You should read the following discussion and analysis of our financial condition and results of operations together with our interim financial statements and the related notes appearing at the beginning of this report. The interim financial statements and this Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended September 30, 2008 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on March 9, 2009.

The following discussion and other parts of this Form 10-Q contain forward-looking statements that involve risks and uncertainties. Forward-looking statements can be identified by words such as "anticipates," "expects," "believes," "plans," and similar terms. Our actual results could differ materially from any future performance suggested in this report as a result of factors, including those discussed in "Factors That May Affect Future Operating Results" and elsewhere in this report and in our Annual Report on Form 10-K/A for the fiscal year ended September 30, 2008. All forward-looking statements are based on information currently available to Composite Technology Corporation and we assume no obligation to update such forward-looking statements, except as required by law. Service marks, trademarks and trade names referred to in this Form 10-Q are the property of their respective owners.

OVERVIEW

CTC conducts its operations in the following two business segments: the CTC Cable division and the DeWind division. The segments have been organized on the basis of products. All of each segment's product revenues relate to external customers.

The three and six months ended March 31, 2009 represented a period of significant shocks to the world economies and worldwide financial markets including a collapse of risk capital financing and the failure of multiple commercial and investment banking institutions. These shocks were countered by legislation and other government economic stimulus packages and incentives including significant incentives for investment in electrical infrastructure and renewable energy in the U.S. under the American Recovery and Reinvestment Act of 2009 (ARRA). The combination of these factors has been seen in the press through significantly lowered economic forecasts and expectations in the short term with expectations of economic recovery after these incentive measures are implemented. The turmoil of these external forces has caused negative impacts on both businesses of Composite Technology Corporation in the short term but has improved the long-term outlook for both businesses, each of which is well positioned to take advantage of the economic stimulus incentives of ARRA and similar initiatives elsewhere in the world.

The CTC Cable business saw delays in several anticipated sales wins in new markets, while it recovered from the negative impact of delays in sales orders caused by a slowdown in China due to the Beijing Olympics in previous quarters. These delays affected revenues for the September, 2008 and December, 2008 quarters resulting in deliveries of only 562 km of ACCC™ products in the December 2008 quarter. We saw a resurgence of orders from China at the end of the December 2008 quarter, which resulted in the shipment of 1,153 kilometers of ACCC™ products including shipment to a new customer in the U.S.

A more significant impact is occurring in the DeWind business segment through product order delays and most importantly through a significant restriction in available financing necessary to order and purchase wind turbines for wind farm projects. In addition, the delay until October of the extension of a key renewable tax credit for wind turbines, suspended ordering and financing of turbines at almost the time when the severity of the credit crisis was becoming known. Further, the decrease in the price of fossil fuels from their historical peaks in July, 2009 to prices approximately 30% of the peak, has created a perception that there is less willingness to pay the higher price for renewable energy. These factors combine to make the business environment for wind turbines very difficult. While none of our existing customers have cancelled their orders, one customer with two orders totaling 60 DeWind turbines has defaulted on key progress payments as a result of losing their wind farm financings and other customers that were expected to purchase turbines have delayed their purchase decisions. DeWind is continuing to work with these customers to help them re-establish project funding. Finally, and to date, our expected contingency plan to finance our own wind farms for internal development projects has not come to fruition due to the difficult investment marketplace.

As the Company realized during the December, 2008 quarter that the financing environment for wind turbines had changed significantly as compared to the environment only one quarter earlier, management began to develop plans to ensure the maximum preservation of value for both businesses. Central among these plans was to invest to continue the viability and growth of the CTC Cable business, while realizing that the DeWind business would need to seek a strategic investor or partner, so that it could weather the storm until the economic environment for the wind business improves. During the quarter and the six months ended March 31, 2009, we continued to focus on cost reduction initiatives that were begun in the September quarter. Operating expenses for the quarter ended March 31, 2009 were $10.2 million and included $1.7 million of depreciation and amortization and $1.9 million in stock-based compensation charges. Excluding those non-cash charges, operating expenses were $6.6 million for the quarter ended March 31, 2009. For the quarter ended December 31, 2008 operating expenses were $9.5 million including $0.3 million in depreciation and amortization charges and $1.6 million in stock-based compensation charges. Excluding the non-cash charges, the December 31, 2008 quarterly operating expenses were $7.6 million. We intend to continue to focus on cost reductions for both business segments. Second, during the March quarter we successfully negotiated an acceleration for royalty payments for older DeWind technology. Royalty payments of 3 million Euros ($3,992,000 at March 31, 2009 exchange rates) were received in April and May, 2009. Third, we continued to execute on our DeWind capital strategy. In December, 2008 the Company engaged the services of RBS Securities to identify qualified companies interested in a partnership to better leverage and monetize the leading edge technology of DeWind which will allow DeWind to take advantage of the expected demand in the wind renewables market over the next few years. RBS Securities identified and contacted a significant list of interested parties and negotiations and diligence discussions with these parties are underway.

In January, 2009 the Company continued on its strategy to wind up non-operating and non-performing subsidiaries related to certain European based DeWind subsidiaries by filing for and receiving approval for insolvency for its wholly owned DeWind Holdings Ltd. subsidiary. DeWind Holdings was the 100% owner of Dewind GmbH which was placed into insolvency in September, 2008. DeWind Holdings served as the holding company for DeWind GmbH.

Economic Stimulus Initiatives:

The February, 2009 American Recovery and Reinvestment Act of 2009 (ARRA) had over $61 billion designated for Energy related projects including:
? $11 billion funding for an electric smart grid

? $6.3 billion for state and local governments to make investments in energy efficiency

? $6 billion for renewable energy and electric transmission technologies loan guarantees

? $4.5 billion for the Office of Electricity and Energy Reliability to modernize the nation's electrical grid and smart grid.

? $3.25 billion for the Western Area Power Administration for power transmission system upgrades

? $3.25 billion for the Bonneville Power Authority for power transmission system upgrades

? $2.5 billion for energy efficiency research

? $3.2 billion toward Energy Efficiency and Conservation Block Grants

CTC Cable has been working diligently with various Federal and State agencies and power companies to include its ACCC™ products in the planning stages for projects set to receive stimulus spending.

The ARRA also had significant incentives for wind power. In addition to the loan guarantees listed above, the ARRA extended the production tax credit, formerly set to expire at the end of 2009, to expire at the end of 2012. Further, to address the loss of a substantial wind farm finance source called a "tax equity" partner, as a result of the global economic crisis, wind farm developers can now opt to take the production tax credit as an investment tax credit (ITC) with a further possible option to take the ITC as a grant, representing 30% of the physical plant of a wind farm. While the net revenue impact to the Federal government is negligible since the total tax credit is essentially the same, an acceleration of the ITC as a grant serves as a significant acceleration to a wind project cash flow, resulting in a material improvement in the rate of return due to acceleration of plant cost return.

Consolidated Revenues, Gross Margins, and EBITDAS

On a consolidated basis, revenues from continuing operations for the three months ended March 31 decreased by $5.1 million or 24.1% from $21.2 million in 2008 to $16.1 million in 2009. The decrease was due to a $4.3 million decrease in CTC Cable sales and a decrease of $0.7 million of turbine product sales and a $0.1 million decrease in turbine service related sales. Revenues from continuing operations for the six months ending March 31, 2009 decreased by $12.3 million or 31.6% from $38.8 million in 2008 to $26.5 million in 2009. The decrease was due to a $10.9 million decrease in CTC Cable sales, a decrease of $0.8 million of turbine product sales and a decrease of $0.5 million of turbine service sales.

The March 2009 quarter decrease for CTC Cable was due primarily to a change in product mix as prior year deliveries in the March 2008 quarter were primarily higher sales price ACCC™ conductor, while current quarter sales were lower priced ACCC™ core. Deliveries in the current quarter consisted of 1,153 km of ACCC™ product (90 km of ACCC™ conductor and 1,063 km of ACCC™ core) compared to prior year of 846 km of ACCC™ product (334 km ACCC™ conductor and 512 km of ACCC™ core). The March 2009 quarter decrease for turbine product is the net effect of a reduction to $7.2 million of turbine deliveries recorded into revenue, offset by an increase in license fee revenues of $6.4 million for the March 2009 quarter. The decrease in turbine service related sales is due to reductions of amortized prepaid turbine maintenance and a reduction of turbine service revenues from the European installation base.

Consolidated gross margins decreased by $3.4 million from $3.4 million or 16.0% of revenues for the three months ended March 31, 2008 to $2,000 for the three months ended March 31, 2009. The margin decrease is due to reduced CTC Cable margins of $0.6 million primarily due to lower revenue levels, and a $2.8 million decrease in DeWind margins due to the combined effect of a $6.4 million inventory mark to market reserve charge, offset by increased high margin license fee revenue recorded from the royalty fee settlement.

The Company has provided non-GAAP measures such as EBITDAS at the segment and consolidated level in the following management discussion and analysis. The Company uses the non-GAAP information internally as one of several measures used to evaluate its operating performance and believes these non-GAAP measures are useful to and have been requested by, investors as they provide additional insight into the underlying operating results viewed in conjunction with GAAP operating results. For the non-GAAP EBITDAS measure, a significant portion of non-cash expenses is excluded, primarily for amortization of acquired DeWind related intangibles that occur ratably over time and stock based compensation charges that are valued based on the share price and volatility at the date of grant and then expensed as earned, typically upon vesting of service over time. Management believes that an alternate view of operating results that exclude DeWind amortization and stock based charges is useful in evaluating current period operations. The material limitation of non-GAAP EBITDAS compared with Net Income is that significant non-cash expenses are excluded. Management compensates for such limitation by utilizing EBITDAS only for particular purposes and that it evaluates EBITDAS in the context of other metrics such as Net Income when evaluating the Company's performance and financial condition. Non-GAAP measures are not stated in accordance with, should not be considered in isolation from, and are not a substitute for, GAAP measures. A reconciliation of GAAP to non-GAAP results has been provided in the relevant financial tables below.

The following table is a reconciliation of the Company's "non-GAAP" EBITDAS discussed above for the three and six months ended March 31, 2009 and 2008.

 (Unaudited, In Thousands)                                        Three months ended March 31,
Consolidated                                                        2009                 2008
Net loss from continuing operations                            $       (10,644 )     $      (8,414 )

Interest, taxes, depreciation, amortization and stock-based
compensation (ITDAS):
Interest                                                                   489                 609
Taxes                                                                      (13 )                 3
Depreciation and amortization                                            1,982                 577
Stock-based compensation                                                 1,919                 662
Total ITDAS                                                    $         4,377       $       1,851

"Non-GAAP" EBITDAS                                             $        (6,267 )     $      (6,563 )



 (Unaudited, In Thousands)                                       Six months ended March 31,
Consolidated                                                        2009               2008
Net loss from continuing operations                            $      (18,977 )     $  (13,263 )

Interest, taxes, depreciation, amortization and stock-based
compensation (ITDAS):
Interest                                                                  948            1,505
Taxes                                                                      (4 )             10
Depreciation and amortization                                           2,586            1,443
Stock-based compensation                                                3,472              878
Total ITDAS                                                    $        7,002       $    3,836

"Non-GAAP" EBITDAS                                             $      (11,975 )     $   (9,427 )

EBITDAS loss decreased by $0.3 million for the current quarter and increased by $2.6 million for the current six months as compared to the same periods in prior year primarily due to the net effect of reduced margins related to lower cable revenues and mark to market inventory reserves, offset by reduced operating expenses.

DeWind Division
The DeWind segment operates under the brand name DeWind, which has designed and sold wind turbines since 1995 from Lubeck, Germany. Currently, DeWind is operated from the Company's Irvine, California offices with sales operations in, Irvine, California and Lubeck, Germany along with Engineering and R&D operations in both Irvine, California and Lubeck, Germany. The DeWind segment designs, produces, sells and services DeWind turbines in the 1.25 and 2.0 megawatt range worldwide. We acquired DeWind during the EU Energy acquisition on July 3, 2006. Accordingly, we have incorporated DeWind's operations into our financial results since that date.

RECENT DEVELOPMENTS

The revenues of the DeWind segment for the quarter ended March 31, 2009 consisted primarily of one D8.2 turbine sold in the US and license fees and royalty revenues associated with the acceleration of D6 licenses for one of DeWind's Chinese license partners of $6.1 million. DeWind also delivered 10 D8 units and three D6 turbines during the six months ended March 31, 2009. While delivered to the customer site, the 10 D8 units valued at approximately $19 million remained deferred at the end of March as were the three delivered D6 turbines booked and shipped during the six months ended March 31, 2009 but awaiting commissioning. As of March 31, 2009, the total backlog of DeWind was $300 million, of which $265 million represents orders where financing is uncertain or pending.

The DeWind segment entered fiscal 2009 with caution and optimism. The credit market downturn, which began in September was not fully known early in the quarter. Between August, 2008 and early October, 2008 DeWind had received orders for 50 D9 turbines for a wind farm in Canada worth approximately $150 million, had received an initial down payment for the first 10 turbines of this order and had signed a development agreement to jointly develop 620 Megawatts of wind farms in Texas with a total potential cost of approximately $1.5 billion. Based on these developments, DeWind continued to commit resources towards the completion of the D9 turbine as well as begin construction of the first 10 megawatts of the wind farms in Texas. By November, 2008 after the Canadian order financing was withheld from the developer, who then defaulted on scheduled payments, and it became apparent that financing for wind farms had been significantly reduced, DeWind quickly decided that additional strategies needed to be pursued.

In December, 2008 management realized that additional funding would be necessary to complete the development initiatives and to maintain a viable supply chain for the D8.2 and D9 turbine products. DeWind has since engaged an international investment banking firm to entertain alternative options including financing of the 620 Megawatt wind farms and obtaining strategic investors into DeWind. At present, the investment banking firm has introduced the Company to various potential investors or partners with sufficient financial backing. The Company is in discussions and negotiation with multiple parties for both options. Since December, DeWind has significantly restricted its cash payments by reducing operating expenses, reducing or temporarily halting development initiatives, and limiting payments to suppliers, in particular for advance payments on future deliveries of parts in an effort to conserve cash until either the financing market allows for turbine financing or an investor is found for the wind farms or as an investment into DeWind.

The Company has provided non-GAAP measures such as EBITDAS at the segment and consolidated level in the following management discussion and analysis. The Company uses the non-GAAP information internally as one of several measures used to evaluate its operating performance and believes these non-GAAP measures are useful to and have been requested by, investors as they provide additional insight into the underlying operating results viewed in conjunction with GAAP operating results. For the non-GAAP EBITDAS measure, a significant portion of non-cash expenses is excluded, primarily for amortization of acquired DeWind related intangibles that occur ratably over time and stock based compensation charges that are valued based on the share price and volatility at the date of grant and then expensed as earned, typically upon vesting of service over time. Management believes that an alternate view of operating results that exclude DeWind amortization and stock based charges is useful in evaluating current period operations. The material limitation of non-GAAP EBITDAS compared with Net Income is that significant non-cash expenses are excluded. Management compensates for such limitation by utilizing EBITDAS only for particular purposes and that it evaluates EBITDAS in the context of other metrics such as Net Income when evaluating the Company's performance and financial condition. Non-GAAP measures are not stated in accordance with, should not be considered in isolation from, and are not a substitute for, GAAP measures. A reconciliation of GAAP to non-GAAP results has been provided in the relevant financial tables below.

The following table is a reconciliation of DeWind only "non-GAAP" EBITDAS discussed above for the three and six months ended March 31, 2009 and 2008.

 (Unaudited, In Thousands)                                        Three months ended March 31,
DeWind Segment Only                                                 2009                 2008
Net loss from continuing operations                            $       (6,815 )     $       (6,549 )

Interest, taxes, depreciation, amortization and stock-based
compensation (ITDAS):
Interest                                                                   38                   94
Taxes                                                                     (13 )                  2
Depreciation and amortization                                           1,757                  372
Stock-based compensation                                                  248                   12
Total ITDAS                                                    $        2,030       $          480

"Non-GAAP" EBITDAS                                             $       (4,785 )     $       (6,069 )



 (Unaudited, In Thousands)                                       Six months ended March 31,
DeWind Segment Only                                                 2009               2008
Net loss from continuing operations                            $      (10,944 )     $  (11,412 )

Interest, taxes, depreciation, amortization and stock-based
compensation (ITDAS):
Interest                                                                   50              177
Taxes                                                                      (7 )              9
Depreciation and amortization                                           2,121            1,032
Stock-based compensation                                                  672               25
Total ITDAS                                                    $        2,836       $    1,243

"Non-GAAP" EBITDAS                                             $       (8,108 )     $  (10,169 )

EBITDAS loss decreased by $1.3 million for the current quarter and $2.1 million for the current six months as compared to the same periods in prior year primarily due to increased margins from license fee revenues, decreases in research and development costs, offset by increased inventory reserve charges.

CTC Cable Division
Located in Irvine, California with sales operations in Irvine, California, Shanghai, China, Europe, the Middle East, and Brazil, the CTC Cable Division produces and sells ACCC™ conductor products and related ACCC™ hardware products. ACCC™ conductor production is a two step process. The Irvine operations produce the high strength, light weight, composite ACCC™ core, which is then shipped to one of four conductor stranding licensees in Canada, Belgium, China, or Bahrain where the core is stranded with conductive aluminum to become ACCC™ conductor. ACCC™ conductor and core are sold in Canada and the U.S. directly by CTC Cable to utilities. ACCC™ conductor and core are sold elsewhere in the world directly to utilities as well as through license and distribution agreements with Lamifil in Belgium, Jiangsu New Far East in China, and Midal in Bahrain. ACCC™ conductor has been sold commercially since 2005 and is currently marketed worldwide to electrical utilities, transmission companies and transmission design and engineering firms.

RECENT DEVELOPMENTS

The CTC Cable business saw continued expansion into new markets and greater traction on our new efficiency message in our U.S. market but CTC Cable also saw delays in several anticipated sales wins in new markets and was still negatively impacted from the delay in sales orders in previous quarters caused by a slowdown in China due to the Beijing Olympics. These delays affected revenues for the September, 2008 and December, 2008 quarters resulting in deliveries of only 562 km of ACCC™ products in the December 2008 quarter. Order levels improved during the March, 2009 quarter and CTC Cable shipped 1,153 km of ACCC™ products during the March quarter. Production during the quarter increased to its highest level to date, in excess of 1,500 km.

The Cable division's focus during the quarter and six months ending March 31, 2009 was sales, marketing, and operations with a goal to position CTC Cable for rapid revenue growth. Our goals include the expansion of our customer base outside of the Chinese market by penetrating other markets including the U.S. Our sales pipeline continues to improve and we currently are working on nearly $400 million of sales opportunities, most of which are outside of China. We are also optimistic that the proposed infrastructure and grid efficiency directives included in the ARRA stimulus package will result in an increased focus by utilities in the U.S. to acknowledge the efficiency benefits of our ACCC™ products.

To this extent, the order to Sierra Pacific Power Company, an electric utility servicing portions of Nevada, is our largest order to a U.S. customer to date and is important since the decision to purchase ACCC™ conductor by this customer was primarily due to the cost savings associated with using ACCC™ including the improved efficiency of ACCC™ conductor over existing transmission conductor products. Prior U.S. sales were demonstration lines for the reduced sag or high temperature applications of ACCC™ conductor. We believe this win is significant because it represents a significant change in the perception of the use of ACCC™ conductor with U.S. utilities away from a "niche" product chosen when there was no other alternative available to a product that could be rolled out to replace a substantial amount of the transmission conductor within a given utility's grid under management. We are hopeful that this is the first of many such efficiency related wins for U.S. utility sales opportunities.

Within our China market, we reached an important milestone by obtaining approval to have ACCC™ conductor installed in a 500kV installation on a 1,500 km installation and we are working with our distributor and the local grid to develop a trial line at 1,000kV. The significance for this approval is that a substantial portion of the electrical transmission infrastructure spending in China is at 500kV or higher, including much of the projected Chinese stimulus bill spending.

Outside of China, our international efforts continue to expand. We have certified the stranding capabilities for Midal for one size of conductor and we will review several additional sizes prior to certification. We expect that the certification will allow for closing near term sales which were delayed and pending the certification. We are also in the process of certifying two stranding sources in Indonesia, which is expected by the end of 2009. Progress also continues in identifying local stranding sources in South and Latin America.

The sales and marketing initiatives begun in the latter half of fiscal 2008 were continued with multiple areas of the sales and marketing infrastructure completed. These initiatives focused on developing a sales organization . . .