<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                  FORM 10-QSB/A

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

(Mark one)
   [X]   Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
         Act of 1934.

           FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2002

   [ ]   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)

          18881 Von Karman Avenue, Suite 1630, Irvine, California 92612
          -------------------------------------------------------------
                    (Address of principal executive offices)

                                 (949) 756-1091
                                 --------------
                           (Issuer's telephone number)

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

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [X]  NO [ ]

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: February 7, 2003: 79,431,429
                                          ----------------------------

Transitional Small Business Disclosure Format (check one):  YES [ ]  NO [X]





<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION

              Form 10-QSB/A for the Quarter ended December 31, 2002

                                Table of Contents

                                                                            Page
                                                                            ----
PART I - FINANCIAL INFORMATION

   Item 1  Financial Statements                                               3

   Item 2  Management's Discussion and Analysis or Plan of Operation         22

   Item 3  Controls and Procedures                                           24

PART II - OTHER INFORMATION

   Item 1  Legal Proceedings                                                 24

   Item 2  Changes in Securities                                             25

   Item 3  Defaults Upon Senior Securities                                   26

   Item 4  Submission of Matters to a Vote of Security Holders               26

   Item 5  Other Information                                                 26

   Item 6  Exhibits and Reports on Form 8-K                                  26

SIGNATURES                                                                   26

                                       2





<PAGE>
<TABLE>

PART 1 - ITEM 1 - FINANCIAL STATEMENTS
--------------------------------------

                           COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                                  (a development stage enterprise)
                                RESTATED CONSOLIDATED BALANCE SHEETS
                                     December 31, 2002 and 2001

                                             (UNAUDITED)
<CAPTION>

                                                                      December 31,      December 31,
ASSETS                                                                    2002              2001
------                                                                ------------      ------------
<S>                                                                   <C>               <C>
CURRENT ASSETS
   Cash on hand and in bank                                           $    97,899       $        --
   Advances to officers                                                        --            15,841
   Prepaid expenses and other                                              67,253            30,078
                                                                      ------------      ------------
     TOTAL CURRENT ASSETS                                                 165,152            45,919
                                                                      ------------      ------------

PROPERTY AND EQUIPMENT - AT COST                                          128,164             8,684
   Accumulated depreciation                                                (5,956)           (1,915)
                                                                      ------------      ------------
     NET PROPERTY AND EQUIPMENT                                           122,208             6,769
                                                                      ------------      ------------

OTHER ASSETS
   Contract rights                                                        165,000           165,000
   Investments in other companies                                           1,000           236,270
                                                                      ------------      ------------
                                                                          166,000           401,270
                                                                      ------------      ------------

TOTAL ASSETS                                                          $   453,360       $   453,958
                                                                      ============      ============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable - trade                                           $ 1,300,782       $   264,076
   Accrued interest payable                                                13,101                --
   Accrued dividends payable                                               17,392            16,246
   Accrued officer compensation                                           309,778                --
                                                                      ------------      ------------
     TOTAL CURRENT LIABILITIES                                          1,641,053           280,322

LONG-TERM LIABILITIES
   Deferred compensation - fair
     value of vested stock options                                      1,664,275                --
                                                                      ------------      ------------
     TOTAL LIABILITIES                                                  3,305,328           280,322
                                                                      ------------      ------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY (DEFICIT)
   Preferred stock - $0.001 par value
     5,000,000 shares authorized
     1,320 and 1,485 shares issued and outstanding, respectively                1                 1
   Common stock - $0.001 par value
     200,000,000 shares authorized
     75,611,429 and 66,542,500 shares issued and outstanding,
     respectively                                                          75,611            66,543
   Additional paid-in capital                                           3,742,230         1,110,341
   Accumulated deficit                                                 (6,669,810)       (1,003,249)
                                                                      ------------      ------------
     TOTAL SHAREHOLDERS' EQUITY (DEFICIT)                              (2,851,968)          173,636
                                                                      ------------      ------------

   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                         $   453,360       $   453,958
                                                                      ============      ============
</TABLE>

The  financial information presented herein has been prepared by management
     without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

                                                 3





<PAGE>
<TABLE>

                                COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                                       (a development stage enterprise)
                     RESTATED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                              Three months ended December 31, 2002 and 2001 and
                   Period from March 28, 2001 (date of inception) through December 31, 2002

                                                  (UNAUDITED)
<CAPTION>

                                                                                           Period from
                                                                                          March 28, 2001
                                                     Three months       Three months   (date of inception)
                                                        ended              ended             through
                                                     December 31,       December 31,       December 31,
                                                         2002               2001               2002
                                                    -------------      -------------      -------------
<S>                                                 <C>                <C>                <C>
REVENUES                                            $         --       $         --       $         --
                                                    -------------      -------------      -------------

EXPENSES
   Research and development expenses                     211,703                 --            211,703
   Officer compensation                                   30,000                 --            354,900
   General and administrative expenses                    52,884            101,985            476,044
   Legal, professional and consulting fees               107,403            390,885          3,148,591
   Reorganization expenses                                    --                 --             30,000
   Interest expense                                        3,250                 --             20,218
   Depreciation                                            1,350                681              5,956
   Compensation expense related to common
     stock issuances at less than "fair value"                --                 --            603,500
   Compensation expense related to fair value
     of vested stock options                                  --                 --          1,664,275
                                                    -------------      -------------      -------------
     TOTAL OPERATING EXPENSES                            406,590            493,553          6,515,187
                                                    -------------      -------------      -------------

LOSS FROM OPERATIONS                                    (406,590)          (493,553)        (6,515,187)
OTHER INCOME (EXPENSE)
   Carrying value impairment adjustment
     on investments in other companies                        --                 --           (137,230)
                                                    -------------      -------------      -------------

LOSS BEFORE PROVISION FOR INCOME TAXES                  (406,590)          (493,553)        (6,652,417)
PROVISION FOR INCOME TAXES                                    --                 --                 --
                                                    -------------      -------------      -------------

NET LOSS                                                (406,590)          (493,553)        (6,652,417)
OTHER COMPREHENSIVE INCOME                                    --                 --                 --
                                                    -------------      -------------      -------------

COMPREHENSIVE LOSS                                  $   (406,590)      $   (493,553)      $ (6,652,417)
                                                    =============      =============      =============

Earnings per share of common stock
   outstanding computed on net income
   - basic and fully diluted                        $      (0.01)      $      (0.01)      $      (0.10)
                                                    =============      =============      =============

Weighted-average number of shares
   outstanding - basic and fully diluted              74,171,081         66,512,935         68,199,099
                                                    =============      =============      =============
</TABLE>

The  financial information presented herein has been prepared by management
     without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

                                                      4





<PAGE>
<TABLE>
                                COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                                       (a development stage enterprise)
                                RESTATED CONSOLIDATED STATEMENTS OF CASH FLOWS
                               Three months ended December 31, 2002 and 2001 and
                   Period from March 28, 2001 (date of inception) through December 31, 2002

                                                  (UNAUDITED)
<CAPTION>

                                                                                           Period from
                                                                                          March 28, 2001
                                                        Three months      Three months  (date of inception)
                                                           ended             ended            through
                                                        December 31,      December 31,      December 31,
                                                            2002              2001              2002
                                                        ------------      ------------      ------------
<S>                                                     <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss for the period                              $  (406,590)      $  (493,553)      $(6,652,417)
   Adjustments to reconcile net loss
     to net cash provided by operating activities
       Depreciation                                           1,350               681             5,956
       Amortization of prepaid expenses originally
         paid with common stock                                  --                --            68,613
       Compensation expense related to common
         stock issuances at less than "fair value"               --                --           603,500
       Compensation expense related to fair value
         of vested stock options                                 --                --         1,664,275
       Carrying value impairment adjustment
         on investments in other companies                       --                --           137,230
       Consulting, legal and other expenses
         paid with common stock                                  --                --         1,563,263
       (Increase) Decrease in
         Prepaid expenses and other                          29,318             3,281            28,703
       Increase (Decrease) in
         Accounts payable - trade                           330,945           254,451         1,300,781
         Accrued interest payable                             3,250                --            13,101
         Accrued officer compensation                        30,000                --           276,000
                                                        ------------      ------------      ------------

NET CASH USED IN OPERATING ACTIVITIES                   $   (11,727)      $  (235,140)      $  (990,995)
                                                        ============      ============      ============

CASH FLOWS FROM INVESTING ACTIVITIES
   Cash paid for investments in other companies                  --                --           (40,000)
   Cash advanced by (to) officers                             3,850            (7,099)           33,778
   Purchase of property and equipment                      (102,950)           (1,284)         (128,164)
                                                        ------------      ------------      ------------

NET CASH USED IN INVESTING ACTIVITIES                   $   (99,100)      $    (8,383)      $  (134,386)
                                                        ============      ============      ============

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from short-term working capital loans                --                --           223,000
   Proceeds from sale of preferred stock                         --            32,000           132,000
   Proceeds from sale of common stock                       194,770           178,510           868,280
                                                        ------------      ------------      ------------

NET CASH PROVIDED BY FINANCING ACTIVITIES               $   194,770       $   210,510       $ 1,223,280
                                                        ============      ============      ============
</TABLE>

                                                 - CONTINUED -

The  financial information presented herein has been prepared by management
     without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

                                                      5





<PAGE>
<TABLE>

                                COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                                       (a development stage enterprise)
                          RESTATED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
                               Three months ended December 31, 2002 and 2001 and
                   Period from March 28, 2001 (date of inception) through December 31, 2002

                                                  (UNAUDITED)
<CAPTION>

                                                                                      Period from
                                                                                     March 28, 2001
                                                    Three months     Three months (date of inception)
                                                       ended            ended           through
                                                    December 31,     December 31,     December 31,
                                                        2002             2001             2002
                                                    ------------     ------------     ------------
<S>                                                 <C>                 <C>                 <C>
NET CASH USED IN OPERATING ACTIVITIES               $   (11,727)     $  (235,140)     $  (990,995)
NET CASH USED IN INVESTING ACTIVITIES                   (99,100)          (8,383)        (134,386)
NET CASH PROVIDED BY FINANCING ACTIVITIES               194,770          210,510        1,223,280
                                                    ------------     ------------     ------------

INCREASE (DECREASE) IN CASH                              83,943          (33,013)          97,899

Cash at beginning of period                              13,956           33,013               --
                                                    ------------     ------------     ------------

CASH AT END OF PERIOD                               $    97,899      $        --      $    97,899
                                                    ============     ============     ============

SUPPLEMENTAL DISCLOSURE OF
   INTEREST AND INCOME TAXES PAID
     Interest paid for the period                   $        --      $        --      $       150
                                                    ============     ============     ============
     Income taxes paid for the period               $        --      $        --      $        --
                                                    ============     ============     ============

SUPPLEMENTAL DISCLOSURE OF
   NON-CASH INVESTING AND FINANCING ACTIVITIES
     Redemption of Series A Preferred Stock
       for investments in other companies           $        --      $        --      $   169,098
                                                    ============     ============     ============
     Conversion of short-term working capital
       loans to common stock                        $        --      $        --      $   161,000
                                                    ============     ============     ============
     Preferred stock issued to
       acquire technology rights                    $        --      $        --      $   165,000
                                                    ============     ============     ============
     Common stock issued to
       acquire investments in other companies       $        --      $   191,250      $   191,250
                                                    ============     ============     ============
     Common stock issued
       for prepaid representation agreement         $        --      $    39,375      $    39,375
                                                    ============     ============     ============
</TABLE>

The  financial information presented herein has been prepared by management
     without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.

                                                      6





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

               NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS

Composite Technology Corporation (CTC or Company) was incorporated under the
laws of the State of Florida on February 26, 1980 as Eldorado Gold &
Exploration, Inc. On January 13, 1987, the Company amended its Articles of
Incorporation to change the corporate name to Eldorado Financial Group, Inc. and
modified the Company's 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, the Company changed its 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. 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 the Company.

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

In conjunction with the November 3, 2001 transaction, the Company, in November
2001, changed its corporate name to Composite Technology Corporation and amended
its 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.

The acquisition of Transmission Technology Corporation, on November 3, 2001, by
the Company effected a change in control and was accounted for as a" reverse
acquisition" whereby Transmission Technology Corporation 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 Transmission
Technology Corporation from its inception on March 28, 2001 and the operations
of the Company subsequent to September 30, 2001.

NOTE B - RESTATEMENT OF FINANCIAL INFORMATION

The November 3, 2001 change in control of the Company, effected by the
acquisition of Transmission Technology Corporation (a development stage
enterprise), created a situation whereby the consolidated overall operations of
the Company reverted back to that of a development stage enterprise. A
development stage enterprise is one where substantially all of its efforts are
devoted to establishing a new business plan and either the planned principal
operations have not commenced or the planned principal operations have
commenced, but there has been no significant revenue therefrom.

As a result of the November 3, 2001 transaction, the financial statements of the
Company reflect the historical financial statements of Transmission Technology
Corporation from its inception on March 28, 2001, as adjusted for the effective
recapitalization of the Company on November 3, 2001. The accompanying financial
statements have been restated to present the cumulative financial information,
as required by accounting principles generally accepted in the United States of
America, for the development stage activities of the consolidated entity.

While Composite Technology Corporation (formerly Eldorado Financial Group, Inc.)
was not a development stage enterprise but, rather, a dormant entity with
discontinued operations, management of Composite Technology is of the opinion
that development stage reporting for the consolidated entity is more
appropriate.

                                       7





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE B - RESTATEMENT OF FINANCIAL INFORMATION - CONTINUED

Management is restating it's financial statements for all quarterly and annual
periods, commencing with the Transitional Report on Form 10-KSB for the period
ended September 30, 2001 through the quarterly period ended June 30, 2003. The
financial statements will be restated to present the cumulative financial
information, as required by accounting principles generally accepted in the
United States of America, for the development stage activities of the
consolidated entity. There will be no change to the previously reported results
of operations or balance sheet composition for any of the aforementioned
periods. The restatement will consist only of adding the cumulative from
inception balances on the Statement of Operations and Comprehensive Loss and the
Statements of Cash Flows.

Accordingly, for all periods subsequent to December 31, 2000, the financial
statements of the Company reflect the historical financial statements of
Transmission Technology Corporation from its inception on March 28, 2001, as
adjusted, retroactively, for the effective recapitalization of the Company on
November 3, 2001.

NOTE C - GOING CONCERN UNCERTAINTY

We are engaged in the development, production, and commercialization of
composite reinforced cable and support systems for use in electrical power
transmission and distribution systems. The Company continues to be in the
process of research and development related to its product line and has not
commenced operations. Accordingly, the Company is considered in the development
stage.

We plan to obtain capital through loans or equity offerings in order to have the
funds required to complete the implementation of our plan of operation. We
currently have no material commitments for capital expenditures.

We anticipate receiving orders for our products during the final three months of
fiscal 2003. Prior to the consummation, processing and shipment of revenue
generating orders, we anticipate that we will remain dependent on the receipt of
additional financing from third parties. If such financing is not available, we
may be required to discontinue operations.

The Company's current management anticipates that the initial capitalization
will be sufficient to maintain the corporate status of the Company in the
immediate future. Because of the Company's lack of operating assets, the
Company's continuance may become dependent on either future sales of securities
and/or advances or loans from significant stockholders or corporate officers to
provide sufficient working capital to preserve the integrity of the corporate
entity during the development phase.

There is no assurance that the Company will be able to obtain additional equity
or debt funding or, that such funding, if available, will be obtained on terms
favorable to or affordable by the Company.

It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, there is no legal obligation for either
management or significant stockholders to provide additional future funding.

NOTE D - PREPARATION OF FINANCIAL STATEMENTS

On December 28, 2001, the Company's Board of Directors, and the Board of
Directors for TTC established the initial year-end of September 30 for the
Registrant's wholly-owned subsidiary, Transmission Technology Corporation and,
concurrently, elected to change the fiscal year-end of CTC from December 31 to
September 30.

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 revenues and expenses
during the reporting period. Actual results could differ from those estimates.

                                       8





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE D - PREPARATION OF FINANCIAL STATEMENTS - CONTINUED

Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented

The accompanying consolidated financial statements contain the accounts of
Composite Technology Corporation (formerly Eldorado Financial Group, Inc.) and
its wholly-owned subsidiary, Transmission Technology Corporation. All
significant intercompany transactions have been eliminated. The consolidated
entities are collectively referred to as "the Company".

For segment reporting purposes, the Company operates in only one industry
segment and makes all operating decisions and allocates resources based on the
best benefit to the Company as a whole.

NOTE E - RELATED PARTY TRANSACTIONS

Prior to the November 3, 2001 acquisition of Transmission Technology Corporation
(TTC) by the Company, TTC engaged in significant transactions involving both
Preferred Stock and Common Stock of TTC with Red Guard Industries, Inc. (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 technology.

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.

NOTE F - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.   Cash and cash equivalents
     -------------------------

     For Statement of Cash Flows purposes, the Company considers all cash on
     hand and in banks, including accounts in book overdraft positions,
     certificates of deposit and other highly-liquid investments with maturities
     of three months or less, when purchased, to be cash and cash equivalents.

2.   Property and Equipment
     ----------------------

     Property and equipment are recorded at historical cost. These costs are
     depreciated over the estimated useful lives of the individual assets,
     generally 4 to 10 years, using the straight-line method.

     Gains and losses from disposition of property and equipment are recognized
     as incurred and are included in operations.

3.   Marketable Securities
     ---------------------

     Investments in the equity securities of other companies that have readily
     determinable fair values (as defined in Statement of Financial Accounting
     Standards No. 115, "Accounting for Certain Investments in Debt and Equity
     Securities" (SFAS 115) are classified, at the date of acquisition, into
     three categories and accounted for as follows:

                                       9





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE F - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

3.   Marketable Securities - continued
     ---------------------------------

     Available-for-Sale Securities - Equity securities not classified in other
     categories are reported at fair value, with unrealized gains and losses
     excluded from earnings and reported in a separate component of
     shareholders' equity.

     Trading Securities - Equity securities that are bought and held principally
     for the purpose of selling them in the near term are reported at fair
     value. Unrealized gains and losses are included in earnings.

     Held-to-Maturity Securities - Equity securities that the Company has the
     positive intent and ability to hold to maturity are reported at amortized
     cost.

     Other investments that do not have a readily determinable fair value are
     recorded at amortized cost.

     The Company evaluates the carrying value of all marketable securities
     classified as "held-to-maturity" or "other investments that do not have a
     readily determinable fair value" on a quarterly basis in accordance with
     Statement of Financial Accounting Standards No. 121 "Accounting for the
     Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of".
     Any permanent impairment, if any, is charged to operations in the quarter
     in which the determination of impairment is made.

     For purposes of computing realized gains and losses, the specific
     identification method is used.

4.   Reorganization costs
     --------------------

     CTC and TTC have adopted the provisions of AICPA 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.

5.   Research and development expenses
     ---------------------------------

     Research and development expenses are charged to operations as incurred.

6.   Advertising expenses
     --------------------

     Advertising and marketing expenses are charged to operations as incurred.

7.   Income taxes
     ------------

     The Company utilizes the asset and liability method of accounting for
     income taxes. At December 31, 2002 and 2001, respectively, the deferred tax
     asset and deferred tax liability accounts, as recorded when material,
     consist of temporary differences. Temporary differences represent
     differences in the recognition of assets and liabilities for tax and
     financial reporting purposes, primarily allowance for doubtful accounts and
     accumulated depreciation.

     As of December 31, 2002 and 2001, the deferred tax asset related to the
     Company's net operating loss carryforward is fully reserved. Due to the
     provisions of Internal Revenue Code Section 338, the Company may have no
     net operating loss carryforwards 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.

                                       10





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE F - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

8.   Income (Loss) per share
     -----------------------

     Basic earnings (loss) per share is computed by dividing the net income
     (loss) by the weighted-average number of shares of common stock and common
     stock equivalents (primarily outstanding options and warrants). Common
     stock equivalents represent the dilutive effect of the assumed exercise of
     the outstanding stock options and warrants, using the treasury stock
     method. The calculation of fully diluted earnings (loss) per share assumes
     the dilutive effect of the exercise of outstanding options and warrants at
     either the beginning of the respective period presented or the date of
     issuance, whichever is later. As of December 31, 2002 and 2001, the
     Company's outstanding stock options are considered anti-dilutive due to the
     Company's net operating loss position.

NOTE G - FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.

Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.

Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The Company does not use derivative
instruments to moderate its exposure to financial risk, if any.

NOTE H - CONTRACT RIGHTS

On April 12, 2001, TTC issued 165 shares of restricted, unregistered Series A
Cumulative and Convertible Preferred Stock to 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
technology. This transaction was valued at an agreed-upon amount of
approximately $165,000. WBG and Red Guard were and are unrelated entities.

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.

                                       11





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE H - CONTRACT RIGHTS - CONTINUED

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 shall be
defined as the pultruded composite core capacity stated on the specifications by
the builder (WBG) as mutually agreed upon by TTC. The royalty shall decline by
one percent (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 two percent (2%) of Gross Revenues received by TTC from the sale of
the technology products. In the event of any sub-license agreements, TTC shall
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 shall have the right
to produce same. No such requirements exist as of September 30, 2002 or
subsequent thereto.

Through February 2003, the Company, TTC and WBG were involved in litigation
regarding the interpretation and enforcement of the License Agreement. (See Note
N - Litigation Contingencies). During February 2003, all litigation was settled
involving the "license dispute" and 3 other related cases. This included a new
license agreement was signed which with W. Brandt Goldsworthy & Associates, Inc.
(WBGA), which allows CTC to produce electrical cables using any patent which may
be granted as a result of WBGA's patent application on CRAC1 technology, for
which CTC will owe a royalty of 1% to WBGA. If CTC's ACCC cable product uses any
claim from CRAC1 that is granted by the Patent Office, then CTC will owe a
royalty of 2% to WBGA.

NOTE I - INVESTMENTS IN OTHER COMPANIES

Investments in other companies consists of the following at December 31, 2002
and 2001:

                                           Carrying value at  Carrying value at
                                              December 31,       December 31,
     Investee company                             2002              2001
     ----------------                          ---------         ---------
Held-to-Maturity
----------------
     Integrated Performance Systems, Inc.      $  1,000          $  1,000
     STL Group, Inc.                                 --             1,000
     TMA Ventures, LLC/ MEMX, Inc.                   --             1,000
     AMJ Logistics, Inc.                             --           233,270
                                               ---------         ---------

         Totals                                $  1,000          $236,270
                                               =========         =========

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 all of the
Company's investment interests in other companies, except for the investment in
Integrated Performance Systems, Inc.

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.

                                       12





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE J - INCOME TAXES

The components of income tax (benefit) expense for the three months ended
December 31, 2002 and 2001 and the period from March 28, 2001 (date of
inception) through December 31, 2002 , respectively, are as follows:

                                                                Period from
                                                               March 28, 2001
                         Three months        Three months    (date of inception)
                            ended               ended              through
                         December 31,        December 31,        December 31,
                             2002                2001                2002
                           --------            --------            --------
       Federal:
         Current           $     -             $     -             $     -
         Deferred                -                   -                   -
                           --------            --------            --------
                                 -                   -                   -
                           --------            --------            --------
       State:
         Current                 -                   -                   -
         Deferred                -                   -                   -
                           --------            --------            --------
                                 -                   -                   -
                           --------            --------            --------

         Total             $     -             $     -             $     -
                           ========            ========            ========

As of December 31, 2002, the Company has a net operating loss carryforward of
approximately $6,300,000 to offset future taxable income. Subject to current
regulations, this carryforward will begin to expire in 2020. The amount and
availability of the net operating loss carryforwards 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 50 percent 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 carryforwards.

The Company's income tax expense for the three months ended December 31, 2002
and 2001 and the period from March 28, 2001 (date of inception) through December
31, 2002, respectively, are as follows:

<TABLE>
<CAPTION>
                                                                                             Period from
                                                                                            March 28, 2001
                                                          Three months      Three months  (date of inception)
                                                              ended            ended            through
                                                          December 31,      December 31,      December 31,
                                                              2002              2001              2002
                                                          ------------      ------------      ------------
<S>                                                       <C>               <C>               <C>
Statutory rate applied to income before income taxes      $  (138,000)      $  (168,000)      $(2,262,000)
Increase (decrease) in income taxes resulting from:
     State income taxes                                            --                --                --
     Other, including reserve for deferred tax asset          138,000           168,000         2,262,000
                                                          ------------      ------------      ------------

       Income tax expense                                 $        --       $        --       $        --
                                                          ============      ============      ============
</TABLE>

Temporary differences, consisting primarily of statutory deferrals of expenses
for organizational costs, statutory differences in the depreciable lives for
property and equipment, between the financial statement carrying amounts and tax
bases of assets and liabilities and timing of the deductibility of accrued
executive compensation give rise to deferred tax assets and liabilities as of
December 31, 2002 and 2001, respectively:

                                                 December 31,      December 31,
                                                     2002              2001
                                                 ------------      ------------
         Deferred tax assets
           Net operating loss carryforwards      $ 1,896,000       $   341,000
           Less valuation allowance               (1,896,000)         (341,000)
                                                 ------------      ------------

         Net Deferred Tax Asset                  $        --       $        --
                                                 ============      ============

                                       13





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE J - INCOME TAXES - CONTINUED

During the three months ended December 31, 2002 and 2001, respectively, the
reserve for the deferred current tax asset increased by approximately $128,000
and $167,000, respectively.

NOTE K - PREFERRED STOCK TRANSACTIONS

Preferred stock consists of the following as of December 31, 2002 and 2001,
respectively:

<TABLE>
<CAPTION>
                                              December 31,            December 31,
                                                  2002                     2001
                                          ---------------------   ---------------------
                                          # shares    par value   # shares    par value
                                          --------    ---------   --------    ---------
<S>                                         <C>         <C>         <C>          <C>
Series A Cumulative Convertible Stock          --       $  --         165       $  --
Series B Cumulative Convertible Stock       1,320           1       1,320           1
                                            -----       -----       -----       -----
     Totals                                 1,320       $   1       1,485       $   1
                                            =====       =====       =====       =====
</TABLE>

On June 27, 2001, TTC authorized and allocated 2,000 shares of Series B 10%
Cumulative Convertible Preferred Stock. The Series B Preferred Stock (Series B
Stock) was issued at $100.00 per share. The Series B Stock shall be entitled to
receive cumulative cash dividends at a rate of 10.0% per annum of the issue
price ($100.00 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
shall be 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 shall bear interest at 10.0% 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 109.0% 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 approximately
$100,000 on August 28, 2001 and 320 shares to an unrelated third party for cash
proceeds of approximately $32,000 on October 11, 2001.

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.

NOTE L - COMMON STOCK TRANSACTIONS

On November 3, 2001, in connection with a business combination transaction, the
Company's then controlling shareholder surrendered and cancelled 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 Transmission
Technology Corporation (TTC) in exchange for 100.0% 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.
Transmission Technology Corporation became a wholly-owned subsidiary of the
Company.

On November 3, 2001, the Company issued an aggregate 450,000 shares of
restricted, unregistered common stock to four (4) unrelated entities and/or
individuals as compensation for various financial consulting services provided
in the above discussed Agreement and Plan of Reorganization. This transaction
was valued at approximately $90,000, 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.

                                       14





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE L - COMMON STOCK TRANSACTIONS - CONTINUED

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 shall vest against normal monthly billings from the law firm to
the Company using the agreed-upon valuation of $3.78 per share, regardless of
the open market price of the Company's common stock during the billing month. If
the aggregate market value of the 79,402 shares are worth less than $450,000 in
the open market at the average mean of the bid and ask price for the shares
during the one-month period just preceding the first anniversary of the retainer
agreement (October 30, 2002) then the law firm will have 15 days to make a
written election to either a) exercise a downward adjustment in the agreed-upon
price of $3.78 to an amount of not less than $1.89 per share, which would cause
the Company to issue up to an additional 79,402 equivalent post- acquisition
shares to the law firm or b) put all 79,402 shares back to the Company and
require payment in cash for the legal services provided during the initial term
of the agreement. 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 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.

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 approximately $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.

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 $152,729, 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.

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.

                                       15





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE L - COMMON STOCK TRANSACTIONS - CONTINUED

During the fourth quarter of 2002, the Company, in conjunction with a separate
Private Placement Memorandum sold an aggregate 6,400 Units for gross proceeds of
approximately $11,520. Each Unit consisted of 10 shares of unregistered,
restricted common stock; 10 Series A warrants and 5 Series B warrants.

During November and December 2002, in conjunction with a separate Private
Placement Memorandum, the Company sold an aggregate 1,832,500 Units for gross
proceeds of approximately $183,250. Each Unit consists of one share of
unregistered, restricted common stock and one Series E warrant to purchase one
share of unregistered, restricted common stock.

NOTE M - STOCK OPTIONS

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 following table summarizes
all common stock options granted from the grant date through March 31, 2002:

<TABLE>
<CAPTION>

                              Options        Options          Options           Options      Exercise price
                              granted       exercised        terminated       outstanding      per share
                              -------       ---------        ----------       -----------      ---------
<S>                          <C>            <C>               <C>               <C>             <C>
     Series B
        Preferred            $500,000       $132,000          $368,000          $     -         $100.00
                             ---------      ---------         ---------         --------

     Totals                  $500,000       $132,000          $368,000          $     -
                             =========      =========         =========         ========
</TABLE>

On May 15, 2001, TTC established the 2001 Incentive Compensation Stock Option
Plan (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. The
exercise price of the underlying shares will be determined by the Board of
Directors; however, the exercise price may not be lower than 100.0% 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 shall automatically terminate 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. The options were issued at
exercise prices between $0.40 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. 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.

                (Remainder of this page left blank intentionally)

                                       16





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE M - STOCK OPTIONS - CONTINUED

The following table summarizes all common stock options granted through December
31, 2002.

<TABLE>
<CAPTION>
                            Options           Options       Options        Options      Exercise price    Options
                            granted          exercised     terminated    outstanding       per share     not vested
                            -------          ---------     ----------    -----------       ---------     ----------
<C>                         <C>             <C>             <C>            <C>           <C>              <C>
2001 employees              1,357,740           -              -           1,357,740     $0.31 - $0.35      52,382
2002 consultants            5,950,000       (2,000,000)     (125,000)      3,825,000     $0.08 - $2.00    3,166,666
                            ---------       -----------     ---------      ---------                      ---------

     Totals                 7,307,740       (2,000,000)     (125,000)      5,182,740                      3,219,048
                            =========       ===========     =========      =========                      =========
</TABLE>

The weighted average exercise price of all issued and outstanding options at
December 31, 2002 is approximately $0.68 and approximately 1,963,692 of the
issued and outstanding options are vested and eligible for exercise.

Effective September 30, 2002, the Company's Board of Directors elected to
expense the imputed compensation cost related to stock options granted during
Fiscal 2002. The calculations to estimate the fair value of the options were
made using the Black-Scholes pricing model which required making significant
assumptions, which are listed as follows:

Expected life of the option:        The initial life of the corresponding
                                    option, either five (5) or ten (10) years
Expected volatility in
   the Company's stock price:       100.0%, which was based on fluctuations of
                                    the Company's stock price over the past
                                    Fiscal year.
Expected dividends:                 Zero (0.00) based on past performance
Anticipated risk free
    interest rate:                  Estimated to be 6.0% at September 30, 2002

This calculation resulted in approximately $1,664,275 being charged to
operations for the year ended September 30, 2002 for stock options outstanding.

NOTE N - STOCK 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.

The Company (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.

During the fourth quarter of 2002, the Company sold an aggregate 6,400 Units, in
conjunction with a separate Private Placement Memorandum, for gross proceeds of
approximately $11,520. Each Unit consisted of 10 shares of restricted,
unregistered common stock; 10 Series A warrants and 5 Series B warrants. Each
Series A warrant entitles the holder to purchase a share of common stock at a
price of $0.35 per share and expires at the earlier of December 1, 2003 or 3
weeks following written notification by the Company that our common stock closed
at or above $0.61 per share for 5 consecutive trading days. Each Series B
warrant entitles the holder to purchase a share of common stock at $0.60 per
share and expires at the earlier of June 30, 2004 or 3 weeks following written
notification by the Company that our common stock closed at or above $1.05 per
share for 5 consecutive trading days.

                                       17





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE N - STOCK WARRANTS - CONTINUED

During November and December 2002, the Company sold an aggregate 1,832,500
Units, pursuant to a separate Private Placement Memorandum, for gross proceeds
of approximately $183,250. Each Unit consists 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.

The following table presents the status of the issued and outstanding stock
warrants as of December 31, 2002:

<TABLE>
<CAPTION>
                                      Warrants            Warrants
                                     originally        outstanding at
                                       issued         December 31, 2002    Exercise price
                                       ------         -----------------    --------------
<S>                                   <C>                  <C>            <C>
Series A Preferred Stock Warrants     1,905,000            1,897,660      $1.26 per share
Series A Common Stock Warrants           64,000               64,000      $0.35 per share
Series B Common Stock Warrants           32,000               32,000      $0.60 per share
Series E Common Stock Warrants        1,832,500            1,832,500      $0.25 per share
                                      ---------            ---------

Totals at December 31, 2002           3,833,500            3,826,160
                                      =========            =========
</TABLE>

NOTE O - COMMITMENTS

The Company operates in leased offices, located in Irvine, California, on a
month-to-month agreement at a rate of approximately $4,600 per month.

NOTE P - LITIGATION CONTINGENCIES

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"):

The following describes all known material legal proceedings commenced by or
against CTC or its wholly owned subsidiary, Transmission Technology Corporation
("TTC") for the quarterly period covered by this report. As discussed at the end
of this section, four of the actions are being dismissed in connection with a
Settlement Agreement and Mutual Release dated February 6, 2003.

1. 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 at this time are Transmission Technology Corporation ("TTC"), C.
William Arrington, Composite Technology Corporation ("CTC"), W. Brandt
Goldsworthy & Associates, Inc. ("WBGA"), W.B.G., Inc. ("WBG"), Tom Sawyer, and
Composite Power Corporation. See Subsequent Events below.

2. 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 and has now been transferred 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.
See Subsequent Events below.

                                       18





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE P - LITIGATION CONTINGENCIES - CONTINUED

3. 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 and has now been transferred to the United States District
Court, Central District of California after being allowed to be included in the
action of TTC vs WBG/WBGA et al. The principal parties are TTC, CTC, Arrington,
Wilcoxon, and Sawyer. 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. See Subsequent Events below.

4. 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. See Subsequent Events below.

5. 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. Plaintiff
seeks $250,000 in unpaid legal fees. CTC believes that it has valid defenses and
intends to vigorously contest the claim. On December 12, 2003 the motions were
heard and the Demurrer was granted in part. On or about January 13, 2003,
Plaintiffs filed a First Amended Complaint that is currently pending. Due to
CTC's cash position, a judgment in favor of Plaintiff on this claim could have a
material negative effect on CTC's plan of operation.

Subsequent Events - As of February 6, 2003, CTC entered a Settlement Agreement
and Mutual Release pursuant to which all of claims and counterclaims in the
legal proceedings 1-4 discussed above are being dismissed. A copy of the
Settlement Agreement and Mutual Release will be filed as an exhibit to CTC's
Form 10-QSB for the period ending March 31, 2003.

Other than the matters discussed above, the Company is not a party to any other
legal proceedings.

NOTE Q - COMMITMENTS

PROFESSIONAL SERVICES CONSULTING AGREEMENTS
-------------------------------------------

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

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 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. Further, the Company is obligated
to pay the individual interest on unpaid amounts at a rate of 10.0% per annum.

A contract with an individual for product development research at a rate of $500
per day. This contract is cancellable at any time by either party.

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                                       19





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE Q - COMMITMENTS - CONTINUED

PROFESSIONAL SERVICES CONSULTING AGREEMENTS - CONTINUED
-------------------------------------------

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 $2.00 per
share for 100,000 options. The options vested on the grant date.

A contract with a corporation, who's 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 also contained the granting of
options to the individual to purchase up to 635,000 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 options vest in pro-rata equal segments
of 20.0% of the total grant on an annual basis starting in December 2002. The
Company is obligated to pay the individual interest on unpaid amounts at a rate
of 10.0% per annum and is obligated to pay a royalty to the individual equal to
0.35% of gross revenues on all products sold by the Company using technology
developed by this individual.

A contract with a corporation, who's 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 the individual 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 $1.00 per share. The options vest in pro-rata equal
segments of 20.0% of the total grant on an annual basis starting in December
2002. The Company is obligated to pay the individual interest on unpaid amounts
at a rate of 10.0% per annum and is obligated to pay a royalty to the individual
equal to 0.35% of gross revenues on all products sold by the Company using
technology developed by this individual.

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.

BUSINESS SERVICES AGREEMENTS
----------------------------

A contract with an unrelated person for consulting services at a rate of
$500,000 per year, payable in common stock. 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 at a price of $0.10
per share. The options vest in pro-rata equal segments in April 2002, January
2003 and January 2004.

A contract with an unrelated individual for consulting services at a rate of
$100,000 per year, payable in 75,000 shares of common stock. This agreement
commenced in March 2002 and automatically renews annually unless cancelled 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 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. This contract was cancelled by the Company in the first calendar
quarter of 2003.

A contract with an individual for consulting services for 1,000,000 shares of
common stock. This contract commenced on January 2002 and expires in January
2003. This agreement commenced in January 2002 for a one- year term. This
agreement also contained the granting of options to purchase up to 1,000,000
shares of common stock 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. Further, the
Company is obligated to pay the individual a success fee equal to 10.0% on all
equity capital raised by the individual. As of September 30, 2002, the Company
had no obligation under the "success fee" portion of this agreement.

                                       20





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE Q - COMMITMENTS - CONTINUED

FINANCIAL SERVICES AGREEMENTS - CONTINUED
-----------------------------

A finders 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. Further, 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 will be cancelled by the
Company in the first calendar quarter of 2003.

A finders fee agreement for capital financing with an unrelated corporation on a
"successful efforts" basis at a rate of 6.0% of the total gross investment
received by the Company as facilitated under this agreement and 200,000 shares
of unregistered, restricted common stock. Further, 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
consultant. This agreement expired in December 2002.

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. Further, the entity will also receive a
commission of 10.0% in cash and 10.0% in equivalent warrants for stock for
successful funding through sources identified by this entity.

A finders fee agreement for capital financing with an unrelated entity which
requires a one-time fee 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. Further, the
agreement requires a cash commission equal to 8.0% if the investment is in the
form of equity; 6.0% if the investment is in the form of subordinated debt and
2.0% if the investment is in the form of senior debt. This contract will be
cancelled by the Company in the first calendar quarter of 2003.

A finders fee agreement for capital financing with an unrelated individual on a
"successful efforts" basis at a rate of 4.0% of the total gross investment
received by the Company as facilitated under this agreement. This agreement is
expected to be either cancelled or significantly modified during the first
calendar quarter of 2003.

A finders fee agreement for capital financing with an unrelated entity on a
"successful efforts" basis at a rate of 5.0% 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
anticipates cancelling this agreement during the first calendar quarter of 2003.

                (Remainder of this page left blank intentionally)

                                       21





<PAGE>

ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

(1)  CAUTION REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in this quarterly filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"

and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.

Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; 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.

Given these uncertainties, readers of this Form 10-QSB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.

(2)  GENERAL COMMENTS

Composite Technology Corporation (Company) was originally incorporated under the
laws of the State of Florida on February 26, 1980 as Eldorado Gold &
Exploration, Inc. On January 13, 1987, the Company amended its Articles of
Incorporation to change the corporate name to Eldorado Financial Group, Inc. and
modified the Company's 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, the Company changed its 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. The Articles of Incorporation and Bylaws of the Nevada
corporation became the Articles of Incorporation and Bylaws of the surviving
corporation. Such Articles of Incorporation did not make any changes to the
capital structure of the Company.

On November 3, 2001, the Company exchanged 60,000,000 shares of restricted,
unregistered common stock for 100.0% of the then issued and outstanding common
stock of Transmission Technology Corporation, a privately- owned Nevada
corporation. Transmission Technology Corporation was incorporated on March 28,
2001 and initially capitalized on April 3, 2001. Transmission Technology
Corporation was formed to own a license agreement related to patent-pending
composite reinforced electrical transmission cable utilizing composite core
materials. Transmission Technology Corporation became a wholly-owned subsidiary
of the Company.

In conjunction with the November 3, 2001 transaction, the Company, in November
2001, changed its corporate name to Composite Technology Corporation and amended
its 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, the Company's Board of Directors elected to change the
fiscal year-end of the Company from December 31 to September 30. Additionally,
the Board of Directors established the initial year-end of September 30 for the
Company's wholly-owned subsidiary, Transmission Technology Corporation. The
accompanying consolidated financial statements reflect this action.

The acquisition of Transmission Technology Corporation, on November 3, 2001, by
the Company effected a change in control and was accounted for as a" reverse
acquisition" whereby Transmission Technology Corporation is the accounting
acquiror for financial statement purposes. Accordingly, for all financial
statement presentations for periods subsequent to the September 30, 2001
year-end date, the financial statements of the Company reflect the historical
financial statements of Transmission Technology Corporation from its inception
on March 28, 2001 and the operations of the Company subsequent to September 30,
2001.

                                       22





<PAGE>

(3)  RESULTS OF OPERATIONS

The Company had no revenue for either of the quarters ended December 31, 2002 or
2001, respectively.

General and administrative expenses for the quarters ended December 31, 2002 and
2001 were approximately $407,000 and $493,000, of which legal and professional
fees principally associated with the reverse acquisition of Transmission
Technology Corporation, and regulatory reporting thereof, composed approximately
$107,000 (26.425) and $391,000 (79.31%) of the total quarterly expenses. Accrued
officer compensation of approximately $30,000 (7.38%) and $49,000 (9.92%) and
travel expenses of approximately $10,600 (2.61%) and $32,000 (6.49%) composed
other key expenditures for the quarters ended December 31, 2002 and 2001. During
the quarter ended December 31, 2002, the Company incurred research and
development costs of approximately $211,700 (52.07%). The Company anticipates
similar expense trends in future periods until such time that the Company
commences production of various composite products for sale.

(4)  PLAN OF OPERATION

We plan to produce a limited production of composite core and subcontract the
helical winding of aluminum conductors so that a significant demonstration test
in an operating transmission line can be commenced during the second quarter of
Calendar 2003. We expect that the planned test will be conducted by a major
American utility company along with a consortium of approximately 15 other
utility companies and the Electric Power Research Institute. The test will be
closely monitored for three months after which time we anticipate receiving
orders from utility companies, although the demonstration will continue for at
least two years. By June 30, 2003, we plan to finalize the design and produce a
working prototype of the specialized production line capable of economically
manufacturing high strength composite core. We are presently negotiating various
possible strategic relationships, including joint ventures with conventional
ACSR cable manufacturers, in which we will either sell our composite core,
license or sell our production equipment, or enter into an agreement with
respect to the production of cable using our composite core. The equipment can
be used for other types of high strength composite production with various
modifications in the event that there is any delay in the acceptance of the
composite reinforced cable. We intend to establish an equipment and product
prototype development facility in Orange County, California. We plan to continue
negotiating joint ventures for the production of our products in other
countries, including in China and Brazil.

(5)  LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2002, the Company had working capital of approximately
$(1,476,000) as compared to approximately $(1,159,000) as of September 30, 2002
and approximately $(234,000) as of December 31, 2001.

During the year ended September 30, 2002, the Company sold a combination of
preferred and common stock for gross proceeds of approximately $641,000, which
was used to support operations and working capital needs. Through December 31,
2002, the Company sold approximately 1,686,500 shares of common stock through
two separate Private Placement Memorandums for gross proceeds of approximately
$194,770.

Between January 2002 and September 2002, various individuals and entities,
including Red Guard Industries, Inc., an affiliated entity, made various
short-term working capital loans to the Company aggregating $223,000. As of
September 30, 2002, each respective loan had been converted into an aggregate
42,500 shares of restricted, unregistered common stock.

During the first quarter of 2003, various individuals and entities made various
short-term working capital loans to the Company aggregating $45,000. As of 31
December 2002, two loans aggregating $15,000 were converted into 150,000
restricted, unregistered common stock with 150,000 warrants at $0.25.

We plan to obtain capital through loans or equity offerings in order to have the
funds required to complete the implementation of our plan of operation. We
currently have no material commitments for capital expenditures.

We anticipate receiving orders for our products during the first six months of
Calendar 2003. Prior to the consummation, processing and shipment of revenue
generating orders, we anticipate that we will remain dependent on the receipt of
additional financing from third parties. If such financing is not available, we
may be required to discontinue operations.

We expect to recover some equipment development costs through the sale of
equipment to production joint ventures, although there can be no assurance that
we will sell any such equipment or enter into any such joint ventures.

                                       23





<PAGE>

It may be necessary for management and/or significant stockholders to obtain or
provide additional working capital necessary to support and preserve the
integrity of the corporate entity. However, there is no legal obligation for
either management or significant stockholders to provide additional future
funding.

(6)  PRODUCT RESEARCH AND DEVELOPMENT

We believe research and development activities are important to our success.
Over the next 12 calendar months, we anticipate completing various other
composite reinforced cable designs and the development of the hardware required
to splice, terminate, and extend the cable. Additionally, we plan to design,
seek patents for, and produce prototypes of novel composite structures. We plan
to complete a unique prototype production equipment line that will allow for the
production of several types of products, which will allow us to expand to
different products.

(7)  ACQUISITION OF PLANT AND EQUIPMENT

We do not own any real estate. During the quarter ended December 31, 2002, we
have acquired an initial pultrusion machine for approximately $102,950 and
anticipate utilizing this equipment in our research and development efforts. We
do anticipate the need for further prototype equipment and product manufacturing
capability in the near future and are actively searching for facilities. The
precise space requirements are being finalized since we anticipate the
requirement for prototype equipment development to occur during the first six
months of calendar 2003.

(8)  PERSONNEL

We currently have two full time employees; Benton H Wilcoxon, and C. William
Arrington. Since we are in the "start-up" phase of our business plan, we have
not been able to pay salaries to date. However, salaries are being accrued at a
monthly rate of $5,000 since April 1, 2001 for each of Mr. Wilcoxon and Mr.
Arrington.

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 3 - 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 Chief Financial Officer.
Based upon that evaluation, the Company's President and Chief Executive Officer
along with the Company's 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.

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

The following describes all known material legal proceedings commenced by or
against CTC or its wholly owned subsidiary, Transmission Technology Corporation
("TTC") for the quarterly period covered by this report. As discussed under
Subsequent Events, four of the actions are being dismissed in connection with a
Settlement Agreement and Mutual Release dated February 6, 2003.

1.   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 at this time are Transmission Technology Corporation

                                       24





<PAGE>

     ("TTC"), C. William Arrington, Composite Technology Corporation ("CTC"), W.
     Brandt Goldsworthy & Associates, Inc. ("WBGA"), W.B.G., Inc. ("WBG"), Tom
     Sawyer, and Composite Power Corporation. See Subsequent Events below.

2.   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 and has now been transferred 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. See Subsequent Events
     below.

3.   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 and has now been transferred to the
     United States District Court, Central District of California after being
     allowed to be included in the action of TTC vs WBG/WBGA et al. The
     principal parties are TTC, CTC, Arrington, Wilcoxon, and Sawyer. 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. See Subsequent Events below.

4.   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. See Subsequent Events below.

5.   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. Plaintiff seeks $250,000 in unpaid legal fees. CTC believes that
     it has valid defenses and intends to vigorously contest the claim. On
     December 12, 2003 the motions were heard and the Demurrer was granted in
     part. On or about January 13, 2003, Plaintiffs filed a First Amended
     Complaint that is currently pending. Due to CTC's cash position, a judgment
     in favor of Plaintiff on this claim could have a material negative effect
     on CTC's plan of operation.

As of February 6, 2003, CTC entered a Settlement Agreement and Mutual Release
pursuant to which all of claims and counterclaims in the items numbered 1-4
discussed above are being dismissed. A copy of the Settlement Agreement and
Mutual Release will be filed as an exhibit to CTC's Form 10-QSB for the period
ending March 31, 2003.

Other than the matters discussed above, CTC was not a party to any material
pending legal proceedings during the period covered by this report.

ITEM 2 - CHANGES IN SECURITIES

During November and December 2001, the Company sold an aggregate 1,832,500
Units, pursuant to a Private Placement Memorandum, for gross proceeds of
approximately $183,250. Each Unit consists of one share of unregistered,
restricted common stock and one Series E warrant to purchase one share of
unregistered, restricted common stock. Each Series E warrant entitles the holder
to purchase a share of common stock at $0.25 per share and expires on December
1, 2004. The Company did not use an underwriter in the sales of these
securities. All sales were to accredited investors. There were no public offers
or general solicitation and Management negotiated the terms of the private
placement. The Company relied upon Section 4(2) of The Securities Act of 1933,
as amended, for an exemption from registration on these shares.

During the fourth quarter of 2002, the Company sold an aggregate 6,400 Units, in
conjunction with a separate Private Placement Memorandum, for gross proceeds of
approximately $11,520. Each Unit consisted of 10 shares of unregistered,
restricted common stock; 10 Series A warrants and 5 Series B warrants. Each
Series A warrant entitles the holder to purchase a share of common stock at a
price of $0.35 per share and expires at the earlier of December 1, 2003 or 3
weeks following written notification by the Company that our common stock closed
at or above $0.61 per share for 5 consecutive trading days. Each Series B
warrant entitles the holder to purchase a share of common stock at $0.60 per
share and expires at the earlier of June 30, 2004 or 3 weeks following written
notification by the Company that our common stock closed at or above $1.05 per
share for 5 consecutive trading days. The Company did not use an underwriter in

                                       25





<PAGE>

the sales of these securities. All sales were to accredited investors. There
were no public offers or general solicitation and Management negotiated the
terms of the private placement. The Company relied upon Section 4(2) of The
Securities Act of 1933, as amended, for an exemption from registration on these
shares.

ITEM 3 - DEFAULTS ON SENIOR SECURITIES

   None

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

   None

ITEM 5 - OTHER INFORMATION

   None

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

Exhibits
--------
       23.1   Consent of Independent Certified Public Accountants
       31.1   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
              2002 - Chief Executive Officer
       31.2   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
              2002 - Chief Financial Officer
       32.1   Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act
              of 2002

Reports on Form 8-K
-------------------
   None

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

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                COMPOSITE TECHNOLOGY CORPORATION

Date: February 3, 2004          /s/ Benton H Wilcoxon
      -----------------         ---------------------------------
                                Benton H Wilcoxon
                                Chief Executive Officer,
                                Chief Financial Officer, Director, and Secretary


                                       26