UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
                                   (Mark One)

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934.


                         COMMISSION FILE NUMBER 0-10999


                        COMPOSITE TECHNOLOGY CORPORATION

             (Exact Name of Registrant as Specified in Its Charter)


          NEVADA                                        59-2025386
       -------------                                    ----------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No.)
 Incorporation or Organization)


                       2026 McGaw Avenue Irvine, CA 92614
                    (Address of Principal Executive Offices)
                                   (Zip Code)


                                 (949) 428-8500
              (Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

YES |X| NO |_|

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

YES |X| NO |_|

Indicate the number of shares outstanding of the issuer's common stock as of
May 2, 2005


            CLASS                              NUMBER OF SHARES OUTSTANDING
            -----                              ----------------------------
   Common Stock, par value                          114,541,414 shares
       $0.001 per share

================================================================================
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                 Form 10-Q for the Quarter ended March 31, 2005
                                Table of Contents


<TABLE>
<CAPTION>
                                                                                                     Page
                                                                                                     ----
<S>                                                                                                  <C>
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements                                                                            3
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations          15
Item 3 Quantitative and Qualitative Disclosures About Market Risk                                     32
Item 4 Controls and Procedures                                                                        32

PART II - OTHER INFORMATION
Item 1 Legal Proceedings                                                                              33
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds                                    35
Item 3 Defaults on Senior Securities                                                                  35
Item 4 Submission of Matters to a Vote of Security Holders                                            36
Item 5 Other Information                                                                              36
Item 6 Exhibits                                                                                       37
SIGNATURE                                                                                             40
</TABLE>


                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

                          ITEM 1 - FINANCIAL STATEMENTS
                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                           CONSOLIDATED BALANCE SHEET
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                      March 31, 2005  September 30, 2004
                                                                                      --------------  ------------------
                                                                                        (unaudited)       (restated)
<S>                                                                                     <C>             <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents                                                                  6,659,967       2,930,615
Restricted Cash                                                                                   --      10,010,060
Accounts receivable, net                                                                   2,500,000       2,501,994
Inventory                                                                                  1,162,528         788,799
Prepaid expenses and other current assets                                                    434,761         378,052
                                                                                        ------------    ------------

Total current assets                                                                      10,757,256      16,609,520

PROPERTY AND EQUIPMENT, net                                                                2,459,438       1,253,123
OTHER ASSETS                                                                                 224,026         218,600
                                                                                        ------------    ------------

TOTAL ASSETS                                                                            $ 13,440,720    $ 18,081,243
                                                                                        ------------    ------------

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITY
Accounts payable - trade                                                                $  1,572,529    $  1,841,535
Accrued payroll and related expenses                                                         109,583         122,621
Accrued legal settlement                                                                     116,366              --
Deferred revenue                                                                             564,750         564,750
Accrued officer compensation                                                                 255,619         264,561
Deferred gain on sale of fixed assets                                                         26,110          49,569
Lease obligation - current                                                                   384,813         251,782
                                                                                        ------------    ------------

Total current liabilities                                                                  3,029,770       3,094,818
                                                                                        ------------    ------------

LONG TERM LIABILITIES
Convertible notes, net of unamortized debt  discount                                       9,961,786       8,901,106
Lease obligation - long-term                                                                 653,643         482,600
                                                                                        ------------    ------------

Total long-term liabilities                                                               10,615,429       9,383,706
                                                                                        ------------    ------------

Total Liabilities                                                                         13,645,199      12,478,524
                                                                                        ------------    ------------

SHAREHOLDERS' EQUITY
Common stock, $.001 par value 200,000,000 shares authorized 114,541,414 shares issued        114,541         110,841
and outstanding
Deferred compensation - stock options                                                       (159,950)       (362,925)
Additional paid-in capital                                                                36,397,746      32,294,159
Deficit accumulated during the development stage                                         (36,556,816)    (26,439,356)
                                                                                        ------------    ------------

Total shareholder's equity (Deficit)                                                        (204,479)      5,602,719
                                                                                        ------------    ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                              $ 13,440,720    $ 18,081,243
                                                                                        ------------    ------------
</TABLE>

The accompanying notes are an integral part of these financial statements


                                       3
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS
               FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
                                   (UNAUDITED)
                FOR THE SIX MONTHS ENDED MARCH 31, 2005 AND 2004
                                   (UNAUDITED)
               AND FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION)
                                TO MARCH 31, 2005
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                                 For the Period
                                                                                                                   from March
                                  Three Months        Three Months         Six Months         Six Months            28, 2001
                                 ended March 31,     ended March 31,     ended March 31,     ended March 31,     (Interception)
                                       2005               2004                2005               2004           to March 31, 2005
                                ----------------    ----------------    ----------------    ----------------    ----------------
                                   (unaudited)          Restated           (unaudited)          Restated
                                ----------------    ----------------    ----------------    ----------------    ----------------
                                                      (unaudited)                              (unaudited)         (unaudited)
<S>                             <C>                 <C>                 <C>                 <C>                 <C>
Revenue:
     Product Sales                            --                  --              46,485                  --              46,485
     Consulting Revenue                       --                  --                  --                  --          2,500,.000
                                ----------------    ----------------    ----------------    ----------------    ----------------

Total Revenue                                 --                  --              46,485                  --           2,546,485

Cost of production sales sold                 --                  --              30,894                  --              30,894
Cost of consulting revenue                    --                  --                  --                  --             314,548
                                ----------------    ----------------    ----------------    ----------------    ----------------

Gross margin                                  --                  --              15,591                  --           2,201,043

OPERATING EXPENSES
Officer compensation                      71,453              90,335             126,838             185,335           1,566,738
General and administrative               783,230           1,105,825           1,381,837           1,568,637           6,420,123
Legal, professional, &                 1,308,586             386,416           4,164,416             822,253          15,524,639
consulting
Research and development               1,139,749           1,515,676           2,219,400           1,978,985           9,679,873
Sales and Marketing                      232,453             254,221             505,242             565,838           3,126,534
Depreciation                             124,952              22,047             236,328              31,238             412,542
                                ----------------    ----------------    ----------------    ----------------    ----------------

Total operating expenses               3,660,423           3,374,520           8,634,061           5,152,286          36,730,449
                                ----------------    ----------------    ----------------    ----------------    ----------------

LOSS FROM OPERATIONS                  (3,660,423)         (3,374,520)         (8,618,470)         (5,152,286)        (34,529,406)
                                ----------------    ----------------    ----------------    ----------------    ----------------

OTHER INCOME /EXPENSE
Interest expense                        (783,570)               (147)         (1,534,789)               (147)         (1,949,353)
Interest income                            5,284                  --              32,544                  --              46,441
Gain on sale of assets                        --                  --               4,256                  --              13,732
Carrying value impairment
adjustment on investments in
other companies                           (1,000)                 --              (1,000)                 --            (138,230)
                                ----------------    ----------------    ----------------    ----------------    ----------------

Total other income/expense              (779,286)               (147)         (1,498,989)               (147)         (2,027,410)
                                ----------------    ----------------    ----------------    ----------------    ----------------

NET LOSS                              (4,439,709)         (3,374,667)        (10,117,459)         (5,152,433)        (36,556,816)
                                ----------------    ----------------    ----------------    ----------------    ----------------

BASIC AND DILUTED LOSS PER
SHARE                                      (0.04)              (0.03)              (0.09)              (0.05)
Loss per share                             (0.04)              (0.03)              (0.09)              (0.05)
                                ----------------    ----------------    ----------------    ----------------

TOTAL BASIC AND DILUTED LOSS
PER SHARE AVAILABLE TO COMMON
SHAREHOLDERS                               (0.04)              (0.03)              (0.09)              (0.05)

WEIGHT-AVERAGE COMMON SHARES
OUTSTANDING                          114,227,327         102,155,003         113,020,722         100,775,400
                                ----------------    ----------------    ----------------    ----------------
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                       4
<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION
                                AND SUBSIDIARIES
                          (DEVELOPMENT STAGE COMPANIES)
                CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE SIX MONTHS ENDED MARCH 31, 2005 AND 2004 (UNAUDITED)
      AND FOR THE PERIOD FROM MARCH 28, 2001 (INCEPTION) TO March 31, 2005
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                             For the Period
                                                                                                               from March
                                                                                 For the       For the six       28,2001
                                                                               six months     months ending  (Interception)
                                                                             ending March 31,   March 31,      to March 31,
                                                                                  2005           2004             2005
                                                                              ------------    ------------    ------------
                                                                              (unaudited)       Restated       (unaudited)
                                                                                              (unaudited)
<S>                                                                           <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                                       (10,117,459)     (5,152,286)   $(36,556,816)
Adjustments to reconcile net loss to net cash used in operating activities:
    Accretion of deferred gain on PP&E                                             (23,459)             --         (32,935)
    Loss on sale of fixed assets                                                    16,411              --          16,411
    Depreciation                                                                   124,952          31,239         301,166
    Amortization of prepaid expenses originally paid with common                        --         325,199         218,993
stock
    Interest on fixed conversion features                                        1,060,680              --       1,325,849
    Issuance of common stock for services                                          271,765         133,549       8,857,320
    Issuance of common stock for legal settlements                                      --              --         832,750
    Issuance of warrants for services                                            2,079,523              --       3,953,883
    Issuance of warrants for legal settlement                                           --              --          11,750
   Expense related to issuance of common stock at less than fair                        --              --         603,500
value
   Compensation expense related to fair value of stock options                     202,975         208,901       1,504,325
   Compensation expense related to modification of stock options                        --         282,651         364,277
   Compensation expense related to modification of stock warrants                       --              --       1,540,000
   Carrying value impairment adjustment on investments in other                      1,000              --         138,230
companies
(Increase) decrease in Assets:
   Restricted Cash                                                              10,010,060              --              --
   Accounts Receivable                                                               1,994              --      (2,500,000)
   Inventory                                                                      (361,855)             --      (1,150,654)
   Prepaid Expenses                                                                115,911        (203,984)         94,410
   Capitalized construction costs                                                  (11,874)             --        (218,153)
   Other assets                                                                    (66,668)             --        (276,268)
Increase (Decrease) in Liabilities
   Accounts payable - trade                                                       (269,006)        978,130       1,580,546
   Accrued legal settlement                                                        116,366         (49,066)        116,366
   Accrued payroll and related expenses                                            (13,038)         22,043         109,583
   Accrued officer compensation                                                     (8,942)          7,385         255,619
   Deferred revenue                                                                     --         303,500         564,750
                                                                              ------------    ------------    ------------
Net cash provided by (used in) operating activities                              3,129,335      (3,112,739)    (18,345,098)
                                                                              ------------    ------------    ------------

CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment                                                (895,795)       (656,403)     (1,966,088)
Proceeds from sale of assets                                                            --              --         500,000
Investments in other companies                                                          --              --         (40,000)
                                                                              ------------    ------------    ------------
Net cash provided by (used in) investing activities                               (895,795)       (656,403)     (1,506,088)
                                                                              ------------    ------------    ------------

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible debentures                                        --              --      15,000,000
Proceeds from notes payable                                                             --              --         253,000
Payments on capital lease assets                                                  (147,809)             --        (213,427)
Proceeds from sale of preferred stock                                                   --              --         132,000
Proceeds from exercise of options                                                  195,000              --         755,000
Proceeds from exercise of warrants                                               1,448,621         219,375       4,345,399
Common Stock Subscription Receivable                                                    --         (98,522)             --
Proceeds from sale of common stock                                                      --       3,403,504       6,476,211
Payment for costs associated with the sale of common stock                              --        (220,030)       (237,030)
                                                                              ------------    ------------    ------------
Net cash provided by financing activities                                        1,495,812       3,304,327      26,511,153
                                                                              ------------    ------------    ------------

Net increase/(decrease) in cash and cash equivalents                             3,729,352        (464,815)      6,659,967
CASH AND CASH EQUIVALENTS, BEGINNING OF  PERIOD                                  2,930,615       1,130,498              --
                                                                              ------------    ------------    ------------

CASH AND CASH EQUIVALENTS, END OF  PERIOD                                        6,659,967    $    665,683       6,659,967
                                                                              ------------    ------------    ------------

SUPPLEMENTAL DISCLOSERS OF CASH FLOW  INFORMATION
INTEREST PAID                                                                      501,690              --         884,486
INCOME TAX PAID                                                                      1,600              --           1,600
                                                                              ------------    ------------    ------------
</TABLE>

The accompanying notes are an integral part of these financial statements


                                       5
<PAGE>

Supplemental Schedule for Non Cash Financing Activities

During the first quarter of fiscal 2005, the Company approved for issuance
82,417 Series U warrants to two entities in connection with obtaining equipment
lease financing for the Company. Each Series U warrant entitles the holder to
purchase one share of unregistered, restricted common stock at $1.83 per share
and expires on August 18, 2008. The Company may, subject to a 20 day notice,
call the warrants if the common stock price is equal to or exceeds 200% of the
exercise price. The Company valued the warrants using the modified
Black-Scholes-Merton option pricing model at a fair value per warrant of $1.04.
The Company recognized $85,714 of compensation expense for services rendered
recorded in Legal, Consulting, and Professional Fees expense.

During the first quarter of fiscal 2005, the Company issued 1,083,592 warrants
in connection with obtaining an amendment to the Debenture held by Midsummer
Investment, Ltd, Bristol Investment Fund, Ltd, Islandia L.P. and Omicron Master
Trust. Each warrant entitles the holder to purchase one share of unregistered,
restricted common stock at $3.23 per share and expires on November 19, 2008. The
warrants were valued using the modified Black-Scholes-Merton option pricing
model at a fair value per warrant of $1.84 and the Company recognized $1,993,809
of compensation expense for services rendered in Legal, Consulting, and
Professional Fees expense.

During the second quarter of fiscal 2005, the Company issued 150,000 Common
Shares valued at $2.77 per share and registered under the Company's Form S-8 to
one consultant in payment of services related to intellectual property rights.

During the six months ended March 31, 2005, 33,332 Series K warrants exercisable
at $0.46 per warrant were exercised on a cashless exercise basis.

During the six months ended March 31, 2005, 250,000 Series L warrants
exercisable at $0.42 per warrant were exercised on a cashless exercise basis.

During the six months ended March 31, 2005, the Company acquired fixed assets
under a capital lease agreement in the amount of $451,883.

NOTE 1 - ORGANIZATION AND LINE OF BUSINESS
Composite Technology Corporation, incorporated in Florida and reincorporated in
Nevada, is an Irvine, CA based company providing advanced composite core
conductor ("ACCC") cables for electric transmission and distribution lines. The
Company operates under four wholly owned subsidiaries incorporated in the State
of Nevada: CTC Wind Systems Corporation, CTC Cable Corporation, CTC Towers &
Poles Corporation, and Transmission Technology Corporation. The Company's first
product is high performance ACCC cable for electric transmission and
distribution lines.

ACCC cable is commercially available in the United States and Canada through
distribution and purchase agreements between General Cable Industries, Inc. and
the Company's wholly owned subsidiary, CTC Cable Corporation and elsewhere
worldwide directly from the Company.

NOTE 2 - RESTATEMENT AND RECLASSIFICATIONS

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

In May, 2005, the Company also reclassified certain consulting related expenses
in the Statement of Operations for the three and six months ended March 31,
2004.


                                       6
<PAGE>

Below is the effect to the Balance Sheet as of March 31, 2004 and the Statements
of Operations for the three and six months ended March 31, 2004:

Balance Sheet as of March 31, 2004

                                      As Originally   Restatement        As
                                        Reported       Adjustment     Restated
 Shareholders' Deficit
Additional paid-in capital               16,842,552       282,945 1  17,125,497
                                        -----------   -----------   -----------
 Deficit accumulated during the
   development stage                    (16,632,419)     (282,945)1 (16,915,364)
                                        -----------   -----------   -----------
 Total stockholders' deficit               (219,757)                   (219,757)
                                        -----------   -----------   -----------

 Total liabilities & shareholders'
   deficit                                1,988,569            --     1,988,569
                                        ===========   ===========   ===========

Statement of Operations for
 Three months ended March 31, 2004

                                      As Originally   Restatement        As
                                         Reported      Adjustment     Restated
Operating Expenses
General and administrative                  956,543       266,529
                                                         (117,246)1   1,105,826
                                       ------------    ----------    ----------
Legal, Professional, and consulting       1,111,842        13,750 2
                                                         (739,176)2     386,416
                                       ------------    ----------    ----------
Research and Development                    806,505       709,171 2   1,515,676
                                       ------------    ----------    ----------
Sales and Marketing                              --         2,666 1
                                                          251,555 2     254,221
                                       ------------    ----------    ----------
Compensation expense related to fair
value of stock options legal                 64,125       (64,125)2          --
                                       ------------    ----------    ----------
Compensation expense related to fair
value of stock options research and
development                                  40,325       (40,325)2          --
                                       ------------    ----------    ----------

                                       ------------    ----------    ----------
Interest Expense                                 --           147 2         147
                                       ------------    ----------    ----------
 Net loss                                (3,091,722)     (282,945)   (3,374,667)

Statement of Operations for Six months ended March 31, 2004

                                      As Originally   Restatement        As
                                         Reported      Adjustment     Restated
Operating Expenses
General and administrative                1,554,279       266,529 1
                                                         (252,171)2   1,568,637
                                       ------------  ------------    ----------
Legal, Professional, and consulting       1,683,925        13,750 1
                                                         (875,422)2     822,253
                                       ------------  ------------    ----------
Research and Development                  1,205,810       773,175 2   1,978,985
                                       ------------  ------------    ----------
Sales and Marketing                              --         2,666 1
                                                          563,172 2     565,838
                                       ------------  ------------    ----------
Compensation expense related to fair
value of stock options legal                128,250      (128,250)2          --
                                       ------------  ------------    ----------
Compensation expense related to fair
value of stock options research and
development                                  80,650       (80,650)2          --
                                       ------------  ------------    ----------

                                       ------------  ------------    ----------
Interest Expense                                 --           147 2         147
                                       ------------  ------------    ----------
 Net loss                                (4,869,488)     (282,945)   (5,152,433)


                                       7
<PAGE>

1) During fiscal 2004, the Company allowed for the cashless exercise of non
qualifying employee stock options to four former employees as part of the
settlement of their option vesting and to one employee. A total of 280,265
shares were exercised between $0.25 per share and $1.00 per share. As a result
of these transactions, the Company had initially recorded $64,005 in
compensation expense. Under FIN 44, a cashless exercise where the exercise price
is paid for by the stock being exercised is considered to be a modification of
the option grant and the fair value of the transaction must be recorded as
expense. For the 280,265 shares exercised, 237,220 shares of Common Stock of the
Company were issued and additional compensation expense was recorded as follows:
the fair value was determined using the difference between the closing market
value of the Company's common stock on the date of each underlying transaction
and the exercise price per share of the options exercised. For fiscal 2004, the
total additional expense of $364,277 represents the fair value of the 280,265
shares, valued at $496,217 less the exercise cost of $65,935 and less the
previously recorded expense of $64,005. For the three and six months ended March
31, 2005, three individuals exercised 185,265 options at an exercise price of
between $0.25 and $0.53 per share resulting in additional compensation expense
of $282,945. The Company does not intend to allow for the cashless exercise of
additional stock options in the future.

2) During the preparation of the quarterly filing for the period ending March
31, 2005, the Company changed classification of certain consulting expenses
related to general and administrative, product development, and sales and
marketing activities. To be consistent with the current period presentation,
certain operating expense balances for the three and six month periods ending
March 31, 2004 were reclassified. No additional expense was recorded as a result
of this reclassification.

NOTE 3 - GOING CONCERN
The Company has received a report from its independent auditors for the year
ended September 30, 2004 that includes an explanatory paragraph describing the
uncertainty as to the Company's ability to continue as a going concern. These
consolidated financial statements contemplate the ability to continue as such
and do not include any adjustments that might result from this uncertainty.

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
The accompanying unaudited consolidated financial statements of Composite
Technology Corporation (the "Company" or "Composite Technology") have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not contain all of the information and footnotes required for complete financial
statements. Interim information is unaudited; however, in the opinion of the
Company's management, the accompanying unaudited, consolidated financial
statements reflect all adjustments (consisting of normal, recurring adjustments)
considered necessary for a fair presentation of the Company's interim financial
information. These financial statements and notes should be read in conjunction
with the audited financial statements of the Company included in the Company's
Annual Report on Form 10-KSB for the year ended September 30, 2004 filed with
the Securities and Exchange Commission on December 23, 2004.

The results of operations for the interim period ended March 31, 2005 are not
necessarily indicative of the operating results that may be reported for the
fiscal year ending September 30, 2005 or for any other future period.

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

Restricted Cash
Restricted cash equivalents at September 30, 2004 consisted of $10,010,060 held
in escrow pursuant to the conditions of the $15,000,000 Debenture offering
issued in August, 2004. The restriction condition was released in November, 2004
by the Debenture holders as a result of a renegotiation and issuance of
additional warrants to purchase shares of our Common Stock and the cash was
released to the company.

Revenue Recognition
Revenues are recognized based on guidance provided in the Securities and
Exchange Commission (SEC) Staff Accounting Bulletin No. 104 "Revenue Recognition
in Financial Statements," as amended (SAB 104). Accordingly, our general revenue
recognition policy is to recognize revenue when there is persuasive evidence of
an arrangement, the sales price is fixed or determinable, collection of the
related receivable is reasonably assured, and delivery has occurred or services
have been rendered.
The Company derives, or seeks to derive revenues from two sources:
(1)      Product revenue which includes revenue from the sale of composite core,
         wrapped composite core, and other electric utility related products.
(2)      Consulting revenue, which includes engineering, product design, and
         service fees that we receive under customer agreements related to the
         installation and design of our product sale solutions.
In addition to the above general revenue recognition principles prescribed by
SAB 104, our specific revenue recognition policies for each revenue source are
more fully described below.


                                       8
<PAGE>

PRODUCT SALES. Product revenues are generally recognized when product shipment
has been made and title has passed to the end user customer. Product revenues
consist primarily of revenue from the sale of: (i) wrapped composite core to
utilities either sold directly by the Company or through our distributor, ii)
composite core sold to a cable wrapping partner not subject to a distributor
agreement and where title passes to the partner, or iii) cable core hardware
sold to utility companies. For most product sales, we expect that the terms of
sales generally will not contain provisions that will obligate us to provide
additional products or services after installation to end users. We recognize
revenue: (i) upon shipment when products are shipped FOB shipping point or (ii)
upon delivery at the customer's location when products are shipped FOB
destination.

CONSULTING REVENUE Consulting revenues are generally recognized as the
consulting services are provided. We have entered into service contract
agreements with electric utility and utility services companies that generally
require us to provide engineering or design services, often in conjunction with
current or future product sales. In return, we receive engineering service fees
payable in cash. For multiple element contracts where there is no vendor
specific objective evidence (VSOE) that would allow the allocation of an
arrangement fee amongst various pieces of a multi-element contract, fees
received in advance of services provided are recorded as deferred revenues until
additional operational experience or other vendor specific objective evidence
becomes available, or until the contract is completed.

During its history, the Company has entered into revenue bearing contracts of a
long term (greater than one year) duration. Due to a lack of operational history
resulting in low reliability of estimates on interim rates of completion of such
contracts, revenues associated with long term contracts are recognized on the
completed-contract method of accounting. Under this method, billings and costs
are accumulated during the period of installation, but no revenues are recorded
before the completion of the work. Costs of revenues are capitalized and are
recorded in other current assets. Provisions for estimated losses on uncompleted
contracts are made at the time such losses are determined. Operating expenses,
including indirect costs and administrative expenses, are charged as incurred to
periodic income and not allocated to contract costs.

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

Stock-Based Compensation
The Company accounts for Stock Based Compensation according to the guidelines of
Staff Accounting Bulletin No. 107 which incorporates the interaction between
Statement of Financial Accounting Standards Statement 123 and certain SEC rules
and regulations. SFAS No. 123, "Accounting for Stock Compensation," as amended
by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure," defines a fair value based method of accounting for stock-based
compensation. However, SFAS No. 123 allows an entity to continue to measure
compensation cost related to stock and stock options issued to employees using
the intrinsic method of accounting prescribed by Accounting Principles Board
("APB") Opinion No. 25,"Accounting for Stock Issued to Employees." Entities
electing to remain with the accounting method of APB No. 25 must make pro forma
disclosures of net income and earnings per share as if the fair value method of
accounting defined in SFAS No. 123 had been applied. The Company has elected to
account for its stock-based compensation to employees using the intrinsic value
method under APB No. 25. In December 2004, SFAS No. 123 was revised and
eliminated the ability to account for share-based compensation transactions
using the intrinsic value method under APB Opinion No. 25, effective the first
interim or annual period beginning after June 15, 2005 for public companies. The
effective date for the Company will be beginning fourth quarter of fiscal 2005.

The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation cost other than that required to be recognized by
APB No. 25, the difference between the fair value of the Company's common stock
at the grant date and the exercise price of the options has been recognized. Had
compensation cost for the Company's Stock Plan been determined based on the fair
value at the grant date for awards consistent with the provisions of SFAS No.
123, the Company's net loss and loss per share for the six months ended March
31, 2005 and 2004 would have been increased to the pro forma amounts indicated
below:


                                       9
<PAGE>

<TABLE>
<CAPTION>
                                       Three months
                                       end March 31,       Three months end        Six months end         Six months end
                                           2005            March 31, 2004         March 31, 2005         March 31, 2004
                                     -----------------    ------------------    -------------------    -------------------
<S>                                  <C>                  <C>                   <C>                    <C>
Net loss, as reported                     (4,439,709)          $(3,374,667)           (10,117,459)           $(5,152,433)
Deduct total stock based employee
compensation expense determined
under fair value method for all
awards, net of tax                          (329,269)             (296,711)              (748,511)              (649,098)
                                     -----------------    ------------------    -------------------    -------------------

Net loss, pro forma                       (4,768,978)          $(3,671,378)           (10,865,970)          $ (5,801,531)
                                     -----------------    ------------------    -------------------    -------------------

Earnings per common share
Basic, as reported                             (0.04)                (0.03)                 (0.09)                 (0.05)
Basic, pro forma                               (0.04)                (0.04)                 (0.10)                 (0.06)
Diluted, as reported                           (0.04)                (0.03)                 (0.09)                 (0.05)
Diluted, pro forma                             (0.04)                (0.04)                 (0.10)                 (0.06)
</TABLE>

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

Research and Development Expenses
Research and development expenses are charged to operations as incurred.

Accounts Receivable

The Company has a $2,500,000 account receivable from one entity relating to
engineering services provided during fiscal 2004 for an electrical line project
in Kansas. The Company has received a progress payment on this receivable in
April, 2005 and has entered into a payment schedule for repayment of the entire
receivable by July, 2005.

Inventory
Inventory consists primarily of the following:

<TABLE>
<CAPTION>
                                      ---------------    ---------------
                                         March 31,         September 31,
                                           2005                2004
                                      ---------------    ---------------
              <S>                     <C>                <C>
              Raw Materials                  348,202             55,718
              Finished Goods                 814,326            733,081
                                             -------            -------
              Total                        1,162,528            788,799
</TABLE>

Loss Per Share
The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per share is
computed by dividing loss available to common shareholders by the
weighted-average number of common shares outstanding. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive.

The following common stock equivalents were excluded from the calculation of
diluted loss per share for the six months ended March 31, 2005 and 2004 since
their effect would have been anti-dilutive:

<TABLE>
<CAPTION>
                                                       March 31
                                             -----------------------------
                                                 2005            2004
                                             -------------    ------------
     <S>                                     <C>              <C>
     Convertible Debentures, if converted       8,982,036               0
     Options for common stock                   6,790,336       6,890,398
     Warrants                                  11,211,616      12,789,569
</TABLE>


                                       10
<PAGE>

Concentration of Credit Risk
The Company has an $2,500,000 account receivable from one entity relating to
engineering services provided during fiscal 2004. The Company expects receipt of
payment by the end of the second quarter of fiscal 2005. The Company has
received a progress payment on this receivable in April, 2005 and has entered
into a payment schedule for repayment of the entire receivable by July, 2005.

Recently Issued Accounting Pronouncements

SFAS No. 151
In November 2004, the FASB issued SFAS No. 151,"Inventory Costs". SFAS No. 151
amends the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage) under the guidance in ARB No. 43,
Chapter 4,"Inventory Pricing". Paragraph 5 of ARB No. 43, Chapter 4, previously
stated that ". . . under some circumstances, items such as idle facility
expense, excessive spoilage, double freight, and rehandling costs may be so
abnormal as to require treatment as current period charges. . . ." This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. This statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. Management does not expect adoption
of SFAS No. 151 to have a material impact on the Company's financial statements.

SFAS No. 152
In December 2004, the FASB issued SFAS No. 152,"Accounting for Real Estate
Time-Sharing Transactions". The FASB issued this Statement as a result of the
guidance provided in AICPA Statement of Position (SOP) 04-2,"Accounting for Real
Estate Time-Sharing Transactions". SOP 04-2 applies to all real estate
time-sharing transactions. Among other items, the SOP provides guidance on the
recording of credit losses and the treatment of selling costs, but does not
change the revenue recognition guidance in SFAS No. 66,"Accounting for Sales of
Real Estate", for real estate time-sharing transactions. SFAS No. 152 amends
Statement No. 66 to reference the guidance provided in SOP 04-2. SFAS No. 152
also amends SFAS No. 67, "Accounting for Costs and Initial Rental Operations of
Real Estate Projects", to state that SOP 04-2 provides the relevant guidance on
accounting for incidental operations and costs related to the sale of real
estate time-sharing transactions. SFAS No. 152 is effective for years beginning
after June 15, 2005, with restatements of previously issued financial statements
prohibited. This statement is not applicable to the Company.

SFAS No. 153
In December 2004, the FASB issued SFAS No. 153,"Exchanges of Nonmonetary
Assets," an amendment to Opinion No. 29,"Accounting for Nonmonetary
Transactions". Statement No. 153 eliminates certain differences in the guidance
in Opinion No. 29 as compared to the guidance contained in standards issued by
the International Accounting Standards Board. The amendment to Opinion No. 29
eliminates the fair value exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. Such an exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS No. 153 is effective for
nonmonetary asset exchanges occurring in periods beginning after June 15, 2005.
Earlier application is permitted for nonmonetary asset exchanges occurring in
periods beginning after December 16, 2004. Management does not expect adoption
of SFAS No. 153 to have a material impact on the Company's financial statements.

SFAS No. 123(R)
In December 2004, the FASB issued SFAS No. 123(R),"Share-Based Payment". SFAS
123(R) amends SFAS No. 123,"Accounting for Stock-Based Compensation", and APB
Opinion 25,"Accounting for Stock Issued to Employees." SFAS No.123(R) requires
that the cost of share-based payment transactions (including those with
employees and non-employees) be recognized in the financial statements. SFAS No.
123(R) applies to all share-based payment transactions in which an entity
acquires goods or services by issuing (or offering to issue) its shares, share
options, or other equity instruments (except for those held by an ESOP) or by
incurring liabilities (1) in amounts based (even in part) on the price of the
entity's shares or other equity instruments, or (2) that require (or may
require) settlement by the issuance of an entity's shares or other equity
instruments. This statement is effective for the Company as of the first interim
period or fiscal year beginning after June 15, 2005, or beginning its fourth
quarter of fiscal 2005. Management is currently assessing the effect of SFAS No.
123(R) on the Company's financial statement.


                                       11
<PAGE>

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment at March 31, 2005 consisted of the following:

<TABLE>
<CAPTION>
                      <S>                                              <C>
                      Manufacturing equipment                    2,157,810
                      Office furniture equipment                   304,417
                      Leasehold improvements                       357,193
                                                            ---------------
                                                                 2,819,420
                         Less accumulated depreciation           (359,982)
                                                            ---------------
                              TOTAL                              2,459,438
                                                            ---------------
</TABLE>

Depreciation expense was $236,328, $31,239, and $301,166 for the six months
ended March 31, 2005 and 2004 and the period from March 28, 2001 (inception) to
March 31, 2005, respectively.

NOTE 6 - COMMITMENT AND CONTINGENCIES

In November 2004, the Company committed to a $450,000 capital lease with a
financial institution. The lease was funded during the six months ended March
31, 2005. The Company is obligated to pay total monthly lease payments of
$14,197 for a total of 42 months and will have the option to purchase the
equipment for the fair market value, subject to a minimum of 10% and maximum of
20% of equipment cost. The Company allocated 12,362 Series U warrants as part of
the lease terms (See Note 7C - Warrants).

As part of this capital lease, the Company entered into a $93,015 sale leaseback
of one piece of manufacturing equipment. Under the terms of the Master Lease
Agreement, the Company received $83,714, which was net of a 10% security
deposit, and is to make payments of $2,896 per month for 42 months. At the end
of the lease term, the Company has the right to renew the lease for an
additional 12 months, terminate the lease and return the equipment or purchase
the equipment at fair value, subject to a minimum of 10% and a maximum of 20% of
the original capitalized cost. The Company recognized a loss in the amount of
$15,656 from this transaction which will be applied against the deferred gain on
sale of fixed assets that were leased back by the Company.

The Company has a $3 million commitment for equipment lease financing, subject
to completing due diligence, from a financial institution. The lease is for a
term of 42 months, has total monthly payments of $84,240 if fully funded and, at
the end of the lease term, the Company has the option of purchasing the
equipment for fair market value, subject to a minimum of 10% and a maximum of
20% of the equipment cost. As part of this commitment, the Company made a
deposit of $5,000 and allocated 70,055 Series U warrants to be paid upon lease
funding as part of the lease terms (See Note 6- Common Stock).

On March 2, 2005, an Arbitration Panel of the Superior Court of Fulton County,
State of Georgia in the case of J.P. Turner & Company, L.L.C. v. Composite
Technology Corporation awarded the plaintiff compensatory damages in the amount
of $106,763 plus interest. As of March 31, 2005, the Company has recorded an
accrual of $116,366 representing the total amount of the damages plus accrued
interest through March 31, 2005.

NOTE 7 - SHAREHOLDERS' EQUITY

A.  COMMON STOCK

During the second quarter of fiscal 2005, the Company issued 150,000 Common
Shares valued at $2.77 per share and registered under the Company's Form S-8 to
one consultant in payment of services related to intellectual property rights.

During the six month period ending March 31, 2005 the Company issued a total of
257,352 shares of Common Stock pursuant to cashless warrant exercises and
2,822,742 shares of Common Stock pursuant to warrant exercises at prices between
$0.25 and $2.04 per warrant for total cash proceeds of $1,448,621

During the six month period ending March 31, 2005, the Company issued a total of
480,000 shares of Common Stock pursuant to option exercises for cash at prices
between $0.25 and $1.75 per share for total cash proceeds of $195,000.


                                       12
<PAGE>

B.  STOCK OPTIONS

Stock Plan
During the six month period ending March 31, 2005 the Company issued to one
employee 100,000 options to purchase an equivalent number of shares registered
under the Company's Form S-8, at an exercise price of $1.68. These options were
cancelled in February, 2005. During the six month period ending March 31, 2005,
the Company issued to two employees 175,000 options to purchase an equivalent
number of shares registered under the Company's Form S-8, at an exercise price
of $4.02. 100,000 of these options were cancelled in February, 2005.

During the six months ended March 31, 2005, 430,000 options were exercised to
purchase common stock for total cash consideration of $107,500, at $0.25 per
share. During the six months ended March 31, 2005, 50,000 options were exercised
to purchase common stock for total cash consideration of $87,500, at $1.75 per
share.

On October 28, 2004, the Company's shareholders approved an increase of 15
million shares subject to the 2002 Non-Qualified Stock Compensation Plan.

The following table summarizes all Stock Plan activity through March 31, 2005.

                                                            Average
                                            Number          Exercise
                                           of Shares         Price

Outstanding, March 18, 2001 (inception)             --    $         --
     Granted                                 1,357,740    $       0.35
                                          ------------

Outstanding, September 30, 2001              1,357,740    $       0.35
     Granted                                 5,950,000    $       0.35
     Exercised                              (2,000,000)   $       0.24
                                          ------------

Outstanding, September 30, 2002              5,307,740    $       0.39
     Granted                                 3,950,000    $       0.46
     Exercised                                (110,000)   $        .25
     Cancelled                              (1,000,000)   $       0.69
                                          ------------

Outstanding, September 30, 2003              8,147,740    $       0.36
     Granted                                   969,904    $       1.00
     Exercised                                (497,220)   $       0.11
     Cancelled                              (1,425,088)   $       0.30
                                          ------------

Outstanding, September 30, 2004              7,195,336    $       0.37
     Granted                                   275,000    $       3.17
     Exercised                                (480,000)   $       0.41
     Cancelled                                (200,000)   $       2.85
OUTSTANDING, March 31, 2005                  6,790,336    $       0.40
                                          ============

EXERCISABLE, March 31, 2005                  3,762,744    $       0.37
                                          ============

C.  WARRANTS

During the first quarter of fiscal 2005, the Company approved for issuance
82,417 Series U warrants to two entities in connection with obtaining equipment
lease financing for the Company. Each Series U warrant entitles the holder to
purchase one share of unregistered, restricted common stock at $1.83 per share
and expires on August 18, 2008. The Company may, subject to a 20 day notice,
call the warrants if the common stock price is equal to or exceeds 200% of the
exercise price. The Company recognized $85,714 of compensation expense for
services rendered.

In addition, during the first quarter of fiscal 2005, the Company issued
1,083,592 warrants in connection with obtaining an amendment to the Convertible
Debentures held by Midsummer Investment, Ltd, Bristol Investment Fund, Ltd,
Islandia L.P. and Omicron Master Trust. Each warrant entitles the holder to
purchase one share of unregistered, restricted common stock at $3.23 per share
and expires on November 19, 2008. The Company recognized $1,993,809 of
compensation expense as a result of this amendment transaction.

We relied upon the exemption from registration as set forth in Section 4(2) of
the Securities Act of 1933 for the issuance of these securities. All of the
recipients took their securities for investment purposes without a view to
distribution and had access to information concerning the Company and our
business prospects, as required by the Securities Act. In addition, there was no
general solicitation or advertising for the acquisition of these securities.


                                       13
<PAGE>

Cashless Exercises
During the six months ended March 31, 2005, 33,332 Series K warrants exercisable
at $0.46 per warrant were exercised on a cashless exercise basis. The Company
issued 28,352 Common Shares as a result of these transactions. During the six
months ended March 31, 2005, 250,000 Series L warrants exercisable at $0.42 per
warrant were exercised on a cashless exercise basis. The Company issued 229,000
Common Shares as a result of this transaction.

Cash exercises
During the six months ended March 31, 2005, 572,242 warrants issued in 2002 were
exercised for total cash consideration of $286,121 at $0.50 per share. During
the six months ended March 31, 2005, 1,338,000 Series E warrants were exercised
for total cash consideration of $334,500, at $0.25 per share. During the six
months ended March 31, 2005, 500,000 Series N warrants were exercised for total
cash consideration of $250,000, at $0.50 per share. During the six months ended
March 31, 2005, 212,500 Series P warrants were exercised for total cash
consideration of $170,000, at $0.80 per share. During the six months ended March
31, 2005 200,000 warrants issued in 2003 were exercised for total cash
consideration of $408,000 at $2.04 per share

The following table summarizes all Warrant activity through March 31, 2005:

                                             Number      Weighted-Average
                                            of Shares    Exercise Price

Outstanding, March 18, 2001 (inception)             --    $         --
     Granted                                 1,905,600    $       1.26
                                          ------------    ------------

Outstanding, September 30, 2001              1,905,600    $       1.26
     Granted                                   848,630    $       0.50
     Exercised                                  (7,940)   $       1.26
                                          ------------

Outstanding, September 30, 2002              2,746,290    $       1.03
     Granted                                14,919,667    $       0.46
     Exercised                                (267,500)   $       0.29
                                          ------------

Outstanding, September 30, 2003             17,398,457    $       0.55
     Granted                                 7,359,446    $       1.58
     Exercised                              (6,785,222)   $       0.42
     Cancelled                              (4,821,000)   $       0.49
                                          ------------

Outstanding, September 30, 2004             13,151,681    $       0.81
     Granted                                 1,166,009    $       3.13
     Exercised                              (3,106,074)   $       0.50
                                          ------------

OUTSTANDING, March 31, 2005                 11,211,616    $       1.47
                                          ============

EXERCISABLE, March 31, 2005                 11,211,616    $       1.47
                                          ============

Note 8 - SUBSEQUENT EVENTS

On April 14, 2005, the Company was served with notice that a Writ of Attachment
was granted to the plaintiffs of the pending litigation matter entitled
Composite Technology Corporation v. Acquvest (OCSC Case No. 03 CC 12640). The
Court granted plaintiffs and cross-complainants application for Writs of
Attachment allowing for the attachment of the Company's assets totaling $2.55
million. The Court had denied two prior applications by the plaintiff and
cross-complainant for Writs of Attachment. The Company immediately filed a
Notice of Appeal on April 14, 2005 and an Emergency Writ on April 18, 2005 with
the California Courts of Appeal to challenge the Courts decision to grant the
Writs of Attachment and to stay the Writs of Attachment. Additionally, the
Company is working to arrange to post the bond to stay the attachment of the
entire amount subject to the Writs of Attachment. The Company believes that the
Court committed reversible error by granting the Writs of Attachment and intends
to vigorously seek to reverse it.


                                       14
<PAGE>

ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

You should read the following discussion and analysis of our financial condition
and results of operations together with our interim financial statements and the
related notes appearing at the beginning of this report. The interim financial
statements and this Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the financial
statements and notes thereto for the year ended September 30, 2004 and the
related Management's Discussion and Analysis of Financial Condition and Results
of Operations, both of which are contained in our Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission on December 23, 2004.

The following discussion and other parts of this Form 10-Q contain
forward-looking statements that involve risks and uncertainties. Forward-looking
statements can be identified by words such as "anticipates," "expects,"
"believes," "plans," and similar terms. Our actual results could differ
materially from any future performance suggested in this report as a result of
factors, including those discussed in "Factors That May Affect Future Operating
Results" and elsewhere in this report and in our Annual Report on Form 10-KSB
for the fiscal year ended September 30, 2004. All forward-looking statements are
based on information currently available to Composite Technologies and we assume
no obligation to update such forward-looking statements, except as required by
law. Service marks, trademarks and trade names referred to in this Form 10-Q are
the property of their respective owners.

OVERVIEW

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

ACCC cable is now commercially available for sale in the U.S. and Canadian
markets through a strategic partnership with an existing cable manufacturer,
General Cable Industries, Inc., and worldwide, on a limited basis, directly from
the Company.

Our marketing strategy for ACCC is to penetrate the domestic U.S. and Canadian
markets through our strategic partnership with General Cable and to negotiate
similar partnerships globally to market the product internationally. Our product
and production development strategy is to develop and market follow-on products
serving the utility industry using our proprietary composite materials
technologies by taking initial concepts to commercially promising prototype,
then moving to small scale production, making relevant product modifications to
optimize the combination of manufacturability and performance. Following
optimization, pilot production is organized to mimic factory conditions under
close monitoring. During this process, the optimal commercial production
parameters and product design are documented so that the technology will be
available for licensing or transfer to third parties or subsidiaries in a full
scale factory launch.

At the beginning of the first quarter of Fiscal 2005, on October, 2, 2004, our
wholly owned subsidiary, CTC Cable Corporation, entered into two separate
agreements for the manufacture and distribution of our proprietary ACCC cable
with General Cable Industries, Inc., the principal U.S. operating subsidiary of
General Cable Corporation.


                                       15
<PAGE>

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

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

These agreements represent the conclusion of the initial phase of the
introduction of our bare overhead conductor ACCC product range in that they
provide the framework for the products to be made available in commercial
quantities produced by General Cable. We believe the General Cable relationship
provides an important level of comfort to customers regarding the stability of
supply and consistency and viability of production since they are an established
manufacturer and distributor with long standing market relationships. The
agreements also mark the beginning of a new phase of our operations in which the
focus will be on production of the core for supply to cable manufacturers
worldwide and sales of the ACCC products to end users.

Throughout the first quarter of 2005, we have concentrated on improving the
operational mechanics of our relationship with General Cable, culminating,
subsequent to the quarter end, on January 18, 2005, with the announcement of the
introduction of the TransPowr ACCC/TW bare overhead conductor. The TransPowr
ACCC/TW bare overhead conductor integrates General Cable's ACSS/TW technology
and our carbon and glass fiber core technology that is at the center of our ACCC
product range.

TransPowr ACCC/TW bare overhead conductor is the product with which we intend to
begin full scale commercial introduction of the ACCC product into the
transmission and distribution conductor market.

In addition, we provide consulting services relating to the planning of overhead
electrical transmission power lines and utility services, including undertaking
preliminary feasibility analysis and strategic advice regarding location and for
scope as well as advice regarding the establishment of production facilities for
the production of products used in the Electrical Transmission Industry. We
currently, however, are not concentrating our efforts to increase our consulting
business and instead are focused on the commercialization of the ACCC Cable.


                                       16
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operations
is based upon the condensed consolidated financial statements, which have been
prepared in accordance with U.S. generally accepted accounting principles. The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities as of the date
of the financial statements, and the reported amounts of revenue and expense
during the periods. These estimates are based on historical experience and
various other assumptions that we believe to be reasonable under the
circumstances. We have identified those critical accounting policies used in
reporting our financial position and results of operations based upon a
consideration of those accounting policies that involve the most complex or
subjective decisions or assessment. We consider the following to be our critical
policies.

Revenue Recognition
Revenues are recognized based on guidance provided in the Securities and
Exchange Commission (SEC) Staff Accounting Bulletin No. 104 "Revenue Recognition
in Financial Statements," as amended (SAB 104). Accordingly, our general revenue
recognition policy is to recognize revenue when there is persuasive evidence of
an arrangement, the sales price is fixed or determinable, collection of the
related receivable is reasonably assured, and delivery has occurred or services
have been rendered.
The Company derives, or seeks to derive revenues from two sources:
(1)      Product revenue which includes revenue from the sale of composite core,
         wrapped composite core, and other electric utility related products.
(2)      Consulting revenue, which includes engineering, product design, and
         service fees that we receive under customer agreements related to the
         installation and design of our product sale solutions.
In addition to the above general revenue recognition principles prescribed by
SAB 104, our specific revenue recognition policies for each revenue source are
more fully described below.

PRODUCT SALES. Product revenues are generally recognized when product shipment
has been made and title has passed to the end user customer. Product revenues
consist primarily of revenue from the sale of: (i) wrapped composite core to
utilities either sold directly by the Company or through our distributor, ii)
composite core sold to a cable wrapping partner not subject to a distributor
agreement and where title passes to the partner, or iii) cable core hardware
sold to utility companies. For most product sales, we expect that the terms of
sales generally will not contain provisions that will obligate us to provide
additional products or services after installation to end users.. We recognize
revenue: (i) upon shipment when products are shipped FOB shipping point or (ii)
upon delivery at the customer's location when products are shipped FOB
destination.

CONSULTING REVENUE Consulting revenues are generally recognized as the
consulting services are provided. We have entered into service contract
agreements with electric utility and utility services companies that generally
require us to provide engineering or design services, often in conjunction with
current or future product sales. In return, we receive engineering service fees
payable in cash. For multiple element contracts where there is no vendor
specific objective evidence (VSOE) that would allow the allocation of an
arrangement fee amongst various pieces of a multi-element contract, fees
received in advance of services provided are recorded as deferred revenues until
additional operational experience or other vendor specific objective evidence
becomes available, or until the contract is completed.

During its history, the Company has entered into revenue bearing contracts of a
long term (greater than one year) duration. Due to a lack of operational history
resulting in low reliability of estimates on interim rates of completion of such
contracts, revenues associated with long term contracts are recognized on the
completed-contract method of accounting. Under this method, billings and costs
are accumulated during the period of installation, but no revenues are recorded
before the completion of the work. Costs of revenues are capitalized and are
recorded in other current assets. Provisions for estimated losses on uncompleted
contracts are made at the time such losses are determined. Operating expenses,
including indirect costs and administrative expenses, are charged as incurred to
periodic income and not allocated to contract costs.


                                       17
<PAGE>

Development Stage Enterprise

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

Stock-Based Compensation

The Company accounts for Stock Based Compensation according to the guidelines of
Staff Accounting Bulletin No. 107 which incorporates the interaction between
Statement of Financial Accounting Standards Statement 123 and certain SEC rules
and regulations. SFAS No. 123, "Accounting for Stock Compensation," as amended
by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure," defines a fair value based method of accounting for stock-based
compensation. However, SFAS No. 123 allows an entity to continue to measure
compensation cost related to stock and stock options issued to employees using
the intrinsic method of accounting prescribed by Accounting Principles Board
("APB") Opinion No. 25,"Accounting for Stock Issued to Employees." Entities
electing to remain with the accounting method of APB No. 25 must make pro forma
disclosures of net income and earnings per share as if the fair value method of
accounting defined in SFAS No. 123 had been applied. The Company has elected to
account for its stock-based compensation to employees using the intrinsic value
method under APB No. 25. In December 2004, SFAS No. 123 was revised and
eliminated the ability to account for share based compensation transactions
using the intrinsic value method under APB Opinion No. 25, effective the first
interim or annual period beginning after June 15, 2005 for public companies. The
effective date for the Company will be beginning fourth quarter of fiscal 2005.

The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, no compensation cost other than that required to be recognized by
APB No. 25, the difference between the fair value of the Company's common stock
at the grant date and the exercise price of the options has been recognized. Had
compensation cost for the Company's Stock Plan been determined based on the fair
value at the grant date for awards consistent with the provisions of SFAS No.
123, the Company's net loss and loss per share for the three months ended
December 31, 2004 and 2003 would have been increased to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
                                       Three months
                                      end March 31,       Three months end        Six months end         Six months end
                                           2005            March 31, 2004         March 31, 2005         March 31, 2004
                                     -----------------    ------------------    -------------------    -------------------
<S>                                  <C>                  <C>                   <C>                    <C>
Net loss, as reported                     (4,439,709)          $(3,374,667)           (10,117,459)           $(5,152,433)
Deduct total stock based employee
compensation expense determined
under fair value method for all
awards, net of tax                          (329,269)             (296,711)              (748,511)              (649,098)
                                     -----------------    ------------------    -------------------    -------------------

Net loss, pro forma                       (4,768,978)          $(3,671,378)           (10,865,970)          $ (5,801,531)
                                     -----------------    ------------------    -------------------    -------------------

Earnings per common share
Basic, as reported                             (0.04)                (0.03)                 (0.09)                 (0.05)
Basic, pro forma                               (0.04)                (0.04)                 (0.10)                 (0.06)
Diluted, as reported                           (0.04)                (0.03)                 (0.09)                 (0.05)
Diluted, pro forma                             (0.04)                (0.04)                 (0.10)                 (0.06)
</TABLE>

Principles of Consolidation

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

Research and Development Expenses

Research and development expenses are charged to operations as incurred.

Accounts Receivable

The Company has a $2,500,000 account receivable from one entity relating to
engineering services provided during fiscal 2004 for an electrical line project
in Kansas. The Company has received a progress payment on this receivable in
April, 2005 and has entered into a payment schedule for repayment of the entire
receivable by July, 2005.


                                       18
<PAGE>

Loss Per Share

The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per share is
computed by dividing loss available to common shareholders by the
weighted-average number of common shares outstanding. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive.

The following common stock equivalents were excluded from the calculation of
diluted loss per share for the three months ended March 31, 2005 and 2004 since
their effect would have been anti-dilutive:

<TABLE>
<CAPTION>
                                                        March 31
                                              -----------------------------
                                                  2005            2004
                                              -------------    ------------
              <S>                             <C>              <C>
              Convertible Debentures             8,982,036               0
              Options for common stock           6,790,336       6,890,398
              Warrants                          11,211,616      12,789,569
</TABLE>

Concentration of Credit Risk

The Company has a $2,500,000 account receivable from one entity relating to
engineering services provided during fiscal 2004. The Company has received a
progress payment on this receivable in April, 2005 and has entered into a
payment schedule for repayment of the entire receivable by July, 2005.

RESULTS OF OPERATIONS

PRODUCT SALES

PRODUCT REVENUES Product revenues consist of revenue from the sale of ACCC Cable
products to utility companies on a "trial" basis so these customers can verify
our claims that the ACCC Cable is technologically superior to existing cable
technology. From inception through March 31, 2005 there have been no substantial
sales of our ACCC Cable products. There were no product revenues for the quarter
ended March 31, 2005. Product revenues increased from $0 for the six months
ending March 31, 2004 to $46,485 for the six months ending March 31, 2005. The
dollar increase was due to increased ACCC cable trials by utility companies.
Revenue of $564,750 from one project has been deferred, with associated costs
capitalized, pending completion of the project.

CONSULTING REVENUES Consulting revenues since inception consisted of $2,500,000
for a single consulting contract that was completed during the three months
ending September 30, 2004. No consulting contracts were completed during either
the six months ended March 31, 2004 or 2005. While this contract provided us
with significant revenues, we currently are not concentrating our efforts to
increase our consulting business and instead are focused on increasing our
product revenues through commercialization of the ACCC Cable. As a result, we do
not believe that consulting revenues will be maintained or grow.

COST OF PRODUCT REVENUES Cost of product revenues for the six months ending
March 31, 2005 represented materials costs to produce ACCC cable. Cost of
product revenues increased from $0 for the six months ending March 31, 2004 to
$30,894 for the six months ending March, 2005. The dollar increase was due to
increased ACCC cable trials by utility companies. There were no product revenues
or costs associated with product revenues for the three months ending March 31,
2004 or 2005.

COST OF CONTRACT REVENUE Cost of contract revenue consists primarily of salaries
for engineers and expenses for consultants, supplies, equipment, depreciation
and facilities associated with contract projects. Our total engineering costs
are allocated between cost of contract revenue and research and development
expense. In a given period, the allocation of engineering costs between cost of
contract revenue and research and development is a function of the level of
effort expended on each.

Cost of contract revenue since inception consisted of costs related to the
single consulting contract that was completed during the three months ending
September 30, 2004. No consulting contracts were completed during either the
three or six months ended March 31, 2004 or 2005 and accordingly, no costs of
contract revenue were recorded for the respective quarters.

OFFICER COMPENSATION Officer Compensation expense consisted of salaries and
employee benefits for our Chief Executive, Chief Operating, and Chief Financial
Officers and the Corporate Secretary. Officer Compensation decreased 21% from
$90,335 in the second fiscal quarter of 2004 to $71,543 in the second fiscal
quarter of 2005. For the six months ended March 31, officer compensation
decreased 32% from $185,335 in 2004 to $126,838 in 2005. The dollar decrease was
due to fewer officers in 2005.


                                       19
<PAGE>

GENERAL AND ADMINISTRATIVE EXPENSE General and administrative expense consisted
primarily of salaries and employee benefits for administrative personnel,
facilities costs, stock exchange fees and insurance expenses. General and
Administrative expense decreased 29% from $1,105,826 in the second fiscal
quarter of 2004 to $783,230 in the second fiscal quarter of 2005. For the six
months ended March 31, general and administrative expense decreased 12% from
$1,568,637 in 2004 to $1,381,837 in 2005.

For the six month period, the dollar decreases are primarily due to the net
effect of headcount costs increases offset by facility cost decreases, travel
expenditure decreases, and a non recurring non-cash compensation expense in the
second fiscal quarter of 2004 relating to modification of stock options
exercised on a cashless basis.

LEGAL, PROFESSIONAL, AND CONSULTING EXPENSE Legal, professional, and consulting
expense consisted primarily of legal, professional, and financing fees and
consultants performing legal and professional services. Legal, Professional, and
Consulting expense increased 239% from $386,416 in the second fiscal quarter of
2004 to $1,308,586 in the second fiscal quarter of 2005. For the six months
ended March 31, legal, professional, and consulting expense increased 406% from
$822,253 in 2004 to $4,164,416 in 2005.

For the six month period, the dollar increase was due to increased litigation
and SEC related legal fees and financing costs related to the issuance of the
Convertible Debentures in August, 2004 and warrants issued in November, 2004 in
exchange for the release of $10MM in restricted cash. For the three month
period, the increase was related to increased litigation and SEC related legal
fees.

RESEARCH AND DEVELOPMENT EXPENSE Research and development expense consisted
primarily of salaries for engineers and product development personnel, expenses
for consultants, recruiting, supplies, equipment, and facilities related to
engineering projects to enhance and extend our composite materials intellectual
property offerings, and our composite materials product technology and
processes. Research and Development expense decreased 24% from $1,515,676 in the
second fiscal quarter of 2004 to $1,139,749 in the second fiscal quarter of
2005. For the six months ended March 31, research and development expense
increased 12% from $1,978,985 in 2004 to $2,219,400 in 2005.

For the six month period, the increase was due to increased research and
development employee expenses offset by a reduction in consulting fees. For the
three month period, the decrease was due to a reduction in consulting fees and a
reduction in expensed supplies and equipment.

SALES AND MARKETING EXPENSE Sales and marketing expense consisted primarily of
salaries for sales and marketing personnel, expenses for sales and marketing
consultants, equipment, travel, and printed marketing literature and sales
materials. Sales and marketing expense decreased 9% from $254,221 in the second
fiscal quarter of 2004 to $232,453 in the second fiscal quarter of 2005. For the
six months ended March 31, sales and marketing expense decreased 10% from
$565,838 in 2004 to $505,242 in 2005.

For the three and six month periods, the decrease was due to reduced expenditure
on marketing literature and materials offset by higher employee costs.

DEPRECIATION EXPENSE Depreciation expense consisted of depreciation on
capitalized equipment, leasehold improvements, and other capital assets.
Depreciation expense increased 466% from $22,046 in the second fiscal quarter of
2004 to $124,952 in the second fiscal quarter of 2005. For the six months ended
March 31, depreciation expense increased 656% from $31,238 in 2004 to $236,328
in 2005. The dollar increase was due to a higher depreciable asset base in
fiscal 2005 than 2004.

INTEREST INCOME Interest income increased to $5,284 in the second fiscal quarter
of fiscal 2005 from $0 in the prior year quarter and to $32,544 for the six
months ended March 31, 2005 from $0 in 2004. The increase was due to interest
earned on higher cash balances.

INTEREST EXPENSE Interest expense increased from $147 in the second fiscal
quarter of 2004 to $783,570 in the second fiscal quarter of 2005. For the six
months ended March 31, interest expense increased from $147 in 2004 to
$1,534,789 in 2005. The dollar increase was due to cash interest expense paid on
the capital leases that were initiated late in fiscal 2004 and the interest on
the Convertible Subordinated Debentures issued in the fourth quarter of fiscal
2004.

INCOME TAXES We made no provision for income taxes in the three months ending
March 31, 2005 and 2004 due to net losses incurred. In 2002, we determined that
due to our continuing operating losses as well as the uncertainty of the timing
of profitability in future periods, we should fully reserve our deferred tax
assets. As of March 31, 2005, our deferred tax assets continued to be fully
reserved. We will continue to evaluate, on a quarterly basis, the positive and
negative evidence affecting the realizability of our deferred tax assets.


                                       20
<PAGE>

Net Loss

Our net loss increased to $4.4 million and $10.1 million for the three and six
months ended March 31, 2005 compared to $1.8 million and $5.2 during the
corresponding periods in 2004. The increase in fiscal 2005 from 2004 for the six
months ending March 31, 2005 was due primarily to expense increases consisting
of $1.0 million in increased employee headcount, consulting, legal, supplies,
equipment, and additional overhead expenses related to preparation for full
production of our core product, $2.45 million of non-recurring finance and
warrant expenses related to our $15 million debentures, and $1.5 million in
interest expense on our $15.0 million debentures and our capital leases. The
increase in fiscal 2005 from 2004 for the quarter ending March 31, 2005 was due
primarily to expense increases consisting of $285,000 in increased employee
headcount, consulting, legal fees, supplies and equipment and $780,000 in
interest expense on our $15.0 million debentures and our capital leases.

RECENT ACCOUNTING PRONOUNCEMENTS

SFAS No. 151
In November 2004, the FASB issued SFAS No. 151,"Inventory Costs". SFAS No. 151
amends the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage) under the guidance in ARB No. 43,
Chapter 4,"Inventory Pricing". Paragraph 5 of ARB No. 43, Chapter 4, previously
stated that ". . . under some circumstances, items such as idle facility
expense, excessive spoilage, double freight, and rehandling costs may be so
abnormal as to require treatment as current period charges. . . ." This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. This statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. Management does not expect adoption
of SFAS No. 151 to have a material impact on the Company's financial statements.

SFAS No. 152
In December 2004, the FASB issued SFAS No. 152,"Accounting for Real Estate
Time-Sharing Transactions". The FASB issued this Statement as a result of the
guidance provided in AICPA Statement of Position (SOP) 04-2,"Accounting for Real
Estate Time-Sharing Transactions". SOP 04-2 applies to all real estate
time-sharing transactions. Among other items, the SOP provides guidance on the
recording of credit losses and the treatment of selling costs, but does not
change the revenue recognition guidance in SFAS No. 66,"Accounting for Sales of
Real Estate", for real estate time-sharing transactions. SFAS No. 152 amends
Statement No. 66 to reference the guidance provided in SOP 04-2. SFAS No. 152
also amends SFAS No. 67, "Accounting for Costs and Initial Rental Operations of
Real Estate Projects", to state that SOP 04-2 provides the relevant guidance on
accounting for incidental operations and costs related to the sale of real
estate time-sharing transactions. SFAS No. 152 is effective for years beginning
after June 15, 2005, with restatements of previously issued financial statements
prohibited. This statement is not applicable to the Company.

SFAS No. 153
In December 2004, the FASB issued SFAS No. 153,"Exchanges of Nonmonetary
Assets," an amendment to Opinion No. 29,"Accounting for Nonmonetary
Transactions". Statement No. 153 eliminates certain differences in the guidance
in Opinion No. 29 as compared to the guidance contained in standards issued by
the International Accounting Standards Board. The amendment to Opinion No. 29
eliminates the fair value exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. Such an exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. SFAS No. 153 is effective for
nonmonetary asset exchanges occurring in periods beginning after June 15, 2005.
Earlier application is permitted for nonmonetary asset exchanges occurring in
periods beginning after December 16, 2004. Management does not expect adoption
of SFAS No. 153 to have a material impact on the Company's financial statements.

SFAS No. 123(R)
In December 2004, the FASB issued SFAS No. 123(R),"Share-Based Payment". SFAS
123(R) amends SFAS No. 123,"Accounting for Stock-Based Compensation", and APB
Opinion 25,"Accounting for Stock Issued to Employees." SFAS No.123(R) requires
that the cost of share-based payment transactions (including those with
employees and non-employees) be recognized in the financial statements. SFAS No.
123(R) applies to all share-based payment transactions in which an entity
acquires goods or services by issuing (or offering to issue) its shares, share
options, or other equity instruments (except for those held by an ESOP) or by
incurring liabilities (1) in amounts based (even in part) on the price of the
entity's shares or other equity instruments, or (2) that require (or may
require) settlement by the issuance of an entity's shares or other equity
instruments. This statement is effective for the Company (1) for public
companies qualifying as SEC small business issuers, as of the first interim
period or fiscal year beginning after December 15, 2005, or (2) for all other
public companies, as of the first interim period or fiscal year beginning after
June 15, 2005, or beginning its fourth quarter of fiscal 2005., or (3) for all
nonpublic entities, as of the first fiscal year beginning after December 15,
2005. Management is currently assessing the effect of SFAS No. 123(R) on the
Company's financial statement.


                                       21
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of working capital have been private debt issuances and
equity financings.

For the six months ended March 31, 2005, we had a net loss of $10.1million. At
March 31, 2005, we had $6.7 million of cash and cash equivalents, which
represented an increase of $3.8 million from September 30, 2004. The increase
was due to the transfer of $10.0 million of cash from restricted cash related to
the convertible subordinated debentures offset by $6.2 million of net change in
cash.

Cash provided by operations during the six months ended March 31, 2005 of
$3,129,335 was primarily the result of operating losses, offset by depreciation,
amortization, and non-cash compensation expenses and working capital
requirements, in particular the release of the $10million in restricted cash in
November, 2004. Cash used for investing activities of $895,795 was related to
the purchase of computer hardware and software, and equipment put in service in
anticipation of manufacturing activities offset by the sale of equipment. Cash
provided by financing of $1,495,812 was primarily due to the cash proceeds from
option and warrant exercises net of principal payments made on capital lease
obligations.

In November 2004, we reached an agreement with the investors that purchased
debentures in our $15 million financing of August 17, 2004 to release $10
million that was held in a custodian account. Following the release of the $10
million, we believe that we have sufficient operating capital to carry out our
plans for the near to medium term. We anticipate that we will begin generating
sales in fiscal year ending September 30, 2005 sufficient to cover operating
costs. Central to our financial strategy for fiscal 2005 is the securing of
sufficient equipment lease financing to support the ramp up of our core
production in larger production facilities. During the six months ending March
31, 2005, we obtained approximately $455,000 in long term lease financing and we
are in negotiation for an additional $3.0 million in long term equipment lease
financing.

CAPITAL EXPENDITURES

The Company does not have any material commitments for capital expenditures.

EFFECTS OF INFLATION

We are subject to inflation and other price risks arising from price
fluctuations in the market prices of the various raw materials that we use to
produce our products. Price risks are managed through cost-containment measures.
We do not believe that inflation risk or other price risks with respect to raw
materials used to produce our products are material to our business, financial
position, results of operations or cash flows.

DEVELOPMENTS THIS QUARTER

We continue to develop and refine the ACCC product. During this quarter,
refinements to the product and production process have resulted in processing
optimizations, including increasing line speed. In addition, funds were expended
for further development work for various conductor ancillaries, such as
connection hardware, which we anticipate will facilitate the installation of
ACCC cable in the field using conventional installation tools.

A number of changes have been made to our operations capabilities, both in terms
of systems implementation and human resources.

We have purchased additional information technology systems supporting finance,
sales, marketing and administration. We believe these infrastructure
improvements will improve efficiency and form the back bone of our compliance
with the requirements of the Sarbanes Oxley Act.

During the six months ending March 31, 2005, we sought to strengthen our
operational management specifically in relation to increasing our production
capabilities and in the strategic marketing arena. These efforts culminated,
subsequent to the end of the first quarter, in the appointment of a new Acting
Chief Operating Officer, Brian Brittsan, who has had considerable experience in
managing companies as they take new technology products into the commercial
production stage of operations. It is hoped that following a probationary period
Mr. Brittsan will be appointed COO and become an officer of the Company. In
addition, we strengthened our financial management with the employment of
Domonic Carney as VP of Finance who will assist the Acting Chief Financial
Officer, Benton Wilcoxon, in the fulfillment of his duties. Mr Carney has
extensive experience in operational financial systems, accounting, and
Sarbanes-Oxley compliance.

Mr. William Arrington, our former Chief Operating Officer, has been appointed
Senior Vice President, Office of the CEO, a new position that will enable Mr.
Arrington to focus on public relations and strategic marketing of our products
in addition to assisting the CEO in the fulfillment of his duties.


                                       22
<PAGE>

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS There are no off
balance sheet arrangements.

The following table summarizes our contractual obligations (including interest
expense) and commitments as of March 31, 2005:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
Contractual
Obligations             Total                Less than 1 Year     1-3 Years            3-5 Years           More than 5 Years
<S>                     <C>                  <C>                  <C>                  <C>                 <C>
-------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt
Obligations             $17,157,500          $  900,000           $16,257,500               --                  --
-------------------------------------------------------------------------------------------------------------------------------
Capital Lease
Obligations             $ 1,196,143          $  481,292           $   682,469          $   32,382               --
-------------------------------------------------------------------------------------------------------------------------------
Operating Lease
Obligations             $ 6,673,995          $  930,312           $ 3,017,995          $1,914,235               --
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

While we can not assure you that we will not require additional financing, or
that such financing will be available to us, we believe that our cash and cash
equivalents and investments will be sufficient to fund our operations for at
least the next twelve months.

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

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

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

WE EXPECT FUTURE LOSSES AND OUR FUTURE PROFITABILITY IS UNCERTAIN.

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

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


                                       23
<PAGE>

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

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

For the six months ended March 31, 2005, we had a net loss of $10,117,459 and
positive cash flows from operations of $3,129,335. For the fiscal year ended
September 30, 2004, we had a net loss of $14,687,874 and negative cash flows
from operations of $18,735,430. For the fiscal years ended September 30, 2003
and 2002, we had net losses of $6,771,252 and $4,523,953, respectively. For the
same periods, we had negative cash flows from operations of $2,022,935 and
$715,923, respectively.

As of March 31, 2005, our accumulated deficit was $36,556,816.

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

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

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

The electrical utility industry has historically used a variety of technologies,
including a variety of technologies involving steel cable. Compared to these
conventional technologies, our technology is relatively new, and the number of
companies using our technology is limited. The commercial success of our product
will depend upon the widespread adoption of our technology as a preferred method
by major utility companies to transmit electricity. In order to be successful,
our product must meet the technical and cost requirements for electric
transmission within the electric utility industry. Market acceptance will depend
on many factors, including: (i) the willingness and ability of customers to
adopt new technologies; (ii) our ability to convince prospective strategic
partners and customers that our technology is an attractive alternative to
conventional methods used by the electric utility industry; (iii) our ability to
change our customers' evaluation of the economics of powerline construction,
changing their focus on limiting initial capital costs to evaluating the cost
and benefit of the full life of a line liberating capital funding to acquire our
products that can overall reduce costs in power transmission; and (iv) our
ability to sell sufficient quantities of our products.

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


                                       24
<PAGE>

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

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

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

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

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

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

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

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

We rely to a substantial extent on the management, marketing and product
development skills of our key employees, particularly Benton H Wilcoxon, our
Chief Executive Officer, and Brian Brittsan, our acting Chief Operating Officer.
If Mr. Wilcoxon or Mr. Brittsan were unable to provide services to us for
whatever reason, our business would be adversely affected. Mr. Wilcoxon has not
entered into an employment agreement with the Company. Mr. Brittsan has entered
into a consulting agreement. The term of such consulting agreement is from
January 3, 2005 through June 30, 2005.

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


                                       25
<PAGE>

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

We have entered into purchase and distribution agreements with General Cable to
manufacture and distribute our ACCC product in the United States and Canada. Our
success is dependent upon establishing and maintaining relationships with
strategic partners, such as our relationship with General Cable. We face
numerous risks in successfully obtaining suitable partners on terms consistent
with our business model, including, among others: (i) we must typically undergo
a lengthy and expensive process of building a relationship with a potential
partner before there is any assurance of an agreement with such party; (ii) we
must persuade cable manufacturers with significant resources to rely on us for
critical technology on an ongoing basis rather than trying to develop similar
technology internally; (iii) we must persuade potential partners to bear
retooling costs associated with producing our products; and (iv) we must
successfully transfer technical know-how to our partners.

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

Our business could be seriously harmed if: (i) we cannot obtain suitable
partners; (ii) our partners fail to achieve significant sales of ACCC cable or
products incorporating our technology; or (iii) we otherwise fail to implement
our business strategy successfully.

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

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

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

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

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

As of May 2, 2005, Benton H Wilcoxon, our Chairman of the Board, Chief Executive
Officer and Acting Chief Financial Officer, and C. William Arrington, our
director, in the aggregate beneficially own or control approximately 35% of the
outstanding common stock. As a result, these persons have controlling influence
in determining the outcome of any corporate matters submitted to our
stockholders for approval, including mergers, consolidations and the sale of all
or substantially all of our assets, election of directors and other significant
corporate actions. They also have the power to prevent or cause a change in
control. The interests of these stockholders may differ from the interests of
the other stockholders, and may limit the ability of other stockholders to
affect our management and affairs.

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

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


                                       26
<PAGE>

OUR BUSINESS MAY BE SUBJECT TO INTERNATIONAL RISKS.

We are pursuing international business opportunities, including in China,
Mexico, Brazil, Europe, the Middle East, certain far eastern countries and
Africa. As to international business in the Middle East, our current target
markets include Saudi Arabia, Qatar, United Arab Emirates, Oman, Iraq,
Afghanistan and Jordan. Of these the only countries that we believe pose a
particular problem are Iraq and Afghanistan as a result of additional
instability. In Africa we are actively pursuing South Africa and Kenya as well
as engaging in discussions with engineering companies that bid on trans-African
projects. There are no special additional risks related to these countries that
are not disclosed in the list of risks affecting most international business. To
date, we have not engaged in any transactions on these countries. Our business
model has been implemented only in the United States and Canada where we produce
the ACCC core for delivery to General Cable under a manufacturing agreement.
Expansion internationally will depend on our adaptation of this model to
international markets and may be costly and time consuming. Risks inherent in
international operations in general include: (i) unexpected changes in
regulatory requirements, export restrictions, tariffs and other trade barriers;
(ii) challenges in staffing and managing foreign operations; (iii) differences
in technology standards, employment laws and business practices; (iv) longer
payment cycles and problems in collecting accounts receivable; (v) political
instability; (vi) changes in currency exchange rates; (vii) currency exchange
controls; and (viii) potentially adverse tax consequences.

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

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

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

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

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


                                       27
<PAGE>

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

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

RISKS RELATED TO INVESTMENT IN OUR SECURITIES

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

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

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

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

Stockholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, dated April 17, 1991, the market for penny
stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include: (i) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (ii)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (iii) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (vi) excessive and undisclosed bid-ask differential and markups
by selling broker-dealers; and (v) the wholesale dumping of the same securities
by promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses.


                                       28
<PAGE>

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

The market price of our common stock may be subject to significant fluctuations
in response to our operating results, announcements of new products or market
expansions by us or our competitors, changes in general conditions in the
economy, the financial markets, the electrical power transmission and
distribution industry, or other developments and activities affecting us, our
customers, or our competitors, some of which may be unrelated to our
performance. The sale or attempted sale of a large amount of common stock into
the market may also have a significant impact on the trading price of our common
stock. During the last 12 months, the closing bid prices for our common stock
have fluctuated from a high of $6.24 to a low of $0.87. Fluctuations in the
trading price or liquidity of our common stock may adversely affect our ability
to raise capital through future equity financings.

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

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

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

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

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

AS OF MAY 2, 2005, 25,046,896 COMMON SHARES ARE ISSUABLE UPON EXERCISE OF ALL
OUTSTANDING OPTIONS, WARRANTS AND CONVERSION OF CONVERTIBLE DEBENTURES FOR LESS
THAN THE MARKET PRICE OF $1.90 PER SHARE. CASH PROCEEDS RESULTING FROM THE FULL
EXERCISE AND CONVERSION OF THESE SECURITIES WOULD BE APPROXIMATELY $16,333,908.
THE EXERCISE OR CONVERSION OF THESE SECURITIES COULD RESULT IN THE SUBSTANTIAL
DILUTION OF THE COMPANY IN TERMS OF A PARTICULAR PERCENTAGE OWNERSHIP IN THE
COMPANY AS WELL AS THE BOOK VALUE OF THE COMMON SHARES. THE SALE OF A LARGE
AMOUNT OF COMMON SHARES RECEIVED UPON EXERCISE OF THESE OPTIONS OR WARRANTS ON
THE PUBLIC MARKET TO FINANCE THE EXERCISE PRICE OR TO PAY ASSOCIATED INCOME
TAXES, OR THE PERCEPTION THAT SUCH SALES COULD OCCUR, COULD SUBSTANTIALLY
DEPRESS THE PREVAILING MARKET PRICES FOR OUR SHARES. FULL CONVERSION OF SUCH
SHARES WOULD INCREASE THE OUTSTANDING COMMON SHARES BY 22.0% TO APPROXIMATELY
139,588,000 SHARES.


                                       29
<PAGE>

The exercise price or conversion price of outstanding options, warrants and
convertible debentures may be less than the current market price for our common
shares. In the event of the exercise of these securities, a shareholder could
suffer substantial dilution of his or her investment in terms of the percentage
ownership in us as well as the book value of the common shares held. At the May
2, 2005 market price of $1.90 per share, 25,046,896 shares would be exercisable
or convertible for less than the market prices. Full exercise and conversion of
these below market shares would result in us receiving cash proceeds of
$16,333,908 and would increase the outstanding common shares by 22.0% to
approximately 139,588,000 shares.

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

Our quarterly revenue and operating results are difficult to predict and may
fluctuate significantly from quarter to quarter. Because we have not had any
substantial ACCC product revenues to date, we can have no assurance that our
revenues will materialize. Since our revenues may fluctuate and are difficult to
predict, and our expenses are largely independent of revenues in any particular
period, it is difficult for us to accurately forecast revenues and
profitability.

Our business is subject to a variety of additional risks, which could materially
adversely affect quarterly and annual operating results, including: (i) market
acceptance of our composite technologies by utility companies; (ii) due to the
potential lengthy lead time for the implementation of new lines or the
reconductoring of existing lines, the extent and timing of these new cable
transactions with utility companies may lead to significant delays in sales that
could adversely impact our cash flow; (iii) announcements or introductions of
new technologies or products by us or our competitors; (iv) delays or problems
in the introduction or performance of enhancements or of future generations of
our technology; (v) failures or problems in our utility cable product,
particularly during the early stages of the introduction of the product when
problems or failures identified during trials carried out with the product or
during its installation or operation can have an adverse effect; (vi) delays in
the adoption of new industry standards or changes in market perception of the
value of new or existing standards; (vii) competitive pressures resulting in
lower revenues; (viii) personnel changes, particularly those involving
engineering and technical personnel; (ix) costs associated with protecting our
intellectual property; (x) the potential that customers could fail to make
payments under their current contracts; (xi) market-related issues, including
lower ACCC Cable demand brought on by excess cable inventory and lower average
selling prices for ACCC cable as a result of market surpluses; (xii) increased
costs or shortages of key raw materials including carbon fiber and glass fiber;
(xiii) regulatory developments; and (xiv) general economic trends and other
factors.


                                       30
<PAGE>

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk relates primarily to our cash balances and the
effect that changes in interest rates have on the interest earned on that
portfolio. Our convertible debentures bear a fixed rate of interest.

As of March 31, 2005 we did not hold any derivative financial instruments for
speculative or trading purposes. The primary objective of our investment
activities is the preservation of principal while maximizing investment income
and minimizing risk. As of March 31, 2005, we had $6.7 million in cash, cash
equivalents and short-term investments that mature in twelve months or less. Due
to the short duration of these financial instruments, we do not expect that a
change in interest rates would result in any material loss to our investment
portfolio.

ITEM 4: CONTROLS AND PROCEDURES

Based on an evaluation under the supervision and with the participation of the
Company's management, including the Chief Executive Officer, the financial
consultant assisting the acting Chief Financial Officer, and the acting Chief
Operating Officer, the Company's principal executive officer and principal
financial officer has concluded that the Company's disclosure controls and
procedures (as defined under the Securities Exchange Act of 1934, as amended
(Exchange Act)) were effective as of March 31, 2005 to ensure that information
required to be disclosed by the Company in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and
forms.

There were no changes in the Company's internal control over financial reporting
that occurred during the second quarter of fiscal 2005 that have materially
affected or are reasonably likely to materially affect the Company's internal
control over financial reporting.


                                       31
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

J.P. TURNER & COMPANY, LLC V. COMPOSITE TECHNOLOGY CORP. (NASD ARBITRATION
NUMBER 04-01114):

J.P. Turner & Company, L.L.C. ("J.P. Turner") initiated arbitration before the
National Association of Securities Dealers in February 2004 alleging Composite
Technology Corporation ("CTC") breached a finder's agreement by failing to pay
certain fees to J.P. Turner. CTC disputes that any breach of the agreement took
place and denies that J.P. Turner made any introduction of investors to CTC
which directly led to financing. CTC has filed a counterclaim against J.P.
Turner alleging claims of fraud against J.P. Turner arising out of
misrepresentations made by J.P. Turner concerning an investment opportunity.
J.P. Turner claimed $200,000 in monetary damages, a warrant to purchase shares
of CTC common stock amounting to $200,000 at an exercise price equal to the
closing bid on December 17, 2003, pre-judgment interest as of December 18, 2003,
attorneys' fees and costs. CTC sought compensatory damages in an amount
according to proof, punitive damages, and attorneys' fees and costs based upon
its counterclaims. CTC filed its Statement of Answer and Counterclaims on May
17, 2004. The Arbitration took place on February 24-25, 2005 in Atlanta, Georgia
before an NASD Arbitration Panel. On March 2, 2005, the Panel awarded J.P.
Turner compensatory damages in the amount of $106,763.28, plus interest at the
rate of 7% per annum from December 18, 2003 until the date of payment of the
award, and $500 for one-half of the initial claim filing fee. The parties are
seeking to resolve this matter in lieu of satisfying the Arbitration Award in
its entirety.

COMPOSITE TECHNOLOGY CORPORATION V. ACQUVEST (OCSC CASE NO. 03 CC 12640):
--------------------------------------------

On October 16, 2003, CTC filed suit against Acquvest, Inc., Paul Koch, Victoria
Koch, Patricia Manolis, and Michael Tarbox in Orange County Superior Court. CTC
alleges causes of action for declaratory relief, breach of contract, fraudulent
inducement, rescission and economic duress arising out of certain subscription
and related agreements among the Company and the defendants. In connection with
such agreements, CTC issued to Acquvest, Inc. and Patricia Manolis, in April
2003 and September 2003, a total of 150,000 units for a total purchase price of
$375,000. Each unit consists of 10 shares of unregistered, restricted common
stock and 10 Series I warrants to purchase one share of unregistered, restricted
common stock. Each Series I warrant entitles the holder to purchase a share of
common stock at $0.50 per share and expires on March 30, 2005. The agreements
provide for the issuance of up to an additional 550,000 of such units for the
same purchase price of $2.50 per unit, subject to certain conditions, and
registration of share issuances under the Securities Act of 1933. The additional
units have not been issued and the additional purchase consideration has not
been paid. The parties disagree as to their respective rights and obligations
with respect to the original issuances and such additional units. 10,000 units
were also issued to Paul Koch for services in connection with such agreements,
and a dispute has arisen as to his entitlement to those and additional units and
warrants in connection with the agreements. CTC is seeking actual damages,
punitive damages, statutory costs, attorneys' fees and injunctive relief against
the defendants. CTC also seeks rescission of the pertinent agreements based on
numerous grounds, including fraudulent inducement. By a letter to CTC's counsel
dated September 8, 2004, Acquvest stated that it was waiving the contractual
conditions to its purchase of an additional 400,000 units under its subscription
agreement and was tendering $1,000,000, which was available on deposit, to CTC
as payment for the units. Acquvest, Koch, and Manolis filed a Cross-Complaint on
September 16, 2004, which they amended per stipulation on December 17, 2004. On
April 14, 2005, CTC was served with notice that the Court granted defendants and
cross-complainants' application for Writs of Attachment allowing for the
attachment of CTC's assets totaling $2.55 million. The Court had denied two
prior applications by defendants and cross-complainants for Writs of Attachment.
CTC immediately filed a Notice of Appeal on April 14, 2005 and an Emergency Writ
on April 18, 2005 with the California Courts of Appeal to challenge the Court's
decision to grant the Writs of Attachment and to stay the Writs of Attachment.
Additionally, CTC is working to arrange to post the bond to stay attachment of
the entire amount subject to the Writs of Attachment. CTC believes that the
Court committed reversible error by granting the Writs of Attachment and intend
to vigorously seek to reversal of the order. Trial date has been set for May 9,
2005.

ASCENDIANT CAPITAL GROUP, LLC V. COMPOSITE TECHNOLOGY CORPORATION (JAMS ARB. NO.
1200034701 AND OCSC CASE NOS. 03CC13314 & 03CC13531):


                                       32
<PAGE>

On November 4, 2003, Ascendiant Capital Group LLC, Mark Bergendahl, and Bradley
Wilhite ("Plaintiffs") filed suit in Orange County Superior Court alleging
causes of action against CTC and its CEO, Benton Wilcoxon, personally
("Defendants") for breach of contract, specific performance, fraud and deceit,
negligent misrepresentations, breach of covenant of good faith and fair dealing,
and declaratory relief arising out of a business advisory and consulting
agreement (the "Agreement") allegedly executed between CTC and Ascendiant. CTC
denies the material allegations and, on November 10, 2003, CTC filed a case in
Orange County Superior Court against Plaintiffs alleging causes of action for
declaratory relief, breach of contract, fraudulent inducement, and economic
coercion arising out of the Agreement as well as various unrelated business
agreements between Plaintiffs and Wilcoxon. CTC is seeking actual damages,
punitive damages, statutory costs, attorneys' fees and injunctive relief against
Plaintiffs. The principal parties are Ascendiant, Bergendahl, Wilhite, CTC and
Wilcoxon. On November 24, 2003, the court entered an order consolidating the
cases. On January 15, 2004, the parties agreed to submit all claims and
cross-claims arising out of the Agreement to binding arbitration before the
Honorable Robert Thomas Ret. at JAMS - Orange County. The remaining claims and
cross-claims not arising out of the Agreement are pending before the Honorable
Kazuharu Makino of Orange County Superior Court. On May 28, 2004, CTC's
demurrers to Plaintiffs' causes of action in the arbitration for specific
performance, negligent misrepresentation and breach of covenant of good faith
and fair dealing were sustained, with leave to amend, as well as CTC's motion to
strike Plaintiff's claims for punitive damages. Plaintiffs subsequently filed an
amended complaint. Judge Thomas has reserved ruling on Plaintiffs' demurrers and
motion to strike in the arbitration pending the outcome of the ruling on
Plaintiffs' demurrers and motions to strike filed with respect to CTC's
cross-claim pending in the superior court. An order has issued in the Orange
County Superior Court action exempting this case from various pre-trial
deadlines and noting that he expects that the case will not proceed to trial
within 24 months of the date of filing. On February 22, 2005, CTC and Wilcoxon
filed a Demurrer to Plaintiffs' causes of action for breach of contract and
alter ego liability. The court overruled the Demurrer on April 1, 2005 and set
Trial in the State court action for November 7, 2005. The arbitration commenced
on February 9, 2005, but is not expected to be completed until July 1, 2005.

DEVONE V. DONNER (OCSC CASE NO. 04CC09321):

On September 10, 2004, Adam Devone filed a Complaint in Orange County Superior
Court (Case No. 04-CC-09321) against Donner, Evan Wride and Global Research,
Inc., Nutek, Inc., Zeta Centauri, Inc., Sherpa Financial & Investigations, Inc.
and Multiplyingchurches.org, Inc. (collectively, the "Donner Parties") and CTC.
Devone alleges a variety of claims against the Donner Parties based upon alleged
contractual breaches and tortuous conduct related to a $200,000 loan made
between Devone and the Donner Parties. CTC is only party to the last two causes
of action for Imposition of Constructive Trust and Declaratory Relief. Devone
seeks a constructive trust on any CTC shares or related proceeds obtained
through the use of Devone's $200,000. Devone further seeks a judicial
declaration that the CTC securities and proceeds derived therefrom are his
property. As noted earlier, Devone is not presently seeking monetary damages or
costs against CTC. On October 20, 2004, Multiplyingchurches.org, Inc. ("MC Org")
filed a Cross-Complaint against CTC, Adam Devone, Sheryl Lyn Devone (Plaintiff's
wife) and Roes 1-100 alleging claims for breach of contract against CTC and Roes
51-100 and tortious interference with contract against Plaintiff, his wife and
Roes 1-50. MC Org alleges that CTC breached a warrant agreement by failing to
issue shares thereunder and seeks unspecified damages and an injunction
compelling CTC to issue shares under the warrant agreement. CTC filed an Answer
to MC Org's Cross-Complaint on November 19, 2004. On December 30, 2004, MC Org
filed a request for dismissal of all claims against CTC pursuant to a settlement
reached between MC Org and CTC. In exchange for the dismissal, CTC agreed to
issue shares pursuant to a warrant issued to MC Org. A settlement agreement was
subsequently entered into by all parties to the lawsuit. The terms of the
settlement agreement are confidential. A request for dismissal of the entire
action with prejudice was filed.

TARBOX V. KOCH (OCSC CASE NO. 04CC10345):

On October 13, 2004, Michael Tarbox ("Tarbox") filed an action in Orange County
Superior Court (Case No. 04-CC-10345) against Paul Koch, Acquvest, CTC and Doe
Defendants. Tarbox alleges that Koch made fraudulent transfers to Acquvest and
the Doe defendants for the purpose of avoiding the debt owed to Tarbox. Tarbox
alleges that CTC securities were intended to serve as security for a debt owed
by Koch to Tarbox. Tarbox alleges that Defendants were not bona fide purchasers
of the CTC securities since they were receiving such securities for the benefit
of Tarbox. Tarbox further alleges that CTC breached an agreement to pay him a
finder's fee in connection with investments made by Koch. Tarbox alleges that
CTC's breach has caused him to suffer damages in excess of $750,000. On November
14, 2004, CTC filed a demurrer to the Complaint, and the other defendants also
filed a demurrer. The Court granted leave to amend, and Tarbox then filed an
amended Complaint. CTC just recently filed an Answer to the Tarbox's Amended


                                       33
<PAGE>

Complaint. CTC recently filed an Answer to Tarbox's Amended Complaint. A
demurrer filed by the other Defendants was granted on February 22, 2005, and
Tarbox was again granted leave to amend.

JEREMIAH O'KEEFFE VS. C. WILLIAM ARRINGTON AND COMPOSITE TECHNOLOGY CORPORATION:

On December 31, 2004, Jeremiah O'Keeffe ("Plaintiff") filed suit against C.
William Arrington and Composite Technology Corporation ("Defendants") in the
District Court of Dallas, Texas (Cause No. 04-13004-A). Plaintiff alleges causes
of action for breach of agreement and quantum meruit, arising out of an alleged
failure, based on a verbal agreement, to compensate Plaintiff for unspecified
services provided to Defendants. Plaintiff seeks compensatory damages, including
the transfer 5,500,000 shares of common stock, $22,880,000 in monetary damages,
attorneys' fees, interest and costs. Defendants deny the claims and intend to
vigorously defend against them. On February 7, 2005, Defendants removed the case
to Federal Court (Case No. 3-05CV0257N). On February 14, 2005, Defendants filed
a Motion to Dismiss for lack of jurisdiction, and on March 7, 2005, Plaintiff
filed a Motion to Extend Time to File Response to the Motion to Dismiss and to
Allow Discovery on the Jurisdiction Issue. Both motions are pending in Federal
Court.

DAVID S. SHIELDS V. COMPOSITE TECHNOLOGY CORPORATION:

On January 21, 2005, David S. Shields filed suit against CTC in Santa Clara
Superior Court (Case No. 1-05-CV-034368) alleging CTC breached a subscription
agreement by failing to issue the appropriate number of shares thereunder. CTC
denies the claims and intends to vigorously defend against them. CTC filed an
Answer and Cross-Complaint against Shields for Rescission and Declaratory Relief
on April 18, 2005.


                                       34
<PAGE>

ITEM 2--UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3 - DEFAULTS ON SENIOR SECURITIES

None


                                       35
<PAGE>

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


Our 2005 annual meeting of stockholders (the "2005 Annual Meeting") was held on
March 1, 2005 at the Atrium Hotel ballroom at 18700 MacArthur Blvd Irvine, CA
92612. Two proposals, as described in our Proxy Statement dated January 20,
2005, 2004, were voted on at the meeting. Following is a brief description of
the matters voted upon and the results of the voting:

1.    Election of Directors:



Nominee:                               Number of Shares:

Benton H Wilcoxon                      For 92,504,732
                                       Withheld 685,210

C. William Arrington                   For 92,497,279
                                       Withheld 692,663


2.    Ratification of selection of Singer Lewak Greenbaum & Goldstein LLP, as
      the independent auditor for Composite Technology Corporation


For            Against                 Abstain
86,973,568     6,133,752               82,622



ITEM 5 - OTHER INFORMATION

None


                                       36
<PAGE>

ITEM 6 - EXHIBITS

(a) Index to Exhibits



Number      Description

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

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

3.1(3)      Articles of Incorporation of the Registrant.

3.2(12)     Bylaws of Registrant.

4.1(9)      Form of Securities Purchase Agreement including form of the
            Debenture attached as Exhibit A, form of the Registration Rights
            Agreement attached as Exhibit B thereto, form of the Common Stock
            Purchase Warrant attached as Exhibit C thereto, form of legal
            opinion attached as Exhibit D, form of Custodial and Security
            Agreement attached as Exhibit E, dated August 17, 2004.

10.1(3)     2001 Transmission Technology Corporation Incentive Compensation
            Stock Option Plan.

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

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

10.4(9)     Composite Technology Corporation Option Agreement - Dominic J.
            Majendie dated August 11, 2003.

10.5(5)     Composite Technology Corporation Option Agreement - Benton Wilcoxon
            dated August 13, 2003.

10.6(5)     Composite Technology Corporation Option Agreement - William
            Arrington dated August 13, 2003.

10.7(5)     Composite Technology Corporation Option Agreement - Brent N. Robbins
            dated August 13, 2003.

10.8(9)     Employment Agreement between Composite Technology Corporation and
            Dominic J. Majendie, dated October 1, 2003.

10.9(5)     Lease Agreement between Composite Technology Corporation and CNH,
            LLC dated November 7, 2003.

10.10(6)    Form of Securities Purchase Agreement, Registration rights Agreement
            and Common Stock Purchase Warrants, dated as of December 16, 2003.

10.11(9)    Form of Securities Purchase Agreement including form of the
            Debenture attached as Exhibit A, form of the Registration Rights
            Agreement attached as Exhibit B thereto, form of the Common Stock
            Purchase Warrant attached as Exhibit C thereto, form of legal
            opinion attached as Exhibit D, form of Custodial and Security
            Agreement attached as Exhibit E, dated August 17, 2004.


                                       37
<PAGE>

10.12(13)   Letter Agreement between the Registrant and the city of Kingman,
            Kansas, dated November 11, 2003.

10.13(11)   Engagement Agreement between Composite Technology Corporation and
            Brian Brittsan, dated December 18, 2004.

10.14(8)    Manufacturing Agreement between Composite Technology Corporation and
            General Cable Corp dated October 2,2004.


                                       38
<PAGE>

10.15(8)    Distribution Agreement between Composite Technology Corporation and
            General Cable Corp dated October 2, 2004.

10.16(10)   Letter agreement between Composite Technology Corporation and
            Feldman Weinstein LLP, dated November 23, 2004.

10.17(13)   Letter Agreement between Composite Technology Corporation and
            Midsummer Investment, Ltd., Bristol Investment Fund, Ltd., Islandia,
            L.P. and Omicron Trust dated January 21, 2005.

21(7)       Subsidiaries of the Registrant.

31.1        Rule13a-14(a) / 15d-14(a) Certification of Chief Executive Officer
            and Acting Chief Financial Officer

32.1        Section 1350 Certification of Chief Executive Officer and Chief
            Financial Officer

----------

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

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

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

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

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

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

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

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

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

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

(11) Incorporated by reference to Form 8-K filed with the U.S. Securities and
Exchange Commission on January 11, 2005.

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

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


                                       39
<PAGE>

                                    SIGNATURE

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

                                COMPOSITE TECHNOLOGY CORPORATION
                                         (Registrant)


                                   By: /s/ Benton H Wilcoxon
                                   -------------------------
                                   Benton H Wilcoxon
                                   Chief Executive Officer

May 3, 2005


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