<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                  FORM 10-QSB/A

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

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

              FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002

   [ ]   Transition Report Under Section 13 or 15(d) of The Securities Exchange
         Act of 1934

              For the transition period from ______________ to _____________

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

                         Commission File Number: 0-10999
                                                 -------

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

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

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

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

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

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

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: July 31, 2002: 71,994,931
                                          -------------------------

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





<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION

                Form 10-QSB/A for the Quarter ended June 30, 2002

                                Table of Contents

                                                                            Page
                                                                            ----
PART I - FINANCIAL INFORMATION

  Item 1   Financial Statements                                               3

  Item 2   Management's Discussion and Analysis
           of Financial Condition and Plan of Operation                      24

  Item 3   Controls and Procedures                                           27

PART II - OTHER INFORMATION

  Item 1   Legal Proceedings                                                 27

  Item 2   Changes in Securities                                             27

  Item 3   Defaults Upon Senior Securities                                   28

  Item 4   Submission of Matters to a Vote of Security Holders               28

  Item 5   Other Information                                                 28

  Item 6   Exhibits and Reports on Form 8-K                                  29

SIGNATURES                                                                   29

                                       2





<PAGE>

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

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)
                      RESTATED CONSOLIDATED BALANCE SHEETS
                             June 30, 2002 and 2001

                                   (UNAUDITED)
                                                     June 30,         June 30,
                                                      2002              2001
                                                    ---------------------------
                                     ASSETS
                                     ------

CURRENT ASSETS
   Cash on hand and in bank                         $   9,043        $      --
   Prepaid expenses and other                         188,515               --
                                                    ----------       ----------

      TOTAL CURRENT ASSETS                            197,558               --
                                                    ----------       ----------

PROPERTY AND EQUIPMENT - AT COST
   Office furniture and equipment                       8,684               --
   Manufacturing equipment                              9,523               --
                                                    ----------       ----------
                                                       18,207               --
   Accumulated depreciation                            (3,423)              --
                                                    ----------       ----------

      NET PROPERTY AND EQUIPMENT                       14,784               --
                                                    ----------       ----------

OTHER ASSETS
   Contract rights                                    165,000               --
   Investments in other companies                     236,470               --
                                                    ----------       ----------

      TOTAL OTHER ASSETS                              401,470               --
                                                    ----------       ----------

TOTAL ASSETS                                        $ 613,812        $      --
                                                    ==========       ==========

                                  - CONTINUED -

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

                                       3





<PAGE>
<TABLE>

                           COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                              (formerly Eldorado Financial Group, Inc.)
                                  (a development stage enterprise)
                          RESTATED CONSOLIDATED BALANCE SHEETS - CONTINUED
                                       June 30, 2002 and 2001

                                             (UNAUDITED)
                                                                June 30,          June 30,
                                                                  2002              2001
                                                              ------------      ------------

                                LIABILITIES AND SHAREHOLDERS' EQUITY
                                ------------------------------------
<S>                                                           <C>               <C>
CURRENT LIABILITIES
   Notes payable to shareholders                              $   138,000       $        --
   Accounts payable - trade                                       642,614                --
   Accrued officers compensation                                  177,002                --
   Accrued interest payable                                         3,578                --
   Accrued dividends payable                                       31,096                --
                                                              ------------      ------------

      TOTAL CURRENT LIABILITIES                                   992,290                --
                                                              ------------      ------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
   Preferred stock - $0.001 par value
      5,000,000 shares authorized
      1,485 and -0- issued and outstanding, respectively                1                --
   Common stock - $0.001 par value
      200,000,000 shares authorized
      69,382,966 and 66,500,000 shares
      issued and outstanding, respectively                         69,383                --
   Additional paid-in capital                                   2,778,291                --
   Accumulated deficit                                         (3,226,153)               --
                                                              ------------      ------------

   TOTAL SHAREHOLDERS' EQUITY                                    (378,478)               --
                                                              ------------      ------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                    $   613,812       $        --
                                                              ============      ============
</TABLE>

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

                                                 4





<PAGE>
<TABLE>

                                     COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                                        (formerly Eldorado Financial Group, Inc.)
                                            (a development stage enterprise)
                          RESTATED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                                       Nine and Three months ended June 30, 2002,
                          Period from March 28, 2001 (date of inception) through June 30, 2002,
                                          Three months ended June 30, 2001 and
                          Period from March 28, 2001 (date of inception) through March 31, 2002

                                                       (UNAUDITED)
<CAPTION>

                                                                                                                 Period from
                                                                                                                March 28, 2001
                                      Nine months      Period from       Three months        Period from     (date of inception)
                                        ended         March 28, 2001         ended          March 28, 2001         through
                                       June 30,           through           June 30,           through             June 30,
                                         2002          June 30, 2001          2002           June 30,2001            2002
                                    -------------      -------------      -------------      -------------      -------------
<S>                                 <C>                <C>                <C>                <C>                <C>
REVENUES                            $         --       $         --       $         --       $         --       $         --
                                    -------------      -------------      -------------      -------------      -------------
EXPENSES
General and
   administrative
   expenses                              432,943             30,110            157,726             30,110            564,079
Legal, professional
   and consulting fees                 1,795,397              2,734            321,327              2,734          1,913,097
Reorganization expenses                       --                 --                 --                 --             30,000
Interest expense                           3,578                150              2,278                150              3,728
Depreciation                               2,189                617                827                617              3,423
Compensation expense
   related to common stock
   issuances at less than
   "fair value"                          467,500             76,000            467,500             76,000            543,500
                                    -------------      -------------      -------------      -------------      -------------
Total operating expenses               2,701,607            109,611            949,658            109,611          3,057,827
                                    -------------      -------------      -------------      -------------      -------------

LOSS FROM OPERATIONS                  (2,701,607)          (109,911)          (949,658)          (109,611)        (3,057,827)
OTHER INCOME (EXPENSE)
   Carrying value impairment
     adjustment on investments
     in other companies                       --           (132,730)                --           (132,730)          (137,230)
                                    -------------      -------------      -------------      -------------      -------------

LOSS BEFORE PROVISION
   FOR INCOME TAXES                   (2,701,607)          (242,341)          (949,658)          (242,341)        (3,195,057)
PROVISION FOR
   INCOME TAXES                               --                 --                 --                 --                 --
                                    -------------      -------------      -------------      -------------      -------------

NET LOSS                              (2,701,607)          (242,341)          (949,658)          (242,341)        (3,195,057)
OTHER
   COMPREHENSIVE INCOME                       --                 --                 --                 --                 --
                                    -------------      -------------      -------------      -------------      -------------

COMPREHENSIVE LOSS                  $ (2,701,607)      $   (242,341)      $   (949,658)      $   (242,341)      $ (3,195,057)
                                    =============      =============      =============      =============      =============

Earnings per share of
   common stock
   outstanding computed
   on net loss - basic and
   fully diluted                    $      (0.04)               nil       $      (0.01)                nil      $      (0.05)
                                    =============      =============      =============      =============      =============

Weighted-average number of
   shares outstanding - basic
   and fully diluted                  67,321,108         66,650,000         68,742,109         66,500,000         66,174,325
                                    =============      =============      =============      =============      =============
</TABLE>

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

                                                           5





<PAGE>
<TABLE>

                                COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                                   (formerly Eldorado Financial Group, Inc.)
                                       (a development stage enterprise)
                                RESTATED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      Nine months ended June 30, 2002 and
                     Period from March 28, 2001 (date of inception) through June 30, 2001
                    Period from March 28, 2001 (date of inception) through March 31, 2002

                                                  (UNAUDITED)
<CAPTION>
                                                                                           Period from
                                                                                          March 28, 2001
                                                       Nine months      Period from     (date of inception)
                                                          ended        March 28, 2001        through
                                                         June 30,          through           June 30,
                                                           2002         June 30, 2001          2002
                                                       ------------      ------------      ------------
<S>                                                    <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss for the period                             $(2,701,607)      $  (242,341)      $(3,195,057)
   Adjustments to reconcile net loss
     to net cash provided by operating activities
     Depreciation                                            2,189               617             3,423
     Amortization of prepaid expenses
       paid with common stock                               92,344             2,734            98,360
     Consulting fees paid with
       issuance of common stock                            808,090                --           808,090
     Compensation expense related to
       common stock issuances at less
        than "fair value"                                  467,500            76,000           543,500
       Carrying value impairment adjustment
         on investments in other companies                      --           132,730           137,230
       Increase (Decrease) in
         Accounts payable - trade                          632,989                --           642,614
         Accrued officer compensation                      185,744            30,000           185,744
         Accrued interest payable                            3,578                --             3,578
                                                       ------------      ------------      ------------
NET CASH USED IN OPERATING ACTIVITIES                     (509,173)             (260)         (772,518)
                                                       ------------      ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Cash advanced to officers                                    --           (27,300)           (8,742)
   Cash advanced on deposit for technology rights               --          (100,000)               --
   Cash paid for investments in other companies                 --                --           (40,000)
   Purchase of property and equipment                      (10,807)           (7,400)          (18,207)
                                                       ------------      ------------      ------------
NET CASH USED IN INVESTING ACTIVITIES                      (10,807)         (134,700)          (66,949)
                                                       ------------      ------------      ------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from notes payable to a shareholder            138,000                --           138,000
   Proceeds from sale of preferred stock                    32,000                --           132,000
   Proceeds from sale of common stock                      326,010           222,500           578,510
                                                       ------------      ------------      ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                  496,010           222,500           848,510
                                                       ------------      ------------      ------------

INCREASE (DECREASE) IN CASH                                (23,970)           87,540             9,043
Cash at beginning of period                                 33,013                --                --
                                                       ------------      ------------      ------------

CASH AT END OF PERIOD                                  $     9,043       $    87,540       $     9,043
                                                       ============      ============      ============
</TABLE>

                                                 - CONTINUED -

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

                                                      6





<PAGE>
<TABLE>
                                COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                                   (formerly Eldorado Financial Group, Inc.)
                                       (a development stage enterprise)
                                RESTATED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      Nine months ended June 30, 2002 and
                     Period from March 28, 2001 (date of inception) through June 30, 2001
                     Period from March 28, 2001 (date of inception) through March 31, 2002

                                                  (UNAUDITED)
<CAPTION>
                                                                                                       Period from
                                                                                                      March 28, 2001
                                                                           Nine months  Period from (date of inception)
                                                                              ended    March 28, 2001    through
                                                                             June 30,      through       June 30,
                                                                               2002     June 30, 2001      2002
                                                                            ---------- --------------- -----------
<S>                                                                         <C>           <C>           <C>
SUPPLEMENTAL DISCLOSURE OF INTEREST AND INCOME TAXES PAID
     Interest paid for the period                                           $     --      $     --      $    150
                                                                            =========     =========     =========
     Income taxes paid for the period                                       $     --      $     --      $     --
                                                                            =========     =========     =========

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
   Preferred stock issued to
     acquire technology rights                                              $     --      $     --      $165,000
                                                                            =========     =========     =========
   Common stock issued to
     acquire investments in other companies                                 $191,250      $     --      $333,500
                                                                            =========     =========     =========
   Common stock issued for
     prepaid representation agreement                                       $     --      $     --      $ 39,375
                                                                            =========     =========     =========
</TABLE>

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

                                                      7





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

               NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

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

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

On December 28, 2001, the Company's Board of Directors, and the Board of
Directors for TTC established the initial year-end of September 30 for the
Registrant's wholly-owned subsidiary, Transmission Technology Corporation and,
concurrently, elected to change the fiscal year-end of CTC from December 31 to
September 30. This action was taken after an evaluation and review of the
November 3, 2001 acquisition transaction, the operations of both the Company and
Transmission Technology Corporation during the period since the last annual
filing on Form 10-KSB and consideration of future economic events and
opportunities.

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

                (Remainder of this page left blank intentionally)

                                       8





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE B - RESTATEMENT OF FINANCIAL INFORMATION

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

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

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

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

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

NOTE C - GOING CONCERN UNCERTAINTY

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

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

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

                                       9





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE C - GOING CONCERN UNCERTAINTY - CONTINUED

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

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

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

NOTE D - PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

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

During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements filed with the U. S. Securities and
Exchange Commission on its Annual Report on Form 10-KSB for the year ended
September 30, 2001. The information presented within these interim financial
statements may not include all disclosures required by generally accepted
accounting principles and the users of financial information provided for
interim periods should refer to the annual financial information and footnotes
when reviewing the interim financial results presented herein.

In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the U. S. Securities and Exchange Commission's
instructions for Form 10-QSB, are unaudited and contain all material
adjustments, consisting only of normal recurring adjustments necessary to
present fairly the financial condition, results of operations and cash flows of
the Company for the respective interim periods presented. The current period
results of operations are not necessarily indicative of results which ultimately
will be reported for the full fiscal year ending September 30, 2002.

                                       10





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE D - PREPARATION OF FINANCIAL STATEMENTS - CONTINUED

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

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

NOTE E - RELATED PARTY TRANSACTIONS

Prior to the November 3, 2001 acquisition of Transmission Technology Corporation
(TTC) by the Company, TTC engaged in significant transactions involving both
Preferred Stock and Common Stock of TTC with Red Guard Industries, Inc. (Red
Guard), an entity in which a shareholder, officer, and director of TTC, and
subsequently, the Company, is also a shareholder and was an officer through
December 2001. Key transactions involving this relationship include the issuance
of the Series A and Series B Preferred Stock, the issuance of Common Stock to
acquire various marketable and restricted securities in various unrelated
entities and to acquire the rights to negotiate to acquire the license to
manufacture, develop and sell certain patent-pending Composite Reinforced
Aluminum Conductor technology.

NOTE F - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

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

                                       11





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE F - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

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

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

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

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

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

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

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

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

     CTC and TTC have adopted the provisions of AICPA Statement of Position
     98-5, "Reporting on the Costs of Start-Up Activities" whereby all
     organization and initial costs incurred with the incorporation and initial
     capitalization of TTC, the costs associated with the reverse acquisition of
     TTC by CTC and costs incurred by TTC related to the reverse acquisition
     transaction with CTC were charged to operations in the period the
     respective costs were incurred.

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

     Research and development expenses are charged to operations as incurred.

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

     Advertising and marketing expenses are charged to operations as incurred.

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

     The Company utilizes the asset and liability method of accounting for
     income taxes. At June 30, 2002 and 2001, respectively, the deferred tax
     asset and deferred tax liability accounts, as recorded when material,
     consist of temporary differences. Temporary differences represent
     differences in the recognition of assets and liabilities for tax and
     financial reporting purposes, primarily allowance for doubtful accounts and
     accumulated depreciation.

                                       12





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE F - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

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

     As of June 30, 2002 and 2001, the deferred tax asset related to the
     Company's net operating loss carryforward is fully reserved. Due to the
     provisions of Internal Revenue Code Section 338, the Company may have no
     net operating loss carryforwards available to offset financial statement or
     tax return taxable income in future periods as a result of a change in
     control involving 50 percentage points or more of the issued and
     outstanding securities of the Company.

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

     Basic earnings (loss) per share is computed by dividing the net income
     (loss) by the weighted-average number of shares of common stock and common
     stock equivalents (primarily outstanding options and warrants). Common
     stock equivalents represent the dilutive effect of the assumed exercise of
     the outstanding stock options and warrants, using the treasury stock
     method. The calculation of fully diluted earnings (loss) per share assumes
     the dilutive effect of the exercise of outstanding options and warrants at
     either the beginning of the respective period presented or the date of
     issuance, whichever is later. As of June 30, 2002 and 2001, the Company's
     outstanding stock options are considered anti-dilutive due to the Company's
     net operating loss position.

NOTE G - FAIR VALUE OF FINANCIAL INSTRUMENTS

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

NOTE H - YEAR-END CHANGE AND COMPARABILITY (UNAUDITED)

On December 28, 2001, the Company's Board of Directors elected to change the
fiscal year-end of the Company from December 31 to September 30. Additionally,
the Board of Directors established the initial year-end of September 30 for the
Registrant's wholly-owned subsidiary, Transmission Technology Corporation. The
following unaudited information presents selected annualized financial data as
if the fiscal year had been reset as of September 30, 2001 and 2000,
respectively.

                                            (pre-acquisition) (pre-acquisition)
                                             October 1, 2000   October 1, 1999
                                                 through            through
                                           September 30, 2001 September 30, 2000
                                           ------------------ ------------------

         Revenues                            $         --       $         --
         Gross profit                                  --                 --
         Income taxes                                  --                 --
         Loss from continuing operations          (90,636)            (1,620
         Earnings per share                           nil                nil
         Proforma weighted-average number
           of shares issued and outstanding    66,500,000         66,500,000

                                       13





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE I - CONTRACT RIGHTS

On April 12, 2001, TTC issued 165 shares of restricted, unregistered Series A
Cumulative and Convertible Preferred Stock to Red Guard to acquire the rights to
negotiate to acquire the license to manufacture, develop and sell certain
patent-pending Composite Reinforced Aluminum Conductor technology. This
transaction was valued at an agreed-upon amount of approximately $165,000.

TTC entered into a technology license agreement with W.B.G., Inc., a California
corporation ("WBG"), on May 7, 2001 (the "License Agreement"). The License
Agreement related to patent pending composite reinforced aluminum conductor
technologies and gave TTC an exclusive license to the technologies covered by
the License Agreement. The License Agreement currently is the basis for our
rights to the composite reinforced aluminum conductor technologies. The Company
intends to file patent applications for several cable designs resulting from any
future development and testing work. WBG and Red Guard were and are unrelated
entities.

In the License Agreement, WBG represented and warranted to TTC that WBG had the
right to enter into the License Agreement, including without limitation the
right to grant TTC the exclusive rights to the technologies covered by the
License Agreement.

TTC agreed to pay royalties to WBG, initially at a maximum rate of 5% of Gross
Revenues (as defined in the License Agreement) received by TTC from the sale of
the Technology products until sales of product have equaled the design capacity
of the first commercial production line. Design capacity of each commercial
production line shall be defined as the capacity stated on the specifications by
the builder which is WBG. The royalty shall decline by ONE percent (1%) of Gross
Revenues as sales of product from each additional commercial production line
reaches design capacity. TTC shall pay WBG a minimum royalty of TWO percent (2%)
of Gross Revenues received by TTC from the sale of the Technology products. In
the event of any sub-license agreements, TTC shall pay the same royalty to WBG
as it would if it sold the products itself.

For commercial product line development, TTC agrees to pay WBG to design, build,
test, install, provide specifications, manuals, and training for complete
commercial product equipment lines for each Technology. The price to be mutually
agreed upon based upon costs plus reasonable overhead fees. TTC understands and
agrees that it must advance funds to WBG for each phase as required under a
mutually agreed upon budget and schedule. As of September 30, 2001 and periods
subsequent thereto, no mutually agreed upon budget has been developed or agreed
to by either party. Further, for additional commercial product lines, TTC has
agreed to purchase additional commercial product lines from WBG for all
additional plant lines as required at mutually agreed upon prices and delivery
schedules. If WBG is unable to supply said additional commercial product lines,
then TTC shall have the right to produce same. No such requirements exist as of
September 30, 2001 or subsequent thereto.

WBG also agreed to provide TTC full disclosure of all current and future
technologies covered by the License Agreement as well as disclosure of any
interested parties in such technologies. TTC agreed to pay WBG to design, build,
install and provide specifications, manuals and training to complete commercial
product equipment lines for the technologies, with the price to be mutually
agreed upon. TTC would advance funds to WBG for each phase as required under a
mutually agreed upon budget and schedule.

As of June 30, 2002 and subsequent thereto, the Company, TTC and WBG are
involved in litigation questioning the validity of the original license
agreement (See Note M - Contingencies). Management is of the opinion that the
license agreement will be upheld and no valuation impairment of the original
agreed-upon acquisition cost has been provided in the accompanying financial
statements.

                                       14





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE J - INVESTMENTS IN OTHER COMPANIES

Investments in other companies consists of the following at June 30, 2002 and
2001:

                                          Carrying value at  Carrying value at
     Investee company                        June 30, 2002     June 30, 2001
     ----------------                        -------------     -------------
Held-to-Maturity
----------------
     Integrated Performance Systems, Inc.      $  1,000           $  1,000
     STL Group, Inc.                              1,000              1,000
     TMA Ventures, LLC/ MEMX, Inc.                1,000              1,000
     AMJ Logistics, Inc.
       Equity investment, including
         conversion of cash advances            233,470              2,020
                                               ---------          ---------

         Totals                                $236,470           $  5,020
                                               =========          =========

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

Through September 30, 2001, upon evaluations in accordance with Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of", management has
recognized an aggregate permanent valuation impairment of approximately $137,230
against these holdings.

Integrated Performance Systems, Inc. (IPS) is a publicly-traded electronics
manufacturing corporation located in Frisco, Texas. IPS is a manufacturer and
supplier of performance-driven circuit boards for high-speed digital computer
and telecommunications applications. The Company acquired an aggregate 3,000
shares of IPS in the April 12, 2001 transaction.

STL Group, Inc. (STL) is a privately-owned company based in Cleveland, Ohio
involved in manufacturing and distributing patented and FDA approved solid
surgical implants and other surgical products. The Company acquired an aggregate
15,000 post-STL forward split shares of STL in the April 12, 2001 transaction.

TMA Ventures, LLC/MEMX, Inc. is a privately-owned company which was formed in
2000 to commercialize micro electro-mechanical systems "MEMS" technologies
licensed by Sandia National Laboratories, specifically to make an all optical
cross-connect microchip for optical switches. The Company acquired an aggregate
3,389 units in TMA Ventures, Inc., which convert on a one-for-one basis into
shares in MEMX, Inc., in the April 12, 2001 transaction.

AMJ Logistics, Inc. (AMJ) is a privately-owned software company based in Tucson,
Arizona. AMJ's primary product is an open-architecture, event-driven,
object-oriented integrated Electronic Data Interchange (EDI) system providing
transaction accountability for a complete audit trail for history and accurate
tracing of costs.

                                       15





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE J - INVESTMENTS IN OTHER COMPANIES - CONTINUED

The Company, on August 11, 2001, executed a 30-day purchase option to acquire up
to an additional 110,000 unregistered, restricted shares of AMJ at prices
ranging between $12.40 and $16.00 per share. During August 2001, the Company
paid $10,000 in cash and issued 158,800 equivalent post-acquisition shares of
restricted, unregistered common stock, valued at $4,500.00, to acquire
approximately 72,665 shares of AMJ common stock under this option.

On September 29, 2001, the Company made an advance of $30,000 cash to AMJ. On
October 13, 2001, AMJ and the Company agreed to convert this $30,000 advance and
an additional advance of $20,000, made on October 3, 2001, into 3,125 shares of
AMJ restricted, unregistered common stock.

In December 2001, the Company and AMJ settled the outstanding balances on the
purchase option agreement with the issuance of 42,500 shares of the Company's
restricted, unregistered common stock to AMJ in exchange for 37,335 shares of
restricted, unregistered AMJ common stock. This transaction was valued at
approximately $909,635, which approximated the discounted "fair value" of the
Company's common stock based upon the quoted closing price of the Company's
unrestricted equity securities as quoted on the date of the transaction.

As a result of all AMJ transactions, through December 31, 2001, the Company owns
an aggregate 114,125 shares of AMJ, including the initial 1,000 shares acquired
in the April 12, 2001 transaction.

NOTE K - PREFERRED STOCK TRANSACTIONS

Preferred stock consists of the following as of June 30, 2002 and 2001,
respectively:

<TABLE>
<CAPTION>
                                              June 30, 2002           June 30, 2001
                                          ---------------------------------------------
                                          # shares    par value   # shares    par value
                                          --------    ---------   --------    ---------
<S>                                         <C>         <C>           <C>       <C>
Series A Cumulative Convertible Stock         165       $  --         165       $   --
Series B Cumulative Convertible Stock       1,000           1          --           --
                                            -----       -----       -----       ------
     Totals                                 1,165       $   1         165           --
                                            =====       =====       =====       ======
</TABLE>

On April 12, 2001, TTC authorized and allocated 165 shares of Series A 10.0%
Cumulative Convertible Preferred Stock. The Series A Preferred Stock (Series A
Stock) was issued at $1,000.00 per share. The Series A Shares shall be entitled
to receive cumulative cash dividends at a rate of 10.0% per annum of the issue
price ($1,000.00 per share) from the date of issuance of the shares until such
shares are converted into common stock or redeemed by the Company. The dividends
shall be payable quarterly on the last day of March, June, September and
December in each year, commencing on September 30, 2001. The Series A Shares are
convertible into common stock at an negotiated conversion rate of $0.47 per
effective post-acquisition share at the election of the holder beginning 90 days
after the date of issuance. The Series A Shares are callable at any time by TTC
at a price of 102.0% of issue value upon a 10-day advance written notice. These
shares were issued on April 12, 2001 to Red Guard, to acquire the rights to
negotiate to acquire the license to manufacture, develop and sell certain
patent- pending Composite Reinforced Aluminum Conductor technology. This
transaction was valued at an agreed-upon amount of approximately $165,000.

                                       16





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE K - PREFERRED STOCK TRANSACTIONS - CONTINUED

On June 27, 2001, TTC authorized and allocated 2,000 shares of Series B 10%
Cumulative Convertible Preferred Stock. The Series B Preferred Stock (Series B
Stock) was issued at $100.00 per share. The Series B Stock shall be entitled to
receive cumulative cash dividends at a rate of 10.0% per annum of the issue
price ($100.00 per share) from the date of issuance of the shares until such
shares are converted into common stock or redeemed by the Company. The dividends
shall be payable quarterly on the last day of March, June, September and
December in each year, commencing on September 30, 2001. Any dividends on the
Series B Stock that are not paid within 30 days after the date upon which
payment thereof is due shall bear interest at 10.0% per annum from such date
until ultimately paid. The shares are convertible into common stock at a rate of
$1.25 per effective post-acquisition share at the election of the holder
beginning 90 days after the date of issuance. The Series B Stock is callable at
a price of 109.0% at any time by TTC upon 10-day advance written notice. TTC
sold 1,000 Series B Shares to Red Guard for cash proceeds of approximately
$100,000 on August 28, 2001.

NOTE L - COMMON STOCK TRANSACTIONS

On December 26, 2000, the Company cancelled an aggregate total of 833,485 shares
of its issued and outstanding common stock. Management, upon extensive research
into transactions approved by former officers and or controlling shareholders,
determined that all of such shares may have been issued improperly, inasmuch as
no corporate authorization of the issuances existed and no consideration was
received by the Company for such shares.

Specifically, the cancellations were as follows:

     400,000 shares were purchased by the then majority stockholder from a
     former officer of the Company for a cash consideration of $15,000 and
     returned to the Company's treasury for no consideration.

     403,485 shares issued to former officers, directors and individuals. These
     shares were issued improperly as (a) at the time of such issuance, the
     corporate charter of the Company had been revoked by the Secretary of State
     of Florida for failure to make required filings and to pay associated fees
     and (b) no consideration was received by the Company for such shares. Many
     of the certificates representing these shares were never delivered and
     remained in the possession of the Company's transfer agent since their
     initial issuance.

     30,000 shares issued to a company in anticipation of fees due for
     investment banking activities. These shares were issued improperly as (a)
     there was no action by the Company's Board of Directors authorizing the
     issuance of any of such shares, and (b) at the time of such issuance, the
     corporate charter of the Company had been revoked by the Secretary of State
     of Florida for failure to make required filings and to pay associated fees.

As a result of the cancellation of these 833,485 shares of Company common stock,
the Company then had 9,166,515 shares outstanding. The effect in the
accompanying financial statements was to restate the par value of the issued and
outstanding shares with a corresponding offset to the additional paid-in capital
account. There was no impact on the earnings of the Company as a result of this
event.

                                       17





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE L - COMMON STOCK TRANSACTIONS - CONTINUED

On November 3, 2001, in connection with a business combination transaction, the
Company's then controlling shareholder surrendered and cancelled an aggregate
3,116,515 shares of common stock to the Company for no consideration. The effect
of this transaction was to reduce the common stock account by the par value
(approximately $3,117) and increase the additional paid-in capital account.

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

On November 3, 2001, the Company issued an aggregate 450,000 shares of
restricted, unregistered common stock to four (4) unrelated entities and/or
individuals as compensation for various financial consulting services provided
in the above discussed Agreement and Plan of Reorganization. This transaction
was valued at approximately $90,000, which approximates the "fair value" of the
Company's stock on the date of the transaction using the discounted closing
price of the Company's common stock as quoted on the NASDAQ Electronic Bulletin
Board.

Upon completion of the November 3, 2001 reverse acquisition transaction, the
Company had an aggregate 66,500,000 shares of issued and outstanding common
stock.

On October 30, 2001, TTC issued an aggregate 79,402 equivalent post-acquisition
shares of restricted, unregistered common stock to its corporate law firm at an
agreed-upon value of approximately $300,000 as a retainer for future legal
services to be provided during a one-year period from October 30, 2001. The
retainer shares shall vest against normal monthly billings from the law firm to
the Company using the agreed-upon valuation of $3.78 per share, regardless of
the open market price of the Company's common stock during the billing month. If
the aggregate market value of the 79,402 shares are worth less than $450,000 in
the open market at the average mean of the bid and ask price for the shares
during the one-month period just preceding the first anniversary of the retainer
agreement (October 30, 2002) then the law firm will have 15 days to make a
written election to either a) exercise a downward adjustment in the agreed-upon
price of $3.78 to an amount of not less than $1.89 per share, which would cause
the Company to issue up to an additional 79,402 equivalent post- acquisition
shares to the law firm or b) put all 79,402 shares back to the Company and
require payment in cash for the legal services provided during the initial term
of the agreement. During January 2002, the Company and the law firm agreed to
rescind this transaction and the 79,402 shares were returned to the Company. All
future transactions between the Company and the law firm will be conducted on a
cash transaction basis.

On December 4, 2001, the Company issued 42,500 shares of the Company's
restricted, unregistered common stock in exchange for 37,335 shares of
restricted, unregistered AMJ common stock. This transaction was valued at
approximately $191,450, which approximates the "fair value" of the Company's
stock on the date of the transaction using the discounted closing price of the
Company's common stock as quoted on the NASDAQ Electronic Bulletin Board.

                                       18





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE L - COMMON STOCK TRANSACTIONS - CONTINUED

On February 27, 2002, the Company filed a Registration Statement Under The
Securities Act of 1933 on Form S-8 to register an aggregate 9,000,000 shares of
common stock pursuant to the 2002 Non-Qualified Stock Compensation Plan. During
the period from February 28, 2002 through June 30, 2002, the Company issued an
aggregate 2,861,000 shares of common stock pursuant to this plan. These shares
were issued at prices ranging between $0.19 and $1.85 per share, as based on the
closing quoted stock price on the respective date of each transaction. These
transactions were valued at an aggregate approximate $2,176,590.

On April 1, 2002, the Company authorized the issuance of 18,868 shares of the
Company's restricted, unregistered common stock to an unrelated individual for
consulting services. This transaction was valued at approximately $10,000, which
approximates the "fair value" of the Company's stock on the date of the
transaction using the discounted closing price of the Company's common stock as
quoted on the NASDAQ Electronic Bulletin Board.

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

NOTE M - STOCK OPTIONS

On July 12, 2001, TTC granted to Red Guard an option to purchase up to $500,000
of 10% Series B Cumulative Convertible Preferred Stock of TTC (the "TTC Series B
Preferred") at $100 per share (the "Red Guard Option") and a warrant to purchase
up to 120,000 shares of TTC Common Stock at $20.00 per share (the "Red Guard
Warrant") in reliance upon the exemption from registration set forth in Section
4(2) of the Securities Act as an inducement for revising the initial conversion
terms of the TTC Series A Preferred. The Red Guard Option and Warrant was
granted to Red Guard as an inducement to modify the conversion price of the TTC
Series A Preferred from an initial conversion price of $0.20 per share, as
adjusted for TTC stock splits prior to the November 3, 2001 reverse acquisition
transaction with CTC, to $0.47 per share after accounting for the effects of the
CTC reverse acquisition transaction. The Red Guard Option was exercisable at any
time and expired on January 12, 2002.

On August 28, 2001, Red Guard exercised a portion of the Series B option and
purchased an aggregate $100,000 of Series B Preferred from the Company. On
October 11, 2001, Red Guard assigned an additional portion of this option to an
unrelated individual who then exercised the option to purchase an aggregate
$32,000 of Series B Preferred from the Company The following table summarizes
all common stock options granted from the grant date through March 31, 2002:

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

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

                                       19





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE M - STOCK OPTIONS - CONTINUED

On May 15, 2001, TTC established the 2001 Incentive Compensation Stock Option
Plan (Plan). The purpose of the Plan is to grant options to purchase the
Company's common stock to employees of the Company and any subsidiaries to
attract and retain persons of ability and provide incentives for them to exert
their best efforts on behalf of the Company. The Plan is administered by either
the Company's Board of Directors or a committee established and appointed by the
Board of Directors. Under the Plan, the Board has reserved 4,764,000 shares of
common stock to support the underlying options which may be granted. The
exercise price of the underlying shares will be determined by the Board of
Directors; however, the exercise price may not be lower than 100.0% of the mean
of the last reported bid and asked price of the Company's common stock as quoted
on the NASDAQ Bulletin Board or any other exchange or organization. The term of
each option will be established by the Board of Directors at the date of issue
and may not exceed 10 years. The Plan shall automatically terminate on May 15,
2021 and no options under the Plan may be granted after May 15, 2011.

In June 2001, the TTC Board of Directors granted an aggregate 1,357,740 options
to various officers and employees to purchase an equivalent number of shares of
TTC restricted, unregistered common stock. The options were issued exercise
prices of either $0.31 or $0.35 per share and expire in either June 2006 or June
2011.

On March 31, 2002, the Company granted an aggregate 5,200,000 options to various
consulting professionals to purchase an equivalent number of shares registered
under the Company's Form S-8, filed in February 2002. The options were issued at
exercise prices between $0.40 and $2.00 per share. These options expire at
various dates between March 31, 2003 and December 31, 2011.

On April 1, 2002, the Company granted 750,000 options to a consulting
professional to purchase an equivalent number of shares registered under the
Company's Form S-8, filed in February 2002. The options were issued at an
exercise price of $0.50 per share. The options vested as follows: 150,000
immediately upon issue and 150,000 per year on the grant anniversary date from
April 1, 2003 through April 1, 2006.

The following table summarizes all common stock options granted through June 30,
2002.

<TABLE>
<CAPTION>
                             Options         Options        Options          Options     Exercise price      Options
                             granted        exercised     terminated       outstanding      per share      not vested
<S>                         <C>             <C>             <C>            <C>             <C>              <C>
2001 employees              1,357,740          -                  -        1,357,740       $0.31 - $0.35      53,970
2002 consultants            5,950,000       1,000,000             -        4,950,000       $0.40 - $2.00    2,666,666
                            ---------       ---------       -------        ---------                        ---------

     Totals                 7,307,740       1,000,000             -        6,307,740                        2,720,636
                            =========       =========       =======        =========                        =========
</TABLE>

The weighted average exercise price of all issued and outstanding options at
June 30, 2002 is approximately $0.89 and approximately 3,587,104 of the issued
and outstanding options are vested and eligible for exercise.

Had compensation cost for options granted been determined based on the fair
values at the grant dates, as prescribed by SFAS 123, the Company's net loss and
net loss per share would not have changed significantly as the exercise price of
the options was relatively equivalent to the market price at the grant date.

                                       20





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE M - STOCK OPTIONS - CONTINUED

The calculations to estimate the fair value of the options were made using the
Black-Scholes pricing model which required making significant assumptions. These
assumptions include the expected life of the options, which was determined to be
the initial life of the corresponding option, either five (5) or ten (10) years,
the expected volatility, which was based on fluctuations of the stock price over
a 12 month period, the expected dividends, determined to be zero based on past
performance, and the risk free interest rate, which was estimated using the bond
equivalent yield of 6.0% at June 30, 2002 and 2001, respectively.

NOTE N - STOCK WARRANT

On July 12, 2001, TTC issued to Red Guard, as an inducement to modify the
conversion price of the TTC Series A Preferred from an initial conversion price
of $0.20 per share, as adjusted for TTC stock splits prior to the November 3,
2001 reverse acquisition transaction with CTC, to $0.47 per share after
accounting for the effects of the CTC reverse acquisition transaction, a stock
warrant to purchase 1,905,600 shares of TTC restricted, unregistered common
stock at a price of $1.26 per share, in reliance upon the exemption from
registration set forth in Section 4(2) of The Securities Act of 1933. This
warrant is exercisable at any time after its issuance and expires on June 12,
2006. Due to the uncertainty related to the ultimate exercise for purchase of
any shares covered by this warrant, TTC did not assign any compensation expense
upon the issuance of this warrant.

The Company (CTC) intends to substitute CTC shares of common stock in place of
the TTC stock prescribed in the above warrant.

On October 18, 2001, the holder of the Warrant to purchase shares of the
Company's common stock exercised 7,940 warrants and purchased 7,940 shares of
restricted, unregistered common stock for $10,000 cash.

<TABLE>
<CAPTION>
                                        Warrants          Warrants
                                       originally      outstanding at
                                         issued         June 30, 2002     Exercise price
                                         ------         -------------     --------------
<S>                                     <C>               <C>            <C>
Series A Preferred Stock Warrants       1,905,600         1,897,660      $1.26 per share
                                        ---------         ---------

Totals at March 31, 2002                1,905,600         1,897,660
                                        =========         =========
</TABLE>

NOTE O - COMMITMENTS

The Company operates in leased offices, located in Irvine, California, on a
month-to-month agreement at a rate of approximately $4,400 per month.

                (Remainder of this page left blank intentionally)

                                       21





<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE P - LITIGATION CONTINGENCIES

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

TRANSMISSION TECHNOLOGY CORPORATION VS W. BRANDT GOLDSWORTHY & ASSOCIATES, INC.,
ET AL., Case No. 01- 07118, was filed in August 15, 2001 before the United
States District Court, Central District of California. Pursuant to a court order
entered May 28, 2002, a substantial part of this suit was compelled to
arbitration. A motion by TTC to clarify the scope of the arbitration order is
currently before the Court. The principal parties to the suit are Transmission
Technology Corporation ("TTC"), C. William Arrington, Composite Technology
Corporation ("CTC"), W. Brandt Goldsworthy & Associates, Inc. ("WBGA"), W.B.G.,
Inc. ("WBG"), Tom Sawyer, and Composite Power Corporation ("CPC"). On or about
May 7, 2001, TTC, a wholly-owned subsidiary of CTC, entered into a written
agreement with WBG to obtain an exclusive license on two related energy
transmission technologies -- Composite Reinforced Aluminum Conductor ("CRAC"
technology) and Advanced Composite Reinforced Aluminum Conductor ("ADVANCED
CRAC" technology). However, within weeks of the execution of the license
agreement, WBG and WBGA refused to perform, asserting that the agreement was
invalid and ineffective because TTC had failed to fullfill an oral condition
precedent discussed during negotiations -- allegedly that TTC would provide WBG
with millions of dollars worth of funding within days of their execution of the
agreement. WBG has subsequently contended that, among other things, the license
agreement was fraudulently induced, signed by persons lacking corporate
authority of TTC, and an illegal agreement entered into by C. William Arrington
in violation of an injunction against him in Nevada, which has since been
largely vacated. Moreover, WBG also contends that the license agreement does not
encompass CRAC technology, only Advanced CRAC technology. TTC first brought suit
against WBGA and WBG seeking to require them to perform under the license,
seeking damages for their breach of contract, and seeking an injunction against
them licensing CRAC or Advanced CRAC to third parties. Promptly after filing its
complaint, TTC brought a motion to compel arbitration pursuant to the
arbitration provision in the parties' license agreement, and a motion for a
status quo preliminary injunction. The District Court denied the requested
preliminary injunction, but did subsequently grant in part TTC's motion to
compel arbitration pursuant to the license agreement, as discussed below.

TTC later amended its complaint to add tort causes of action for fraud and
unfair competition based on WBG's fraudulent misrepresentations made during the
parties' negotiations, as evidenced by their subsequent refusal to perform under
the agreement. WBG and WBGA have brought cross-claims against TTC, CTC, and C.
William Arrington for false advertising and unfair competition, seeking to
enjoin them from representing to others that they have an exclusive license for
CRAC and Advanced CRAC. The court denied WBG and WBGA's motion for preliminary
injunction on this ground on May 24, 2002. WBG and WBGA have also brought
cross-claims against the above defendants and their employees for
misappropriation of alleged trade secrets regarding CRAC and Advanced CRAC
technology and customer information of WBG and/or WBGA, unfair competition, and
interference with economic relations based on their alleged contacts with
customers of WBG and/or WBGA. WBG and WBGA are seeking damages and an injunction
against the foregoing defendants. On or about May 28, 2002, the District Court
partially granted TTC's motion to compel arbitration and compelled a substantial
portion of this case to arbitration pursuant to the arbitration provision in the
parties' license agreement. The parties have submitted this matter to
arbitration and are proceeding with the initial stages of discovery. On or about
July 2, 2002, the Nevada State Court that had issued the injunction previously
in effect against Arrington denied in its entirety a motion for contempt brought
by the parties who had obtained the injunction, finding specifically and on
multiple grounds that Arrington did not violate the injunction by entering into
the license agreement on behalf of TTC. This result contradicts the defense
asserted by WBG and WBGA that the License Agreement was entered into in
violation of the Nevada injunction. If either the court or arbitration
proceeding determines that TTC does not have a license for CRAC and Advanced
CRAC, CTC's plan of operation may be adversely affected.

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<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                    (formerly Eldorado Financial Group, Inc.)
                        (a development stage enterprise)

         NOTES TO RESTATED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE P - LITIGATION CONTINGENCIES - CONTINUED

Management intends to vigorously pursue its claims and to continue development
of its composite reinforced conductor cable beyond the technology covered by the
license agreement.

DR. CLEM HIEL, ET AL. VS. W. BRANDT GOLDSWORTHY & ASSOCIATES, INC., ET AL..,
Case No. 02CC05443, was filed on April 9, 2002 in the State of California for
the County of Orange and has now been transferred and is pending before the
Superior Court of the State of California for the County of Los Angeles. The
principal parties are Dr. Clem Hiel, Dr. Alonso Rodriguez (both of whom are
former employees of WBG and/or WBGA and are currently consultants of CTC), WBGA,
WBG and W. Brandt Goldsworthy. This lawsuit was brought after Drs. Hiel and
Rodriguez received several threats from WBG/WBGA and its principals regarding
their departure from WBG/WBGA and their subsequent decision to work as
consultants for CTC. These threats alleged that Hiel and Rodriguez were part of
a conspiracy to misappropriate WBG/WBGA proprietary information, customers, and
employees, and contained warnings that Hiel and Rodriguez would soon be subject
to legal action. Hiel and Rodriguez brought suit for declaratory relief, unfair
competition, tortuous interference with contract, tortuous interference with
economic advantage, and an injunction. Specifically, Hiel and Rodriguez seek a
declaration that their rights to work for CTC are not subject to any contractual
limitation on their right to work for CTC or any other company, that CRAC and
Advanced CRAC do not constitute trade secrets, and that they have not and will
not misappropriate any trade secrets of WBG/WBGA in conjunction with their
consulting with CTC. They also seek to recover damages against defendants for
their interference with plaintiffs' economic relationship with CTC and current
and potential customers, and to enjoin defendants from making similar threats in
the future. CTC has agreed to bear the expense of this proceeding because it
affects two of CTC's consultants. These consultants are involved in
commercialization of CTC's composite reinforced conductor cable beyond the
technology covered by the license agreement. Any decision that limits the scope
of the consultants work on behalf of CTC would have a negative material effect
on CTC's plan of operation.

JARBLUM VS. TRANSMISSION TECHNOLOGY CORPORATION, ET AL., Case No. SC-072087, was
filed on May 13, 2002 in the Superior Court of the State of California for the
County of Los Angeles, West District. The principal parties are Plaintiff
William Jarblum and Defendants TTC, CPC, and C. William Arrington. Plaintiff
seeks $250,000 in unpaid legal fees. CTC believes that it has valid defenses and
intends to vigorously contest the claim. Due to CTC's cash position, a judgment
in favor of Plaintiff on this claim would have a material negative effect on
CTC's plan of operation.

TRANSMISSION TECHNOLOGY CORPORATION, ET AL. VS. TOM SAWYER, Case No. 02CC10972,
was filed on June 21, 2002 in the Superior Court of the State of California for
the County of Orange. The principal parties are TTC, CPC, Arrington, Wilcoxon,
and Sawyer. Plaintiffs seek declaratory relief and an injunction against Sawyer,
as well as damages arising from various tort causes of actions, including
without limitation tortious interference with contract, fraud, legal
malpractice, and breach of fiduciary duty. The focus of the declaratory relief
and injunction causes of action is to obtain a court order declaring, among
other things, that: (a) Sawyer is not a shareholder, director or officer of TTC;
and (b) TTC is and has always been duly authorized to enter into the License
Agreement and to seek to enforce the License Agreement in a court of law.

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

                (Remainder of this page left blank intentionally)

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<PAGE>

PART I - ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF
OPERATION

(1)  CAUTION REGARDING FORWARD-LOOKING INFORMATION

Certain statements contained in this quarterly filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements.

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

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

(2)  GENERAL COMMENTS

Composite Technology Corporation (Company) was originally incorporated under the
laws of the State of Florida on February 26, 1980 as Eldorado Gold &
Exploration, Inc. On January 13, 1987, the Company amended its Articles of
Incorporation to change the corporate name to Eldorado Financial Group, Inc. and
modified the Company's capital structure to allow for the issuance of up to
100,000,000 shares of common stock at $0.001 par value per share. On June 27,
2001, the Company changed its State of Incorporation from Florida to Nevada by
means of a merger with and into Eldorado Financial Group, Inc., a Nevada
corporation formed on June 25, 2001 solely for the purpose of effecting the
reincorporation. The Articles of Incorporation and Bylaws of the Nevada
corporation became the Articles of Incorporation and Bylaws of the surviving
corporation. Such Articles of Incorporation did not make any changes to the
capital structure of the Company.

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

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

                                       24





<PAGE>

On December 28, 2001, the Company's Board of Directors elected to change the
fiscal year-end of the Company from December 31 to September 30. Additionally,
the Board of Directors established the initial year-end of September 30 for the
Company's wholly-owned subsidiary, Transmission Technology Corporation. The
accompanying consolidated financial statements reflect this action.

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

(3)  RESULTS OF OPERATIONS

The Company had no revenue for the nine and three months ended June 30, 2002 nor
for the period from March 28, 2001 (date of inception) through June 30, 2001.
The Company's initial capitalization occurred early in April 2001.

General and administrative expenses for the nine months ended June 30, 2002 were
approximately $2,702,000, including approximately $1,300,000 in non-cash charges
for consulting and legal services which were paid with common stock issued
pursuant to a Form S-8 Registration Statement filed with the U. S. Securities
and Exchange Commission on February 27, 2002. Legal and professional fees
associated with the reverse acquisition of Transmission Technology Corporation,
regulatory reporting thereof and subsequent financial consulting and legal
services composed approximately $1,295,000 (66.43%) of the total year-to-date
expenses. Accrued officer compensation of approximately $193,000 (7.14%) and
travel expenses of approximately $103,000 (3.81%) composed other key
expenditures for the nine months ended June 30, 2002. Additionally, the Company
incurred non-cash charges to operations of approximately $468,000 for common
stock issued at equivalent prices below the "fair value" of similar transactions
within a comparable time period.

General and administrative expenses for the period from March 28, 2001 (date of
inception) through June 30, 2001 were approximately $110,000, including a
non-cash charge of approximately $74,000 related to charges to operations for
common stock issued at equivalent prices below the "fair value" of similar
transactions within a comparable time period. Other significant expenses during
this period were accrued officer compensation of approximately $30,000 (27.37%)
of the total year-to-date expenses.

Additionally, on April 12, 2001, the Company exchanged 15,086,000 equivalent
post-acquisition shares of restricted, unregistered common stock with Red Guard
for various marketable and restricted securities in various unrelated entities.
The initial exchange transaction was valued using an agreed-upon valuation of
approximately $137,750. As of June 30, 2001, upon evaluations in accordance with
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of",
management recognized an aggregate permanent valuation impairment of
approximately $132,730 against these holdings.

As of the respective periods ended June 30, 2002 and 2001, the Company
recognized a net loss of approximately $(2,702,000) and $(242,000). This equates
to a net loss per share of approximately $(0.04) and $0.00 based upon the
weighted-average number of shares outstanding for the respective
post-acquisition periods.

(4)  PLAN OF OPERATION

Summary
-------

We plan to produce a limited quantity of composite core and subcontract the
helical winding of aluminum conductors so that a certification test can be
completed during the fall of 2002. Additionally we plan a demonstration on an
operating transmission line that can be commenced prior to the end of 2002. We
expect that the demonstration will be conducted by a major American utility
company in conjunction with a consortium of approximately 11other utility
companies and the Electric Power Research Institute. The demonstration will be

                                       25





<PAGE>

closely monitored for three months after which time we anticipate receiving
orders from utility companies, although the line will continue to operate for at
least three years. During the last quarter of 2002, we plan to finalize the
design and produce a working model of the specialized production line capable of
economically manufacturing high strength composite core.

We are presently negotiating potential joint ventures with cable manufacturers
of conventional Aluminum Conductor Steel Reinforced (ACSR) conductors in North
America, China and are in early discussions with other foreign manufacturers for
the establishment of a joint production venture of our ACCC cable. We plan to
either sell our composite core and license the technology to the venture to wind
aluminum conductors around the cable or license the joint venture to produce the
composite core using equipment lines produced by the Company and produce the
cable. In both cases the company plans to provide strategic marketing
involvement using proprietary software that demonstrates the capital savings to
a utility for a specific project along with the performance advantages and
energy savings aspects of the use of the new ACCC conductor. We intend to
establish an equipment and product prototype development facility in Southern
California before the end of 2002.

Product Research and Development
--------------------------------

We believe research and development activities are important to our success.
Over the next 12 calendar months, we anticipate completing various other
composite core cable sizes and designs as well as the development of hardware
required to splice, terminate, and extend the cable. Patent applications have
been filed and additional patent applications will continue to be prepared and
filed using strategies designed for the maximum protection of the Company's
intellectual properties. Additionally, we plan to design, seek patents for, and
produce prototypes of proprietary composite structures including tubular towers
and lattice towers. We plan to complete a unique prototype production equipment
line that will allow for the production of several types of structural products,
which will allow us to expand to different product lines..

Acquisition of Plant and Equipment
----------------------------------

We do not own any real estate or significant equipment. We do anticipate the
need for prototype equipment and product manufacturing capability in the near
future and are actively searching for facilities. The precise space requirements
are being finalized since we anticipate the requirement for prototype equipment
development to occur during the third quarter of 2002.

Personnel
---------

We currently have three full time employees: Benton H Wilcoxon, C. William
Arrington, and Robert Nikoley. Due to limited resources, we have not been able
to pay salaries to date. However, salaries are being accrued at a monthly rate
of $5,000 since April 1, 2001 for each of Mr. Wilcoxon and Mr. Arrington.

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

(5)  LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2002, the Company had working capital of approximately $(795,000) as
compared to working capital of approximately $118,000 as of June 30, 2001 and
approximately $57,000 at the most recent fiscal year-end of September 30, 2001.

During the first quarter of Fiscal 2002, the Company sold a combination of
preferred and common stock for gross proceeds of approximately $210,000, which
was used to support operations and working capital needs.

Between January 3, 2002 and January 28, 2002, an affiliated entity, Red Guard
Industries, Inc,. made four short- term working capital loans to the Company
aggregating $62,000. Each respective loan is for six months (maturing from July
3, 2002 to July 28, 2002), is unsecured and bears interest at 10 1/2% per annum.

                                       26





<PAGE>

Between May 16, 2002 and June 7, 2002, a shareholder (Glenn Little) made short
term working capital loans to the Company aggregating $15,000.

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

We anticipate receiving orders for our products by the end of 2002. Prior to
that, we will be dependent on the receipt of additional financing from third
parties. If such financing is not available, we may be required to discontinue
operations.

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

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

ITEM 3 - CONTROLS AND PROCEDURES

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

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

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

   See Notes to Restated Consolidated Financial Statements

ITEM 2 - CHANGES IN SECURITIES

   On February 27, 2002, the Company filed a Registration Statement Under The
   Securities Act of 1933 on Form S-8 to register an aggregate 9,000,000 shares
   of common stock pursuant to the 2002 Non-Qualified Stock Compensation Plan.

   On April 1, 2002, the Company authorized the issuance of 18,868 shares of
   common stock pursuant to the 2002 Non-Qualified Stock Compensation Plan to
   Alonzo Rodriguez for consulting services. This transaction was valued at
   $10,000 (or $0.53 per share) which approximated the closing quoted price of
   the Company's equivalent common stock on the date of the transaction.
   Concurrent with the issuance of the 18,868 shares, the Company granted Mr.
   Rodriguez an aggregate 750,000 options to purchase an equivalent number of
   shares of the Company's common stock pursuant to the 2002 Non-Qualified Stock

                                       27





<PAGE>

   Compensation Plan at an exercise price of $0.50 per share. The options vested
   as follows: 150,000 immediately upon issue and 150,000 per year on the grant
   anniversary date from April 1, 2003 through April 1, 2006.

   On April 9, 2002, May 29, 2002 and June 13, 2002, the Company issued an
   aggregate 666,000 shares of common stock pursuant to the 2002 Non-Qualified
   Stock Compensation Plan to the law firm of Call & Jensen for professional
   legal and consulting services. These transactions were valued at an aggregate
   $202,540 (or per share prices ranging between $0.70 and $0.19 per share)
   which approximated the closing quoted price of the Company's equivalent
   common stock on the date of the respective transaction.

   On April 19, 2002, the Company issued 750,000 shares of common stock upon the
   exercise of options granted pursuant to the 2002 Non-Qualified Stock
   Compensation Plan to Rocci Howe. This transaction was valued at an aggregate
   $292,500 (or $0.39 per share) which approximated the closing quoted price of
   the Company's equivalent common stock on the date of the transaction.

   On April 19, 2002, the Company issued 120,000 shares of common stock pursuant
   to the 2002 Non-Qualified Stock Compensation Plan to Dominic Magliariditti
   for professional consulting services. This transaction was valued at an
   aggregate $46,800 (or $0.39 per share) which approximated the closing quoted
   price of the Company's equivalent common stock on the date of the
   transaction.

   Between May 25, 2002 and June 30, 2002 the Company received $51,000 from two
   individuals and subsequently issued restricted, unregistered shares of common
   stock in the amount of 250,000 shares to Gary Shapiro for cash and for
   services and 83,333 shares to Barry Berman for cash.

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

ITEM 3 - DEFAULTS ON SENIOR SECURITIES

   As of the date of this filing, the Company is delinquent in making the
   required payment of accrued dividends on its issued and outstanding Series A
   10% Cumulative Convertible Preferred Stock (Series A Stock) and Series B 10%
   Cumulative Convertible Preferred Stock (Series B Stock).

   In the event the Company does not pay any required dividends by 365 days
   after the due date thereof, the number of directors on TTC's Board of
   Directors will be increased by one and the holders of the respective Series A
   Stock and Series B Stock who have not received such dividends for such period
   may elect the extra director. Upon the payment of the dividends, the term of
   the extra director will automatically end and the Board will return to its
   prior size.

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

   None

ITEM 5 - OTHER INFORMATION

"Penny Stock Rules"
-------------------

   So 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

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<PAGE>

   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 shareholder's ability to resell the Common Stock.

   Stockholders should be aware that, according to Securities and Exchange
   Commission Release No. 34-29093, the market for penny stocks has suffered in
   recent years from patterns of fraud and abuse. Such patterns include (i)
   control of the market for the security by one or a few broker-dealers that
   are often related to the promoter or issuer; (ii) manipulation of prices
   through prearranged matching of purchases and sales and false and misleading
   press releases; (iii) boiler room practices involving high-pressure sales
   tactics and unrealistic price projections by inexperienced sales persons;
   (iv) excessive and undisclosed bid-ask differential and markups by selling
   broker-dealers; and (v) the wholesale dumping of the same securities by
   promoters and broker-dealers after prices have been manipulated to a desired
   level, along with the resulting inevitable collapse of those prices and with
   consequent investor losses. Our management is aware of the abuses that have
   occurred historically in the penny stock market. Although we do not expect to
   be in a position to dictate the behavior of the market or of broker-dealers
   who participate in the market, management will strive within the confines of
   practical limitations to prevent the described patterns from being
   established with respect to our securities.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

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

Reports on Form 8-K
   July 15, 2002       Updating disclosure related to various litigation
                       involving the Company, its subsidiaries and other
                       interested parties.

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

                                   SIGNATURES

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

                                 COMPOSITE TECHNOLOGY CORPORATION

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


                                       29