UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   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, 2003


   [ ] 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, 2003 was $0.00.

The aggregate market value of voting common equity held by  non-affiliates as of
January 29, 2004 was approximately  $112,594,004  using the closing price of the
Company's common stock of $1. 83 per share on January 29, 2004.

As of January 29, 2004 there were 101,254,602  shares of Common Stock issued and
outstanding.

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


<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                    Page
                                                                                   Number
                                                                                   ------
<S>                                                                                <C>
PART I

Item 1 -      Description of Business                                                1
Item 2 -      Description of Property                                                9
Item 3 -      Legal Proceedings                                                      9
Item 4 -      Submission of Matters to a Vote of Security Holders                   10

PART II

Item 5 -      Market for Company's Common Stock and Related Stockholders
              Matters                                                               10
Item 6 -      Management's Discussion and Analysis or Plan of Operation             12
Item 7 -      Index to Financial Statements                                         13
Item 8 -      Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosures                               13
Item 8A -     Controls and Procedures                                               13

PART III

Item 9 -      Officers and Directors                                                14
Item 10 -     Executive Compensation                                                14
Item 11 -     Security Ownership of Certain Beneficial Owners And Management        16
Item 12 -     Certain Relationships and Related Transactions                        16

PART IV

Item 13 -     Exhibits and Reports on 8-K                                           17
Item 14 -     Principal Accounting Fees and Services

SIGNATURES                                                                          18
</TABLE>

                                        i

<PAGE>

CAUTION REGARDING FORWARD-LOOKING INFORMATION

All  statements  contained  in  this  Form  10-KSB,  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 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, 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 are an Irvine, CA-based company providing high performance advanced composite
core conductor  cables for electric  transmission  and  distribution  lines. The
proprietary new Aluminum  Conductor  Composite Core ("ACCC") cable transmits two
times more power than comparably sized  conventional  cables in use today.  ACCC
can solve line sag problems, create energy savings through less line losses, has
significantly  lower  electromagnetic  fields,  and can easily be retrofitted on
exiting  towers to upgrade  energy  throughput.  ACCC cables allow  transmission
owners,  utility companies,  and power producers to easily replace  transmission
lines without modification to the towers using standard installation  techniques
and equipment,  thereby avoiding the deployment of new towers and  establishment
of new  rights-of-way  that are costly,  time consuming,  controversial  and may
impact  the  environment.  We  have  established  strategic  relationships  with
existing  cable  manufacturers  to  rapidly  expand  production  and  facilitate
deployment  to end  users  worldwide.  Follow-on  products  include  proprietary
electrical  towers and poles,  wind turbine  erection and support  systems,  and
building components. See also Company website at: www.compositetechcorp.com

We were 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  Eldorado  Financial  Group,  Inc.,  a Nevada
corporation  formed on June 25,  2001 solely for the  purpose of  effecting  the
reincorporation.

On November 3, 2001, we exchanged 60,000,000 shares of restricted,  unregistered
common  stock  for  100.0%  of  the  issued  and  outstanding  common  stock  of
Transmission   Technology   Corporation   ("TTC"),   a  privately-owned   Nevada
corporation  incorporated  on March 28,  2001.  TTC was first formed to secure a
license  agreement  related to patent-pending  composite  reinforced  electrical
transmission   lines  utilizing   composite  core  materials.   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  the 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  acquiror  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.


                                       1
<PAGE>

PRINCIPAL PRODUCT

Our principal  product is our proprietary  patent pending ACCC cables which have
been developed over the past two years. These unique electrical transmission and
distribution  cables are able to deliver more power (ampacity) than conventional
ACSR  (aluminum  conductor  steel  reinforced)  cables that are in worldwide use
today. ACCC cables are similar in weight and size to typical  conventional steel
reinforced  cable,  but they have a much higher ampacity  rating,  thus allowing
them to replace existing overhead lines without  structural  modification of the
supporting  tower  systems  while  allowing  far more  power to be  transmitted.
Independent  reviews confirm that the use of this technology to replace existing
lines could  improve  the  reliability  and reduce the stress on the  overloaded
electrical  infrastructure  at a fraction of the cost and in a much shorter time
period than is  required to create  expensive  new  rights-of-way  and build new
tower systems to run new lines.  Our technologies are based upon a high-strength
composite  core that  replaces  steel cores found in most  conventional  cables,
resulting in extremely low sag even at high temperature operation. An additional
feature is cooler  operation  since there are less line losses  associated  with
inductive  heating  involved with steel cores,  resulting in energy  savings and
lower electromagnetic  fields. The cables' greater power throughput is primarily
due to higher  conductivity  as a result of the addition of  significantly  more
aluminum  in the same size cable and the use of pure  annealed  aluminum  rather
than the less  conductive  aluminum  alloy in use today.  ACCC cable is truly an
engineered  product that can be designed  and  manufactured  to satisfy  unusual
utility requirements,  such as providing individual conductor  specifications to
rapidly and  cost-effectively  solve problems in ways  previously  thought to be
unachievable.  An example is a utility with existing,  aging support  structures
that must be de-rated due to their age and condition,  where we can provide ACCC
unique  designs to allow  installation  of lighter  conductors  with far greater
ampacity than normally available to utility planners.  Another example is if new
system  construction is required to support new generation sources of supply, we
can predict the size and cost of new towers to be  significantly  reduced due to
the higher  composite  core  tensile  strength,  the  reduced sag and the higher
ampacity of the ACCC cables.

In  addition,  the ACCC  cable's  outside  conductive  wire  portion is the same
diameter and helical  configuration as the conventional ACSR cable,  which means
that it can be handled and spliced with minimal  re-training of utility linemen.
The only  difference  is the  splicing  of the  inside  composite  core (and the
splicing of the fiber optic bundle,  if requested by the utility).  The splicing
techniques have been developed and  demonstrated by technicians  retained by us.
Further, FCI/Burndy, one of the world's largest cable hardware manufacturers, is
now making and  successfully  testing first generation  connecting  hardware for
ACCC.

Electricity  now  accounts  for nearly 40% of total  energy  consumption  in the
United  States  and  in  other   countries   with  similar  levels  of  economic
development.  The  electricity  system has emerged as the world's most  critical
infrastructure,  in the  sense  that it  enables  all other  infrastructures  to
function. To ensure the capability and reliability of electricity systems in the
twenty-first century, new advanced materials,  polymers,  composites and special
structures will be required. High-performance polymeric cables, such as our ACCC
cables,  are expected to meet the needs of the electrical  industry because they
are the same weight or lighter,  have a higher current carrying capacity and are
better able to tolerate high stresses during emergency overload conditions.

The US Department of Energy and electrical  industry leaders agree that there is
an immediate need for a reasonably priced higher  performance cable. This urgent
need was clearly  confirmed in the August 14, 2003  northeast  blackout  when 50
million  people lost  electrical  power.  Recent  industry  research has focused
primarily on  superconductors,  which are very  expensive  and require  constant
cooling  to  cryogenic  temperatures.  While  superconductors  perform  with low
transmission  losses,  their much  higher  price,  larger  size,  and  increased
maintenance  constraints make them suitable only for select underground lines in
highly  congested  power centers,  such as New York City. We do not believe that
this technology will be used in overhead transmission or distribution systems in
the foreseeable future.

In  November/December  2003, the first  commercial ACCC cable was produced under
contract by General  Cable,  one of the  largest  cable  manufacturers  in North
America,  using  composite  core we  produced.  The cable was  designed by us to
replace  the  ACSR  "Drake"  size  (795  kcmil  area)  cable  commonly  used  in
transmission  lines  and in larger  distribution  lines.  There  are many  other
similar versions of ACSR cables with different  specifications that will also be
produced using the similar  arrangements as the ACCC cable versions of the Drake
model  produced by General Cable.  ACCC's unique core simply  replaces the steel
wires in the center of the ACSR with pultruded  composite  profiles.  Therefore,
the handling and splicing of the ACCC cable is similar to  conventional  cables,
except  for the  joining of the  composite  core.  Our ACCC cable that  replaces
"Drake" size cable is now ready for commercial orders.

In December 2003, the first commercial order was received for our ACCC cable for
a new transmission line in Kansas. This order requires a smaller size ACCC cable
to replace a "Hawk" size designation, which we anticipate to begin to produce in
the second  quarter of 2004.  We will continue to design and produce other sizes
of ACCC cable to fill customer requirements.

SALES AND DISTRIBUTION

During  Fiscal Year 2003,  we continued  developing  numerous key contacts  with
several North American and foreign cable  manufacturers  having an  established,
successful  distribution  network of  existing  mature  customers  to deploy our
products. We have also opened discussions with direct end-users of our products.
We anticipate these distribution  channels/methods/contacts may yield successful
results  during Fiscal Year 2004. We are also seeking to distribute our products
internationally  through joint ventures and/or other  contractual  relationships
with cable manufacturers that are designed to fit the laws and tax structures of
the countries where they will be domiciled.  Active  discussions are underway on
five continents.

The first sale of 21 circuit miles of our products (Engineering  Procurement and
Construction contracts valued up to $2.675 million) was signed in December, 2003
in the state of Kansas  involving a major utility and a municipal end user.  Our
initial ACCC cable sales efforts are being targeted at potential  customers that
have the  greatest  need for a solution  to  congested  line  circuits  or aging
transmission systems. We have initiated discussions with potential customers for
our ACCC cable  including  generation  companies  and  transmission  grid owners
located  throughout  the United States and the world,  as well as various local,
state and federal government  agencies in the United States,  Canada and Mexico.
In order to further this effort,  demonstration  activities  are in process with
the U.S.  Department of Energy's offices at Oak Ridge,  Tennessee (ORNL) and the
Western Area Power  Administration  (WAPA) in Phoenix,  AZ. An  understanding in
principal  has also been  reached  with the New York State  Energy  Research and
Development  Authority (NYSERDA) for supply of a power drop using ACCC to supply
their new state-of- the-art Saratoga Technology + Energy Park near Saratoga, NY.


                                       2
<PAGE>

Our products are  targeted at an industry  which is mature in North  America and
developing in various other countries around the world,  such as China and South
America.  Although the power generation and distribution  industry is relatively
conservative  by  nature  and  evolution,  events  impacting  domestic  electric
distribution,  such as the August, 2003 northeast blackout,  followed by several
European blackouts,  cause us to believe that our products will be accepted on a
more rapid than "normal" product  evaluation  process.  We have produced several
miles of ACCC  cable for  demonstrations  during  Fiscal  Year 2004 in the North
American, Chinese, European and South American markets.

Following a parallel  path sales  strategy,  we have  continued to be in contact
with  selected  companies  or  agencies  that are in  early  stages  of  project
development of generation  facilities requiring new transmission or distribution
systems.

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.

We also believe that the utility  industry  will benefit  significantly  through
simplified installation methods, as well as through the introduction of emerging
innovation.  New product lines should also provide further value for the utility
companies, while adding new revenue streams for us.

MANUFACTURING

We design,  prototype  and produce our  proprietary  high speed  composite  core
manufacturing systems for our own use and for sale to our joint venture partners
and/or  licensees,  as appropriate.  We will, in most  instances,  produce cable
through  relationships  with existing cable makers, by having them add helically
stranded  combinations of individual aluminum wires around the composite core we
supply.

The composite cores produced by us, and tested by independent laboratories,  are
manufactured  using  a  proprietary  pultrusion  process.  This  process  allows
numerous glass and carbon filaments to be  pre-tensioned,  impregnated with high
performance  thermoset  resin systems,  and rapidly cured as the product emerges
through a heated die. The shape of the various dies dictates the finished  shape
of the pultruded parts. The proprietary resin formulations used by us are highly
resistant to temperature,  impact,  tensile, and bending stresses, as well as to
the harsh environmental  conditions encountered in the field. In addition to the
pultruded  products'  structural  attributes,  long life and  resistance to high
energy electrical fields are the processing advantages. Thermoset resin systems,
rapidly  catalyzed  by  chemical  and heat  reactions,  allow the  potential  of
high-speed  processing.   We  have  started  to  develop  high-speed  processing
technologies,  through scaled prototypes,  and intend to build  production-ready
equipment in Fiscal Year 2004.

We have started to manufacture our ACCC cable core at our facilities and through
a  subcontractor.  We have wrapped the core with  aluminum to produce a finished
product using a major cable  manufacturer  as  subcontractor  in order to reduce
market entry time and costs.  We believe that these  methods allow us to produce
ACCC cables with much lower  initial  capital  expenditures  which allows a more
rapid   deployment  of  the  Company's   products.   Presently  we  can  produce
approximately  10  miles  of  ACCC  cables  per day and we  expect  to  increase
production  to  approximately  100 miles per day during  Fiscal  Year 2004 using
available subcontract facilities  (coinciding with market  requirements/orders).
Arrangements  are also being  discussed for expansion of production  capacity if
orders exceed our planned capacity.

In any of these scenarios, we anticipate a potential need for additional capital
to facilitate the  development of our products.  We anticipate debt financing or
sale of our equity  securities,  either through private  placements or secondary
public offerings, to raise the necessary capital to execute our production plan.
We may also secure license  payments and/or venture  relationship  payments from
prospective manufacturers and/or secure deposits on products/machines ordered.

Our principal raw materials are glass and carbon  fibers,  plus various  polymer
resins and high-grade  aluminum.  The prices for these raw materials are subject
to market forces largely  beyond our control,  including  energy costs,  organic
chemical feedstocks,  market demand, and freight costs. The prices for these raw
materials have varied  significantly  in the past and may vary  significantly in
the future.

INTELLECTUAL PROPERTY

We filed U.S.  Provisional  Patent Application No. 60/374,879 on April 23, 2002.
We filed 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;  10/691447,  filed October 22, 2003; and 10/690839,  filed October 22,
2003.  We have  preserved  all of our foreign  filing  options of interest.  The
inventors of record of all of our  applications are Dr. Clem Hiel and Mr. George
Korzeniowski.  Dr. Hiel is  world-renowned  in the field of composite  materials
engineering  and  design.  Mr.  Korzeniowski  has a long and very  distinguished
career  dealing  directly  with  design,   building  and  operating   pultrusion
processing   equipment  for  composite   products   manufacturing.   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  pultrusion  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.


                                       3
<PAGE>

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. If we are successful in
being  granted  patent  protection  consistent  with  the  disclosures  in these
applications,  it is  anticipated  that we will have a dominant  position in the
field of composite-based electrical conductors.

Our subsidiary,  Transmission  Technology  Corporation ("TTC"),  entered into an
exclusive   technology  license  agreement  with  W.B.G.,   Inc.,  a  California
corporation  ("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.  CTC, TTC and WBG (aka WBGA) were
involved in  litigation  regarding the  interpretation  and  enforcement  of the
License  Agreement.  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  ("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  ACCC
products  that include items  contained in patent claims  granted to WBGA by the
U.S.  Patent and Trademark  Office  ("USPTO").  The New License  Agreement  also
provides CTC a broader  non-exclusive  license for any other pultuded  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 USPTO.  To date no such claims have been granted by USPTO to WBGA.  We
have 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  USPTO  for the
specific technologies licensed herein.

Goldsworthy  has  no  relevant  patents  issued  to  date.  To the  best  of our
knowledge,   Goldsworthy  and  his  affiliate  companies  have  filed  a  patent
application that might be potentially  relevant to our intended  products.  This
application  was filed on November  1, 1999.  The  application  received a final
rejection  from the US Patent  and  Trade  Office  on June 9,  2001.  We have no
knowledge of the status of the application  following this final  rejection,  in
spite of numerous requests pursuant to court ordered discovery.  The Goldsworthy
application generally discloses a composite reinforced  electrical  transmission
conductor.  The  application  was not prepared with a great deal of specificity,
which   makes  it  more   unlikely   that  it  will  ever  issue  as  a  patent.
Confidentiality   restrictions   prevent  us  from   providing   more   detailed
information,  but our patent and legal  advisors are  carefully  monitoring  the
matter. If the application somehow issues as a patent, the New License Agreement
grants  us  both  exclusive  and  non-exclusive  rights  to the  patent  and all
improvements as referred to hereinabove.

We are currently  pursuing patent  protection for other composite based products
and applications.  It is anticipated that these additional  patent  applications
will  be  filed  in  the  near  future.  We  also  anticipate  filing  trademark
applications to secure protection of our trademarks.

MARKETABILITY

The U.S.  Department of Energy has reported that much of the nation's electrical
transmission and distribution  infrastructure  is rapidly becoming  incapable of
meeting the demands of our modern  economy since the  consumption of electricity
has doubled over the last 10 years. Traditionally, utilities would be adding new
transmission  capacity  to handle the  expected  load  increase,  but because of
difficulty in obtaining  permits and the uncertainty  over receiving an adequate
rate of return on  investment,  the total of  transmission  circuit  miles added
annually has been stagnant. Obtaining approval to site and build new electricity
transmission  is becoming more  difficult  due to  environmental  concerns,  the
perceived  health  effects of electric and  magnetic  fields,  interest  groups'
concerns,  and the concern that property values would decline along transmission
line  routes.  In the period from 1985 to 1990,  10,000 new  circuit  miles were
added in the United  States,  while only 4,000  circuit  miles were added in the
period from 1990 to 1995.  We believe  that there is an  increased  need for new
conductors  that deliver more power at a reasonable  cost on the existing  tower
system.

COMPETITION

There are three  principal  manufacturers  of traditional  bare overhead  (ACSR)
conductors which supply the United States market: Southwire Company,  reportedly
with over one third of the US market; General Cable Corporation and Alcan Cable,
both reportedly supply most of the balance of the market.  Outside of the United
States  market,  key  manufacturers  for ACSR  cable  include  Nexans in Europe,
Pirelli  Cable in Europe,  Condumex in Mexico,  Jaingsu Far East Group  Company,
Ltd., in China, Aberdare in South Africa, and numerous others.

Some of these cable manufacturers produce variations of ACSS (Aluminum Conductor
Strength Steel)  reinforced with higher strength steel alloys that allow the use
of trapezoidal shaped wires,  similar to the Company's cable, but still have the
following problems,  particularly in retrofit  applications:  when compared with
equivalent  sized ACSR cables,  the ACSS cable is normally  heavier and thus may
require higher tension and resulting tower modifications; it is also higher cost
than ACSR cables.  When compared with the Company's ACCC cables, the ACSS cable:
(i) has less aluminum  conductive  cross-section  than ACCC cables  resulting in
less power capacity;  (ii) has much higher sag than ACCC cables;  (iii) has line
losses associated with inductive heating of a ferromagnetic  core; (iv) has more
electromagnetic  field  generation;  and (v) with respect to new line  projects,
would require a greater number of taller towers than ACCC cables.

The following  developmental-stage  efforts may eventually compete with our ACCC
cable:


                                       4
<PAGE>

o     3M Company reports that they have developed Aluminum  Conductor  Composite
      Reinforced (ACCR), a new metal matrix core conductor under testing,  which
      they claim is expected to have  increased  ampacity  over ACSR by 1.5 to 3
      times at very high temperatures. Its price is reported to be seven to nine
      times higher than ACSR.  We have not seen any published  performance  data
      from  independent  third  parties as to  certified  test  results for this
      conductor,  although our study of available  data  indicates that our ACCC
      cable  will  have  higher   performance   specifications   at   equivalent
      temperatures. 3M Company literature also indicates that some modifications
      from  the  ACSR-norm  in  handling  and  installation  procedures  may  be
      required. Such literature also notes that the conductivity of the aluminum
      is lower than the  aluminum in  conventional  ACSR and also lower than our
      ACCC.  We have  not  been  able to  determine  when  the  product  will be
      commercially available.

o     Korea Electric Power Corporation  completed 24 overhead  transmission line
      upgrade  projects  between  1994 and 1997  where  they  replaced  existing
      conductors  with  high-ampacity   conductors  using  existing  towers  and
      rights-of-way.  They used the  "Super  Thermal  Resistant  Aluminum  Alloy
      Conductor with Invar Reinforcement" ("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 with slightly increased line losses. 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  reportedly  experienced  mixed results in
      various applications and industry evaluation continues.  Some difficulties
      in handling and installing  this conductor have been reported.  We believe
      that significant structural strengthening 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 (50) times the current price of conventional  systems, so that
      it would only be practical in specific short underground  installations in
      downtown  metropolitan  areas, such as New York City.  Overhead use is not
      presently anticipated.

Based upon preliminary test results,  both internal using our own test equipment
and when conducted by independent third parties, we believe the ACCC cable meets
or exceeds industry standards for quality and performance when compared to ACSR.
We are not  presently  aware of any  comparable  conductor  in terms of cost and
performance.

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. The Company anticipates,
and to date has had, no difficulty in meeting these standards.

RESEARCH AND DEVELOPMENT

We have spent considerable funds on research and development of our proprietary,
patent pending ACCC and related  electrical  system component  technologies.  We
anticipate the need to continue  spending  significant funds to protect the ACCC
technologies.  We have also filed  patents  with respect to certain new hardware
components,  new related  tower and pole  structures,  and  advanced  production
equipment  lines.  The costs  associated with  development work on new equipment
lines is expected to be recovered  through the purchase of such equipment by our
licensees, manufacturing partners, or joint ventures. We estimate that in Fiscal
Year 2003 we spent  approximately  $3,513,613 on development costs and in Fiscal
Year 2002 approximately $638,555. SEE, "INTELLECTUAL PROPERTY"

EMPLOYEES

As of the date of this filing, we currently have 19 full time employees. We have
three officers, six corporate managers, two corporate administrative assistants,
four production managers, four production assistants. We have three consultants.
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

WE ARE A "START-UP" COMPANY AND HAVE A LIMITED OPERATING HISTORY.

We are a "start-up" company and have a limited operating history. We are subject
to  business  risks that are typical of  "start-up"  companies  and  "lead-time"
factors are expected to affect the timing of our receipt of revenues.  There can
be no assurance that we will be able to generate any significant revenues. Until
we generate  significant  revenues,  we will experience  negative cash flows and
financial  losses.  Our ability to generate revenues may be affected by numerous
factors.  No  assurance  can be given that a demand for our product will develop
or, if it does develop,  that it will be sufficient to justify our investment in
developing our intended business.


                                       5
<PAGE>


WE EXPECT FUTURE LOSSES AND WE MAY NOT BECOME PROFITABLE.

Prior to acquiring TTC, we were a shell corporation having no operating history,
revenues from operations, or assets since December 31, 1989. We have not had any
revenues from operations  subsequent to acquiring TTC though September 30, 2003.
We anticipate  that we will 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 and product
prototype and  equipment  prototype  production  expenses,  as  necessary.  As a
result,  we will need to generate  significant  revenues to achieve and maintain
profitability.

OUR  INDEPENDENT  AUDITORS  HAVE ISSUED A QUALIFIED  REPORT WITH  RESPECT TO OUR
ABILITY TO CONTINUE AS A GOING CONCERN.

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  and/or to obtain the  necessary  financing to meet our
obligations and repay our liabilities from normal business  operations when they
come due. For the fiscal year ended  September  30, 2003 and 2002,  we had a net
loss of $(6,751,252) and $(4,518,082),  respectively.  For the same periods,  we
had  negative  cash  flows  from  operations  of  $(2,022,935)  and  $(715,923),
respectively.   As  of  September  30,  2003,   our   accumulated   deficit  was
$(11,796,877).

OUR PRODUCT MAY NOT BE ACCEPTED BY OUR POTENTIAL CUSTOMERS.

While we have  received  numerous  serious  inquiries  about  our  products  and
technology,  there can be no  assurance  that we will be able to profit from the
development  or  manufacture  of our  products  as  planned,  or that we will be
successful in consummating sales of our products to our potential customers. Our
ability to  successfully  commercialize  our products will depend in part on the
acceptance  of our  products by our  potential  customers,  primarily  the major
utility  companies.  The failure of utility  companies  to purchase our products
would have a material adverse effect on our business,  results of operations and
financial  condition.  Any  unfavorable  publicity  concerning  us or any of our
products  could have an adverse  effect on our ability to achieve  acceptance of
our products by utility companies and to commercialize our products, which could
have a  material  adverse  effect on our  business,  results of  operations  and
financial condition.

WE MAY NOT BE ABLE TO MANAGE OUR GROWTH EFFECTIVELY.

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. Failure to manage our
growth effectively could have a material adverse effect on our business, results
of operations and financial  condition.  Significant  additional  growth will be
necessary for the Company to achieve its plan of operation.

OUR FAILURE TO RAISE  NECESSARY  CAPITAL  COULD  RESTRICT OUR GROWTH,  LIMIT OUR
ABILITY TO DEVELOP AND MARKET OUR PRODUCT AND HINDER OUR ABILITY TO COMPETE.

In order to fully exploit our business  plan,  we  anticipate  the need to raise
significant  additional  funds.  Failure to obtain adequate  capital would:  (i)
restrict our growth;  (ii) limit our ability to market our product;  (iii) limit
the  development  of our  product;  (iv) hinder our ability to compete;  and (v)
hinder  our  ability  to  continue  our  business   operations.   Any  of  these
consequences  would have a material  adverse effect on our business,  results of
operations and financial condition.

TO SATISFY OUR CAPITAL REQUIREMENTS, WE MAY SEEK TO RAISE FUNDS IN THE PUBLIC OR
PRIVATE CAPITAL MARKETS.

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,
or if any  products  developed  are not  well-received.  We may seek  additional
funding through corporate  collaborations  and other financing  vehicles or from
loans  or  investments  from  new  or  existing  stockholders.  There  can be no
assurance  that any such funding will be available to us, or if available,  that
it will be available on acceptable  terms.  If adequate funds are not available,
we will 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,
thereby  eliminating  stockholder  equity,  or we could be forced to  relinquish
rights to some or all of our products under  development in return for an amount
substantially  less  than  we  expended  to  develop  such  products.  If we are
successful  in obtaining  additional  financing,  the terms of the financing may
have the effect of diluting the holdings or  adversely  affecting  the rights of
the holders of Common Stock.

WE MAY NOT BE ABLE TO DIVERSIFY OUR OPERATIONS INTO OTHER INDUSTRIES.

Because of the limited  financial  resources that we have, we may not be able to
diversify our activities into other areas outside the  development,  production,
and  commercialization  of cable and support systems for use in electrical power
transmission and distribution  systems.  Our inability to diversify our products
into other areas will subject us to economic  fluctuations  within this industry
and therefore increase the risks associated with our operations.


                                       6
<PAGE>


WE MAY NOT BE ABLE TO PROTECT  OUR  PROPRIETARY  RIGHTS AND MAY  INFRINGE ON THE
PROPRIETARY RIGHTS OF OTHERS.

Establishment  of  patents  and other  proprietary  rights is  important  to our
success  and  our  competitive  position.   Accordingly,  we  intend  to  devote
substantial  resources to the  establishment and protection of patents and other
proprietary  rights.  There can be no assurance  that the actions taken by us to
establish and protect any patents or other  proprietary  rights will be adequate
to  prevent  imitation  of our  products  by others or to  prevent  others  from
prohibiting sales of any products we may develop in violation of the patents and
proprietary  rights of others.  Moreover,  no assurance can be given that others
will not assert rights in, or ownership of, patents and other proprietary rights
we may establish or acquire or that we will be able to successfully resolve such
conflicts.

There can be no assurance that any of our pending  patents for our  technologies
and products will be issued.  There can be no assurance that any patents related
to the technology licensed under the new License Agreement will be issued.

WE  DEPEND  ON KEY  PERSONNEL  AND WE MAY  NOT BE  ABLE TO  ATTRACT  AND  RETAIN
QUALIFIED EMPLOYEES.

Our  success  will be largely  dependent,  in  particular,  upon the  continuing
services of 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. There
can be no assurance  that we will be successful in attracting  and retaining key
personnel. The loss of key personnel, or the inability to attract and retain the
additional,   highly-talented   employees   required  for  the  development  and
commercialization  of our  products,  could  adversely  affect  our  results  of
operations and our business.

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

We will depend on  establishing  and  maintaining  relationships  with strategic
partners. Our ability to develop,  produce, and market our products is dependent
upon our ability to establish and maintain  relationships  with other  companies
and  individuals.  We may not be able to enter  into  relationships  with  these
companies  on  commercially  reasonable  terms or at all.  Even if we enter into
these  relationships,  not all such relationships may result in benefits for our
company.

WE CANNOT CONTROL THE COST OF OUR RAW MATERIALS.

Our  principal  raw  materials  will be glass and carbon  fibers,  plus  various
polymer resins and high-grade  aluminum.  The prices for these raw materials are
subject to market forces  largely  beyond our control,  including  energy costs,
organic chemical  feedstocks,  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  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.

Currently,  three  stockholders  in the  aggregate  beneficially  own or control
approximately  39% of the outstanding  Common Stock. As a result,  these persons
will have the  ability to control  substantially  all matters  submitted  to our
stockholders  for approval and to control our management and affairs.  SEE, ITEM
11--"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."

WE WILL LIKELY EXPERIENCE CUSTOMER CONCENTRATION.

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.

OUR BUSINESS MAY BE SUBJECT TO INTERNATIONAL RISKS.

We are  pursuing  international  business  opportunities,  including  in  China,
Mexico,  Brazil and Africa.  Risks inherent in international  operations include
unexpected changes in regulatory requirements, export restrictions,  tariffs and
other trade barriers;  challenges in staffing and managing  foreign  operations;
differences in technology  standards,  employment  laws and business  practices;
longer payment cycles and problems in collecting accounts receivable;  political
instability; changes in currency exchange rates; currency exchange controls; and
potentially adverse tax consequences.


                                       7
<PAGE>


WE MUST COMPLY WITH ENVIRONMENTAL REGULATIONS.

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   Underwriters
Laboratories,  the  Telecommunications  Industry  Association,  the  Electronics
Industries Association 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,  any delay or
failure to pass such  legislation and regulatory  rulings could adversely affect
our opportunities and anticipated prospects may not arise. 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 WILL EXPERIENCE COMPETITION FROM OTHER COMPANIES IN THE INDUSTRY.

Our  competitors  include  makers of  traditional  bare  overhead wire and other
companies with  developmental-stage  products that have the potential to compete
with ACCC cable. While we are not aware of any existing competing  manufacturers
that have been able to  significantly  increase the  performance  of the current
electrical power  transmission and  distribution  cables,  there is no certainty
that unique  technological  advances won't be achieved by our competition,  with
better  capital  resources,  in the  future.  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  which 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,  ITEM
1--"DESCRIPTION OF BUSINESS--COMPETITION."

THERE IS CURRENTLY A LIMITED TRADING MARKET FOR OUR COMMON STOCK.

Our  Common  Stock is  traded in the  over-the-counter  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  AFFECT 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.


                                       8
<PAGE>

Stockholders  should  be  aware  that,  according  to  Securities  and  Exchange
Commission  Release No.  34-29093,  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.  Our
management is aware of the abuses that have occurred  historically  in the penny
stock  market.  Although  we do not  expect to be in a position  to dictate  the
behavior  of the market or of  broker-dealers  who  participate  in the  market,
management  will strive within the confines of practical  limitations to prevent
the described patterns from being established with respect to our securities.

OUR STOCK PRICE IS VOLATILE.

The market price of the 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 Common
Stock. The closing bid prices for the Common Stock has fluctuated from a high of
$ 2.67 to a low of $ 0.09 since September 30, 2002.

WE DO NOT ANTICIPATE PAYING DIVIDENDS IN THE FORESEEABLE FUTURE.

We have not paid dividends on the Common Stock and do not anticipate paying such
dividends in the foreseeable future.

WE ARE RESPONSIBLE FOR THE INDEMNIFICATION OF OUR OFFICERS AND DIRECTORS.

Our  By-laws  provide  for  the  indemnification  of  our  directors,  officers,
employees, and agents, under certain circumstances,  against attorney's fees and
other  expenses  incurred by them in any litigation to which they become a party
arising from their association with or activities on behalf of our company. This
indemnification policy could result in substantial expenditures, which we may be
unable to recoup.

TERRORIST  ATTACKS  AND OTHER  ATTACKS OR ACTS OF WAR MAY  ADVERSELY  AFFECT THE
MARKETS IN WHICH WE OPERATE, OUR OPERATIONS AND OUR PROFITABILITY.

The attacks of September 11, 2001 and subsequent events,  including the military
action in Iraq, has caused and may continue to cause  instability in our markets
and have led and may continue to lead to,  further armed  hostilities or further
acts of  terrorism  worldwide,  which  could  cause  further  disruption  in our
markets. Acts of terrorism may impact our operations,  or those of our customers
or  suppliers  and may  further  limit  or  delay  purchasing  decisions  of our
customers.  Depending on their magnitude,  acts of terrorism or war could have a
material  adverse  effect on our  business,  financial  results,  cash flows and
financial position.

ITEM 2 - DESCRIPTION OF PROPERTY

We do not own any real estate.  During  fiscal year 2003, we rented office space
in Irvine,  California  on a month to month  basis at a rate of $4,600 per month
and we rented 8,000 square feet of manufacturing space on a month to month basis
for $8,000 per month. On January 1, 2004, we leased a combination  manufacturing
and office facility in Irvine, California with approximately 105,120 square feet
for seven years with the first cash payment beginning March 1, 2004 for $ 73,584
per  month,  since  January  and  February  of 2004  rent was paid by a grant of
140,160  restricted  shares to the  landlord,  with a provision  for no security
deposit. We have negotiated a sublease for 10,560 square feet of office space at
$1.25 per square foot  beginning  March 1, 2004 with an option for an additional
5,600 square feet at $1.25 per square foot, all for a term of 1.5 years.

We  own  3,000  shares  of  Integrated  Performance  Systems,  Inc.  ("IPS"),  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.

ITEM 3 - LEGAL PROCEEDINGS

The following  discussion  discusses  all known or  anticipated  material  legal
proceedings  commenced  by or  against  CTC  or  its  wholly  owned  subsidiary,
Transmission Technology Corporation ("TTC"):

A. GARY COPE and ROBERT  NIKOLEY v.  COMPOSITE  TECHNOLOGY  CORPORATION  ET AL.,
Orange  County  Superior  Court Case No.  03CC05636;  filed  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. Plaintiffs seek actual damages, punitive damages,
statutory  costs,  attorneys'  fees,  and  injunctive  relief against us and our
officers. The principal parties are Cope, Nikoley, CTC, Wilcoxon, and Arrington.
We deny plaintiffs' material allegations. The case is presently in the discovery
stage and trial is scheduled to begin in May of 2004,  although a continuance is
likely.


                                       9
<PAGE>

B. COMPOSITE TECHNOLOGY CORPORATION v. ACQUVEST, INC., PAUL KOCH, VICTORIA KOCH,
PATRICIA  MANOLIS,  AND MICHAEL TARBOX,  United States District Court,  Southern
Division, Case No. SACV03-1664-DOC;  filed October 16, 2003. We allege 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 us, Acquvest,  Inc., and Manolis.  The
Defendants  deny our  material  allegations  and  intend to assert  cross-claims
against us. We are seeking actual damages,  punitive  damages,  statutory costs,
attorneys' fees, and injunctive  relief against the defendants.  We believe that
the  defendants  will  seek the same  relief  against  us and our  officers.  On
November 21, 2003,  defendants  Acquvest,  Paul and Victoria  Koch,  and Manolis
("Removing  Defendants")  removed this case from Orange County  Superior  Court.
Plaintiffs  filed a motion to remand.  On January 22, 2004 the case was remanded
to Orange County Superior Court. No trial date has been set.

C.  ASCENDIANT  CAPITAL  GROUP,  LLC, MARK  BERGENDAHL,  and BRADLEY  WILHITE v.
COMPOSITE TECHNOLOGY  CORPORATION and BENTON H WILCOXON,  Orange County Superior
Court Case No.  03CC13314;  filed 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  ("Agreement")  allegedly  executed
between us and Ascendiant.  Plaintiffs seek actual  damages,  punitive  damages,
statutory  costs,  attorneys'  fees,  and  injunctive  relief against us and our
officers.  We deny the material allegations and on November 10, 2003, we 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 plaintiffs and Wilcoxon.
We are seeking actual damages,  punitive  damages,  statutory costs,  attorneys'
fees and injunctive  relief against the  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 15th,  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  before Judge Thomas  Thrasher of Orange County  Superior  Court.
Neither a trial date nor an arbitration date has been set.

D. COMPOSITE  TECHNOLOGY  CORPORATION and BENTON H WILCOXON v. Michael DeAngelo,
Orange County  Superior  Court Case No.  03CC13319;  filed  November 4, 2003. We
allege  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 we allege  DeAngelo  failed to perform.  We are
seeking actual damages,  punitive damages,  statutory costs, attorneys' fees and
injunctive relief against Mr. DeAngelo. DeAngelo denies our material allegations
and  previously  stated his  intention  to assert  cross-claims  against  us. On
December 23, 2003, CTC obtained a default in this case due to DeAngelo's failure
to respond to the  complaint.  A default  judgment  is expected to be entered in
early 2004 and, as such, no trial date is expected to be set.

There was a  settlement  on April 8, 2003  concerning  the  previously  reported
matter of  JARBLUM  V.  TRANSMISSION  TECHNOLOGY  CORPORATION  et al.,  Case No.
SC-072087,  that 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
were Plaintiff William Jarblum and Defendants TTC, us, and C. William Arrington.
Plaintiff  sought $250,000 in unpaid legal fees. The settlement  agreed to by us
on  April 8,  2003 was for a total of  $210,000  in a  series  of  payments  and
warrants  to  purchase  49,999  shares of our  common  stock  (series  K) with a
cashless  exercise  provision  and an exercise  price of $0.50 per share with an
expiration  date of September 30, 2005.  The terms of the  settlement are not in
default as of January  12,  2004 and the  balance  due as of January 12, 2004 is
$81,865 due as follows in six  payments  with due dates:  $13,866 due  2/1/2004;
$13,777 due 3/1/2004;  $13,688 due 4/1/2004;  $13,599 due 5/1/2004;  $13,510 due
6/1/2004; $13,425 due 7/1/2004.

Other  than the  matters  discussed  above,  we are not a party to any  material
pending legal proceedings.

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

There were no meetings of  stockholders  nor matters  submitted  to the security
holders for a vote during the fourth quarter of the fiscal year ended  September
30, 2003.

                                     PART II

ITEM 5 - MARKET FOR 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,  as  reported  by the OTC
Bulletin Board.


                                       10
<PAGE>


                       QUARTERLY COMMON STOCK PRICE RANGES

           ---------------------------------------------------------------------
           QUARTER ENDED                                    2001/2002
           ------------------------------------------------------ --------------
                                                     HIGH                LOW
           ------------------------------------------------------ --------------
           December 31, 2001                        $9.00               $2.00
           ------------------------------------------------------ --------------
           March 31, 2002                           $6.50               $0.60
           ------------------------------------------------------ --------------
           June 30, 2002                            $0.70               $0.14
           ------------------------------------------------------ --------------
           September 30, 2002                       $0.54               $0.11
           ------------------------------------------------------ --------------

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


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

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

These quotations reflect inter-dealer prices, without retail mark-up,  mark-down
or commission and may not represent actual transactions. As of January 29, 2004,
there were approximately 2,568 stockholders of record of our Common Stock and no
stockholders of record of our Preferred Stock.

We have never paid any dividends on the Common Stock or the Preferred  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 or the Preferred Stock in the foreseeable future.

On May 15, 2001, TTC  established the 2001 Incentive  Compensation  Stock Option
Plan ("TTC PLAN").  After the Plan of  Reorganization  between TTC and El Dorado
(the  predecessor of CTC) in November 2001, we suspended  using the TTC Plan and
planned to convert the granted  options to a new CTC plan.  We  established  our
2002  Non-Qualified  Stock  Compensation  Plan (the "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  appoved  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 is 14,000,000 shares.


<TABLE>
<CAPTION>
------------------------------ ------------------------- --------------------------- ------------------------
                                                                                     Number of securities
                               Number of securities to   Weighted-average exercise   remaining available
                               be issued upon exercise   price of outstanding        for future issuance
                               of outstanding options,   options, warrants and       under equity
Plan Category                  warrants and rights       rights.                     compensation plans.
------------------------------ ------------------------- --------------------------- ------------------------
<S>                            <C>                       <C>                         <C>
Equity Compensation Plans      10,007,740                $0.41                       3,992,260
approved by security holders.
------------------------------ ------------------------- --------------------------- ------------------------
Equity Compensation Plans      0                         0                           0
not approved by security
holders.
------------------------------ ------------------------- --------------------------- ------------------------

------------------------------ ------------------------- --------------------------- ------------------------
TOTAL                          10,007,740                $0.41                       3,992,260
------------------------------ ------------------------- --------------------------- ------------------------
</TABLE>


SALES OF UNREGISTERED SECURITIES

During April and September 2003, pursuant to a Private Placement  Memoranda,  we
sold an  aggregate  150,000  Units for gross  proceeds  of  $375,000.  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.  We  received  subscription
agreements  for the  issuance  of an  additional  450,000  Units.  However,  the
proceeds  of  $1,125,000  were  never  received.  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 shares  related to the  450,000  Units were  issued by the
transfer  agent and were being held by the attorney  handling the matter for us.
The shares were cancelled in October, 2003.

During  August  2003,  pursuant  to a Private  Placement  Memoranda,  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.


                                       11
<PAGE>

During September 2003,  pursuant to a Private  Placement  Memoranda,  we 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 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.

During September 2003,  pursuant to a Private  Placement  Memoranda,  we sold an
aggregate 332,500 Units for gross proceeds of $1,330,000. 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 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.

During September 2003,  pursuant to a Private  Placement  Memoranda,  we 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.

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

RESULTS OF OPERATIONS

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

PLAN OF OPERATION

We started to manufacture  our ACCC cable core and wrapped it with aluminum into
a product for testing  during the last quarter of Fiscal Year 2003.  In order to
reduce market entry costs, we have  established  subcontractor  relationships to
manufacture our ACCC cable product line.  These methods allow us to produce ACCC
cables with much lower initial  capital  expenditures.  This allows a more rapid
deployment of the Company's products.  Presently we can produce approximately 10
miles of ACCC  (Drake  size)  cable per day and we expect  to  increase  this to
approximately  100 miles per day during Fiscal Year 2004 (coinciding with market
requirements/orders).

The  composite  cores  produced  by  the  Company  have  successfully  undergone
substantial testing by independent laboratories. Testing of completed ACCC cable
have also been  successful.  All tests are being performed to accepted  industry
standards and, in some cases, to specific utility company protocols. To date all
results meet or exceed industry requirements.  Additional  demonstration testing
is  scheduled  over the next  several  months  by a part of the  Electric  Power
Research Institute (EPRI),  the U.S.  Department of Energy at Oak Ridge National
Laboratories (ORNL), the Western Area Power Administration  (WAPA), the New York
State Energy  Research & Development  Authority  (NYSERDA)  and CIGRE  (Europe's
equivalent to IEEE).

We have begun  commercial  marketing and secured our first  commercial  order in
December of 2003 for a 21 mile long new ACCC  transmission line of a new smaller
"Hawk"  sized  cable  under  a  $2.675  million  dollar   contract  for  design,
production,  and installation in Kansas during Fiscal Year 2004.  Production for
the new "Hawk" size is expected to start during the second  quarter of 2004 with
installation  anticipated  during  the  third  quarter  of 2004.  Several  other
domestic contract negotiations are underway.

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 the
Company will supply.

We are also beginning design and fabrication of specialized  machines to produce
composite poles, lattice towers and wind turbine support towers.  Prototypes are
projected  to be  available  in late Fiscal Year 2004.  We plan to use  separate
subsidiaries, CTC Towers & Poles Corporation and CTC Wind Systems Corporation to
carry out  commercialization of these machines and opportunities in wind turbine
support towers.

Our products are  targeted at an industry  which is mature in North  America and
developing in various other countries around the world,  such as China and South
America.   We  have   produced   several   miles  of  ACCC  cable  for  specific
demonstrations during Fiscal 2004 in the North American,  Chinese,  European and
South  American  markets.  We  expect  these  to lead to  venture  relationships
throughout the world,  wherein we would secure  strategic  relationships  with a
strong  resident  companies  that are already in the business of  producing  and
supplying to our product markets.

We  completed a  $3,000,000  financing in December of 2003 which we believe will
cover  anticipated  operating  expenses  during Fiscal Year 2004 while we secure
payments  from the present order and other  potential  orders during Fiscal Year
2004. We also  anticipate  calling all or part of the 8.2 million  warrants that
could  yield $3.5  million.  Such  warrants  are  subject to a call by us if the
underlying shares were registered and the stock price remained above 150% of the
exercise price,  for which the highest exercise price is $0.80 per share. We may
also be able to secure direct  financing  through  advance  orders,  deposits to
secure  strategic  partnerships  or  joint  venture  relationships,   or  direct
investment in our new  subsidiaries to provide most financial  requirements  for
the new non-cable  products.  At current and  projected  expenditure  rates,  we
believe  that we  have  sufficient  cash  reserves  to  sustain  operations  for
approximately  one year. If there is  significantly  greater demand for our ACCC
cable  products  then we may seek  additional  financing  to fund  expansion  or
finance raw materials or order inventory.


                                       12
<PAGE>


We plan to continue using our present model of subcontracting for all or most of
the production of our products and plan to continue to utilize our key strengths
for the research and development of new products,  new processes and specialized
machinery to produce the  products,  and the  marketing  and sales of technology
based new products.

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. We plan in Fiscal Year 2004 to complete a unique
prototype  high  speed  production  equipment  line that will allow for the cost
effective  production of several  types of composite  shapes for use in distinct
complex composite products.

ACQUISITION OF PLANT AND EQUIPMENT

We do not own any real estate. We have designed, built and successfully operated
two  pultrusion  lines for ACCC  cable.  These  lines have been moved into a new
leased  facility,  along with the  materials  and  machinery  necessary to begin
construction  of an additional  high speed  production  lines for development of
other products for the electrical  energy  marketplace  during Fiscal Year 2004.
Additional  fabrication  equipment and  materials  will be necessary to complete
these tasks.

PERSONNEL

We currently have nineteen full time employees,  including  three officers,  six
corporate managers,  two corporate  administrative  assistants,  four production
managers,  four  production  assistants.  We also  utilize the services of three
consultants.

Numerous  technical  skills will be  required  to bring our  products to market.
Recruiting efforts have begun and will continue in the near future.  Independent
consultants,  accountants  and attorneys have been retained in the past and will
continue to be used extensively in the future.

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 required by Rule 13a-15 under the Exchange  Act,  within the 90 days prior to
the filing date of this report,  the Company  carried out an  evaluation  of the
effectiveness of the design and operation of the Company's  disclosure  controls
and  procedures.  This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's President
and Chief  Executive  Officer  along with the Company's  former Chief  Financial
Officer. Based upon that evaluation, the Company's President and Chief Executive
Officer along with the Company's former Chief Financial  Officer  concluded that
the Company's disclosure controls and procedures are effective.  There have been
no significant  changes in the Company's  internal controls or in other factors,
which could  significantly  affect internal controls  subsequent to the date the
Company carried out its evaluation.

Disclosure  controls and procedures are controls and other  procedures  that are
designed to ensure that information  required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported,  within the time  periods  specified  in the  Securities  and Exchange
Commission's  rules and  forms.  Disclosure  controls  and  procedures  include,
without limitation,  controls and procedures designed to ensure that information
required to be  disclosed  in Company  reports  filed under the  Exchange Act is
accumulated  and  communicated  to  management,  including the  Company's  Chief
Executive  Officer and Chief Financial  Officer as appropriate,  to allow timely
decisions regarding required disclosure.


                                       13
<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          54       Chief Executive Officer   2001              2002
                                    Chairman, Acting Chief
                                    Financial Officer and
                                    Secretary

C. William Arrington       62       President and Director    2001              2002

Brent N. Robbins           42       CFO (former)              2003              --
</TABLE>

The  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,  of which none currently exists. Other than as
set  forth  in  the  Reorganization  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  is no  family  relationship  among  any of our  directors  and  executive
officers.

BIOGRAPHICAL INFORMATION

BENTON H WILCOXON,  54, has been our  Chairman,  Chief  Executive  Officer,  and
Secretary  since  November  3,  2001.  Currently  he is also  the  acting  Chief
Financial  Officer of CTC. He also is Chairman  and Chief  Executive  Officer of
TTC. 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, 62, has been our President since November 3, 2001. He also
is President and Chief  Operating  Officer of TTC. Mr.  Arrington has headed his
own  consulting  firm for more  than the past five  years.  He has over 30 years
experience in the electrical energy industry, both generation and transmission.

BRENT N. ROBBINS,  42, was our Chief Financial Officer from June 1, 2003 through
January 28, 2004. He has 18 years experience in public  accounting for a "Big 4"
accounting  firm, in private  practice as a CPA, as well as in industry as a CFO
and as Tax Director for a national  conglomerate.  He holds a Masters  Degree in
Accounting/Taxation.

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.

Mr. Wilcoxon timely filed Form 4s to report changes in his beneficial  ownership
during fiscal 2003.  Mr.  Arrington had no changes in his  beneficial  ownership
during fiscal 2003. Form 5s were not required to be file 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,  a copy of such code of
ethics by sending such request to us at our principal office.

ITEM 10 - EXECUTIVE COMPENSATION

None of our executive  officers received  compensation in excess of $120,000 for
the fiscal years ended  September  30,  2003,  2002 or 2001,  respectively.  The
following  table  summarizes all  compensation  received by our Chief  Executive
Officer,  President and Chief  Financial  Officer in fiscal years 2003, 2002 and
2001.


                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                               Long-Term Compensation
                                                               ----------------------
                             Annual Compensation               Awards                                 Payouts
                             -------------------               ------                                 -------
                                                               Other           Restricted     Securities
                                                               Annual          Stock          Underlying     LTIP     All Other
Name and                     Fiscal      Salary       Bonus    Compensation    Award(s)       Options/SARs   Payouts  Compensation
Principal Position            Year        ($)          ($)          ($)           ($)             (#)          ($)       ($)
------------------            ----      --------      -----    ------------    ----------     ------------   -------  ------------
<S>                           <C>       <C>             <C>          <C>           <C>          <C>              <C>     <C>
Benton H Wilcoxon             2003      $120,000        --           --            --           635,216          --      --
Chief Executive               2002      $ 60,000        --           --            --           635,216          --      --
Officer                       2001      $ 30,000        --           --            --           635,216          --      --

C. William Arrington          2003      $120,000        --           --            --           635,216          --      --
President                     2002        60,000        --           --            --           635,216          --      --
                              2001             0        --           --            --           635,216          --      --

Brent N. Robbins              2003      $ 30,000                     --            --           750,000          --      --
Chief Financial
Officer (former)
</TABLE>

The following  table shows all grants during the fiscal year ended September 30,
2003 of stock  options  under our  stock  option  plans to the  named  executive
officers.

           OPTIONS/SAR GRANTS IN FISCAL YEAR ENDED SEPTEMBER 30, 2003
                               (Individual Grants)

<TABLE>
<CAPTION>
                                    Percent of
                  Number of         Total Options
                  Securities        Granted to
                  Underlying        Employees       Exercise or
                  Option            during Fiscal   Base Price         Expiration
         Name     Granted (#)       Year (%)         ($/Sh)            Date
         ----     -----------       --------         ------            ----
<S>               <C>               <C>              <C>               <C>
Brent N. Robbins  750,000           100%             $0.53             12/31/2011
</TABLE>


The  following  table  provides  information  as to  the  number  and  value  of
unexercised  options to purchase  CTC Common  Stock held by the named  executive
officers at September 30, 2003. None of the named executive  officers  exercised
any options during the fiscal year ended September 30, 2003.

<TABLE>
<CAPTION>
                                Number of Securities Underlying             Value of Unexercised In-the-Money
                                Unexercised Options at Fiscal Year-         Options at Fiscal Year-End ($)
         Name                   End (#) Exercisable/Unexercisable           Exercisable/Unexercisable
         ----                   ---------------------------------           -------------------------
<S>                             <C>                                         <C>
Benton H Wilcoxon               635,216 / 0                                 $1,232,319.04 / $0
C. William Arrington            635,216 / 0                                 $1,232,319.04 / $0
Brent N. Robbins                50,000 / 700,000                            $97,000 / $1,358,000
</TABLE>


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

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.

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.


                                       15
<PAGE>


ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following  table sets forth, as of January 12, 2004, the number of shares of
our  Common  Stock  owned of record  and  beneficially  by  executive  officers,
directors and persons who hold 5% or more of our outstanding  Common Stock. Also
included are the shares held by all executive officers and directors as a group.


<TABLE>
<CAPTION>
---------------------------- --------------------------------------- --------------------------------- ----------------------
Title of Class               Name and address of beneficial owner    Amount and nature of  beneficial  Percent of class
                                                                       ownership
---------------------------- --------------------------------------- --------------------------------- ----------------------
<S>                          <C>                                     <C>                               <C>
Common                       Benton H Wilcoxon                       19,477,312 (1)                    19.3%
                             2026 McGaw Avenue
                             Irvine CA 92614
---------------------------- --------------------------------------- --------------------------------- ----------------------
Common                       C. William Arrington                    20,250,512                          20%
                             2026 McGaw Avenue
                             Irvine CA 92614
---------------------------- --------------------------------------- --------------------------------- ----------------------
Common                       G. William Harrison                      5,764,461 (2)                     5.7%
                             26218 James Drive
                             Grosse Il MI 48138
---------------------------- --------------------------------------- --------------------------------- ----------------------
                             All officers and directors as a group   39,727,824                        39.3%
---------------------------- --------------------------------------- --------------------------------- ----------------------
</TABLE>


(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.

(2) Represents  beneficial ownership of shares indirectly owned or controlled by
G.  William  Harrison,  an  outsider  who is not a  director  or  officer of the
Company:  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).

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 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.


                                       16
<PAGE>

ITEM 13- EXHIBITS AND REPORTS ON FORM 8-K


<PAGE>


EXHIBITS

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

2.1***              Articles  of Merger of ElDorado  Financial  Group,  Inc.,  a
                    Florida corporation,  into ElDorado Financial Group, Inc., a
                    Nevada corporation

2.2*                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***              Articles of Incorporation of the Company

3.2***              By-Laws of the Company

10.1***             2001 TTC Incentive Compensation Stock Option Plan

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

10.3****            Composite  Technology  Corporation 2002 Non-Qualified  Stock
                    Compensation Plan

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

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

10.6                Composite  Technology  Corporation  Option Agreement - Brent
                    Robbins dated August 13, 2003

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

14.                 Code of Business Ethics

21                  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

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

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

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


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

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

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

(****) Incorporated herein by reference to Definitive

Schedule 14C filed with the U.S.  Securities and Exchange  Commission on January
27, 2003.



                                       17
<PAGE>

ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

The aggregate  fees billed for each of Fiscal Year 2002 and Fiscal Year 2003 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 2002:  $10,968.75;
Fiscal Year 2003: $16,098.48.

AUDIT RELATED FEES

The aggregate  fees billed for each of Fiscal Year 2002 and Fiscal Year 2003 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 2002: $0.00; Fiscal Year 2003: $0.00.

TAX FEES

The aggregate  fees billed for each of Fiscal Year 2002 and Fiscal Year 2003 for
professional  services rendered by our principal accountants for tax compliance,
tax advice and tax planning are as follows:  Fiscal Year 2002:  $992.50;  Fiscal
Year 2003: $0.0.

ALL OTHER ACCOUNTANT FEES

The aggregate  fees billed for each of Fiscal Year 2002 and Fiscal Year 2003 for
other  professional  services  rendered  by  our  principal  accountants  are as
follows: Fiscal Year 2002: $0; Fiscal Year 2003: $0.



                                       18
<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                                                        CONTENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


                                                                  Page

INDEPENDENT AUDITOR'S REPORTS                                   F-2 - F-3

CONSOLIDATED FINANCIAL STATEMENTS

       Consolidated Balance Sheet                                  F-4

       Consolidated Statements of Operations                       F-5

       Consolidated Statements of Shareholders' Equity          F-6 - F8

       Consolidated Statements of Cash Flows                       F-9

       Notes to Consolidated Financial Statements              F-10 - F-43



                                      F-1

<PAGE>


INDEPENDENT AUDITOR'S REPORT

Board of Directors and Shareholders
Composite Technology Corporation and subsidiary
(development stage companies)

We have  audited  the  accompanying  consolidated  balance  sheet  of  Composite
Technology  Corporation  and  subsidiary  (development  stage  companies)  as of
September  30, 2003,  and the related  consolidated  statements  of  operations,
shareholders'  equity,  and cash flows for the year then ended.  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 audit.  We have not audited the balance sheets and statements of operations,
shareholders'  equity,  and cash  flows for the  periods  from  March  28,  2001
(inception)  to December 31,  2002,  which  constitute  an  accumulated  deficit
aggregating to $5,025,625. These periods have been audited by other auditors.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  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  audit  provides  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 subsidiary  (development  stage  companies) as of September 30,
2003, and the consolidated  results of their operations and their cash flows for
the year then ended in conformity with accounting  principles generally accepted
in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
financial  statements,  during the year ended  September  30, 2003,  the Company
incurred a net loss of $6,751,252 and had negative cash flows from operations of
$2,022,935.  In addition,  the Company had an accumulated deficit of $11,796,877
at September 30, 2003.  These factors,  among others,  as discussed in Note 2 to
the financial statements, raise 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  2.  The  financial  statements  do  not  include  any
adjustments that might result from the outcome of this uncertainty.

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
January 16, 2004



                                      F-2
<PAGE>

[LOGO]
S. W. Hatfield, CPA
certified public accountants _____        Use our past to assist your future. sm

               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors and Shareholders
Composite Technology Corporation

We have audited the accompanying consolidated statement of operations, statement
of changes in  shareholders'  equity and statement of cash flows of of Composite
Technology  Corporation  (a Nevada  corporation)  and  Subsidiary (a development
stage  enterprise)  for the year ended  September  30,  2002 and the period from
March 28, 2001 (date of formation)  through  September  30, 2002,  respectively.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility  is to express  an  opinion  on these  restated
consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the consolidated  results of operations and
cash flows of Composite Technology Corporation and Subsidiary for the year ended
September  30, 2002 and for the period  from March 28, 2001 (date of  formation)
through September 30, 2002, respectively,  in conformity with generally accepted
accounting principles generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 2 to the
consolidated  financial  statements,  the  Company has no viable  operations  or
significant assets and was dependent upon external sources to provide sufficient
working  capital to  maintain  the  integrity  of the  corporate  entity.  These
circumstances  create  substantial doubt about the Company's ability to continue
as a going concern and are discussed in Note 2. The financial  statements do not
contain  any   adjustments   that  might   result  from  the  outcome  of  these
uncertainties.

                                        S. W. HATFIELD, CPA

Dallas, Texas
December 5, 2003


214.342.9635
800.244.0639
f: 214-342-9601
swhcpa@aol.com

P. O. Box 820395
Dallas, Texas 75382-0395

9002 Green Oaks Circle
2nd Floor
Dallas, Texas 75243-7212


                                      F-3

<PAGE>

                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                                      CONSOLIDATED BALANCE SHEET
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                        ASSETS

CURRENT ASSETS
<S>                                                                    <C>
     Cash and cash equivalents                                         $  1,130,498
     Prepaid expenses and other current assets                               79,036
                                                                       ------------
         Total current assets                                             1,209,534

PROPERTY AND EQUIPMENT, net                                                 200,733
OTHER ASSETS                                                                  9,000
                                                                       ------------
                TOTAL ASSETS                                           $  1,419,267
                                                                       ============


                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable - trade                                          $    466,443
     Accrued legal settlement                                               145,600
     Accrued payroll and related expenses                                    61,252
     Accrued dividends payable                                               40,393
     Accrued officer compensation                                           255,619
                                                                       ------------

         Total current liabilities                                          969,307
                                                                       ------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
     Series B Preferred stock, $0.001 par value
         5,000,000 shares authorized
         1,000 shares issued and outstanding                                      1
     Common stock, $0.001 par value
         200,000,000 shares authorized
         102,012,815 shares issued and outstanding                          102,013
     Common stock committed                                                 194,375
     Common stock subscription receivable                                   (50,000)
     Deferred compensation - stock options                                 (661,746)
     Additional paid-in capital                                          12,662,194
     Deficit accumulated during the development stage                   (11,796,877)
                                                                       ------------
            Total shareholders' equity                                      449,960
                                                                       ------------
                TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY             $  1,419,267
                                                                       ============
</TABLE>

                                      F-4

<PAGE>

                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                             FOR THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002 AND
            FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                              For the
                                                                                            Period from
                                                            For the Year Ended             March 28, 2001
                                                               September 30,              (Inception) to
                                                     -------------------------------       September 30,
                                                         2003               2002               2003
                                                     ------------       ------------       ------------
<S>                                                  <C>                <C>                <C>
OPERATING EXPENSES
     Officer compensation                            $    240,000       $    264,900       $    564,900
     General and administrative                         1,213,190            352,024          1,636,350
     Legal, professional, and consulting                1,496,655          2,923,488          4,537,843
     Research and development                           3,210,289                 --          3,210,289
     Reorganization                                            --                 --             30,000
     Depreciation                                          18,569              3,372             23,175
     Compensation expense related to
         issuances of common stock at
         less than fair value                                  --            527,500            603,500
     Compensation expense related to
         fair value of stock options - legal              269,225            166,425            435,650
     Compensation expense related to
         fair value of stock options - research
         and development                                  303,324            263,555            566,879
                                                     ------------       ------------       ------------

            Total operating expenses                    6,751,252          4,501,264         11,608,586
                                                     ------------       ------------       ------------

LOSS FROM OPERATIONS                                   (6,751,252)        (4,501,264)       (11,608,586)
                                                     ------------       ------------       ------------

OTHER EXPENSE
     Interest expense                                          --            (16,818)           (16,968)
     Carrying value impairment adjustment
         on investments in other companies                     --                 --           (137,230)
                                                     ------------       ------------       ------------
            Total other expense                                --            (16,818)          (154,198)

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

NET LOSS                                             $ (6,751,252)      $ (4,518,082)      $(11,762,784)

PREFERRED STOCK DIVIDENDS                                  20,000              5,871             34,093
                                                     ------------       ------------       ------------

NET LOSS AVAILABLE TO COMMON
     SHAREHOLDERS                                    $ (6,771,252)      $ (4,523,953)      $(11,796,877)
                                                     ============       ============       ============

BASIC AND DILUTED LOSS PER SHARE
     Loss per share                                  $      (0.08)      $      (0.07)
     Preferred stock dividend                                  --                 --
                                                     ------------       ------------

TOTAL BASIC AND DILUTED LOSS PER SHARE
     AVAILABLE TO COMMON SHAREHOLDERS                $      (0.08)      $      (0.07)
                                                     ============       ============

WEIGHTED-AVERAGE COMMON SHARES
     OUTSTANDING                                       87,132,657         68,537,780
                                                     ============       ============
</TABLE>

                                      F-5

<PAGE>

                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
            FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                   Preferred Stock                     Common Stock
                                           ------------------------------       ------------------------------
                                              Shares            Amount             Shares            Amount
                                           -----------       ------------       ------------      ------------
<S>                                        <C>               <C>                <C>               <C>
BALANCE, MARCH 28, 2001
    (INCEPTION)                                     --       $         --           9,166,51      $      9,167
RECAPITALIZATION EFFECT OF
    REVERSE ACQUISITION WITH
    TRANSMISSION TECHNOLOGY
    CORPORATION                                  1,165                  1         57,333,485            57,333
PREFERRED STOCK DIVIDENDS
NET LOSS
                                           -----------       ------------       ------------      ------------

BALANCE, SEPTEMBER 30, 2001                      1,165                  1         66,500,000            66,500
ISSUANCE OF SERIES B
    PREFERRED STOCK                                320                 --
ISSUANCE OF COMMON
    STOCK FOR
      Cash                                                                         2,065,790             2,066
      Consulting and legal fees                                                    4,319,868             4,320
      Investment in other
        company                                                                       42,500                42
      Conversion of notes
        payable and accrued
        interest                                                                     866,173               866
CANCELLATION OF COMMON
    STOCK UPON TERMINATION
    OF CONTRACT                                                                      (79,402)              (79)
FAIR VALUE OF STOCK OPTIONS FOR
    SERVICES RENDERED
DEFERRED COMPENSATION - FAIR
    VALUE OF STOCK OPTIONS FOR
    SERVICES RENDERED
EXCHANGE OF PREFERRED
    STOCK AND ACCRUED
    DIVIDENDS FOR INVESTMENT
    IN OTHER COMPANIES                            (165)      $         --
PREFERRED STOCK DIVIDENDS
NET LOSS
                                           -----------       ------------       ------------      ------------

BALANCE, SEPTEMBER 30, 2002                      1,320                  1         73,714,929      $     73,715
ISSUANCE OF COMMON
    STOCK FOR
      Cash                                                                        16,786,410            16,786
      Services rendered for research
        and development                                                            3,803,900             3,804
      Legal services rendered                                                      4,950,000             4,950
      Offering costs                                                                 750,000               750
      Legal settlement                                                             1,500,000             1,500
      Payment of debt                                                                300,000               300
ISSUANCE OF WARRANTS FOR
      Services rendered for research
        and development
      Offering costs
      Legal settlement
COMMON STOCK COMMITTED FOR
    Cash
    Exercise of options
    Exercise of warrants
OFFERING COSTS
DEFERRED COMPENSATION - FAIR
    VALUE OF STOCK OPTIONS FOR
    SERVICES RENDERED
SUBSCRIPTION RECEIVABLE
PREFERRED STOCK CONVERTED TO
    COMMON STOCK                                  (320)                --            207,576      $        208
PREFERRED STOCK DIVIDENDS
NET LOSS
                                           -----------       ------------       ------------      ------------

BALANCE, SEPTEMBER 30, 2003                      1,000       $          1        102,012,815      $    102,013
                                           ===========       ============        ===========      ============
</TABLE>

                                      F-6

<PAGE>

                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
            FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                              Common            Deferred
                                            Common             Stock          Compensation      Additional
                                             Stock         Subscription          Stock            Paid-In
                                           Committed         Receivable          Options          Capital
                                          -----------       -----------       -----------       -----------
<S>                                       <C>               <C>               <C>               <C>
BALANCE, MARCH 28, 2001
    (INCEPTION)                           $        --       $        --       $        --       $ 2,001,570
RECAPITALIZATION EFFECT OF
    REVERSE ACQUISITION WITH
    TRANSMISSION TECHNOLOGY
    CORPORATION                                                                                  (1,292,946)
PREFERRED STOCK DIVIDENDS
NET LOSS
                                          -----------       -----------       -----------       -----------

BALANCE, SEPTEMBER 30, 2001                        --                --                --           708,624
ISSUANCE OF SERIES B
    PREFERRED STOCK                                                                                  32,000
ISSUANCE OF COMMON
    STOCK FOR
      Cash                                                                                          956,444
      Consulting and legal fees                                                                   1,977,169
      Investment in other
        company                                                                                     191,408
      Conversion of notes
        payable and accrued
        interest                                                                                    152,730
CANCELLATION OF COMMON
    STOCK UPON TERMINATION
    OF CONTRACT                                                                                    (299,921)
FAIR VALUE OF STOCK OPTIONS FOR
    SERVICES RENDERED                                                          (1,664,275)      $ 1,664,275
DEFERRED COMPENSATION - FAIR
    VALUE OF STOCK OPTIONS FOR
    SERVICES RENDERED                                                             429,980
EXCHANGE OF PREFERRED
    STOCK AND ACCRUED
    DIVIDENDS FOR INVESTMENT
    IN OTHER COMPANIES                                                                             (169,098)
PREFERRED STOCK DIVIDENDS
NET LOSS
                                          -----------       -----------       -----------       -----------

BALANCE, SEPTEMBER 30, 2002               $        --       $        --       $(1,234,295)        5,213,631
ISSUANCE OF COMMON
    STOCK FOR
      Cash                                                                                        3,164,010
      Services rendered for research
        and development                                                                           2,336,325
      Legal services rendered                                                                     1,758,135
      Offering costs                                                                                213,000
      Legal settlement                                                                               92,250
      Payment of debt                                                                                42,801
ISSUANCE OF WARRANTS FOR
      Services rendered for research
        and development                                                                              61,250
      Offering costs                                                                                 20,600
      Legal settlement                                                                               11,750
COMMON STOCK COMMITTED FOR
    Cash                                  $   100,000
    Exercise of options                        15,000
    Exercise of warrants                       79,375
OFFERING COSTS                                                                                  $  (251,350)
DEFERRED COMPENSATION - FAIR
    VALUE OF STOCK OPTIONS FOR
    SERVICES RENDERED                                                             572,549
SUBSCRIPTION RECEIVABLE                                     $   (50,000)
PREFERRED STOCK CONVERTED TO
    COMMON STOCK                                                                                       (208)
PREFERRED STOCK DIVIDENDS
NET LOSS
                                          -----------       -----------       -----------       -----------

BALANCE, SEPTEMBER 30, 2003               $   194,375       $   (50,000)      $  (661,746)      $12,662,194
                                          ===========       ===========       ===========       ===========
</TABLE>

                                      F-7

<PAGE>

                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
            FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                            Deficit
                                          Accumulated
                                          during the
                                          Development
                                              Stage             Total
                                          ------------       ------------
<S>                                       <C>                <C>
BALANCE, MARCH 28, 2001
    (INCEPTION)                           $ (2,010,737)      $         --
RECAPITALIZATION EFFECT OF
    REVERSE ACQUISITION WITH
    TRANSMISSION TECHNOLOGY
    CORPORATION                              2,010,737            775,125
PREFERRED STOCK DIVIDENDS                       (8,222)            (8,222)
NET LOSS                                      (493,450)          (493,450)
                                          ------------       ------------

BALANCE, SEPTEMBER 30, 2001                   (501,672)           273,453
ISSUANCE OF SERIES B
    PREFERRED STOCK                                                32,000
ISSUANCE OF COMMON
    STOCK FOR
      Cash                                                        958,510
      Consulting and legal fees                                 1,981,489
      Investment in other
        company                                                   191,450
      Conversion of notes
        payable and accrued
        interest                                                  153,596
CANCELLATION OF COMMON
    STOCK UPON TERMINATION
    OF CONTRACT                                                  (300,000)
FAIR VALUE OF STOCK OPTIONS FOR
    SERVICES RENDERED                                        $         --
DEFERRED COMPENSATION - FAIR
    VALUE OF STOCK OPTIONS FOR
    SERVICES RENDERED                                        $    429,980
EXCHANGE OF PREFERRED
    STOCK AND ACCRUED
    DIVIDENDS FOR INVESTMENT
    IN OTHER COMPANIES                                           (169,098)
PREFERRED STOCK DIVIDENDS                 $     (5,871)            (5,871)
NET LOSS                                    (4,518,082)        (4,518,082)
                                          ------------       ------------

BALANCE, SEPTEMBER 30, 2002                 (5,025,625)          (972,573)
ISSUANCE OF COMMON
    STOCK FOR
      Cash                                                      3,180,796
      Services rendered for research
        and development                                         2,340,129
      Legal services rendered                                   1,763,085
      Offering costs                                              213,750
      Legal settlement                                             93,750
      Payment of debt                                              43,101
ISSUANCE OF WARRANTS FOR
      Services rendered for research
        and development                                            61,250
      Offering costs                                               20,600
      Legal settlement                                             11,750
COMMON STOCK COMMITTED FOR
    Cash                                                     $    100,000
    Exercise of options                                            15,000
    Exercise of warrants                                           79,375
OFFERING COSTS                                                   (251,350)
DEFERRED COMPENSATION - FAIR
    VALUE OF STOCK OPTIONS FOR
    SERVICES RENDERED                                             572,549
SUBSCRIPTION RECEIVABLE                                           (50,000)
PREFERRED STOCK CONVERTED TO
    COMMON STOCK                                                       --
PREFERRED STOCK DIVIDENDS                 $    (20,000)           (20,000)
NET LOSS                                    (6,751,252)        (6,751,252)
                                          ------------       ------------

BALANCE, SEPTEMBER 30, 2003               $(11,796,877)      $    449,960
                                          ============       ============
</TABLE>

                                      F-8

<PAGE>

                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                             FOR THE YEARS ENDED SEPTEMBER 30, 2003 AND 2002 AND
                                              FOR THE PERIOD FROM MARCH 28, 2001
                                               (INCEPTION) TO SEPTEMBER 30, 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                               For the
                                                                                             Period from
                                                             For the Year Ended             March 28, 2001
                                                                September 30,               (Inception) to
                                                      -------------------------------       September 30,
                                                          2003               2002               2003
                                                      ------------       ------------       ------------
<S>                                                   <C>                <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                          $ (6,751,252)      $ (4,518,082)      $(11,762,784)
    Adjustments to reconcile net loss
      to net cash used in operating activities
        Depreciation                                        18,569              3,372             23,175
        Amortization of prepaid expenses
             originally paid with common stock              17,535             62,597             86,148
        Issuance of common stock for
           consulting, legal, and other expenses         4,103,214          1,563,263          5,666,477
        Issuance of common stock for legal
           settlement                                       93,750                 --             93,750
        Issuance of warrants for services
           rendered for research and
           development                                      61,250                 --             61,250
        Issuance of warrants for legal
           settlement                                       11,750                 --             11,750
        Compensation expense related to
           issuances of common stock at
           less than fair value                                 --            527,500            603,500
        Compensation expense related to
           fair value of stock options                     572,549            429,980          1,002,529
        Carrying value impairment adjustment
           on investments in other companies                    --                 --            137,230
        (Increase) decrease in Prepaid expenses
             and other current assets                      157,000               (615)           156,385
        Increase (decrease) in
           Accounts payable - trade                   $   (497,093)      $    960,211       $    472,743
           Accrued legal settlement                        145,600                 --            145,600
           Accrued payroll and related
             expenses                                       61,252                 --             61,252
           Accrued interest payable                          3,250              9,851             13,101
           Accrued officer compensation                    (20,309)           246,000            225,691
                                                      ------------       ------------       ------------

Net cash used in operating activities                   (2,022,935)          (715,923)        (3,002,203)
                                                      ------------       ------------       ------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Cash advanced by (to) officers, net                         --             38,670             29,928
    Purchase of property and equipment                    (198,694)           (17,814)          (223,908)
    Investments in other companies                              --                 --            (40,000)
                                                      ------------       ------------       ------------

Net cash provided by (used in) investing
activities                                                (198,694)            20,856           (233,980)
                                                      ------------       ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Common stock subscription receivable                   (50,000)                --            (50,000)
    Proceeds from sale of committed stock                  194,375                 --            194,375
    Payment for costs associated with
      the sale of common stock                             (17,000)                --            (17,000)
    Proceeds from notes payable                             30,000            223,000            253,000
    Proceeds from sale of preferred stock                       --             32,000            132,000
    Proceeds from sale of common stock                   3,180,796            421,010          3,854,306
                                                      ------------       ------------       ------------

Net cash provided by financing activities                3,338,171            676,010          4,366,681
                                                      ------------       ------------       ------------

Net increase (decrease) in cash and cash
    equivalents                                       $  1,116,542       $    (19,057)      $  1,130,498

CASH AND CASH EQUIVALENTS, BEGINNING
    OF PERIOD                                               13,956             33,013                 --
                                                      ------------       ------------       ------------

CASH AND CASH EQUIVALENTS, END OF
    PERIOD                                            $  1,130,498       $     13,956       $  1,130,498
                                                      ============       ============       ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION

    INTEREST PAID                                     $         --       $         --       $        150
                                                      ============       ============       ============
</TABLE>

                                      F-9

<PAGE>

                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                          FOR THE YEARS  ENDED  SEPTEMBER  30, 2003 AND 2002 AND
            FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES

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.

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  $161,000 of notes  payable and accrued  interest  into  866,173
      shares of common stock.


                                      F-10
<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


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  ("CTCWSC"),  CTC
         Cable  Corporation  ("CTCCC"),  and CTC  Towers  and Poles  Corporation
         ("CTCTPC").


                                      F-11
<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 2 - GOING CONCERN

         These financial statements have been prepared on a going concern basis.
         However, during the year ended September 30, 2003, the Company incurred
         a net loss of $6,751,252 and had negative cash flows from operations of
         $2,022,935.  In  addition,  the Company had an  accumulated  deficit of
         $11,796,877 at September 30, 2003. 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  by  issuing   equity
         securities.

         Management  plans to continue to provide for its capital  needs  during
         the year ended  September 30, 2004 by the continued  development of its
         products  with minimal  borrowings  and by issuing  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 continue as a going concern.

NOTE 3 - FOURTH QUARTER ADJUSTMENTS

         During the fourth quarter of fiscal 2003, the Company had the following
         significant accounting adjustments:

         1.       A  prepaid  legal  expense  balance  of  $451,730  and a legal
                  expense of $19,592 that had been recorded in the third quarter
                  of fiscal 2003 in exchange for shares of the Company's  common
                  stock were reversed.  Management determined that these amounts
                  had been recorded in error.

         2.       Common  stock  issued for  services  rendered for research and
                  development  that had been  recorded  in the  second and third
                  quarters of fiscal 2003 at $978,700 and $11,718, respectively,
                  were   adjusted  to  $1,226,740   and  $8,789,   respectively.
                  Management   determined   that  incorrect   amounts  had  been
                  initially recorded.

         3.       Common stock issued for legal services  rendered that had been
                  recorded in the first  quarter of fiscal 2003 at $470,500  was
                  adjusted to $508,000.  Management determined that an incorrect
                  amount had been initially recorded.

         4.       The reversal of compensation expense related to the fair value
                  of vested stock options for $292,020 was corrected. Management
                  determined that the reversal was recorded in error.


                                      F-12
<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 4 - CORRECTION OF ERRORS

         The  following  errors in the financial  statements  for the year ended
         September 30, 2002 were corrected

         1.       Reclassification of $1,664.275 of deferred compensation - fair
                  value of vested stock options from  long-term  liabilities  to
                  additional paid-in capital.

         2.       Reclassification of $1,234,294 of compensation expense for the
                  fair  value of stock  options  issued  to  third  parties  for
                  services  rendered  to a deferred  compensation  contra-equity
                  account  to  reflect  the  portion  of the  value of the stock
                  options  granted  relating to services to be rendered over the
                  period of the consultants' contracts from one to five years.

         3.       Revision to the  roll-forward  of warrant  activity to reflect
                  the granting of 848,630 warrants during the year.

         4.       Revision  to the  roll-forward  of stock  option  activity  to
                  remove the  cancellation  of 125,000 stock options  during the
                  year.

NOTE 5 - 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 subsidiary,  TTC  (collectively,  the "Company").  All
         significant  inter-company  accounts and transactions are eliminated in
         consolidation.

         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.


                                      F-13

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         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 events
         or changes in  circumstances  indicate  that the  carrying  value of an
         asset  may not be  recoverable.  If the  estimated  future  cash  flows
         (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.



                                      F-14
<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         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.

         Research and Development Expenses

         Research  and  development   expenses  are  charged  to  operations  as
         incurred.

         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,  2003,  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 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-15
<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         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:


                                                       2003            2002
                                                   ----------       ---------
         Series B convertible preferred stock          80,000         105,600
         Options for common stock                   8,197,740       5,307,740
         Warrants                                  17,047,624       2,796,290


         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.

NOTE 6 - PROPERTY AND EQUIPMENT

         Property  and  equipment  at  September  30,  2003   consisted  of  the
         following:

         Office furniture and equipment                        $ 23,624
         Manufacturing equipment                                200,283
                                                               --------

                                                                223,907
         Less accumulated depreciation                           23,174
                                                               --------

             TOTAL                                             $200,733
                                                               ========

         Depreciation  expense was  $18,569,  $3,372,  and $23,175 for the years
         ended  September  30,  2003 and 2002 and the period from March 28, 2001
         (inception) to September 30, 2003, respectively.


                                      F-16
<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 7 - 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.

         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  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.


                                      F-17

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 7 - CONTRACT RIGHTS (CONTINUED)

         The  Company,  TTC,  and WBG (aka WBGA)  were  involved  in  litigation
         regarding the  interpretation  and enforcement of the License Agreement
         (see Note 9). 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 pultuded  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 8 - 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.

         On  April  12,  2001,  the  Company  exchanged  15,086,000   equivalent
         post-acquisition  shares of restricted,  unregistered common stock with
         Red Guard for various  marketable  and  restricted  securities  in four
         unrelated entities.  The initial exchange  transaction was valued using
         an agreed-upon valuation of approximately  $137,750.  Through September
         30, 2001, 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  has  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.


                                      F-18

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 8 - INVESTMENTS IN OTHER COMPANIES (CONTINUED)

         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.  On August 11,
         2001, the Company executed a 30-day purchase option to acquire up to an
         additional 110,000  unregistered,  restricted shares of common stock of
         AMJ at prices ranging  between $12.40 and $16 per share.  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.

         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  $909,635,  which  approximated
         the  discounted  "fair value" of the Company's  common stock based upon
         the  quoted  closing  price  of  the  Company's   unrestricted   equity
         securities as quoted on the date 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.

         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.


                                      F-19

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 9 - 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.

         In January 2004, the Company entered into a seven-year  lease agreement
         for  a  combination   manufacturing  and  office  facility  in  Irvine,
         California  for 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.  The Company has negotiated
         an 18 month  sub-lease  for a portion of the space at $13,200 per month
         beginning  March 1, 2004 with an option for additional  space at $6,250
         per month.

         Future minimum lease payments under the new lease at September 30, 2003
         were as follows:

                   Year Ending
                  September 30,
                  -------------

                      2004                                  $   662,256
                      2005                                      883,008
                      2006                                      883,008
                      2007                                      883,008
                      2008                                      883,008
                      Thereafter                              1,986,768
                                                            -----------

                           TOTAL                            $ 6,181,056
                                                            ===========

         Rent expense was  $140,035,  $48,344,  and $188,379 for the years ended
         September  30,  2003  and 2002  and the  period  from  March  28,  2001
         (inception) to September 30, 2003, respectively.

         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  individual  for product  development  and
                  research  services  at a  rate  of  $15,000  per  month.  This
                  agreement  commenced  in April 2002 and is for an initial term
                  of one  year  with  automatic  renewals,  subject  to a 30-day
                  cancellation  by either party.  This agreement also included a
                  "signing  bonus" of $10,000  cash and 10,000  shares of common
                  stock issued  pursuant to a Registration  Statement  under the
                  Securities Act of 1933 on Form S-8.  Furthermore,  the Company
                  is obligated to pay the individual  interest on unpaid amounts
                  at a rate of 10% per annum.  This contract was canceled during
                  the year ended September 30, 2003.


                                      F-20

<PAGE>


NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

         Professional Services Consulting Agreements (Continued)

         o        A contract with an individual for product development research
                  at a rate of $500 per day.  This contract is cancelable at any
                  time by either party.  This  contract was canceled  during the
                  year ended September 30, 2003.

         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.

         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.


                                      F-21

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

         Professional Services Consulting Agreements (Continued)

         o        A  contract  with an  individual  to provide  Chief  Financial
                  Officer services at a rate of $7,000 per month. This agreement
                  commenced in January 2002 and was terminated in November 2002.

         Financial Services Agreements

         The Company has entered into various financial services  agreements for
         professional and product development services as follows:

         o        A  contract  with  an  unrelated   corporation  for  financial
                  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  unrelated   individual   for  financial
                  consulting services at a rate of $100,000 per year, payable in
                  75,000   shares  of  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
                  automatically  renews annually unless canceled by either party
                  with the  appropriate  notice,  as defined in this  agreement.
                  This  agreement  also  contained  the  granting  of options to
                  purchase up to 250,000  shares of common  stock  pursuant to a
                  Registration  Statement  under the  Securities  Act of 1933 on
                  Form S-8 at a price of $1.25 per share.  The  options  vest in
                  pro-rata  equal  segments  of 1/12  of the  total  grant  on a
                  monthly  basis  starting  in March  2002.  The  agreement  was
                  canceled during January 2003, and all options were returned to
                  the Company and canceled.

         o        A  contract  with  an  individual  for  financial   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, 2003,  the Company did not have any  obligation
                  under the "success fee" portion of this agreement.


                                      F-22

<PAGE>


NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

         Financial Services Agreements (Continued)

         o        A  contract   with  an   unrelated   individual   for  product
                  development  and  research  services  at a rate of $15,000 per
                  month,  with a signing  bonus of $10,000  cash and  $10,000 in
                  shares of registered common stock. This agreement commenced in
                  April 2002 and  expires in March  2007.  This  agreement  also
                  contained  the  granting  of options to purchase up to 150,000
                  shares of common  stock on the  agreement  date and on each of
                  the next four  anniversaries  of the  agreement  pursuant to a
                  Registration  Statement  under the  Securities  Act of 1933 on
                  Form S-8 at a price of $0.50 per share.  The options  vest one
                  year from the grant date and expire on December 31, 2011. This
                  agreement was canceled on March 31, 2003.  No options  granted
                  under this agreement were vested on the cancellation  date and
                  were therefore canceled.

         o        A  contract  with  an  individual  for  financial   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  $1.75  per
                  share.  The  exercise  price was  reduced to $0.08 on July 11,
                  2002.  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, 2003,  the Company did not have any  obligation
                  under the "success fee" portion of this agreement.

         o        A  finder's  fee  agreement  for  capital  financing  with  an
                  unrelated  corporation  on a "successful  efforts"  basis at a
                  rate of 5.0% of the total  gross  investment  received  by the
                  Company as facilitated under this agreement.  Furthermore,  if
                  successful,  the Company will issue to the finder a warrant to
                  purchase  up to  300,000  shares of  common  stock at a strike
                  price equal to the price paid by the respective investor under
                  this  agreement.  This contract was canceled by the Company in
                  the first quarter of fiscal 2003. No fees were paid under this
                  agreement.

         o        A  finder's  fee  agreement  for  capital  financing  with  an
                  unrelated  corporation  on a "successful  efforts"  basis at a
                  rate  of 6% of the  total  gross  investment  received  by the
                  Company as facilitated under this agreement and 200,000 shares
                  of  unregistered,  restricted  common stock.  Furthermore,  if
                  successful   by   early-November   2002,  as  defined  in  the
                  agreement, the Company will issue an additional 200,000 shares
                  of  restricted,  unregistered  common  stock to the  unrelated
                  corporation.  This  agreement  expired in December  2002.  The
                  agreement  was settled in April 2003  through the  issuance of
                  27,900 shares of unregistered,  restricted common stock valued
                  at $11,718.


                                      F-23

<PAGE>


NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

         Financial Services Agreements (Continued)

         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, 2003.

         o        A  finder's  fee  agreement  for  capital  financing  with  an
                  unrelated entity, which required a one-time fee in fiscal 2002
                  of 40,000 shares of unregistered, restricted common stock with
                  registration rights upon the delivery of a qualified Letter of
                  Intent for the funding of either equity, subordinated debt, or
                  senior  debt.  Furthermore,  the  agreement  requires  a  cash
                  commission  equal  to 8% if the  investment  is in the form of
                  equity,  6% if the  investment is in the form of  subordinated
                  debt,  and 2% if the investment is in the form of senior debt.
                  This  contract  will be  canceled by the Company in the second
                  quarter of fiscal 2004.

         o        A  finder's  fee  agreement  for  capital  financing  with  an
                  unrelated individual on a "successful efforts" basis at a rate
                  of 4% of the total gross investment received by the Company as
                  facilitated under this agreement.  This agreement was canceled
                  during fiscal 2003. No fees were paid under this agreement.

         o        A  finder's  fee  agreement  for  capital  financing  with  an
                  unrelated entity on a "successful  efforts" basis at a rate of
                  5% of the gross  proceeds  raised from sources  introduced  by
                  this entity, with a minimum fee of $100,000. This agreement is
                  dated  August 2002 and has  defined  cancellation  terms.  The
                  Company  canceled this  agreement  during fiscal 2003. No fees
                  were paid under this agreement.

         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.


                                      F-24

<PAGE>


NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

         Litigation (Continued)

         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.

         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.

         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 to be paid through  September  2004.  At  September  30, 2003,
         $145,600 remained unpaid on the settlement.

         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.


                                      F-25
<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

         Litigation (Continued)

         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.

         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.  The case is presently  in the  discovery  stage,  and the
         trial is  scheduled  to begin in May 2004,  although a  continuance  is
         likely.

         Composite Technology Corporation v. Acquvest, Inc., Paul Koch, Victoria
         Koch,  Patricia Manolis,  and Michael Tarbox The United States District
         Court, Southern Division, Case No. SACV03-1664-DOC 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 Manolis. The Defendants deny
         CTC's material  allegations and intend to assert  cross-claims  against
         CTC. On November 21, 2003, defendants Acquvest, Paul and Victoria Koch,
         and Manolis removed this case from Orange County  Superior  Court.  CTC
         has filed a motion to remand  the case back to Orange  County  Superior
         Court. No trial date has been set.

         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.


                                      F-26

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 9 - COMMITMENTS AND CONTINGENCIES (CONTINUED)

         Litigation (Continued)

         Ascendiant Capital Group, LLC, Mark Bergendahl,  and Bradley Wilhite v.
         Composite Technology Corporation and Benton H. Wilcoxon (Continued) 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.  Neither a trial date nor an arbitration  date has been
         set.

         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.  A default
         judgment is expected to be entered in early 2004 and, as such, no trial
         date is expected to be set.

NOTE 10 - SHAREHOLDERS' EQUITY

         Preferred Stock

         On April 12, 2001, TTC authorized and allocated 165 shares of Series A,
         10%  cumulative,  convertible  preferred stock (the "Series A Preferred
         Stock") was issued at $1,000 per share. The Series A shareholders  will
         be 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 are payable  quarterly
         on the last day of March, June,  September,  and December in each year,
         commencing on September 30, 2001.


                                      F-27

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         Preferred Stock (Continued)

         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 companies, except for the investment in IPS.

         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.

         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-day  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 April 2003,  the Company  converted 320 shares of the Series B Stock
         into 207,576 shares of unregistered, restricted common stock.


                                      F-28
<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         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.

         Services Rendered

         On November 3, 2001, the Company issued an aggregate  450,000 shares of
         restricted, unregistered common stock to four unrelated entities 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,  which  approximates  the "fair
         value" of the  Company's  common  stock on the date of the  transaction
         using the  discounted  closing price of the  Company's  common stock as
         quoted on the NASDAQ Electronic  Bulletin Board. 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.


                                      F-29

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         Common Stock (Continued)

         Services Rendered (Continued)

         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.

         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.

         On February 27, 2002, the Company filed a Registration  Statement Under
         The  Securities  Act of 1933  on  Form  S-8 to  register  an  aggregate
         9,000,000  shares of common  stock  pursuant to the 2002  Non-Qualified
         Stock  Compensation  Plan.  During the period  from  February  28, 2002
         through  September 30, 2002, the Company issued an aggregate  5,929,868
         shares of common stock pursuant to this plan.  These shares were issued
         at prices  ranging  between $0.19 and $1.85 per share,  as based on the
         closing quoted stock price on the respective date of each  transaction.
         These transactions were valued at an aggregate of $2,701,490.

         On May 22, 2002,  the Company  issued  40,000  shares of the  Company's
         restricted,  unregistered  common  stock  to an  unrelated  entity  for
         various   consulting   services.   This   transaction   was  valued  at
         approximately  $16,000,  which  approximates  the  "fair  value" of the
         Company's  stock on the date of the  transaction  using the  discounted
         closing  price of the  Company's  common  stock as quoted on the NASDAQ
         Electronic Bulletin Board.

         In July and August 2002, the Company issued an aggregate 350,000 shares
         of the Company's restricted,  unregistered common stock to two separate
         unrelated  entities for consulting  services.  These  transactions were
         valued at approximately $95,000, which approximates the "fair value" of
         the Company's stock on the date of the transaction using the discounted
         closing  price of the  Company's  common  stock as quoted on the NASDAQ
         Electronic Bulletin Board.


                                      F-30

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         Common Stock (Continued)

         Services Rendered (Continued)

         During the year ended September 30, 2003, the Company issued  6,422,171
         shares of free trading common  registered  pursuant to Form S-8 to nine
         individuals for product design, technology registration, legal services
         and consulting  services valued at $2,597,310,  which  approximated the
         closing  price of the  Company's  common  stock as quoted on the NASDAQ
         Electronic Bulletin Board on the date of issue.

         During the year ended September 30, 2003, the Company issued  2,331,729
         shares of the Company's  restricted,  unregistered  common stock to six
         individuals and two unrelated entities for various consulting services.
         These  transactions were valued at $1,505,903,  which  approximates the
         "fair  value"  of the  Company's  stock on the date of the  transaction
         using the  discounted  closing price of the  Company's  common stock as
         quoted on the NASDAQ Electronic Bulletin Board.

         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 AMJ common stock. This transaction was valued
         at approximately  $191,450,  which approximates the "fair value" of the
         Company's  stock on the date of the  transaction  using the  discounted
         closing  price of the  Company's  common  stock as quoted on the NASDAQ
         Electronic Bulletin Board.

         Conversion of Short-Term Loans

         In July and September  2002,  the Company  issued an aggregate  866,173
         shares of the Company's  restricted,  unregistered common stock to four
         separate individuals, several of whom were existing shareholders of the
         Company, for conversion of short-term working capital loans and accrued
         but unpaid interest.  These  transactions  were valued at approximately
         $153,596,  which equaled the outstanding  debt and was in excess of the
         "fair  value"  of the  Company's  stock on the date of the  transaction
         using the  discounted  closing price of the  Company's  common stock as
         quoted on the NASDAQ Electronic Bulletin Board.

         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 accrued but unpaid interest.

         Legal Settlement

         In February 2003, the Company  issued  1,500,000  shares of restricted,
         unregistered  common  stock  valued at $93,750 in  connection  with the
         settlement of certain legal matters (see Note 9).


                                      F-31

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         Common Stock (Continued)

         Cash

         On August 22,  2002,  the  Company  sold 65,790  shares of  restricted,
         unregistered  common  stock  to an  individual  for  cash  proceeds  of
         approximately  $25,000.  This  transaction was consummated in excess of
         the "fair value" of the Company's  stock on the date of the transaction
         using the  discounted  closing price of the  Company's  common stock as
         quoted on the NASDAQ Electronic Bulletin Board.

         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  expires  at the  earlier  of
         December 1, 2003 or three weeks following  written  notification by the
         Company  that its common  stock  closed at or above $0.61 per share for
         five consecutive  trading days. In addition,  the Series A warrants can
         be redeemed by the Company for $0.001 each if a Registration  Statement
         covering the shares  underlying the Series A warrants has been declared
         effective and the  Company's  common stock closes at or above $0.61 for
         five consecutive days.

         Each  Series B warrant  entitles  the holder to  purchase  one share of
         common  stock at $0.60 per share and expires at the earlier of June 30,
         2004 or three weeks following written  notification by the Company that
         its  common  stock  closed  at  or  above  $1.05  per  share  for  five
         consecutive  trading  days.  In addition,  the Series B warrants can be
         redeemed by the Company  for $0.001  each if a  Registration  Statement
         covering the shares  underlying the Series B warrants has been declared
         effective and the  Company's  common stock closes at or above $1.05 for
         five consecutive days.

         Between  November 2002 and February 2003, the Company sold an aggregate
         2,954,000 Units, pursuant to a Private Placement Memorandum,  for gross
         proceeds of $295,400.  Each Unit  consisted of one share of restricted,
         unregistered  common  stock and one  Series E warrant to  purchase  one
         share of unregistered,  restricted  common stock. Each Series E warrant
         entitles  the holder to  purchase a share of common  stock at $0.25 per
         share and expires on December 1, 2004.


                                      F-32
<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         Common Stock (Continued)

         Cash (Continued)

         During  February  and  March  2003,   pursuant  to  Private   Placement
         Memoranda,  the Company  sold an  aggregate  3,465,500  Units for gross
         proceeds of $866,375.  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
         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  April  and  September  2003,   pursuant  to  Private  Placement
         Memoranda,  the  Company  sold an  aggregate  150,000  Units  for gross
         proceeds of $375,000.  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 Company received  subscription
         agreements for the issuance of an additional  450,000  Units.  However,
         the  proceeds  of  $1,125,000  were never  received.  The matter is now
         subject to litigation as discussed in Note 8 under Composite Technology
         Corporation  v. Acquvest,  Inc.,  Paul Koch,  Victoria  Koch,  Patricia
         Manolis,  and Michael  Tarbox.  The shares related to the 450,000 Units
         were issued by the  transfer  agent and were being held by the attorney
         handling  the  matter for the  Company.  The shares  were  canceled  in
         October 2003.

         During  August  2003,  pursuant  to Private  Placement  Memoranda,  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.


                                      F-33

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         Common Stock (Continued)

         Cash (Continued)

         During September 2003,  pursuant to Private  Placement  Memoranda,  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.

         During September 2003,  pursuant to Private  Placement  Memoranda,  the
         Company  sold  an  aggregate   332,500  Units  for  gross  proceeds  of
         $1,330,000.   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 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.

         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.

         Red Guard

         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 up to 1,905,660 shares of TTC 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.


                                      F-34

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         Stock Options

         Red Guard (Continued)

         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.

         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, 2003:


                                                                       Weighted-
                                                                        Average
                                                            Number     Exercise
                                                           of Shares     Price
                                                           ---------   ---------

         Outstanding, March 18, 2001 (inception)               --       $   --
           Granted                                          5,000       $ 1.26
           Exercised                                       (1,000)      $ 1.26
                                                           ------

         Outstanding, September 30, 2001                    4,000       $ 1.26
           Exercised                                         (320)      $ 1.26
           Canceled/expired                                (3,680)      $ 1.26
                                                           ------

             OUTSTANDING, SEPTEMBER 30, 2002 AND 2003          --       $   --
                                                           ======


                                      F-35

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         Stock Options

         Stock Plan

         On May 15, 2001, TTC established the 2001 Incentive  Compensation Stock
         Option Plan (the  "Plan").  The purpose of the Plan is 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 Plan is  administered  by either the  Company's  Board of
         Directors  or a committee  established  and  appointed  by the Board of
         Directors.  Under the Plan, the Board has 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 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 an aggregate 1,357,740
         options to various  officers and  employees  to purchase an  equivalent
         number of shares of TTC  restricted,  unregistered  common  stock.  The
         options were issued  exercise prices of either $0.31 or $0.35 per share
         and expire in either  June 2006 or June 2011.  On March 31,  2002,  the
         Company granted an aggregate  5,200,000  options to various  consulting
         professionals  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 to 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 April 1, 2002, the Company  granted  750,000 options to a consulting
         professional  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.


                                      F-36

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         Stock Options (Continued)

         Stock Plan (Continued)

         The Company  recorded  deferred  compensation of $1,664,275  related to
         3,200,000  of the  options  granted on March 31,  2002 and the  750,000
         options  granted on April 1, 2002.  The Company  recorded  compensation
         expense of $572,549 and $429,980  during the years ended  September 30,
         2003 and 2002,  respectively,  for the value of the legal,  consulting,
         and research and development services rendered during those years.

         In February,  July,  and August 2003,  the Company  granted  options to
         purchase  750,000,  250,000,  and 2,950,000  shares,  respectively,  of
         common  stock to  employees  at exercise  prices of $0.25,  $0.25,  and
         $0.53, respectively. The options vest between three and five years from
         the date of grant and expire 10 years from the date of grant.

         The following table summarizes all Plan activity through  September 30,
         2003.

<TABLE>
<CAPTION>
                                                                        Weighted-
                                                                        Average
                                                         Number         Exercise
                                                       of Shares          Price
<S>                                                   <C>              <C>
         Outstanding, March 18, 2001 (inception)              --       $       --
           Granted                                     1,357,740       $     0.35
                                                      ----------

         Outstanding, September 30, 2001               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                                     (60,000)      $     0.25
           Canceled                                   (1,000,000)      $     0.69
                                                      ----------

             OUTSTANDING, SEPTEMBER 30, 2003           8,197,740       $     0.39
                                                      ==========

             EXERCISABLE, SEPTEMBER 30, 2003           2,872,407       $     0.38
                                                      ==========
</TABLE>


                                      F-37

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         Stock Options (Continued)

         Stock Plan (Continued)

         The  weighted-average   remaining   contractual  life  of  the  options
         outstanding at September 30, 2003 was 4.9 years. The exercise prices of
         the options  outstanding at September 30, 2003 ranged from $0.08 to $2,
         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>
         $ 0.08 - 0.10        1,000,000           666,667        3.62 years          $ 0.10             $ 0.10
         $ 0.25 - 0.53        6,997,740         2,005,740        5.10 years          $ 0.39             $ 0.32
         $ 1.75 - 2.00          200,000           200,000        3.62 years          $ 1.88             $ 1.88
                              ---------         ---------

                              8,197,740         2,872,407
                              =========         =========
</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:

<TABLE>
<CAPTION>
                                                                      2003                2002
                                                                  -------------       -------------
<S>                                                               <C>                 <C>
         Net loss
             As reported                                          $  (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                            (73,520)                 --
                                                                  -------------       -------------

                      PRO FORMA                                   $  (6,824,772)      $  (4,518,082)
                                                                  =============       =============

         Earnings per common share
             Basic - as reported                                  $       (0.08)      $       (0.07)
             Basic - pro forma                                    $       (0.08)      $       (0.07)
             Diluted - as reported                                $       (0.08)      $       (0.07)
             Diluted  pro forma                                   $       (0.08)      $       (0.07)
</TABLE>


                                      F-38

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         Stock Options (Continued)

         Stock Plan (Continued)

         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  Black-Scholes  option-pricing  model
         with the  following  weighted-average  assumptions  for the year  ended
         September 30, 2003:  dividend yield of 0%, expected volatility of 100%,
         risk-free  interest rate of 3.25%, and expected life of five years. The
         weighted-average  fair value of options  granted  during the year ended
         September  30, 2003 for which the  exercise  price was greater than the
         market  price on the grant  date was  $0.31,  and the  weighted-average
         exercise price was $0.30.  The  weighted-average  fair value of options
         granted during the year ended September 30, 2003 for which the exercise
         price was less than the market  price on the grant date was $0.46,  and
         the  weighted-average  exercise price was $0.50.  No stock options were
         granted during the year ended September 30, 2003 for which the exercise
         price was equal to the market  price on the grant date.  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.

         Warrants

         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.


                                      F-39

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)

         Warrants (Continued)

         CTC intends to  substitute  CTC shares of common  stock in place of the
         TTC stock  prescribed in the above  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.

         In April 2003, the Company  granted 50,000 Series K warrants  valued at
         $11,750  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.

         In April 2003, the Company  granted 250,000 Series L warrants valued at
         $61,250  as  payment  for  services  rendered.  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.

         In September 2003,  267,500  warrants were exercised at exercise prices
         between $0.25 and $0.50 per share.

         The following table presents  warrant  activity  through  September 30,
         2003:


<TABLE>
<CAPTION>
                                                                         Weighted-
                                                                          Average
                                                         Number          Exercise
                                                       of Shares           Price
                                                       ----------       -----------
<S>                                                    <C>              <C>
         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           17,047,624       $      0.55
                                                       ==========

             EXERCISABLE, SEPTEMBER 30, 2003           17,047,624       $      0.55
                                                       ==========
</TABLE>


                                      F-40

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 11 - 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, 2003 and 2002 as follows:


<TABLE>
<CAPTION>
                                                               2003               2002
                                                            -----------       -----------
<S>                                                         <C>               <C>
         Statutory regular federal income benefit rate      $(2,001,500)      $(1,955,800)
         Change in valuation allowance                        2,337,700                --
         State tax, net of federal benefit                     (342,300)               --
         Other                                                    6,100         1,955,800
                                                            -----------       -----------
             TOTAL                                          $        --       $        --
                                                            ===========       ===========
</TABLE>


         Significant  components  of  the  Company's  deferred  tax  assets  and
         liabilities for federal and state income taxes as of September 30, 2003
         consisted of the following:


         Deferred tax assets
             Net operating loss carry-forwards                 $ 4,106,400
             Compensation for fair value of stock options          245,400
             Warrants issued for services                           26,300
             Warrants issued for legal settlement                    5,100
             Accrued payroll                                        26,300
             Accrued officer compensation                          109,500
             Less valuation allowance                           (4,519,000)
                                                               -----------

                  NET DEFERRED TAX ASSETS                      $        --
                                                               ===========


         During the year ended  September  30,  2003,  the  valuation  allowance
         increased by $2,751,000.  As of September 30, 2003, the Company had net
         operating loss carry-forwards for federal and state income tax purposes
         of  approximately  $10,381,000 and $10,381,000,  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-41

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 12 - 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.

NOTE 13 - SUBSEQUENT EVENTS

         Exchange Offer

         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 31, 2003, the holder would receive one share
         of  unregistered  common stock and one Series R warrant to purchase 0.2
         share of unregistered  restricted  common stock.  Each Series R warrant
         entitled  the holder to  purchase  one share of common  stock at $2 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. In December  2003, the
         Company issued 755,555 shares of unregistered  restricted  common stock
         and 151,111 Series R warrants.

         Stock for Lease Agreement

         In December  2003, as part of entering  into a lease  agreement for its
         new  offices  and  warehouse,  the  Company  issued  140,160  shares of
         unregistered  restricted  common stock valued at $147,168 to the lessor
         as payment for the first two month's rent.

         Stock for Services

         In October and  November  2003,  the  Company  issued an  aggregate  of
         200,000 shares of common stock as payment for legal services  valued at
         $380,500.

         In  November  2003,  the Company  issued  20,000  shares of  restricted
         unregistered common stock valued at $28,050 for consulting services.


                                      F-42

<PAGE>


                                                COMPOSITE TECHNOLOGY CORPORATION
                                                                  AND SUBSIDIARY
                                                   (DEVELOPMENT STAGE COMPANIES)
                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                              SEPTEMBER 30, 2003
--------------------------------------------------------------------------------


NOTE 13 - SUBSEQUENT EVENTS (CONTINUED)

         Exercise of Stock Options

         In December 2003, a former employee exercised 50,000 stock options on a
         cashless basis and received 44,318 shares of common stock

         Cash

         In December 2003, the Company issued  2,400,000 Units for cash proceeds
         of $2,790,000 net of offering costs of $210,000. 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.

         During  November 2003,  pursuant to Private  Placement  Memoranda,  the
         Company sold an aggregate  25,000 Units for gross proceeds of $100,000.
         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.

         During  November 2003,  pursuant to Private  Placement  Memoranda,  the
         Company sold an aggregate of 89,360 shares of  restricted  unregistered
         common stock at $1.40 per share for gross proceeds of $125,104.


                                      F-43
<PAGE>


                                   SIGNATURES

         In accordance  with Section 13 or 15(d) of the Securities  Exchange Act
of 1934,  as  amended,  the  registrant  caused  this 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: January 29, 2004


         In  accordance  with the  Securities  Exchange Act of 1934, as amended,
this  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,
                                     Chairman, and Secretary

                                     Dated:   January 29, 2004


                                     /s/ C. William Arrington
                                     -------------------------------
                                     C. William Arrington
                                     President and Director

                                     Dated:   January 29, 2004


                                     /s/ Benton H Wilcoxon
                                     -------------------------------
                                     Benton H Wilcoxon
                                     Acting Chief Financial Officer

                                     Dated:   January 29, 2004


                                       19