<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

                                   (Mark one)

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

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

         For the transition period from ______________ to _____________


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

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


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


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


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

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

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: May 2, 2003: 89,325,429
------------------------------------------------------------------

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

<PAGE>

                        COMPOSITE TECHNOLOGY CORPORATION

                Form 10-QSB for the Quarter ended March 31, 2003

                                Table of Contents


                                                                            Page
                                                                            ----
PART I - FINANCIAL INFORMATION

Item 1        Financial Statements                                            3

Item 2        Management's Discussion and Analysis or Plan of Operation      18

Item 3        Controls and Procedures                                        20

PART II - OTHER INFORMATION

Item 1        Legal Proceedings                                              21

Item 2        Changes in Securities                                          21

Item 3        Defaults Upon Senior Securities                                21

Item 4        Submission of Matters to a Vote of Security Holders            21

Item 5        Other Information                                              21

Item 6        Exhibits and Reports on Form 8-K                               21

SIGNATURES                                                                   22

CERTIFICATIONS

CERTIFICATIONS PURSUANT TO SARBANES-OXLEY ACT OF 2002                        23


                                       2
<PAGE>
<TABLE>

PART 1 - ITEM 1 - FINANCIAL STATEMENTS

                             COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                                       CONSOLIDATED BALANCE SHEETS
                                         March  31, 2003 and 2002

                                                 (UNAUDITED)
<CAPTION>

                                                                      March 31,         March 31,
                                ASSETS                                  2003              2002
                                ------                              ------------      ------------
<S>                                                                 <C>               <C>
CURRENT ASSETS
   Cash on hand and in bank                                         $   346,352       $     5,098
   Prepaid consulting and other expenses                                728,822           311,167
                                                                    ------------      ------------
      TOTAL CURRENT ASSETS                                            1,075,174           316,265

PROPERTY AND EQUIPMENT - AT COST
   Office furniture and equipment                                       143,080             8,684
   Accumulated depreciation                                              (7,306)           (2,596)
                                                                    ------------      ------------
      NET PROPERTY AND EQUIPMENT                                        135,774             6,088
                                                                    ------------      ------------
OTHER ASSETS
   Contract rights                                                      165,000           165,000
   Deposits                                                              16,000                --
   Investments in other companies                                         1,000           236,470
                                                                    ------------      ------------
      TOTAL OTHER ASSETS                                                182,000           401,470
                                                                    ------------      ------------
   TOTAL ASSETS                                                     $ 1,392,948       $   723,823
                                                                    ============      ============
                 LIABILITIES AND SHAREHOLDERS' EQUITY
                 ------------------------------------
CURRENT LIABILITIES
   Notes payable to a shareholder                                   $        --       $    62,000
   Accounts payable and accrued expenses                                457,794           405,328
   Accrued interest payable                                                  --             1,300
   Accrued dividends payable                                             20,692            23,671
   Accrued officers compensation                                        336,000            80,759
                                                                    ------------      ------------
      TOTAL CURRENT LIABILITIES                                         814,486           573,058
                                                                    ------------      ------------
LONG-TERM LIABILITIES
  Deferred compensation - fair  value of vested stock options           798,500                --
                                                                    ------------      ------------
     TOTAL LIABILITIES                                                1,612,986           573,058

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
   Preferred stock - $0.001 par value
      5,000,000 shares authorized
        1,320 and 1,485 issued and outstanding, respectively                  1                 1
   Common stock - $0.001 par value
      200,000,000 shares authorized  89,325,429 and 67,788,098
        shares issued and  outstanding, respectively                     89,325            67,788
   Additional paid-in capital                                         6,742,709         2,352,046
   Accumulated deficit                                               (7,052,073)       (2,269,070)
                                                                    ------------      ------------
   TOTAL SHAREHOLDERS' EQUITY                                          (220,038)          150,765
                                                                    ------------      ------------

   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                       $ 1,392,948       $   723,823
                                                                    ============      ============

             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
</TABLE>
                                                 3
<PAGE>
<TABLE>

                                    COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                             CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                                  Six and Three months ended March 31, 2003 and 2002

                                                      (UNAUDITED)
<CAPTION>

                                              Six Months         Six Months       Three Months      Three Months
                                                 ended              ended             ended             ended
                                               March 31,          March 31,         March 31,         March 31,
                                                 2003               2002              2003              2002
<S>                                          <C>               <C>               <C>               <C>
REVENUES                                     $         --      $         --      $         --      $         --
                                             -------------     -------------     -------------     -------------
EXPENSES
Research and development expenses                 717,335                --           505,632                --
Officer compensation                               90,000                --            60,000                --
General and administrative expenses                95,800           275,217            42,826           173,232
Legal, professional and consulting fees           737,645         1,474,070           630,242         1,083,185
Interest expense                                    3,160             1,300                --             1,300
Depreciation                                        2,700             1,362             1,350               681
Compensation expense (income) related to
  Value of vested stock options                  (865,775)               --          (865,775)               --
                                             -------------     -------------     -------------     -------------
Total operating expenses                          780,865         1,751,949           374,275         1,258,398
                                             -------------     -------------     -------------     -------------
LOSS FROM OPERATIONS                             (780,865)       (1,751,949)         (374,275)       (1,258,398)

PROVISION FOR INCOME TAXES                             --                --                --                --
                                             -------------     -------------     -------------     -------------
NET LOSS                                         (780,865)       (1,751,949)         (374,275)      (1,258,,398)
                                             -------------     -------------     -------------     -------------
OTHER COMPREHENSIVE INCOME

COMPREHENSIVE LOSS                           $   (780,865)     $ (1,751,949)     $   (374,275)     $ (1,258,398)
                                             =============     =============     =============     =============
Earnings per share of common
   stock outstanding computed on net
   loss - basic and fully  diluted           $      (0.01)     $      (0.03)     $       (nil)     $      (0.02)
                                             =============     =============     =============     =============
Weighted-average number of
   shares outstanding - basic and
   fully diluted                               77,749,589        66,610,607        81,311,369        66,710,449
                                             =============     =============     =============     =============

                  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
</TABLE>

                                                      4
<PAGE>
<TABLE>

                                COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        Six months ended March 31, 2003
                                                 (UNAUDITED)

                                                                  Six Months        Six Months
                                                                     ended             ended
                                                                   March 31,         March 31,
                                                                     2003              2002
                                                                 ------------      ------------
<S>                                                              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period                                          $  (780,865)      $(1,751,949)
Adjustments to reconcile net loss to net cash provided
   by operating activities:
Depreciation                                                           2,700             1,362
Consulting legal and other expenses paid with common stock         2,243,851           997,442
Compensation expense related to fair value of stock options         (865,775)               --
(Increase) in prepaid expenses and other assets                     (632,250)          (32,500)
Increase (Decrease) in
     Accounts payable - trade                                       (512,043)          395,703
     Accrued interest payable                                         (9,851)            1,300
     Accrued officer compensation                                     60,072            89,501
                                                                 ------------      ------------
NET CASH USED IN OPERATING ACTIVITIES                               (494,161)         (299,141)
                                                                 ------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Deposits                                                             (16,000)               --
Purchase of property and equipment                                  (117,866)           (1,284)
                                                                 ------------      ------------
NET CASH USED IN INVESTING ACTIVITIES                               (133,866)           (1,284)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable to a shareholder                              --            62,000
Proceeds from sale of preferred stock                                     --            32,000
Proceeds from short-term debt                                         30,000                --
Proceeds from sale of common stock                                   930,423           178,510
                                                                 ------------      ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                            960,423           272,510
                                                                 ------------      ------------
INCREASE (DECREASE) IN CASH                                          332,396           (27,915)
Cash at beginning of period                                           13,956            33,013
                                                                 ------------      ------------
CASH AT END OF PERIOD                                            $   346,352       $     5,098
                                                                 ============      ============
SUPPLEMENTAL DISCLOSURE OF
INTEREST AND INCOME TAXES PAID
  Interest paid for the period                                   $        --       $        --
                                                                 ============      ============
  Income taxes paid for the period                               $        --       $        --
                                                                 ============      ============
SUPPLEMENTAL DISCLOSURE OF
NON-CASH INVESTING AND FINANCING ACTIVITIES
  Common stock exchanged for Investment in Other Companies       $        --       $   191,350
  Common stock issued in settlement of short-term debt                30,000                --
                                                                 ============      ============

               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
</TABLE>

                                                     5
<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

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

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

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

NOTE B - PREPARATION OF FINANCIAL STATEMENTS

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

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

                                       6
<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE B - PREPARATION OF FINANCIAL STATEMENTS - CONTINUED

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

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

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

NOTE C - RELATED PARTY TRANSACTIONS

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

On September 30, 2002, the Company and Red Guard consummated a transaction
whereby Red Guard exchanged 100.0% of the issued and outstanding Series A
Preferred Stock; all accrued, but unpaid, dividends; certain short term working
capital loans; and all accrued, but unpaid, interest, in return for certain of
the Company's investment interests in other companies

NOTE D - 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.

                                       7
<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED


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

       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:

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

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

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

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

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

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


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


5. Research and development expenses
------------------------------------
       Research and development expenses are charged to operations as
       incurred.

                                       8
<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED


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 March 31, 2003 and 2002, respectively, the deferred tax
       asset and deferred tax liability accounts, as recorded when material,
       consist of temporary differences. Temporary differences represent
       differences in the recognition of assets and liabilities for tax and
       financial reporting purposes, primarily allowance for doubtful accounts
       and accumulated depreciation.

       As of March 31, 2003 and 2002, 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 March 31,
       2003 and 2002, the Company's outstanding stock options are considered
       anti-dilutive due to the Company's net operating loss position.

NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

                                       9
<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE F - CONCENTRATIONS OF CREDIT RISK

The Company maintains its cash accounts in a financial institution subject to
insurance coverage issued by the Federal Deposit Insurance Corporation (FDIC).
Under FDIC rules, the Company is entitled to aggregate coverage of $100,000 per
account type per separate legal entity per financial institution. During the
three months ended March 31, 2003, the Company had deposits in two (2) separate
financial institution with credit risk exposures in excess of statutory FDIC
coverage. The Company has incurred no losses as a result of any of these
unsecured situations."

NOTE G - CONTRACT RIGHTS

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

TTC entered into a technology license agreement with WBG on May 7, 2001 (the
"License Agreement"). The License Agreement related to patent pending composite
reinforced aluminum conductor technologies and all improvements and gave TTC an
exclusive license to the technologies covered by the License Agreement.

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

TTC agreed to pay royalties to WBG, initially at a maximum rate of 5% of Gross
Revenues (as defined in the License Agreement) received by TTC from the sale of
the technology products until sales of product have equaled the design capacity
of the first commercial composite core production line. Design capacity shall be
defined as the pultruded composite core capacity stated on the specifications by
the builder (WBG) as mutually agreed upon by TTC. The royalty shall decline by
one percent (1%) of Gross Revenues upon the addition of each new composite core
production line until the fourth line is installed whereupon WBG would receive a
royalty of two percent (2%) of Gross Revenues received by TTC from the sale of
the technology products. In the event of any sub-license agreements, TTC shall
pay the same royalty to WBG as it would if it sold the products itself.

WBG also agreed to provide TTC full disclosure of all current and future
technologies covered by the License Agreement as well as disclosure of any
interested parties in such technologies. TTC agreed to pay WBG to design, build,
install and provide specifications, manuals and training to complete commercial
product equipment lines for the technologies, with the price and specifications
to be mutually agreed upon. TTC would advance funds to WBG for each phase as
required under a mutually agreed upon budget and schedule. If WBG is unable to
supply said additional commercial product lines, then TTC shall have the right
to produce same. No such requirements exist as of September 30, 2002 or
subsequent thereto.

Through February 2003, the Company, TTC and WBG were involved in litigation
regarding the interpretation and enforcement of the License Agreement. (See Note
N - Litigation Contingencies). During February 2003, all litigation was settled
involving the "license dispute" together with three other related cases. The
settlement included a new license agreement with W. Brandt Goldsworthy &
Associates, Inc. (WBGA), allowing CTC to produce electrical cables using any
patent which may be granted as a result of WBGA's patent application on CRAC1
technology, for which CTC will owe a royalty of 1% to WBGA. If CTC's ACCC cable
product uses any claim from CRAC1 that is granted by the Patent Office, then CTC
will owe a royalty of 2% to WBGA. Except for future royalty payments under these
new license agreements, the Company has no liability to WBG or WBGA.

                                       10
<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE H - INVESTMENTS IN OTHER COMPANIES

Investments in other companies consists of the following at March 31, 2003 and
2002:

                                                      Carrying        Carrying
                                                       value at        value at
                                                      March 31,       March 31,
Investee company                                        2003            2002
                                                        ----           ------
Held-to-maturity
  Integrated Performance Systems, Inc.                $  1,000        $  1,000
  STL Group, Inc.                                           --           1,000
  TMA Ventures, LLC/ MEMX, Inc.                             --           1,000
  AMJ Logistics, Inc.                                       --         233,470
                                                      ---------       ---------
Totals                                                $  1,000        $236,470
                                                      =========       =========


On September 30, 2002, the Company and Red Guard consummated a transaction
whereby Red Guard exchanged 100.0% of the issued and outstanding Series A
Preferred Stock; all accrued, but unpaid, dividends; certain short term working
capital loans; and all accrued, but unpaid, interest, in return for all of the
Company's investment interests in other companies, except for the investment in
Integrated Performance Systems, Inc.

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

NOTE I - INCOME TAXES

The components of income tax (benefit) expense for the six months ended March
31, 2003 and 2002, respectively, are as follows:

                                            Six months          Six months
                                              ended              ended
                                             March 31,           March 31,
                                               2003               2002
                                               ----               ----
Federal:
           Current                             $--                $--
           Deferred                             --                 --
           --------                            ----               ----

State:
           Current                              --                 --
           Deferred                             --                 --
           --------                            ----               ----

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

As of March 31, 2003, the Company has a net operating loss carryforward of
approximately $7,100,000 to offset future taxable income. Subject to current
regulations, this carryforward will begin to expire in 2020. The amount and
availability of the net operating loss carryforwards may be subject to
limitations set forth by the Internal Revenue Code. Factors such as the number
of shares ultimately issued within a three year look-back period; whether there
is a deemed more than 50 percent change in control; the applicable long-term tax
exempt bond rate; continuity of historical business; and subsequent income of
the Company all enter into the annual computation of allowable annual
utilization of the carryforwards.

                                       11
<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE I - INCOME TAXES - CONTINUED

The Company's income tax expense for the six months ended March 31, 2003 and
2002, respectively, are as follows:

<TABLE>
<CAPTION>
                                                          Six months      Six months
                                                            ended          ended
                                                           March 31,        March 31,
                                                             2003           2002
                                                             ----           ----
<S>                                                       <C>             <C>
Statutory rate applied to income before income taxes      $(388,000)      $(595,000)
Increase (decrease) in income taxes resulting from:
State income taxes                                               --              --
Other, including reserve for deferred tax asset             388,000         595,000
                                                          ----------      ----------

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

Temporary differences, consisting primarily of statutory deferrals of expenses
for organizational costs, statutory differences in the depreciable lives for
property and equipment, between the financial statement carrying amounts and tax
bases of assets and liabilities and timing of the deductibility of accrued
executive compensation give rise to deferred tax assets and liabilities as of
March 31, 2003 and 2002, respectively:

                                                   March 31,         March 31,
                                                     2003             2002
                                                     ----             ----
Deferred tax assets
           Net operating loss carryforwards      $ 2,520,000       $   771,000
           Less valuation allowance               (2,520,000)         (771,000)
                                                 ------------      ------------

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

During the six months ended March 31, 2003 and 2002, respectively, the reserve
for the deferred current tax asset increased by approximately $338,000 and
$595,000, respectively.

NOTE J - PREFERRED STOCK TRANSACTIONS

Preferred stock consists of the following as of March 31, 2003 and 2002,
respectively:

<TABLE>
<CAPTION>
                                                 March 31,                  March 31,
                                                    2003                      2002
                                                    ----                      ----
                                            # shares    par value       # shares    par value
                                            --------    ---------       --------    ---------
<S>                                           <C>            <C>          <C>            <C>
Series A Cumulative Convertible Stock           --           $--            165          $--
Series B Cumulative Convertible Stock         1,320            1          1,320            1
                                              -----          ---          -----          ---

Totals                                        1,320          $ 1          1,485            1
                                              =====          ===          =====          ===
</TABLE>

On June 27, 2001, TTC authorized and allocated 2,000 shares of Series B 10%
Cumulative Convertible Preferred Stock. The Series B Preferred Stock (Series B
Stock) was issued at $100.00 per share. The Series B Stock shall be entitled to
receive cumulative cash dividends at a rate of 10.0% per annum of the issue
price ($100.00 per share) from the date of issuance of the shares until such
shares are converted into common stock or redeemed by the Company. The dividends
shall be payable quarterly on the last day of March, June, September and
December in each year, commencing on September 30, 2001. Any dividends on the
Series B Stock that are not paid within 30 days after the date upon which
payment thereof is due shall bear interest at 10.0% per annum from such date
until ultimately paid. The shares are convertible into common stock at a rate of
$1.25 per effective post-acquisition share at the election of the holder
beginning 90 days after the date of issuance. The Series B Stock is callable at
a price of 109.0% at any time by TTC upon 10-day advance written notice. TTC
sold 1,000 Series B Shares to Red Guard for cash proceeds of approximately
$100,000 on August 28, 2001 and 320 shares to an unrelated third party for cash
proceeds of approximately $32,000 on October 11, 2001.

On September 30, 2002, the Company and Red Guard consummated a transaction
whereby Red Guard exchanged 100.0% of the issued and outstanding Series A
Preferred Stock; all accrued, but unpaid, dividends; certain short-term working
capital loans; and all accrued, but unpaid, interest in return for certain of
the Company's investment interests in other companies.

                                       12
<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE K - COMMON STOCK TRANSACTIONS

As fully described in the Company's Annual Report on Form 10-KSB for the year
ended September 30, 2002, on November 3, 2001 in a series transactions, the
Company executed an Agreement and Plan of Reorganization to effect a reverse
acquisition transaction with Transmission Technology Corporation ("TTC"),
whereby TTC became a wholly-owned subsidiary of the Company. In the transaction
the shareholders of TTC effectively controlled the Company.

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. During
January 2002, the Company and the law firm agreed to rescind this transaction
and the 79,402 shares were returned to the Company. All future transactions
between the Company and the law firm will be conducted on a cash transaction
basis.

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

As fully described in the Company's Annual Report on Form 10-KSB for the year
ended September 30, 2002, during fiscal 2002 the company issued 1,262,673 shares
of the it's restricted, unregistered common stock in four separate transactions
valued at $455,179 for the purpose of acquiring marketable securities in an
unrelated entity, payment for consulting services and converting short working
capital loans to equity.

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

During the first quarter of fiscal 2003, the Company, in conjunction with a
separate Private Placement Memorandum sold an aggregate 6,400 Units for gross
proceeds of approximately $11,520. Each Unit consisted of 10 shares of
unregistered, restricted common stock; 10 Series A warrants and 5 Series B
warrants.

During first quarter of fiscal 2003, in conjunction with a separate Private
Placement Memorandum, the Company sold an aggregate 1,862,500 shares with a
warrant to purhase one share of common stock for gross proceeds of approximately
$188,650. Unit consisted of tene shares of unregistered, restricted common stock
and either 10 Series A warrants and 5 Series B warrants or 10 Series E warrant.
In connection with these transactions, 30,000 Series A Warrants, 15,000 Series B
Warrants and 1,832,500 Series E warrants were issued.

During the second quarter of fiscal 2003 pursuant to Private Placement
Memoranda, the Company sold an aggregate 3,937,000 Units, for gross proceeds of
approximately $775,575 to 48 accredited individuals and 1 unrelated entity. Each
Unit consisted of one share of restricted, unregistered common stock and one
warrant of either Series E or H attached to purchase one share of unregistered,
restricted common stock. In connection with these transactions, 1,153,500 Series
E warrants and 2,783,500 Series H warrants were issued. Each Series E warrant
entitles the holder to purchase a share of common stock at $0.25 per share and
expires on December 1, 2004.

As further described in Note O - Litigation Contingencies, the Company issued
1,500,000 shares of restricted, unregistered common stock valued at $93,750 in
connection with a settlement agreement.

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

During the second quarter of fiscal 2003, the Company issued 5,931,000 shares of
free trading common registered pursuant to Form S-8 to six individuals for
product design, technology registration, legal services and accounting services
valued at $1,866,500 which approximated the closing price of the Company's
common stock as quoted on the NASDAQ Electronic Bulletin Board on the date of
issue.

During the second quarter of fiscal 2003, the Company issued 2,090,000 shares of
the Company's restricted, unregistered common stock to twenty- two individuals
and six unrelated entities for various consulting services. These transactions
were valued at approximately $270,500, 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.

                                       13
<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED


NOTE L - STOCK OPTIONS

On August 28, 2001, Red Guard exercised a portion of the Series B option and
purchased an aggregate $100,000 of Series B Preferred from the Company. On
October 11, 2001, Red Guard assigned an additional portion of this option to an
unrelated individual who then exercised the option to purchase an aggregate
$32,000 of Series B Preferred from the Company The following table summarizes
all preferred stock options granted from the grant date through March 31, 2003:

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

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

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

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

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

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

The following table summarizes all common stock options granted through March
31, 2003.

<TABLE>
<CAPTION>
                        Options          Options         Options        Options       Exercise price     Options
                        granted         exercised      terminated     outstanding        per share      not vested
                        -------         ---------      ----------     -----------        ---------      ----------
<C>                   <C>             <C>            <C>               <C>            <C>               <C>
2001 employees        1,357,740               --            --         1,357,740      $0.31 - $0.35             0
2002 consultants      5,950,000       (2,000,000)    (1,000,000)       2,950,000      $0.08 - $2.00     1,785,715
2003 consultants        750,000            --                --          750,000              $0.25       700,000
                        -------       -----------    -----------       ----------     --------------    ----------

Totals                8,057,740       (2,000,000)    (1,000,000)       5,057,740                        2,485,715
                      =========       ===========    ===========       =========                        =========
</TABLE>

The weighted average exercise price of all issued and outstanding options at
March 31, 2003 is approximately $0.31 and approximately 2,572,025 of the issued
and outstanding options are vested and eligible for exercise.

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

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

                                       14
<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE L - STOCK OPTIONS - CONTINUED

This calculation resulted in approximately $1,664,275 being charged to
operations for the year ended September 30, 2002 for stock options then
outstanding. During the second quarter of fiscal 2003, 1,000,000 outstanding
stock options were cancelled and another 1,750,000 outstanding options were
repriced from the original price of $1.31 and $1.25 to $0.25 per share,
resulting in a reversal of the previously recorded compensation expense of
$293,875 for the cancelled options and $806,500 for the repriced options. In
connection with the repricing the Company recorded deferred compensation expense
of $101,850 based on the revised option price of $0.25 per share.

In February 2003, the Company granted three stock options of 250,000 shares each
to 3 individuals and recorded deferred compensation expense of $132,750 in
connection with such options based upon the Black-Scholes assumptions previously
outlined.


NOTE M - STOCK WARRANTS

On July 12, 2001, TTC issued to Red Guard, as an inducement to modify the
conversion price of the TTC Series A Preferred, 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. As described in "NOTE I - Preferred
Stock Transactions" Red Guard converted 100% of the Series A Preferred Stock on
September 30, 2002. Due to the uncertainty related to the ultimate exercise for
purchase of any shares covered by this warrant, TTC did not assign any
compensation expense upon the issuance of this warrant.

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

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

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

During November and December 2002, the Company sold an aggregate 1,832,500
Units, pursuant to a separate Private Placement Memorandum, for net proceeds of
approximately $183,250. Each Unit consists of one share of restricted,
unregistered common stock and one Series E warrant to purchase one share of
unregistered, restricted common stock. Each Series E warrant entitles the holder
to purchase a share of common stock at $0.25 per share and expires on December
1, 2004.

During the second quarter of fiscal 2003 the Company sold an aggregate 3,937,000
Units, pursuant to separate Private Placement Memoranda, for net proceeds of
approximately $735,653. Each Unit consists of one share of restricted,
unregistered common stock and one warrant of either Series E or H to purchase
one share of unregistered, restricted common stock. Each Series E warrant
entitles the holder to purchase a share of common stock at $0.25 per share and
expires on December 1, 2004. Each Series H warrant entitles the holder to
purchase a share of common stock at $0.50 per share and expires on January 30,
2005. In connection with these transactions, 1,153,500 Series E warrants and
2,783,500 Series H warrants were issued.

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

<TABLE>
<CAPTION>
                                                     Warrants             Warrants
                                                    originally       outstanding at
TO COME                                               issued           March 31, 2003       Exercise price
                                                      ------           --------------       --------------
<S>                                                <C>                   <C>                <C>
Series A Preferred Stock Warrants                  1,905,000             1,897,660          $1.26 per share
Series A Common Stock Warrants                        30,000                30,000          $0.35 per share
Series B Common Stock Warrants                        15,000                15,000          $0.60 per share
Series E Common Stock Warrants                     2,986,500             2,986,500          $0.25 per share
Series H Common Stock Warrants                     2,783,500             2,783,500          $0.50 per share
                                                   ---------             ---------
Totals at March 31, 2003                           7,720,000             7,712,660
                                                   =========             =========
</TABLE>

                                       15
<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE N - COMMITMENTS

The Company operates it's corporate offices and research facilities in Orange
County, California pursuant to two (2) separate operating lease agreements, on a
month-to-month basis. The two leases require aggregate monthly payments of
approximately $12,600.

NOTE O - LITIGATION CONTINGENCIES

As discussed in "Part II Item 1 - Legal Proceedings", prior to the end of the
quarter ended March 31, 2003, the Company has settled all known material legal
proceedings that had commenced by or against CTC or its wholly owned subsidiary,
Transmission Technology Corporation ("TTC").

As of February 6, 2003, CTC entered a Settlement Agreement and Mutual Release
pursuant to which all of claims and counterclaims in the various legal
proceedings related to CTC, CTC's Officers or consultants and W. Brandt
Goldsworthy & Associates, Inc. ("WBGA"), W.B.G., Inc. ("WBG"), W. Brandt
Goldsworthy and affiliates of WBGA and WBG were dismissed. A copy of the
Settlement Agreement and Mutual Release is filed herein as an exhibit to this
Form 10-QSB. Pursuant to the settlement, CTC issued 1,500,000 shares of
unregistered, restricted common stock to various parties in the actions. The
shares issued were valued at $93,750.

As of March 31, 2003, CTC and TTC entered into a Settlement Agreement with
William Jarblum pursuant to which all of claims in the legal proceeding against
CTC, TTC and an officer of CTC were dismissed. A copy of the Settlement
Agreement and Mutual Release is filed herein as an exhibit to this Form 10-QSB.
Pursuant to the settlement agreement CTC has agreed to pay plaintiffs $210,000
in installments beginning June 1, 2003 and ending August 1, 2003. The company
also issued to plaintiff warrants to purchase 50,000 shares of unregistered
restricted common stock of the Company at $0.50 per share. The warrants expire
on September 30, 2005.

NOTE P - COMMITMENTS

PROFESSIONAL SERVICES CONSULTING AGREEMENTS
-------------------------------------------
The Company has outstanding consulting agreements for professional and product
development services as follows:

A contract with an individual for product development and research services at a
rate of $10,000 per month. This agreement commenced in April 2002 and is for an
initial term of one year with automatic renewals, subject to 30 day cancellation
by either party.

A contract with an unrelated partnership for legal services at a rate of $300
per hour, payable in common stock issued pursuant to a Registration Statement
under the Securities Act of 1933 on Form S-8. The Company is required to issue
common stock in blocks of 100,000 shares to prepay for these legal services.
This agreement commenced in January 2002 for an initial one-year term and is
continuing subject to 30 day cancellation by either party.. This agreement also
contained the granting of options to purchase up to 200,000 shares of common
stock pursuant to a Registration Statement under the Securities Act of 1933 on
Form S-8 at a price of $1.75 per share for 100,000 options and $2.00 per share
for 100,000 options. The options vested on the grant date. The Company has
$50,000 prepaid under the contract at March 31, 2003.

A contract with a corporation, who's controlling officer sits on the Company's
product development/advisory board, for product development and research
services at a rate of $15,000 per month. This agreement commenced in January
2002 and expires in December 2006. This agreement also contained the granting of
options to the individual to purchase up to 1,000,000 shares of common stock
pursuant to a Registration Statement under the Securities Act of 1933 on Form
S-8. The initial option price of $1.31 per share was repriced to $0.25 per share
in February 2003. The options vest in pro-rata equal segments of 20.0% of the
total grant on an annual basis starting in December 2002. The Company is
obligated to pay the individual interest on unpaid amounts at a rate of 10.0%
per annum and is obligated to pay a royalty to the individual equal to 0.35% of
gross revenues on all products sold by the Company using technology developed by
this individual.

A contract with a corporation, who's controlling officer sits on the Company's
product development/advisory board, for product development and research
services at a rate of $25,000 per month. This agreement commenced in January
2002 and runs for an indefinite time period. This agreement also contained the
granting of options to the individual to purchase up to 750,000 shares of common
stock pursuant to a Registration Statement under the Securities Act of 1933 on
Form S-8. The initial option price of $1.00 per share was repriced to $0.25 per
share in February 2003. The options vest in pro-rata equal segments of 20.0% of
the total grant on an annual basis starting in December 2002. The Company is
obligated to pay the individual interest on unpaid amounts at a rate of 10.0%
per annum and is obligated to pay a royalty to the individual equal to 0.35% of
gross revenues on all products sold by the Company using technology developed by
this individual.

                                       16
<PAGE>

                 COMPOSITE TECHNOLOGY CORPORATION AND SUBSIDIARY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE P - COMMITMENTS - CONTINUED

BUSINESS SERVICES AGREEMENTS
----------------------------
A contract with an unrelated person for consulting services at a rate of
$500,000 per year, payable in common stock. This agreement commenced in March
2002 and expires in March 2004. This agreement also contained the granting of
options to purchase up to 1,000,000 shares of common stock at a price of $0.10
per share. The options vest in pro-rata equal segments in April 2002, January
2003 and January 2004.

A contract with an unrelated individual for consulting services at a rate of
$100,000 per year, payable in 75,000 shares of common stock. This agreement
commenced in March 2002 and automatically renews annually unless cancelled by
either party with the appropriate notice, as defined in this agreement. This
agreement also contained the granting of options to purchase up to 250,000
shares of common stock at a price of $1.25 per share. The options vest in
pro-rata equal segments of 1/12 of the total grant on a monthly basis starting
in March 2002. This contract was cancelled by the Company in the first calendar
quarter of 2003.

Additionally, the Company has finders fee agreements with approximately seven
(7) unrelated entities or individuals on a "successful efforts" basis. Typically
these agreements call for a finders fee of 5% to 10% of the amount raised.
Certain of the agreements also include a requirement for the Company to issue
warrants to purchase shares of the Company's common stock at various prices, as
defined in each respective agreement. The Company intends to continue to use
finders in its capital raising efforts and expects to entire into additional
agreements on similar terms.

Information on expired agreements is fully described in the Company's Annual
Report on Form 10-KSB for the year ended September 30, 2002.


                (Remainder of this page left blank intentionally)

                                       17
<PAGE>

PART I - ITEM 2

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

(1)  CAUTION REGARDING FORWARD-LOOKING INFORMATION

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

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

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

(2)  GENERAL COMMENTS

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

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

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

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

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

                                       18
<PAGE>

(3)  RESULTS OF OPERATIONS

We had no revenue for either of the six months and quarters ended March 31, 2003
or 2002, respectively.

Operating expenses for the six months ended March 31, 2003 and 2002 were
approximately $1.6 million (net of deferred compensation income from
cancellation of stock options) and $1.8 million, respectively. Operating
expenses for the three months ended March 31, 2003 and 2002 were approximately
$1.2 million (net of deferred compensation income from cancellation of stock
options) and $1.3 million, respectively. During the current fiscal year we
specifically identified expenses of $1.1 million of research and development
expenses which we previously included with other legal, professional and
consulting expenses. We expended these costs to further develop our products
including patent protection, legal expense and shareholder related expense. The
fiscal 2003 expenditures decreased as a result of our ability to settle certain
obligations utilizing our common stock in lieu of cash. Expenses however may
increase in the near term as we expand beyond the design stage into the
prototype stage of our plan coupled with the opening of the product prototype
development and limited production facility in Orange County, California.

We anticipate incurring similar expense increase trends in future periods until
such time that the Company commences production of various composite products
for sale.

(4)  PLAN OF OPERATION

We plan to produce a limited production of composite core and subcontract the
helical winding of aluminum conductors so that significant demonstration tests
in operating transmission lines can be commenced during the second half of
fiscal 2003. We expect that one planned test will be conducted by a major
American utility company along with a consortium of approximately 15 other
utility companies and the Electric Power Research Institute. The tests will be
closely monitored for at least three months during which time we anticipate
receiving orders from utility companies and other end users, although the
initial demonstration as well as other demonstrations will continue for the
foreseeable future. We currently are finalizing the design and expect to produce
a working prototype shortly of the specialized production line capable of
economically manufacturing the high strength composite core. We are presently
negotiating various possible strategic relationships, including joint ventures
with conventional cable manufacturers, in which we will either sell our
composite core, license or sell our production equipment, or enter into an
agreement with respect to the production of cable using our composite core. The
equipment can also be used for other types of high strength composite production
with various modifications in the event that there is any delay in the
acceptance of the composite reinforced cable. During the recent quarter, we set
up an equipment and product prototype development and limited production
facility in Orange County, California. We plan to continue negotiating joint
ventures for the production of our products in other countries, including in
China, Mexico and Brazil.

(5)  LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2003, the Company had working capital of approximately $261,000 as
compared to approximately $(1,159,000) as of September 30, 2002 and
approximately $(257,000) as of March 31, 2002.

During the quarter ended March 31, 2003, we utilized our common stock both
registered as well as unregistered and restricted valued at $2.1 million in the
aggregate to satisfy certain of our current obligations and prepay future
expenses. with the intention of improving our working capital position. We
intend to continue wherever possible to utilize our common stock to satisfy our
working capital needs.

During the quarter ended March 31, 2003, in conjunction with a separate Private
Placement Memorandum, we sold an aggregate 3,937,000 Units for gross proceeds of
approximately $775,575. Each Unit consists of one share of unregistered,
restricted common stock and one warrant either Series E or Series H to purchase
one share of unregistered, restricted common stock. Additionally in connection
with certain of these placements we received commitments to purchase 570,000
additional units for $1,425,000 on identical terms based upon our meeting
certain milestones in our product development.

During the quarter ended December 31, 2002, in conjunction with a separate
Private Placement Memorandum, we sold an aggregate 1,832,500 Units for gross
proceeds of approximately $183,250. Each Unit consists of one share of
unregistered, restricted common stock and one Series E warrant to purchase one
share of unregistered, restricted common stock.

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

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

                                       19
<PAGE>

During the first quarter of fiscal 2003, various individuals and entities made
various short-term working capital loans to the Company aggregating $45,000. In
December 2002, two loans aggregating $15,000 were converted into 150,000
restricted, unregistered common stock with 150,000 warrants at $0.25. In
February 2003, the remaining $30,000 loan including accrued interest was
converted into 300,000 restricted, unregistered common stock with 300,000
warrants at $0.25.

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

We anticipate receiving orders for our products during the second six 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.

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.

(6)  PRODUCT RESEARCH AND DEVELOPMENT

We believe research and development activities are and will continue to be
important to our success. During the balance of the fiscal year, we expect to
complete the development of the hardware required to splice, terminate, and
extend the cable. Over the next 12 calendar months, we plan to develop and
complete a unique prototype production equipment line that will allow for the
production of several types of cable related composite products, allowing us to
expand into other cable related products.

(7)  ACQUISITION OF PLANT AND EQUIPMENT

We do not own any real estate. During the quarter ended March 31, 2002, we took
delivery of the initial base pultrusion machine for approximately $102,950
before the cost of dies and related ancillary items. We anticipate utilizing
this equipment in our research and development efforts as well as limited
production. The machine is currently operating in an Orange County location
comprising approximately 8,000 square feet. We lease this facility on a month to
month basis. We do anticipate the need for additional 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 second six months of fiscal 2003.

(8)  PERSONNEL

We currently have two full time employees; Benton H Wilcoxon, and C. William
Arrington. Since we are in the "start-up" phase of our business plan, we have
not been able to pay salaries to date. However, salaries have been accrued at a
monthly rate of $5,000 each for of Mr. Wilcoxon and Mr. Arrington for the period
April 1, 2001 through September 30, 2002 and $10,000 per month since October 1,
2002.

The Company also has 4 individuals who devote substantially all of their time
providing various required services for the Company as consultants. These
individuals are either independent contractors or paid through a temporary
agency.

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.

PART I - 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 are
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.

                                       20
<PAGE>

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

Presently, there are no known material legal proceedings by or against the
Company or its wholly owned subsidiary, Transmission Technology Corporation
("TTC").

As discussed in "Footnote N - Legal Contingencies", during the quarter ended
March 31, 2003, the Company settled all known material legal proceedings that
had commenced by or against CTC or its wholly owned subsidiary, Transmission
Technology Corporation ("TTC").

As of February 6, 2003, CTC entered a Settlement Agreement and Mutual Release
pursuant to which all of claims and counterclaims in the various legal
proceedings related to CTC, CTC's Officers or consultants and W. Brandt
Goldsworthy & Associates, Inc. ("WBGA"), W.B.G., Inc. ("WBG"), W. Brandt
Goldsworthy and affiliates of WBGA and WBG were dismissed. A copy of the
Settlement Agreement and Mutual Release is filed herein as an exhibit to this
Form 10-QSB. Pursuant to the settlement, CTC issued 1,500,000 shares of
unregistered, restricted common stock to various parties in the actions. The
shares issued were valued at $93,750.

As of March 31, 2003, CTC and TTC entered into a Settlement Agreement with
William Jarblum pursuant to which all of claims in the legal proceeding against
CTC, TTC and an officer of CTC were dismissed. A copy of the Settlement
Agreement and Mutual Release is filed herein as an exhibit to this Form 10-QSB.
Pursuant to the settlement agreement CTC has agreed to pay plaintiffs $210,000
in installments beginning June 1, 2003 and ending August 1, 2003. The company
also issued to plaintiff warrants to purchase 50,000 shares of unregistered
restricted common stock of the Company at $0.50 per share. The warrants expire
on September 30, 2005.

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

ITEM 2 - CHANGES IN SECURITIES

During the second quarter of fiscal 2003 pursuant to Private Placement
Memoranda, the Company sold an aggregate 3,937,000 Units, for gross proceeds of
approximately $775,575 to 48 accredited individuals and 1 unrelated entity. Each
Unit consisted of one share of restricted, unregistered common stock and one
warrant of either Series E or H attached to purchase one share of unregistered,
restricted common stock. In connection with these transactions, 1,153,500 Series
E warrants and 2,783,500 Series H warrants were issued. Each Series E warrant
entitles the holder to purchase a share of common stock at $0.25 per share and
expires on December 1, 2004. Each Series H warrant entitles the holder to
purchase a share of common stock at $0.50 per share and expires on January 30,
2005.

ITEM 3 - DEFAULTS ON SENIOR SECURITIES

None

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

         On February pursuant to the written consent of a majority of
         stockholders of record the following actions were taken:

         1.       Benton H Wilcoxon and C. William Arrington were elected to
                  serve as directors until the next annual meeting of
                  shareholders or until their successors are duly elected and
                  qualified.
         2.       Approved the creation, amendment and participation by
                  management in Composite Technology's 2002 Non-Qualified Stock
                  Plan.

ITEM 5 - OTHER INFORMATION

None

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

Exhibits
--------

23.1     CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

99.1     Certification Pursuant to 18 USC ss.1350,

Reports on Form 8-K
-------------------

On February 18, 2003, the Company reported a commitment for direct investment
into the Company of $500,000.

On February 13, 2003, the Company reported the settlement of certain legal
proceedings.

                                       21
<PAGE>

                                   SIGNATURES

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

                                              COMPOSITE TECHNOLOGY CORPORATION

Date: May 14, 2003                            /s/ Benton H Wilcoxon
                                              ---------------------
                                              Benton H Wilcoxon
                                              Chief Executive Officer
                                              Director and Secretary


Date: May 14, 2003                            /s/ Leonard J. Roman
                                              --------------------
                                              Leonard J. Roman
                                              Chief Financial Officer


                                       22
<PAGE>

CERTIFICATION PURSUANT TO 18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO SECTIONS 302 AND 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Composite Technology Corporation
(Registrant) on Form 10-QSB for the quarter ended March 31, 2003, as filed with
the Securities and Exchange Commission, on the date hereof, we, Benton H
Wilcoxon, Chief Executive Officer and Leonard J. Roman, Chief Financial Officer
of the Company, certify to the best of our knowledge, pursuant to 18 USC 1350,
as adopted pursuant to ss.302 and promulgated as 18 USC 1350 pursuant to ss.906
of the Sarbanes-Oxley Act of 2002, that:

       1) We have reviewed this Quarterly Report on Form 10-QSB of Composite
       Technology Corporation for the quarter ended March 31, 2003.

       2) Based on our knowledge, this Quarterly Report does not contain any
       untrue statement of a material fact or omit to state a material fact
       necessary to make the statements made, in light of the circumstances
       under which such statements were made, not misleading with respect to the
       period covered by this quarterly report;

       3) Based on our knowledge, the financial statements, and other financial
       information included in this Quarterly Report, fairly present in all
       material respects the financial condition, results of operations and cash
       flows of the registrant as of, and for, the periods presented in this
       Quarterly Report;

       4) The registrant's other certifying officers, if any, and we are
       responsible for establishing and maintaining disclosure controls and
       procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
       Registrant and have:

       a) designed such disclosure controls and procedures to ensure that
       material information relating to the Registrant, including its
       consolidated subsidiaries, is made known to us by others within those
       entities, particularly during the period in which this Quarterly Report
       is being prepared; b) evaluated the effectiveness of the Registrant's
       disclosure controls and procedures as of a date within 90 days prior to
       the filing date of this Quarterly Report (the "Evaluation Date"); and c)
       presented in this Quarterly Report our conclusions about the
       effectiveness of the disclosure controls and procedures based on our
       evaluation as of the Evaluation Date;

       5) The Registrant's other certifying officers, if any, and we have
       disclosed, based on our most recent evaluation, to the Registrant's
       auditors and the audit committee of registrant's board of directors (or
       persons performing the equivalent functions):

       a) all significant deficiencies in the design or operation of internal
       controls which could adversely affect the Registrant's ability to record,
       process, summarize and report financial data and have identified for the
       Registrant's auditors any material weaknesses in internal controls; and
       b) any fraud, whether or not material, that involves management or other
       employees who have a significant role in the Registrant's internal
       controls; and

       6) The Registrant's other certifying officers, if any, and us have
       indicated in this Quarterly Report whether or not there were significant
       changes in internal controls or in other factors that could significantly
       affect internal controls subsequent to the date of our most recent
       evaluation, including any corrective actions with regard to significant
       deficiencies and material weaknesses.

Date: May 13, 2003                               /s/ Benton H Wilcoxon
                                                 ---------------------
                                                 Benton H Wilcoxon
                                                 Chief Executive Officer
                                                 Director and Secretary


Date: May 13, 2003                               /s/ Leonard J. Roman
                                                 --------------------
                                                 Leonard J. Roman
                                                 Chief Financial Officer

                                       23