RECENT DEVELOPMENTS

RECENT DEVELOPMENTS: STOCKHOLDERS' LETTERS

Recent developments within CTIC have ultimately forced us, as a group of concerned stockholders, to initiate actions we hope will redirect this company in a positive fashion. Stockholders have sent many letters to CTIC management requesting information about its administrative, financial and operational activities. (You will find many of these letters posted on this website.) The president, Irene Lainhart and the CEO, Darrell Lainhart, have adamantly refused to honor these stockholder's requests.

Following, you will find one person's experiences during the last decade with CTIC. Although there are many letters that have been sent to the President and CEO of CTIC, this letter is one person's account and appears to represent the experience and subsequent disillusionment of a large number of CTIC stockholders. These experiences involve CTIC's efforts to raise capital through aggressive stock sale promotions by the company's principal. These sales promotions represented that the capital generated by these stock sales would be used for the support of CTIC's administrative and operational costs in developing the technology into a viable commercial enterprise. However, the prospect of becoming a commercial success has become ever more elusive, while financial accountability to the investors has been non-existent.

Executive Summary

One Shareholder's Experience
Danny Cross is a 10-year shareholder of Clean Technology International Corporation (CTIC). Danny's experiences with CITC provide a unique perspective, in that as a shareholder his experiences are parallel to many of our own, but he has also been involved in the inner workings of the company as a volunteer.

Danny was first drawn to the company by an acquaintance who told him about the exciting potential of CTIC's toxic waste remediation process. Danny was skeptical of the claims being made about the technology, so before investing in the company, he went so far as to travel to Little Rock, Arkansas, for a demonstration of the process, bringing with him samples of over 20 toxic waste substances to be treated. Afterward, Danny paid to have the treated samples tested by a lab in Florida, his home state. The test results were amazing and confirmed the reality of the claims made for the technology, so he invested in the company.

Since becoming a shareholder, Danny has been both directly and indirectly involved in the activities of the company. Volunteering his services, he was first appointed by CEO Darrell Lainhart to be the Director of Oversight and functioned in this position for a number of years. Then, for the past two and a half years, he has served as the Senior Vice President and Chief Operations Officer at our Nano production facility in Houston, Texas. All of the services Danny provided in these CTIC positions were without remuneration and carried out at his own expense.

As a stockholder with more than 2 million shares of stock, Danny volunteered to provide this service because, like the rest of the shareholders, he strongly believed in the technology and its potential.

Danny's enthusiasm for the technology led him to introduce many of his friends and relatives to Darrell Lainhart, who presented himself as the CEO and Managing Consultant of CTIC. During numerous visits to Pensacola, Florida, Darrell made a number of sales presentations resulting in the sale of stock to 62 of Danny's friends and relatives. These sales represented well over a million dollars worth of CTIC stock.

Over the ensuing years, Darrell constantly created a great deal of hype around all of the great and wonderful things in which CTIC was said to be involved. Danny's enthusiasm therefore remained very high. As time passed, additional friends approached him about buying more stock. He even invited Darrell to travel with him to Costa Rica to meet many of his business and personal friends there. Again, Darrell did a convincing sales job, and sold another $450,000 worth of stock to them over the years.

Darrell continually related new incidents in CTIC's progress, each a little rosier than the previous one. The US Government was interested; a number of state governments were interested; businesses in the private sector were interested. However, as time passed it became apparent to Danny that Darrell was just relating one great story after another with nothing really happening-particularly the ever illusive IPO, which Darrell was always assuring us, was just 3-6 months away.

By this time, Danny was being inundated with questions from his stockholder friends and relatives about what was happening (or rather not happening) with CTIC. It became more and more apparent to him that the return on stockholder investments so far consisted only of stories of great possibilities, and more promises of an IPO. Days became months, and months became years, with no customers, no formal business plan, no financial reports and no IPO

Danny came to the conclusion that something definitely was awry concerning the management, operational abilities, focus, and real purpose of the company. At the time, Houston, Texas, was where CTIC was conducting most of its research and development, so in September, 2005, Danny volunteered his services and went to Houston as the Chief Operations Officer, hoping to find out what the problems were and to help get things on track.

Danny's position at the Houston CTIC facility provided a day-to-day familiarity, as well as a keen insight, into the workings of that site. As the Chief Operations Officer he was directly involved in the discovery and the follow-on research and development of the material that came to be known as Carbon Nanosphere Chains (CNSC). He was further involved in the testing and subsequent production of large volume runs of CNSC material utilizing the first "commercial-scale (80,000 lb. capacity) reactor". This newly discovered CNSC material seemed to represent an even greater potential for CTIC in the exciting new field of nano technology.

However, problems with the production process, and unsuccessful efforts to solve them, brought back to the surface some of the issues and concerns regarding Darrell's methods and practices. Eventually the person, who had been funding the Houston facility, shut it down, because he had reached an impasse with Darrell over how to get the reactor functioning again. Soon after, with the Houston facility standing idle, Danny also reached a similar point with Darrell and left the company.

Over the last three years, and particularly recently, Danny accumulated a good deal of alarming information about CTIC and Darrell's practices:

The CTIC office in Cincinnati was funded by another large shareholder, not by CTIC.
The 80,000 lb. capacity commercial-scale reactor, the building in Houston where it is housed, and its related operating expenses since 1998 were financed by another large stockholder, not by CTIC.
The medium sized machine that was used in Houston for approximately 4 years was paid for in the form of a loan from the 1st Tennessee Bank, with another large shareholder/ board member co-signing on and taking ultimate responsibility for paying off the loan.
The current CleanTechNano website was created and designed at the expense of another stockholder.
A disclosure document, which apparently went to some CTIC stockholders in the past, relates that Darrell Lainhart has been involved in previous questionable, perhaps fraudulent, dealings in the insurance and bond businesses-dealings which resulted in sanctions, fines, and tax liabilities.
There is an internet listing of a foreclosure on some property owned by Darrell and his wife Irene (Mattie), apparently indicating a lack of liquidity on their part just before he became involved with CTIC.
The Lainharts/Diamond Capital Corporation have made acquisitions of large land holdings (4,000+acres), homes, an antique automobile collection with a building to house them, land improvements, including impoundment dams, and numerous pieces of (according to Darrell) personally owned heavy construction equipment, an extensive gun collection, and many, many other expensive possessions and luxury items that apparently have been acquired since Darrell began selling CTIC stock.
A company named Diamond Capital Corporation now owns the vast majority of all common stocks (93% according to Darrell Lainhart) and 100% of all preferred stocks of CTIC. This does not reflect the large volume of stocks that have also been issued to his two brothers, nephews, son, daughter, and a trust fund that is controlled by Irene Lainhart.
In most cases, when stockholders thought they were purchasing CTIC stocks from CTIC, they were in fact purchasing shares of CTIC stocks that were owned by Diamond Capitol Corporation. Our shares actually were being re-sold to us by Diamond Capital, with the proceeds going to Diamond Capital. Irene (Mattie) Lainhart is the 100% shareholder of Diamond Capital Corporation and is free to use the funds of Diamond Capital however she chooses.
There have been large increases in the percentage of total outstanding shares of CTIC stock owned by Diamond Capital, even though Diamond Capital has been selling a substantial number of its shares to many of us as investors. This action, despite major purchases by new CTIC investors has vastly diluted the value (if any) of our stocks to a point, that if we were ever to go public, the only one to truly benefit from this company's technology, would be Diamond Capital Corporation.

These revelations are disturbing. If most of the company's major projects have been financed by individual shareholders out of their own pockets, as appears to be the case, it is alarming to ponder where the proceeds have gone from what we believed were our CTIC stock investments.

For more information about Danny Cross' experiences with Darrell Lainhart and CITC, you may read a copy of a letter he sent to the Arkansas Securities Department that goes into these issues in great detail.