur substantial
legal fees and our management's attention and resources would be diverted from
operating our business in order to respond to the litigation.

WE ISSUED DULY AUTHORIZED SHARES TO EMPLOYEES AND CONSULTANTS UNDER OUR 2002
NON-QUALIFIED STOCK COMPENSATION PLAN UNDER THE INCORRECT ASSUMPTION THAT WE HAD
REGISTERED THE SHARES PURSUANT TO FEDERAL SECURITIES LAWS. HOWEVER, WE
SUBSEQUENTLY REALIZED THAT THESE SHARES HAD NOT BEEN REGISTERED PRIOR TO
ISSUANCE. AS A RESULT, OUR ISSUANCE MAY HAVE VIOLATED FEDERAL AND STATE
SECURITIES LAWS, AND MAY RESULT IN OUR LIABILITY TO CERTAIN SUBSEQUENT
PURCHASERS OF THESE SHARES.

                                       24

<PAGE>


Between March 18, 2003 and February 4, 2004 we issued common stock and options
representing 1,504,780 shares of common stock to nine employees and consultants
in satisfaction of bona fide services rendered and valued at an aggregate amount
of $880,266 pursuant to our 2002 Non-Qualified Stock Compensation Plan. Although
we believed that we and our counsel had filed the appropriate registration
statement on Form S-8, it came to our attention in February, 2004 in connection
with the preparation of a registration statement that an appropriate Form S-8
had not been filed. It may be determined that such issuances were not exempt
from registration or qualification under Federal and state securities laws, and
we did not obtain the required registrations or qualifications. As a result, we
may be subject to contingent liabilities from these investors, as well as
subsequent purchasers of the shares directly and indirectly issued. These
liabilities may include an obligation to make a rescission offer to the holders
of these shares and options. If rescission is required and accepted, we could be
required to make payments to the holders of these shares and options. In
addition, Federal securities laws do not expressly provide that a rescission
offer will terminate a purchaser's right to rescind a sale of stock that was not
registered as required. If rescission is required, and any or all of the
offerees reject the rescission offer, we may continue to be liable under Federal
and state securities laws. See our disclosure titled "Stock Compensation
Issuances."

AS OF DECEMBER 20, 2004, 27,925,654 SHARES WERE ISSUABLE UPON EXERCISE OF ALL
OUTSTANDING OPTIONS, WARRANTS AND CONVERSION OF CONVERTIBLE DEBENTURES. CASH
PROCEEDS RESULTING FROM THE FULL EXERCISE AND CONVERSION OF THESE SECURITIES
WOULD BE APPROXIMATELY $20,266,000. THE EXERCISE OR CONVERSION OF THESE
SECURITIES COULD RESULT IN THE SUBSTANTIAL DILUTION OF THE COMPANY IN TERMS OF A
PARTICULAR PERCENTAGE OWNERSHIP IN THE COMPANY AS WELL AS THE BOOK VALUE OF THE
COMMON SHARES. THE SALE OF A LARGE AMOUNT OF COMMON SHARES RECEIVED UPON
EXERCISE OF THESE OPTIONS OR WARRANTS ON THE PUBLIC MARKET TO FINANCE THE
EXERCISE PRICE OR TO PAY ASSOCIATED INCOME TAXES, OR THE PERCEPTION THAT SUCH
SALES COULD OCCUR, COULD SUBSTANTIALLY DEPRESS THE PREVAILING MARKET PRICES FOR
OUR SHARES. FULL CONVERSION OF SUCH SHARES WOULD INCREASE THE OUTSTANDING COMMON
SHARES BY 25% TO APPROXIMATELY 141,347,000 SHARES.

The exercise price or conversion price of outstanding options, warrants and
convertible debentures may be less than the current market price for our common
shares. In the event of the exercise of these securities, a shareholder could
suffer substantial dilution of his or her investment in terms of the percentage
ownership in the Company as well as the book value of the common shares held. At
the December 20, 2004 market price of $5.78 per share, 27,925,654 shares would
be exercisable or convertible for less than the market prices. Full exercise and
conversion of these below market shares would result in us receiving cash
proceeds of $20,266,000 and would increase the outstanding common shares by
24.6% to approximately 141,347,000 shares.

OUR FUTURE REVENUE IS UNPREDICTABLE AND COULD CAUSE OUR OPERATING RESULTS TO
FLUCTUATE SIGNIFICANTLY FROM QUARTER TO QUARTER.

Our quarterly revenue and operating results are difficult to predict and may
fluctuate significantly from quarter to quarter. Because we have not had any
substantial ACCC product revenues to date, we can have no assurance that our
revenues will materialize. Since our revenues may fluctuate and are difficult to
predict, and our expenses are largely independent of revenues in any particular
period, it is difficult for us to accurately forecast revenues and
profitability. Our business is subject to a variety of additional risks, which
could materially adversely affect quarterly and annual operating results,
including:

      (i)   market acceptance of our composite technologies by utility
            companies;

      (ii)  due to potential lengthy lead time for the implementation of new
            lines or the reconductoring of existing lines, the extent and timing
            of these new cable transactions with utility companies may lead to
            significant delays in sales that could adversely impact our
            cashflow;

      (iii) the loss of a strategic relationship or termination of a
            relationship with a cable partner, specifically General Cable;

      (iv)  announcements or introductions of new technologies or products by us
            or our competitors;

      (v)   delays or problems in the introduction or performance of
            enhancements or of future generations of our technology;

      (vi)  failures or problems in our utility cable product, particularly
            during the early stages of the introduction of the product when
            problems or failures identified during trials carried out with the
            product or during its installation or operation can have an adverse
            effect;

      (vii) delays in the adoption of new industry standards or changes in
            market perception of the value of new or existing standards;

      (viii) competitive pressures resulting in lower revenues;

      (ix)  personnel changes, particularly those involving engineering and
            technical personnel;

      (x)   costs associated with protecting our intellectual property;

      (xi)  the potential that customers could fail to make payments under their
            current contracts;

      (xii) market-related issues, including lower ACCC Cable demand brought on
            by excess cable inventory and lower average selling prices for ACCC
            cable as a result of market surpluses;

      (xiii) increased costs or shortages of key raw materials including carbon
            fiber and glass fiber;

      (xiv) regulatory developments; and

      (xv)  general economic trends and other factors.


ITEM 2 - DESCRIPTION OF PROPERTY

We do not own any real estate. During the first quarter of fiscal year 2004, we
rented office space in Irvine, California on a month to month basis at a rate of
$4,600 per month and 8,000 square feet of manufacturing space on a month to
month basis for $8,000 per month at a separate location. On January 1, 2004 we
commenced leasing a combination manufacturing and office facility in Irvine,
California with approximately 105,120 square feet, including 21,180 square feet
in the office area with the remaining 83,940 manufacturing, storage and other
areas. The lease is for seven years with the first cash payment beginning March
1, 2004 for $ 73,584 per month, since the rent for January and February of 2004
was paid by a grant of 140,160 restricted shares to the landlord, with a
provision for no security deposit.

We own 3,000 shares of Integrated Performance Systems, Inc. , a publicly-traded
electronics manufacturing corporation located in Frisco, Texas. IPS is a
manufacturer and supplier of performance-driven circuit boards for high-speed
digital computer and telecommunications applications.

We do not anticipate investing in real estate or interests in real estate, real
estate mortgages, or securities of or interests in persons primarily engaged in
real estate activities. We currently have no formal investment policy, and we do
not intend to undertake investments in real estate as a part of our normal
operations.

                                       25

<PAGE>

ITEM 3 - LEGAL PROCEEDINGS

The following disclosure identifies all known or anticipated material legal
proceedings commenced by or against the Company or its wholly owned subsidiary,
Transmission Technology Corporation, or TTC, CTC Cable Corporation, CTC Wind
Systems, CTC Towers & Poles Corporation:

J.P. Turner & Company, L.L.C. initiated arbitration before the National
Association of Securities Dealers in February 2004 alleging CTC breached a
finder's agreement by failing to pay certain fees to J.P. Turner. CTC disputes
that any breach of the agreement took place and denies that J.P. Turner made any
introductions of investors to CTC which directly led to financing. CTC has filed
a counterclaim against J.P. Turner alleging claims of fraud against J.P. Turner
arising out of misrepresentations made by J.P. Turner concerning an investment
opportunity. J.P. Turner seeks $200,000 in monetary damages, a warrant to
purchase 200,000 shares of CTC common stock at an exercise price equal to the
closing bid on December 17, 2003, pre -judgment interest as of December 18,
2003, reasonable attorneys' fees and costs. CTC seeks compensatory damages in an
amount according to proof, punitive damages, and reasonable attorneys' fees and
costs based upon its counterclaims. CTC filed its Statement of Answer and
Counterclaims on May 17, 2004. The matter is presently set for hearing in
February 2005.

On October 16, 2003, CTC filed suit against Acquvest, Inc., Paul Koch, Victoria
Koch, Patricia Manolis, and Michael Tarbox in Orange County Superior Court. CTC
alleges causes of action for declaratory relief, breach of contract, fraudulent
inducement, rescission and economic duress arising out of certain subscription
and related agreements among the Company and the defendants. In connection with
such agreements, CTC issued to Acquvest, Inc. and Patricia Manolis, in April
2003 and September 2003, a total of 150,000 units for a total purchase price of
$375,000. Each unit consists of 10 shares of unregistered, restricted common
stock and 10 Series I warrants to purchase one share of unregistered, restricted
common stock. Each Series I warrant entitles the holder to purchase a share of
common stock at $0.50 per share and expires on March 30, 2005. The agreements
provide for the issuance of up to an additional 550,000 of such units for the
same purchase price of $2.50 per unit, subject to certain conditions, and
registration of share issuances under the Securities Act of 1933. The additional
units have not been issued and the additional purchase consideration has not
been paid. The parties disagree as to their respective rights and obligations
with respect to the original issuances and such additional units. 10,000 units
were also issued to Paul Koch for services in connection with such agreements,
and a dispute has arisen as to his entitlement to those and additional units and
warrants in connection with the agreements. The defendants deny CTC's material
allegations and have asserted cross-claims against CTC. CTC is seeking actual
damages, punitive damages, statutory costs, attorneys' fees and injunctive
relief against the defendants. CTC believes the defendants will seek the same
relief and issuance of the additional units against CTC and CTC's officers. By a
letter to CTC's counsel dated September 8, 2004, Acquvest stated that it was
waiving the contractual conditions to its purchase of an additional 400,000
units under its subscription agreement and was tendering $1,000,000, which was
available on deposit, to CTC as payment for the units. On May 13, 2004, the
court sustained the defendants' demurrers as to CTC's causes of action for
breach of contract, fraudulent inducement, rescission (only as against Patricia
Manolis) and economic duress and the defendants' motion to strike CTC's request
for punitive damages based on the rescission and economic duress causes of
action, with leave for CTC to amend its complaint. CTC has filed an amended
complaint. Acquvest, Koch, and Manolis filed a Cross-Complaint on September 16,
2004. The parties stipulated to permit Cross-Complainants to amend the
Cross-Complaint, which was filed on December 17, 2004. CTC expects to attack the
Amended Cross-Complaint via demurrer. The Cross-Complaint seeks general, special
and punitive damages totaling millions of dollars, specific performance, and
interest. Trial date has been set for May 9, 2005, though CTC has moved to
continue the trial date to a later date. The hearing on that motion is currently
set for January 7, 2005.

                                       26

<PAGE>


On November 4, 2003, Ascendiant Capital Group LLC, Mark Bergendahl, and Bradley
Wilhite filed suit in Orange County Superior Court alleging causes of action
against CTC and its CEO, Benton Wilcoxon, personally for breach of contract,
specific performance, fraud and deceit, negligent misrepresentations, breach of
covenant of good faith and fair dealing, and declaratory relief arising out of a
business advisory and consulting agreement (the "Agreement") allegedly executed
between CTC and Ascendiant. CTC denies the material allegations and, on November
10, 2003, CTC filed a case in Orange County Superior Court against Plaintiffs
alleging causes of action for declaratory relief, breach of contract, fraudulent
inducement, and economic coercion arising out of the Agreement as well as
various unrelated business agreements between Plaintiffs and Wilcoxon.
Plaintiffs seek the issuance of 1,000,000 shares of unrestricted CTC common
stock, options to purchase an additional 1,000,000 shares of unrestricted CTC
common stock at a cash exercise price of (i) $1.25 per share for the first
300,000 shares, (ii) $1.50 per share for the following 400,000 shares, and (iii)
$1.75 per share for the remaining 300,000 shares, along with compensatory
damages, punitive damages, pre- and post-judgment interest, attorneys fees and
costs. CTC is seeking actual damages, punitive damages, statutory costs,
attorneys' fees and injunctive relief against Plaintiffs. The principal parties
are Ascendiant, Bergendahl, Wilhite, CTC and Wilcoxon. On November 24, 2003, the
court entered an order consolidating the cases. On January 15, 2004, the parties
agreed to submit all claims and cross-claims arising out of the Agreement to
binding arbitration before the Honorable Robert Thomas Ret. at JAMS - Orange
County. The remaining claims and cross-claims not arising out of the Agreement
are pending before the Honorable Kazuharu Makino of Orange County Superior
Court. On May 28, 2004, CTC's demurrers to Plaintiffs' causes of action in the
arbitration for specific performance, negligent misrepresentation and breach of
covenant of good faith and fair dealing were sustained, with leave to amend, as
well as CTC's motion to strike Plaintiff's claims for punitive damages.
Plaintiffs subsequently filed an amended complaint. Judge Thomas has reserved
ruling on Plaintiffs' demurrers and motion to strike in the arbitration pending
the outcome of the ruling on Plaintiffs' demurrers and motions to strike filed
with respect to CTC's cross-claim pending in the superior court. An order has
issued in the Orange County Superior Court action exempting this case from
various pre-trial deadlines and noting that he expects that the case will not
proceed to trial within 24 months of the date of filing.

On September 10, 2004, Adam Devone filed a Complaint in Orange County Superior
Court (Case No. 04-CC-09321) against Donner, Evan Wride and Global Research,
Inc., Nutek, Inc., Zeta Centauri, Inc., Sherpa Financial & Investigations, Inc.
and Multiplyingchurches.org, Inc. or collectively, the Donner Parties, and CTC.
Devone alleges a variety of claims against the Donner Parties based upon alleged
contractual breaches and tortuous conduct related to a $200,000 loan made
between Devone and the Donner Parties. CTC is only party to the last two causes
of action for Imposition of Constructive Trust and Declaratory Relief. Devone
seeks a constructive trust on any CTC shares or related proceeds obtained
through the use of Devone's $200,000. Devone further seeks a judicial
declaration that the CTC securities and proceeds derived therefrom are his
property. As noted earlier, Devone is not presently seeking monetary damages or
costs against CTC. On October 6, 2004, CTC filed a Motion for Order Discharging
Liability asserting it should be discharged from the matter as it took no
position with regard to the dispute between the parties. On October 8, 2004, CTC
filed an Answer to the Complaint. The Motion for Order Discharging Liability is
presently set to be heard on January 3, 2005. On October 20, 2004,
Multiplyingchurches.org, Inc., or MC Org filed a Cross-Complaint against CTC,
Adam Devone, Sheryl Lyn Devone (Plaintiff's wife) and Roes 1-100 alleging claims
for breach of contract against CTC and Roes 51-100 and tortious interference
with contract against Plaintiff, his wife and Roes 1-50. MC Org alleges that CTC
breached a warrant agreement by failing to issue shares thereunder and seeks
unspecified damages and an injunction compelling CTC to issue shares under the
warrant agreement. CTC filed an Answer to MC Org's Cross-Complaint on November
19, 2004.

                                       27

<PAGE>

On October 13, 2004, Michael Tarbox filed an action in Orange County Superior
Court (Case No. 04-CC-10345) against Paul Koch, Acquvest, CTC and Doe
Defendants. Tarbox alleges that Koch made fraudulent transfers to Acquvest and
the Doe defendants for the purpose of avoiding the debt owed to Tarbox. Tarbox
alleges that CTC securities were intended to serve as security for a debt owed
by Koch to Tarbox. Tarbox alleges that Defendants were not bona fide purchasers
of the CTC securities since they were receiving such securities for the benefit
of Tarbox. Tarbox further alleges that CTC breached an agreement to pay him a
finder's fee in connection with investments made by Koch. Tarbox alleges that
CTC's breach has caused him to suffer damages in excess of $750,000. On November
9, 2004, CTC filed a Motion to Consolidate this action with the Acquvest action
above (OCSC Case No. 03-CC-12640). The Motion to Consolidate is set for January
7, 2005. On November 14, 2004, CTC filed a demurrer to the Complaint. Tarbox
agreed to amend the Complaint in response thereto.

Other than the matters discussed above, we are not aware of any material pending
legal proceedings involving CTC or its subsidiaries.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the fourth quarter of the fiscal year ended September 30, 2004, we gave
notice to our Shareholders of the 2003 Annual General Meeting together with a
Proxy Statement and a copy of the 10-KSB for the fiscal year end 2003.

The shareholders were asked to vote on 4 issues at the 2003 Annual General
Meeting held at 10:00 am (PST) on Thursday October 28, 2004 at the offices of
the Company at 2026 McGaw Avenue, Irvine, California 92614. The issues were as
follows:

1. To elect two directors, each to a one-year term;

2. To ratify the selection of Singer Lewak, Greenbaum & Goldstein LLP, as the
independent auditor for the Company;

3. To approve an increase in the number of shares subject to the 2002
Non-Qualified Stock Compensation Plan by 15 million shares; and

4. To transact any other business that may properly come before the meeting.

Only the 110,692,432 stockholders of record at the close of business on
September 8, were entitled to notice of, and to vote at, the meeting. Further
details of the matters placed before the Shareholders is included in the
Schedule 14A disclosure filed with the SEC and available on the SEC website at
http://www.sec.gov

The Shareholders approved the Election of both Directors, the ratification of
Singer Lewak as the independent auditors and the increase in the 2002
Non-Qualified Stock Compensation Plan.

                                       28

<PAGE>

Voting was as follows:

                                           For        Against       Abstained

Election of Directors:

Voting for Benton H Wilcoxon           85,628,639      391,005        650,335
Voting for C. William Arrington:       85,628,589      391,005        650,355

Voting for the Auditors:               85,655,736      173,621        840,642

Voting to extend the Option Plan:      54,736,200    5,963,476      1,891,490


Voting for the election of Directors and the appointment of the auditors were
routine. Voting for the extension of the option plan was not routine. The
Company received 48,301,092 votes cast by proxy and 38,368,907 votes were cast
through ADP Proxy Services of Englewood New York, NY. The total number of
shareholders voting at the meeting was therefore 86,669,999 or 78.2% of the
shareholders of record.

Decisions are passed by the majority of those voting for, against or abstaining
from a particular motion.

                                       29

<PAGE>


                                     PART II

ITEM 5 - MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Common Stock is not listed on any stock exchange. The Common Stock is traded
over-the-counter on the OTC Bulletin Board under the symbol CPTC. The following
table sets forth the high and low bid information for the Common Stock for each
quarter within the last two fiscal years.


                       QUARTERLY COMMON STOCK PRICE RANGES

--------------------------------------------------------------------------------
 QUARTER ENDED                                     2002/2003
--------------------------------------------------------------------------------
                                          HIGH                     LOW
--------------------------------------------------------------------------------
 December 31, 2002                       $0.25                   $0.09
--------------------------------------------------------------------------------
 March 31, 2003                          $0.61                   $0.16
--------------------------------------------------------------------------------
 June 30, 2003                           $0.52                   $0.32
--------------------------------------------------------------------------------
 September 30, 2003                      $2.67                   $0.49
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
 QUARTER ENDED                                     2003/2004
--------------------------------------------------------------------------------
                                          HIGH                     LOW
--------------------------------------------------------------------------------
 December 31, 2003                       $2.38                   $1.28
--------------------------------------------------------------------------------
 March 31, 2004                          $2.14                   $1.02
--------------------------------------------------------------------------------
 June 30, 2004                           $1.74                   $0.84
--------------------------------------------------------------------------------
 September 30, 2004                      $1.92                   $0.95
--------------------------------------------------------------------------------


These quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions. As of December 15,
2004, there were approximately 5,126 stockholders of record of our Common Stock
and no stockholders of record of our Preferred Stock.

                                       30

<PAGE>


We have never paid any dividends on the Common Stock. We currently anticipate
that any future earnings will be retained for the development of our business
and do not anticipate paying any dividends on the Common Stock in the
foreseeable future.

On May 15, 2001, TTC established the 2001 Incentive Compensation Stock Option
Plan, or TTC PLAN. After the Plan of Reorganization between TTC and Eldorado,
the predecessor of CTC. in November 2001, we suspended using the TTC Plan and
converted the granted options to a new CTC plan. We established our 2002
Non-Qualified Stock Compensation Plan, or Plan, on February 27, 2002 with
9,000,000 shares approved and terminated the TTC Plan. The purpose of the Plan
is to grant stock and stock options to purchase our common stock to our
employees and key consultants. On February 17, 2003 by Written Consent in Lieu
of Annual Meeting the Plan was approved and amended to include an additional
5,000,000 shares and declared effective on that date and approved the transfer
of options granted to two Director/Officers under the TTC Plan to the Plan. The
total amount of shares subject to the Plan was then increased from 14,000,000
shares to 29,000,000 by decision of the Shareholders dated October 28, 2004,
subsequent to the September 30, 2004 fiscal year-end.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                                        Number of securities                                Number of securities
                                           to be issued upon          Weighted-average       remaining available
                                                 exercise of         exercise price of       for future issuance
                                        outstanding options,      outstanding options,              under equity
Plan Category                            warrants and rights      and warrants rights.       compensation plans.
----------------------------------------------------------------------------------------------------------------
                                                (A)                         (B)                       (C)
----------------------------------------------------------------------------------------------------------------
<S>                                    <C>                       <C>                        <C>
Equity Compensation Plans                          7,195,366                       $0.43                   0 (1)
approved by security holders.
----------------------------------------------------------------------------------------------------------------
Equity Compensation Plans                          2,145,500                       $1.24                   0
not approved by security
holders.

----------------------------------------------------------------------------------------------------------------
TOTAL                                              9,423,283                       $0.43                   0
----------------------------------------------------------------------------------------------------------------
</TABLE>


(1) Securities represent common shares issuable upon the exercise of the
Company's 2002 Non-Qualified Stock Compensation Plan. At the shareholders
meeting of the Company passed a motion on October 29, 2004 to increase the
number of shares subject to the 2002 Non-Qualified Stock Compensation Plan by 15
million shares, or ("Stock Plan"). Once registered, this will bring the total
number of shares registered under the plan to 29 million. The Company has
already issued 11,265,868 shares of the Stock Plan to remunerate certain
professional consultants. As at Fiscal 2004 Employees and professional
consultants issued with options had exercised 2,607,220 options to acquire
shares.

(2) Securities represent common shares issuable upon the exercise of Series' R,
S, T, and U warrant series issued for services rendered prior to September 30,
2004. See Note 8 - Shareholders Equity, Warrants for additional disclosure.

                                       31

<PAGE>

SALES OF UNREGISTERED SECURITIES

                                       32

<PAGE>

In January 2004, we converted the 1,000 shares of Series B 10% preferred stock
of our subsidiary Transmission Technology Corporation into 80,000 shares of
unregistered, restricted common stock that were issued to one accredited
investor pursuant to a court order. In addition under the terms of the order,
the Company was obliged to issue 27,631 shares of unregistered, restricted
common stock in satisfaction of the unpaid preferred stock dividends and
interest totaling $31,996. We relied upon the exemption from registration as set
forth in Section 4(2) of the Securities Act of 1933 for the issuance of these
securities. The recipient took their securities for investment purposes without
a view to distribution and had access to information concerning the Company and
our business prospects, as required by the Securities Act. In addition, there
was no general solicitation or advertising for the acquisition of these
securities.

                                       33


<PAGE>



                                       34


<PAGE>



                                       35


<PAGE>


In October 2003, pursuant to a Private Placement Memoranda, or Series P PPM, the
Company sold an aggregate of 60,000 Units to 8 accredited investors for gross
proceeds of $240,000. Each Unit consisted of 10 shares of restricted
unregistered common stock and two Series P warrants to purchase one share of
unregistered, restricted common stock. Each Series P warrant entitles the holder
to purchase a share of common stock at $0.80 per share and expires at the
earlier of July 30, 2005 or three weeks following written notification by the
Company that its common stock closed at or above $1.20 per share for 10
consecutive trading days. In addition, the Series P warrants can be redeemed by
the Company for $0.001 each if a Registration Statement covering the shares
underlying the Series P warrants has been declared effective and the Company's
common stock closes at or above $1.20 for 10 consecutive days. The value of the
warrants was determined using the Modified Black-Scholes-Merton option pricing
model at a value of $1.212 per warrant and was accounted for as Paid in Capital.
We relied upon the exemption from registration as set forth in Section 4(2) of
the Securities Act of 1933 for the issuance of these securities. In connection
with their purchase of the securities, such investors made representations that
they acquired their securities for investment purposes without a view to
distribution and had access to information concerning the Company and our
business prospects, as required by the Securities Act. In addition, there was no
general solicitation or advertising for the acquisition of these securities.

During November 2003, pursuant to a Private Placement Memoranda, we sold an
aggregate of 89,360 restricted unregistered shares of common stock to 5
accredited investors at a purchase price of $1.40 per share for gross proceeds
of $125,104. The Company relied upon the exemption from registration as set
forth in Section 4(2) of the Securities Act of 1933 for the issuance of these
shares. In connection with their purchase of the shares, such investors made
representations that they acquired their shares for investment purposes without
a view to distribution and had access to information concerning the Company and
our business prospects, as required by the Securities Act. In addition, there
was no general solicitation or advertising for the acquisition of these
securities.

                                       36

<PAGE>


In November 2003, the Company made an offer to the holders of the Series E and
Series H warrants that if the holders exercised their warrants before December
10, 2003, the holder would receive one Series R warrant to purchase 1 share of
unregistered restricted common stock for every 5 Series E or H warrants
exercised. Each Series R warrant entitles the holder to purchase one share of
common stock at $1.95 per share and expires on December 30, 2005. In addition,
the Series R warrants can be redeemed by the Company for $0.001 each if a
Registration Statement covering the shares underlying the Series R warrants has
been declared effective and the Company's common stock closes at or above $3 for
10 consecutive days and if the shares underlying the warrants have been
registered. In December 2003, the Company issued 272,500 shares of common stock
to such investors upon the exercise of Series E Warrants, exercisable at $0.25
per share, and 20,000 shares of common stock to such investors upon the exercise
of Series H Warrants, exercisable at $0.50 per share, for total cash
consideration of $78,125. Pursuant to the terms of the offer, the Company also
issued Series R warrants to purchase an aggregate 58,500 shares of common stock
to these 13 accredited investors. The value of the Series R warrants was
determined using the Modified Black-Scholes-Merton option pricing model at a
value of $1.814 per warrant and was accounted for as Paid in Capital and Legal,
Consulting, and Professional expense in the amount of $106,120. We relied upon
the exemption from registration as set forth in Section 4(2) of the Securities
Act of 1933 for the issuance of these securities. In connection with their
purchase of the securities, such investors made representations that they were
accredited investors within the meaning of Regulation D under the Securities
Act. They also represented their intentions to acquire their securities for
investment purposes without a view to distribution and had access to information
concerning the Company and our business prospects, as required by the Securities
Act. In addition, there was no general solicitation or advertising for the
acquisition of these securities.

During December 2003, the Company issued 140,160 shares of restricted,
unregistered common stock to an accredited investor in lieu of 2 month's rent on
a commercial facility valued at $147,168. The Company relied upon the exemption
from registration as set forth in Section 4(2) of the Securities Act of 1933 for
the issuance of these shares. In connection with its purchase of the shares,
such investor made representations that it acquired its shares for investment
purposes without a view to distribution and had access to information concerning
the Company and our business prospects, as required by the Securities Act. In
addition, there was no general solicitation or advertising for the acquisition
of these securities.

In December 2003, the Company issued 2,400,000 units to five accredited
investors for cash proceeds of $2,790,000 net of offering costs of $210,000,
referred to in this report as the December Offering. The December Offering was
subscribed by 5 investment funds. Each unit consisted of one share of the
Company's unregistered restricted common stock and 0.5 warrant to purchase one
share of the Company's unregistered restricted common stock at an exercise price
of $2.04 per share. The warrants vest immediately and expire in December 2008.
The Company has the right to call the warrants if the closing price of the
Company's common stock is greater than 200% of the exercise price of the
warrants for 20 consecutive trading days. The value of the December Offering
warrants was determined using the Modified Black-Scholes-Merton option pricing
model at a value of $1.877 per warrant and was accounted for as Paid in Capital.
In June 2004, the Company offered these warrant holders, for a limited period of
time, the opportunity to exercise their warrants at a reduced strike price of
$0.50. Pursuant to this offer, the Company issued 1,000,000 shares of the
Company's unregistered, restricted common stock against receipt of $500,000. One
holder of a warrant to purchase 200,000 shares of common stock did not take
advantage of this right. In connection with this offering, one of the accredited
investors, was issued an additional warrant to purchase 120,000 shares of common
stock on the same terms in July 2004. As a result of this transaction, we
recorded additional Paid in Capital and Legal, Consulting, and Professional
expenses of $1,433,880 resulting from the modification of the warrant terms. The
warrant to purchase 120,000 shares issued to the accredited investor in
consideration for prior performance of business consulting services related to
the December Offering to the Company was valued using the Modified
Black-Scholes-Merton option pricing model at $1.277 per warrant and $153,207 in
additional Paid in Capital and Legal, Consulting, and Professional expenses were
recorded. We relied upon the exemption from registration as set forth in Section
4(2) of the Securities Act of 1933 for the issuance of these securities. In
connection with their purchase of the securities, such investors made
representations that they acquired their securities for investment purposes
without a view to distribution and had access to information concerning the
Company and our business prospects, as required by the Securities Act. In
addition, there was no general solicitation or advertising for the acquisition
of these securities.

In December 2003, we issued to accredited investors 193,055 shares of common
stock upon the exercise of warrants, exercisable at $0.50 per share, for cash in
an aggregate amount of $96,528. We relied upon the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended, for the issuance
of these shares as transactions by an issuer not involving any public offering.
The recipients of securities in each transaction represented their intentions to
acquire the securities for investment purposes without a view to distribution
and had access to information concerning the Company and our business prospects,
as required by the Securities Act. In addition, there was no general
solicitation or advertising for the acquisition of these securities.

During January 2004, the Company issued an aggregate 58,881 shares of
restricted, unregistered common stock to two accredited investors in
consideration for the prior performance of construction improvement services
valued at $65,166. The Company relied upon the exemption from registration as
set forth in Section 4(2) of the Securities Act of 1933 for the issuance of
these shares. The recipients of securities in each transaction represented their
intentions to acquire the securities for investment purposes without a view to
distribution and had access to information concerning the Company and our
business prospects, as required by the Securities Act. In addition, there was no
general solicitation or advertising for the acquisition of these securities.

During March 2004, the Company issued 150,000 shares of restricted, unregistered
common stock to an accredited investor in partial compensation of equipment
purchased valued at approximately $237,000. The Company relied upon the
exemption from registration as set forth in Section 4(2) of the Securities Act
of 1933 for the issuance of these shares. In connection with the purchase of the
shares, such investor made representations that it acquired the shares for
investment purposes without a view to distribution and had access to information
concerning the Company and our business prospects, as required by the Securities
Act. In addition, there was no general solicitation or advertising for the
acquisition of these securities. During June 2004 the Company and such investor
agreed that the investor would not accept the shares in lieu of partial payment
for the equipment purchased by the Company with the result that the 150,000
shares were cancelled in August 2004.

                                       37

<PAGE>

During March 2004, we issued 837,500 shares of common stock pursuant to Series E
warrant exercises, at an exercise price of $0.25 per share, to accredited
investors. During this time period, we also issued 40,000 shares of common stock
to accredited investors upon the exercise of Series H warrants, exercisable at
$0.50 per share. Our gross proceeds from these Series E and Series H warrant
exercises were $132,500 and $20,000, respectively. We relied upon the exemption
from registration as set forth in Section 4(2) of the Securities Act of 1933 for
the issuance of these securities. The recipients of securities in each
transaction made representations that they were accredited investors within the
meaning of Regulation D under the Securities Act. They also represented their
intentions to acquire the securities for investment purposes without a view to
distribution and had access to information concerning the Company and our
business prospects, as required by the Securities Act. In addition, there was no
general solicitation or advertising for the acquisition of these securities.

In July 2004, we issued 790,000 shares of restricted, unregistered common stock
to five accredited investors in remuneration for and payment of debts relating
to prior performance of product development, marketing and advertising,
strategic business development and advisory, public relations and legal advisory
services valued at $790,000, the closing market price on the date of issuance.
The Company relied upon the exemption from registration as set forth in Section
4(2) of the Securities Act of 1933 for the issuance of these shares. . In
connection with the purchase of the shares, such investors made representations
that they acquired the shares for investment purposes without a view to
distribution and had access to information concerning the Company and our
business prospects, as required by the Securities Act. In addition, there was no
general solicitation or advertising for the acquisition of these securities.

In July and August 2004, we issued 675,000 shares of restricted, unregistered
common stock to two accredited investors as part of a legal settlement valued at
$739,000, the closing market price on the date of issuance. The Company relied
upon the exemption from registration as set forth in Section 4(2) of the
Securities Act of 1933 for the issuance of these shares. The recipients in each
transaction represented their intentions to acquire their securities for
investment purposes without a view to distribution and had access to information
concerning the Company and our business prospects, as required by the Securities
Act. In addition, there was no general solicitation or advertising for the
acquisition of these securities.

During August 2004, we issued 364,373 shares to one officer and one accredited
investor in remuneration for performance of product development, intellectual
property, marketing and business advisory services in 2003 to the Company valued
at $664,881, the fair market value on the date of issuance. We relied upon the
exemption from registration as set forth in Section 4(2) of the Securities Act
of 1933 for the issuance of these securities. The recipients of securities in
each transaction made representations that they were accredited investors within
the meaning of Regulation D under the Securities Act. They also represented
their intentions to acquire the securities for investment purposes without a
view to distribution and had access to information concerning the Company and
our business prospects, as required by the Securities Act. In addition, there
was no general solicitation or advertising for the acquisition of these
securities.

From July 2004 through September 2004, we issued a total of 650,000 shares of
common stock to accredited investors upon the exercise of Series E Warrants for
cash at an exercise price per share of $0.25, or an aggregate amount of
$162,500. The issuance of these securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving any public offering.
The recipients of securities in these transactions represented their intention
to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof. The sales of these securities were
made without general solicitation or advertising.

From July 2004 through August 2004, we issued a total of 3,705,500 shares of
common stock to accredited investors upon the exercise of Series H Warrants for
cash at an exercise price per share of $0.50, or an aggregate amount of
$1,852,750. The issuance of these securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving any public offering.
The recipients of securities in these transactions represented their intention
to acquire the securities for investment only and not with a view to or for sale
in connection with any distribution thereof. The sales of these securities were
made without general solicitation or advertising.

On August 25, 2004, we issued a total of 11,325 shares of common stock to an
accredited investor pursuant to cashless exercise of a Series K Warrant to
purchase 16,667 shares of common stock at an exercise price per share of $0.50.
The issuance of these securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act as
transactions by an issuer not involving any public offering. The recipients of
securities in these transactions represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof. The sales of these securities were made without
general solicitation or advertising.

During September 2004, we issued 1,427,000 Series S warrants to nine accredited
investors in consideration for the prior performance of business development,
international sales and marketing, strategic business consulting, public
relations, domestic sales and marketing and advertising services rendered to the
Company and in settlement of disputes relating to such services. Each Series S
warrant entitles the holder to purchase one share of unregistered, restricted
common stock at $1.00 per share and expires at the earlier of July 17, 2007 or
following written notification by us that our common stock closed at or above
$3.00 per share for 10 consecutive trading days. The value of the Series S
warrants was determined using the Modified Black-Scholes-Merton option pricing
model at a value of $0.644 per warrant and was accounted for as Paid in Capital
and Legal, Consulting, and Professional expense in the amount of $918,376. We
relied upon the exemption from registration as set forth in Section 4(2) of the
Securities Act of 1933 for the issuance of these securities. The recipients
represented their intentions to acquire the securities for investment purposes
without a view to distribution and had access to information concerning the
Company and our business prospects, as required by the Securities Act. In
addition, there was no general solicitation or advertising for the acquisition
of these securities.

During September 2004, we issued 160,000 Series T warrants to five accredited
investors in consideration for prior services associated with $3.0 million
capital lease financing to the Company. Each Series T warrant entitles the
holder to purchase one share of unregistered, restricted common stock at $1.00
per share and expires at the earlier of July 17, 2008. The value of the Series T
warrants was determined using the Modified Black-Scholes-Merton option pricing
model at a value of $0.662 per warrant and was accounted for as Paid in Capital
and Legal, Consulting, and Professional expense in the amount of $105,915. We
relied upon the exemption from registration as set forth in Section 4(2) of the
Securities Act of 1933 for the issuance of these securities. The recipients
represented their intentions to acquire the securities for investment purposes
without a view to distribution and had access to information concerning the
Company and our business prospects, as required by the Securities Act. In
addition, there was no general solicitation or advertising for the acquisition
of these securities.

DEBENTURE OFFERING

On August 17, 2004, CTC closed a financing transaction in which it sold 6%
convertible debentures to select institutional accredited investors, in order to
raise a total of $15,000,000. We received $5,000,000 upon closing and
$10,000,000 was deposited into a Custodian Account to secure repayment of the
debentures. The debentures will mature on August 17, 2007. The investors may
convert the debentures into our common stock for $1.67 per share, or the
Conversion Price. We may force conversion of all outstanding debentures if the
daily volume weighted average price of our common stock exceeds the Conversion
Price by 150%. We may drawdown the $10,000,000 held in the Custodian Account on
a monthly basis starting after the effective date of a Registration Statement
registering the common stock issuable upon conversion debentures by exercising a
monthly optional redemption, or the Monthly Redemption. The minimum Monthly
Redemption is $500,004. The Monthly Redemption may only be paid by the issuance
of our common stock to the investors priced at 93% of the volume weighted
average price of our common stock at the time of such Monthly Redemption.

The investors also received warrants to purchase an aggregate of 3,453,947
shares of common stock, 50% of which are at an exercise price of $1.75 per share
and the balance of which are at an exercise price of $1.82 per share. The
warrants were valued using the Modified Black-Scholes-Merton option pricing
model at an aggregate value of $6,364,063. The warrant value was recorded as
paid in capital and as a discount to the debentures. The discount will be
amortized to interest expense over the expected duration of the debentures which
are scheduled for repayment in August, 2007.

On November 23, 2004, we reached an agreement with the four funds that purchased
the debentures to release the $10 million that was held in a custodian account.
The $10 million was to be released periodically after the effectiveness of a
registration statement filed by the Company on Form SB-2 pursuant to monthly
optional redemptions. In consideration for such early release of the $10
million, each of the four funds was issued an additional warrant to purchase in
aggregate 1,083,591 shares of our common stock with an exercise price of $3.23.
The four funds also agreed to extend the deadlines for the filing of and
effectiveness date of the registration statement. The additional warrants were
valued using the Modified Black-Scholes-Merton option pricing model at $1.84 per
warrant. The aggregate warrant value of $1,993,809 was recorded as Paid in
Capital and Legal, Professional, and Consulting expense in Fiscal 2005.

                                       38

<PAGE>

Lane Capital Markets acted as our exclusive placement agent and financial
advisor in connection with the placement of the debentures. In partial
consideration for Lane Capital's services, Lane Capital received 500,000 Series
U warrants, a 4-year warrant to purchase 500,000 shares of our common stock with
an exercise price of $1.82 per share. CTC may, subject to a 20 day notice, call
the warrants if our common stock is equal to or exceeds 200% of their exercise
price. The value of the Series U warrants was determined using the Modified
Black-Scholes-Merton option pricing model at a value of $1.23 per warrant and
was accounted for as Paid in Capital and Legal, Consulting, and Professional
expense in the amount of $615,012.

We relied upon the exemption from registration as set forth in Section 4(2) of
the Securities Act of 1933 and Rule 506 of Regulation D promulgated under such
Act for the issuance of these securities. The recipients of securities in each
transaction represented their intentions to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the securities
issued in these transactions. All recipients had access, through their
relationship with the Company, to information about us.

There were no underwritten offerings employed in connection with any of the
transactions described above.

ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and related notes
thereto. The following discussion contains certain forward-looking statements
that involve risks and uncertainties. Our actual results could differ materially
from those discussed herein. We undertake no obligation publicly to release the
results of any revisions to these forward-looking statements that may be made to
reflect any future events or circumstances.

RESULTS OF OPERATIONS

We have had no revenue for either the fiscal years ended September 30, 2003 or
September 30, 2002.

In the fiscal quarter ended December 31, 2003 CTC commenced providing services
under a $2.675 million contract for design, production, and installation of a 21
mile long new ACCC transmission line in Kansas. Revenue from this contract will
be recognized upon completion and as of September 30, 2004, CTC had received
$564,750 under the initial milestones of the contract that has been recorded as
deferred revenue.

Subsequent to year end, the Company also began to receive income from certain
trial sales of the cable. The trial sales are typically short length wrapped
cable lines that are purchased by a utility company to try out the new cable in
a real world operational basis. There is no right of return for these trial
sales. The Company expects to make more trial sales before the market accepts
its ACCC products for full deployment.

During the fiscal year ending September 30, 2004, CTC provided consulting
services to Global American Energy and its related companies. These services
were provided under an amended and restated Consulting Agreement that terminated
on September 30, 2004. Under the arrangement, the Company provided general
consulting services and business advice relating to the planning of overhead
electrical transmission power lines and utility services, including undertaking
preliminary feasibility analysis and strategic advice regarding location and
scope as well as advice regarding the establishment of production facilities for
the production of products used in the Electrical Transmission Industry. Under
the terms of this agreement Global American Energy is required to pay the
Company $2.5 million for work carried out between March 31, 2003 and September
30, 2004. The entire $2,500,000 contract was recorded as Services Revenue in
Fiscal 2004. The Company recorded direct costs related to this consulting work
in the amount of $314,548 consisting primarily of personnel costs including
salaries, benefits, and travel expense which has been recorded in fiscal 2004 as
Cost of Service Revenue. The entire balance outstanding of $2,500,000 was
included in the Accounts Receivable balance as of September 30, 2004. There are
no additional obligations related to this agreement and there are no amounts
refundable on the contract. In March 2005, the Company agreed to an extended
payment plan whereby the customer would pay $250,000 by April 30, 2005, $250,000
by May 31, 2005, $250,000 by June 30, 2005 and the remaining $1,750,000 by July
31, 2005. The customer presented payment for $250,000 on April 29, 2005. This
payment was returned for insufficient funds in May, 2005. No further payments
have been received. Unless payments are made, the Company expects to reserve all
or part of this receivable on a prospective basis beginning in the quarter
ending June 30, 2005.

OPERATING EXPENSES:

Prior to January, 2004, the Company was primarily involved in developing
composite utility products in anticipation of commercially marketing these
products. Beginning in January, the company began to move towards marketing and
producing these products.

OFFICER COMPENSATION: Officer Compensation consists primarily of salaries,
consulting fees paid in cash, and the fair value of stock grants issued to
Officers of the Company. Officer compensation increased by $575,000 from
$270,000 in fiscal 2003 to $845,000 in fiscal 2004. This is due to an increase
in cash payments of $165,000 resulting from the addition of two officers and the
issuance of company stock of $410,000, valued at the fair market value on the
date of issuance in August, 2004, which was issued to one officer in lieu of
stock options promised for services rendered through September 30, 2003.

GENERAL AND ADMINISTRATIVE: General and Administrative expenses consist
primarily of salaries, consulting, SEC filing fees, facilities costs, and
general corporate expenses. General and Administrative expenses increased from
$867,643 in fiscal 2003 to $3,717,583 in fiscal 2004. The increase of
approximately $2,850,000 is due to:

i. An increase of $785,000 from $129,000 in 2003 to $914,000 in 2004 from rent
and facilities expenses resulting from the company moving to a new manufacturing
facility. A substantial portion of this facility was idle during 2004 and the
costs associated with the idle portion were recorded to general and
administrative expenses. Total rent and facilities expense for all departments
increased from $161,000 in 2003 to $1,344,000 in 2004.

ii. An increase of $1,275,000 from $649,000 in 2003 to $1,924,000 in 2004 due to
increased personnel costs payable in cash including salaries, employee benefits,
consulting fees, travel, office supplies, and other general corporate expenses
related to increased headcounts in Finance, IT, Investor Relations, and
Corporate administration.

iii. An increase of $479,000 from $0 in 2003 related to compensation expense
recorded from the issuance of common stock warrants relating to investor
relations and general corporate business strategy consultants and advisors.

iv. An increase of $260,000 from $0 in 2003 for compensation expense related to
modification of options exercised on a cashless basis,

v. An increase of approximately $50,000 from $90,000 in 2003 to $140,000 in 2004
for SEC filing fees and shareholder related expenses.

LEGAL, PROFESSIONAL, AND CONSULTING: Legal, Professional, and Consulting
expenses consist of legal fees paid to outside attorneys for litigation and
general corporate purposes both in cash and in common stock valued at fair
market value upon date of issuance, legal settlements paid in cash and stock,
fees paid to external auditors and accountants, costs associated with financing
arrangements including finders fees and financing costs, and compensation
expense related to variable accounting treatment of a decrease in the exercise
price of warrants granted. Legal, Professional and Consulting expenses increased
from $1,453,930 in fiscal 2003 to $6,790,568 in fiscal 2004. The increase of
approximately $5,337,000 is due to increases of $3,099,000 for non-cash expenses
and $2,238,000 for expenses paid in cash as follows:

i. An increase from $0 in 2003 to $1,540,000 in 2004 for non-cash compensation
expense relating to the modification of warrants granted in December, 2003
resulting from reduction in exercise price effective June, 2004.

ii. Increase of $632,000 from $106,000 in 2003 to $738,000 in 2004 for legal
settlements paid in common stock and stock warrants.

iii. An increase of $1,006,000 from $61,000 in 2003 to $1,067,000 in 2004, for
compensation expense recorded due to the value of warrants granted to
consultants and entities related to the Capital Lease Obligations, the
Convertible Debentures, legal fees, and other consulting.

iv. An increase of $399,000 from $791,000 in 2003 to $1,190,000 in 2004 for
issuance of Common stock in payment of legal fees related to attorney services
for litigation and general corporate counsel.

v. A decrease of $141,000 from $269,000 in 2003 to $128,000 in 2004 for
compensation expense relating to the amortization of deferred compensation
expense recorded in prior years that resulted from issuances of options at
exercise prices below the fair market price at the date of grant.

vi. An increase of $924,000 from $209,000 in 2003 to $1,133,000 in 2004 for
legal fees related to litigation and corporate counsel payable in cash.

vii. An increase of $738,000 from $0 in 2003 for financing fees payable in cash
relating to the $15,000,000 Convertible Debenture offering in August of 2004.

viii. An increase of $238,000 from $17,000 in 2003 to $255,000 in 2004 for audit
and accounting fees paid.

PRODUCT DEVELOPMENT: Product development expenses consist primarily of salaries,
consulting fees, materials, tools, and related expenses for work performed in
designing and development of manufacturing processes for the Company's products.
Product Development expenses increased from $3,243,475 in fiscal 2003 to
$3,258,055 in fiscal 2004, or approximately $15,000. The increase is due
primarily to:

i. a decrease of $1,992,000 from $2,370,000 in 2003 to $378,000 in 2004 related
to product development, product design, and intellectual property consulting
services paid in common stock

ii. a decrease of $133,000 from $303,000 in 2003 to $170,000 in 2004 from
compensation expense relating to the amortization of deferred compensation
expense recorded in prior years that resulted from issuances of options at
exercise prices below the fair market price

iii. an increase of $1,501,000 from $438,000 in 2003 to $1,939,000 in 2004 or
related to increased employee and consulting headcount costs payable in cash
including salaries, benefits, travel, and consulting fees paid in cash who were
focusing on product development and production design

iv. an increase of $68,000 from $0 in 2003 due to non-cash compensation expense
resulting from variable accounting on stock options exercised on a cashless
basis.

v. an increase of $330,000 from $32,000 in 2003 to $362,000 in 2004 relating to
product development and production design facilities costs.

vi. an increase related to production related supplies and materials of
approximately $241,000.

SALES AND MARKETING: Sales and marketing expenses consist primarily of salaries,
consulting fees, materials, travel, and other expenses performed in marketing,
sales, and business development efforts for the Company. Sales and marketing
expenses increased by $825,822 from $897,735 in 2003 to $1,723,557 in 2004.
Prior to 2004, substantially all sales and marketing expenses were due to the
fair value of common stock issued in exchange for public relations and business
development efforts. Beginning in 2004, additional staff were hired, consultants
engaged, and other marketing costs were incurred as the Company began efforts to
sell and market the Company's products. The expense increase from 2003 to 2004
is due primarily to:

i. an increase of $519,000 from $237,000 in 2003 to $756,000 in 2004 due to
increased salaries, benefits, and consulting fees related to marketing and
business development efforts payable in cash

ii. An increase of $246,000 from $0 in 2003 related to compensation expense
recorded from the issuance of common stock warrants for marketing, sales
strategy, and business development related consultants and advisors.

iii. a decrease of $160,000 from $660,000 in 2003 to $500,000 in 2004 of
marketing related consulting fees paid in common stock of the company

iv. an increase of $130,000from $0 in 2003 for marketing related literature and
trade show expenses payable in cash

v. an increase of $75,000 from $0 in 2003 for increased facilities costs
attributable to marketing and business development efforts.

vi. an increase of $16,000 from $0 in 2003 due to non-cash compensation expense
resulting from variable accounting on stock options exercised on a cashless
basis.

DEPRECIATION: Depreciation expense consists of depreciation related to thae
depreciation and amortization of the Company's capitalized assets. The increase
from $18,569 for fiscal 2003 to $153,029 for fiscal 2004 is due to a larger
capitalized asset base in 2004 than for 2003.

INTEREST EXPENSE: Interest expense consists of interest paid and payable on the
Company's capital lease obligations, the cash interest payable on the
$15,000,000 6% Convertible Debentures, and the amortization of the Convertible
Debenture discount recorded for the value of the warrants issued in conjunction
with the Convertible Debentures. The increase of $408,898 from $0 in 2003 is due
to the placement of both the Convertible Debentures and the Capital Lease
Obligations during fiscal 2004. The Company had no debt recorded throughout
fiscal 2003.

During the period commencing with our reorganization in 2001 to the end of
fiscal year 2004, we were in our developmental phase with the primary task of
elucidating and rendering concrete our concepts and designs for the electrical
power industry. We believe that the last fiscal year was a pivotal one for the
Company and the year end marks a turning point in our focus from development to
commercial production and sale of commercially viable products.

                                       39

<PAGE>


ACCC BARE OVERHEAD CABLE OPERATIONS

Our product and production development strategy is to take initial concepts to
commercially promising prototype, then move production to design, making
relevant product modifications to optimize the combination of manufacturability
and performance. Following optimization, pilot production is organized to mimic
factory conditions under close monitoring. During this process the optimal
commercial production parameters and product design are documented so that the
technology will be available for licensing or transfer to third parties or
subsidiaries in a full scale factory launch.

At the beginning of the fiscal year ending September 30, 2004, we completed our
initial product and manufacturing process development and was commencing the
manufacture of ACCC cable core and the wrapping of the core with aluminum under
sub-contract with General Cable.

During fiscal 2004, we progressed our product and production development path
through product refinement to the commencement of pilot plant operations with a
unit of two lines. This unit has since been expanded to three lines and is
currently operating under factory conditions.

Essential milestones along this path were as follows:

The design characteristics of the ACCC family of cables were accepted and
included in the bare overhead conductor line CADD design software produced by
Power Line Systems.

Additional development work for various conductor ancillaries, such as
connection hardware was conducted during the fiscal year ending September 30,
2004 and will now be produced by a new pilot production unit at the Company's
Irvine facility as well as by FCI Burndy, one of the leading producers of
hardware in the US which has agreed to produce the special hardware accessories
required to install the ACCC successfully. These special accessories will
supplement their existing high temperature accessories that can be used with
ACCC. Field installation and testing of this hardware has been successfully
carried out at EPRI (see below) and will continue during the first part of
fiscal 2005. The use of conventional installation tools, grippers, equipment,
and techniques all proved satisfactory for the installation of the ACCC.

Test data is available from the Electrical Power Research Institute, or EPRI,
performed at the Haslet Texas facility and the University of Southern
California. Additional demonstration testing is expected to commence and/or
continue during fiscal 2005 at the Electric Power Research Institute , the U.S.
Department of Energy at Oak Ridge National Laboratories , the Western Area Power
Administration , the New York State Energy Research & Development Authority ,
Electricity of France, and at other third party labs, both domestic and abroad.

                                       40

<PAGE>


Our conceptual plans for the establishment of full-scale core and accessories
production at a suitable factory location are underway. However, no such factory
location has been identified.

Our marketing and sales strategy has been operating in parallel with our product
development strategy. Due to the nature of the business and the principal
customers for the cable, the product introduction is followed by the sale of
small amounts of cable for trial purposes. In point of fact these sales are
significant in the furtherance of the commercialization of the ACCC but this
importance is not initially necessarily reflected in terms of revenue. We expect
that the successful trial of the product will lead to larger commercial sales
that will require a ramp up of its core and accessory production capacity.

During the fiscal year ending September 2004, the first commercial order for a
21 mile long new ACCC transmission line of a new smaller Hawk sized cable was
placed in December of 2003. This trial implementation for design, production,
and installation of a line in Kansas during 2004 and 2005 is expected to bring
the Company $2.6 million dollars with completion anticipated in 2005. The
Company had started delivery of the necessary cable and initial hanging the
cable began following the fiscal year end.

The first commercial installation of Hawk sized ACCC conductor for a
distribution line was completed at Holland, Michigan. Other trial
implementations have been completed or are planned during the initial part of
fiscal 2005.

We believe that the commercial viability and utility of the ACCC bare overhead
conductors has been thoroughly proven through laboratory and field testing and
commercial sale.

The most significant event, immediately subsequent to the 2004 fiscal year end,
announced on October 4, 2004, was the signature of agreements with General
Cable. These agreements give us the ability to supply large commercial
quantities of cable using the General Cable production facilities and access to
the General Cable sales force. In addition, the final ACCC product sold through
General Cable will integrate seamlessly with its other products, forming part of
their TransPowrTM product line as the ACCC/TW Bare Overhead Conductor.

The ability to supply commercial quantities of ACCC with the General Cable seal
of approval and access to the General Cable sales force allows CTC to
concentrate on core production.

OTHER PROPRIETARY PRODUCTS

During the year ending September 30, 2004, we substantially completed the work
on the design and fabrication of a prototype for the production of specialized
machines to produce composite poles, lattice towers and wind turbine support
towers.

                                       41

<PAGE>


FINANCIAL CONSIDERATIONS

INCEPTION TO SEPTEMBER 30, 2002

PREFERRED STOCK:

Preferred A issuance: During the period of inception through September 30, 2002,
we issued 165 shares of Preferred A stock at a price per share of $1,000 in
exchange for investments in private and public companies valued at $165,000.
This initial investment was later supplemented by additional investments in
these companies in cash and for common stock issued by us. On September 30,
2002, we exchanged substantially all of the investments in exchange for the 165
shares of Preferred A stock outstanding and the forgiveness of notes payable to
the Preferred A shareholder. Prior to the exchange, we recorded a carrying loss
on the investments of $137,230. As a result of the exchange, we recorded no
other gain or loss resulting from the exchange transaction.

Preferred B issuance: During the period of inception through September 30, 2002,
we issued a total of 1,320 shares of Series B 10% cumulative, convertible
preferred stock at a price per share of $100 for cash proceeds of $132,000. 320
of these shares were converted in April, 2003 into 207,576 shares of the
Company's common stock and 1,000 of these shares were converted in December,
2003 into 107,631 shares of the Company's common stock.

In December 2001, the Company issued 42,500 shares of Common Stock to AMJ in
exchange for 37,335 shares of the common stock of AMJ. The value of this
transaction was calculated to be the fair value of the investment or $191,450.

COMMON STOCK:

In January, 2002, the Company cancelled 79,402 Common shares originally issued
as payment for legal services provided relating to the reverse merger and
reorganization and rescinded at the request of the Company and the legal entity.
The value attributed to the shares was the value of the services provided of
approximately $300,000.

From May, 2002 until September, 2002, the Company issued in aggregate 1,407,543
shares of the Company's restricted, unregistered common stock to three unrelated
entities and two persons in exchange for legal, intellectual property, business
strategy, and financial consulting services. One of the consultants was also
issued 17,543 warrants. The warrants were issued with an exercise price of $0.50
and expire on July 12, 2006 and were assigned a value of $0.05 per warrant using
the Modifed Black-Scholes-Merton option valuation model. The expense of $877 was
recorded to General and Administrative expenses in fiscal 2002. The combined
total of the services provided in exchange for these transactions was valued at
$605,121 which was equal to the fair value of the services provided.

Between March, 2002 and September, 2002, the Company issued in aggregate
2,929,868 common shares registered under an S-8 filing to seven consultants
providing legal, intellectual property, product development, and business
strategy services valued at $1,498,944.

Between March, 2002 and September, 2002, the Company issued 2,000,000 common
shares registered under an S-8 filing to one consultant as a result of a stock
option exercise. The options were exercised at an average price of approximately
$0.24 per share and the company we received $480,000 in proceeds.

From July 2002 until August, 2002, the Company issued an aggregate 399,123
shares of the Company's restricted, unregistered common stock to three separate
persons in return for $86,000 in cash. Each of the shares issued carried a
warrant to acquire an equal number of restricted, unregistered common stock at
an exercise price of $0.50 that shall expire on July 12, 2006. At the date of
issuance, the warrants were valued at approximately $0.05 per share and were
recorded as paid in capital.

In September, 2002, the Company issued an aggregate 515,297 shares of the
Company's restricted, unregistered common stock to two individuals in repayment
of outstanding indebtedness of $90,000. Each of the shares issued carried a
warrant to acquire an equal number of restricted, unregistered common stock at
an exercise price of $0.50 that shall expire on July 12, 2006. At the date of
issuance, the warrants were valued at approximately $0.05 per share and were
recorded as paid in capital.

During the fiscal year ended September 30, 2002 the Company issued stock options
to certain consultants and employees at exercise prices below the market price
on the date of issuance. In accordance with APB 25, compensation expense of
$2,102,532 was recorded as of result of these grants and deferred. The expense
will be recognized as the options vest. During the fiscal year ended September
30, 2002, the Company amortized $868,237 in compensation expense relating to
these option grants.

FISCAL YEAR 2003

Preferred Stock:

In March, 2003, the the Company converted 320 shares of Series B 10% preferred
stock of its subsidiary Transmission Technology Corporation and all unpaid
dividends attributable to the Series B preferred shares into 207,576 shares of
unregistered, restricted common stock based on the value of the original $32,000
subscription plus $4,533 in unpaid dividends. The conversion price was
determined to be 40% of the fair market value of unrestricted, registered common
shares on the date of conversion.

Common Stock:

During fiscal year 2003, the Company issued private placements of an aggregate
16,786,410 shares of common stock and detachable warrants for total cash
consideration of $3,180,797 as follows:

During the first quarter of fiscal 2003, the Company, in conjunction with a
separate Private Placement Memorandum, or Series A PPM, sold 6,400 Units for
gross proceeds of approximately $11,520 to two individuals. Each Unit consisted
of 10 shares of unregistered, restricted common stock; 10 Series A warrants and
5 Series B warrants. One of these individuals rescinded his investment and his
34,000 shares and all the warrants were cancelled effective in fiscal 2004. The
remaining 30,000 warrants expired unexercised in Fiscal 2004. The value of the
warrants was determined using the Modified Black-Scholes-Merton option pricing
model at a combined total of $752. The unexpired warrants were recorded as a
reduction in Paid in Capital in fiscal 2004.

During the first and second quarters of fiscal 2003, under a Private Placement
Memorandum, or Series E PPM, the Company sold an aggregate 2,954,000 Units to 52
individuals and entities for gross proceeds of $295,400. Each Unit consists of
one share of unregistered, restricted common stock and one Series E warrant to
purchase one share of unregistered, restricted common stock. Each Series E
warrant entitled the holder to purchase a share of common stock at $0.25 per
share and expired on December 1, 2004. The value of the warrants was determined
using the Modified Black-Scholes-Merton option pricing model at a value of
$0.058 per warrant and was accounted for as Paid in Capital.

During the first and second quarters of fiscal 2003, in conjunction with a
separate Private Placement Memorandum, or Series H PPM, the Company sold an
aggregate 3,465,500 Units to 28 individuals and entities for gross proceeds of
$716,375. Each Unit consists of one share of unregistered, restricted common
stock and one warrant Series H to purchase one share of unregistered, restricted
common stock at an exercise price of $0.50. The value of the warrants was
determined using the Modified Black-Scholes-Merton option pricing model at a
value of $0.103 per warrant and was accounted for as Paid in Capital.

During March through September 2003, pursuant to Private Placement Memoranda, or
Series I PPM, we sold an aggregate 150,000 Units to one entity and one
individual; an additional 10,000 Units were issued in compensation for the
arrangement of the financing. Each Unit consisted of 10 shares of restricted,
unregistered common stock and 10 Series I warrants to purchase one share of
unregistered, restricted common stock. Each Series I warrant entitles the holder
to purchase a share of common stock at $0.50 per share and expires on March 30,
2005. The value of the warrants was determined using the Modified
Black-Scholes-Merton option pricing model at a value of $0.191 per warrant and
was accounted for as Paid in Capital. Total consideration received for the
160,000 units was $375,000. In the subscription agreement there was a
conditional provision for the issue of up to an additional 550,000 Units to the
entity and the individual, however, the proceeds in payment were never received;
an additional 40,000 Units that were to be issued in connection with the
perfection of the subscription were cancelled due to non-performance. The matter
is now subject to litigation as discussed in Item 3(B) above under Composite
Technology Corporation v. Acquvest, Inc., Paul Koch, Victoria Koch, Patricia
Manolis, and Michael Tarbox. The 4,400,000 shares and 4,400,000 warrants related
to the 550,000 Units subscribed to under the conditional provision were issued
by the transfer agent, were being held by the attorney handling the matter for
us, and were cancelled in October, 2003. The above 10,000 Units issued in
compensation are themselves the subject of separate litigation that is
preventing their exercise. The above 10,000 Units issued in compensation are
themselves the subject of separate litigation that is preventing their exercise.

During August 2003, pursuant to a Private Placement Memoranda, or Series O PPM,
we sold an aggregate 16,667 Units for gross proceeds of $50,000. Each Unit
consisted of 10 shares of restricted, unregistered common stock and five Series
O warrants to purchase one share of unregistered, restricted common stock. Each
Series O warrant entitles the holder to purchase one share of common stock at
$0.60 per share and expires at the earlier of June 30, 2005 or three weeks
following written notification by us that its common stock closed at or above
$0.90 per share for 10 consecutive trading days. In addition, the Series O
warrants can be redeemed by us for $0.001 each if a Registration Statement
covering the shares underlying the Series O warrants has been declared effective
and our stock closes at or above $0.90 for 10 consecutive days. The value of the
warrants was determined using the Modified Black-Scholes-Merton option pricing
model at a value of $0.263 per warrant and was accounted for as Paid in Capital.

During the last quarter of fiscal 2003, pursuant to a Private Placement
Memoranda, or Series N PPM, we sold an aggregate 50,000 Units for gross proceeds
of $125,000 to 5 individuals and entities. Each Unit consisted of 10 shares of
restricted, unregistered common stock and 10 Series N warrants to purchase one
share of unregistered, restricted common stock. Each Series N warrant entitles
the holder to purchase one share of common stock at $0.50 per share and expires
at the earlier of June 30, 2005 or three weeks following written notification by
us that our common stock closed at or above $0.75 per share for 10 consecutive
trading days. In addition, the Series N warrants can be redeemed by us for
$0.001 each if a Registration Statement covering the shares underlying the
Series N warrants has been declared effective and our common stock closes at or
above $0.75 for 10 consecutive days. The value of the warrants was determined
using the Modified Black-Scholes-Merton option pricing model at a value of
$0.258 per warrant and was accounted for as Paid in Capital up to the total
consideration paid of $125,000.

During September a 2003, pursuant to Private Placement Memoranda, or Series P
PPM, we sold an aggregate 332,500 Units for gross proceeds of 1,330,000 to 26
individuals. Each Unit consisted of 10 shares of restricted, unregistered common
stock and two Series P warrants to purchase one share of unregistered,
restricted common stock. Each Series P warrant entitles the holder to purchase
one share of common stock at $0.80 per share and expires at the earlier of July
30, 2005 or three weeks following written notification by us that its common
stock closed at or above $1.20 per share for 10 consecutive trading days. In
addition, the Series P warrants can be redeemed by the Company for $0.001 each
if a Registration Statement covering the shares underlying the Series P warrants
has been declared effective and our common stock closes at or above $1.20 for 10
consecutive days. The value of the warrants was determined using the Modified
Black-Scholes-Merton option pricing model at a value of $1.212 per warrant and
was accounted for as Paid in Capital.

During September 2003, pursuant to various Private Placement Memoranda, we sold
an aggregate of 88,462 restricted unregistered shares of common stock to 3
individuals at a price of $0.65 per share for gross proceeds of $57,500; 27,778
restricted unregistered shares of common stock to one individual at a price of
$0.90 per share for gross proceeds of $25,000; and 195,000 restricted
unregistered shares of common stock to 3 individuals at a price of $1.00 per
share for gross proceeds of $195,000.

For the fiscal year ended September 30, 2003 a total of $251,350 of legal and
other costs related to the private placements was recorded as a reduction in
paid in capital.

For the fiscal year ended September 30, 2003 the Company issued in aggregate
9,503,900 shares of common stock for consulting services. The Company recorded
expenses totaling $4,316,964. Included in the 9,503,900 shares issued were a
total of 2,515,000 restricted, unregistered common shares representing
consulting services valued at $1,346,861. These restricted shares were issued as
follows:

During February 2003, the Company issued 750,000 shares of the Company's
restricted, unregistered common stock to nineteen individuals and six unrelated
entities for various consulting services relating to offering costs associated
with Series E and Series H Private Placements. The shares were valued at the
fair value of the services provided of $213,750.

In February 2003, the Company issued an aggregate 1,065,000 shares of the
Company's restricted, unregistered common stock to two individuals, in payment
of product development consulting services provided totaling $404,523.

During August 2003, the Company issued 700,000 shares of restricted,
unregistered common stock to two entities in compensation for professional
consulting services consisting of marketing, business development, and business
strategy services valued at $728,588.

Included in the 9,503,900 shares of common stock issued for consulting services
were a total of 6,988,900 shares of common shares registered under an S-8 filing
were issued for services valued at the fair market value of the date of the
stock issuance or in payment of balances due on services rendered totaling, in
aggregate $2,970,103 as follows:

From October, 2002 until September, 2003 the Company issued 2,250,000 common
shares valued at $1,004,960, the fair value at date of issuance, were issued to
two individuals for litigation and general corporate legal services rendered.

From October, 2002 until March, 2003, the Company issued in aggregate 4,738,900
common shares valued at $1,965,143, the fair value at date of issuance were
issued to eleven individuals for intellectual property and product research and
development related consulting services.

In February 2003, CTC entered a Settlement Agreement and Mutual Release pursuant
to litigation settlement which required the Company to issue 1,500,000 shares of
unregistered, restricted common stock to various parties in the actions. The
shares issued were valued at $93,750, or $0.0625 per share, which represented a
value consistent with the issuance of similar securities, namely the value of
the restricted common stock issued in conjunction with the Series E and Series H
private placements of $0.042 and $0.072 per share respectively.

In March 2003, the Company issued an aggregate 300,000 shares of the Company's
restricted, unregistered common stock to an individual, who was an existing
shareholder of the Company, for conversion of $30,000 of a short-term working
capital loan and accrued, but unpaid, interest of $13,101.

During February 2003, the Company issued an aggregate 200,000 Series H Warrants
to one entity in remuneration for professional services connected with the
issuance of the Series H Warrants. Each Series H warrant gives the older the
right to purchase one share of unregistered, restricted common stock at an
exercise price of $0.50. The value of the warrants was determined using the
Modified Black-Scholes-Merton option pricing model at a value of $0.103 per
warrant and $20,600 was accounted for as Offering Costs.

In April 2003 the Company issued 250,000 Series L warrants to purchase the
Company's restricted unregistered common stock with an exercise price of $0.42,
to one individual for consulting services. These warrants expire April 8, 2008.
The value of the warrants was determined using the Modified Black-Scholes-Merton
option pricing model at a value of $0.245 per warrant and was accounted for as
Paid in Capital and expensed Legal, Consulting, and Professional expenses in the
amount of $61,250.

In April 2003 the Company issued 49,999 Series K warrants to purchase the
Company's restricted unregistered common stock at an exercise price of $0.50 to
3 individuals for settlemen of a dispute over attrorney fees. These warrants
expire March 30, 2005. The value of the warrants was determined using the
Black-Scholes option pricing model at a value of $0.235 per warrant and was
accounted for as Paid in Capital and expensed Legal, Consulting, and
Professional expenses for $11,750.

During fiscal 2003, the Company recognized $572,549 in compensation expense
related to vested options that were granted with exercise prices below the
market price at the date of the grants in fiscal 2002. There were no option
grants in fiscal 2003 issued where the exercise price on the date of grant was
below the market price.

Common Stock Committed:

As of September 30, 2003, the Company had recorded in aggregate $194,375 in
Common Stock Committed consisting of $15,000 and $79,375 for the exercise of
60,000 stock options and 317,500 Series E stock warrant exercises respectively
and $100,000 for the Series P issuance completed in fiscal 2004 . Both the
options and warrants had an exercise price of $0.25 per share. The Common Stock
Committed is recorded in the Statement of Equity as Common Stock Committed and
the balances are included in the Statement of Cash Flows in the appropriate
classification in Cash Flows from Financing Activities. The shares purchased
were issued in fiscal 2004.

FISCAL YEAR ENDED SEPTEMBER 30, 2004

Preferred Stock Activity:

In January 2004, the Company converted the 1,000 shares of Series B 10%
preferred stock of its subsidiary Transmission Technology Corporation into
80,000 shares of unregistered, restricted common stock that were issued to one
individual pursuant to a court order. In addition under the terms of the order,
the Company was obliged to issue 27,631 shares of unregistered, restricted
common stock in satisfaction of the unpaid preferred stock dividends and
interest totaling $45,395.

Common Stock Activity:

During fiscal year 2004, the Company issued 3,089,360 shares of Common Stock and
received cash proceeds totaling $3,265,104 for the following Private Placements:

In the first quarter of fiscal 2004, pursuant to a Private Placement Memoranda,
or Series P PPM, the Company sold an aggregate of 60,000 Units to 8 individuals
for gross proceeds of $240,000. $100,000 of the $240,000 was received in fiscal
2003 and was recorded as Common Stock Committed in 2003. Each Unit consisted of
10 shares of restricted unregistered common stock and two Series P warrants to
purchase one share of unregistered, restricted common stock. Each Series P
warrant entitles the holder to purchase a share of common stock at $0.80 per
share and expires at the earlier of July 30, 2005 or three weeks following
written notification by the Company that its common stock closed at or above
$1.20 per share for 10 consecutive trading days. In addition, the Series P
warrants can be redeemed by the Company for $0.001 each if a Registration
Statement covering the shares underlying the Series P warrants has been declared
effective and the Company's common stock closes at or above $1.20 for 10
consecutive days. The value of the warrants was determined using the Modified
Black-Scholes-Merton option pricing model at a value of $1.212 per warrant and
was accounted for as Paid in Capital.

During November 2003, pursuant to a Private Placement Memoranda, we sold an
aggregate of 89,360 restricted unregistered shares of common stock to 5
individuals at a price of $1.40 per share for gross proceeds of $125,104. The
Company relied upon the exemption from registration as set forth in Section 4(2)
of the Securities Act of 1933 for the issuance of these shares. All of the
recipients took their securities for investment purposes without a view to
distribution and had access to information concerning the Company and our
business prospects, as required by the Securities Act. In addition, there was no
general solicitation or advertising for the acquisition of these securities.

In December 2003, the Company issued 2,400,000 Units for $1.25 per unit for cash
proceeds of $2,790,000 net of offering costs of $210,000, referred to in this
report a the December Offering. The December Offering was subscribed by 5
investment funds. Each unit consisted of one share of the Company's unregistered
restricted common stock and 0.5 warrant to purchase one share of the Company's
unregistered restricted common stock at an exercise price of $2.04 per share.
The warrants vest immediately and expire in December 2008. The Company has the
right to call the warrants if the closing price of the Company's common stock is
greater than 200% of the exercise price of the warrants for 20 consecutive
trading days. The value of the December Offering warrants was determined using
the Modified Black-Scholes-Merton option pricing model at a value of $1.877 per
warrant and was accounted for as Paid in Capital. In June 2004, the Company
offered the December Offering warrant holders, for a limited period of time, the
opportunity to exercise their warrants at a reduced strike price of $0.50.
Pursuant to this offer, the Company issued 1,000,000 shares of the Company's
unregistered, restricted common stock against receipt of $500,000. One holder of
200,000 warrants did not take advantage of this right. In connection with this
offering, one professional company was issued with an additional 120,000
warrants on the same terms as the original offering. As a result of this
transaction, we recorded additional Paid in Capital and Legal, Consulting, and
Professional expenses of $1,433,880 resulting from the modification of the
warrant terms. The 120,000 warrants issued to the professional services firm
were valued using the Modified Black-Scholes-Merton option pricing model at
$1.277 per warrant and $153,207 in additional Paid in Capital and Legal,
Consulting, and Professional expenses were recorded.

During fiscal 2004, the Company issued in aggregate 1,213,345 shares of
restricted, unregistered common stock in exchange for services valued at
$1,520,047 as follows:

During January 2004, the Company issued 58,881 shares of restricted,
unregistered common stock to two entities in compensation of professional
services and product research with a value of $65,166. During March 2004, the
Company issued 150,000 shares of restricted, unregistered common stock in the
name of one entity in partial compensation of professional services. During the
June, 2004 it was agreed by the Company and the entity that the entity would not
accept the shares in lieu of partial payment for professional services with the
result that the 150,000 shares were cancelled. In July 2004, the Company issued
790,000 shares of restricted, unregistered common stock to two individuals and 3
entities in remuneration for and payment of debts relating to research, product
development, marketing, business development and business strategy services
valued at $790,000. During August 2004, the Company issued 364,373 shares of
restricted, unregistered common stock to one officer and one consultant in
remuneration for consulting services performed in fiscal 2003 and valued at
$664,881, the closing market price on the date of issuance.

During fiscal 2004, the Company issued in aggregate 700,000 shares registered
under an S-8 registration statement to two individuals for legal, product
development, and intellectual property services valued at $1,058,000, the fair
market value on the date of the share issuances.

In July and August 2004, the Company issued 675,000 shares of restricted,
unregistered common stock to two individuals as part of a legal settlement
valued at $739,000, the closing market price on the date of issuance.

During December 2003, the Company issued 140,160 shares of restricted,
unregistered common stock to an entity in lieu of 2 month's rent on a commercial
facility valued at $147,168, the market value of the rents.

Common Stock option activity:

During fiscal year 2004, the company issued 370,000 shares in conjunction with
option exercises from one consultant and one employee at an option price of
$0.25 per share. Of the $92,500 in consideration, the Company had received
$15,000 in fiscal 2003 and had recorded this balance as Common Stock Committed
in the Statement of Equity and Proceeds from option exercises in the Statement
of Cash Flows The company also issued a total of 237,220 common shares, net of
43,045 shares recalled, pursuant to the cashless exercise of stock options by
employees of the company. Under the guidelines of FIN 44, the Company accounted
for the cashless exercises as a modification of option grant and recorded a
total of $364,277 of compensation charges to compensation expense.

During fiscal 2004, the Company recognized $298,820 in compensation expense
related to vested options that were granted with exercise prices below the
market price at the date of the grants in fiscal 2002. There were no option
grants in fiscal 2004 issued where the exercise price on the date of grant was
below the market price.

Common Stock warrant activity:

During fiscal year 2004, the Company received $2,817,403 for the exercise of an
aggregate of 6,718,555 warrants as follows:

A total of 1,000,000 "December" offering warrants were exercised at an exercise
price of $0.50 per warrant resulting in $500,000 in cash consideration paid to
the company. A total of 1,860,000 "Series E" warrants were exercised at a price
of $0.25 per warrant resulting in $388,125 in cash consideration paid to the
company. A total of 3,665,500 "Series H" warrants were exercised at a reduced
exercise price of $0.50 per share resulting in cash consideration paid of
$1,832,750. A total of 193,055 "Numbered" warrants were exercised at an exercise
price of $0.50 per share resulting in consideration of $96,528 received by the
Company. Of these exercises, the Company had previously recorded $79,375 as
Common Stock Committed in fiscal 2003 in the Statement of Equity and as Proceeds
from warrant exercises in the Statement of Cash Flows.

In November 2003, the Company made an offer to the holders of the Series E and
Series H warrants that if the holders exercised their warrants before December
10, 2003, the holder would receive one Series R warrant to purchase 1 share of
unregistered restricted common stock for every 5 Series E or H warrants
exercised. Each Series R warrant entitles the holder to purchase one share of
common stock at $1.95 per share and expires on December 30, 2005. In addition,
the Series R warrants can be redeemed by the Company for $0.001 each if a
Registration Statement covering the shares underlying the Series R warrants has
been declared effective and the Company's common stock closes at or above $3 for
10 consecutive days and if the shares underlying the warrants have been
registered. In December 2003, the Company issued 58,500 Series R warrants to 13
individuals. The value of the Series R warrants was determined using the
Modified Black-Scholes-Merton option pricing model at a value of $1.814 per
warrant and was accounted for as Paid in Capital and Legal, Consulting, and
Professional expense in the amount of $106,120.

During the last quarter of fiscal 2004, the Company issued 1,427,000 Series S
warrants to 7 individuals and 2 entities in connection with professional
services rendered to the Company and in settlement of certain disputes relating
to such services. Each Series S warrant entitles the holder to purchase one
share of unregistered, restricted common stock at $1.00 per share and expires at
the earlier of July 17, 2007 or following written notification by us that our
common stock closed at or above $3.00 per share for 10 consecutive trading days.
The value of the Series S warrants was determined using the Modified
Black-Scholes-Merton option pricing model at a value of $0.644 per warrant and
was accounted for as Paid in Capital and Legal, Consulting, and Professional
expense in the amount of $918,376.

During the last quarter of fiscal 2004, the Company issued 160,000 Series T
warrants to 4 individuals and 1 entity in connection with professional services
rendered to the Company. Each Series T warrant entitles the holder to purchase
one share of unregistered, restricted common stock at $1.00 per share and
expires at the earlier of July 17, 2008. The value of the Series T warrants was
determined using the Modified Black-Scholes-Merton option pricing model at a
value of $0.662 per warrant and was accounted for as Paid in Capital and Legal,
Consulting, and Professional expense in the amount of $105,915.

DEBENTURE OFFERING

On August 17, 2004, CTC closed a financing transaction in which it sold 6%
convertible debentures to select institutional accredited investors, in order to
raise a total of $15,000,000. We received $5,000,000 upon closing and
$10,000,000 was deposited into a Custodian Account to secure repayment of the
debentures. The debentures will mature on August 17, 2007. The investors may
convert the debentures into our common stock for $1.67 per share, or the
Conversion Price. We may force conversion of all outstanding debentures if the
daily volume weighted average price of our common stock exceeds the Conversion
Price by 150%. We may drawdown the $10,000,000 held in the Custodian Account on
a monthly basis starting after the effective date of a Registration Statement
registering the common stock issuable upon conversion debentures by exercising a
monthly optional redemption, or the Monthly Redemption. The minimum Monthly
Redemption is $500,004. The Monthly Redemption may only be paid by the issuance
of our common stock to the investors priced at 93% of the volume weighted
average price of our common stock at the time of such Monthly Redemption.

The investors also received warrants to purchase an aggregate of 3,453,947
shares of common stock, 50% of which are at an exercise price of $1.75 per share
and the balance of which are at an exercise price of $1.82 per share. The
warrants were valued using the Modified Black-Scholes-Merton option pricing
model at an aggregate value of $6,364,063. The warrant value was recorded as
Paid in capital and as a discount to the debentures. The discount will be
amortized to interest expense over the expected duration of the debentures which
are scheduled for repayment in August, 2007.

On November 23, 2004, we reached an agreement with the four funds that purchased
the debentures to release the $10 million that was held in a custodian account
and was recorded on the September 30, 2004 balance sheet as Restricted Cash. The
$10 million was to be released periodically after the effectiveness of a
registration statement filed by the Company on Form SB-2 pursuant to monthly
optional redemptions. In consideration for such early release of the $10
million, each of the four funds was issued an additional warrant to purchase (in
aggregate) 1,083,591 shares of our common stock with an exercise price of $3.23.
The four funds also agreed to extend the deadlines for the filing of and
effectiveness date of the registration statement. The additional warrants were
valued using the Modified Black-Scholes-Merton option pricing model at $1.919
per warrant. The aggregate warrant value of $2,079,523 was recorded as Paid in
Capital and Legal, Professional, and Consulting expense in Fiscal 2005.

Lane Capital Markets acted as our exclusive placement agent and financial
advisor in connection with the placement of the debentures. In partial
consideration for Lane Capital's services, Lane Capital received 500,000 Series
U warrants, a 4-year warrant to purchase 500,000 shares of our common stock with
an exercise price of $1.82 per share. The value of the Series U warrants was
determined using the Black-Scholes option pricing model at a value of $1.23 per
warrant and was accounted for as Paid in Capital and Legal, Consulting, and
Professional expense in the amount of $615,012. CTC may, subject to a 20 day
notice, call the warrants if our common stock is equal to or exceeds 200% of
their exercise price.

We believe that our current cash balance, the proceeds from the conversion of
warrants of approximately $6,077,000 that are callable at the discretion of the
company subject to certain market conditions, progress payments that may be made
on the $2.675 million order, drawdowns on the capital lease financings, and
additional sales of cable will cover anticipated operating expenses for a period
of one year without supplementing our cash reserves. The proceeds from the sale
of the Debentures will, however, be used exclusively for operations relating to
the commercialization of our principal product, the ACCC cable and general and
intellectual property expenses relating to other products. With respect to the
pursuit of our other products and technologies, CTC will proceed with
discussions with potential sources of financing through one or more of CTC's
subsidiaries in joint ventures or other forms of partnership or cooperation.
Except for the capital lease financing described above, we have no definitive
agreements or plans to raise additional capital.

We anticipate that we will continue to issue common stock in exchange for
certain consulting services, stock options as a form of incentive compensation
to our employees, and warrants as incentives to capital lending agencies and
possible future debt or equity financings.

ACQUISITION OF PLANT AND EQUIPMENT

We do not own any real estate. We have designed, built and successfully operated
three pultrusion lines for ACCC composite core. These lines are now being
operated in the leased facility that we moved into during the first quarter of
2004. We expect 1-3 additional lines to be made operational at the Irvine
facility before moving production to a new facility. However, no such new
facility has been identified.

SALE-LEASE BACK OF CAPITAL ASSETS

On May 5, 2004 we entered into a $500,000 sale leaseback of certain of our
capital assets, including our manufacturing lines. Under the terms of the Master
Lease Agreement we received $450,000 which was net of a 10% security deposit and
are to make payments of $16,440 per month for 36 months. At the end of the lease
period, CTC has the right to renew the lease for an additional 12 months,
terminate and return the equipment or purchase the equipment at the fair market
value, subject to a minimum of 10% and a maximum of 20% of the original
capitalized cost. We recognized a gain in the amount of $ 59,045 from this
transaction and will defer the gain and recognize it as income over the period
of the initial lease term.

                                       42

<PAGE>


PLAN OF OPERATIONS

ACCC COMMERCIALIZATION STRATEGY

We plan to continue our strategic path outlined in "RESULTS OF OPERATIONS - ACCC
Bare Overhead Cable Operations." As an important part of this strategy, we
expect to open a production facility for the commercial production of the ACCC
core, planned for the second quarter of the fiscal year ending September 30,
2005. However, no such new facility has been identified.

ACCC targets an industry which is mature in North America and Western Europe and
developing in various other countries around the world, such as Eastern Europe,
China and South East Asia, and South America. In spite of this, we believe that
the utility and distribution companies will be investing increasing amounts in
renewing their aging, insufficient transmission and distribution networks.

Our strategy at present is to enter into arrangements with cable manufacturers
internationally under which we will supply our core to these manufacturers for
wrapping and resale in allocated markets. Initial deliveries will be made from
production facilities in the U.S. with additional local facilities established
as the market requires.

In certain selected international markets we plan to joint venture with local
partners in the establishment of its ACCC core production and sales.

ORGANIZATION OF A NEW PRODUCTION FACILITY

We consider it a priority to organize our full scale commercial production at a
new facility in preparation for its expected orders of cable. Although
conceptual plans are underway to transfer production to a new facility when the
order volume reaches a critical mass, no such production facility has been
identified. As an alternative, we still maintains the ability to use
sub-contractors to produce the core necessary for supply to General Cable and
other manufacturers, but would prefer to organize its own production in a timely
manner. We do not anticipate acquiring any real estate for this purpose.
Equipment leasing agreements are being negotiated to supplement existing funding
arrangements for this purpose. We expect that the new production facility will
return its initial capital investment in a short period of time, however, we
will use our income to invest in a continued ramp-up of capacity.

CONTINUING PRODUCT RESEARCH AND DEVELOPMENT

We continue to believe research and development activities are important to our
success. Over the past 12 calendar months we completed various composite
reinforced cable designs and developed the hardware required to splice,
terminate, and extend the cable. Additionally, we designed and sought patents
for novel composite structures. In 2005 we plan to complete our prototype high
speed ACCC core production process and our unique production line equipment that
will allow for the cost effective production of several types of composite
shapes for use in distinct complex composite products.

We plan to continue designing, prototyping and producing our proprietary high
speed manufacturing systems for our own use and for sale to our joint venture
partners and/or licensees, as appropriate. We will, in some instances, produce
cable through relationships with existing cable makers, by having them add
helically stranded combinations of individual aluminum wires around the
composite core and/or by using our proprietary pultrusion systems which CTC will
supply.

                                       43

<PAGE>


FINANCIAL PLANS

It is anticipated that we will begin generating sales in fiscal year ending
September 30, 2005 sufficient to cover its operating costs. Central to our
financial strategy for fiscal 2005 is the securing of sufficient lease financing
to manage the ramp up of its core production and the organization of separate
larger production facilities. As part of the preparation for this, subsequent to
year end, we have already obtained approximately $1.4 million in lease financing
commitments and have a firm offer for an additional $3 million in equipment
lease financing.

We expect to commit $3-5 million in raw materials purchases that would secure
access to long term supplies of such raw materials. These amounts may be funded
from down payments on purchases, trading credit facilities and short term loans,
topped up, as necessary, with operating capital.

Our financial statements include a going concern opinion from our auditors
acknowledging that during the year ended September 30, 2004, the Company
incurred a net loss of $14,687,874 and had negative cash flows from operations
of $18,735,430; and in addition that the Company had an accumulated deficit of
$26,439,356 at September 30, 2004. These losses and negative cash flows are the
result of Company undergoing its product development phase during its start-up
period. During start up a product development company must rely on the promise
of future revenues (if the product under development gains acceptance) to secure
finance from the capital markets so that it can complete the development of its
products. During this phase, there is no guarantee that the product will be
completed, accepted or provide a marketable advantage and therefore no guarantee
that the development will ever be profitable. The start up company's ability to
become a going concern is dependent upon its ability to emerge from its
development phase with a business that can generate profit form operations
and/or to obtain the necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come due.

Management believes that the Company is now emerging from its development phase;
and while the outcome of it future development cannot be predicted with any
certainty at this time, in its present situation, management believes that it
has completed product development sufficiently and is able to plan the
introduction of the ACCC product into the market. In connection with its
introduction, ACCC has, to date, had an excellent reception in the market and
the Company believes that it can break even on its operations without the need
for raising additional operating capital. However, management plans to ensure
that sufficient capital will be available to provide for its capital needs with
minimal borrowings and may issue equity securities to ensure that this is the
case.

PERSONNEL

The Company currently has 48 full time employees. The opening of new production
facilities will increase this number significantly. The Company expects that the
number of employees at its central office may fall marginally as the new
production facilities are organized.

The Company makes extensive use of the services of professional consultants and
consulting companies. The Company expects to continue this practice during the
course of the fiscal year ending September 30, 2005. In particular the
Information Systems and Intellectual Property Departments will continue to be
operated under the responsibility of the CEO using outside consulting firms and
individuals. The Company believes that it would be difficult to secure the same
level of expertise at an affordable rate by hiring employees for these areas.
The Company expects to decrease its dependence on external consultants for
marketing and sales during Fiscal 2005.

The Company expects to increase the number of corporate officers by 2 to a total
of 4 in the new year with the addition of a President and a Chief Financial
Officer (who will assume the role of Corporate Secretary).

The Company currently has 2 Directors. The Company is seeking and expects to
increase the number of members of the Board by 3 additional independent
directors during the fiscal year ending September 30, 2005.

We believe that our employee relations are good. None of our employees are
represented by a collective bargaining unit. We anticipate employing the
services of a professional human resources consulting specialist to audit and
supervise our HR policies and procedures.

                                       44

<PAGE>


OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements.

ITEM 7 - FINANCIAL STATEMENTS

Our financial statements appear at the end of this report beginning with the
Index to Financial Statements on page F-1 of this report.

ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None.

ITEM 8A - CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation
of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).
This evaluation was carried out under the supervision and with the participation
of our management, including the Chief Executive Officer (acting as the
principal accounting officer) and Chief Operating Officer. The evaluation
included certain internal control areas in which we have made and are continuing
to make changes to improve and enhance controls. Based upon that evaluation, our
Chief Executive Officer and Acting Chief Financial Officer has concluded that
our disclosure controls and procedures were effective as of the end of the
period covered by this report to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms, and that such information
is accumulated and communicated to our management, including our Chief Executive
Officer and Acting Chief Financial Officer.

We have enhanced and upgraded our accounting system with the addition of new
software and are in the process of transferring the system to a new secure
server. These measures are part of an overall upgrade of our management computer
systems, which we believe enhance our system of internal controls. This upgrade
was not made in response to any deficiency in our internal controls. Other than
such ongoing modifications to our computer systems, there was no change in our
internal control over financial reporting during our fourth quarter of fiscal
year ended September 30, 2004 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

                                       45

<PAGE>

ITEM 8B - OTHER INFORMATION

None.

                                       46

<PAGE>

                                    PART III

ITEM 9 - OFFICERS AND DIRECTORS

The following table sets forth the names, ages, and positions of our directors
and officers.

<TABLE>
<CAPTION>
Name                                Age                       Position Held        Officer since          Director since
------------------------          -----                    ----------------      ---------------        ----------------
<S>                               <C>              <C>                           <C>                    <C>
Benton H Wilcoxon                    55             Chief Executive Officer                 2001                    2002
                                                     Chairman, Acting Chief
                                                          Financial Officer

C. William Arrington                 63                            Director                 2001                    2002
                                                    Chief Operating Officer
                                                              and President

Dominic J. Majendie                  42             Corporate Secretary and                 2004                     N/A
                                                       Vice President, EMEA
</TABLE>

The two directors named above will serve until the next annual meeting of our
stockholders or until their successors are duly elected and have qualified.
Directors will be elected for one-year terms at the annual stockholders meeting.
Officers will hold their positions at the pleasure of the board of directors,
absent any employment agreement. There is no arrangement or understanding
between any of our directors or officers and any other person pursuant to which
any director or officer was or is to be selected as a director or officer, and
there is no arrangement, plan or understanding as to whether non-management
stockholders will exercise their voting rights to continue to elect the current
board of directors. There are also no arrangements, agreements or understandings
between non-management stockholders that may directly or indirectly participate
in or influence the management of our affairs.

There are no family relationships among the foregoing directors and executive
officers. None of the directors or executive officers has, during the past five
years: (a) Had any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time; (b) Been convicted in a
criminal proceeding or subject to a pending criminal proceeding; (c) Been
subject to any order, judgment, or decree, not subsequently reversed, suspended
or vacated, of any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities, futures, commodities or banking activities; and (d)
Been found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading Commission
to have violated a Federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.

                                       47

<PAGE>


BIOGRAPHICAL INFORMATION

BENTON H WILCOXON, 55, has been our Chief Executive Officer since November 3,
2001 and Chairman of the Board and a Director since February 2002. Currently, he
is also the acting Chief Financial Officer of CTC. He also is Chairman and Chief
Executive Officer of the Company's 100% owned subsidiaries TTC, CCC, CWS and
TPC. From 1998 to 2001, he was a consultant for Magnesium Alloy Corporation, a
Canadian company involved in the development of magnesium salt deposits and
served as a Director from 1998 until December 2003. Between 1998 and 2000 he was
a consultant to Macallan & Callanish Ltd., regarding business in Russia and
Ukraine. Mr. Wilcoxon held senior positions with Ashurst Technology Ltd., a
Bermuda corporation, from 1991 to 1997, culminating as Chairman, Chief Executive
Officer and President. Ashurst Technology Ltd. commercialized advanced materials
technologies, primarily from the Ukraine.

C. WILLIAM ARRINGTON, 63, has been our President since November 3, 2001 and a
Director since February 2002. He also is President and Chief Operating Officer
of CTC's 100% owned subsidiaries TTC, CCC, CWS and TPC. Mr. Arrington has over
forty years experience in the electrical energy industry, both generation and
transmission. This work has been in the areas of fossil fuel, nuclear,
hydroelectric, wind and solar generation. He has also worked extensively in the
chemical, petrochemical, utility and infrastructure development fields both in
the U.S. and abroad. Mr. Arrington has served in many capacities in DOE
programs. Through the USAFI program, he has achieved several degrees including a
PhD in electrical engineering and an MBA. He currently serves on the boards of a
number of energy and technology related companies. Mr. Arrington has operated
his own consulting firm for the past eight years. Throughout his career he has
specialized in air and water pollution control, new materials, renewable energy
sources, resource conservation and technology commercialization.

DOMINIC J. MAJENDIE, 42, was appointed Secretary in August 2004. He has held the
position of Director of Operations for EMEA (Europe, Middle East and Africa)
since October 2002. From October 2001 to September 2002, Mr. Majendie was the
General Manager of Middle East Telecommunications Company FZ-LLC, Dubai UAE,
with the responsibility for operations including VoIP telecommunications
operations and tendering for telecommunications network construction. Mr.
Majendie has worked in the senior management of new materials, technology, IT
and telecommunications companies in North America, Europe, Ukraine, and the
Middle East. From April 1999 to October 2001, Mr. Majendie served as the
Chairman of the Supervisory Board of ZAT 'Telesystems of Ukraine,' where he was
responsible for the reorganization of the business and the company as well as
guiding strategic, marketing and business planning, and negotiations with
investors, equipment suppliers and partners for the launch of a mobile and local
access telecommunications network. He has a law degree from Geneva University,
Switzerland.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires our directors and executive officers, and persons who beneficially own
more than ten percent of a registered class of our equity securities, to file
with the Securities and Exchange Commission (the "Commission") initial reports
of beneficial ownership and reports of changes in beneficial ownership of our
Common Stock. The rules promulgated by the Commission under Section 16(a) of the
Exchange Act require those persons to furnish us with copies of all reports
filed with the Commission pursuant to Section 16(a). The information in this
section is based solely upon a review of Forms 3, Forms 4, and Forms 5 received
by us.

                                       48

<PAGE>


Mr. Wilcoxon timely filed Form 4s to report changes in his beneficial ownership
during fiscal 2003 and had no changes to beneficial ownership in fiscal 2004.
Mr. Arrington had no changes in his beneficial ownership during fiscal 2003 or
fiscal 2004. Mr. Majendie failed to timely file a Form 3 within 10 days after he
was elected an officer in August 2004. Mr. Majendie did not have any change in
beneficial ownership after he was elected an officer in August 2004. Form 5s
were not required to be filed under Rule 16a-3(f)(2) because all transactions
otherwise required to be reported on Form 5 were reported before the due date of
the Form 5.

CODE OF ETHICS

We have adopted a code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. Such code of ethics will be
provided to any person without charge, upon request. You may request a copy of
this code of ethics to be sent as a pdf file to an e-mail address; if you do not
have an e-mail address you may request a copy by sending such request to us at
our principal office.

AUDIT COMMITTEE FINANCIAL EXPERT

No person serving as a director qualifies as an "audit committee financial
expert," as defined by the Sarbanes Oxley Act of 2002 and the regulations
promulgated under the Securities Act of 1933 and the Securities Exchange Act of
1934. In forming our Board of Directors, we sought out individuals who would be
able to guide our operations based on their business experience, both past and
present, or their education. Our business model is not complex and our
accounting issues are straightforward. Responsibility for our operations is
centralized within management. We rely on the assistance of others, such as
independent contractor accountants, to help us with the preparation of our
financial statements. We recognize that having a person who possesses all of the
attributes of an audit committee financial expert would be a valuable addition
to our Board of Directors, however, we are not, at this time, able to compensate
such a person therefore, we may find it difficult to attract such a candidate.

PROCEDURES FOR NOMINATING DIRECTORS

There have been no material changes to the procedures by which our stockholders
may recommend nominees to our board of directors during the fiscal year ended
September 30, 2004 or since the last time we responded to Item 7(d)(2)(ii)(G) of
Schedule 14A.

ITEM 10 - EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

The following executive compensation disclosure reflects all compensation
awarded to, earned by or paid to the executive officers below, for the fiscal
years ended September 30, 2004, 2003 and 2002. None of our executive officers
received compensation in excess of $130,000 for the fiscal year ended September
30, 2004, and no officer received compensation in excess of $120,000 for the
fiscal years 2003 or 20021, respectively. The following table summarizes all
compensation received by our Chief Executive Officer, Chief Operating
Officer/President, Corporate Secretary and Chief Financial Officer (former) in
fiscal years 2004, 2003 and 2002.

                                       49

<PAGE>

<TABLE>
<CAPTION>
                             Annual Compensation
                      --------------------------

                                                                        Other Annual
Name and                      Fiscal         Salary       Bonus         Compensation
Principal Position              Year            ($)         ($)                  ($)
------------------              ----       --------       -----         ------------
<S>                           <C>         <C>             <C>           <C>
Benton H Wilcoxon               2004       $120,000          --                   --
Chief Executive                 2003       $120,000          --                   --
Officer                         2002       $ 60,000          --                   --

C. William Arrington            2004       $120,000          --                   --
Chief Operating                 2003       $120,000          --                   --
Officer and President           2002         60,000          --                   --


Dominic J. Majendie             2004       $120,000          --               10,000
Vice-President, EMEA            2003              0(3)       --                   --
                                2002              0          --                   --

Brent N. Robbins (4)            2004       $ 65,000          --                   --
Chief Financial                 2003       $ 30,000          --                   --
Officer (former)
</TABLE>

<TABLE>
<CAPTION>

                                   Long-Term Compensation
                               --------------------------------

                                 Awards Payouts
                               ------------------

                                 Stock           Underlying        LTIP            All Other
Name and                      Award(s)         Options/SARs     Payouts         Compensation
Principal Position                 ($)                  ($)         (#)                  ($)
------------------           ---------         ------------     -------         ------------
<S>                          <C>              <C>              <C>              <C>
Benton H Wilcoxon (1)               --                  --          --                 --
Chief Executive                     --                  --          --                 --
Officer                             --             635,216          --                 --

C. William Arrington (2)            --                  --          --                 --
Chief Operating                     --                  --          --                 --
Officer and President               --             635,216          --                 --

Dominic J. Majendie (3)       $410,000                  --          --                 --
Vice-President, EMEA                --           1,000,000          --                 --
                                    --                   0          --                 --

Brent N. Robbins (4)                 0                  --          --                 --
Chief Financial                     --             750,000          --                 --
Officer (former)
</TABLE>

(1) Benton H Wilcoxon was awarded an additional 2 million options by decision of
the Board of Directors dated August 13, 2003. This grant is subject to the
approval by an independent committee established by the Board of Directors to
consider compensation.

(2) C. William Arrington was awarded an additional 2 million options by decision
of the Board of Directors dated August 13, 2003. This grant is subject to the
approval by an independent committee established by the Board of Directors to
consider compensation.

(3) In August 2004, Dominic J. Majendie was awarded 250,000 shares of restricted
stock in consideration for consulting services rendered during the fiscal year
ended 2003. Compensation recorded in the financial statements for this stock
issuance for the year ended September 30, 2003 was $0. The fair market value of
the stock granted in 2004 on the date of issuance was $410,000 which is included
in the statement of operations as officer compensation in the fiscal year ending
September 30, 2004. As of September 30, 2004, the value of these shares was
$375,000 based on a closing price of $1.50 per share of our common stock, as
quoted on the OTC Bulletin Board. These shares are not subject to vesting. At
this time, we do not intend to declare dividends on the shares.

(4) Brent Robbins' employment with the Company as the Chief Financial Officer
ceased on January 30, 2004. His base salary was $120,000 per annum. At the time
of termination, Mr. Robbins exercised 120,765 options and the remaining 629,235
options were cancelled.

There were no options granted to the Company's executive officers during fiscal
year ending September 30, 2004.

Benton H Wilcoxon and C. William Arrington were each awarded an option to
purchase 2 million options by decision of the Board of Directors dated August
13, 2003. This grant is subject to the approval by an independent committee
established by the Board of Directors to consider compensation. The committee
has not yet met to decide this issue. To date, no members have been appointed to
the independent committee and no meetings have been held. Our board consists of
two non-independent directors and it is actively seeking at least three
independent directors. The options have not been included in the table above
because they have not been approved by the independent committee yet and thus
are not yet effective.


                                       50

<PAGE>

              AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR ENDED
                   SEPTEMBER 30, 2004 AND FY-END OPTION VALUES

The following table provides information on option exercises for our Chief
Executive Officer and our other most highly compensated executive officers in
the year ended September 30, 2004 and their option holdings as of September 30,
2004.The value of an in-the-money stock option represents the difference between
the aggregate estimated fair market value of the underlying stock and the
aggregate exercise price of the stock option. We have used the quoted closing
price of $1.50 per share on the OTC Bulleting Board on September 30, 2004 as the
estimated fair market value of our common stock in determining the value of
unexercised options.

<TABLE>
<CAPTION>
                                                                     Number of Securities                 Value of Unexercised
                                                                    Underlying Unexercised               In-the-Money Options at
                       Shares Acquired                            Options at Fiscal Year-End               Fiscal Year-End ($)
Name                    Upon Exercise       Value Realized         (#) Exercisable/Unexercisable         Exercisable/Unexercisable
----                   ---------------      --------------        ------------------------------         -------------------------
<S>                    <C>                  <C>                   <C>                                     <C>
Benton H Wilcoxon             --                   --                         381,129 / 254,087           $474,293.23 / $316,196.73
C. William Arrington          --                   --                         381,129 / 254,087           $474,293.23 / $316,196.73
Dominic J. Majendie           --                   --                         340,000 / 660,000           $414,459.32 / $804,538.68
Brent N. Robbins (1)        120,765              $156,995                                 0 / 0                               0 / 0
</TABLE>


(1) Prior to his termination Mr. Brent N. Robbins held a total of 750,000
options, which were granted in Fiscal Year 2003. Of these options, 120,765 were
exercised on January 29, 2004, at an exercise price of $0.53 per share,
following the departure of Mr. Robbins and the remaining 629,235 were cancelled.
We have used the quoted closing price of $1.83 per share on the OTC Bulleting
Board on January 29, 2004 as the estimated fair market value of our common
stock.



                 LONG-TERM INCENTIVE PLAN AWARDS ("LTIP") TABLE

We do not currently have any LTIP.

COMPENSATION OF DIRECTORS

Directors do not receive compensation for their services as directors, but are
to be reimbursed for expenses incurred in attending board meetings.

EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

Except for the Employment Agreement with Mr. Dominic Majendie, dated October 1,
2003, we currently have no employment agreements with any of our executive
officers, nor any compensatory plans or arrangements resulting from the
resignation, retirement or any other termination of any of our executive
officers, from a change-in-control, or from a change in any executive officer's
responsibilities following a change-in-control.

Mr. Dominic Majendie was originally employed in October 2002 as Director of
Operations, EMEA (Europe, Middle East, and Africa) of CTC, and he now occupies
the position of Vice President, EMEA, under an employment agreement dated
October 1, 2003, which expires on September 30, 2008. The essential terms of the
employment agreement are as follows:

Mr. Majendie was initially entitled to annual base compensation of $120,000.00,
which shall be increased at a minimum of 10% per year and an option to purchase
up to 1,000,000 shares of common stock, vesting with respect to 85,000 shares
each quarter was issued as of August 11, 2003.

                                       51

<PAGE>


CTC will reimburse Mr. Majendie for all reasonable business or travel expenses
and office related expenses incurred in the performance of his duties, and
provide him with a $150.00 per month telephone allowance and a company car in
accordance with the guidelines set out by the Board of Directors from time to
time, or an equivalent car allowance in cash.

In the event that CTC merges, sells a controlling interest, or sells a majority
of its assets, CTC will pay Mr. Majendie 18 months salary.

In the event the agreement is terminated prior to its expiration for any reason,
Mr. Majendie will be entitled to receive his then current base salary, any and
all accrued, earned but unpaid bonuses or benefits described.

In the event that Mr. Majendie's employment is terminated due to his death, his
beneficiary or beneficiaries shall be entitled to receive Mr. Majendie's then
current Base Salary through 60 days after the date of his death.

The employment agreement provides for early termination in the case of Mr.
Majendie's death, permanent incapacity for 6 months or more or for "Cause."
Cause includes (i) the commission of a criminal act involving fraud,
embezzlement or breach of trust or other act which would prohibit him from
holding his position under the rules of the Securities and Exchange Commission,
(ii) willful, knowing and malicious violation of written corporate policy or
rules of the Company, (iii) willful, knowing and malicious misuse,
misappropriation, or disclosure of any of proprietary matters, (iv)
misappropriation, concealment, or conversion of any money or property of CTC,
(v) being under the habitual influence of intoxicating liquors or controlled
substances while in the course of employment, (vi) intentional and non-trivial
damage or destruction of property of CTC, (vii) reckless and wanton conduct
which endangers the safety of other persons or property during the course of
employment or while on premises leased or owned by CTC, (viii) the performance
of duties in a habitually unsatisfactory manner after being repeatedly advised
in writing by CTC of such unsatisfactory performance, or (ix) continued
incapacity to perform his duties, unless waived by CTC.

The agreement also contains provisions relating to Mr. Majendie's obligation to
maintain the confidentiality of CTC proprietary information.

ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial
ownership of our common stock as of December 9, 2004, determined in accordance
with Rule 13d-3 and 13d-5 of the Exchange Act by (i) each person who is known by
CTC to own beneficially more than five percent (5%) of the outstanding shares of
our voting securities, (ii) each director and executive officer of CTC, and
(iii) all directors and executive officers of CTC as a group. Unless otherwise
indicated below, to the knowledge of CTC, all persons listed below have sole
voting and investing power with respect to their shares of common stock, except
to the extent authority is shared by spouses under applicable community property
laws, and, unless otherwise stated, their address is 2026 McGaw Avenue, Irvine
California 92614. Also included are the shares held by all executive officers
and directors as a group.

                                       52

<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
Title of Class                           Name and address                  Amount and nature              Percent of class
                                      of beneficial owner            of beneficial ownership
--------------------------------------------------------------------------------------------------------------------------
<S>                               <C>                               <C>                                  <C>
Common                                  Benton H Wilcoxon                         19,858,442 (1)                    17.76%
                                        2026 McGaw Avenue
                                          Irvine CA 92614
--------------------------------------------------------------------------------------------------------------------------
Common                               C. William Arrington                         20,631,641 (2)                    18.45%
                                        2026 McGaw Avenue
                                          Irvine CA 92614
--------------------------------------------------------------------------------------------------------------------------
Common                                Dominic J. Majendie                            675,000 (3)                        *%
                                           Dunston House,
                                        Dunston's Corner,
                                     Hemingstone, Ipswich
                                      Suffolk IP6 9QD, UK
--------------------------------------------------------------------------------------------------------------------------
Common                                G. William Harrison (4)                      5,764,461 (5)                      5.2%
                                        26218 James Drive
                                       Grosse Il MI 48138
--------------------------------------------------------------------------------------------------------------------------
                    All officers and directors as a group                         41,165,083                         36.8%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

* less than 1%.

(1) Represents ownership after gifts to family members in 2002 of 439,200
shares; and gifts to family members and a research association totaling 240,000
shares in 2003; and gifts to family in early 2004 totaling 94,000 shares.
Ownership of 19,477,312 shares is increased by 381,129 options that may be
exercised within the next 60 days. The executive owns a total of 635,216 options
to purchase shares of common stock and a further 2 million options have been
granted subject to the approval of a Board Committee.

(2) Ownership of 20,250,512 shares is increased by 381,129 options that may be
exercised within the next 60 days. The executive owns a total of 635,216 options
to purchase shares of common stock and a further 2 million options have been
granted subject to the approval of a Board Committee.

(3) Ownership of 250,000 shares is increased by 425,000 options that may be
exercised within the next 60 days. The executive owns a total of 1,000,000
options to purchase shares of common stock

(4) The address of G. William Harrison is 26218 James Drive, Grosse Il Michigan
48138.

(5) Represents beneficial ownership of shares indirectly owned or controlled by
G. William Harrison, an outsider who is not a director or officer of CTC as per
the Company records September 30, 2004: George W. Harrison, III Trust (538,318
shares); Kathleen M. Harrison Trust (440,322 shares); Bridgestone Capital Group,
LLC (Mr. Harrison is Chairman of the Board and President) (1,000 shares); and
Red Guard Industries, Inc. (Mr. Harrison is Chairman of the Board) (4,784,821
shares). As at December 9, 2004, Mr. G. William Harrison has confirmed to the
Company that his total holdings of the Company's common shares or warrants to
purchase such shares held by himself or his wife either directly or through
controlled entities represents 5,188,721 or 4.6%.

                                       53

<PAGE>


ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Between December 21, 2001 and February 11, 2002, Red Guard made five (5)
short-term working capital loans to the Company aggregating $57,000. Each
respective loan was for a term of six months and bore interest at ten and one
half of a percent (10 1/2%) per annum. On September 30, 2002, the Company and
Red Guard consummated a transaction whereby Red Guard exchanged 100.0% of the
issued and outstanding Series "A" Preferred Stock; all accrued, but unpaid,
dividends; certain short-term working capital loans; and all accrued, but
unpaid, interest in return for certain of the Company's investment interests in
other companies.

Prior to the consummation of the transactions contemplated by the Reorganization
Agreement, Glenn Little was the controlling stockholder of the Company, owning
8,548,899 shares of Common Stock. On November 3, 2001, as part of the
transactions contemplated by the Reorganization Agreement, he contributed,
without consideration, 3,116,515 shares of Common Stock to the Company for
cancellation. In addition, for his services in connection with the transaction,
he was issued 185,000 shares of Common Stock.

In June 2004, Benton Wilcoxon made a short term non interest bearing loan to us
of $81,000. This loan was repaid on August 9, 2004.

                                     PART IV

ITEM 13- EXHIBITS AND REPORTS ON FORM 8-K

EXHIBITS

Number            Description
------            -----------

2.1(3)            Articles of Merger of ElDorado Financial Group, Inc., a
                  Florida corporation, into ElDorado Financial Group, Inc., a
                  Nevada corporation

2.2(1)            Agreement and Plan of Reorganization By and Among Transmission
                  Technology Corporation, Certain of its Stockholders, and
                  ElDorado Financial Group, Inc. dated November 3, 2001

3.1(3)            Articles of Incorporation of the Company

3.2(7)            By-Laws of the Company

                                       54

<PAGE>

4.1(8)            Form of Debenture (included in Exhibit 10.10).

10.1(3)           2001 TTC Incentive Compensation Stock Option Plan

10.2(2)           Technology License Agreement by and between W.B.G., Inc. and
                  Transmission Technology Corporation dated May 7, 2001.

10.3(4)           Composite Technology Corporation 2002 Non-Qualified Stock
                  Compensation Plan

10.4(5)           Composite Technology Corporation Option Agreement - Benton
                  Wilcoxon dated August 13, 2003

10.5(5)           Composite Technology Corporation Option Agreement - William
                  Arrington dated August 13, 2003

10.6(10)          Composite Technology Corporation Option Agreement - Dominic
                  Majendie dated August 11, 2003

10.7(5)           Lease Agreement between Composite Technology Corporation and
                  CNH, LLC dated November 7, 2003.

10.8(6)           Purchase Agreement between CTC Cable Corporation and General
                  Cable Industries, Inc. dated October 2, 2004.

10.9(6)           Distribution Agreement between CTC Cable Corporation and
                  General Cable Industries, Inc. dated October 2, 2004.

10.10(8)          Form of Securities Purchase Agreement including form of the
                  Debenture attached as Exhibit A, form of the Registration
                  Rights Agreement attached as Exhibit B thereto, form of the
                  Common Stock Purchase Warrant attached as Exhibit C thereto,
                  form of legal opinion attached as Exhibit D, form of Custodial
                  and Security Agreement attached as Exhibit E, dated August 17,
                  2004.

10.10             Letter Agreement between Composite Technology Corporation and
                  ATEL Ventures, Inc., dated December 16, 2004.

10.11             Master Lease Agreement between Composite Technology
                  Corporation and IFC Credit Corporation dated May 7, 2004, as
                  amended.

10.12(13)         Letter Agreement between Composite Technology Corporation and
                  the City of Kingman, Kansas, dated November 11, 2003.

10.13(9)          Letter agreement between Composite Technology Corporation and
                  Feldman Weinstein LLP, dated November 23, 2004.

10.14(5)          Composite Technology Corporation Option Agreement - Brent N.
                  Robbins dated August 13, 2003.

10.15(10)         Employment Agreement between Composite Technology Corporation
                  and Dominic J. Majendie, dated October 1, 2003.

10.16(11)         Form of Securities Purchase Agreement, Registration rights
                  Agreement and Common Stock Purchase Warrants, dated as of
                  December 16, 2003.

10.17             Consulting Agreement by and between Composite Technology
                  Corporation, CTC Cable Corporation and Global American Energy
                  Inc., dated March 31, 2003.

10.18             License Agreement between Composite Technology Corporation and
                  W. Brandt Goldsworthy & Associates, Inc., dated February 6,
                  2003.

10.19             Consulting Agreement by and between Composite Products
                  Development, Inc., George Korzeniowski and Composite
                  Technology Corporation, dated March 1, 2002.

10.20             Consulting Agreement by and between Composite Support &
                  Solutions, Inc. and Composite Technology Corporation.

10.21             Firm Fixed Price Billable Services Agreement Terms and
                  Conditions between EPRI Solutions, Inc. and Composite
                  Technology Corporation, dated February 2003.

10.22             Research Agreement between University of Southern California
                  and Composite Technology Corporation, dated June 23, 2003.

10.23             Joint Development Agreement between FCI SA and Composite
                  Technology Corporation, dated November 5, 2003.

10.24             Consulting Agreement between David C. Bryant and Composite
                  Technology Corporation, dated February 21, 2003.

10.25             Employee Confidentiality and Assignment Agreement between
                  David C. Bryant and Composite Technology Corporation, dated
                  February 21, 2005.

14.(5)            Code of Business Ethics

21(12)            Subsidiaries of the Registrant

23.1              Consent of Singer Lewak Greenbaum & Goldstein LLP

31.1              Certification Pursuant to Rule 13a-14(a) and 15d-14(a) (4)
                  of Principal Executive Officer and Principal Financial Officer

32.1              Certification Pursuant to Section 1350 of Title 18 of the
                  United States Code of Principal Executive Officer and
                  Principal Financial Officer


(1) Incorporated herein by reference to Form 8-K filed with the U. S. Securities
and Exchange Commission on November 20, 2001.

(2) Incorporated herein by reference to Form 8-K filed with the U. S. Securities
and Exchange Commission on January 11, 2002.

(3) Incorporated herein by reference to Form 10-KSB filed with the U. S.
Securities and Exchange Commission on February 14, 2002.

(4) Incorporated herein by reference to Definitive Schedule 14C filed with the
U.S. Securities and Exchange Commission on January 27, 2003.

(5) Incorporated herein by reference to Form 10-KSB filed with the U.S.
Securities and Exchange Commisson on February 4, 2004.

(6) Incorporated herein by reference to Form 8-K filed with the U.S. Securities
and Exchange Commisson on October 7, 2004.

(7) Incorporated herein by reference to Form 8-K filed with the U.S. Securities
and Exchange Commission on January 18, 2005.

(8) Incorporated herein by reference to Form 8-K filed with the U.S. Securities
and Exchange Commission on August 25, 2004.

(9) Incorporated herein by reference to Form 8-K filed with the U.S. Securities
and Exchange Commission on November 24, 2004.

(10) Incorporated herein by reference to Form SB-2/A (File No. 333-118991) filed
with the U.S. Securities and Exchange Commission on October 29, 2004.

(11) Incorporated herein by reference to Form 8-K filed with the U.S. Securities
and Exchange Commission on December 19, 2003.

(12) Incorporated herein by reference to Form SB-2 filed with the U.S.
Securities and Exchange Commission on February 13, 2004.

(13) Incorporated herein by reference to Form SB-2 Registration Statement filed
with the U.S. Securities and Exchange Commission on January 25, 2005.

                                       55

<PAGE>

ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

The aggregate fees billed for each of Fiscal Year 2003 and Fiscal Year 2004 for
professional services rendered by our principal accountants for the audit of our
annual financial statements, review of financial statements included in our Form
10-QSBs and other services provided by the accountant in connection with
statutory and regulatory filings are as follows:

Fiscal Year 2003: $98,598.48;

Fiscal Year 2004: $103,418.61 (to date).

AUDIT RELATED FEES

The aggregate fees billed for each of Fiscal Year 2003 and Fiscal Year 2004 for
assurance and related services by our principal accountant that are reasonably
related to the performance of the audit or review of our financials statements
are as follows:

Fiscal Year 2003: $0.00;

Fiscal Year 2004: $0.00.

TAX FEES

The aggregate fees billed during Fiscal Year 2003 and Fiscal Year 2004 for
professional services rendered by our principal accountants for tax compliance,
tax advice and tax planning are as follows:

Fiscal Year 2003: $3,000.00 (to date);

Fiscal Year 2004: $0.00 (to date).

ALL OTHER ACCOUNTANT FEES

The aggregate fees billed for each of Fiscal Year 2003 and Fiscal Year 2004 for
other professional services rendered by our principal accountants are as
follows:

Fiscal Year 2003: $0.00;

Fiscal Year 2004: $0.00.

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

The Company does not have an audit committee and does not have any pre-approval
policies or procedures.

                                       56

<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)

                                    CONTENTS
                               SEPTEMBER 30, 2004

                                                                  Page

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REPORTS              F-2

CONSOLIDATED FINANCIAL STATEMENTS

       Consolidated Balance Sheet                                  F-3

       Consolidated Statements of Operations                       F-4

       Consolidated Statements of Shareholders' Equity        F-5 - F10

       Consolidated Statements of Cash Flows                 F-11 - F12

       Notes to Consolidated Financial Statements            F-13 - F41


                                       F-1

<PAGE>

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
Composite Technology Corporation
Irvine, California

We have audited the consolidated balance sheet of Composite Technology
Corporation and subsidiaries (a developmental stage company) as of September 30,
2004, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the two years in the period ended September
30, 2004, and the period from March 28, 2001 (inception) to September 30, 2004.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provided a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Composite Technology
Corporation and subsidiaries (a developmental stage company) as of September 30,
2004, and the results of their operations and their cash flows for each of the
two years in the period ended September 30, 2004, and the period from March 28,
2001 (inception) to September 30, 2004, in conformity with U.S. generally
accepted accounting principles.

As described in Note 2 to the financial statements, the September 30, 2004
financial statements have been restated.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and has an accumulated deficit. This raises substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 8 to the financial statements, the Company is involved in
various litigation matters. The effect of such litigation on the Company's
financial statements is indeterminable at this time.



/s/ Singer Lewak Greenbaum and Goldstein LLP
--------------------------------------------
SINGER LEWAK GREENBAUM AND GOLDSTEIN LLP

Los Angeles, California
December 14, 2004, except for Note 2 as to which
                 the date is April 8, 2005

                                      F-2

<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                           CONSOLIDATED BALANCE SHEET
                                   (restated)*
                               SEPTEMBER 30, 2004

<TABLE>
<CAPTION>

                                     ASSETS
<S>                                                                <C>
CURRENT ASSETS
     Cash and cash equivalents                                     $  2,930,615
     Restricted cash (See Note 11)                                   10,010,060
     Accounts receivable                                              2,501,994
     Inventory                                                          788,799
     Prepaid expenses and other current assets                          378,052
                                                                   ------------
         Total current assets                                        16,609,520

PROPERTY AND EQUIPMENT, net                                           1,253,123
OTHER ASSETS                                                            218,600
                                                                   ------------
                TOTAL ASSETS                                         18,081,243
                                                                   ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable - trade                                         1,841,535
     Accrued payroll and related expenses                               122,621
     Accrued officer compensation                                       264,561
     Deferred revenue                                                   564,750
     Deferred gain on sale of assets                                     49,569
     Lease obligations - current                                        251,782
                                                                   ------------

         Total current liabilities                                    3,094,818
                                                                   ------------
LONG TERM LIABILITIES
     Convertible notes payable, net
                  Of unamortized debt discount                        8,901,106
     Lease obligation - long term                                       482,600

                                                                   ------------
         Total long term liabilities                                  9,383,706

                Total liabilities                                    12,478,434
                                                                   ------------


COMMITMENT AND CONTINGENCIES

SHAREHOLDERS' EQUITY
     Common stock, &.001 par value
         200,000,000 shares authorized
         110,841,320 shares issued and outstanding                      110,841
     Deferred compensation - stock options                             (362,925)
     Additional paid-in capital                                      32,294,159
     Deficit accumulated during the development stage               (26,439,356)
                                                                   ------------


                Total shareholders' equity                            5,602,719
                                                                   ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $ 18,081,243
                                                                   ------------
</TABLE>

* See Notes to Consolidated Financial Statements - "Note 2 - Restatements and
Reclassifications."

                                       F-3

<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)

                      CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004

<TABLE>
<CAPTION>
                                                                                          For the Period
                                                                                          from March 28,
                                                                                               2001
                                                   For the Year Ended September 30,       (Inception) to
                                                   --------------------------------        September 30,
                                                      2004                2003                 2004
                                                   (restated)*                              (restated)*
                                                   ------------        ------------        ------------
<S>                                                <C>                 <C>                 <C>
Service Revenues                                   $  2,500,000        $         --        $  2,500,000

Less: Cost of Services                                  314,548                  --             314,548
                                                   ------------        ------------        ------------
Gross Margin                                          2,185,452                  __           2,185,452

OPERATING EXPENSES
     Officer compensation                               845,000             270,000           1,439,900
     General and administrative                       3,717,583             867,543           5,038,286
     Legal, professional, and consulting              6,790,568           1,453,930          11,360,223
     Research and development                         3,258,055           3,243,475           7,460,473
     Sales and Marketing                              1,723,557             897,735           2,621,292
     Depreciation                                       153,039              18,569             176,214
         Total operating expenses                    16,487,801           6,751,252          28,096,387
                                                   ------------        ------------        ------------
LOSS FROM OPERATIONS                                (14,302,349)         (6,751,252)        (25,910935)
                                                   ------------        ------------        ------------

OTHER INCOME/(EXPENSE)
     Interest expense                                  (408,898)                 --            (414,564)
     Interest income                                     13,897                  --              13,897
     Gain on sale of Assets                               9,476                  --               9,476
     Carrying value impairment adjustment on                 --                  --            (137,230)
       investment in other companies
                                                   ------------        ------------        ------------
         Total other income and expenses               (385,525)                 --            (528,421)
                                                   ------------        ------------        ------------

NET LOSS                                           $(14,687,874)       $ (6,751,252)       $(26,439,356)

PREFERRED STOCK DIVIDENDS                                    --              20,000                  --
                                                   ------------        ------------        ------------

NET LOSS AVAILABLE TO COMMON SHAREHOLDERS          $(14,687,874)       $ (6,771,252)       $(26,439,356)
                                                   ============        ============        ============

BASIC AND DILUTED LOSS PER SHARE
     Loss per share                                $      (0.14)       $      (0.08)
     Preferred stock dividend                                --                  --
                                                   ------------        ------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
<S>                                              <C>                  <C>
TOTAL BASIC AND DILUTED LOSS PER SHARE
   AVAILABLE TO COMMON SHAREHOLDERS              $        (0.14)      $        (0.08)
                                                 ==============       ==============

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING          103,168,626           87,132,657
                                                 ==============       ==============
</TABLE>

* See Notes to Consolidated Financial Statements - "Note 2 - Restatements and
Reclassifications."

                                       F-4

<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                       Common                     Common        Common
                                              Stock                          Stock                       Stock        Stock
                                                                                                       Committed    Subscription
                                                                                                                     Receivable
                                      Shares            Amount       Shares         Amount
<S>                               <C>                <C>         <C>              <C>                  <C>          <C>

BALANCE, MARCH 28, 2001                   --         $    --       9,166,510          $ 9,167          $    --        $     --
(INCEPTION)

Recapitalization effect of                --              --      57,333,490           57,333               --              --
reverse acquisition
with Transmission
Technology Corp.
Issuance of Series A                     165              --              --               --               --              --
Preferred Stock in exchange
for investments in other
companies for a price of
$1,000 per share on
April12, 2001

Issuance of Series B                   1,000               1              --               --               --              --
Preferred Stock for cash of
at a price of $100 per
share on August 21, 2001
Preferred Stock Dividends                 --              --              --               --               --              --
Net Loss                                  --              --              --               --               --              --
                                     -------         -------      ----------          -------          -------       ---------

BALANCE, SEPTEMBER 30, 2001            1,165         $     1      66,500,000          $66,500          $   --        $     --
                                     -------         -------      ----------          -------          -------       ---------

Issuance of Series B                     320              --              --               --               --              --
Preferred Stock for cash at
a price of $100 per share
on October 11, 2001
Issuance of Common Stock on               --              --          42,500               42               --              --
December 4, 2001 to
purchase investments in
other companies valued at
$4.50 per share
Cancellation on January 7,                --              --         (79,402)             (79)              --              --
2002 of common stock issued
in October, 2001 and
included in the fiscal 2001
recapitalization, upon
termination of contract
Issuance of 100,000 options               --              --              --               --               --              --
to a non-employee on
February 20, 2002 valued at
the fair value of the
options granted
Issuance of 100,000 options               --              --              --               --               --              --
to a non-employee on
February 20, 2002 valued at
the fair value of the
options granted
Issuance of Common Stock on               --              --         250,000              250                               --
February 27, 2002 for cash
upon exercise of Options at
an exercise price of $0.40
per share
Issuance of 1,000,000                     --              --              --               --               --              --
options to a non-employee
on February 27, 2002 valued
at the fair value of the
options granted
Issuance of 1,000,000                     --              --              --               --               --              --
options to a non-employee
on February 27, 2002 valued
at the fair value of the
options granted
Issuance of Common Stock on               --              --         100,000              100               --              --
February 28, 2002 for
business and marketing
advisory services rendered,
recorded as Compensation
expense at the fair value
of services provided
Issuance of Common Stock on               --              --         100,000              100               --              --
February 28, 2002 for
corporate legal services
rendered, recorded as
Compensation expense at the
fair value of services
provided
Issuance of 250,000 options               --              --              --               --               --              --
to a non-employee on March
12, 2002 valued at the fair
value of the options granted
Issuance of 1,000,000                     --              --              --               --               --              --
options to a non-employee
on March 12, 2002 valued at
the fair value of the
options granted
Issuance of Common Stock on               --              --         200,000              200               --              --
March 14, 2002 for business
and marketing advisory
services rendered, recorded
as Compensation expense at
the fair value of services
provided
Issuance of Common Stock on               --              --          75,000               75               --              --
March 14, 2002 for legal
advisory services rendered,
recorded as compensation
expense at the fair value
of services provided
Issuance of Common Stock on               --              --         600,000              600               --              --
March 29, 2002 for
intellectual property &
product development
services rendered, recorded
as Compensation expense at
the fair value of services
provided
Issuance of 1,000,000                     --              --              --               --               --              --
options to a non-employee
on March 31, 2002 valued at
the fair value of the
options granted
</TABLE>


                                      F-5
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                       Deferred      Additional          Deficit             Total
                                     Compensation     Paid-In          Accumulated
                                     Stock Options    Capital          During the
                                                                     Development Stage

<S>                                  <C>            <C>            <C>                   <C>

BALANCE, MARCH 28, 2001                $      --     $  2,001,570     $ (2,010,737)      $       --
(INCEPTION)

Recapitalization effect of                    --       (1,557,946)       2,010,737          510,124
reverse acquisition
with Transmission
Technology Corp.
Issuance of Series A                          --          165,000               --          165,000
Preferred Stock in exchange
for investments in other
companies for a price of
$1,000 per share on
April12, 2001

Issuance of Series B                          --           99,999               --          100,000
Preferred Stock for cash of
at a price of $100 per
share on August 21, 2001
Preferred Stock Dividends                     --               --           (8,222)          (8,222)
Net Loss                                      --               --         (493,450)        (493,450)
                                       ---------     ------------     ------------       ----------

BALANCE, SEPTEMBER 30, 2001            $      --     $    708,623     $   (501,672)      $  273,452
                                       ---------     ------------     ------------       ----------

Issuance of Series B                          --           32,000               --           32,000
Preferred Stock for cash at
a price of $100 per share
on October 11, 2001
Issuance of Common Stock on                   --          191,208               --          191,250
December 4, 2001 to
purchase investments in
other companies valued at
$4.50 per share
Cancellation on January 7,                    --         (299,921)              --         (300,000)
2002 of common stock issued
in October, 2001 and
included in the fiscal 2001
recapitalization, upon
termination of contract
Issuance of 100,000 options              (26,857)          26,857               --               --
to a non-employee on
February 20, 2002 valued at
the fair value of the
options granted
Issuance of 100,000 options              (24,800)          24,800               --               --
to a non-employee on
February 20, 2002 valued at
the fair value of the
options granted
Issuance of Common Stock on                   --           99,750               --          100,000
February 27, 2002 for cash
upon exercise of Options at
an exercise price of $0.40
per share
Issuance of 1,000,000                   (513,000)         513,000               --               --
options to a non-employee
on February 27, 2002 valued
at the fair value of the
options granted
Issuance of 1,000,000                   (393,000)         393,000               --               --
options to a non-employee
on February 27, 2002 valued
at the fair value of the
options granted
Issuance of Common Stock on                   --          184,900               --          185,000
February 28, 2002 for
business and marketing
advisory services rendered,
recorded as Compensation
expense at the fair value
of services provided
Issuance of Common Stock on                   --          184,900               --          185,000
February 28, 2002 for
corporate legal services
rendered, recorded as
Compensation expense at the
fair value of services
provided
Issuance of 250,000 options              (11,125)          11,125               --               --
to a non-employee on March
12, 2002 valued at the fair
value of the options granted
Issuance of 1,000,000                    (44,500)          44,500               --               --
options to a non-employee
on March 12, 2002 valued at
the fair value of the
options granted
Issuance of Common Stock on                   --          179,800               --          180,000
March 14, 2002 for business
and marketing advisory
services rendered, recorded
as Compensation expense at
the fair value of services
provided
Issuance of Common Stock on                   --           67,425               --           67,500
March 14, 2002 for legal
advisory services rendered,
recorded as compensation
expense at the fair value
of services provided
Issuance of Common Stock on                   --          305,400               --          306,000
March 29, 2002 for
intellectual property &
product development
services rendered, recorded
as Compensation expense at
the fair value of services
provided
Issuance of 1,000,000                   (457,000)         457,000               --               --
options to a non-employee
on March 31, 2002 valued at
the fair value of the
options granted
</TABLE>


                                      F-6
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                       Common                     Common        Common
                                              Stock                          Stock                       Stock        Stock
                                                                                                       Committed    Subscription
                                                                                                                     Receivable
                                      Shares            Amount       Shares         Amount
<S>                               <C>                <C>         <C>              <C>                  <C>          <C>
Issuance of 750,000 options               --              --              --              --              --              --
to a non-employee on March
31,2002 valued at the fair
value of the options granted
Issuance of Common Stock on               --              --         100,000             100              --              --
April 10, 2002 for
corporate legal services
rendered, recorded as
Compensation expense at the
fair value of services
provided
Issuance of Common Stock on               --              --         750,000             750              --              --
April 18, 2002 for cash
upon exercise of Options at
an exercise price of $0.40
per share
Issuance of Common Stock on               --              --       1,000,000           1,000              --              --
April 19, 2002 for business
and marketing advisory
services rendered, recorded
as Compensation expense at
the fair vlue of services
provided
Issuance of Common Stock on               --              --         120,000             120              --              --
April 19, 2002 for legal
advisory services rendered,
recorded as Compensation
expense at the fair value
of services provided
Issuance of Common Stock on               --              --          40,000              40              --              --
May 17, 2002 for financial
consulting services
rendered, recorded as
Compensation expense at the
fair value of services
provided
Issuance of Common Stock on               --              --         100,000             100              --              --
May 29, 2002 for corporate
legal services rendered,
recorded as Compensation
expense at the fair value
of services provided
Issuance of Common Stock                  --              --          83,333              83              --              --
net of offering costs at a
price of $0.30 per share on
June 4, 2002 less value of
warrants issued
Issuance of 83,333 warrants to            --              --              --              --              --              --
purchase common stock at an
exercise price of $0.50 per
share on June 4, 2002 in
conjunction with common
share cash sale valued at
$0.05 per warrant
Issuance of Common Stock on               --              --         466,000             466              --              --
June 13, 2002 for corporate
legal services rendered,
recorded as Compensation
expense at the fair value
of services provided
Issuance of Common Stock                  --              --         250,000             250              --              --
less value of warrants
issued, net of offering
costs at a price of
approximately $0.14 per
share on July 2, 2002
Issuance of 250,000 warrants to           --              --              --              --              --              --
purchase common stock at an
exercise price of $0.50 per
share on July 2, 2002 in
conjunction with common
share cash sale valued at
$0.05 per warrant
Issuance of Common Stock on               --              --         100,000             100              --              --
July 9, 2002 for financial
consulting services
rendered, recorded as
Compensation expense at the
fair value of services
provided
Issuance of Common Stock on               --              --          50,000              50              --              --
July 9, 2002 for corporate
public relations and
marketing services
rendered, recorded as
Compensation expense at the
fair value of services
provided
Issuance of Common Stock on               --              --       1,000,000           1,000              --              --
July 15, 2002 for cash upon
exercise of Options at an
exercise Price of $0.08 per
share
Issuance of Common Stock on               --              --         200,000             200              --              --
July 15, 2002 for corporate
legal services rendered,
recorded as Compensation
expense at the fair value
of services provided
Issuance of Common Stock on               --              --         100,000             100              --              --
August 13,2002 for
corporate legal services
rendered, recorded as
Compensation expense at the
fair value of services
provided
Issuance of Common Stock                  --              --          65,790              66              --              --
less value of warrants
issued, net of offering
costs at a price of $0.38
per share on August 22, 2002
Issuance of 65,790 warrants to            --              --              --              --              --              --
purchase common stock at an
exercise price of $0.50 per
share on August 22, 2002 in
conjunction with common
share cash sale valued at
$0.05 per warrant
Issuance of Common Stock on               --              --         200,000             200              --              --
August 27, 2002 for
intellectual property &
product development
services rendered, recorded
as Compensation expense at
the fair value of services
provided
</TABLE>


                                      F-7
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                     Deferred      Additional          Deficit           Total
                                   Compensation     Paid-In          Accumulated
                                   Stock Options    Capital          During the
                                                                   Development Stage

<S>                                <C>            <C>            <C>                   <C>
Issuance of 750,000 options         (349,500)         349,500              --              --
to a non-employee on March
31,2002 valued at the fair
value of the options granted
Issuance of Common Stock on               --           69,900              --          70,000
April 10, 2002 for
corporate legal services
rendered, recorded as
Compensation expense at the
fair value of services
provided
Issuance of Common Stock on               --          299,250              --         300,000
April 18, 2002 for cash
upon exercise of Options at
an exercise price of $0.40
per share
Issuance of Common Stock on               --          389,000              --         390,000
April 19, 2002 for business
and marketing advisory
services rendered, recorded
as Compensation expense at
the fair vlue of services
provided
Issuance of Common Stock on               --           46,680              --          46,800
April 19, 2002 for legal
advisory services rendered,
recorded as Compensation
expense at the fair value
of services provided
Issuance of Common Stock on               --           15,960              --          16,000
May 17, 2002 for financial
consulting services
rendered, recorded as
Compensation expense at the
fair value of services
provided
Issuance of Common Stock on               --           43,900              --          44,000
May 29, 2002 for corporate
legal services rendered,
recorded as Compensation
expense at the fair value
of services provided
Issuance of Common Stock                  --           20,750              --          20,833
net of offering costs at a
price of $0.30 per share on
June 4, 2002 less value of
warrants issued
Issuance of 83,333 warrants to            --            4,167              --           4,167
purchase common stock at an
exercise price of $0.50 per
share on June 4, 2002 in
conjunction with common
share cash sale valued at
$0.05 per warrant
Issuance of Common Stock on               --           88,074              --          88,540
June 13, 2002 for corporate
legal services rendered,
recorded as Compensation
expense at the fair value
of services provided
Issuance of Common Stock                  --           23,250              --          23,500
less value of warrants
issued, net of offering
costs at a price of
approximately $0.14 per
share on July 2, 2002
Issuance of 250,000 warrants to           --           12,500              --          12,500
purchase common stock at an
exercise price of $0.50 per
share on July 2, 2002 in
conjunction with common
share cash sale valued at
$0.05 per warrant
Issuance of Common Stock on               --           10,900              --          11,000
July 9, 2002 for financial
consulting services
rendered, recorded as
Compensation expense at the
fair value of services
provided
Issuance of Common Stock on               --            5,450              --           5,500
July 9, 2002 for corporate
public relations and
marketing services
rendered, recorded as
Compensation expense at the
fair value of services
provided
Issuance of Common Stock on               --           79,000              --          80,000
July 15, 2002 for cash upon
exercise of Options at an
exercise Price of $0.08 per
share
Issuance of Common Stock on               --           27,800              --          28,000
July 15, 2002 for corporate
legal services rendered,
recorded as Compensation
expense at the fair value
of services provided
Issuance of Common Stock on               --           53,900              --          54,000
August 13,2002 for
corporate legal services
rendered, recorded as
Compensation expense at the
fair value of services
provided
Issuance of Common Stock                  --           21,644              --          21,710
less value of warrants
issued, net of offering
costs at a price of $0.38
per share on August 22, 2002
Issuance of 65,790 warrants to            --            3,290              --           3,290
purchase common stock at an
exercise price of $0.50 per
share on August 22, 2002 in
conjunction with common
share cash sale valued at
$0.05 per warrant
Issuance of Common Stock on               --           69,800              --          70,000
August 27, 2002 for
intellectual property &
product development
services rendered, recorded
as Compensation expense at
the fair value of services
provided
</TABLE>


                                      F-8
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>

                                                    Preferred                       Common                       Common
                                                      Stock                          Stock                        Stock
                                                                                                                Committed

                                             Shares           Amount         Shares             Amount
<S>                                      <C>              <C>            <C>                <C>                <C>

Issuance of Common Stock on                    --                --           50,000               50               --
August 27, 2002 to a financial
consultant for services
rendered, recorded as
Compensation expense at the fair
value of services provided
Issuance of Common Stock on                    --                --          200,000              200               --
August 27, 2002 for financial
consulting services rendered,
recorded as Compensation expense
at the fair value of services
provided
Issuance of Common Stock on                    --                --           18,868               19               --
August 27, 2002 for marketing
services rendered, recorded as
compensation expense at the fair
value of services provided
Issuance of 750,000 options to a               --                --               --               --               --
non-employee on August 27, 2002
valued at the fair value of the
options granted
Issuance of Common Stock on                    --                --          500,000              500               --
September 11, 2002 for
intellectual property & product
development services rendered,
recorded as compensation expense
at the fair value of services
provided
Issuance of Common Stock on                    --                --           17,543               18               --
September 26, 2002 for product
development services rendered,
recorded as compensation expense
at the fair value of services
provided
Issuance of 17,543 Warrants on                 --                --               --               --               --
September 26, 2002 for product
development services rendered,
recorded as compensation expense
and valued at fair value
Issuance of Common Shares, less                --                --          322,242              322               --
value of detachable warrants, in
exchange of forgiveness of notes
payable of $55,000 on September
26, 2002
Issuance of warrants to purchase               --                --               --               --               --
common stock at an exercise
price of $0.50 per share on
September 26, 2002 in
conjunction with shares issued
in exchange of forgiveness of
notes payable at a fair value of
$0.05 per warrant
Issuance of Common Shares, less                --                --          193,055              193               --
value of detachable warrants, in
exchange of forgiveness of
notes payable of $35,000 on
September 26, 2002

Issuance of warrants to purchase               --                --               --               --               --
common stock at an exercise
price of $0.50 per share on
September 26, 2002 in
conjunction with shares issued
in exchange of forgiveness of
notes payable at a fair value of
$0.05 per warrant
Recognition of deferred                        --                --               --               --               --
Compensation expense related to
stock options issued to non-
employees in fiscal 2002
Exchange of Preferred Stock and              (165)               --               --               --               --
Accrued Dividends for Investment
in other companies on September
30, 2002

Preferred Stock Dividends                      --                --               --               --               --
Net Loss                                       --                --               --               --               --
                                            -----            ------       ----------          -------          -------

BALANCE, SEPTEMBER 30, 2002                 1,320            $    1       73,714,929          $73,715          $    --
                                            -----            ------       ----------          -------          -------
Issuance of Common Shares for                  --                --          500,000              500               --
legal counsel on October 18,
2002 at the fair value of
services rendered
Issuance of Common Shares for                  --                --          700,000              700               --
product development and
intellectual property services
on October 18, 2002 at the fair
value of services rendered
Issuance of Common Shares for                  --                --        1,000,000            1,000               --
product development and
intellectual property services
on October 18, 2002 at the fair
value of services rendered
Issuance of Common Shares for                  --                --          250,000              250               --
legal counsel on October 31,
2002 at the fair value of
services rendered
Issuance of Common Shares for                  --                --          500,000              500               --
legal counsel on December 13,
2002 at the fair value of
services rendered
Issuance of Common Shares                      --                --           64,000               64               --
(Series A/B PPM) for cash at a
price of $0.18 per share on
December 20, 2002
</TABLE>


                                      F-9
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                                 Common           Deferred      Additional        Deficit             Total
                                                 Stock          Compensation     Paid-In         Accumulated
                                              Subscription      Stock Options    Capital         during the
                                              Receivable                                      Development Stage
<S>                                        <C>                <C>             <C>           <C>                    <C>

Issuance of Common Stock on                       --               --            17,450                --            17,500
August 27, 2002 to a financial
consultant for services
rendered, recorded as
Compensation expense at the fair
value of services provided
Issuance of Common Stock on                       --               --            69,800                --            70,000
August 27, 2002 for financial
consulting services rendered,
recorded as Compensation expense
at the fair value of services
provided
Issuance of Common Stock on                       --               --             6,585                --             6,604
August 27, 2002 for marketing
services rendered, recorded as
compensation expense at the fair
value of services provided
Issuance of 750,000 options to a                  --         (282,750)          282,750               --                --
non-employee on August 27, 2002
valued at the fair value of the
options granted
Issuance of Common Stock on                       --               --           149,500                --           150,000
September 11, 2002 for
intellectual property & product
development services rendered,
recorded as compensation expense
at the fair value of services
provided
Issuance of Common Stock on                       --               --             4,017                --             4,035
September 26, 2002 for product
development services rendered,
recorded as compensation expense
at the fair value of services
provided
Issuance of 17,543 Warrants on                    --               --             3,859                --             3,859
September 26, 2002 for product
development services rendered,
recorded as compensation expense
and valued at fair value
Issuance of Common Shares, less                   --               --            38,566                --            38,888
value of detachable warrants, in
exchange of forgiveness of notes
payable of $55,000 on September
26, 2002
Issuance of warrants to purchase                  --               --            16,112                --            16,112
common stock at an exercise
price of $0.50 per share on
September 26, 2002 in
conjunction with shares issued
in exchange of forgiveness of
notes payable at a fair value of
$0.05 per warrant
Issuance of Common Shares, less                   --               --            25,154                --            25,347
value of detachable warrants, in
exchange of forgiveness of
notes payable of $35,000 on
September 26, 2002

Issuance of warrants to purchase                  --               --             9,653                --             9,653
common stock at an exercise
price of $0.50 per share on
September 26, 2002 in
conjunction with shares issued
in exchange of forgiveness of
notes payable at a fair value of
$0.05 per warrant
Recognition of deferred                           --          868,237                --                --           868,237
Compensation expense related to
stock options issued to non-
employees in fiscal 2002
Exchange of Preferred Stock and                   --               --          (169,098)               --          (169,098)
Accrued Dividends for Investment
in other companies on September
30, 2002

Preferred Stock Dividends                         --               --                --            (5,871)           (5,871)
Net Loss                                          --               --                --        (4,518,082)       (4,518,082)
                                            --------      -----------        ----------       -----------       -----------

BALANCE, SEPTEMBER 30, 2002                 $     --      $(1,234,295)       $5,213,430       $(5,025,625)      $  (972,774)
                                            --------      -----------        ----------       -----------       -----------
Issuance of Common Shares for                     --               --            72,118                --            72,618
legal counsel on October 18,
2002 at the fair value of
services rendered
Issuance of Common Shares for                     --               --           128,075                --           128,775
product development and
intellectual property services
on October 18, 2002 at the fair
value of services rendered
Issuance of Common Shares for                     --               --           144,230                --           145,230
product development and
intellectual property services
on October 18, 2002 at the fair
value of services rendered
Issuance of Common Shares for                     --               --            36,059                --            36,309
legal counsel on October 31,
2002 at the fair value of
services rendered
Issuance of Common Shares for                     --               --            72,120                --            72,620
legal counsel on December 13,
2002 at the fair value of
services rendered
Issuance of Common Shares                         --               --            10,704                --            10,768
(Series A/B PPM) for cash at a
price of $0.18 per share on
December 20, 2002
</TABLE>


                                      F-10
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                                  Preferred                       Common                   Common
                                                   Stock                          Stock                     Stock
                                                                                                          Committed

                                             Shares            Amount       Shares         Amount
<S>                               <C>                <C>          <C>              <C>           <C>           <C>
Issuance of 64,000 Series                      --              --              --              --              --
A warrants in conjunction
with Series A/B PPM on
December 20, 2002 valued at
$0.01/warrant

Issuance of 32,000 Series                      --              --              --              --              --
B warrants in conjunction
with Series A/B PPM on
December 20, 2002 valued at
$0.01/warrant

Issuance of Common Shares                      --              --       1,162,500           1,163              --
Series E for cash at a
price of $0.10 per share on
December 20, 2002 less
value of Series E warrants
issued

Issuance of 1,162,500 Series                   --              --              --              --              --
E warrants in conjunction
with Series E PPM on
December 20, 2002 valued at
$0.058 per warrant

</TABLE>


                                      F-11
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                     Common         Deferred      Additional          Deficit         Total
                                     Stock        Compensation     Paid-In          Accumulated
                                   Subscription   Stock Options    Capital          During the
                                    Receivable                                    Development Stage

<S>                               <C>            <C>             <C>              <C>                <C>
Issuance of 64,000 Series                  --              --             752              --             752
A warrants in conjunction
with Series A/B PPM on
December 20, 2002 valued at
$0.01/warrant

Issuance of 32,000 Series                  --              --              --              --              --
B warrants in conjunction
with Series A/B PPM on
December 20, 2002 valued at
$0.01/warrant

Issuance of Common Shares                  --              --          47,662              --          48,825
Series E for cash at a
price of $0.10 per share on
December 20, 2002 less
value of Series E warrants
issued

Issuance of 1,162,500 Series               --              --          67,425              --          67,425
E warrants in conjunction
with Series E PPM on
December 20, 2002 valued at
$0.058 per warrant
</TABLE>


                                      F-12
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                          Preferred                       Common                Common        Common
                                           Stock                          Stock                  Stock        Stock
                                                                                               Committed    Subscription
                                                                                                             Receivable
                                   Shares            Amount       Shares         Amount
<S>                               <C>                <C>          <C>              <C>           <C>           <C>
Issuance of Common Shares              --            --             460,000           460            --            --
Series E for cash at a
price of $0.10 per share on
December 31, 2002 less
value of Series E warrants
issued
Issuance of 460,000 Series             --            --                  --            --            --            --
E warrants in conjunction
with Series E PPM on
December 31, 2002 valued at
$0.058 per warrant
</TABLE>


                                      F-13
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                      Deferred      Additional          Deficit           Total
                                    Compensation     Paid-In          Accumulated
                                    Stock Options    Capital          During the
                                                                    Development Stage

<S>                               <C>             <C>             <C>                   <C>
Issuance of Common Shares                 --        18,860                  --           19,320
Series E for cash at a
price of $0.10 per share on
December 31, 2002 less
value of Series E warrants
issued
Issuance of 460,000 Series                --        26,680                  --           26,680
E warrants in conjunction
with Series E PPM on
December 31, 2002 valued at
$0.058 per warrant
</TABLE>


                                      F-14
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                       Common                  Common        Common
                                              Stock                          Stock                    Stock        Stock
                                                                                                    Committed    Subscription
                                                                                                                 Receivable
                                      Shares            Amount       Shares         Amount
<S>                                  <C>                <C>          <C>              <C>           <C>           <C>

Issuance of Common Shares                --              --         310,000             310              --              --
Series E for cash at a
price of $0.10 per share on
January 10, 2003 less value
of Series E warrants issued
Issuance of 310,000 Series               --              --              --              --              --              --
E warrants in conjunction
with Series E PPM on
January 10, 2003 valued at
$0.058 per warrant
Issuance of Common Shares                --              --         480,000             480              --              --
Series E for cash at a
price of $0.10 per share on
February 4, 2003 less value
of Series E warrants issued
Issuance of 480,000 Series E             --              --              --              --              --              --
warrants in conjunction
with Series E PPM on February
4, 2003 valued at $0.058
per warrant
</TABLE>


                                      F-15
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                      Deferred      Additional          Deficit           Total
                                    Compensation     Paid-In          Accumulated
                                    Stock Options    Capital          During the
                                                                   Development Stage

<S>                                  <C>            <C>            <C>                   <C>
Issuance of Common Shares                    --          12,710              --          13,020
Series E for cash at a
price of $0.10 per share on
January 10, 2003 less value
of Series E warrants issued
Issuance of 150,000 Series                   --          17,980              --          17,980
E warrants in conjunction
with Series E PPM on
January 10, 2003 valued at
$0.058 per warrant
Issuance of Common Shares                    --          19,680              --          20,160
Series E for cash at a
price of $0.10 per share on
February 4, 2003 less value
of Series E warrants issued
Issuance of 50,000 Series E                  --          27,840              --          27,840
warrants in conjunction
with Series E PPM on
February 4, 2003 valued at
$0.058 per warrant
</TABLE>


                                      F-16
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                       Common                  Common        Common
                                              Stock                          Stock                    Stock        Stock
                                                                                                    Committed    Subscription
                                                                                                                 Receivable
                                      Shares            Amount       Shares         Amount
<S>                                  <C>                <C>          <C>              <C>           <C>           <C>
Issuance of Common Shares                 --              --         300,000             300              --              --
on February 4, 2003 for
repayment of notes and
interest payable
Issuance of Common Shares                 --              --       1,500,000           1,500              --              --
in settlement of litigation
at a value of $0.25 per
share on February 11, 2003
Issuance of Common Shares                 --              --       2,000,000           2,000              --              --
Series H for cash at a
price of $0.175 per share
on February 13, 2003 less
value of Series H warrants
issued
Issuance of 2,000,000 of                  --              --              --              --              --              --
Series H warrants in
conjunction with Series H
PPM on February 13, 2003
valued at $0.103 per warrant
Issuance of Common Shares                 --              --         531,500             531              --              --
Series E for cash at a
price of $0.10 per share on
February 27, 2003 less
value of Series H warrants
issued
Issuance of 531,500 Series E              --              --              --              --              --              --
warrants in conjunction
with Series E PPM on
February 27,2003 valued at
$0.058 per warrant
</TABLE>


                                      F-17
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                     Deferred      Additional          Deficit           Total
                                   Compensation     Paid-In          Accumulated
                                   Stock Options    Capital          During the
                                                                  Development Stage
<S>                                 <C>            <C>            <C>                   <C>
Issuance of Common Shares                    --          42,801              --          43,101
on February 4, 2003 for
repayment of notes and
interest payable
Issuance of Common Shares                    --          92,250              --          93,750
in settlement of litigation
at a value of $0.25 per
share on February 11, 2003
Issuance of Common Shares                    --         142,000              --         144,000
Series H for cash at a
price of $0.175 per share
on February 13, 2003 less
value of Series H warrants
issued
Issuance of 2,000,000 of                     --         206,000              --         206,000
Series H warrants in
conjunction with Series H
PPM on February 13, 2003
valued at $0.103 per warrant
Issuance of Common Shares                    --          21,792              --          22,323
Series E for cash at a
price of $0.10 per share on
February 27, 2003 less
value of Series H warrants
issued
Issuance of 22,500 Series E                  --          30,827              --          30,827
warrants in conjunction
with Series E PPM on
February 27,2003 valued at
$0.058 per warrant
</TABLE>


                                      F-18
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                       Common                  Common        Common
                                              Stock                          Stock                    Stock        Stock
                                                                                                    Committed    Subscription
                                                                                                                 Receivable
                                      Shares            Amount       Shares         Amount
<S>                                  <C>                <C>          <C>              <C>           <C>           <C>
Issuance of Common Shares                --              --         750,000             750              --              --
on February 27, 2003 for
offering costs related to
Series E placement at the
fair value of services
provided
</TABLE>


                                      F-19
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                        Deferred      Additional          Deficit           Total
                                      Compensation     Paid-In          Accumulated
                                      Stock Options    Capital          During the
                                                                     Development Stage
<S>                                    <C>            <C>            <C>                   <C>
Issuance of Common Shares                      --         213,000              --         213,750
on February 27, 2003 for
offering costs related to
Series E placement at the
fair value of services
provided
</TABLE>


                                      F-20
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                       Common                  Common        Common
                                              Stock                          Stock                    Stock        Stock
                                                                                                    Committed    Subscription
                                                                                                                 Receivable
                                      Shares            Amount       Shares         Amount
<S>                                  <C>                <C>          <C>              <C>           <C>           <C>
Issuance of Common Shares                 --              --       1,200,000            1200              --              --
for business consulting and
strategic marketing on
March 19, 2003 at the fair
value of services rendered
Issuance of Common Shares                 --              --          15,000              15              --              --
for legal counsel on March
19, 2003 at the fair value
of services rendered
Issuance of Common Shares                 --              --         275,000             275              --              --
for business confusing and
strategic marketing on
March 19, 2003 at the fair
value of services rendered
Issuance of Common Shares                 --              --         665,000             665              --              --
for product development
consulting on March 19,
2003 at the fair value of
services rendered
Issuance of Common Shares                 --              --         266,000             266              --              --
for product development
consulting on March 19,
2003 at the fair value of
services rendered
Issuance of Common Shares                 --              --         400,000             400              --              --
for product development
consulting on March 19,
2003 at the fair value of
services rendered
Issuance of Common Shares                 --              --         300,000             300              --              --
for legal counsel on March
19, 2003 at the fair value
of services rendered
Issuance of Common Shares                 --              --         200,000             200              --              --
for legal counsel on March
19, 2003 at the fair value
of services rendered
Issuance of Common Shares                 --              --       1,000,000            1000              --              --
for product development and
intellectual property
services on March 19, 2003
at the fair value of
services rendered
Issuance of Common Shares                 --              --          10,000              10              --              --
Series E for cash at a
price of $0.10 per share on
March 26, 2003 less value
of Series E warrants issued,
Issuance of 10,000 Series E               --              --              --              --              --              --
warrants in conjunction
with Series E PPM on March
26, 2003 valued at $0.058
per warrant
Issuance of Common Shares                 --              --       1,465,500           1,466              --              --
Series H for cash at a
price of $0.25 per share on
March26, 2003 less value of
Series H warrants issued
Issuance of 1,465,500 of                  --              --              --              --              --              --
Series H warrants in
conjunction with Series H
PPM on March 26, 2003
valued at $0.103 per warrant
</TABLE>


                                      F-21
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                     Deferred      Additional          Deficit           Total
                                   Compensation     Paid-In          Accumulated
                                   Stock Options    Capital          During the
                                                                  Development Stage
<S>                                 <C>            <C>            <C>                   <C>
Issuance of Common Shares                    --         598,800              --         600,000
for business consulting and
strategic marketing on
March 19, 2003 at the fair
value of services rendered
Issuance of Common Shares                    --           2,985              --           3,000
for legal counsel on March
19, 2003 at the fair value
of services rendered
Issuance of Common Shares                    --          49,225              --          49,500
for business confusing and
strategic marketing on
March 19, 2003 at the fair
value of services rendered
Issuance of Common Shares                    --         251,858              --         252,523
for product development
consulting on March 19,
2003 at the fair value of
services rendered
Issuance of Common Shares                    --          52,934              --          53,200
for product development
consulting on March 19,
2003 at the fair value of
services rendered
Issuance of Common Shares                    --         151,600              --         152,000
for product development
consulting on March 19,
2003 at the fair value of
services rendered
Issuance of Common Shares                    --         144,936              --         145,236
for legal counsel on March
19, 2003 at the fair value
of services rendered
Issuance of Common Shares                    --          96,624              --          96,824
for legal counsel on March
19, 2003 at the fair value
of services rendered
Issuance of Common Shares                    --         483,120              --         484,120
for product development and
intellectual property
services on March 19, 2003
at the fair value of
services rendered
Issuance of Common Shares                    --             410              --             420
Series E for cash at a
price of $0.10 per share on
March 26, 2003 less value
of Series E warrants issued,
Issuance of 10,000 Series E                  --             580              --             580
warrants in conjunction
with Series E PPM on March
26, 2003 valued at $0.058
per warrant
Issuance of Common Shares                    --         213,963              --         215,429
Series H for cash at a
price of $0.25 per share on
March26, 2003 less value of
Series H warrants issued
Issuance of 33,000 of                        --         150,947              --         150,947
Series H warrants in
conjunction with Series H
PPM on March 26, 2003
valued at $0.103 per warrant
</TABLE>


                                      F-22
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                                Preferred                       Common                  Common        Common
                                                 Stock                          Stock                    Stock        Stock
                                                                                                       Committed    Subscription
                                                                                                                    Receivable
                                         Shares            Amount       Shares         Amount
<S>                                  <C>                <C>          <C>              <C>              <C>         <C>
Issuance of 200,000 Series                     --              --              --              --              --              --
H warrants on March 26, 2003
for Series H Financing
Offering Costs valued at the
fair value of the warrants issued
Issuance of Common Shares                      --              --       1,000,000           1,000              --              --
Series I for cash at a
price of $0.25 per share on
April 17, 2003, net of
offering costs
</TABLE>


                                      F-23
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                    Deferred      Additional          Deficit           Total
                                   ompensation     Paid-In          Accumulated
                                   tock Options    Capital          During the
                                                                 Development Stage
<S>                                <C>             <C>            <C>                   <C>
Issuance of 200,000 Series                    --          20,600              --          20,600
H warrants on March 26, 2003
for Series H Financing
Offering Costs valued at the
fair value of the warrants issued
Issuance of Common Shares                     --          33,000              --          34,000
Series I for cash at a
price of $0.25 per share on
April 17, 2003, net of
offering costs
</TABLE>


                                      F-24
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                       Preferred                       Common                  Common        Common
                                        Stock                          Stock                    Stock        Stock
                                                                                              Committed    Subscription
                                                                                                           Receivable
                                  Shares            Amount       Shares         Amount
<S>                             <C>              <C>          <C>              <C>           <C>            <C>
Issuance of 1,000,000 of                --            --            --            --            --                --
Series I warrants in
conjunction with Series I
PPM on April 17, 2003
valued at $0.191 per warrant
Issuance of Common Shares               --            --       100,000           100            --                --
Series I on April 17. 2003
for offering costs
Issuance of 100,000 of                  --            --            --            --            --                --
Series I warrants in
conjunction with Series I
PPM Offering Costs
on April 17, 2003
valued at $0.191 per warrant
Issuance of Common Shares               --            --        15,900            16            --                --
for product development
consulting on April 17,
2003 at the fair value of
services provided
Issuance of Common Shares               --            --        12,000            12            --                --
for product development
consulting on April 17,
2003 at the fair value of
services provided
Issuance of 250,000 Series              --            --            --            --            --                --
l warrants on April 17,2003
for Product Development
Services provided valued at
the fair value of the
warrants issued
Issuance of 49,999 Series K             --            --            --            --            --                --
warrants on April 17, 2003
for settlement of
litigation valued at the
fair value of the warrants
issued
Issuance of Common Shares               --            --       166,670           167            --                --
Series 0 for cash at a
price of $0.30 per share on
August 11, 2003 less value
of Series H warrants issued
Issuance of 83,335 of                   --            --            --            --            --                --
Series 0 warrants in
conjunction with Series 0
PPM on August 11, 2003
valued at $0.263 per warrant
Issuance of Common Shares               --            --       236,171           236            --                --
for legal counsel on August
11, 2003 at the fair value
of services rendered
Issuance of Common Shares               --            --       500,000           500            --                --
Series N for cash at a
price of $0.25 per share on
August 13, 2003 less value
of Series N warrants issued
Issuance of 500,000 of                   --            --            --            --            --                --
Series N warrants in
conjunction with Series N
PPM on August13, 2003
valued at $0.258 per warrant
Issuance of Common Shares               --            --       400,000           400            --                --
for corporate marketing
consulting on August 20,
2003 at the fair value of
services provided
Issuance of Common Shares               --            --       300,000           300            --                --
for financial service
consulting on August 20,
2003 at the fair value of
services provided
</TABLE>


                                      F-25
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                     Deferred      Additional          Deficit           Total
                                   Compensation     Paid-In          Accumulated
                                   Stock Options    Capital          During the
                                                                  Development Stage
<S>                               <C>             <C>            <C>                    <C>
Issuance of 1,000,000 of                 --           191,000                --           191,000
Series I warrants in
conjunction with Series I
PPM on April 17, 2003
valued at $0.191 per warrant
Issuance of Common Shares                --             5,800                --             5,900
Series I on April 17. 2003
for offering costs
Issuance of 100,000 of                   --            19,100                --            19,100
Series I warrants in
conjunction with Series I
PPM on April 17, 2003
valued at $0.191 per warrant
Issuance of Common Shares                --             6,662                --             6,678
for product development
consulting on April 17,
2003 at the fair value of
services provided
Issuance of Common Shares                --             5,028                --             5,040
for product development
consulting on April 17,
2003 at the fair value of
services provided
Issuance of 250,000 Series               --            61,250                --            61,250
l warrants on April 17,2003
for Product Development
Services provided valued at
the fair value of the
warrants issued
Issuance of 49,999 Series K              --            11,750                --            11,750
warrants on April 17, 2003
for settlement of
litigation valued at the
fair value of the warrants
issued
Issuance of Common Shares                --            27,916                --            28,083
Series 0 for cash at a
price of $0.30 per share on
August 11, 2003 less value
of Series H warrants issued
Issuance of 83,335 of                    --            21,917                --            21,917
Series 0 warrants in
conjunction with Series 0
PPM on August 11, 2003
valued at $0.263 per warrant
Issuance of Common Shares                --            90,660                --            90,896
for legal counsel on August
11, 2003 at the fair value
of services rendered
Issuance of Common Shares                --                --                --               500
Series N for cash at a
price of $0.25 per share on
August 13, 2003 less value
of Series N warrants issued
Issuance of 500,000 of                    --          124,500                --           124,500
Series N warrants in
conjunction with Series N
PPM on August13, 2003
valued at $0258 per warrant

Issuance of Common Shares                --           660,096                --           660,496
for corporate marketing
consulting on August 20,
2003 at the fair value of
services provided
Issuance of Common Shares                --            67,792                --            68,092
for financial service
consulting on August 20,
2003 at the fair value of
services provided
</TABLE>


                                      F-26
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                       Common                  Common        Common
                                              Stock                          Stock                    Stock        Stock
                                                                                                    Committed    Subscription
                                                                                                                 Receivable
                                      Shares            Amount       Shares         Amount
<S>                                  <C>                <C>          <C>              <C>           <C>           <C>
valued at $1.212 per warrant
Issuance of Common Shares               --                --       3,325,000         3,325            --              --
Series P for cash at a
price of $0.40 per share on
September 1, 2003 less
value of Series P warrants
issued
Issuance of 665,000 of                  --                --              --            --            --              --
Series P warrants in
conjunction with Series P
PPM on September 1, 2003
valued at $1.212 per warrant
</TABLE>


                                      F-27
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                      Deferred      Additional          Deficit           Total
                                    Compensation     Paid-In          Accumulated
                                    Stock Options    Capital          During the
                                                                   Development Stage

<S>                                  <C>            <C>            <C>                   <C>
Issuance of Common Shares                 --           520,695             --            524,020
Series P for cash at a
price of $0.40 per share on
September 1, 2003 less
value of Series P warrants
issued
Issuance of 665,000 of                    --           805,980              --           805,980
Series P warrants in
conjunction with Series P
PPM on September 1, 2003
valued at $1.212 per warrant
</TABLE>


                                      F-28
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                       Common                  Common        Common
                                              Stock                          Stock                    Stock        Stock
                                                                                                    Committed    Subscription
                                                                                                                 Receivable
                                      Shares            Amount       Shares         Amount
<S>                                  <C>                <C>          <C>              <C>           <C>           <C>
Issuance of Common Shares                --              --          88,462             88              --              --
for cash at a price of
$0.65 per share on
September 3, 2003
Issuance of Common Shares                --              --          27,778             28              --              --
for cash at a price of
$0.65 per share on
September 4, 2003

Issuance of Common Shares                --              --         195,000            195              --              --
for cash at a price of $1
per share on September 19,
2003

Offering costs paid in cash              --              --              --             --              --              --
Issuance of Common Shares                --              --         263,829            264              --              --
for legal counsel on
September 25, 2003 at the
fair value of services
rendered
Issuance of Common Shares                --              --          80,000             80              --              --
for product development
consulting on September 25,
2003 at the fair value of
services provided
Issuance of Common Shares                --              --         100,000            100              --              --
for product development
consulting on September 25,
2003 at the fair value of
services provided
Issuance of Common Shares                --              --          50,000             50              --              --
for product development
consulting on September 25,
2003 at the fair value of
services provided
Issuance of Common Shares                --              --          25,000             25              --              --
for product development
consulting on September 25,
2003 at the fair value of
services provided
Issuance of Common Shares                --              --         500,000            500              --              --
and detachable Series I
warrants for cash at a price of
$0.25 per share on September
30, 2003, less fair value of
warrants issued
Issuance of 500,000                      --              --              --             --              --              --
Series I warrants in
conjunction with Series I
PPM Subscription valued
at $0.191 per warrant
issued on September
30, 2003
Issuance of Common                       --              --       4,400,000          4,400              --        (259,600)
Shares and detachable
Series I warrants on
September 30, 2003
pursuant to a subscription
agreement
Issuance of 4,400,000                    --              --              --             --              --        (840,400)
Series I warrants in
conjunction with Series I
PPM Subscription valued
at $0.191 per warrant
issued on September
30, 2003

Common Stock
Committed for:

Cash purchase of Series P                --              --              --             --         100,000              --
PPM
Exercise of options                      --              --              --             --          15,000              --
Exercise of Series E                     --              --              --             --          79,375              --
warrants
Recognition of deferred                  --              --              --             --              --              --
Compensation expense
related to vesting stock
options issued to
non-employees in fiscal 2002
Subscription Receivable                  --              --              --             --              --         (50,000)
</TABLE>


                                      F-29
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                        Deferred      Additional          Deficit           Total
                                      Compensation     Paid-In          Accumulated
                                      Stock Options    Capital          During the
                                                                     Development Stage

<S>                                    <C>            <C>            <C>                   <C>
Issuance of Common Shares                     --         57,412               --           57,500
for cash at a price of
$0.65 per share on
September 3, 2003
Issuance of Common Shares                     --         24,972               --           25,000
for cash at a price of
$0.65 per share on
September 4, 2003

Issuance of Common Shares                     --        194,805               --          195,000
for cash at a price of $1
per share on September 19,
2003

Offering costs paid in cash                   --       (251,350)              --         (251,350)
Issuance of Common Shares                     --        490,193               --          490,457
for legal counsel on
September 25, 2003 at the
fair value of services
rendered
Issuance of Common Shares                     --        153,520               --          153,600
for product development
consulting on September 25,
2003 at the fair value of
services provided
Issuance of Common Shares                     --        191,900               --          192,000
for product development
consulting on September 25,
2003 at the fair value of
services provided
Issuance of Common Shares                     --         95,950               --           96,000
for product development
consulting on September 25,
2003 at the fair value of
services provided
Issuance of Common Shares                     --         47,975               --           48,000
for product development
consulting on September 25,
2003 at the fair value of
services provided
Issuance of Common Shares                     --         29,000               --           29,500
and detachable Series I
warrants for cash at a price of
$0.25 per share on September
30, 2003, less fair value of
warrants issued
Issuance of 500,000                           --         95,500               --           95,500
Series I warrants in
conjunction with Series I
PPM Subscription valued
at $0.191 per warrant
issued on September
30, 2003
Issuance of Common                            --        255,200               --               --
Shares and detachable
Series I warrants on
September 30, 2003
pursuant to a subscription
agreement
Issuance of 4,400,000                          --        840,400               --               --
Series I warrants in
conjunction with Series I
PPM Subscription valued
at $0.191 per warrant
issued on September
30, 2003

Common Stock
Committed for:

Cash purchase of Series P                     --             --               --          100,000
PPM
Exercise of options                           --             --               --           15,000
Exercise of Series E                          --             --               --           79,375
warrants
Recognition of deferred                  572,549             --               --          572,549
Compensation expense
related to vesting stock
options issued to
non-employees in fiscal 2002
Subscription Receivable                       --             --               --          (50,000)
</TABLE>


                                      F-30
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                       Common                  Common        Common
                                              Stock                          Stock                    Stock        Stock
                                                                                                    Committed    Subscription
                                                                                                                 Receivable
                                      Shares            Amount       Shares         Amount
<S>                                  <C>                <C>    <C>               <C>               <C>           <C>

Preferred Stock converted              (320)             --        207,576             208              --              --
to Common Stock on April
17, 2003

Preferred Stock Dividends                --              --             --              --              --              --
Net Loss                                 --              --             --              --              --              --
                                    -----------   -----------  -------------     -----------     -----------    -----------
BALANCE, SEPTEMBER 30, 2003           1,000            $  1    $ 102,012,815     $ 102,014       $  194,375     $(1,150,000)
                                    -----------   -----------  -------------     -----------     -----------    -----------
Cancellation on October 15,              --              --     (4,400,000)         (4,400)             --         259,600
2003 of Series I PPM Common
Shares previously issued
under Subscription
Receivable agreement
Cancellation on October 15,              --              --             --              --              --         840,400
2003 of 4,400,000 Series I
PPM warrants previously
issued under Subscription
Receivable agreement
Issuance of Common Shares                --              --        350,000             350              --              --
Series P for cash at a
price of $0.40 on October
20, 2003 less value of
Series H warrants issued
Issuance of 70,000 of                    --              --             --              --              --              --
Series P warrants in
conjunction with Series P
PPM on October 20, 2003
valued at $1.212 per warrant
Issuance of Common Shares                --              --         60,000              60         (15,000)             --
on November 10, 2003 for
exercises of options for
cash at price of $0.25 per
share
Issuance of Common Shares                --              --        200,000             200              --              --
on November 17, 2003 for
legal counsel valued at the
fair value of services
rendered
Issuance of Common Shares                --              --         89,360              88              --              --
for cash at a price of
$1.40 per share on November
18, 2003

Issuance of Common Shares                --              --        250,000             250         (39,400)             --
Series P for cash at a
price of $0.40 on December
1, 2003 less value of
Series P warrants Issued
Issuance of 50,000 of                    --              --             --              --         (60,600)             --
Series P warrants in
conjunction with Series P
PPM on December 1, 2003
valued al $1.212 per warrant
</TABLE>


                                      F-31
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                        Deferred      Additional          Deficit           Total
                                      Compensation     Paid-In          Accumulated
                                     Stock Options    Capital          During the
                                                                     Development Stage
<S>                                    <C>            <C>            <C>                   <C>

Preferred Stock converted                     --            (208)             --              --
to Common Stock on April
17, 2003

Preferred Stock Dividends                     --              --         (20,000)        (20,000)
Net Loss                                      --              --      (6,751,252)     (6,751,252)
                                       ---------     -----------    ------------        --------
BALANCE, SEPTEMBER 30, 2003            $(661,746)    $13,761,991    $(11,796,877)       $449,758
                                       ---------     -----------    ------------        --------
Cancellation on October 15,                   --        (255,200)             --              --
2003 of Series I PPM Common
Shares previously issued
under Subscription
Receivable agreement
Cancellation on October 15,                   --        (840,400)             --              --
2003 of 4,400,000 Series I
PPM warrants previously
issued under Subscription
Receivable agreement
Issuance of Common Shares                     --          54,810              --          55,160
Series P for cash at a
price of $0.40 on October
20, 2003 less value of
Series H warrants issued
Issuance of 70,000 of                         --          84,840              --          84,840
Series P warrants in
conjunction with Series P
PPM on October 20, 2003
valued at $1.212 per warrant
Issuance of Common Shares                     --          14,940              --              --
on November 10, 2003 for
exercises of options for
cash at price of $0.25 per
share
Issuance of Common Shares                     --         382,800              --         383,000
on November 17, 2003 for
legal counsel valued at the
fair value of services
rendered
Issuance of Common Shares                     --         125,016              --         125,104
for cash at a price of
$1.40 per share on November
18, 2003

Issuance of Common Shares                     --          39,150              --              --
Series P for cash at a
price of $0.40 on December
1, 2003 less value of
Series P warrants Issued
Issuance of 20,000 of                         --          60,600              --              --
Series P warrants in
conjunction with Series P
PPM on December 1, 2003
valued al $1.212 per warrant
</TABLE>


                                      F-32
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                          Preferred                       Common                  Common        Common
                                            Stock                          Stock                    Stock        Stock
                                                                                                  Committed    Subscription
                                                                                                               Receivable
                                    Shares            Amount       Shares         Amount
<S>                                  <C>                <C>        <C>               <C>           <C>           <C>

Issuance of Common Shares              --                  --      2,400,000         2,400            --            --
December Series for cash at
a price of $1.25 on
December 12, 2003 less
value of warrants issued
Issuance of 1,200,000 of               --                  --            --            --            --            --
December warrants in
conjunction with December
Series PPM on December 12,
2003 valued at $1.212 per
warrant
Issuance of Common Stock on            --                  --       140,160           140            --            --
December 22, 2003 in
exchange for facility rents
valued at fair market value
Issuance of Common Shares              --                  --       193,055           193            --            --
on December 23, 2003 for
exercises of Warrants for
cash at an exercise price
of $0.50 per share
Issuance of Common Shares              --                  --       272,500           272            --            --
on December 23, 2003 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
</TABLE>


                                      F-33
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                       Deferred      Additional          Deficit           Total
                                      Compensation     Paid-In          Accumulated
                                     Stock Options    Capital          During the
                                                                     Development Stage
<S>                                  <C>              <C>            <C>                    <C>
Issuance of Common Shares                   --        1,543,200                  --         1,545,600
December Series for cash at
a price of $1.25 on
December 12, 2003 less
value of warrants issued
Issuance of 1,200,000 of                    --         1,454,400                  --        1,454,400
December warrants in
conjunction with December
Series PPM on December 12,
2003 valued at $1.212 per
warrant
Issuance of Common Stock on                 --          147,028                  --          147,168
December 22, 2003 in
exchange for facility rents
valued at fair market value
Issuance of Common Shares                   --           96,335                  --           96,528
on December 23, 2003 for
exercises of Warrants for
cash at an exercise price
of $0.50 per share
Issuance of Common Shares                   --           67,853                  --           68,125
on December 23, 2003 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
</TABLE>


                                      F-34
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                       Common                  Common        Common
                                              Stock                          Stock                    Stock        Stock
                                                                                                    Committed    Subscription
                                                                                                                 Receivable
                                      Shares            Amount       Shares         Amount
<S>                                  <C>                <C>          <C>              <C>             <C>                <C>

Issuance of Common Shares                --              --          20,000              20              --              --
on December 23, 2003 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Fair value of 54,500 Series              --              --              --              --              --              --
R warrants issued on
December 23, 2003 to
compensate for early
exercise of Series E warrant
Fair value of 4,000 Series               --              --              --              --              --              --
R warrants issued on
December 23, 2003 to
compensate for early
exercise of Series H warrant
Cancellation of shares on                --              --         (34,000)            (34)             --              --
January 7, 2004 previously
issued as an exercise of
Series B warrants
Issuance of Common Shares                --              --          44,318              44              --              --
on January 14, 2004
pursuant to cashless
exercise of stock options
net of 5,682 shares
repurchased
Common shares issued in              (1,000)             (1)        107,631             107              --              --
exchange for Preferred B
stock on January 14, 2004
Issuance of Common Shares                --              --          30,238              31              --              --
on January 25, 2004 for
construction improvement
services valued at the fair
value of services rendered
Issuance of Common Shares                --              --          28,643              29              --              --
on January 25, 2004 for
construction improvement
services valued at the fair
value of services rendered
Issuance of Common Shares                --              --         120,765             121              --              --
on January 29, 2004
pursuant to stock option
vesting settlement
Issuance of Common Shares                --              --           8,849               9              --              --
on February 28, 2004
pursuant to cashless
exercise of stock options,
net of 5,651 shares
repurchased
Issuance of Common Shares                --              --         837,500             837         (76,875)             --
on March 17, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
</TABLE>


                                      F-35
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                      Deferred      Additional         Deficit         Total
                                    Compensation     Paid-In         Accumulated
                                    Stock Options    Capital         During the
                                                                  Development Stage
<S>                                <C>             <C>           <C>                  <C>

Issuance of Common Shares                   --          9,980              --         10,000
on December 23, 2003 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Fair value of 54,500 Series                 --         98,864              --         98,864
R warrants issued on
December 23, 2003 to
compensate for early
exercise of Series E warrant
exercise of Series H warrant
Fair value of 4,000 Series                  --          7,256              --          7,256
R warrants issued on
December 23, 2003 to
compensate for early
exercise of Series H warrant
Cancellation of shares on                   --         (6,086)             --         (6,120)
January 7, 2004 previously
issued as an exercise of
Series B warrants
Issuance of Common Shares                   --            (44)             --             --
on January 14, 2004
pursuant to cashless
exercise of stock options
net of 5,682 shares
repurchased
Common shares issued in                     --           (107)         45,395         45,394
exchange for Preferred B
stock on January 14, 2004
Issuance of Common Shares                   --         33,434              --         33,465
on January 25, 2004 for
construction improvement
services valued at the fair
value of services rendered
Issuance of Common Shares                   --         31,672              --         31,701
on January 25, 2004 for
construction improvement
services valued at the fair
value of services rendered
Issuance of Common Shares                   --           (121)             --             --
on January 29, 2004
pursuant to stock option
vesting settlement
Issuance of Common Shares                   --             (9)             --             --
on February 28, 2004
pursuant to cashless
exercise of stock options,
net of 5,651 shares
repurchased
Issuance of Common Shares                   --        208,538              --        132,500
on March 17, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
</TABLE>


                                      F-36
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION >
                                             Preferred                            Common                  Common
                                              Stock                               Stock                    Stock
                                                                                                         Committed

                                      Shares            Amount          Shares           Amount
<S>                                  <C>                <C>           <C>              <C>           <C>
Issuance of Common Shares                 --               --           40,000               40               --
on March 17, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                 --               --           50,000               50               --
On March 17, 2004 for
exercises of options for
cash at a price of $0.25
per share
Issuance of Common Shares                 --               --          150,000              150               --
for partial payment of
equipment purchased  on
March 17, 2004 at the fair
value of services rendered
Issuance of Common Shares                 --               --          120,000              120               --
on April 1, 2004 for
exercises of options for
cash at price of $0.25 per
share
Issuance of Common Shares                 --               --          250,000              250               --
on June 7, 2004 for legal
counsel valued at the fair
value of services rendered
Issuance of Common Shares                 --               --          250,000              250               --
for product development and
intellectual property
services on June 7, 2004 at
the fair value of services
rendered
Issuance of Common Shares                 --               --           54,400               54               --
on June 16, 2004 pursuant
to cashless exercise of
stock options, net of
20,600 shares repurchased
Issuance of Common Shares                 --               --        1,000,000            1,000               --
on June 24, 2004 for
exercises of Warrants for
cash at a price of $0.50
per share
Induced conversion of                     --               --               --               --               --
warrants exercised on June
24, 2004 related to
Securities Purchase
Agreement
</TABLE>


                                      F-37
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                            Common          Deferred      Additional          Deficit           Total
                                            Stock         Compensation     Paid-In          Accumulated
                                          Subscription    Stock Options    Capital          During the
                                          Receivable                                    Development Stage

<S>                                <C>                   <C>             <C>            <C>                   <C>
Issuance of Common Shares                      --               --           19,960                --           20,000
on March 17, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                      --               --           12,450                --           12,500
On March 17, 2004 for
exercises of options for
cash at a price of $0.25
per share
Issuance of Common Shares                      --               --          236,850                --          237,000
for partial payment of
equipment purchased  on
March 17, 2004 at the fair
value of services rendered
Issuance of Common Shares                      --               --           29,880                --           30,000
on April 1, 2004 for
exercises of options for
cash at price of $0.25 per
share
Issuance of Common Shares                      --               --          337,250                --          337,500
on June 7, 2004 for legal
counsel valued at the fair
value of services rendered
Issuance of Common Shares                      --               --          337,250                --          337,500
for product development and
intellectual property
services on June 7, 2004 at
the fair value of services
rendered
Issuance of Common Shares                      --               --              (54)               --               --
on June 16, 2004 pursuant
to cashless exercise of
stock options, net of
20,600 shares repurchased
Issuance of Common Shares                      --               --          499,000                --          500,000
on June 24, 2004 for
exercises of Warrants for
cash at a price of $0.50
per share
Induced conversion of                          --               --        1,433,880                --        1,433,880
warrants exercised on June
24, 2004 related to
Securities Purchase
Agreement
</TABLE>


                                      F-38
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                       Common                  Common        Common
                                              Stock                          Stock                    Stock        Stock
                                                                                                    Committed    Subscription
                                                                                                                 Receivable
                                      Shares            Amount       Shares         Amount
<S>                                  <C>                <C>          <C>              <C>           <C>           <C>

Issuance of Common Shares                --              --          40,000              40              --              --
for product development
services on July 16, 2004
at the fair value of
services rendered
Issuance of Common Shares                --              --          30,000              30              --              --
for marketing and
advertising services on
July 16, 2004 at the fair
value of services rendered
Issuance of Common Shares                --              --         200,000             200              --              --
for business advisory
services on July 16, 2004
at the fair value of
services rendered
Issuance of Common Shares                --              --         500,000             500              --              --
for marketing and PR
services on July 16, 2004
at the fair value of
services rendered
Issuance of Common Shares                --              --          20,000              20              --              --
for legal advisory services
on July 16, 2004 at the
fair value of services
rendered
Issuance of 120,000                      --              --              --              --              --              --
warrants on July 16, 2004
for services related to
December 2003 offering
valued at the fair value of
the warrants granted
Issuance of Common Shares                --              --         575,000             575              --              --
on July 19, 2004 in
exchange for settlement of
litigation at market value
of $1 per share
Issuance of Common Shares                --              --         150,000             150              --              --
on July 20, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
Issuance of Common Shares                --              --       2,000,000           2,000              --              --
on July 28, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                --              --          80,000              80              --              --
on August 3, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                --              --         147,500             148              --              --
on August 4, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
Issuance of Common Shares                --              --         210,000             210              --              --
on August 10, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
Issuance of Common Shares                --              --         600,000             600              --              --
on August 10, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                --              --         140,000             140              --              --
on August 11, 2004 for
exercises of options for
cash at a price of $0.25
per share
Issuance of Common Shares                --              --          50,000              50              --              --
on August 13, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
</TABLE>


                                      F-39
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                            Deferred      Additional            Deficit           Total
                                          Compensation     Paid-In            Accumulated
                                          Stock Options    Capital            During the
                                                                           Development Stage
<S>                                     <C>            <C>            <C>                       <C>

Issuance of Common Shares                       --          39,960                  --              40,000
for product development
services on July 16, 2004
at the fair value of
services rendered
Issuance of Common Shares                       --          29,970                  --              30,000
for marketing and
advertising services on
July 16, 2004 at the fair
value of services rendered
Issuance of Common Shares                       --         199,800                  --             200,000
for business advisory
services on July 16, 2004
at the fair value of
services rendered
Issuance of Common Shares                       --         499,500                  --             500,000
for marketing and PR
services on July 16, 2004
at the fair value of
services rendered
Issuance of Common Shares                       --          19,980                  --              20,000
for legal advisory services
on July 16, 2004 at the
fair value of services
rendered
Issuance of 120,000                             --         153,207                  --             153,207
warrants on July 16, 2004
for services related to
December 2003 offering
valued at the fair value of
the warrants granted
Issuance of Common Shares                       --         574,425                  --             575,000
on July 19, 2004 in
exchange for settlement of
litigation at market value
of $1 per share
Issuance of Common Shares                       --          37,350                  --              37,500
on July 20, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
Issuance of Common Shares                       --         998,000                  --           1,000,000
on July 28, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                       --          39,920                  --              40,000
on August 3, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                       --          48,602                  --              48,750
on August 4, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
Issuance of Common Shares                       --          52,290                  --              52,500
on August 10, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
Issuance of Common Shares                       --         299,400                  --             300,000
on August 10, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                       --          34,860                  --              35,000
on August 11, 2004 for
exercises of options for
cash at a price of $0.25
per share
Issuance of Common Shares                       --          12,450                  --              12,500
on August 13, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
</TABLE>


                                      F-40
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                                Preferred                       Common                       Common
                                                 Stock                          Stock                         Stock
                                                                                                            Committed

                                         Shares            Amount       Shares            Amount
<S>                                  <C>                <C>          <C>                <C>              <C>

Issuance of Common Shares                 --               --           35,000                35                --
on August 13, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of 1,726,973 $1.75               --               --               --                --                --
Debenture warrants pursuant
to the $15MM debenture
offering recorded as long
term debt discount
Issuance of 1,726,973 $1.82               --               --               --                --                --
Debenture warrants pursuant
to the $15MM debenture
offering recorded as long
term debt discount
Cancellation on August 19,                --               --         (150,000)             (150)               --
2004 of Common Shares
previously issued for
business consulting
services on March 17, 2004
Issuance of Common Shares                 --               --          380,000               380                --
on August 19, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                 --               --          430,000               430                --
On August 20, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                 --               --           40,000                40                --
on Aug 25, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
</TABLE>


                                      F-41
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                     Common         Deferred      Additional          Deficit              Total
                                     Stock        Compensation     Paid-In          Accumulated
                                   Subscription   Stock Options    Capital          During the
                                   Receivable                                    Development Stage

<S>                              <C>             <C>             <C>             <C>                   <C>

Issuance of Common Shares                  --               --           17,465               --           17,500
on August 13, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of 1,726,973 $1.75                --               --        3,231,972                --        3,231,972
Debenture warrants pursuant
to the $15MM debenture
offering recorded as long
term debt discount
Issuance of 1,726,973                      --               --        3,132,091                --        3,132,091
Debenture warrants pursuant
to the $15MM debenture
offering recorded as long
term debt discount
Cancellation on August 19,                 --               --         (236,850)               --         (237,000)
2004 of Common Shares
previously issued for
business consulting
services on March 17, 2004
Issuance of Common Shares                  --               --          189,620                --          190,000
on August 19, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                  --               --          214,750                --          215,000
On August 20, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                  --               --            9,960                --           10,000
on Aug 25, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
</TABLE>


                                      F-42
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                      Common                Common        Common
                                              Stock                         Stock                  Stock        Stock
                                                                                                 Committed    Subscription
                                                                                                               Receivable
                                      Shares           Amount       Shares         Amount
<S>                                  <C>           <C>           <C>             <C>            <C>           <C>

Issuance of Common Shares                 --             --         33,000             33             --             --
on August 25, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                 --             --         11,325             12             --             --
on August 25, 2004 pursuant
to cashless exercises
of16,667 Series K warrants
for $0.50 Per share net of
5,342 shares repurchased
Issuance of Common Shares                 --             --        250,000            250             --             --
for business and legal
consulting services on
August 27, 2004 at the fair
value of services rendered
Issuance of Common Shares                 --             --        100,000            100             --             --
on August 27, 2004 in
exchange for settlement of
litigation at market value
of $1.64 per share
Issuance of Common Shares                 --             --        114,373            114             --             --
for product development and
intellectual property
services on August 31, 2004
at the fair value of
services rendered
Issuance of 17,000 Series S               --             --             --             --             --             --
warrants on September 13,
2004 for public relations
services valued at the fair
value of the warrants
granted
Issuance of 115,000 Series                --             --             --             --             --             --
S warrants on September 13,
2004 for public relations
services valued at the fair
value of the warrants
granted
Issuance of 150,000 Series                --             --             --             --             --             --
S warrants on September 13,
2004 for services related
to marketing and business
advisory services valued at
the fair value of the
warrants granted

Issuance of 30,000 Series S               --             --             --             --             --             --
warrants on September 13,
2004 for services related
to settle an outstanding
dispute existing prior to
fiscal 2001 valued at the
fair value of the warrants
granted

Issuance of 115,000 Series                --             --             --             --             --             --
S warrants on September 13,
2004 for radio advertising
and promotional services
valued at the fair value
of the warrants granted

Issuance of 250,000 Series                --             --             --             --             --             --
S warrants on September 13,
2004 for services related
to intl sales and marketing
efforts valued al the fair
value of the warrants
granted
Issuance of 300,000 Series                --             --             --             --             --             --
S warrants on September 13,
2004 for product marketing
and strategic growth
consulting valued at the
fair value of the
warrants granted

Issuance of 450,000 Series                --             --             --             --             --             --
S warrants on September 13,
2004 for services related
to business development and
marketing services at the
fair value of the warrants
granted
Issuance of 160,000 Series T              --             --             --             --             --             --
warrants on September 13,
2004 for services related
to capital lease financing
costs valued at the fair
value of the warrants granted

Issuance of 500,000 Series                --             --             --             --             --             --
U warrants of September 13,
2004 for services related
to debenture financing
costs valued at the fair
value of the warrants granted
</TABLE>


                                      F-43
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                          Deferred      Additional        Deficit         Total
                                        Compensation     Paid-In        Accumulated
                                        Stock Options    Capital        During the
                                                                      Development Stage

<S>                                 <C>               <C>           <C>                    <C>

Issuance of Common Shares                      --         16,467              --         16,500
on August 25, 2004 for
exercises of Series H
Warrants for cash at an
exercise price of $0.50 per
share
Issuance of Common Shares                      --            (12)             --             --
on August 25, 2004 pursuant
to cashless exercises
of16,667 Series K warrants
for $0.50 Per share net of
5,342 shares repurchased
Issuance of Common Shares                      --        409,750              --        410,000
for business and legal
consulting services on
August 27, 2004 at the fair
value of services rendered
Issuance of Common Shares                      --        163,900              --        164,000
on August 27, 2004 in
exchange for settlement of
litigation at market value
of $1.64 per share
Issuance of Common Shares                      --        254,766              --        254,880
for product development and
intellectual property
services on August 31, 2004
at the fair value of
services rendered
Issuance of 17,000 Series S                    --         10,941              --         10,941
warrants on September 13,
2004 for public relations
services valued at the fair
value of the warrants
granted
Issuance of 115,000 Series                     --         74,011              --         74,011
S warrants on September 13,
2004 for public relations
services valued at the fair
value of the warrants
granted
Issuance of 150,000 Series                     --         96,536              --         96,536
S warrants on September 13,
2004 for services related
to marketing and business
advisory services valued at
the fair value of the
warrants granted

Issuance of 30,000 Series S                    --         19,307              --         19,307
warrants on September 13,
2004 for services related
to settle an outstanding
dispute existing prior to
fiscal 2001 valued at the
fair value of the warrants
granted

Issuance of 115,000 Series                     --         74,011              --         74,011
S warrants on September 13,
2004 for radio advertising
and promotional services
valued at the fair value
of the warrants granted

Issuance of 250,000 Series                     --        160,893              --        160,893
S warrants on September 13,
2004 for services related
to intl sales and marketing
efforts valued al the fair
value of the warrants
granted
Issuance of 300,000 Series                     --        193,071              --        193,071
S warrants on September 13,
2004 for product marketing
and strategic growth
consulting valued at the
fair value of the
warrants granted

Issuance of 450,000 Series                     --        289,605              --        289,605
S warrants on September 13,
2004 for services related
to business development and
marketing services at the
fair value of the warrants
granted
Issuance of 160,000 Series T                   --        105,915              --        105,915
warrants on September 13,
2004 for services related
to capital lease financing
costs valued at the fair
value of the warrants granted

Issuance of 500,000 Series                     --        615,012            --          615,012
U warrants of September 13,
2004 for services related
to debenture financing
costs valued at the fair
value of the warrants
granted

</TABLE>


                                      F-44
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                             Preferred                       Common                  Common        Common
                                              Stock                          Stock                    Stock        Stock
                                                                                                    Committed    Subscription
                                                                                                                 Receivable
                                      Shares            Amount       Shares         Amount
<S>                                  <C>                <C>          <C>              <C>           <C>           <C>

Issuance of Common Shares                --              --         120,000             120              --               --
on August 31, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
Issuance of Common Shares                --              --          80,000              80              --               --
On September, 21 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
Issuance of Common Shares                --              --           8,888               9              --               --
On September, 30, 2004
pursuant to cashless
exercise of stock options,
net of 11,112 shares
repurchased
Compensation Expense                     --              --              --              --              --               --
related to modification of
option terms
Recognition of deferred                  --              --              --              --              --               --
Compensation expense
related to vesting stock
options issued to
non-employees in fiscal
2002

Committed Stock Adjustment               --              --              --              --          (2,500)          50,000
Offering Costs paid in cash              --              --              --              --              --               --
Net Loss                                 --              --              --              --              --               --
                                     ---------        --------  -----------        ---------        -------           ------
BALANCE, SEPTEMBER 30, 2004              --           $  --     110,841,320        $110,841         $    --           $   --
                                     =========        ========  ===========        =========        =======           ======
</TABLE>


                                      F-45
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004 - Restated

<TABLE>
<CAPTION>
                                       Deferred      Additional          Deficit           Total
                                     Compensation     Paid-In          Accumulated
                                     Stock Options    Capital          During the
                                                                    Development Stage

<S>                                   <C>            <C>            <C>                   <C>

Issuance of Common Shares                      --           29,880               --           30,000
on August 31, 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
Issuance of Common Shares                      --           19,920               --           20,000
On September, 21 2004 for
exercises of Series E
Warrants for cash at an
exercise price of $0.25 per
share
Issuance of Common Shares                      --               (9)              --               --
On September, 30, 2004
pursuant to cashless
exercise of stock options,
net of 11,112 shares
repurchased
Compensation Expense                           --          364,277               --          364,277
related to modification of
option terms
Recognition of deferred                   298,821               --               --           298,821
Compensation expense
related to vesting stock
options issued to
non-employees in fiscal
2002

Committed Stock Adjustment                     --           (9,800)              --           37,700
Offering Costs paid in cash                    --         (220,030)              --         (220,030)
Net Loss                                       --               --      (14,687,874)     (14,687,874)
                                         --------       ----------       ----------        ---------
BALANCE, SEPTEMBER 30, 2004             $(362,925)     $32,294,159      $26,439,356       $5,602,719
                                        =========      ===========      ===========       ==========

</TABLE>


                                      F-46
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
                       FOR THE PERIOD FROM MARCH 28, 2001
                        (INCEPTION) TO SEPTEMBER 30, 2003

<TABLE>
<CAPTION>
                                                                                               For the Period
                                                                                               from March 28,
                                                                                                    2001
                                                          For the Year Ended September 30,     (inception) to
                                                          ---------------------------------     September 30,
                                                                2004             2003               2004
                                                              Restated*                           Restated*
                                                            ------------      ------------      ------------
<S>                                                         <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net loss                                               $(14,687,874)     $ (6,751,252)     $(26,439,356)
     Adjustments to reconcile net loss to net cash used
       in operating activities
         Accretion of deferred gain on PP&E                       (9,476)               --            (9,476)
         Depreciation                                            153,039            18,569           176,214
         Amortization of prepaid expenses originally
           paid with common stock                                234,350            17,535           320,498
     Interest on fixed conversion features                       265,169                --           265,169
     Compensation expense related to modification of
       warrant exercise price                                  1,540,000                --         1,540,000
     Issuance of common stock for services                     2,725,215         4,082,614         8,634,294
     Issuance of common stock for legal settlement               739,000            93,750           832,750
     Issuance of warrants for legal settlement                        --            11,750            11,750
     Compensation expense related to issuance of common
       stock at less than fair value                                  --                --           603,500
     Compensation expense related to fair value of
       stock options                                             298,821           572,549         1,301,350
     Compensation expense related to modification of
       options and warrants due to cashless exercises            364,277                --           364,277
     Issuance of warrants for services                         1,792,510            81,850         1,874,360
     Carrying value impairment adjustments on
       investments in other companies                                 --                --           137,230
     (Increase) decrease in Assets
     Restricted Cash                                         (10,010,060)               --       (10,010,060)
     Inventory                                                  (788,799)               --          (788,799)
     Accounts receivable                                      (2,501,994)               --        (2,501,994)
     Prepaids                                                   (485,750)          157,000          (329,285)
     Other assets                                               (209,600)               --          (209,600)
     Increase (decrease) in
     Accounts payable - trade                                  1,326,353          (497,093)        1,787,792
     Accrued legal settlement                                   (145,600)          145,600                --
     Accrued payroll and related expenses                         61,369            61,252           122,621
     Accrued interest payable                                         --             3,250            13,101
     Accrued officer compensation                                 38,870           (20,309)          264,561
     Deferred revenue                                            564,750                --           564,750
                                                            ------------      ------------      ------------

     Net cash used in operating activities                   (18,735,430)       (2,022,935)      (21,474,433)

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchase of property and equipment                         (846,385)         (198,694)       (1,070,293)
     Proceeds from sale of property and equipment                500,000                --           500,000
     Investment in other companies                                    --                --           (40,000)
                                                            ------------      ------------      ------------

     Net cash provided by (used in) investing
     activities                                                 (346,385)         (198,694)         (610,293)
                                                            ------------      ------------      ------------

CASH FLOW FROM FINANCING ACTIVITIES
     Common stock subscription receivable                         50,000           (50,000)               --
     Offering costs                                             (220,030)          (17,000)         (237,030)
     Proceeds from exercised of options                           65,000            15,000           560,000
     Proceeds from issuance of convertible debenture          15,000,000                --        15,000,000
     Proceeds from notes payable                                      --            30,000           253,000
     Payments on capital lease assets                            (65,618)               --           (65,618)
     Proceeds from sale of preferred stock                            --                --           132,000
     Proceeds from sales of common stock                       3,265,105         3,280,796         6,476,211
     Cash advanced by (to) officers, net                         (29,928)               --                --
     Proceeds from exercise of warrants                        2,817,403            79,375         2,896,778
                                                            ------------      ------------      ------------

     Net cash provided by financing activities                20,881,932         3,338,171        25,015,341
                                                            ------------      ------------      ------------

     Net increase (decrease) in cash and cash
     equivalents                                            $  1,800,117      $  1,116,542      $  2,930,615


CASH AND CASH EQUIVANENTS, BEGINNING OF PERIOD                 1,130,498            13,956                --
                                                            ------------      ------------      ------------

CASH AND CASH EQUIVANETNS, END OF PERIOD                    $  2,930,615      $  1,130,498      $  2,930,615
                                                            ============      ============      ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   INTEREST PAID                                            $    408,898      $         --      $    409,048
                                                            ============      ============      ============
</TABLE>

* See Notes to Consolidated Financial Statements - "Note 2 - Restatements and
Reclassifications."


                                      F-47
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES

                          (DEVELOPMENT STAGE COMPANIES)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES

During the year ended September 30, 2004, the company completed the following:

o Converted the 1,000 shares of Series B 10% preferred stock of its subsidiary,
Transmission Technology Corporation into 80,000 shares of unregistered,
restricted common stock. In addition, Company issued 27,631 shares of
unregistered, restricted common stock in satisfaction of the unpaid preferred
stock dividends and interest totaling $31,996.

o Issued 700,000 shares of free trading common stock registered pursuant to Form
S-8 to two individuals for legal and intellectual property services, valued at
$1.058 million.

o Issued 1,213,254 shares of restricted, unregistered common stock valued at
$1,520,047 to four individuals and five entities for consulting services.

o Issued 2,087,000 warrants valued at $1,792,510 in exchange for financial
business development, marketing, and product development consulting fees.

o Issued 58,500 warrants valued at $106,120 as an inducement for exercise of
Series E and H warrants.

o Issued 3,453,946 warrants valued at $6,364,063 in conjunction with the $15
million debenture offering recorded as a discount to the debentures.

o Recorded $1,433,880 in expense related to the modification of the warrant
exercise price for the December warrants exercised in June 2004.

o During the year ended September 30, 2004, 675,000 shares of common stock was
issued, valued at $739,000 for legal settlements as shown in Note 7.

o In January 2004, 140,160 shares of common stock valued at $147,168 were issued
in lieu of first 2 month's rent at new Irvine location.

o During the year ended September 30, 2004, 127,780 shares were issued under
cashless exercise of options, $364,277 in compensation expense was recorded as a
result of accounting for the options and warrants as a modification of option
terms.

o During the year ended September 30, 2004, 11,325 shares were issued under
cashless exercises of warrants.

o Fixed assets were acquired during the year ended September 30, 2004, for
Capital Leases in the amount of $800,000.

During the year ended September 30, 2003, the Company completed the following:

o Converted $30,000 of short-term loans and accrued interest of $13,101 into
300,000 shares of common stock.

o Converted 320 shares of Series B convertible preferred stock into 207,576
shares of unregistered, restricted common stock.

o Issued 750,000 shares of unregistered, restricted common stock valued at
$213,750 and warrants to purchase 200,000 shares of unregistered, restricted
common stock valued at $20,600 for offering costs payment of equity placement

o Issued 9,053,900 shares of common stock valued at $4,316,964 and warrants to
purchase 250,000 shares of unregistered, restricted common stock valued at
$61,250 for payment of consulting services and fees.

o Issued 1,500,000 shares of common stock valued at $93,750 and warrants to
purchase 50,000 shares of unregistered, restricted common stock valued at
$11,750 for settlement of litigation.

During the year ended September 30, 2002, the Company completed the following:

o Exchanged 165 shares of preferred stock and accrued dividends valued at
$169,098 for investments in other companies.

o Converted $90,000 of notes payable and accrued interest into 515,297 shares of
common stock.

o Issued 4,337,411 shares of common stock valued at $1,995,479 for payment of
consulting services and fees.

o Issued 42,500 shares of common stock valued at $191,450 for an investment in
common stock of another entity.

o Issued 17,543 warrants valued at $3,859 in exchange for consulting services
and fees.


                                      F-48
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


NOTE 1 - ORGANIZATION AND LINE OF BUSINESS

Composite Technology Corporation ("CTC") was incorporated under the laws of the
State of Florida on February 26, 1980 as Eldorado Gold & Exploration, Inc. On
January 13, 1987, CTC's Articles of Incorporation were amended to change the
corporate name to Eldorado Financial Group, Inc., and CTC's capital structure
was modified to allow for the issuance of up to 100,000,000 shares of common
stock at $0.001 par value per share.

On June 27, 2001, CTC's state of incorporation was changed from Florida to
Nevada by means of a merger with and into Eldorado Financial Group, Inc., a
Nevada corporation formed on June 25, 2001 solely for the purpose of effecting
the reincorporation. The Articles of Incorporation and Bylaws of the Nevada
corporation are the Articles of Incorporation and Bylaws of the surviving
corporation. Such Articles of Incorporation did not make any changes to the
capital structure of CTC.

On November 3, 2001, CTC exchanged 60,000,000 shares of restricted, unregistered
common stock for 100% of the issued and outstanding common stock of Transmission
Technology Corporation ("TTC"), a privately-owned Nevada corporation
incorporated on March 28, 2001. TTC was formed to own a license agreement
related to patent-pending composite reinforced electrical transmission lines
utilizing composite core materials. TTC became a wholly-owned subsidiary of CTC.

In November 2001, in conjunction with the acquisition of TTC, Eldorado Financial
Group, Inc.'s name was changed to Composite Technology Corporation, and its
Articles of Incorporation were amended to allow for the issuance of up to
5,000,000 shares of $0.001 par value preferred stock from none previously
authorized and for the issuance of up to 200,000,000 shares of $0.001 par value
common stock from the 100,000,000 shares previously authorized. CTC also changed
its year end to September 30.

The acquisition of TTC by CTC effected a change in control and was accounted for
as a reverse acquisition, whereby TTC is the accounting acquirer for financial
statement purposes. Accordingly, the financial statements of CTC reflect the
historical financial statements of TTC from its inception on March 28, 2001 and
the operations of the Company (as defined in Note 4) subsequent to September 30,
2001.

In December 2003, the Company incorporated three inactive subsidiaries as Nevada
corporations: CTC Wind Systems Corporation ("WSC"), CTC Cable Corporation
("CCC"), and CTC Towers and Poles Corporation ("TPC").


                                      F-49
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


NOTE 2 - RESTATEMENT AND RECLASSIFICATIONS

In May 2005, the Company determined that certain fiscal 2004 transactions with
employee and settlements of former employee non-qualifying stock options that
were exercised on a "cashless" basis were improperly recorded in fiscal 2004.
For these transactions, both the exercise price and any payroll taxes owed by
the employee or former employees were allowed to be paid for in shares of the
stock exercised. Under FIN 44, such changes are considered to be modifications
of the option grant and the transactions are required to be accounted for at the
fair value of the stock issued on the date of the cashless exercise.

In May, 2005, the Company also reclassified certain consulting related expenses
in the Statement of Operations for the fiscal year ended September 30, 2004.

In May, 2005, the Company reclassified certain amounts initially recorded as
accrued legal settlement to accounts payable to more accurately reflect the
operational nature of the balance.

Below is the effect on the Balance Sheet as of September 30, 2004 and the
Statements of Operations for the fiscal years ended September 30, 2004 and 2003

<TABLE>
<CAPTION>

Balance Sheet as of September 30, 2004

                                             As Originally       Restatement                        As
                                                 Reported        Adjustment                  Restated
                                          ----------------- -----------------       -------------------
<S>                                       <C>                <C>                       <C>
Accounts Payable                                 1,371,631           469,904     3           1,841,535

Accrued legal settlement                           469,904         (469,904)     3                  --

Total Current Liabilities                        3,094,818                                   3,094,818

Shareholders' Deficit
Additional paid-in capital                      31,929,882           364,277     1          32,294,159
                                          ----------------- -----------------       -------------------

 Deficit accumulated during the
   development stage                         (26,075,079)          (364,277)     1        (26,439,356)
                                          ----------------- -----------------       -------------------

                                          ----------------- -----------------       -------------------

 Total stockholders' equity                     5,602,719                 --                5,602,719
                                          ----------------- -----------------       -------------------
</TABLE>

Statement of Operations for Fiscal Year Ended September 30, 2004

<TABLE>
<CAPTION>

                                             As Originally       Restatement                        As
                                                 Reported        Adjustment                  Restated
                                          ----------------- -----------------       -------------------
<S>                                       <C>                 <C>                     <C>
Operating Expenses
Officer Compensation                               282,259           562,741     2             845,000

General and administrative                       5,519,506           266,529     1
                                                                 (2,068,452)     2           3,717,583
                                          ----------------- -----------------       -------------------

Legal, Professional, and consulting              3,360,267            13,750     1
                                                                   3,416,551     2           6,790,568
                                          ----------------- -----------------       -------------------

Research and Development                           114,959            68,000     1
                                                                   3,075,096     2           3,258,055
                                          ----------------- -----------------       -------------------

Sales and Marketing                                     --            15,998     1
                                                                   1,707,559     2           1,723,557
                                          ----------------- -----------------       -------------------

Depreciation                                       153,039               --                    153,039
                                          ----------------- -----------------       -------------------
Compensation expense related to
issuance of common stock - legal                 1,058,000       (1,058,000)     2                  --
                                          ----------------- -----------------       -------------------
Stock issued for legal settlement                  739,000         (739,000)     2                  --
                                          ----------------- -----------------       -------------------
Compensation expense related to fair
value of warrants - consultants                  1,792,510       (1,792,510)     2                  --
                                          ----------------- -----------------       -------------------
Compensation expense related to
issuance of common stock - consulting            1,265,165       (1,265,165)     2                  --
                                          ----------------- -----------------       -------------------
Compensation expense related to fair
value warrants                                   1,540,000       (1,540,000)     2                  --
                                          ----------------- -----------------       -------------------
Compensation expense related to fair
value of stock options legal                       128,250         (128,250)     2                  --
                                          ----------------- -----------------       -------------------
Compensation expense related to fair
value of stock options research and
development                                        170,570         (170,570)     2                  --
                                          ----------------- -----------------       -------------------
Total Operating Expenses                        16,123,524           364,277                16,487,801
                                          ----------------- -----------------       -------------------

                                          ----------------- -----------------       -------------------
 Net loss                                     (14,323,597)         (364,277)              (14,687,874)
</TABLE>


Statement of Operations for Fiscal Year Ended September 30, 2003

<TABLE>
<CAPTION>
                                             As Originally       Restatement                        As
                                                 Reported        Adjustment                  Restated
                                          ----------------- -----------------       -------------------
<S>                                        <C>                <C>                     <C>
Operating Expenses

Officer Compensation                               240,000            30,000     2             270,000

General and administrative                       1,213,190         (345,647)     2             867,543
                                          ----------------- -----------------       -------------------

Legal, Professional, and consulting              1,496,655          (42,725)     2           1,453,930
                                          ----------------- -----------------       -------------------

Research and Development                         3,210,289            33,186     2           3,243,475
                                          ----------------- -----------------       -------------------

Sales and Marketing                                     --           897,735     2             897,735
                                          ----------------- -----------------       -------------------

Compensation expense related to fair
value of stock options legal                       269,225         (269,225)     2                  --
                                          ----------------- -----------------       -------------------

Compensation expense related to fair
value of stock options research and
development                                        303,324         (303,324)     2                  --
                                          ----------------- -----------------       -------------------
Total Operating Expenses                         6,751,252                                   6,751,252
                                          ----------------- -----------------       -------------------

                                          ----------------- -----------------       -------------------
 Net loss                                      (6,751,252)                                 (6,751,252)
</TABLE>

1) During fiscal 2004, the Company allowed the cashless exercise of non
qualifying employee stock options by four former employees as part of the
settlement of their option vesting and by one employee. A total of 280,265
shares were exercised between $0.25 per share and $1.00 per share. As a result
of these transactions, the Company had initially recorded $64,005 in
compensation expense. Under FIN 44, a cashless exercise where the exercise price
is paid for by the stock being exercised is considered to be a modification of
the option grant and the fair value of the transaction must be recorded as
expense. For the 280,265 shares exercised, 237,220 shares of Common Stock of the
Company were issued and additional compensation expense was recorded as follows:
the fair value was determined using the difference between the closing market
value of the Company's common stock on the date of each underlying transaction
and the exercise price per share of the options exercised. For fiscal 2004, the
total additional non-cash expense of $364,277 represents the fair value of the
280,265 shares, valued at $496,217 less the exercise cost of $65,935 and less
the previously recorded expense of $64,005. The Company does not intend to allow
for the cashless exercise of additional stock options in the future. The impact
on the fiscal 2004 loss per share for this error correction was less than $0.01
per share on both a basic and fully diluted basis.

2) The Company has changed the classification of certain consulting expenses
related to general and administrative, product development, and sales and
marketing activities and the classification of misc. receivables. To be
consistent with the current period presentation, certain operating expense
balances for the fiscal year ended September 30, 2004 and September 30, 2003
were reclassified. No additional expense was recorded as a result of this
reclassification.

3) In May, 2005, upon review of the balances originally presented as accrued
legal settlement, it was determined that the descriptions of the balances were
misleading. The $469,904 balance represents accrued legal fees related to
financing activities, litigation and intellectual property legal activity
expensed in fiscal 2004. No additional expense was recorded as a result of this
reclassification.

NOTE 3 - GOING CONCERN

These financial statements have been prepared on a going concern basis. However,
during the year ended September 30, 2004, the Company incurred a net loss of
$(14,687,874) and negative cash flows from operations of $(18,735,430). In
addition, the Company had an accumulated deficit of $(26,439,356) at September
30, 2004. The Company's ability to continue as a going concern is dependent upon
its ability to generate profitable operations in the future and/or to obtain the
necessary financing to meet its obligations and repay its liabilities arising
from normal business operations when they come due. The outcome of these matters
cannot be predicted with any certainty at this time.

Since inception, the Company has satisfied its capital needs primarily by
issuing equity securities. With the introduction of its primary product into the
market and following the results of the first evaluation sales, management now
believes that it will generate significant revenues during fiscal 2005. In
addition, subsequent to year end, the Company was able to get the restricted $10
million from the Debenture financing released and the Company believes that it
now has sufficient operating capital to carry out its plans for the future. It
is anticipated that the Company will begin generating sales in Fiscal year
ending September 30, 2005 that combined with existing cash balances will be
sufficient to cover its operating costs. Central to the Company's financial
strategy for fiscal 2005 is the securing of sufficient lease financing to manage
the ramp up of its core production and the organization of separate larger
production facilities. As part of the preparation for this, subsequent to year
end, the Company has already obtained approximately $1.4 million in lease
financing commitments and has a firm offer for an additional $3 million in
equipment lease financing. In May 2005, the Company received a purchase order
totaling approximately $1,200,000. In June 2005, we received two orders totaling
in combination an additional $1,200,000. Cash payments and potential revenues to
the Company for these orders is estimated to be approximately $1.6 million. We
anticipate the announcement of additional orders throughout the remainder of
fiscal 2005 and beyond as our products gain market acceptance.

There is no guarantee that the product will be accepted or provide a marketable
advantage and therefore no guarantee that the product will ever be profitable.
In addition, management plans to ensure that sufficient capital will be
available to provide for its capital needs with minimal borrowings and may issue
equity securities to ensure that this is the case. However, there is no
guarantee that the Company will be successful in obtaining sufficient capital
through borrowings or selling equity securities. These financial statements do
not include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to become a going
concern.

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DEVELOPMENT STAGE ENTERPRISE

The Company is a development stage company as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development
Stage Enterprises." The Company is devoting substantially all of its present
efforts to establish a new business, and its planned principal operations have
not yet commenced. All losses accumulated since inception have been considered
as part of the Company's development stage activities.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of CTC and its wholly
owned subsidiaries, TTC, CCC and TPC (collectively, the "Company"). All
significant inter-company accounts and transactions are eliminated
consolidation.

BASIS OF PRESENTATION

Certain amounts in the prior year financial statements have been reclassified to
conform to the current year presentation.

CASH AND CASH EQUIVALENTS

For the purpose of the statements of cash flows, the Company considers all
highly liquid investments purchased with original maturities of three months or
less to be cash equivalents.

RESTRICTED CASH

Restricted cash at September 30, 2004 consisted of $10,010,060 held in escrow
pursuant to conditions of the $15,000,000 Debenture offering issued in August,
2004. See note 11. The restriction was removed in November, 2004 by the
Debenture holders as a result of a renegotiation of the debenture agreement
terms and the issuance of additional warrants to the Debenture holders and the
cash was released to the Company.


                                      F-50
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. The Company provides for depreciation
using the straight-line method over estimated useful lives of three to 10 years.
Expenditures for maintenance and repairs are charged to operations as incurred
while renewals and betterments are capitalized. Gains or losses on the sale of
property and equipment are reflected in the statements of operations.

IMPAIRMENT OF LONG-LIVED ASSETS

Management evaluates long-lived assets for impairment whenever even or changes
in circumstances indicate that the carrying value of an asset may not be
recoverable. If the estimated future cash flow (undiscounted and without
interest charges) from the use of an asset are less than the carrying value, an
impairment would be recorded to reduce the related asset to its estimated fair
value.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include cash and cash equivalents and
accounts payable - trade. The carrying amounts for these financial instruments
approximates fair value due to their short maturities.

COMPREHENSIVE INCOME

The Company utilizes SFAS No. 130, "Reporting Comprehensive Income." This
statement establishes standards for reporting comprehensive income and its
components in a financial statement. Comprehensive income as defined includes
all changes in equity (net assets) during a period from non-owner sources.
Examples of items to be included in comprehensive income, which are excluded
from net income, include foreign currency translation adjustments, minimum
pension liability adjustments, and unrealized gains and losses on
available-for-sale securities. Comprehensive income is not presented in the
Company's financial statements since the Company did not have any changes in
equity from non-owner sources.

REORGANIZATION COSTS

CTC and TTC have adopted the provisions of American Institute of Certified
Public Accountants Statement of Position 98-5, "Reporting on the Costs of
Start-Up Activities," whereby all organization and initial costs incurred with
the incorporation and initial capitalization of TTC, the costs associated with
the reverse acquisition of TTC by CTC, and costs incurred by TTC related to the
reverse acquisition transaction with CTC were charged to operations in the
period the respective costs were incurred.

STOCK-BASED COMPENSATION

SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure,"
defines a fair value based method of accounting for stock-based compensation.
However, SFAS No. 123 allows an entity to continue to measure compensation cost
related to stock and stock options issued to employees using the intrinsic
method of accounting prescribed by Accounting Principles Board ("APB") Opinion
No. 25,"Accounting for Stock Issued to Employees." Entities electing to remain
with the accounting method of APB No. 25 must make pro forma disclosures of net
income and earnings per share as if the fair value method of accounting defined
in SFAS No. 123 had been applied. The Company has elected to account for its
stock-based compensation to employees using the intrinsic value method under APB
No. 25.

The value assigned to stock issuance, stock options, and stock warrants granted
to non-employees are accounted for in accordance with SFAS No. 123 and Emerging
Issues Task Force (EITF) 96-18, Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services, which require that such costs be measured at the earlier of
the date at which a commitment for performance by the counterparty to earn the
equity instruments is reached or the date at which the counterparty's
performance is complete.

Common stock issued to non-employees is valued at fair value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably measurable. For compensation paid with registered
stock, the fair value is considered to be the market value of the Common Stock,
determined to be the closing price as quoted on the OTC bulletin board and which
typically is also the fair value of the services provided to the Company. For
compensation paid with unregistered stock, whenever possible the fair value of
the services rendered is used to value the transaction. If the fair value of the
services are not determinable, a discount to the company's closing market price
is used based on the length of the restriction, the volatility of the stock and
the size of the stock issuance as compared against the average selling volume of
the stock on the OTC bulletin board.

Common stock options and warrants are valued using the modified
Black-Scholes-Merton option pricing model which requires making significant
assumptions including: Expected life of the option or warrant is the initial
life of the option or warrant. Expected Dividend are zero

For each of the fiscal years listed below, the following assumptions were used:

------------------------------ ------------------------- --------------
Fiscal year ending
September 30                   Risk free rate            Volatility
------------------------------ ------------------------- --------------
2002                           4.73%                     207.5
------------------------------ ------------------------- --------------
2003                           3.87%                     103.5
------------------------------ ------------------------- --------------
2004                           4.14%                     80.3
------------------------------ ------------------------- --------------

No options or warrants were granted for the fiscal period ending September 30,
2001 which would have required the use of an option pricing model.

The Company has not issued any warrants to non-employees with vesting
provisions. For options issued to non-employees with vesting provisions, the
fair value of the option as of the measurement date is recorded as deferred
compensation expense and records the expense associated with the vesting options
ratably over the vesting period. None of the Company's non-employee options
contain market or performance conditions other than service to the Company
during the vesting period and as such, the measurement date used by the company
is the date the options were granted.


                                      F-51
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


RESEARCH AND DEVELOPMENT EXPENSES

Research and development expenses are charged to operations as incurred.

REVENUE RECOGNITION

Revenues are recognized based on guidance provided in the Securities and
Exchange Commission (SEC) Staff Accounting Bulletin No. 104 "Revenue Recognition
in Financial Statements," as amended (SAB 104). Accordingly, our general revenue
recognition policy is to recognize revenue when there is persuasive evidence of
an arrangement, the sales price is fixed or determinable, collection of the
related receivable is reasonably assured, and delivery has occurred or services
have been rendered.

The Company derives, or seeks to derive revenues from two sources:

(1) Product revenue which includes revenue from the sale of composite core,
wrapped composite core, and other electric utility related products.

(2) Consulting revenue, which includes engineering, product design, and service
fees that we receive under customer agreements related to the installation and
design of our product sale solutions.

In addition to the above general revenue recognition principles prescribed by
SAB 104, our specific revenue recognition policies for each revenue source are
more fully described below.

PRODUCT SALES. Product revenues are generally recognized when product shipment
has been made and title has passed to the end user customer. Product revenues
consist primarily of revenue from the sale of: (i) wrapped composite core to
utilities either sold directly by the Company or through our distributor, ii)
composite core sold to a cable wrapping partner not subject to a distributor
agreement and where title passes to the partner, or iii) cable core hardware
sold to utility companies. For most product sales, we expect that the terms of
sales generally will not contain provisions that will obligate us to provide
additional products or services after installation to end users.. We recognize
revenue: (i) upon shipment when products are shipped FOB shipping point to end
users or (ii) upon delivery at the end-user customer's location when products
are shipped FOB destination. Currently, we do not anticipate recognizing
revenues on products provided to distributors unless the title to the product
has been transferred and no right of return exists.

CONSULTING REVENUE Consulting revenues are generally recognized as the
consulting services are provided. We have entered into service contract
agreements with electric utility and utility services companies that generally
require us to provide engineering or design services, often in conjunction with
current or future product sales. In return, we receive engineering service fees
payable in cash. For multiple element contracts where there is no vendor
specific objective evidence (VSOE) or third-party evidence that would allow the
allocation of an arrangement fee amongst various pieces of a multi-element
contract, fees received in advance of services provided are recorded as deferred
revenues until additional operational experience or other vendor specific
objective evidence becomes available, or until the contract is completed.

During its history, the Company has entered into revenue bearing contracts of a
long term (greater than one year) duration. Due to a lack of operational history
resulting in low reliability of estimates on interim rates of completion of such
contracts, revenues associated with long term contracts are recognized on the
completed-contract method of accounting. Under this method, billings and costs
are accumulated during the period of installation, but no revenues are recorded
before the completion of the work. Costs of revenues are capitalized and are
recorded in other current assets. Provisions for estimated losses on uncompleted
contracts are made at the time such losses are determined. Operating expenses,
including indirect costs and administrative expenses, are charged as incurred to
periodic income and not allocated to contract costs.

ACCOUNTS RECEIVABLE

The Company extends credit to its customers. Collateral is generally not
required. Credit losses are provided for in the financial statements based on
management's evaluation of historical and current industry trends as well as
history with individual customers. Although the Company expects to collect
amounts due, actual collections may differ from estimated amounts.

INVENTORIES

Inventories are stated at lower of cost or market, with cost generally
determined on a FIFO basis.

INCOME TAXES

The Company accounts for income taxes under the liability method, which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred income taxes are recognized for the
tax consequences in future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts at each period end based
on enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.

As of September 30, 2004, the deferred tax assets related to the Company's net
operating loss carry-forwards are fully reserved. Due to the provisions of
Internal Revenue Code Section 338, the Company may not have any net operating
loss carry-forwards available to offset financial statement or tax return
taxable income in future periods as a result of a change in control involving 50
percentage points or more of the issued and outstanding securities of the
Company.

ESTIMATES

The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
expenses and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.


                                      F-52
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


LOSS PER SHARE

The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per share is
computed by dividing loss available to common shareholders by the
weighted-average number of common shares outstanding. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive. The following common stock
equivalents were excluded from the calculation of diluted loss per share since
their effect would have been anti-dilutive:

<TABLE>
<CAPTION>

                                              2004             2003             2002
                                           ----------       ----------       ----------
<S>                                        <C>              <C>               <C>
Series B convertible preferred stock               --           80,000          105,600
Convertible Debentures, if converted        8,982,036               --               --
Options for common stock                    7,195,336        8,147,740        5,307,740
Warrants                                   13,081,681       17,047,624        2,796,290
                                           ----------       ----------        ---------
Total                                      24,259,053       25,275,364        8,209,030
</TABLE>

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of
credit risk consist of cash and cash equivalents. The Company places its cash
and cash equivalents with high credit, quality financial institutions. At times,
such cash and cash equivalents may be in excess of the Federal Deposit Insurance
Corporation insurance limit of $100,000. The Company has not experienced any
losses in such accounts and believes it is not exposed to any significant credit
risk on cash and cash equivalents.

The Company has a $2,500,000 account receivable from one entity relating to
engineering services provided during fiscal 2004. In April, 2005, the Company
received payment of $250,000 as a progress payment on this receivable and
accepted payment terms for the remaining $2,250,000. Payments are to be made
monthly with the remaining balance outstanding due and payable in July, 2005.

MAJOR CUSTOMER

Revenues from one customer of Composite Technology Corporation represented all
of the company's revenues for the fiscal year ended September 30, 2004.

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment at September 30, 2004 consisted of the following:

Office furniture and equipment             $  215,513
Leasehold Improvements                        350,693
Manufacturing equipment                       803,387
                                           ----------
                                            1,369,593

 Less accumulated depreciation                116,470
                                           ----------

TOTAL                                      $1,253,123
                                           ==========



Depreciation expense was $153,039, $18,569, and $176,214 for the years ended
September 30, 2004 and 2003 and the period from March 28, 2001 (inception) to
September 30, 2004, respectively.

NOTE 6 - CONTRACT RIGHTS

On April 12, 2001, TTC issued 165 shares of restricted, unregistered Series A
cumulative, convertible preferred stock to Red Guard Industries, Inc. ("Red
Guard") to acquire the rights to negotiate to acquire the license from W.B.G.,
Inc. ("WBG") to manufacture, develop, and sell certain patent-pending composite
reinforced aluminum conductor technologies. Red Guard was a related party as
discussed further in Note 11. This transaction was valued at an agreed-upon
amount of approximately $165,000.


                                      F-53
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


TTC entered into a technology license agreement with WBG on May 7, 2001 (the
"License Agreement"). The License Agreement related to patent pending composite
reinforced aluminum conductor technologies and all improvements and gave TTC an
exclusive license to the technologies covered by the License Agreement. In the
License Agreement, WBG represented and warranted to TTC that WBG had the right
to enter into the License Agreement, including without limitation, the right to
grant TTC the exclusive rights to the technologies covered by the License
Agreement.

TTC agreed to pay royalties to WBG, initially at a maximum rate of 5% of Gross
Revenues (as defined in the License Agreement) received by TTC from the sale of
the technology products until sales of product have equaled the design capacity
of the first commercial composite core production line. Design capacity will be
defined as the pultruded composite core capacity stated on the specifications by
the builder (WBG) as mutually agreed upon by TTC. The royalty will decline by 1%
of Gross Revenues upon the addition of each new composite core production line
until the fourth line is installed, whereupon WBG would receive a royalty of 2%
of Gross Revenues received by TTC from the sale of the technology products.

In the event of any sub-license agreements, TTC will pay the same royalty to WBG
as it would if it sold the products itself. WBG also agreed to provide TTC full
disclosure of all current and future technologies covered by the License
Agreement as well as disclosure of any interested parties in such technologies.
TTC agreed to pay WBG to design, build, install and provide specifications,
manuals, and training to complete commercial product equipment lines for the
technologies, with the price and specifications to be mutually agreed upon. TTC
would advance funds to WBG for each phase as required under a mutually
agreed-upon budget and schedule. If WBG is unable to supply said additional
commercial product lines, then TTC will have the right to produce same. No such
requirement existed as of September 30, 2003.

The Company, TTC, and WBG (aka WBGA) were involved in litigation regarding the
interpretation and enforcement of the License Agreement (see Note 7). The
lawsuits were settled amicably in February 2003, resulting in a revised License
Agreement between W. Brandt Goldsworthy & Associates, Inc. ("WBGA") and CTC. The
new License Agreement (the "New License Agreement") supersedes the previous
License Agreement. The New License Agreement grants CTC the exclusive license
for use of any components in CTC's Aluminum Conductor Composite Core ("ACCC")
products that include items contained in patent claims granted to WBGA by the
United States Patent and Trademark Office (the "USPTO").

The New License Agreement also provides CTC a broader non-exclusive license for
any other pultruded composite core electrical cable designs characterized by
WBGA as CRAC-1. The New License Agreement bears a 2% royalty on net sales
revenues for that component of ACCC using any patent claim issued to WBGA and a
1% royalty for any component of the CRAC-1 technology, if any, used by CTC,
provided WBGA is granted valid patent claims by the USPTO. As of September 30,
2003, no such claims have been granted by the USPTO. The Company has been
notified that the rights to the New License Agreement as Licensor have been
transferred to James M. Dombroski pursuant to Mr. Dombroski's execution of a
lien on the asset dated December 29, 2003. The duration of the New License
Agreement is for the life of any patent granted to WBGA by the USPTO for the
specific technologies licensed therein.

NOTE 7 - INVESTMENTS IN OTHER COMPANIES

Investments in other companies at September 30, 2003 consisted of an investment
in Integrated Performance Systems, Inc., which was valued at $1,000 and is
included in other assets on the accompanying consolidated balance sheet.


                                      F-54
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


On April 12, 2001, the Company exchanged 15,086,000 equivalent post-acquisition
shares of restricted, unregistered common stock with Red Guard for consideration
for the rights to certain technologies and for various marketable and restricted
securities in four unrelated entities described below. The investments received
in the initial exchange transaction were valued using an agreed-upon valuation
of approximately $137,750. Through September 30, 2002, upon evaluations in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed of," management recognized an
aggregate permanent valuation impairment of $137,230 against these holdings.

Integrated Performance Systems, Inc. ("IPS") is a publicly-traded electronics
manufacturing corporation located in Frisco, Texas. IPS is a manufacturer and
supplier of performance-driven circuit boards for high-speed digital computer
and telecommunications applications. The Company acquired an aggregate 3,000
shares of IPS in the April 12, 2001 transaction.

STL Group, Inc. ("STL") is a privately-owned company based in Cleveland, Ohio
involved in manufacturing and distributing patented and FDA approved solid
surgical implants and other surgical products. The Company acquired an aggregate
15,000 post-STL forward split shares of STL in the April 12, 2001 transaction.

TMA Ventures, LLC/MEMX, Inc. is a privately-owned company which was formed in
2000 to commercialize micro electro-mechanical systems "MEMS" technologies
licensed by Sandia National Laboratories, specifically to make an all optical
cross-connect microchip for optical switches. The Company acquired an aggregate
3,389 units in TMA Ventures, Inc., which convert on a one-for-one basis into
shares in MEMX, Inc., in the April 12, 2001 transaction.

AMJ Logistics, Inc. ("AMJ") is a privately-owned software company based in
Tucson, Arizona. AMJ's primary product is an open-architecture, event-driven,
object-oriented integrated Electronic Data Interchange ("EDI") system providing
transaction accountability for a complete audit trail for history and accurate
tracing of costs.

During August 2001, the Company paid $10,000 in cash and issued 158,800
equivalent post-acquisition shares of restricted, unregistered common stock,
valued at $4,500, to acquire approximately 72,665 shares of AMJ common stock
under this option. These shares were included in the recapitalization effect of
reverse acquisition with Transmission Technology Corp since they were issued
prior to the date of the reverse acquisition.

On September 29, 2001, the Company made an advance of $30,000 cash to AMJ. On
October 13, 2001, AMJ and the Company agreed to convert this $30,000 advance and
an additional advance of $20,000 made on October 3, 2001, into 3,125 shares of
AMJ's restricted, unregistered common stock. In December 2001, the Company and
AMJ settled the outstanding balances on the purchase option agreement with the
issuance of 42,500 shares of the Company's restricted, unregistered common stock
to AMJ in exchange for 37,335 shares of restricted, unregistered AMJ common
stock. This transaction was valued at approximately $191,450, which represented
the fair value of the transaction. As a result of all AMJ transactions through
December 31, 2001, the Company owned an aggregate of 114,125 shares of AMJ,
including the initial 1,000 shares acquired in the April 12, 2001 transaction
with a cost basis of $255,950. During fiscal year 2001, reflected in the reverse
merger accounting, the Company recorded an impairment valuation of $101,094.

On September 30, 2002, the Company and Red Guard consummated a transaction,
whereby Red Guard exchanged 100% of the issued and outstanding Series A
preferred stock, all accrued but unpaid dividends, certain short-term working
capital loans, and all accrued but unpaid interest in return for all of the
Company's investment interests in other companies, except for the investment in
IPS which was valued at $1,000. Immediately prior to the exchange, the Company
recognized an additional impairment valuation of $137,230 to write the remaining
investments down to the value of the consideration exchanged. Accordingly, no
additional gain or loss was recorded on this transaction.


                                      F-55
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


NOTE 8 - COMMITMENTS AND CONTINGENCIES

LEASE

Until December 2003, the Company operated in leased offices, located in Irvine,
California, on a month-to-month agreement at a rate of $4,600 per month and in a
manufacturing facility, located in Irvine, California, on a month-to-month
agreement at a rate of $8,000 per month. The Company leases office equipment
with a minimum payment of $965 per month. Leases expire through December 2010.

Rent expense was $687,649, $140,035, and $876,028 for the years ended September
30, 2004 and 2003 and the period from March 28, 2001 (inception) to September
30, 2004, respectively.

In January 2004, the Company entered into a seven-year lease agreement for a
combination manufacturing and office facility in Irvine, California for minimum
monthly payments of $73,584. The Company paid for the first two month's rent by
issuing 140,160 shares of its unregistered, restricted common stock valued at
$147,168.

Future minimum operating lease payments under the new leases at September 30,
2004 were as follows:

                              Operating Leases

 Year Ending
September 30,
-------------

2005                             $ 1,017,466
2006                               1,055,309
2007                               1,093,153
2008                               1,130,996
2009                               1,161,372
Thereafter                         1,498,272
                                 -----------

TOTAL                            $ 6,956,568
                                 ===========


In February 2004, the Company entered into an equipment lease with payments of
$625 per month which includes 6.5% interest. The lease will terminate February
1, 2008.

In May 2004, the Company entered into a $500,000 sale leaseback of certain of
its capital assets. Under the terms of the Master Lease Agreement the Company
received $450,000 which was net of a 10% security deposit, and is to make
payments of $16,441 per month for 36 months. At the end of the lease period, the
Company has the right to renew the lease for an additional 12 months, terminate
and return the equipment or purchase the equipment at the greater of fair market
value subject to a minimum of 10% and a maximum of 20% of the capitalized cost.
The company recognized a gain in the amount of $59,045 from this transaction and
will defer the gain and recognize it as income over the period of the initial
lease term.

In June 2004, the Company entered into a $300,000 equipment lease with the same
company financing the sale leaseback, above. The Company received $131,421 which
was net of a 10% security deposit ($30,000) and direct payment to one vendor
($126,750) and less advance payments. The Company is to make payments of $9,864
per month for 36 months. The terms, at the end of the lease, are the same as
above sale leaseback.

Future minimum capital lease payments under the new leases at September 30, 2004
were as follows:


                                      F-56
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


                                          Capital Leases

 Year Ending
September 30,
--------------

2005                                         $ 323,161
2006                                           323,161
2007                                           201,502
2008                                             3,128
2009                                                --
Thereafter                                          --
                                            ----------
Total payments                              $  850,952

Less: Amounts representing interest           (116,570)
                                            ----------
Fair Value of Capital Leases                   734,382
         Less current portion                 (251,782)
                                            ----------
          Non current portion                  482,600


Property and equipment under capital leases consisted of the following at
September 30, 2004:

Machinery and equipment                     $  826,379

Accumulated depreciation                        85,155
                                            ----------

NET PROPERTY AND EQUIPMENT                  $  741,224
                                            ==========


PROFESSIONAL SERVICES CONSULTING AGREEMENTS

The Company has entered into various consulting agreements for professional and
product development services as follows:

o A contract with an unrelated partnership for legal services at a rate of $300
per hour, payable in common stock issued pursuant to a Registration Statement
under the Securities Act of 1933 on Form S-8. The Company is required to issue
common stock in blocks of 100,000 shares to prepay for these legal services.
This agreement commenced in January 2002 for a one-year term. This agreement
also contained the granting of options to purchase up to 200,000 shares of
common stock pursuant to a Registration Statement under the Securities Act of
1933 on Form S-8 at a price of $1.75 per share for 100,000 options and $2 per
share for 100,000 options. The options vested on the grant date.

o A contract with a corporation, whose controlling officer sits on the Company's
product development/advisory board, for product development and research
services at a rate of $19,500 per month. This agreement commenced in January
2002 and expires in December 2006. This agreement, as amended, also contained
the granting of options to purchase up to 1,000,000 shares of common stock
pursuant to a Registration Statement under the Securities Act of 1933 on Form
S-8 at a price of $1.31 per share. The exercise price was reduced to $0.25 on
March 31, 2003. The options vest in pro-rata equal segments of 20% of the total
grant on an annual basis starting in December 2002. The Company is obligated to
pay the corporation interest on unpaid amounts at a rate of 10% per annum and is
obligated to pay a royalty to the corporation's employee equal to 0.35% of gross
revenues on all products sold by the Company using technology developed by this
individual.


                                      F-57
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


o A contract with a corporation, whose controlling officer sits on the Company's
product development/advisory board, for product development and research
services at a rate of $25,000 per month. This agreement commenced in January
2002 and runs for an indefinite time period. This agreement also contained the
granting of options to purchase up to 750,000 shares of common stock pursuant to
a Registration Statement under the Securities Act of 1933 on Form S-8 at a price
of $1 per share. The exercise price was reduced to $0.25 on March 31, 2003. The
options vest in pro-rata equal segments of 20% of the total grant on an annual
basis starting in December 2002. The Company is obligated to pay the corporation
interest on unpaid amounts at a rate of 10% per annum and is obligated to pay a
royalty to the corporation's employee equal to 0.35% of gross revenues on all
products sold by the Company using technology developed by this individual.

o The company has contracted with several consultants during the year ended
September 30, 2004, most of which have no definite ending date. The Company has
spent in excess of $488,000 on consultants who have assisted with financing,
information technology and finance/accounting.

o Two individuals were contracted during the year to assist with Investor
Relations. They have indefinite termination dates.

o In addition to the consultants mentioned above who have contributed to our
product development, are four additional consultants contracted this year. The
Company has paid them approximately $292,000 this year, and will continue with
their contracts until the projects are completed.

o To assist with the Company's Marketing and Sales efforts the Company has
contracted with several consultants. During fiscal 2004, the company paid in
excess of $425,000 for these services.

PROFESSIONAL SERVICES AGREEMENTS

The Company has entered into various services agreements for professional and
product development services as follows:

o A contract with an unrelated corporation for legal consulting services at a
rate of $500,000 per year, payable in common stock issued pursuant to a
Registration Statement under the Securities Act of 1933 on Form S-8. This
agreement commenced in March 2002 and expires in March 2004. This agreement also
contained the granting of options to purchase up to 1,000,000 shares of common
stock pursuant to a Registration Statement under the Securities Act of 1933 on
Form S-8 at a price of $0.10 per share. The options vest in pro-rata equal
segments in April 2002, January 2003, and January 2004.

o A contract with an individual for consulting services for 1,000,000 shares of
common stock issued pursuant to a Registration Statement under the Securities
Act of 1933 on Form S-8. This contract commenced on January 2002 and expired in
January 2003. This agreement also contained the granting of options to purchase
up to 1,000,000 shares of common stock pursuant to a Registration Statement
under the Securities Act of 1933 on Form S-8 at a price of $0.40 per share. The
options vested on the grant date and have all been exercised as of September 30,
2002. Furthermore the Company is obligated to pay the individual a success fee
equal to 10% on all equity capital raised by the individual. As of September 30,
2004, the Company did not have any obligation under the "success fee" portion of
this agreement.


                                      F-58
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


o A consulting agreement with an unrelated entity for the procurement of
qualified consultants to deliver capital financing on a "successful efforts"
basis for a one-time fee of 400,000 shares of unregistered, restricted common
stock as compensation for all consultants. Furthermore, the entity will also
receive a commission of 10% in cash and 10% in equivalent warrants for common
stock for successful funding through sources identified by this entity. No fees
have been paid on this agreement through September 30, 2004.

o A finder's fee agreement for capital financing with an unrelated party was
agreed to in August 2004. This entity was paid $717,500 in August 2004 and
$307,500 in December 2004. The contract is complete as of December 22, 2004.

LITIGATION

TRANSMISSION TECHNOLOGY CORPORATION ("TTC"): TRANSMISSION TECHNOLOGY CORPORATION
V. W. BRANDT GOLDSWORTHY & ASSOCIATES, INC., ET AL CASE NO. 01-07118 WAS FILED
IN AUGUST 15, 2001 BEFORE THE UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF
CALIFORNIA. THE PRINCIPAL PARTIES TO THE SUIT ARE TTC, C. WILLIAM ARRINGTON,
CTC, WBGA, WBG, TOM SAWYER, AND COMPOSITE POWER CORPORATION.

TTC: Transmission Technology Corporation v. W. Brandt Goldsworthy & Associates,
Inc., et al (Continued) On or about May 7, 2001, TTC, a wholly-owned subsidiary
of CTC, entered into a written agreement with WBG granting TTC the exclusive
license to all WBG teleconductor technologies, including Composite Reinforced
Aluminum Conductor and Advanced Composite Reinforced Aluminum Conductor and any
improvements by WBGA. The litigation concerns the interpretation and enforcement
of the License Agreement. The lawsuits were settled amicably in February 2003,
resulting in a revised License Agreement between WBGA and the Company.
Accordingly, no accrual is recorded.

DR. CLEM HIEL ET AL. V. W. BRANDT GOLDSWORTHY & ASSOCIATES, INC., ET AL

Case No. 02CC05443 was filed on April 9, 2002 in the State of California for the
County of Orange. It was transferred to and is pending before the Superior Court
of the State of California for the County of Los Angeles. The principal parties
are Dr. Clem Hiel, Dr. Alonso Rodriguez (both of whom are former employees of
WBG, and/or WBGA and are currently consultants of CTC), WBGA, WBG and W. Brandt
Goldsworthy. CTC has agreed to bear the expense of this proceeding because it
affects two of CTC's consultants. These consultants are involved in the
commercialization of CTC's novel aluminum conductor composite core cable. This
matter was settled in February 2003. Accordingly, no accrual is recorded.

JARBLUM V. TRANSMISSION TECHNOLOGY CORPORATION, ET AL

Case No. SC-072087 was filed on May 13, 2002 in the Superior Court of the State
of California for the County of Los Angeles, West District. The principal
parties are Plaintiff William Jarblum and Defendants TTC, CTC, and C. William
Arrington. The case was settled in April 2003 for the issuance of 50,000 Series
K warrants valued at $11,750 and cash of $210,000 which was paid in September
2004. Accordingly, no accrual is recorded.

TRANSMISSION TECHNOLOGY CORPORATION, ET AL V. TOM SAWYER

Case No. 02CC10972 was filed on June 21, 2002 in the Superior Court of the State
of California for the County of Orange. It was transferred to the United States
District Court, Central District of California after being allowed to be
included in the action of TTC v. WBG/WBGA et al. The principal parties are TTC,
CTC, Arrington, Wilcoxon, and Sawyer. The plaintiffs seek declaratory relief and
an injunction against Sawyer, as well as damages arising from various tort
causes of actions, including without limitation, tortuous interference with
contract, fraud, legal malpractice, and breach of fiduciary duty. This
proceeding is indirectly related to the litigation concerning the License
Agreement. This matter was settled in February 2003 along with the TTC:

Transmission Technology Corporation v. W. Brandt Goldsworthy & Associates, Inc.,
et al matter with the issuance of 1,500,000 shares of restricted, unregistered
common stock valued at $93,750. Accordingly, no accrual is recorded.


                                      F-59
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED STATEMENTS OF CASH FLOWS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


TRANSMISSION TECHNOLOGY CORPORATION, ET AL. V. MICHAEL WINTERHALTER, ET AL

Case No. 02CC12539 was filed July 26, 2002 in the Superior Court of the State of
California for the County of Orange. TTC/CTC filed suit against Winterhalter (a
WBG employee or business associate) based on his campaign against TTC/CTC by
contacting third parties and disparaging TTC/CTC and threatening third parties
with lawsuits for dealing with TTC/CTC. This proceeding is indirectly related to
the litigation concerning the License Agreement. This matter was settled in
February 2003. Accordingly, no accrual is recorded.

GARY COPE AND ROBERT NIKOLEY V. COMPOSITE TECHNOLOGY CORPORATION, ET AL

The Orange County Superior Court Case No. 03CC05636 was filed on December 24,
2002. Plaintiffs Cope and Nikoley allege causes of action for violations of
California Labor Code, wrongful termination, unfair business practices, breach
of contract, breach of fiduciary duty, fraud, negligent misrepresentation;
defamation, declaratory relief, and an accounting arising out of various alleged
salary and wrongful termination disputes. The principal parties are Cope,
Nikoley, CTC, Wilcoxon, and Arrington. CTC denies the plaintiffs' material
allegations. A settlement agreement and release was entered into as of June 30,
2004 by and between Robert Nikoley and CTC. In compliance with the Settlement
Agreement, Nikoley was issued 575,000 shares of CTC common stock and $65,000 in
attorney's fees. The stock was issued on July 19th and the payments were made in
July 2004 and September 2004. The Cope settlement, dated August 16, 2004 was for
100,000 shares of CTC common stock and $10,000 cash. The stock was issued on
August 27, 2004 and the certificates and check for $10,000 was forwarded to
Cope's attorney on September 1, 2004. Accordingly, no accrual is recorded.

COMPOSITE TECHNOLOGY CORPORATION V. ACQUVEST, INC., PAUL KOCH, VICTORIA KOCH,
PATRICIA MANOLIS, AND MICHAEL TARBOX

The Orange County Superior Court Case No.03-CC-12640 was filed on October 16,
2003. CTC alleges causes of action for declaratory relief, breach of contract,
fraudulent inducement, rescission, and economic duress arising out of certain
alleged subscription and investment agreements executed between CTC, Acquvest,
Inc., and Patricia Manolis. Purported related "finder's fee" agreements are also
at issue involving Paul Koch and Michael Tarbox. The Defendants deny CTC's
material allegations, and Acquvest, Koch, and Manolis filed a Cross-Complaint on
September 16, 2004. The parties stipulated to permit Cross-Complainants to amend
the Cross-Complaint, which was filed on December 17, 2004. CTC expects to attack
the Amended Cross-Complaint via demurrer. Trial date has been set for May 9,
2005, though CTC has moved to continue the trial to a later date. The hearing on
that motion is currently set for January 7, 2005. Due to the uncertainty
surrounding the outcome of this case, we cannot determine what, if any, outcome
will have on the financial condition of the Company, its operations, or its
liquidity. The Company has not recorded a liability relating to this case under
SFAS 5 because we do not believe the likelihood of loss to be probable or
reasonably estimable.

CTC contends that Acquvest materially breached the Acquvest Agreement in various
ways, including by failing to provide the funding in the amounts and in the time
frame Koch promised, and by breaching other representations and warranties
Defendants made under the Agreement. These included promises that Acquvest would
be a long-term investor, was not buying CTC's shares for re-sale, and that
Acquvest was an "accredited investor." CTC also contends that Paul Koch
fraudulently induced CTC into entering into all the agreements at issue in this
lawsuit. Because of Defendants' breaches of the agreements, their fraud,
illegality, and unclean hands, CTC is entitled to rescission of the agreements.
CTC also contends that the "finder's fees" claimed by Koch are also void and
unenforceable because Koch violated regulations of the Securities and Exchange
Commission and other laws, including by acting as a broker-dealer without a
license in setting up the deals with CTC. CTC also alleges that Koch got CTC to
enter into another agreement, the Manolis Agreement, based on fraud. The other
party to that agreement - in name - is Patricia Manolis ("Manolis"). Like the
Acquvest Agreement, CTC only dealt with Paul Koch during the negotiations
leading up to that agreement, which was signed in August 2003. No one at CTC
ever spoke with or met Patricia Manolis, and indeed she appears to be just
another front for Koch. CTC contends that Manolis breached this agreement among
other ways by assigning her rights in the agreement to Paul Koch's wife. Because
of this, CTC contends Manolis does not have standing to sue under the agreement.
CTC also contends that Manolis breached warranties in the Manolis Agreement
including promises that she would be a long-term investor, was not buying the
shares for re-sale, and was an "accredited investor." Finally, CTC also contends
that Acquvest, Paul Koch, and Manolis all breached their agreements by quickly
selling off the stock they received from CTC, though they warranted they would
not do so - making millions of dollars in profits in the process.

The litigants seek issuance of a total of 10,300,000 shares of common stock in
exchange for $2,375,000 in cash and warrants to exercise 9,900,000 shares of
common stock at $0.50 per share plus punitive damage. Assuming a market price
per share of $1.40, issuance of these securities would result in a charge to
earnings of $23,232,000 plus punitive damages and attorney fees, consisting of
$12,045,000 for the common stock issued and $11,187,000 for the warrants issued,
valued using the Black-Scholes option pricing model using a volatility of 84.2%,
a risk free rate of 4.13%, and a life of 4 years. Any punitive damages or
attorney fees are not estimable at this time. Under the terms of our bankruptcy
reorganization plan, any cash awards related to this litigation would be payable
in restricted common stock valued at the average of the previous 20 trading
days.

ASCENDIANT CAPITAL GROUP, LLC, MARK BERGENDAHL, AND BRADLEY WILHITE V. COMPOSITE
TECHNOLOGY CORPORATION AND BENTON H. WILCOXON

The Orange County Superior Court Case No. 03CC13314 was filed on November 4,
2003. Ascendiant, Bergendahl, and Wilhite allege causes of action against
defendants for breach of contract, specific performance, fraud and deceit,
negligent misrepresentations, breach of covenant of good faith and fair dealing,
and declaratory relief arising out of a business advisory and consulting
agreement (the "Agreement") allegedly executed between CTC and Ascendiant.

CTC denies the material allegations, and on November 10, 2003, CTC filed a case
in Orange County Superior Court against Ascendiant, Bergendahl, and Wilhite,
alleging causes of action for declaratory relief, breach of contract, fraudulent
inducement, and economic coercion arising out of the Agreement as well as
various unrelated business agreements between the plaintiffs and Wilcoxon. The
principal parties are Ascendiant, Bergendahl, Wilhite, CTC, and Wilcoxon. On
November 24, 2003, the court entered an order consolidating the cases. On
January 15, 2004, the parties agreed to submit all claims and cross-claims
arising out of the Agreement to binding arbitration before a neutral arbitrator
at JAMS-Orange County. The remaining claims and cross-claims not arising out of
the Agreement remain pending in Orange County Superior Court. An arbitration
date has been set for February 8, 2005. The Company has not recorded a liability
relating to this case under SFAS 5 because we do not believe the likelihood of
loss to be probable or reasonably estimable.

The only written evidence of services performed by the Ascendiant Parties
relates to raising capital for CTC - something which they were never able to do.
While CTC offered the Ascendiant Parties a success fee from the proceeds of any
capital raised, the Ascendiant Parties needed funds for their operations and
requested that CTC issue them S-8 (free-trading) shares as up-front
compensation. But the Ascendiant Parties faced legal impediments to obtaining
S-8 shares because SEC rules and regulations (1) required the Ascendiant Parties
to register as brokers in order to be compensated for providing capital raising
services and (2) prohibited the issuance of S-8 shares for capital raising
activities. In an effort to get around these rules and regulations, the
Ascendiant Parties devised a clever scheme to have CTC execute an agreement for
"business consulting services" that would provide for the issuance of one
million S-8 shares and warrants. CTC expressed concern about the legality of the
deal proposed by the Ascendiant Parties. The Ascendiant Parties assured CTC that
this was "done all the time" and that the Ascendiant Parties' lawyers approved
of the legality of the deal. In reliance upon representations by the Ascendiant
Parties that CTC could modify or void the deal at any time following its review
by CTC's counsel, CTC signed the Business Advisory and Consulting Services
Agreement ("BACSA"). CTC subsequently voided the BACSA upon the advice of its
then corporate counsel that the agreement was illegal. Regardless of the title
of the agreement, the fact that S-8 shares would in truth be compensation for
capital raising services violated SEC rules. The Ascendiant Parties reluctantly
acknowledged the voiding of the deal by, among other things, dropping the
subject completely in April 2002 following a blow up between the principals of
CTC and Ascendiant. The documents produced by the Ascendiant Parties confirm
this fact. A year later, however, apparently viewing the BACSA as a lottery
ticket, the Ascendiant Parties suddenly claimed that during the previous year
they had provided thousands of hours of a wide range of consulting services to
CTC. No documents exist to support their claims. Rather, the only documents and
communications between the parties reflect capital raising efforts - failed
efforts.

The litigants seek the issuance of 1,000,000 shares of common stock and
1,000,000 options to purchase common shares as follows: 300,000 shares for
$1.25/share, 400,000 shares for $1.50/share, and 300,000 shares for $1.75 per
share. Assuming a market price per share of $1.40, issuance of these securities
would result in a charge to earnings of $2,270,000 consisting of $1,400,000 for
the common stock and $870,000 for the options. The options were valued using the
Black-Scholes option pricing model using a volatility of 84.2%, a risk free rate
of 4.13%, and a life of 4 years. The litigants also seek punitive damages and
costs that are not estimable at this time. Under the terms of our bankruptcy
reorganization plan, any cash awards related to this litigation would be payable
in restricted common stock valued at the average of the previous 20 trading
days.


                                      F-60
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


COMPOSITE TECHNOLOGY CORPORATION AND BENTON H. WILCOXON V. MICHAEL DEANGELO

The Orange County Superior Court Case No. 03CC13319 was filed on November 4,
2003. CTC alleges causes of action against DeAngelo for declaratory relief,
economic duress, and fraudulent inducement arising out of a consulting services
agreement executed by the parties on which CTC alleges DeAngelo failed to
perform. DeAngelo denies CTC's material allegations and previously stated his
intention to assert cross-claims against CTC. On December 23, 2003, CTC obtained
a default in this case due to DeAngelo's failure to respond to the complaint. On
February 23, 2004, a default judgment was entered against the defendant.
Accordingly, the Company expects no financial impact resulting from this action.

J.P. TURNER & COMPANY, L.L.C. V. COMPOSITE TECHNOLOGY CORPORATION

J.P. Turner & Company, L.L.C. ("J.P. Turner") initiated an arbitration before
the National Association of Securities Dealers in February 2004 alleging
Composite Technology Corporation ("CTC") breached a finder's agreement by
failing to pay certain fees to J.P. Turner. CTC disputes that any breach of the
agreement took place and denies that J.P. Turner made any introductions of
investors to CTC which directly lead to financing. CTC has filed a counterclaim
against J.P. Turner alleging claims of fraud against J.P. Turner arising out of
misrepresentations made by J.P. Turner concerning an investment opportunity.
J.P. Turner seeks $200,000 in monetary damages, a warrant to purchase $200,000
common shares of CTC at an exercise price equal to the closing bid on December
17, 2003, pre-judgment interest as of December 18, 2003, reasonable attorneys'
fees and costs. CTC seeks compensatory damages in an amount according to proof,
punitive damages, and reasonable attorneys' fees and costs based upon its
counterclaims. CTC filed its Statement of Answer and Counterclaims on May 17,
2004. The matter is presently set for hearing in February 2005. Additionally,
Composite recently asked the panel of arbitrators assigned to the matter to
change the location of the hearing from Georgia to California. The arbitrators
denied the motion for change of venue and the hearing is scheduled to proceed in
Georgia next year. This matter was settled per written agreement on May 3, 2005.
CTC paid to JP Turner the sum of $100,000, which was recorded as litigation
settlement expense in the quarter ended March 31, 2005 and paid in May 2005.

ADAM DEVONE V. COMPOSITE TECHNOLOGY CORPORATION, ET AL.

On September 10, 2004, Adam Devone filed a Complaint in Orange County Superior
Court (Case No. 04-CC-09321) against Donner, Evan Wride and Global Research,
Inc., Nutek, Inc., Zeta Centauri, Inc., Sherpa Financial & Investigations, Inc.
and Multiplyingchurches.org, Inc. (collectively, the "Donner Parties") and CTC.
Devone alleges a variety of claims against the Donner Parties based upon alleged
contractual breaches and tortuous conduct related to a $200,000 loan made
between Devone and the Donner Parties. CTC is only party to the last two causes
of action for Imposition of Constructive Trust and Declaratory Relief. Devone
seeks a constructive trust on any CTC shares or related proceeds obtained
through the use of Devone's $200,000. Devone further seeks a judicial
declaration that the CTC securities and proceeds derived therefrom are his
property. As noted earlier, Devone is not presently seeking monetary damages or
costs against CTC. On October 6, 2004, CTC filed a Motion for Order Discharging
Liability asserting it should be discharged from the matter as it took no
position with regard to the dispute between the parties. On October 8, 2004, CTC
filed an Answer to the Complaint. The Motion for Order Discharging Liability is
presently set to be heard on January 3, 2004. On October 20, 2004,
Multiplyingchurches.org, Inc. ("MC Org") filed a Cross-Complaint against CTC,
Adam Devone, Sheryl Lyn Devone (Plaintiff's wife) and Roes 1-100 alleging claims
for breach of contract against CTC and Roes 51-100 and tortious interference
with contract against Plaintiff, his wife and Roes 1-50. MC Org alleges that CTC
breached a warrant agreement by failing to issue shares thereunder and seeks
unspecified damages and an injunction compelling CTC to issue shares under the
warrant agreement. CTC filed an Answer to MC Org's Cross-Complaint on November
19, 2004. On December 30, 2004, MC Org filed a request for dismissal of all
claims against CTC pursuant to a settlement reached between MC Org and CTC. A
settlement agreement was subsequently entered into by all parties to the
lawsuit. A request for dismissal of the entire action with prejudice was filed.
The terms of the settlement did not require CTC to pay any amounts or to issue
any additional stock.


                                      F-61
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


MICHAEL TARBOX V. COMPOSITE TECHNOLOGY CORPORATION, ET AL.

Michael Tarbox ("Tarbox") filed this action on October 13, 2004 in Orange County
Superior Court (Case No. 04-CC-10345) against Paul Koch, Acquvest, CTC and Doe
Defendants. Tarbox alleges that Koch made fraudulent transfers to Acquvest and
the Doe defendants for the purpose of avoiding the debt owed to Tarbox. Tarbox
alleges that CTC securities were intended to serve as security for a debt owed
by Koch to Tarbox. Tarbox alleges that Defendants were not bona fide purchasers
of the CTC securities since they were receiving such securities for the benefit
of Tarbox. Tarbox further alleges that CTC breached an agreement to pay him a
finder's fee in connection with investments made by Koch. Tarbox alleges that
CTC's breach has caused him to suffer damages in excess of $750,000. On November
9, 2004, CTC filed a Motion to Consolidate this action with the Acquvest action
above (OCSC Case No. 03-CC-12640). The Motion to Consolidate is set for January
7, 2005. On November 14, 2004, CTC filed a demurrer to the Complaint. Tarbox
agreed to amend the Complaint in response thereto. Due to the uncertainty
surrounding the outcome of this case, we cannot determine what, if any, outcome
will have on the financial condition of the Company, its operations, or its
liquidity. The Company has not recorded a liability relating to this case under
SFAS 5 because we do not believe the likelihood of loss to be probable or
reasonably estimable. The claims of Tarbox are without merit as, among other
defenses, (1) he entered into a written agreement with CTC releasing any claim
to a finder's fee in connection with the transactions at issue; (2) he was
acting as an unlicensed broker-dealer in connection with the transactions at
issue; and (3) his complaint concedes that another party orally agreed to take
on any purported obligation to pay a finder's fee to him in connection with the
transactions at issue.

NOTE 9 - SHAREHOLDERS' EQUITY

A. PREFERRED STOCK

On April 12, 2001, TTC authorized 165 shares of Series A, 10% cumulative,
convertible preferred stock (the "Series A Preferred Stock") issued at $1,000
per share. The Series A shareholders were entitled to receive cumulative cash
dividends at a rate of 10% per annum of the issuance price ($1,000 per share)
from the date of issuance of the shares until such shares are converted into
common stock or redeemed by the Company. The dividends were payable quarterly on
the last day of March, June, September, and December in each year, commencing on
September 30, 2001.

The Series A Shares are convertible into common stock at a negotiated conversion
rate of $0.47 per effective post-acquisition share at the election of the holder
beginning 90 days after the date of issuance. The Series A Shares are callable
at any time by TTC at a price of 102% of issuance value upon a 10-day advance
written notice. These shares were issued on April 12, 2001 to Red Guard to
acquire the rights to negotiate to acquire the license to manufacture, develop,
and sell certain patent pending composite reinforced aluminum conductor
technologies. This transaction was valued at an agreed-upon amount of $165,000.
On September 30, 2002, the Company and Red Guard consummated a transaction,
whereby Red Guard exchanged 100% of the issued and outstanding Series A
preferred stock, all accrued but unpaid dividends, certain short-term working
capital loans, and all accrued but unpaid interest in return for all of the
Company's investment interests in other private companies including the STL
Group, TMA Ventures, LLC/MEMX, and AMJ Logistics but excluding the investment in
IPS. The value of the preferred stock received, and the notes, interest, and
dividends payable forgiven by Red Guard equaled the carrying value of the
investments on the transaction date. Accordingly, no gain or loss on the
transaction was recorded.

On June 27, 2001, TTC authorized and allocated 2,000 shares of Series B, 10%
cumulative, convertible preferred stock (the "Series B Stock"). The Series B
Stock was issued at $100 per share. The Series B shareholders will be entitled
to receive cumulative cash dividends at a rate of 10% per annum of the issuance
price ($100 per share) from the date of issuance of the shares until such shares
are converted into common stock or redeemed by the Company. The dividends are
payable quarterly on the last day of March, June, September, and December in
each year, commencing on September 30, 2001. Any dividends on the Series B Stock
that are not paid within 30 days after the date upon which payment thereof is
due will bear interest at 10% per annum from such date until ultimately paid.


                                      F-62
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


The shares are convertible into common stock at a rate of $1.25 per effective
post acquisition share at the election of the holder beginning 90 days after the
date of issuance. The Series B Stock is callable at a price of 109% at any time
by TTC upon 10-days advance written notice. TTC sold 1,000 Series B Shares to
Red Guard for cash proceeds of $100,000 on August 28, 2001 and 320 shares to an
unrelated third party for cash proceeds of $32,000 on October 11, 2001.

In March, 2003, the the Company converted 320 shares of Series B 10% preferred
stock of its subsidiary Transmission Technology Corporation and all unpaid
dividends attributable to the Series B preferred shares into 207,576 shares of
unregistered, restricted common stock based on the value of the original $32,000
subscription plus $4,533 in unpaid dividends. The conversion price was
determined to be 40% of the fair market value of unrestricted, registered common
shares on the date of conversion.

In January 2004, the Company converted the 1,000 shares of Series B 10%
preferred stock of its subsidiary Transmission Technology Corporation into
80,000 shares of unregistered, restricted common stock that were issued to one
individual pursuant to a court order. In addition under the terms of the order,
the Company was obliged to issue 27,631 shares of unregistered, restricted
common stock in satisfaction of the unpaid preferred stock dividends and
interest totaling $31,996.

B. COMMON STOCK

BUSINESS COMBINATION

On November 3, 2001, in connection with a business combination transaction, the
Company's then controlling shareholder surrendered and canceled an aggregate
3,116,515 shares of common stock to the Company for no consideration. The effect
of this transaction was to reduce the common stock account by the par value
(approximately $3,117) and increase the additional paid-in capital account. This
transaction reduced the issued and outstanding common stock to 6,050,000 shares.

On November 3, 2001, the Company executed an Agreement and Plan of
Reorganization, whereby the Company issued an aggregate 60,000,000 shares of
restricted, unregistered common stock to the shareholders of TTC in exchange for
100% of the issued and outstanding stock of TTC. TTC was incorporated as a
Nevada corporation on March 28, 2001 to own a license agreement related to
patent pending composite reinforced electrical transmission lines utilizing
composite core materials. TTC became a wholly-owned subsidiary of the Company.
This transaction, in conjunction with the stock issued on or before November 3,
2001 for services rendered resulted in a total of 66,500,000 Common shares
issued and outstanding as of the effective date of the Business Combination.

SERVICES RENDERED

On November 3, 2001, the Company issued an aggregate 450,000 shares of
restricted, unregistered common stock to four unrelated companies and/or
individuals as compensation for various financial consulting services provided
in the Agreement and Plan of Reorganization. This transaction was valued at
approximately $90,000. Since there was not a liquid market for the Company's
restricted common stock in November, 2001, the fair value of the services
provided was utilized, as appropriate under SFAS 123 "Accounting for Stock Based
Compensation," which approximates the "fair value" of the Company's common stock
on the date of the transaction. Upon completion of the November 3, 2001 reverse
acquisition transaction, the Company had an aggregate 66,500,000 shares of
issued and outstanding common stock.

On October 30, 2001, TTC issued an aggregate 79,402 equivalent post-acquisition
shares of restricted, unregistered common stock to its corporate law firm at an
agreed-upon value of approximately $300,000 as a retainer for future legal
services to be provided during a one-year period from October 30, 2001. The
retainer shares vested against normal monthly billings from the law firm to the
Company using the agreed-upon valuation of $3.78 per share, regardless of the
open market price of the Company's common stock during the billing month.

If the aggregate market value of the 79,402 shares are worth less than $450,000
in the open market at the average mean of the bid and ask price for the shares
during the one-month period just preceding the first anniversary of the retainer
agreement (October 30, 2002), then the law firm will have 15 days to make a
written election to either a) exercise a downward adjustment in the agreed-upon
price of $3.78 to an amount of not less than $1.89 per share, which would cause
the Company to issue up to an additional 79,402 equivalent post acquisition
shares to the law firm, or b) put all 79,402 shares back to the Company and
require payment in cash for the legal services provided during the initial term
of the agreement.


                                      F-63
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


During January 2002, the Company and the law firm agreed to rescind this
transaction, and the 79,402 shares were returned to the Company. All future
transactions between the Company and the law firm will be conducted on a cash
transaction basis.

From May, 2002 until September, 2002, the Company issued in aggregate 1,407,543
shares of the Company's restricted, unregistered common stock to three unrelated
companies and two persons in exchange for legal, intellectual property, business
strategy, and financial consulting services valued at the fair value of services
provided totaling $496,535. One of the consultants was also issued 17,543
warrants valued at $3,859. The warrants were issued with an exercise price of
$0.50 and expire on July 12, 2006 and were assigned a value of $0.05 per warrant
using the Modified Black-Scholes-Merton option valuation model.

Between March, 2002 and September, 2002, the Company issued in aggregate
2,929,868 common shares registered under an S-8 filing to seven consultants
providing legal, intellectual property, product development, and business
strategy services valued at the fair value of services provided totaling
$1,498,944 equal to the fair market value of the stock on the dates of issuance.

For the fiscal year ended September 30, 2003 the Company issued in aggregate
9,503,900 shares of common stock for consulting services. The Company recorded
expenses totaling $ $4,082,614 and prepaid expenses totaling $234,350..

Included in the 9,503,900 shares issued were a total of 2,515,000 restricted,
unregistered common shares representing consulting services valued at the fair
value of services provided totaling $1,346,861. These restricted shares were
issued as follows: During February 2003, the Company issued 750,000 shares of
the Company's restricted, unregistered common stock to nineteen individuals and
six unrelated companies for various consulting services relating to offering
costs associated with the 2003 private placement financings. The shares were
valued at the fair value of services provided totaling $213,750. In February
2003, the Company issued an aggregate 1,065,000 shares of the Company's
restricted, unregistered common stock to two individuals, in payment of product
development consulting services provided valued at the fair value of services
provided totaling $404,523. During August 2003, the Company issued 700,000
shares of restricted, unregistered common stock to two entities in compensation
for professional consulting services consisting of marketing, business
development, and business strategy services valued at the fair value of services
provided totaling $728,588.

Included in the 9,503,900 shares of common stock issued for consulting services
in 2003 were a total of 6,988,900 shares of common shares registered under an
S-8 filing were issued for services valued at the fair market value of the date
of the stock issuance or in payment of balances due on services rendered
totaling, in aggregate $2,970,103 as follows: From October, 2002 until
September, 2003 the Company issued 2,250,000 common shares valued at $1,004,960,
the fair market value on the date of issuance, were issued to two individuals
for litigation and general corporate legal services rendered. From October, 2002
until March, 2003, the Company issued in aggregate 4,738,900 common shares
valued at $ $1,965,143, the fair value at date of issuance were issued to three
individuals for intellectual property and product research and development
related consulting services. As of September 30, 2003, $234,350 relating to
120,800 of the 6,988,900 shares issued was recorded in prepaid expenses valued
at the closing market price on September 30, 2003 of $1.94 per share.

For the fiscal year ended September 30, 2004 the Company issued in aggregate
1,913,354 shares of common stock for consulting services. The Company recorded
expenses totaling $2,578,047 as follows:

During fiscal 2004, the Company issued in aggregate 1,213,354 shares of
restricted, unregistered common stock in exchange for services valued at the
fair value of serviced provided totaling $1,520,047 as follows: During January
2004 the Company issued 58,881 shares of restricted, unregistered common stock
to two companies in compensation of professional construction services valued at
the fair value of the services provided totaling $65,166. During March 2004 the
Company issued 150,000 shares of restricted unregistered common stock in the
name of one company in partial compensation of equipment purchased. During June,
2004 it was agreed by the Company and the entity that the entity would not
accept the shares in lieu of partial payment and the 150,000 shares were
cancelled. In July 2004 the Company issued 790,000 shares of restricted,
unregistered common stock to two individuals and 3 companies in remuneration for
and payment of debts relating to research, product development, marketing,
business development, and business strategy services valued at the fair value of
services provided totaling $790,000. During August 2004, the Company issued
364,373 shares of restricted, unregistered common stock to one officer and one
consultant in remuneration for product development, intellectual property,
marketing, and business advisory services services performed in fiscal 2003 and
valued at the fair market value of the stock issued which equaled the fair value
of services provided of $664,881.

During fiscal 2004, the Company issued in aggregate 700,000 shares registered
under an S-8 registration statement to two individuals for legal, product
development, and intellectual property services valued at the fair market value
of the stock issued which equaled the fair value of services provided of
$1,058,000, the fair market value on the date of the share issuances.

During December 2003, the Company issued 140,160 shares of restricted,
unregistered common stock to the Company's landlord in lieu of 2 month's rent on
a commercial facility valued at $147,168, the market value of the rents.


                                      F-64
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


INVESTMENTS IN OTHER COMPANIES

On December 4, 2001, the Company issued 42,500 shares of the Company's
restricted, unregistered common stock in exchange for 37,335 shares of
restricted, unregistered privately held AMJ common stock. This transaction was
valued at $191,450, the fair value of the investment.

CONVERSION OF SHORT-TERM LOANS

In July and September 2002, the Company issued an aggregate 515,297 shares of
the Company's restricted, unregistered common stock to two separate individuals,
both of whom were existing shareholders of the Company, for conversion of
short-term working capital. These transactions were valued at $90,000, which
equaled the outstanding debt. Since there was not a liquid market for the
Company's restricted common stock in 2004, the fair value of the debt forgiven
was utilized, as appropriate under SFAS 123 "Accounting for Stock Based
Compensation."

In February 2003, the Company issued an aggregate 300,000 shares of the
Company's restricted, unregistered common stock to an individual, who was an
existing shareholder of the Company, for conversion of $30,000 of a short-term
working capital loan and $13,101 in accrued but unpaid interest. Since there was
not a liquid market for the Company's restricted common stock in 2004, the fair
value of the debt and unpaid interest forgiven was utilized, as appropriate
under SFAS 123 "Accounting for Stock Based Compensation."

LEGAL SETTLEMENT

In February 2003, the Company issued 1,500,000 shares of restricted,
unregistered common stock valued at $93,750, or $0.0625 per share, which
represented a value consistent with the issuance of similar securities, namely
the value of the restricted common stock issued in conjunction with the Series E
and Series H private placements of $0.042 and $0.072 per share respectively, in
connection with the settlement of the matter of Transmission Technology
Corporation, et. al. v. Tom Sawyer See Note 8 for additional litigation
disclosure.

During the year ended September 30, 2004, 675,000 shares of common stock was
issued, valued at $739,000 for legal settlements related to Gary Cope and Robert
Nikoley V.l Composite Technology Corporation, et. al litigation. See Note 8 for
additional litigation disclosure. The common stock issued was valued at the
market closing price of the Company's common stock as quoted on the NASDAQ
Electronic Bulletin Board on the date of issue.

CASH

From July 2002 until August, 2002, the Company issued an aggregate 399,123
shares of the Company's restricted, unregistered common stock to three separate
persons in return for $86,000 in cash. Each of the shares issued carried a
warrant to acquire an equal number of restricted, unregistered common stock at
an exercise price of $0.50 that shall expire on July 12, 2006. At the date of
issuance, the warrants were valued at approximately $0.05 per share and were
recorded as paid in capital.

During December 2002, the Company sold an aggregate 6,400 Units, in conjunction
with a Private Placement Memorandum, for gross proceeds of $11,520. Each Unit
consisted of 10 shares of restricted, unregistered common stock, 10 Series A
warrants, and five Series B warrants. Each Series A warrant entitles the holder
to purchase one share of common stock at a price of $0.35 per share and expired
in December 2003.

Each Series B warrant entitles the holder to purchase one share of common stock
at $0.60 per share and expired on June 30, 2004. One of these investors
rescinded his investment and his 34,000 shares and all the warrants were
cancelled effective in fiscal 2004. The value of the warrants at the date of
issuance was determined using the Modified Black-Scholes-Merton option pricing
model at a combined total of $752.


                                      F-65
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


During the first and second quarters of fiscal 2003, under a Private Placement
Memorandum ("Series E PPM"), the Company sold an aggregate 2,954,000 Units to 52
individuals and entities for gross proceeds of $295,400. Each Unit consists of
one share of unregistered, restricted common stock and one Series E warrant to
purchase one share of unregistered, restricted common stock. Each Series E
warrant entitled the holder to purchase a share of common stock at $0.25 per
share and expired on December 1, 2004. The value of the warrants was determined
using the Modified Black-Scholes-Merton option pricing model at a value of
$0.058 per warrant and $171,332 was accounted for as Paid in Capital - Series E
warrants.

During February and March 2003, pursuant to Private Placement Memoranda, the
Company sold an aggregate 3,465,500 Units for gross proceeds of $716,375. Each
Unit consisted of one share of restricted, unregistered common stock and one
Series H warrant to purchase one share of unregistered, restricted common stock.
Each Series H warrant entitles the holder to purchase one share of common stock
at $0.50 per share and expires at the earlier of January 30, 2005 or three weeks
following written notification by the Company that its common stock closed at or
above $0.75 per share for five consecutive trading days. In addition, the Series
H warrants can be redeemed by the Company for $0.001 each if a Registration
Statement covering the shares underlying the Series H warrants has been declared
effective and the Company's common stock closes at or above $0.50 for five
consecutive days. The value of the warrants was determined using the Modified
Black-Scholes-Merton option pricing model at a value of $0.103 per warrant and
$356,945 was accounted for as Paid in Capital - Series H warrants. The Company
incurred offering costs of $234,350 related to this offering, consisting of
warrants to purchase 200,000 unregistered, restricted shares of common stock,
with the same terms as those issued to the investors, valued at $20,600 and
750,000 unregistered, restricted shares of common stock valued at $213,750.

During March through September 2003, pursuant to Private Placement Memoranda, or
Series I PPM, we sold an aggregate 150,000 Units to one entity and one
individual for cash proceeds of $350,000; an additional 10,000 Units were issued
in compensation valued at $25,000 for the arrangement of the financing. Each
Unit consisted of 10 shares of restricted, unregistered common stock and 10
Series I warrants to purchase one share of unregistered, restricted common
stock. Each Series I warrant entitles the holder to purchase a share of common
stock at $0.50 per share and expires on March 30, 2005. The value of the
warrants was determined using the Modified Black-Scholes-Merton option pricing
model at a value of $0.191 per warrant and $305,600 was accounted for as Paid in
Capital - Series I warrants for both the 1,500,000 warrants issued for cash and
the 100,000 warrants issued for financing costs.. In the subscription agreement
there was a conditional provision for the issue of up to an additional 550,000
Units to the entity and the individual, however, the proceeds in payment were
never received; an additional 40,000 Units that were to be issued in connection
with the perfection of the subscription were cancelled due to non-performance.
The matter is now subject to litigation as discussed in Note 7 above under
Composite Technology Corporation v. Acquvest, Inc., Paul Koch, Victoria Koch,
Patricia Manolis, and Michael Tarbox. The 4,400,000 shares and 4,400,000 Series
I warrants related to the 550,000 Units subscribed to under the conditional
provision were issued by the transfer agent, were being held by the attorney
handling the matter for us, and were cancelled in October 2003. The above 10,000
Units issued in compensation are themselves the subject of separate litigation
that is preventing their exercise.

During August 2003, pursuant to Private Placement Memoranda, or Series O PPM,
the Company sold an aggregate 16,667 Units for gross proceeds of $50,000. Each
Unit consisted of 10 shares of restricted, unregistered common stock and five
Series O warrants to purchase one share of unregistered, restricted common
stock. Each Series O warrant entitles the holder to purchase one share of common
stock at $0.60 per share and expires at the earlier of June 30, 2005 or three
weeks following written notification by the Company that its common stock closed
at or above $0.90 per share for 10 consecutive trading days. In addition, the
Series O warrants can be redeemed by the Company for $0.001 each if a
Registration Statement covering the shares underlying the Series O warrants has
been declared effective and the Company's common stock closes at or above $0.90
for 10 consecutive days. The value of the warrants was determined using the
Modified Black-Scholes-Merton option pricing model at a value of $0.263 per
warrant for a total of $21,917and was accounted for as Paid in Capital - Series
O warrants.

During September 2003, pursuant to Private Placement Memoranda, or Series N PPM,
the Company sold an aggregate 50,000 Units for gross proceeds of $125,000. Each
Unit consisted of 10 shares of restricted, unregistered common stock and 10
Series N warrants to purchase one share of unregistered, restricted common
stock. Each Series N warrant entitles the holder to purchase one share of common
stock at $0.50 per share and expires at the earlier of June 30, 2005 or three
weeks following written notification by the Company that its common stock closed
at or above $0.75 per share for 10 consecutive trading days. In addition, the
Series N warrants can be redeemed by the Company for $0.001 each if a
Registration Statement covering the shares underlying the Series N warrants has
been declared effective and the Company's common stock closes at or above $0.75
for 10 consecutive days. The value of the warrants was determined using the
Modified Black-Scholes-Merton option pricing model at a value of $0.258 per
warrant and was accounted for as Paid in Capital - Series N warrants of $124,500
equal to the total consideration paid of $125,000 less the par value of the
stock issued.

During September 2003, pursuant to Private Placement Memoranda, the Company sold
an aggregate of 311,240 restricted unregistered shares of common stock at prices
between $0.65 and $1.00 per share for gross proceeds of $277,500.

During September 2003, pursuant to Private Placement Memoranda, or Series P PPM,
the Company sold an aggregate 332,500 Units for gross proceeds of $1,330,000. In
the first quarter of fiscal 2004, the Company sold an aggregate of 60,000 Series
P Units to 8 individuals for gross proceeds of $240,000Each Unit consisted of 10
shares of restricted, unregistered common stock and two Series P warrants to
purchase one share of unregistered, restricted common stock. Each Series P
warrant entitles the holder to purchase one share of common stock at $0.80 per
share and expires at the earlier of July 30, 2005 or three weeks following
written notification by the Company that its common stock closed at or above
$1.20 per share for 10 consecutive trading days. In addition, the Series P
warrants can be redeemed by the Company for $0.001 each if a Registration
Statement covering the shares underlying the Series P warrants has been declared
effective and the Company's common stock closes at or above $1.20 for 10
consecutive days. The value of the warrants was determined using the Modified
Black-Scholes-Merton option pricing model at a value of $1.212 per warrant for a
total of $805,908 for the fiscal 2003 issuance and $145,440 for the fiscal 2004
issuance and each was accounted for as Paid in Capital - Series P warrants.


                                      F-66
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


During November 2003, pursuant to a Private Placement Memoranda, we sold an
aggregate of 89,360 restricted unregistered shares of common stock to 5
individuals at a price of $1.40 per share for gross proceeds of $125,104.

In December 2003, the Company issued 2,400,000 Units for cash proceeds of
$2,790,000 net of offering costs of $210,000 ("December Offering"). The December
Offering was subscribed by 5 investment funds. Each unit consisted of one share
of the Company's unregistered restricted common stock and 0.5 warrant to
purchase one share of the Company's unregistered restricted common stock at an
exercise price of $2.04 per share. The warrants vest immediately and expire in
December 2008. The Company has the right to call the warrants if the closing
price of the Company's common stock is greater than 200% of the exercise price
of the warrants for 20 consecutive trading days. The value of the December
Offering warrants was determined using the Modified Black-Scholes-Merton option
pricing model at a value of $1.877 per warrant and the value of $2,252,400 was
accounted for as Paid in Capital - December Offering Warrants.. In June 2004,
the Company offered the warrant holders, for a limited period of time, the
opportunity to exercise their warrants at a reduced strike price of $0.50.
Pursuant to this offer, the Company issued 1,000,000 shares of the Company's
unregistered, restricted common stock against receipt of $500,000. One holder of
200,000 warrants did not take advantage of this right. In connection with this
offering, one professional company was issued with an additional 120,000
warrants on the same terms as the original offering. As a result of this
transaction, we recorded additional Paid in Capital and Legal, Consulting, and
Professional expenses of $1,433,880 resulting from the modification of the
warrant terms. The 120,000 warrants issued to the professional services firm
were valued using the Modified Black-Scholes-Merton option pricing model at
$1.277 per warrant and $153,207 in additional Paid in Capital and Legal,
Consulting, and Professional expenses were recorded.

RED GUARD OPTIONS

On July 12, 2001, TTC granted to Red Guard an option to purchase up to $500,000
of Series B, 10% cumulative, convertible preferred stock of TTC (the "TTC Series
B Preferred") at $100 per share (the "Red Guard Option") and a warrant to
purchase shares of TTC Common Stock that, on completion of the November 3, 2001
reverse acquisition transaction with CTC, enabled Red Guard to purchase up to
1,905,660 shares of CTC common stock at $1.26 per share (the "Red Guard
Warrant") in reliance upon the exemption from registration set forth in Section
4(2) of the Securities Act.

The Red Guard Option and Warrant were granted to Red Guard as an inducement to
modify the conversion price of the TTC Series A Preferred from an initial
conversion price of $0.20 per share, as adjusted for TTC stock splits prior to
the November 3, 2001 reverse acquisition transaction with CTC, to $0.47 per
share after accounting for the effects of the CTC reverse acquisition
transaction. The Red Guard Option was exercisable at any time and expired on
January 12, 2002. The Red Guard Warrant expires July 12, 2006.

On August 28, 2001, Red Guard exercised a portion of the Series B option and
purchased an aggregate $100,000 of Series B Preferred from the Company. On
October 11, 2001, Red Guard assigned an additional portion of this option to an
unrelated individual who then exercised the option to purchase an aggregate
$32,000 of Series B Preferred from the Company. The remaining portion of the Red
Guard Option expired on January 12, 2002.

The following table summarizes all Red Guard Option activity from the grant date
through September 30, 2004:


<TABLE>
<CAPTION>
                                                                     Weighted
                                                                Number of Average
                                                        Shares    Exercise Price
                                                     ----------   ------------
<S>                                                  <C>          <C>
Outstanding, March 18 2001 (inception)                       --   $         --
             Granted                                      5,000   $       1.26
             Exercised                                   (1,000)  $       1.26

Outstanding, September 30, 2001                           4,000   $       1.26
             Granted                                       (320)  $       1.26
             Canceled/expired                            (3,680)  $       1.26

OUTSTANDING, SEPTEMBER 30, 2002, 2003 AND 2004               --   $         --
                                                     ==========   ============
</TABLE>


                                      F-67
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


STOCK OPTIONS

On May 15, 2001, TTC established the 2001 Incentive Compensation Stock Option
Plan (the "TTC Plan"). The purpose of the TTC Plan was to grant options to
purchase the Company's common stock to employees of the Company and any
subsidiaries to attract and retain persons of ability and provide incentives for
them to exert their best efforts on behalf of the Company. The TTC Plan was
administered by either the Company's Board of Directors or a committee
established and appointed by the Board of Directors. Under the TTC Plan, the
Board had reserved 4,764,000 shares of common stock to support the underlying
options which may be granted. As part of TTC's acquisition by CTC on November 3,
2001, the TTC Plan was terminated, and the options were converted into options
to purchase shares of CTC's common stock pursuant to the 2002 Non-Qualified
Stock Compensation Plan (the "Stock Plan"). The number of shares reserved
initially under the Stock Plan was 9,000,000. This number was increased to
14,000,000 on October 24, 2002.

The exercise price of the underlying shares will be determined by the Board of
Directors; however, the exercise price may not be lower than 100% of the mean of
the last reported bid and asked price of the Company's common stock as quoted on
the NASDAQ Bulletin Board or any other exchange or organization. The term of
each option will be established by the Board of Directors at the date of issue
and may not exceed 10 years. The Plan automatically terminates on May 15, 2021
and no options under the Plan may be granted after May 15, 2011.

In June 2001, the TTC Board of Directors granted options to various officers and
employees that, when converted to Stock Plan options, comprised an aggregate
1,357,740 to purchase an equivalent number of shares of CTC restricted,
unregistered common stock. Under the Stock Plan these options were exercisable
at a price of $0.35 and expire in June, 2011. On March 31, 2004, 87,308 of these
options were cancelled. The remaining 1,270,432 options will expire December 31,
2011.

From February 20, 2002 to March 31, 2002, the Company granted an aggregate
5,200,000 options to six consulting professionals in consideration for legal,
intellectual property, product development, business development and marketing
services to purchase an equivalent number of shares registered under the
Company's Form S-8, filed in February 2002 for services to be rendered over the
next five years from the grant date. The options were issued at exercise prices
between $0.08 and $2.00 per share. These options expire at various dates between
March 31, 2003 and December 31, 2011. On March 31, 2002, 2,000,000 of these
options were exercised and on January 12, 2003, 250,000 were cancelled. Between
September 2003 and August 2004, 1 of these consulting professionals has
exercised a total of 320,000 options to acquire common shares of CTC.

On August 27, 2002, the Company granted 750,000 options to a consulting
professional for product development services to purchase an equivalent number
of shares registered under the Company's Form S-8, filed in February 2002 for
services to be rendered over the next one year from the grant date. The options
were issued at an exercise price of $0.50 per share. The options vested as
follows: 150,000 immediately upon issue and 150,000 per year on the grant
anniversary date from April 1, 2003 through April 1, 2006. These options were
cancelled March 31, 2003.

The Company recorded deferred compensation of $2,102,532 related to the options
granted from February 20, 2002 to March 31, 2002 and the 750,000 options granted
on August 27, 2002. The Company recorded compensation expense of $298,820,
$572,549 and $868,237 during the years ended September 30, 2004, 2003 and 2002,
respectively, for the value of the legal, consulting, and research and
development services rendered during those years.

In February, 2003, 3 employees received an aggregate of 750,000 options to
purchase an equivalent number of shares registered under the Company's Form S-8,
filed in February 2002 at an exercise price of $0.25. These options expire
December 31, 2011 and vest at a rate of 150,000 per year. Since issuance, 2 of
these employees have been granted cashless exercise of certain of these options
at the market rate on the day of exercise, resulting in the cancellation of
215,682 of the options in payment for the exercise of 84,318 options to acquire
common shares of CTC. See Restatement Footnote 2 Regarding the Modificiation of
the Option Grants.

In July 2003, an employee received 250,000 options to purchase an equivalent
number of shares registered under the Company's Form S-8, filed in February 2002
at an exercise price of $0.25; 50,000 of these options were exercised in fiscal
2003 with the shares issued in fiscal 2004. These options expire December 31,
2011. The remaining options vest at a rate of 50,000 per year.


                                      F-68
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


In August 2003, 4 employees and a legal and business advisory consultant
received an aggregate of 2,950,000 options to purchase an equivalent number of
shares registered under the Company's Form S-8, filed in February 2002 at an
exercise price of $0.53. These options expire December 31, 2011. Since issuance,
3 of these employees have been granted cashless exercise of certain of these
warrants at the market rate on the day of exercise, resulting in the
cancellation of 730,986 of the options in payment for the exercise of 144,014
options to acquire common shares of CTC. The remaining options vest on a
quarterly schedule.

In July 2004, 7 employees received an aggregate of 969,904 options to purchase
an equivalent number of shares registered under the Company's Form S-8, filed in
February 2002 at an exercise price of $1.00. These options expire December 31,
2011. Since issuance, 1 of these employees has been granted cashless exercise of
certain of these warrants at the market rate on the day of exercise, resulting
in the cancellation of 391,112 of the options in payment for the exercise of
8,888 options to acquire common shares of CTC. These options vest at the rate of
10% each six months over 5 years commencing October 16, 2004.

Cashless exercises: During fiscal 2004, the Company allowed for the cashless
exercise of 280,265 options at exercise prices of between $0.25 and $1.00 per
share resulting in the issuance of 237,220 shares of common stock. Under the
guidance issued by FASB Interpretation No. 44, Accounting for Certain
Transactions involving Stock Compensation, a cashless exercise is considered to
be a modification of option grant terms and requires that the intrinsic value of
the settlement to be included as additional compensation expense. The cashless
exercises in 2004 resulted in an additional $364,277 in compensation expense
(see Footnote 2). The Company does not intend to allow for future cashless
exercises of stock options.

The following table summarizes the Stock Plan stock option activity from the
conversion of the Plan through September 30, 2004.


                                      F-69
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


                                                                    Weighted-
                                                                    Average
                                                  Number            Exercise
                                                 of Shares           Price
                                                ----------        -----------

Outstanding, March 18, 2001 (inception)                 --         $      --
       Granted under the Plan                    1,357,740         $    0.35(1)
                                                ----------

Outstanding, February, 2001 following

Registration of the Stock Plan                   1,357,740         $    0.35
       Granted                                   5,950,000         $    0.35
       Exercised                                (2,000,000)        $    0.24
                                                ----------

Outstanding, September 30, 2002                  5,307,740         $    0.39
       Granted                                   3,950,000         $    0.46
       Exercised                                  (110,000)        $    0.25
       Cancelled                                (1,000,000)        $    0.69
                                                ----------

Outstanding, September 30, 2003                  8,147,740         $    0.39
       Granted                                     969,904         $    1.00
       Exercised                                  (497,220)        $    0.11
       Cancelled                                (1,425,088)        $    0.30
                                                ----------

         OUTSTANDING, SEPTEMBER 30, 2004         7,195,336         $    0.43
                                                ==========

         EXERCISABLE, SEPTEMBER 30, 2004         3,277,258         $    0.37
                                                ==========


(1) The exercise price recorded is following the conversion of the Plan to the
Stock Plan and the necessary adjustments.


                                      F-70
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


The weighted-average remaining contractual life of the options outstanding at
September 30, 2004 was 7.3 years. The exercise prices of the options outstanding
at September 30, 2004 ranged from $0.10 to $2.00, and information relating to
these options is as follows:

<TABLE>
<CAPTION>
                                                                                        Weighted-           Weighted-
                                                                     Weighted-          Average             Average
                                                                     Average            Exercise            Exercise
     Range of                 Stock              Stock               Remaining          Price of            Price of
     Exercise                 Options            Options             Contractual        Options             Options
     Prices                   Outstanding        Exercisable         Life               Outstanding         Exercisable
     ------                   -----------        -----------         -----------        -----------         -----------
<S>                           <C>                <C>                <C>                <C>                  <C>
$ 0.10 - 0.24                  1,000,000           1,000,000         7.3 years          $ 0.10              $ 0.10
$ 0.25 - 0.49                  3,350,432           1,542,258         7.3 years          $ 0.29              $ 0.30
$ 0.50 - 0.99                  2,075,000             535,000         7.3 years          $ 0.53              $ 0.53
$ 1.00 - 1.49                    569,904                   0         7.3 years          $ 1.00              $ 1.00
$ 1.50 - 1.49                          0                   0         --                 --                  --
$ 1.75 - 2.00                    200,000             200,000         7.3 years          $ 1.88              $ 1.88
                               ---------           ---------

                               7,195,336           3,277,858
                               =========           =========
</TABLE>


The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation cost other than that required to be recognized by
APB 25 for the difference between the fair value of the Company's common stock
at the grant date and the exercise price of the options has been recognized. Had
compensation cost for the Company's Stock Plan been determined based on the fair
value at the grant date for awards consistent with the provisions of SFAS No.
123, the Company's net loss and loss per share for the years ended September 30,
2003 and 2002 would have been increased to the pro forma amounts indicated
below:


                                      F-71
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004

<TABLE>
<CAPTION>
                                                  2004                2003                2002
                                             --------------      --------------      --------------
<S>                                          <C>                 <C>                 <C>
Net loss
     As reported                             $  (14, 687,874)     $   (6,751,252)     $   (4,518,082)
     Add stock based employee
         compensation expense
         included in net income,
         net of tax                                      --                  --                  --
     Deduct total stock based employee
         compensation expense determined
         under fair value method for all
         awards, net of tax                        (642,594)            (73,520)                 --
                                             --------------      --------------      --------------

     PRO FORMA                               $  (15,330,468)     $   (6,824,772)     $   (4,518,082)
                                             ==============      ==============      ==============

 Earnings per common share
     Basic - as reported                     $        (0.14)     $        (0.08)     $        (0.07)
     Basic - pro forma                       $        (0.14)     $        (0.08)     $        (0.07)
     Diluted - as reported                   $        (0.14)     $        (0.08)     $        (0.07)
     Diluted pro forma                       $        (0.14)     $        (0.08)     $        (0.07)
</TABLE>


For purposes of computing the pro forma disclosures required by SFAS No. 123,
the fair value of each option granted to employees and directors is estimated
using the Modified Black-Scholes-Merton option-pricing model with the following
weighted-average assumptions for the year ended September 30, 2004: dividend
yield of 0%, expected volatility of 80.3%, risk-free interest rate of 4.14%, and
expected life of 7.3 years. All options granted during fiscal 2003 and 2004 were
granted at the market price for common stock on the day of the grant decision.
Stock options were not granted to employees or directors during the year ended
September 30, 2002.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which do not have vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions, including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

During fiscal year 2004, the company issued a total of 237,220 common shares,
net of 43,045 shares recalled, pursuant to the cashless exercise of stock
options by employees of the company. Under the guidelines of FIN 44, the Company
accounted for the cashless exercises as a modification of option grant and
recorded a total of $364,277 of additional compensation charges recorded as
compensation expense. The company does not intend to allow for future cashless
exercises of stock options.


                                      F-72
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


WARRANTS

The Company issues warrants to purchase common shares of the Company either as
compensation for consulting services provided or as additional incentive for
investors who purchase unregistered, restricted common stock, as indicated in
the sequence of Private Placements in fiscal 2003 and 2004. The value of
warrants issued for compensation is accounted for as a non-cash expense to the
Company at the fair value of the warrants issued. The value of warrants issued
in conjunction with financing events is either a reduction in paid in capital
for common issuances or as a discount for debt issuances. The Company values the
warrants at fair value as calculated by using the Modified Black-Scholes-Merton
option-pricing model. See Note 4 for the assumptions used to value warrants
issued.

On July 12, 2001, TTC issued to Red Guard, as an inducement to modify the
conversion price of the TTC Series A Preferred from an initial conversion price
of $0.20 per share, as adjusted for TTC stock splits prior to the November 3,
2001 reverse acquisition transaction with CTC to $0.47 per share after
accounting for the effects of the CTC reverse acquisition transaction, a stock
warrant to purchase 1,905,600 shares of TTC restricted, unregistered common
stock at a price of $1.26 per share, in reliance upon the exemption from
registration set forth in Section 4(2) of the Securities Act of 1933. This
warrant is exercisable at any time after its issuance and expires on June 12,
2006. Due to the uncertainty related to the ultimate exercise for purchase of
any shares covered by this warrant, TTC did not assign any compensation expense
upon the issuance of this warrant.

On October 18, 2001, the holder of the Warrant to purchase shares of the
Company's common stock exercised 7,940 warrants and purchased 7,940 shares of
restricted, unregistered common stock for $10,000 cash. These shares were
included in the total Common shares recapitalized on November 3, 2001. The
remaining warrants have been modified to be exercisable by the holder to
purchase an equivalent number of unregistered Common shares of the Company. As
of September 30, 2004, there were 1,897,660 warrants outstanding to purchase an
equivalent number of the Company's Common shares at $1.26 per share.

From July 2002 until August, 2002, in conjunction with a series of private
equity placements, the Company issued in aggregate 399,123 warrants to purchase
shares of the Company's restricted, unregistered common at an exercise price of
$0.50 that shall expire on July 12, 2006. At the date of issuance, the warrants
were valued at $0.05 per share.

During December 2002, in conjunction with a Private Placement Memorandum, the
Company issued warrants to purchase 64,000 Series A warrants, and 32,000 Series
B warrants. Each Series A warrant entitles the holder to purchase one share of
common stock at a price of $0.35 per share and expired in December 2003. Each
Series B warrant entitles the holder to purchase one share of common stock at
$0.60 per share and expired on June 30, 2004. The value of the warrants at the
date of issuance was determined using the Modified Black-Scholes-Merton option
pricing model at a combined total of $752. All warrants had been cancelled
unexercised as of September 30, 2004.

During the first and second quarters of fiscal 2003, under a Private Placement
Memorandum ("Series E PPM"), the Company issued an aggregate 2,954,000 Series E
warrants to purchase one share of unregistered, restricted common stock. Each
Series E warrant entitled the holder to purchase a share of common stock at
$0.25 per share and expired on December 1, 2004. The value of the warrants was
determined using the Modified Black-Scholes-Merton option pricing model at a
value of $0.058 per warrant and $171,332 was accounted for as Paid in Capital -
Series E warrants. As of September 30, 2004, 1,860,000 warrants had been
exercised and 1,394,000 were exercisable and outstanding.

During February and March 2003, pursuant to Private Placement Memoranda, the
Company issued an aggregate 3,465,500 Series H warrants to purchase one share of
unregistered, restricted common stock. Each Series H warrant entitles the holder
to purchase one share of common stock at $0.50 per share and expires at the
earlier of January 30, 2005 or three weeks following written notification by the
Company that its common stock closed at or above $0.75 per share for five
consecutive trading days. In addition, the Series H warrants can be redeemed by
the Company for $0.001 each if a Registration Statement covering the shares
underlying the Series H warrants has been declared effective and the Company's
common stock closes at or above $0.50 for five consecutive days. The value of
the warrants was determined using the Modified Black-Scholes-Merton option
pricing model at a value of $0.103 per warrant and $356,945 was accounted for as
Paid in Capital - Series H warrants. In conjunction with the Series H PPM, the
Company issued 200,000 warrants, valued at $20,600 in payment of offering costs.
All 3,665,500 warrants were called on July 19, 2004 resulting in the exercise of
3,660,500 warrants and the cancellation of 5,000 warrants.

During March through September 2003, pursuant to Private Placement Memoranda
("Series I PPM"), we issued an aggregate 6,000,000 Series I warrants. Each
Series I warrant entitles the holder to purchase a share of common stock at
$0.50 per share and expires on March 30, 2005. The value of the warrants was
determined using the Modified Black-Scholes-Merton option pricing model at a
value of $0.191 per warrant and $1,146,000 was accounted for as Paid in Capital
- Series I warrants Certain details of the Series I financing is currently under
litigation as discussed in Note 7 above under Composite Technology Corporation
v. Acquvest, Inc., Paul Koch, Victoria Koch, Patricia Manolis, and Michael
Tarbox. The 4,400,000 warrants attached to the units were cancelled by the
company in fiscal 2004 resulting in a reduction of paid-in-capital - Series I
warrants of $840,400. All of the remaining 1,600,000 warrants were outstanding
as of September 30, 2004.

During August 2003, pursuant to Private Placement Memoranda, ("Series O PPM"),
the Company issued 83,335 Series O warrants to purchase one share of
unregistered, restricted common stock. Each Series O warrant entitles the holder
to purchase one share of common stock at $0.60 per share and expires at the
earlier of June 30, 2005 or three weeks following written notification by the
Company that its common stock closed at or above $0.90 per share for 10
consecutive trading days. In addition, the Series O warrants can be redeemed by
the Company for $0.001 each if a Registration Statement covering the shares
underlying the Series O warrants has been declared effective and the Company's
common stock closes at or above $0.90 for 10 consecutive days. The value of the
warrants was determined using the Modified Black-Scholes-Merton option pricing
model at a value of $0.263 per warrant for a total of $21,917 and was accounted
for as Paid in Capital - Series O warrants. All of the Series O warrants were
outstanding as of September 30, 2004.

During September 2003, pursuant to Private Placement Memoranda, ("Series N
PPM"),the Company issued 500,000 Series N warrants to purchase one share of
unregistered, restricted common stock. Each Series N warrant entitles the holder
to purchase one share of common stock at $0.50 per share and expires at the
earlier of June 30, 2005 or three weeks following written notification by the
Company that its common stock closed at or above $0.75 per share for 10
consecutive trading days. In addition, the Series N warrants can be redeemed by
the Company for $0.001 each if a Registration Statement covering the shares
underlying the Series N warrants has been declared effective and the Company's
common stock closes at or above $0.75 for 10 consecutive days. The value of the
warrants was determined using the Black-ScholesModified Black-Sholes-Merton
option pricing model at a value of $0.258 per warrant and was accounted for as
Paid in Capital - Series N warrants of $124,500 equal to the total consideration
paid of $125,000 less the par value of the stock issued. All of the Series N
warrants were outstanding as of September 30, 2004.

In April 2003, the Company granted 49,999 Series K warrants valued at $11,750
using the Black-ScholesModified Black-Sholes-Merton option pricing model as
payment for a legal settlement. Each Series K warrant entitles the holder to
purchase one share of restricted unregistered common stock at $0.50 per share
and expires on September 30, 2005. The Company recorded legal expense and Paid
in Capital - Series K warrants for the $11,750. All of the Series K warrants
were outstanding as of September 30, 2004. During fiscal 2004, 16,667 warrants
were exercised. As of September 30, 2004, 33,332 Series K warrants were
exercisable and outstanding.

In April 2003, the Company granted 250,000 Series L warrants valued at $61,250
using the Black-ScholesModified Black-Sholes-Merton option pricing model as
payment for services rendered recorded as legal expense and Paid in Capital -
Series L warrants. Each Series L warrant entitles the holder to purchase one
share of restricted unregistered common stock at $0.42 per share and expires on
April 8, 2006. All of the Series L warrants were outstanding as of September 30,
2004.

In September 2003, 317,500 warrants were exercised at an exercise price of $0.25
per share for proceeds of $79,375. The Company issued the stock in fiscal 2004
and recorded the 2003 transactions as Committed Stock in 2003. No other warrants
were exercised prior to September, 2003.

During September 2003, pursuant to Private Placement Memoranda, ("Series P PPM")
the Company issued an aggregate 665,000 Series P warrants. In the first quarter
of fiscal 2004, the Company issued an aggregate of 120,000 Series P warrants.
Each Series P warrant entitles the holder to purchase one share of common stock
at $0.80 per share and expires at the earlier of July 30, 2005 or three weeks
following written notification by the Company that its common stock closed at or
above $1.20 per share for 10 consecutive trading days. In addition, the Series P
warrants can be redeemed by the Company for $0.001 each if a Registration
Statement covering the shares underlying the Series P warrants has been declared
effective and the Company's common stock closes at or above $1.20 for 10
consecutive days. The value of the warrants was determined using the
Black-ScholesModified Black-Sholes-Merton option pricing model at a value of
$1.212 per warrant for a total of $805,908 for the fiscal 2003 issuance and
$145,440 for the fiscal 2004 issuance and each was accounted for as Paid in
Capital - Series P warrants. All 785,000 of the Series P warrants were
outstanding as of September 30, 2004.

In November 2003, the Company made an offer to the holders of the Series E and
Series H warrants that if the holders exercised their warrants before December
10, 2003, the holder would receive one Series R warrant to purchase 1 share of
unregistered restricted common stock for every 5 Series E or H warrants
exercised. Each Series R warrant entitles the holder to purchase one share of
common stock at $1.95 per share and expires on December 30, 2005. In addition,
the Series R warrants can be redeemed by the Company for $0.001 each if a
Registration Statement covering the shares underlying the Series R warrants has
been declared effective and the Company's common stock closes at or above $3 for
10 consecutive days and if the shares underlying the warrants have been
registered. In December 2003, the Company issued 58,500 Series R warrants to 13
individuals. The value of the Series R warrants was determined using the
Black-ScholesModified Black-Sholes-Merton option pricing model at a value of
$1.814 per warrant and was accounted for as Paid in Capital - Series R warrants
and Legal, Consulting, and Professional expense in the amount of $106,120. All
of the Series R warrants were outstanding as of September 30, 2004.

In December 2003, in conjunction with the December offering private placement,
the Company issued 1,200,000 December Offering warrants to purchase one share of
the Company's unregistered restricted common stock at an exercise price of $2.04
per share. The warrants vest immediately and expire in December 2008. The
Company has the right to call the warrants if the closing price of the Company's
common stock is greater than 200% of the exercise price of the warrants for 20
consecutive trading days. The value of the December Offering warrants was
determined using the Black-ScholesModified Black-Sholes-Merton option pricing
model at a value of $1.877 per warrant and the value of $2,252,400 was accounted
for as Paid in Capital - December Offering Warrants. In June 2004, the Company
offered the warrant holders, for a limited period of time, the opportunity to
exercise their warrants at a reduced strike price of $0.50. Pursuant to this
offer, the Company issued 1,000,000 shares of the Company's unregistered,
restricted common stock against receipt of $500,000. One holder of 200,000
warrants did not take advantage of this right. In connection with this offering,
one professional company was issued with an additional 120,000 warrants on the
same terms as the original offering. As a result of this transaction, we
recorded additional Paid in Capital and Legal, Consulting, and Professional
expenses of $1,433,880 resulting from the modification of the warrant terms. The
120,000 warrants issued to the professional services firm were valued using the
Black-ScholesModified Black-Sholes-Merton option pricing model at $1.277 per
warrant and $153,207 in additional Paid in Capital and Legal, Consulting, and
Professional expenses were recorded. 320,000 December offering warrants with an
exercise price of $2.04 were outstanding as of September 30, 2004.

In September 2004, the Company issued 1,427,000 Series S warrants valued at
$918,376 using the Black-ScholesModified Black-Sholes-Merton option pricing
model for payment of consulting services to 7 individuals and 2 entities and for
settlement of certain disputes relating to such services. Each Series S warrant
is exercisable at $1.00 per share for the purchase of restricted unregistered
common stock. The warrants are callable at $1.00 per share and expire on July
17, 2007. The Company recognized $918,376 of compensation expense for services
rendered. All of the Series S warrants were outstanding as of September 30,
2004.

In September 2004, the Company issued 160,000 Series T warrants for services
rendered valued at $0.644 per warrant using the Modified Black-Sholes-Merton
option pricing model in payment of services rendered relating to the capital
lease transaction.. Each Series T warrant is exercisable at $1.00 per share for
the purchase of restricted unregistered common stock. The warrants are
non-callable and expire on July 17, 2008. The Company recognized $105,915 of
compensation expense for services rendered. All of the Series T warrants were
outstanding as of September 30, 2004.

In connection with the convertible debenture offering , the Company issued in
August 2004, 1,726,973 "Debenture" warrants valued using the Modified
Black-Scholes-Merton option pricing model at $3,220,972 and exercisable at $1.75
per share and 1,726,973 "Debenture" warrants valued at $3,143,091 and
exercisable at $1.82 per share. Both are exercisable for the purchase of
restricted unregistered common stock, are non-callable and expire August 17,
2008. Registration rights were attached to these warrants. The $6,364,063 value
of the debenture warrants were recorded as a discount to the $15,000,000
Convertible Debt. SEE, NOTE 11.

In September 2004, the Company issued 500,000 Series U warrants for services
rendered valued at $615,012 using the -Scholes option pricing model. The Series
U warrant is exercisable at $1.82 per share for the purchase of restricted
unregistered common stock. The warrants are callable and expire on August 18,
2008. The Company recognized $615,012 of compensation expense for services
rendered related to the $15,000,000 Debenture financing.

During fiscal 2004, a total of 1,000,000 "December" offering warrants were
exercised at an exercise price of $0.50 per warrant resulting in $500,000 in
cash consideration paid to the company. A total of 1,860,000 "Series E" warrants
were exercised at a price of $0.25 per warrant resulting in $477,500 in cash
consideration paid to the company. A total of 3,665,500 "Series H" warrants were
exercised at an exercise price of $0.50 per share resulting in cash
consideration paid of $1,832,750. A total of 193,055 "Numbered" warrants were
exercised at an exercise price of $0.50 per share resulting in consideration of
$96,528 received by the Company.

During fiscal 2004, a total of 4,501,000 warrants were cancelled by the Company:
4,400,000 Series I warrants subject to litigation and valued at $0 per warrant
due to no paid in capital assigned at issuance were cancelled, see note 8,
32,000 Series B warrants were rescinded by the investor, 64,000 Series A
warrants expired, and 5,000 Series H warrants that were called were not
exercised and were therefore cancelled by the company. The Company recorded a
$2,500 Common stock adjustment to Paid in Capital and General and Administrative
expense as a result of these cancellations.


                                      F-73
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


The following table presents warrant activity through September 30, 2004:

                                                                    Weighted-
                                                                     Average
                                                    Number          Exercise
                                                  of Shares           Price
                                                  ----------      -----------

 Outstanding, March 18, 2001 (inception)                  --      $        --
     Granted                                       1,905,600      $      1.26
                                                 -----------

Outstanding, September 30, 2001                    1,905,600      $      1.26
     Granted                                         848,630      $      0.50
     Exercised                                        (7,940)     $      1.26
                                                 -----------

 Outstanding, September 30, 2002                   2,796,290      $      1.06
     Granted                                      14,568,834      $      0.46
     Exercised                                      (267,500)     $      0.29
                                                 -----------

OUTSTANDING, SEPTEMBER 30, 2003                   17,398,457      $      0.55
     Granted                                       7,039,446      $      1.58
     Exercised                                    (6,735,222)     $      0.42
     Cancelled                                    (4,501,000)     $      0.49
                                                 -----------

OUTSTANDING, SEPTEMBER 30, 2004                   13,201,681      $      1.08
                                                 ===========

EXERCISABLE, SEPTEMBER 30, 2004                   13,201,681      $      1.08
                                                 ===========


                                      F-74
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


NOTE 9 - INCOME TAXES

The provision for (benefit from) income taxes differs from the amount that would
result from applying the federal statutory rate for the years ended September
30, 2004 and 2003 as follows:


                                                    2004               2003
                                                 -----------       ------------

Statutory regular federal income benefit rate     (3,247,000)      $(1,955,800)
Change in valuation allowance                      2,256,000         2,337,700
State tax, net of federal benefit                   (421,000)         (342,300)
Other                                              1,412,000             6,100
                                                 -----------       ------------
TOTAL                                                    --        $        --
                                                 ===========       ============


Significant components of the Company's deferred tax assets and liabilities for
federal and state income taxes as of September 30, 2004 consisted of the
following:


Deferred tax assets

          Net operating loss carry-forwards                 $ 4,737,000
          Warrants issued for services                          767,000
          Common Stock issued for services rendered             489,000
          Loan origination fees                                 454,000
          Common Stock issued for legal settlement              316,000
          Other                                                  12,000
          Less valuation allowance                           (6,775,000)
                                                            -----------

 NET DEFERRED TAX ASSETS                                    $        --
                                                            ===========



During the year ended September 30, 2004, the valuation allowance increased by
$2,256,000. As of September 30, 2004, the Company had net operating loss
carry-forwards for federal and state income tax purposes of approximately
$23,117,771 and $23,117,771, respectively. The net operating loss carry-forwards
begin expiring in 2020 and 2010, respectively. The amount and availability of
the net operating loss carry-forwards may be subject to limitations set forth by
the Internal Revenue Code. Factors such as the number of shares ultimately
issued within a three-year, look-back period, whether there is a deemed more
than a 50% change in control, the applicable long-term tax exempt bond rate,
continuity of historical business, and subsequent income of the Company all
enter into the annual computation of allowable annual utilization of the
carry-forwards.


                                      F-75
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED SEPTEMBER 30, 2004 AND 2003 AND
      FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2004


NOTE 10 - RELATED PARTY TRANSACTIONS

Prior to the November 3, 2001 acquisition of TTC by CTC, TTC engaged in
significant transactions involving both its preferred stock and its common stock
of TTC with Red Guard, an entity in which a shareholder, officer, and director
of TTC, and subsequently, of the Company, is also a shareholder and was an
officer through December 2001. Key transactions involving this relationship
included the issuance of the Series A and Series B Preferred Stock, the issuance
of common stock to acquire various marketable and restricted securities in
various unrelated entities, and to acquire the rights to negotiate to acquire
the license to manufacture, develop, and sell certain patent-pending composite
reinforced aluminum conductor technologies.

On September 30, 2002, the Company and Red Guard consummated a transaction,
whereby Red Guard exchanged 100% of the issued and outstanding Series A
preferred stock, all accrued but unpaid dividends, certain short-term working
capital loans, and all accrued but unpaid interest in return for all of the
Company's investment interests in other companies, except for the investment in
IPS. See also Note 7.

A short term non interest bearing loan made by one of Company's Directors to the
Company was repaid in July 2004.

NOTE 11 - CONVERTIBLE DEBENTURES

On August 17, 2004, CTC closed a financing transaction in which it sold 6%
convertible debentures (the "Debentures") to select institutional accredited
investors, in order to raise a total of $15,000,000. We received $5,000,000 upon
closing and $10,000,000 was deposited into a Custodian Account to secure
repayment of the Debentures. The Debentures will mature on August 17, 2007. The
investors may convert the Debentures into our common stock for $1.67 per share
(the "Conversion Price"). We may force conversion of all outstanding Debentures
if the daily volume weighted average price of our common stock exceeds the
Conversion Price by 150%. We may drawdown the $10,000,000 held in the Custodian
Account on a monthly basis starting after the effective date of a Registration
Statement registering the common stock issuable upon conversion Debentures by
exercising a monthly optional redemption (the "Monthly Redemption"). The minimum
Monthly Redemption is $500,004. The Monthly Redemption may only be paid by the
issuance of our common stock to the investors priced at 93% of the volume
weighted average price of our common stock at the time of such Monthly
Redemption.

The investors also received warrants to purchase an aggregate of 3,453,947
shares of common stock, 50% of which are at an exercise price of $1.75 per share
and the balance of which are at an exercise price of $1.82 per share. The
warrants were valued using the Modified Black-Scholes-Merton option pricing
model at an aggregate value of $6,364,063. The warrant value was recorded as
Paid in capital and as a discount to the Convertible Debentures. The discount
will be amortized to interest expense over the expected duration of the
Convertible Debentures which are scheduled for repayment in August, 2007. No
value was assigned to the convertible features of the debt offering. The
Discount will be amortized ratably over the 36 month term of the debentures.
From the date of issuance through September 30, 2004, a total of $265,169 was
recorded to interest expense relating to this discount. The remaining balance
will be amortized over the next 34 1/2 months at a rate of $176,782 per month
for the duration of the Debentures.

On November 23, 2004, we reached an agreement with the four funds that purchased
the Debentures to release the $10 million that was held in a custodian account.
The $10 million was to be released periodically after the effectiveness of a
registration statement filed by the Company on Form SB-2 pursuant to monthly
optional redemptions. In consideration for such early release of the $10
million, each of the four funds was issued an additional warrant to purchase (in
aggregate) 1,083,591 shares of our common stock with an exercise price of $3.23.
The four funds also agreed to extend the deadlines for the filing of and
effectiveness date of the registration statement. The additional warrants were
valued using the Modified Black-Scholes-Merton option pricing model at $1.84 per
warrant. The aggregate warrant value of $1,993,523 was recorded as Paid in
Capital and Legal, Professional, and Consulting expense in Fiscal 2005.

NOTE 12 - SUBSEQUENT EVENTS

MANUFACTURING & DISTRIBUTION AGREEMENTS

Subsequent to year end September 30, 2004, CTC signed two "Manufacturing and
Distribution Agreements" with General Cable Industries, Inc.

CONVERTIBLE DEBENTURES

Since year end and following negotiations with the institutional investors, the
Company secured the release of the $10,000,000 which was originally placed in a
Custodial Account. Refer to Note 3. A total of 1,083,592 additional warrants
valued at $1,993,809 valued using the Modified Black-Scholes-Merton option
pricing model were issued to the four institutional investors in conjunction
with these negotiations. The funds were received on November 23, 2004.An
additional amount of $307,500 was paid to Lane Capital upon release of the
funds. Refer to Financial Considerations (MD&A).

LEASE COMMITMENTS

As part of the preparation for the ramp up of the Company's core production on
November 23, 2004, the Company obtained approximately $1.4 million in lease
financing commitments and has a firm offer for an additional $3 million in
equipment lease financing.


                                      F-76
<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, the registrant caused this amended report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                        COMPOSITE TECHNOLOGY CORPORATION


                                        By: /s/ Benton H Wilcoxon
                                            --------------------------
                                            Benton H Wilcoxon
                                            Chief Executive Officer

Dated: August 8, 2005

In accordance with the Securities Exchange Act of 1934, as amended, this amended
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


/s/ Benton H Wilcoxon
--------------------------
Benton H Wilcoxon
Chief Executive Officer,
Acting Chief Financial Officer and
Chairman

Dated: August 8, 2005


/s/ C. William Arrington
--------------------------
C. William Arrington
President and Director

Dated: August 8, 2005


                                       57