Eurotech Ltd – ‘10-K’ for 12/31/02

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Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                        128    628K 
 2: EX-21.1     Subsidiaries of the Registrant                         1      4K 
 3: EX-99.1     Miscellaneous Exhibit                                  1      6K 
 4: EX-99.2     Miscellaneous Exhibit                                  1      6K 

10-K   —   Annual Report
Document Table of Contents

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 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

 Washington, D. C. 20549

 FORM 10-K

(Mark One)                                                                      

[X]                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE       
 SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002                                     
                          ------------------------------------------------------

OR

[ ]             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE       
 SECURITIES EXCHANGE ACT OF 1934

            FOR THE TRANSITION PERIOD FROM _____________ TO ______________

   COMMISSION FILE NUMBER  000-22129
                                                 -------------------------------

      Eurotech, Ltd.
--------------------------------------------------------------------------------
      (Name of registrant as specified in its charter)

 District of Columbia                             33-0662435
-----------------------------------------        -------------------------------
(State or other jurisdiction of                    (I.R.S. Employer 
 incorporation or organization)                    Identification No.)

10306 Eaton Place, Suite 220                                      
Fairfax, Virginia                                22030
-----------------------------------------         ------------------------------
(Address of principal executive offices)                (Zip Code)        

Registrant's telephone number, including area code   (703) 352-4399             
                                                     ---------------------------

Securities registered pursuant to Section 12(b) of the Act:  None.              

Securities registered pursuant to Section 12(g) of the Act:                     

 Common Stock, $.00025 par value
--------------------------------------------------------------------------------
Title of class

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of   
1934 during the preceding 12 months (or for such shorter period that the        
registrant was required to file such reports), and (2) has been subject to such 
filing requirements for the past 90 days. Yes [ ]  No [X]                       

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       Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,  
to the best of Registrant's knowledge, in definitive proxy or information       
statements incorporated by reference in Part III of this Form 10-K or any       
amendments to this Form 10-K. [ ]                                               

       Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12-b-2). Yes [ ]  No [X]                       

On June 30, 2002, the aggregate market value of the voting and
nonvoting common equity held by non-affiliates of the registrant was            
approximately $13,564,902.                                                      

       On April 15, 2003, the registrant had approximately 94,923,797 shares
of common stock outstanding.                                                    

 DOCUMENTS INCORPORATED BY REFERENCE

            None, other than exhibits listed as incorporated by reference on the
exhibit table hereto.                                                           

 INTRODUCTORY NOTE

THIS REPORT MAY CONTAIN CERTAIN "FORWARD-LOOKING" STATEMENTS AS SUCH TERM IS    
DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 OR BY THE       
SECURITIES AND EXCHANGE COMMISSION IN ITS RULES, REGULATIONS AND RELEASES, WHICH
REPRESENT THE COMPANY'S EXPECTATIONS OR BELIEFS, INCLUDING BUT NOT LIMITED TO,  
STATEMENTS CONCERNING THE COMPANY'S OPERATIONS, ECONOMIC PERFORMANCE, FINANCIAL 
CONDITION, GROWTH AND ACQUISITION STRATEGIES, INVESTMENTS, AND FUTURE           
OPERATIONAL PLANS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED HEREIN THAT ARE   
NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING           
STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WORDS SUCH AS     
"MAY," "WILL," "EXPECT," "BELIEVE," "ANTICIPATE," "INTEND," "COULD," "ESTIMATE,"
"MIGHT," OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE
TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE          
STATEMENTS, BY THEIR NATURE, INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES,       
CERTAIN OF WHICH ARE BEYOND THE COMPANY'S CONTROL, AND ACTUAL RESULTS MAY DIFFER
MATERIALLY DEPENDING ON A VARIETY OF IMPORTANT FACTORS, INCLUDING UNCERTAINTY   
RELATED TO ACQUISITIONS, GOVERNMENTAL REGULATION, MANAGING AND MAINTAINING      
GROWTH, VOLATILITY OF STOCK PRICES AND ANY OTHER FACTORS DISCUSSED IN THIS AND  
OTHER COMPANY FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.              

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PART I

ITEM 1.  BUSINESS.                                                              

GENERAL                                                                         

We are a development-stage company engaged in the business of 
acquiring, developing, and marketing emerging chemical and electronic           
technologies designed to create products for use in the environmental and       
security sectors. We manage engineering and scientific development programs     
designed to identify products and processes that have differentiated            
characteristics with possibly reduced manufacturing and/or use risks. Our       
portfolio of technologies and potential products include: (a) proprietary       
materials created to specifically solve the problems of how nuclear and other   
hazardous wastes are cost effectively contained, (b) advanced performance       
materials for use in industrial products such as coatings and paints, and (c)   
through our subsidiary, Markland Technologies, Inc., a publicly-traded Florida  
corporation, referred to herein as Markland, automatic detection of explosives  
and illicit materials for use in homeland security. We are seeking to           
commercialize our technologies using various financial and transactional        
vehicles including: technology transfer, licensing, joint venture, and          
distribution agreements.                                                        

Our business is divided into three divisions: (i) Nuclear &   
Environmental Technology Solutions, (ii) Security & Safeguards (which is        
currently conducted through our Markland subsidiary) and (iii) Advanced         
Performance Materials.                                                          

   Our nuclear and environmental technologies consist of a family of
silicon-based geopolymers known as EKOR(TM), a fire-resistant surface fixative  
known as Rad-X and a set of remote sensing technologies (known as               
Electromagnetic Radiography, or EMR, and Acoustic Core, or AC) for subsurface   
investigation. All three technologies are aimed at initial opportunities for    
sale or licensing within key U.S. Department of Energy, or DOE, geographic areas
and overseas in the United Kingdom, Germany and Russia. During 2002, we         
completed several demonstration contracts for EKOR(TM) In December, 2002, we    
agreed to license the rights that we own to the AC technology to Markland. In   
March, 2003, we entered into an agreement to license the rights that we own to  
certain of these technologies of HomeCom Communications, Inc., a Delaware       
corporation (referred to herein as HomeCom). See "Business -- Recent Events"    
below.                                                                          

 Our safeguards and security technologies, now conducted through
Markland, are intended to provide or be a part of cost efficient and reliable   
solutions to homeland security needs. Two technologies currently under          
development are the AC technology and Crypto.com(TM) relating to, respectively, 
"in-situ" detection of various materials including certain explosives and       
illicit materials and "cyber-space" security solutions to provide a high level  
of encryption-based security. We have also previously launched, and Markland    
continues to develop, a development program for an Automated Portal Threat      
Inspection System, or APTIS, to fill a homeland security need for automatic,    
efficient screening for plastic explosives carried by personnel and baggage at  
airports and secure facilities.                                                 

      Our advanced performance materials technologies centers around other
technology not related to hazardous waste and security. The technology based    
upon Hybrid Nonisocyanate Polyurethane, or HNIPU, is intended as a replacement  
for conventional polyurethane binders, commercial coatings, paints, adhesives,  
and foams. We are in discussions with domestic and international parties        
relating to licensing, selling and/or joint venturing for developing and        
commercializing certain HNIPU technologies and variants. The technologies can be
used, potentially, for non-toxic industrial paints and coatings and non-toxic   
foam products such as, but not limited to, certain components contained in      
automotive interiors.                                                           

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During second quarter 2002, we successfully demonstrated an acrylic version of  
HNIPU. In March, 2003, we entered into an agreement to license the rights that  
we own in HNIPU to HomeCom.                                                     

        We hold a greater than 50% equity interest in several Israeli research
and development companies which may be deemed to be subsidiaries. In addition,  
we also own a majority interest in Crypto.com, Inc., a Delaware corporation,    
which, prior to the Markland transaction, held certain encryption technology    
assets currently under development. Such assets, including the trademark        
"crypto.com" were transferred to Markland in December 2002, although Crypto,    
though holding no assets, remains a majority-owned subsidiary of ours.          

        We were incorporated under the laws of the District of Columbia on May
26, 1995. Our executive office is located at 10306 Eaton Place, Suite 220,      
Fairfax, Virginia 22030 and our telephone number is (703) 352-4399. Each of our 
operational divisions (some conducted through subsidiaries) are described in the
following sections. In this Report, the terms "Company," "we," "us," "our" and  
similar terms refer to Eurotech, Ltd., a District of Columbia corporation.      

RECENT EVENTS                                                                   

         On November 26, 2002 we announced that we signed a Cooperative Research
and Development Agreement, or CRADA, with the United States Air Force. The      
objective of the CRADA is to jointly develop a system that will demonstrate the 
effectiveness of the Acoustic Core technology to non-intrusively detect         
explosive materials in cargo and/or vehicles. The CRADA Team will consist of    
personnel from the Company, U.S. Air Force Air Mobility Battle Lab, and other   
USAF and Department of Defense, or DOD, personnel from the operating location   
and technical experts as required. The CRADA is now being conducted through     
Markland. Markland will provide the Acoustic Core explosive detection system,   
including the data collection hardware, analysis software/hardware system and   
technical guidance for operation. The Air Force will provide the necessary      
technical support for the trial activity phase and cargo pallets and/or vehicles
for the demonstration phase. The Air Force Air Mobility Battle Lab will also    
arrange to provide the facilities, explosives and resources necessary to conduct
the demonstrations. In general, USAF personnel will be responsible for the      
demonstration of the system with assistance from Markland, and Markland will be 
responsible for the setup and operation of the system with oversight and        
assistance from USAF personnel. The program schedule is estimated to be four to 
six months in length and is divided into three phases. The first phase consists 
of collection of raw acoustic data from containers utilizing surrogate explosive
targets and will be performed at Idaho National Environmental and Engineering   
Laboratories. The second phase consists of collection of acoustic signatures of 
various explosive materials under a controlled environment within DOD           
facilities. The third phase consists of demonstration of technology capabilities
within a field evaluation test. Successful completion of this program could lead
to potential acquisition programs using the technology to screen air cargo and  
within various DOD force protection tasks.                                      

      On December 10, 2002, we received a written notice from the staff of
the American Stock Exchange indicating that such staff had determined that we   
would not be able to regain compliance with the AMEX's continued listing        
standards by March 31, 2004, and that the Exchange intended to proceed with the 
filing of an application with the Securities and Exchange Commission, or SEC, to
strike our common stock from listing and registration on AMEX if we did not     
appeal such determination by Tuesday, December 17, 2002. On December 12, 2002,  
our board of directors decided not to appeal such determination and effective as
of the close of trading on December 24, 2002, our common stock was delisted from
trading on the Amex and thereafter began being quoted on the Pink Sheets        
Electronic Quotation Service under the symbol "EUOT." Our common stock will be  
listed on the Pink Sheets pending our continued pursuit of obtaining approval by
the OTC Bulletin Board, or OTC BB, for the quotation of our common stock on the 
OTC BB.                                                                         

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         On December 19, 2002, we closed a transaction with Markland pursuant to
which we agreed to license all of its rights to the Acoustic Core technology    
relating to illicit materials detection and exchange all rights related to      
certain cryptology technology held by Crypto for 239,927,344 shares of the      
outstanding common shares of Markland, representing approximately 80% of the    
outstanding common shares at the time of closing. As part of this transaction,  
we agreed that the CRADA would be conducted through Markland and that we would  
endeavor to have our rights in the CRADA assigned to Markland.                  

         Also on December 19, 2002, we executed a definitive Pledge and Security
Agreement with our principal stockholder, Woodward LLC, or Woodward, pursuant to
which Woodward surrendered its rights to receive approximately $5.7 million of  
our Series B 5% cumulative convertible preferred stock, or Series B Preferred,  
in exchange for a security interest in the shares of Markland we concurrently   
acquired 50% of the proceeds generated from future sales by us of these same    
shares. Such transactions is referred to herein as the "Security Arrangement."  
It is in our sole discretion on how and when these securities will be sold, if  
at all, subject to applicable laws. Subject to applicable law, such proceeds,   
when received by us, will be directed to automatically redeem the balance of the
shares of Series B Preferred owned or to be acquired by Woodward, in lieu of the
previously agreed upon redemption schedule for the Series B Preferred. If       
redemptions under the Security Arrangement occur later than as would be mandated
by the previously agreed upon schedule, the previously agreed upon schedule     
shall prevail. We subsequently agreed to with Woodward to terminate the Security
Arrangement as described below.                                                 

         On March 27, 2003, we announced that we agreed to license the rights we
own to the EKOR(TM), HNIPU and EMR/AC technologies to HomeCom. The agreement    
calls for us to exchange the license to the technology in exchange for (i)      
shares of HomeCom's newly issued Series F Convertible Preferred Stock, which,   
when sufficient shares of HomeCom common stock are authorized by HomeCom's      
stockholders, will be convertible into 75% of HomeCom's common stock (ii) shares
of newly issued Series G Convertible Preferred Stock with a stated face value of
$1.069 million and (iii) varying royalty payments based on net sales of         
different types of licensed products. HomeCom plans to file a proxy to authorize
the issuance of additional shares of common stock of HomeCom. Upon the closing  
of the sale of HomeCom's existing web hosting business (which also requires     
stockholder approval, and for which a proxy will be required) and the           
resignation of three current members of HomeCom's board of directors, the       
Company will have rights to majority control of the HomeCom board of directors  
and responsibility for the assignment of any new executive management positions 
in HomeCom. The proposed exchange transaction is subject to the satisfaction of 
certain conditions set forth in the transaction documents. The closing of these 
transactions has not occurred as of the date of this Report.                    

     Also on March 27, 2003, we announced that as part of the technology
licensing transaction we entered into with HomeCom, we reached an agreement with
Woodward to (i) retire all shares of our outstanding Series A 3% Convertible    
Preferred Stock held by Woodward and the rights of Woodward to receive shares of
our Series B 5% Convertible Preferred Stock and (ii) cancel our obligation to   
issue to Woodward 10 million shares common stock in exchange for, respectively, 
$16 million of Series D Convertible Preferred Stock of Markland and $1.069      
million worth of HomeCom Series G Preferred Stock. We have also agreed with     
Woodward that we will terminate the Security Arrangement upon the closing of    
this transaction. We expect to obtain the Markland Series D Preferred shares    
from Markland at the future closing of an exchange by us of 100 million shares  
of Markland common stock for such Series D Preferred Stock. We expect to receive
the HomeCom Series G Preferred at the future closing of its technology licensing
transaction with HomeCom. The closing of these transactions has not occurred as 
of the date of this Report and are subject to the satisfaction of certain       
conditions set forth in the transaction agreements.                             

     On April 2, 2003, we announced that Carey Naddell was appointed our
Chairman of the Board to replace Don V. Hahnfeldt, who stepped down as Chairman 
of the Board, but who will continue to serve as a director of the Company. Mr.  

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Naddell has served as an independent director of the Company since March 2002,  
and has been chairman of the Audit Committee of our board of directors. It is   
expected that Mr. Naddell will serve as Chief Operating Officer through a       
transition period up to three months, after which he will become our President  
and CEO. During such time, Mr. Hahnfeldt will continue as President and CEO in a
transitional capacity.                                                          

OUR OPERATING DIVISIONS                                                         

NUCLEAR & ENVIRONMENTAL TECHNOLOGY SOLUTIONS DIVISION (NETS)                    

         Our NETS division operates under a quality assurance program that meets
Federal, domestic and international requirements, including auditing suppliers  
and testing laboratories. NETS has three technologies that are being actively   
marketed. They consist of a family of silicon-based geopolymers known as        
EKOR(TM), a fire-resistant surface fixative known as Rad-X, and a set of remote 
sensing technologies for subsurface investigation known as EMR. Each technology 
was introduced to the market in 2001. All three technologies are aimed at       
initial opportunities for sale or licensing within the DOE market. In 2002, this
division had revenues of $66,174. In December 2002, we agreed to license the    
illicit materials detection application of EMR to Markland. On March 27, 2003,  
we entered into an agreement to license EKOR(TM) and the remaining rights we    
hold in the EMR/AC technologies to HomeCom.                                     

  Despite significant technical advantages to our technologies and
successful demonstrations at various sites, project implementation and          
full-scale application has been initially negatively impacted by budgetary      
reductions within the DOE and re-evaluation of priorities and projects as a     
result of the terrorist attacks of September 11, 2001. Notwithstanding the      
foregoing, we believe that the increased attention to Homeland Security will    
result in a more favorable marketplace for our technologies.                    

The following is a description of our NETS technologies:      

1.       EKOR(TM)                                                               

      BACKGROUND. EKOR(TM) was developed jointly by scientists at the I.V.
Kurchatov Institute, or Kurchatov, and members of the Euro-Asian Geophysical    
Society, or EAPS, both based in Moscow, Russia, as a family of materials        
designed for long-term isolation of hazardous and radioactive materials. As a   
silicon-based elastomer, EKOR(TM)'s adhesive properties allow it to stick to a  
wide variety of wet or dry surfaces and materials. When applied, EKOR(TM)       
materials surround and immobilize radioactive or hazardous debris ranging from  
fine dust to large pieces of equipment and, in combination with their           
fire-resistant and water-proof properties, prevent such debris from migrating by
water or as air-borne particles. EKOR(TM) materials also possess other highly   
desirable performance characteristics such as chemical , fire and heat          
resistance, and resistance to environmental aging and degradation from          
radiation. In addition to its unique combination of performance characteristics,
EKOR(TM) comes in multiple composite forms and can be applied using specified   
methods for waste coating and encapsulation. This allows EKOR(TM) to be used as 
a solution for a broad spectrum of nuclear and hazardous waste management       
problems.                                                                       

The EKOR(TM) product family's performance characteristics and 
flexibility of form make it a tool for a broad spectrum of applications. There  
are five basic forms of EKOR(TM):                                               

        o        Sealer Plus, which can be sprayed to coat containers or cover
contaminated surfaces;                      

    o        Sealer, which can be applied using a brush or poured in a
        range of densities to fill crevices, ducts or pipes;

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o        Foam, which is pumped in a range of densities to fill
crevices, ducts or pipes;                   

        o        Grout, applied in a pour and mix method, which can be used to
                  make shapes for shielding or to macroencapsulate items to form
           an unleachable monolith for transportation or disposal;

         o        Matrix, applied in a pour and mix method, which can be used to
               microencapsulate radioactive or hazardous wastes to form an
            elastomeric monolith for transportation or disposal; and

     o        StoneStore, applied in a pour and mix method, which can be
              used to microencapsulate highly radioactive waste and will
   form a ceramic monolith for permanent disposal.

  In tests conducted at Kurchatov, EKOR(TM) was shown to be highly
resistant to radiation and structural degradation from exposure to radiation. It
also proved to be highly fire resistant, waterproof, and capable of being       
formulated in densities that display considerable structural strength and       
weight-bearing properties of 100 pounds per square inch. In these high-dosage   
radiation tests, EKOR(TM) has met or exceeded all applicable specifications for 
containment materials.                                                          

 NuSil Technologies, or NuSil, is now producing EKOR(TM) under a
manufacturing license agreement with us at its facilities in California. This   
agreement allows EKOR(TM) materials to be manufactured in volumes sufficient to 
support estimated initial EKOR(TM) sales both within and outside of the United  
States. We contemplate developing more local production in Europe and Asia as   
demand increases.                                                               

         In 2001, we successfully replicated the Israeli formula for EKOR(TM) to
make EKOR(TM) products in the United States. In March 2001, the EKOR family of  
products was presented to waste management professionals from around the world  
at the annual Waste Management Symposium in Tucson, Arizona. As a result of the 
interest generated at the symposium, we have been presenting EKOR(TM) for use in
a variety of applications at DOE sites to various waste management              
professionals. Also in 2001, we successfully completed product testing for the  
first EKOR produced in the United States. This testing validated EKOR(TM)'s     
expected performance and provided information required by contractors at DOE    
sites.                                                                          

         During 2002, EKOR(TM) was selected as a waste stabilization material at
multiple DOE sites. Battelle Memorial Institute, Columbus, Ohio, under a site   
decommissioning contract from the DOE, applied EKOR(TM) within a series of      
reactor drain pipes to immobilize residual radioactive contamination, protecting
workers, the public and the environment during facility sectioning and disposal.
EKOR(TM) was selected by Westinghouse Savannah River Company at the DOE Savannah
River Site near Aiken, South Carolina to encapsulate Low Activity Cell Debris in
compliance with the State of South Carolina regulations for containment and     
disposal of radioactive waste. EKOR(TM) is actively being considered by the     
Pacific Northwest National Laboratory, a DOE national laboratory, to stabilize  
Alpha Dust in the H-Basin Fuel Pool, which will provide protection to workers   
during facility decommissioning. EKOR(TM) is also under consideration by BNFL,  
Inc, to stabilize radioactive contamination in waste disposal tanks at the DOE  
Mound Site near Miamisburg, Ohio and in Sellafield, England, which BNFL uses as 
a primary waste disposal site. EKOR(TM) was recently tested at the DOE Argonne  
National Laboratory to immobilize surrogate radioactive calcined waste and      
salts. Initial evaluation of EKOR(TM) is promising for High Level Waste         
Immobilization. The DOE has more than 100 million gallons of HLW at their       
Hanford and Savannah River Sites with additional significant volumes of calcined
waste at the DOE Idaho Falls facility. We will continue to perform testing on   
additional product forms of EKOR(TM) in 2003.                                   

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 INTELLECTUAL PROPERTY. EAPS, as the lead inventor, has patented
EKOR(TM) in the U.S., Russia, and other industrialized countries. On March 23,  
1999, the U.S. Patent and Trademark Office issued to EAPS Patent No. 5,886,060  
on the process for manufacturing one of the EKOR(TM) compound variants. Under   
sub-licensing agreements, Eurotech is the exclusive global licensee of all      
right, title and interest (inclusive of all patent and other intellectual       
property rights now or in the future) in EKOR(TM). For that license and         
specified research and development and engineering services, we are required to 
make fixed payments to EAPS at the rate of $120,000 per year until 2005. We paid
$132,000 to EAPS during 2002, the additional $12,000 being attributable to the  
accelerated development of the StoneStore technology. Our revenue from net sales
of EKOR(TM) are subject to royalties aggregating up to 3%, increasing in 2005 to
3.1% on certain of such revenues. In particular, royalties are payable at the   
rate of 1% to the intermediate licensee of the EKOR technology; a further 2%    
royalty on certain of our EKOR(TM) revenues payable to another entity that until
November 30, 1999 owned a 50% interest in the EKOR(TM) sublicense; and,         
beginning in 2005, a 0.1% royalty on product sales payable to EAPS. We do not at
this point know whether we will be in a position to successfully file for       
additional patents on any other aspect of EKOR(TM) and we do not know if        
additional proprietary technology that we develop relating to EKOR(TM) will     
prove patentable.                                                               

      In addition to patent protection, another form of protection for our
proprietary assets is through the screening and selection of prospective working
partners and collaborators, employees and consultants. We cannot, however, be   
sure that one or more of these people will not violate the trust that we repose 
in them, that, even though we have signed confidentiality agreements, we would  
have adequate remedies for any violation, or that our trade secrets and         
proprietary know-how will not otherwise become known or be independently        
discovered by others.                                                           

      The use of EKOR(TM) is subject to U.S. environmental safety laws and
regulations pertaining to the safe use and containment of hazardous and nuclear 
waste. Based on the results of tests conducted at Kurchatov and those performed 
to date in the United States, we believe that the EKOR(TM) compounds meet       
current applicable regulations for safe use, containment and storage of         
hazardous and nuclear materials. It is, however, possible that more stringent or
different standards may be adopted or applied in the future that might influence
EKOR(TM)'s intended use, and it is also possible that the standards, if adopted 
or applied, may materially increase the cost to us of using EKOR(TM) compounds  
or prevent their use altogether. We are not aware of any other U.S. or foreign  
laws or regulations that significantly hinder the marketing, sale, or use of    
EKOR(TM) based materials.                                                       

       We have applied for trademark protection for the mark "EKOR" with the
U.S. Patent and Trademark Office.                                               

    INVESTMENT. Through December 31, 2002, we have spent approximately
$27,726,021 ($326,021 in 2002) on the development of EKOR(tm), including costs  
of manufacturing, materials, testing, salaries, and consulting fees and travel  
expense reimbursements paid to the Russian scientists and others.               

       COMMERCIALIZATION. Since EKOR(TM) has not generated the revenues that
were projected in its first two years of marketing. EKOR(TM)'s acceptance into  
nuclear waste management has been slower than anticipated resulting in lower    
than expected revenue generation. However, we believe that EKOR(TM) is the most 
technologically advanced material for comprehensive long-term isolation of both 
solid and liquid radioactive materials, suppressing radioactive dust and        
preventing such materials and dust from escaping into the atmosphere and from   
leaching into and contaminating ground-water supplies. We believe that EKOR(TM) 
also has properties that make it a superior, cost effective and safer isolation 
technology for some non-radioactive hazardous materials and a unique sealant for
potential applications in the construction industry. Significant technical      
issues remain, including those dealing with the residue from production of      
nuclear weapons and the examination                                             

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of all research that supported that production and the disposal issues of       
nuclear fuel being discharged from nuclear power plants. These issues are the   
responsibility of the DOE.                                                      

       Our NETS division offers EKOR(TM) for sale in quantities ranging from
5-gallon containers and 55-gallon drums to specialized application guns with    
material cartridges. We also offer technical support to clients in evaluating   
the appropriate equipment and form of EKOR(TM) for their specific needs. We     
offer project management support, application training and equipment rental or  
sale, but we do not provide application personnel. Following the introduction of
EKOR(TM) in March 2001, we targeted several DOE sites for demonstrations that   
that we believed would lead to project implementation and then full-scale       
application. Specifically, we had substantial discussions with staff at Savannah
River Site (or SRS, near Aiken, South Carolina), Oak Ridge National Laboratory  
(or ORNL, in Oak Ridge, Tennessee), Fernald Closure Site (in Fernald, OH),      
Battelle Memorial Institute (or BMI, in Columbus, Ohio), Rocky Flats            
Environmental Testing Site (or RFETS, near Denver, Colorado), Los Alamos        
National Laboratory (or LANL, Los Alamos, New Mexico), Lawrence Livermore       
National Laboratory (or LLNL, Livermore, California), Hanford Reservation       
(Richland, WA) and Idaho National Engineering & Environmental Laboratory (or    
INEEL, Idaho Falls, Idaho). We have had numerous meetings with DOE staff at     
their headquarters in Washington, D.C. and Germantown, Maryland. We also        
introduced EKOR(TM) to companies doing project and management work at DOE and   
commercial sites. We arranged demonstrations at SRS, ORNL, BMI, INEEL and at our
production facility in California for staff from RFETS and ORNL.                

The technical performance of EKOR(TM) was excellent, but early
demonstrations did point out that the Sealer product, as a solution that        
required mixing of a paste and catalyst and significant monitoring of           
specialized application equipment, needed further development to be more        
user-friendly. To address this issue, our technical staff, working with NuSil   
and EAPS, created a one-part formulation that could be applied, as received from
the factory, using standard airless paint sprayers. The new product, Sealer     
Plus, was introduced in November 2001 and was initially demonstrated at BMI in  
January 2002. In that initial demonstration, Sealer Plus was applied to a       
variety of surfaces and tested for over a month to evaluate durability and      
performance. Its ease of application and successful performance led BMI to      
incorporate it into their planning for decommissioning work at BMI and West     
Valley. Reception from other potential users has also been positive.            

        The EKOR(TM) Foam product is currently not receiving funding as we are
concentrating funds on the Sealer, Matrix and Grout products.                   

         The demonstration of EKOR(TM) Grout at INEEL highlighted its ability to
operate in an underwater environment. INEEL has certain components that are     
being stored underwater because of their behavior when exposed to air. Using    
EKOR(TM) Grout to encapsulate these components underwater and form a nearly     
impermeable barrier may permit removal of these components from pool storage and
disposal in a normal non-aquatic manner. Due to the success of this             
demonstration, EKOR(TM) Grout was selected as a technology participant in their 
Large Scale Demonstration & Deployment Project, or LSDDP, originally scheduled  
to start in October 2001 but is currently on hold due to postponements during   
2002.                                                                           

  EKOR(TM) Matrix was demonstrated at the Savannah River Site with
personnel from Westinghouse Savannah River Company in March 2001. It was used in
bench-scale quantities (200 ml per application) to encapsulate incinerator ash  
and wet resins and then in a gallon size to encapsulate several gallons of      
simulated radioactive cell debris. In each application, the material cured over 
a 24-48 hour period into a solid elastomeric monolith. Based on the results of  
the demonstration, Matrix was chosen as the encapsulation technology for debris 
coming from cleanup of SRS's Low Activity Cells. The project, scheduled to start
in March 2002, was on hold through 2002 due to DOE funding and other project    
priorities at Westinghouse Savannah River Company.                              

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  Although EKOR(TM) is not a shielding material itself, in 2002 we
demonstrated it to be a satisfactory medium into which shield material may be   
incorporated. EKOR(TM) Matrix was loaded with various percentage amounts of     
neutron-absorbing boron in one project and gamma shielding tungsten in another, 
which demonstrated EKOR(TM)'s radiation resistance with radiation shielding     
capabilities.                                                                   

       StoneStore is a form of EKOR(TM) that we believe has the potential to
change the way to permanently encapsulate high-level radioactive waste. By using
certain minerals as fillers in conjunction with the block copolymer that forms  
the base of all EKOR(TM) materials, StoneStore starts as an elastomer but       
transitions into a hard ceramic with high doses of radiation. This process does 
not require high temperatures or pressures and can be compared to a             
room-temperature version of vitrification, only without the complex chemistry   
concerns. The DOE has estimated that their vitrification projects may cost up to
$500 billion to dispose of existing highly radioactive waste, but use of        
StoneStore may be able to reduce that estimate by 50-75% or more.               

      We did not achieve our initial projections of $5-10 million in total
EKOR(TM) sales beginning in 2001. Our sales of EKOR(TM) in 2002 amounted to only
$66,174. We believe these shortfalls in revenue generation are the result of our
overly optimistic projections in penetrating the nuclear waste market and       
various other unanticipated events. Production of EKOR(TM) at NuSil was more    
difficult than anticipated and required delay of product rollout until March    
2001, effectively delaying marketing by several months. We also believe the     
change in U.S. government priorities and its appointed officials created a      
flurry of change at DOE that caused most Decommissioning & Dismantlement, or    
D&D, activities within their sites to stop or slow severely. As DOE waste       
management and D&D strategies, budgets and schedules were close to being        
initiated, the events of September 11th apparently caused another reevaluation, 
with the result being DOE sites that did not know their 2002 budgets until      
January 2002, some four months later than usual.                                

         Since EKOR(TM) did not generate the revenues projected in its first two
years of marketing, we have reviewed EKOR(TM) with respect to its performance   
and continued justification for carrying this technology as a depreciable asset.
While the numerous EKOR(TM) demonstrations and small-scale applications, which  
have been performed at various U.S. nuclear sites and for a variety of          
government contractors have generally been successful, the contracts and        
revenues anticipated from them have not been realized yet for several unforeseen
reasons. These include delayed funding for some projects such as the Large Scale
Demonstration Project for which EKOR(TM) was selected for nuclear waste         
encapsulation at Idaho National Engineering and Environmental Lab, and Savannah 
River Site encapsulation of hot cells for which EKOR(TM) was the successful     
competitor. The general cause for the overall delay in launching a successful   
commercialization of EKOR(TM) has been the general lack for funding available   
since EKOR(TM) was introduced due to reasons ranging from change in Presidential
Administrations and Secretary of Energy, to shifts in priorities since September
11, 2001 terrorist attacks and war against terrorism, as well as EKOR(TM)'s     
ability to displace previously selected conventional products for use in        
encapsulation of nuclear waste. In spite of these delays in EKOR(TM)'s          
commercial success, we continue to maintain very high confidence in EKOR(TM)'s  
marketability and revenue generation potential in the nuclear and hazardous     
waste treatment industry. We fully expect that EKOR(TM) will be a viable        
solution to many of the nuclear waste containment, transportation, storage and  
disposal challenges existing today. However, as a result of this assessment of  
EKOR(TM)'s sales performance and the unpredictability of future delays of       
funding that may continue to affect EKOR(TM), we recorded an impairment loss of 
$3,084,947 related our EKOR(TM) technology rights in the fourth quarter of 2002.

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2.       RAD-X                                                                  

      BACKGROUND. Rad-X was developed from a version of Firesil(TM), using
certain new ingredients to improve its properties for its intended use as an    
interior fire-resistant fixative for equipment or facilities with contaminated  
surfaces. See "Business - Technologies Acquired from Dr. Oleg Figovsky -        
FIRESIL" below. Rad-X differs from EKOR(TM) Sealer Plus in that it is not       
weather-resistant and does not have the chemical, radiation and aging resistance
needed for long-term protection. Rad-X does provide a low-cost fixative for     
surfaces that are scheduled for disassembly or dismantlement and need strong    
adhesion (glue-down of contaminated particles that could become airborne) and   
fire-resistance properties. Rad-X was first presented to the market in September
2001. The Rad-X technology is not being licensed to HomeCom and is currently    
being retained by us.                                                           

        INTELLECTUAL PROPERTY. We have chosen to protect our interest in Rad-X
by treating the formulation as proprietary property. The solution is produced   
under contract by Davis-Frost, Inc., a coating fabricator based in Lynchburg,   
Virginia. We entered into a confidentiality agreement with Davis-Frost, Inc.    
that precludes any dissemination of the formulation for Rad-X.                  

         INVESTMENT. Our investment to date in the creation of the Rad-X product
line, is less than $20,000. Including testing and marketing samples projected in
2002, the total investment in its development and commercial roll out should be 
less than $50,000. During 2002, we spent $5,161 in connection with Rad-X, all of
which was paid to Davis-Frost, Inc.                                             

        COMMERCIALIZATION. Rad-X was initially created for feasibility testing
at DOE's Rocky Flats Environmental Testing Site, or RFETS, and was delivered in 
late September 2001. Testing of the product at other laboratories occurred in   
November 2001. This testing confirmed its outstanding fire and smoke resistance.
Rad-X may be one of a very few coatings that can meet proposed DOE fire/smoke   
criteria for certain specialized applications. Rad-X was marketed in connection 
with EKOR(TM) at DOE sites that are performing decommissioning or hazardous     
material management in 2002. Initial small sales of Rad-X have commenced in     
2003.                                                                           

3.       SUBSURFACE REMOTE SENSING TECHNOLOGIES (EMR/AC)                        

       BACKGROUND. In an agreement dated July 2001 and amended on October 3,
2001 with Trylon Metrics, Inc., we were licensed certain rights to Acoustic Core
and Electromagnetic Radiography for specific markets, consisting of (i) illicit 
material detection, (ii) above surface or subsurface nuclear or other hazardous 
material remediation, (iii) marine dredging sites (inland and ocean) and (iv)   
oil exploration. We have agreed to license the illicit materials detection      
application to Markland and the remaining three applications to HomeCom.        

        Both technologies use a non-contact inspection methodology (unique for
each technology) that creates signals that are then interpreted by a digital    
analyzer that allows identification of elemental or compound materials from     
their empirically determined properties. Acoustic Core is used in applications  
that are predominately wet (i.e., riverbeds, wetlands, etc) and EMR is used in  
dry environments. Completed research and development studies have verified that 
Acoustic Core and EMR can uniquely identify materials by their acoustic or      
electromagnetic signatures, but the unique feature of these technologies is its 
ability to map in three dimensions the existence of target materials at         
extremely low concentrations at depths of up to 300 feet. The capabilities of   
these technologies complement the EKOR(TM) product line by, for example,        
allowing tanks of waste to be monitored for leaks and the leaks, when           
discovered, targeted for repair. Acoustic Core and EMR have applications in     
every market that involves subsurface evaluation, from contamination discovery  
and monitoring to resource discovery. The October 3, 2001 Amendment to our      
agreement with Trylon Metrics granted certain additional rights to us which     
allowed us to                                                                   

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further market this core technology to provide screening capabilities for       
explosives. Due to pressing needs for this type of technology in the            
marketplace, the application of Acoustic Core through Markland environment has  
become one of our core developmental initiatives.                               

        INTELLECTUAL PROPERTY. The Acoustic Core technology is covered by U.S.
Patent 4,922,467. EMR is currently protected by trade secret. We acquired the   
worldwide rights to the applications of these technologies listed above, without
restrictions, in July and October 2001. We have subsequently agreed to license  
the illicit materials detection application to Markland and remainder of our    
rights to HomeCom.                                                              

         INVESTMENT. We issued 2,500,000 fully paid and non-assessable shares of
restricted common stock, valued at $2,500,000, for the acquisition of the rights
to Acoustic Core and EMR, including derivatives of this technology which are    
also being used by us through Markland. Included with the technologies were the 
exclusive services of companies that have manufactured them and demonstrated    
them in the field. During the third and fourth quarters of 2001, we spent an    
additional $50,000 on further development, refinement, and marketing of the     
Acoustic Core and EMR for the NETS market segment. During 2002, we spent an     
aggregate of $844,202 on Acoustic Core and EMR, of which $600,000 was           
capitalized. We agreed to license the illicit materials detection application to
Markland in December 2002 and remainder of our rights to HomeCom in March 2003. 

      COMMERCIALIZATION. Both Acoustic Core and EMR have been validated in
tests at DOE sites (Oak Ridge and INEEL) on a variety of materials utilizing    
prototype instrumentation. Sandia National Laboratory did an in-depth evaluation
of the science behind these technologies in 1999 and concluded that they provide
a unique capability to identify and map in three dimensions low levels of       
material concentration at substantial depths. Combined with this performance is 
a cost effectiveness that should be considerably more economical than current   
methods. During the fourth quarter of 2001, we submitted several proposals to   
the DOE for evaluation of areas of potential contamination and to commercial    
entities being pressured by the EPA for potential subsurface contamination, but 
they have not been selected for inclusion in currently funded programs to date. 

         In 2002, we successfully funded a prototype illicit materials detection
apparatus which was reviewed by the Air Force and led to our November 2002      
agreement with the Air Force. We are marketing to U.S. agencies (DOE, DOD and   
EPA) and companies either performing work for those agencies or responsible for 
cleanup activities being required by them. The ability of Acoustic Core and EMR 
in resource detection (oil, gas, minerals) will be explored in 2003 through     
HomeCom.                                                                        

ADVANCED PERFORMANCE MATERIALS DIVISION (APM)                                   

     In 2001, we formed the Advanced Performance Materials Division. Our
objective is to organize our non-nuclear and non-security related technologies  
into a business unit that would provide focus to their commercialization effort,
coordinate on-going research and developement related to those technologies,    
allow prioritization of marketing efforts in-line with available corporate      
resources and provide a managerial structure and point of contact for potential 
licensees. The main principal of the APM division is Dr. Oleg Figovsky, a       
renowned Israeli scientist, who has decided to sell and license his technologies
to us through various technology transfer agreements. In the APM division, we   
are conducting operations relating to technologies acquired directly from Dr.   
Figovsky and the following seven single technology Israeli startup companies    
which developed certain technologies and in which we own a significant equity   
interest. A majority of these companies have proceeded through their "incubator 
stage" and the subject technology is awaiting commercialization as we either own
or control (through stock ownership in such entities) the intellectual property 
rights of these entities. However, due to limited working capital, management   
decided to temporarily curtail the funding of the operations and further        

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development of the technologies and related operations for five of the          
Israeli-based technology companies: Comsyntech, Ltd., Remptech, Ltd., Sorbtech, 
Ltd., Rademate, Ltd. and Amsil, Ltd.                                            

       Chemonol, Ltd., or Chemonol, has developed formulations and processes
for manufacturing hybrid non-isocyanate polyurethane (known as HNIPU) for use in
paints, coatings, adhesives, sealants, forms, and other industrial applications;

    Sorbtech, Ltd., or Sorbtech, has developed a new inorganic sorbent
(known as SB-1) for petroleum product removal;                                  

        Rademate, Ltd., or Rademate, has developed a biodegradable hydrophobic
material with application as a packaging coating for the food industry;         

         Remptech, Ltd., or Remptech, has developed processes for the production
of extra-fine cobalt and nickel powders and a continuous combustion synthesis   
technology;                                                                     

  Comsyntech, Ltd., or Comsyntech, is developing a process for the
continuous combustion synthesis of ceramic, composite and intermetallic powders;

      Amsil, Ltd., or Amsil, is developing high-thermostable organomineral
polymers; and                                                                   

Corpem, Ltd., or Corpem, is investigating the feasibility of  
water-based suspensions utilizing innovative cross-linking agents, which would  
result in non-toxic environmentally friendly, highly stable, crack resistant    
coatings for concrete, metal or rubber. However, we abandoned our investment in 
this entity during 2002.                                                        

1.       CHEMONOL (DEVELOPER OF HYBRID NON-ISOCYANATE POLYURETHANE OR "HNIPU"   
PROCESSES)                                                    

      BACKGROUND. HNIPU is a hybrid polyurethane that does not involve the
toxic isocyanates utilized in the production of conventional polyurethane and   
that has lower permeability and greater chemical resistance qualities as        
compared to conventional polyurethane. We believe that these advanced           
characteristics, in addition to the potential reduced risk from the elimination 
of isocyanates in its production, make HNIPU superior to conventional           
polyurethanes in connection with their use in a number of industrial application
contexts such as manufacturing automotive components, paints, foams, plastics   
and truck bed liners; aerospace sealants, industrial adhesives, coatings,       
flooring, glues; industrial equipment and machinery; and consumer goods such as 
appliances, footwear, furniture and plastic products. We have agreed to license 
the rights we own in HNIPU to HomeCom.                                          

       INTELLECTUAL PROPERTY. On December 25, 1997 Chemonol filed an Israeli
patent application (122763) on a process to produce HNIPU. Chemonol and Polymate
Ltd. (see disclosure below) jointly have filed two process patent applications  
in Europe (99100586.0-2110 filed on January 14, 1999 and 99114308.2-2102 filed  
on July 21, 1999). Chemonol and Polymate also filed an international patent     
application (PCT/IB99/01/01885 filed on November 24, 1999), based on the        
European applications.                                                          

 INVESTMENT. Chemonol is developing manufacturing techniques and
applications for HNIPU. During 1997, 1998, 1999, and 2000, we invested $30,000, 
$60,000, $305,000, and $265,000 respectfully, for which we have acquired 52%    
ownership of the common stock outstanding. During 2001, we invested an          
additional $95,000 to facilitate technology transfer, bringing our total        
investment to $755,000, which represents 57% of ownership of the outstanding    
common stock of Chemonol. We invested no funds on Chemonol during 2002.         

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  COMMERCIALIZATION. Commercialization efforts for HNIPU are being
handled by Eurotech, not Chemonol, and are addressed below under "Business -    
Technologies Acquired from Dr. Oleg Figovsky - HNIPU". Chemonol operations are  
dedicated to support transfer of the HNIPU technology to the U.S. and on-going  
product research and development as directed by Eurotech.                       

2.       SORBTECH, LTD. (DEVELOPER OF SB-1)                                     

  BACKGROUND. There are many oil spill adsorbents available in the
market. SB-1 is a new product that can be used to adsorb oil. SB-1 is an        
innovative new sorbent composed of basalt non-woven fabric - an ultra-fine      
basalt filament. A proprietary process results in extremely high adsorption     
capacity when compared to existing adsorbents currently available in the        
marketplace.                                                                    

Major advantages of SB-1 include:                             

         o        Extremely high adsorption capacity. Common adsorption capacity
                 for products currently in the market range approximately from
              0.8 - 30 grams of petroleum products per gram of adsorbent
                 weight (gr/gr). SB-1 adsorption capacity ranges from 12 to 82
gr/gr, depending on time and oil viscosity; 

  o        Naturally-occurring mineral. SB-1 itself, if handled in
             accordance with its prescribed use, is an environmentally
clean material; and                         

         o        Nonflammable. SB-1 is thermally resistant (up to 700(degree)C)

         SB-1 can be provided in a variety of forms that facilitate the clean-up
of petroleum products from the multitude of spill types such as: open sea,      
harbors, bilges, surface skimming and finishing, large land open surfaces, rail 
yards, oil pump stations, oil storage depots, airports, soil contamination,     
industrial areas, machinery, gas stations, etc.                                 

    When SB-1 is applied to a petroleum spill, oil is adsorbed, but no
water is incorporated, thus increasing the adsorbent efficiency and effective   
life. The extracted oil products can be reused with little, if any,             
reprocessing.                                                                   

       INTELLECTUAL PROPERTY. Sorbtech applied for patents for oil and waste
adsorbent and the method of manufacturing the same with the U.S. Patent and     
Trademark Office (09/497,489) on February 4, 2000 and with the Israeli Patent   
Office (128402) on July 2, 1999. Sorbtech has withdrawn these applications at   
our request as we decided to apply trade secret laws to the protection of the   
Sorbtech technologies.                                                          

     INVESTMENT. During 1999 and 2000, we invested $62,500, and $260,000
respectfully bringing our total investment $322,500, which represents 52%       
ownership of the outstanding common stock of Sorbtech. We did not make any      
additional investment in Sorbtech in 2001 or 2002.                              

        COMMERCIALIZATION. It was determined in early 2001 that the production
of Sorbtech SB-1 in North America was required for the final product to be cost 
competitive. Technologically, SB-1 repeatedly demonstrated superior sorbtive    
capacity when measured against polypropylene. Unfortunately, there are no       
existing North American facilities equipped with the appropriate technology to  
manufacture the required base fiber. Transfer of the technology including       
conversion of an existing U.S. facility or the construction of a dedicated      
production line will require a capital invest of at least several hundred       
thousand dollars. With company resources focused on commercializing HNIPU and   
other technologies, SB-1 marketing activities were restricted to our web site   
and select contacts with potential manufacturers. We have received some interest
from potential end users of a final sorbent product. Potential users of the SB-1

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material for manufacturing an end state sorbent product have elected to wait    
until cost competitive production can be established in North America. As these 
firms do not traditionally manufacture their sorbtive materials they have not   
expressed interest in initiating or funding the production of SB-1 material. Due
to this fact, and the other commercialization efforts focused on HNIPU, we have 
decided to cease further development and active marketing of this product until 
such time as the manufacture or licensing of this technology becomes cost       
effective.                                                                      

3.       REMPTECH (DEVELOPER OF POWDERED METALLURGY TECHNOLOGY)                 

   BACKGROUND. Powdered metallurgy, the process of producing metals,
alloys or metal containing compositions in a solid or compact state from        
powdered or particulate material with or without heating is generally           
acknowledged as being capable of yielding a product with superior structural,   
physical, and mechanical properties. We believe that the powdered metallurgy    
process developed by Remptech is technologically advanced and, based on         
Remptech's research and testing data, is capable of producing cobalt and nickel 
powders of 99.8% purity and a grain size of 1-2 micro-centimeters. We believe   
that such purities and grain sizes are significant factors in the manufacture of
materials of high quality and internal physical integrity from powdered cobalt  
and nickel. Cobalt and nickel are among the three naturally occurring elements  
that display magnetic properties at room temperature and are widely used in     
metal alloys. Powdered cobalt and nickel are used in a wide variety of          
industrial applications, including magnetic, electrical, and electronic         
materials and products.                                                         

        INTELLECTUAL PROPERTY. Remptech's U.S. Patent (6,090,179) for powdered
metallurgy technology was issued on July 81, 2000. On July 12, 1999, Remptech   
also filed under the Patent Cooperation Treaty (PCT/IL99/00379).                

     INVESTMENT. During 1997, 1998, 1999, and 2000, we invested $21,000,
$26,000, $165,500, and $80,000 respectfully bringing our total investment       
$292,500, which represents 52% of ownership of the outstanding common stock of  
Remptech. We did not make any additional investment in Remptech in 2001 or 2002.

        COMMERCIALIZATION. In 2001 and 2002, commercialization of Remptech was
limited to direct mailings to potential candidate for acquisition of the        
technology and our web site. The direct mailings resulted in some requests for  
additional information.                                                         

4.       COMSYNTECH (DEVELOPER OF CONTINUOUS COMBUSTION SYNTHESIS OR "CCS" AND  
CONTINUOUS ACTION REACTOR)                                    

        BACKGROUND. With Comsyntech, we participated in the development of two
technologies: CCS and Continuous Action Reactor.                                

     CCS. CCS is a newly devised process utilizing the internal chemical
energy of initial reactants in a continuous action reactor, a device being      
developed by Comsyntech. We believe this process offers competitive advantages  
(such as increased productivity and lower production costs) over conventional   
technology. Comsyntech research and testing data indicate that materials        
produced with the CCS technology have exhibited superior high-thermomechanical  
properties such as high strength, thermo and wear resistance and good corrosion 
stability. Based on these properties, we believe that the CCS technology has    
potentially significant utility in producing ceramic, composite, and            
intermetallic powders with potential commercial application in the production of
metal-cutting tools and abrasives, metal alloys, aircraft and automotive        
combustor, nozzle and turbine parts, piezo- and ferro-electric materials, and   
surgical instruments.                                                           

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       Continuous Action Reactor (Method for Continuous Combustion Synthesis
of ceramic, composite and intermetallic powders). The continuous action reactor 
offers the competitive advantage of increased productivity and lower production 
costs relative to conventional high-temperature furnace reactors and powder     
production processes. One apparatus replaces high-temperature furnaces as well  
as spraying and grinding equipment. Furthermore, this method offers additional  
significant advantages including:                                               

      o        Rapid production. Large quantities can be quickly produced;

o        Lower manufacturing costs. Expensive high-temperature
              furnaces, complex processes, and equipment are eliminated;

    o        Reduced energy consumption. Energy consumption is greatly
reduced; and                                

         o        Improved purity. Mixture purification during synthesis enables
high purity materials to be obtained.       

        INTELLECTUAL PROPERTY. CCS Patent application (127109) for a method of
obtaining powders of inorganic compounds under combustion conditions was filed  
by Comsyntech with the Israeli Patent Office on November 17, 1998 and is        
pending. A patent application for a Continuous Action Reactor apparatus for     
self-propagating high-temperature synthesis was filed by Comsyntech with the    
U.S. Patent and Trademark Office (09/535,805) on March 28, 2000 and is pending. 

     INVESTMENT. During 1997, 1998, 1999, and 2000, we invested $21,000,
$26,000, $45,500, and $200,000 respectfully bringing our total investment       
$292,500, which represents 52% of ownership of the outstanding common stock of  
Comsyntech. We did not make any additional investment in Comsyntech in 2001 or  
2002.                                                                           

    COMMERCIALIZATION. Commercialization efforts in 2001 and 2002 were
limited to our web site and target mailings to potential candidates for         
acquiring the technology. The target mailings generated a number of requests for
additional information.                                                         

5.       RADEMATE (DEVELOPER OF RAPIDLY BIODEGRADABLE HYDROPHOBIC MATERIAL OR   
"RBHM")                                                       

BACKGROUND. Rademate has developed a cellulose-based, rapidly 
biodegradable hydrophobic material, or RBHM. RBHM is a new, hydrophobic (water  
resistant), strong, cheap, and completely biodegradable composite material that 
is environmentally friendly. The idea of RBHM is to improve the properties of   
both paper and plastic packaging materials. Due to its biodegradable nature,    
RBHM is an ideal coating for disposable loose fill bags and packages. The       
material can be used as a commodity in trade, industry, and agriculture for a   
wide range of applications. To date, most attempts to produce biodegradable     
products for consumers focused on developing plastics that could biodegrade.    
RBHM approaches biodegradable products from the other direction - making        
cellulose-based material with the same physical properties as plastic, except   
the material biodegrades completely in the same time as regular paper bags.     

         RBHM consists of cellulose (paper) and biodegradable organic additives.
Biodegradation of RBHM occurs in wet soil under normal enzymatic action of      
various microorganisms - fungi and bacteria. We believe that the main advantages
of RBHM are:                                                                    

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     o        High Strength. RBHM's strength characteristics, especially
                 combined with low elongation and acquired water resistance of
           the material, make RBHM unique and highly desirable for
packaging applications.                     

      o        Water Resistance. RBHM keeps water resistance for one week.
       Thus, it has excellent prospects for many packaging
              applications. Most of the existing biodegradable packaging
               products are not hydrophobic at all and will fail if wetted
during use.                                 

      o        Full Degradation in the Environment. Enzymes begin breaking
                 down RBHM in the presence of moisture in natural environments
                 such as soil. Then microorganisms decompose the material with
             rapidly occurring metabolic reactions. RBHM is completely
               converted into carbon dioxide, water, and biomass in two to
           three months in wet soil. Thus, this process completely
              coincides with the definition of biodegradability given by
most experts.                               

         o        RBHM Uses Reproducible Natural Raw Materials. The cheapest raw
                material, as well as the most widespread organic material in
             nature, is cellulose. Cellulose is renewable, reproducing
         itself through the natural cycle. Sound environmental
                 management balances resources, recycles whenever possible and
                  uses them in a renewable cycle. Cellulose is present widely on
           the planet - in trees, bushes, grass, and other plants.

      o        Relatively Low Cost. The main obstacle to widespread use of
                biodegradable polymers has been cost. Biodegradable polymers
                 are traditionally significantly more expensive than commodity
          polymers. The high costs involved in the production of
         biodegradable polymers means that they cannot compete
                favorably with conventional polymers. RBHM does not have the
          cost barriers that are characteristic of all the other
                  biodegradable plastics. This high cost deterred the widespread
        adoption of biodegradable plastics in major consumer
             application. At an additional cost of less than 10% , and
             sometimes less depending on the type of material treated,
                materials treated with RBHM provide plastic-like performance
                 and are biodegradable. On the other hand, currently available
degradable materials can cost twice as much.

        We believe that the number of potential applications for RBHM is high.
Because RBHM can be applied on sheets, films and fibers, it is suitable for a   
range of single-use products, including grocery and waste bags, the top, and    
back sheets of disposable diapers, and disposable eating utensils. It can be    
used to create agricultural films and bags that cover ripening fruit. RBHM      
products such as disposable plates and cups, films for food packaging,          
miscellaneous everyday items and sanitary products are but a few of the possible
applications. Box and bag consumers are generally commercial and industrial     
users requiring a particular packaging container for a specific product.        

     INTELLECTUAL PROPERTY. Rademate was issued U.S. Patent #6294265 for
"Hydrophobic biodegradable cellulose-containing material" on September 25, 2001.
Rademate has one application with the Israeli Patent Office (126306), dated     
September 23, 1998, which is pending.                                           

        INVESTMENT. During 1998, 1999, and 2000, we invested $30,000, $60,000,
and $370,000 respectfully bringing our total investment $460,000, which         
represents 52% of ownership of the outstanding common stock of Rademate. We did 
not make any additional investment in Rademate in 2001 or 2002.                 

       COMMERCIALIZATION. RBHM was marketed through our web site during 2001
and 2002.                                                                       

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6.       AMSIL (DEVELOPER OF HIGHLY STABLE ORGANOMINERAL POLYMERS)              

 BACKGROUND. Organomineral polymers based on quaternary ammonium
silicates, or QAS, are a new kind of silicate material with excellent adhesion  
properties to hydrophilic and hydrophobic surfaces, have high chemical          
resistance, fire resistance and are environmentally compatible. QAS have        
superior properties in comparison to epoxy resins and traditional silicates,    
including: high adhesion to metallic and concrete surfaces; extreme stability in
water; thermostability to 2000(degree) K; resistance to corrosion and erosion;  
and excellent mechanical characteristics.                                       

        Dr. Figovsky has advised us that QAS may be used as ammonia compounds;
as biocides; in textiles as textile softeners for home use; as the final rinse  
in the washing machine; as a rinse after shampooing, as emulsifiers; in metal   
working - as additives to acid used in the cleaning and pickling of steel to    
prevent hydrogen corrosion; in road building, as bentonite treatment; in        
oilfields; as antistatic in polymers - e.g., in PVC belting; for the preparation
of excellent quality toner; as components in special systems of water           
purification; as components in self-setting aqueous mixtures for the manufacture
of chemically resisting materials; as additives in concrete and coatings; in    
structure-directing agents, e.g., for the synthesis of molecular sieves with    
high-modulus silica; in silicate salts - for blends of hydrophilic medical use; 
as raw material for preparation of organosilanes; with aggregated titanium      
pigment products containing QAS - for pigment preparation; as silicates,        
anti-corrosion coating of different surfaces (metals, concrete, wood, etc.); as 
fire-protection coating; and for specific application as glue.                  

         INTELLECTUAL PROPERTY. With respect to QAS, Amsil has received two U.S.
Patents and has two pending in Israel (128282 filed January 24, 1999 and 129977 
filed May 16, 1999). U.S. Patent #6320059 for "Polymeric composition having     
self-extinguishing properties" was issued December 11, 2001. U.S. Patent        
#6337036 for "Conductive composition having self-extinguishing properties" was  
issued January 8, 2002.                                                         

        INVESTMENT. During 1998, 1999, and 2000, we invested $30,000, $62,500,
and $230,000 respectfully bringing our total investment $332,500, which         
represents 52% of ownership of the outstanding common stock of Amsil. We did not
make any additional investment in Amsil in 2001 or 2002.                        

      COMMERCIALIZATION. Currently, we are calling QAS to the attention of
industries through our web site and professional contacts, as a result of which 
we have received expressions of interest from companies that included small     
regional producers to a large multinational conglomerate. During 2002, we       
received indications of interest in, and delivered samples of, QAS.             

7.       CORPEM - PROTECTIVE CRACK RESISTANT COATINGS BASED ON WATER BORNE      
CHLOROSULFONATED POLYETHYLENE (OR CSPE)                       

        BACKGROUND AND ABANDONMENT. The proposed project was based on previous
research in the field of statistical modeling of processes of formation of      
various branched crosslinked structures. The modeling allows the preparation of 
materials having preselected desirable properties. CSPE is hardened by water    
suspension of chlorine-sulfonated-polyethylene hardened by Mannich alkalis. In  
2001 we invested $30,000 in Corpem. Eurotech's investment was matched with      
$150,000 by the office of the Chief Scientist of the Ministry of Industry and   
Commerce of the Israeli Government. In 2002, we invested an additional $15,000  
but have made an operational decision to abandon our interest in this project.  
As part of our agreement with the Israeli Government, we will relinquish our    
interest in Corpem during 2003.                                                 

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TECHNOLOGIES ACQUIRED FROM DR. OLEG FIGOVSKY (PART OF APM DIVISION)             

1.       HNIPU                                                                  

       BACKGROUND. We described the HNIPU technology above in our discussion
of Chemonol.                                                                    

     INTELLECTUAL PROPERTY. HNIPU network polymers and composites formed
therefrom is patented in the U.S. (Patent Number #6120905, issued September 19, 
2000) and also in Europe (EP 1088021, PCT WO 9965969) and Australia (4441099).  
Such patents have previously been assigned to Eurotech. The method of synthesis 
of cyclocarbonates and nonisocyanate or hybrid nonisocyanate network            
polyurethanes is patent applied for in the United States, which application has 
been assigned to us.                                                            

       INVESTMENT. HNIPU was independently developed by Dr. Figovsky and was
acquired by us pursuant to a Technology Purchase Agreement dated January 1, 1998
for a purchase price of $75,000, plus royalties equal to 49% of our net revenues
from sales or licenses of any products incorporating HNIPU, payable over a      
period of 15 years commencing on January 1, 1998. To date, we have not derived  
any revenues from HNIPU. Dr. Figovsky is one of our consultants. As of February 
27, 2000, we entered into an amended agreement with Dr. Figovsky pursuant to    
which he surrendered his 49% royalty interest in HNIPU and the other            
technologies discussed below for a payment to him of an aggregate of $235,000   
and an agreement to pay him a royalty of 1% of gross revenues generated by sales
of products incorporating these technologies. On March 5, 2003, in anticipation 
of the HomeCom transaction, Dr. Figovsky and Polymate, Ltd. surrendered to us   
the remaining revenue rights they held in HNIPU (and certain other technologies 
described elsewhere herein) and will receive shares of HomeCom at the closing of
our transaction with HomeCom in consideration thereof.                          

  COMMERCIALIZATION. We are seeking to commercialize HNIPU through
licensing or joint venture agreements with major companies in the United States,
Europe, and Japan that would either produce HNIPU binder or incorporate it into 
their product lines. Several international companies have requested, and been   
supplied with, samples HNIPU binder or foam for evaluation and applications     
testing. A market analysis performed for us shows that the U.S. market for      
polyurethane coatings and adhesives in the U.S. alone is projected to amount to 
$8.5 billion by 2005. We have focused on replicating the formulation of the     
HNIPU technology in the United States. We have identified several suitable      
binder production facilities and have furthered our efforts to establish a      
customer base of paint and coating manufacturers. We achieved a milestone in    
2001 with the development of a HNIPU foam. This development has created         
additional opportunity in the global rigid foam market and has lead to          
considerable interest from North American and European based companies. In 2002,
we developed an acrylic version of HNIPU and engaged in discussions with third  
parties regarding HNIPU and delivered samples of the product.                   

2.       LIQUID EBONITE MATERIAL OR "LEM"                                       

        BACKGROUND. LEM is a synthetic liquid rubber with enhanced mechanical,
permeability and anti-corrosive qualities as compared to conventional sheet     
rubber coverings. In laboratory testing, coverings made with LEM, as compared to
conventional sheet rubber coverings, have displayed greater resistance to harsh 
chemicals such as acids, alkalis and benzene, and have been successfully applied
to intricate and complex surfaces such as sieve meshing. Based on the physical  
and chemical properties of LEM, and on the basis of such tests, we believe that 
LEM coverings are capable of providing superior protection to small-diameter    
piping and to the intricate parts of pumps, fans, and centrifuge rotors. LEM can
be applied to form surface coverings using standard coating techniques,         
including spraying and dipping.                                                 

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        INTELLECTUAL PROPERTY. Dr. Figovsky was issued U.S. Patent #6303683 on
October 16, 2001 for Liquid Ebonite mixtures and coatings, and concretes formed 
therefrom. Dr. Figovsky also filed under the Patent Cooperation Treaty          
(PCT/US99/16883) on July 26,1999. These patents and applications were acquired  
by us in 1998.                                                                  

     INVESTMENT. LEM was independently developed by Dr. Figovsky and was
acquired by us pursuant to a Technology Purchase Agreement, dated January 1,    
1998, for a purchase price of $15,000, plus royalties equal to 49% of our net   
revenues from sales or licenses of any products incorporating LEM, payable over 
a period of 15 years commencing on January 1, 1998. On February 27, 2000, we    
entered into an amended agreement with Dr. Figovsky pursuant to which he        
surrendered his 49% royalty interest in HNIPU and the other technologies,       
including LEM, for a payment to him of an aggregate of $235,000 and an agreement
to pay him a royalty of 1% of gross revenues generated by sales of products     
incorporating these technologies. On March 5, 2003, Dr. Figovsky surrendered to 
us the remaining revenue rights he held in LEM (and certain other technologies  
described elsewhere herein) and will receive shares of HomeCom at the closing of
our transaction with HomeCom in consideration thereof.                          

     COMMERCIALIZATION. During 2001, we were devoting limited management
time and attention to the marketing of this technology. In 2002, we marked LEM  
via our website and received some indications of interest.                      

3.       RUBBER CONCRETE, OR "RUBCON"                                           

  BACKGROUND. RubCon is a technologically advanced, polymer-based,
rubberized concrete that utilizes polybutadiene, a polymer derived from liquid  
rubber, as a binding material for the various aggregates that, together with    
binders, constitute concrete. In laboratory testing, RubCon has exhibited high  
degrees of compression, bending and tensile strength, a high degree of          
water-resistance and a high degree of resistance to aggressive, corrosive       
chemicals as compared to conventional "cement" concrete. We believe that RubCon 
has significant potential utility in the manufacture of industrial flooring,    
equipment operating in aggressive chemical media such as galvanic and           
electrolysis "baths," foundations, concrete pipes and other underground         
structures, seismic reinforcement materials, and outdoor structures such as     
bridges that are routinely exposed to harsh weather and corrosive conditions.   
Other applications may be for pads in vibration-sensitive machinery such as     
compressors and pumps.                                                          

     INTELLECTUAL PROPERTY. RubCon was developed based on our LEM patent
applications and is protected as a trade secret.                                

        INVESTMENT. RubCon was independently developed by Dr. Figovsky and was
acquired by us pursuant to a Technology Purchase Agreement dated January 1, 1998
for a purchase price of $35,000, plus royalties equal to 49% of our net revenues
from sales or licenses of any products incorporating RubCon, payable for a      
period of 15 years commencing on January 1, 1998. On February 27, 2000, we      
entered into an amended agreement with Dr. Figovsky pursuant to which he        
surrendered his 49% royalty interest in HNIPU and the other technologies,       
including RubCon, for a payment to him of an aggregate of $235,000 and an       
agreement to pay him a royalty of 1% of gross revenues generated by sales of    
products incorporating these technologies. On March 5, 2003, Dr. Figovsky       
surrendered to us the remaining revenue rights he held in RubCon (and certain   
other technologies described elsewhere herein) and will receive shares of       
HomeCom at the closing of our transaction with HomeCom in consideration thereof.

       COMMERCIALIZATION. We have done limited marketing for the manufacture
and sale of RubCon. At the end of 2002 and at the time of this report's         
preparation, we were not devoting any management time or attention to the       
marketing of this technology, other than marketing efforts via our website.     

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4.       ANTICORROSIVE ADDITIVES FOR POLYMERS - UPGRADES CHEMICAL RESISTANCE    
CHARACTERISTICS OF BASE POLYMERS                              

 BACKGROUND. Anticorrosive Additives, or Aadd, are an innovative
approach to creating highly chemical resistant polymer materials. AAdd are      
specially designed to upgrade the chemical resistance characteristics of base   
polymers to achieve optimal performance capabilities of materials operating in  
aggressive environments. AAdd can be mixed into a wide range of polymer         
materials offering a significant increase in product life and reducing product  
permeability. These custom-made specialty formulations are designed to meet     
specific client requirements. When cured with polymer-based materials, AAdd can 
dramatically improve the capabilities of poly-based materials by upgrading their
chemical resistance properties. The additives are inorganic powders that react  
with the aggressive environments into which they are introduced, forming a new  
phase of high-strength hydrate complexes. This enhanced bonding occurs upon the 
penetration of aggressive media into the AAdd-containing polymer material. The  
chemical resistant properties of AAdd are activated by harsh environmental      
conditions where polymer systems without additives remain defenseless to        
chemical corrosion.                                                             

        Dr. Figovsky has represented to us, but we have not sought independent
testing to verify that (i) AAdd can be mixed into a wide range of polymer       
materials such as epoxies, polyurethanes, glues, nylons, polyolephines,         
synthetic rubbers and PVC, offering performance-enhancing attributes that       
increase the value of the end product; that he has developed an extensive       
product range of additives for upgrading the most common polymers against a wide
variety of aggressive media including acids, seawater, fluorine, alkalies, and  
more; and that AAdd is an effective solution for many applications.             

         INTELLECTUAL PROPERTY. No patent activity is presently underway. We own
whatever intellectual property rights and patent rights in AAdd that may be     
available.                                                                      

       INVESTMENT. AAdd was independently developed by Dr. Figovsky, and was
acquired by us pursuant to the Technology Purchase Agreement dated January 1,   
1998 referred to above for a purchase price of $45,000 plus royalties equal to  
49% of our net revenues from sales or licenses of any products incorporating    
AAdd, payable for a period of 15 years commencing on January 1, 1998. On        
February 27, 2000, we entered into an amended agreement with Dr. Figovsky       
pursuant to which he surrendered his 49% royalty interest in HNIPU and the other
technologies, including AAdd, for a payment to him of an aggregate of $235,000  
and an agreement to pay him a royalty of 1% of gross revenues generated by sales
of products incorporating these technologies. On March 5, 2003, Dr. Figovsky    
surrendered to us the remaining revenue rights he held in AAdd (and certain     
other technologies described elsewhere herein) and will receive shares of       
HomeCom at the closing of our transaction with HomeCom in consideration thereof.

         COMMERCIALIZATION. We have not yet begun any marketing efforts for AAdd
other than via our website.                                                     

5.       FIRESIL(TM) - FIRE PROTECTION ORGANOMINERAL COATING - FIRE-STOP FOR    
RESIDENTIAL AND COMMERCIAL APPLICATION                        

    BACKGROUND. Firesil(TM) is an environmentally compatible fire-stop
material with good adhesion properties to hydrophilic and hydrophobic surfaces  
and exhibits excellent fire resistance, thermostability, and good water         
resistance.                                                                     

         INTELLECTUAL PROPERTY. We acquired the formula for Firesil(TM) from Dr.
Figovsky in 2000. We terminated previously initiated patent applications and    
have elected to protect this formula as a trade secret. We own the federally    
registered trademark "Firesil".                                                 

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      INVESTMENT. Firesil(TM) was independently developed by Dr. Figovsky,
and was acquired by us pursuant to an amended agreement with Dr. Figovsky dated 
as of February 27, 2000 for a purchase price of $5,000 as part of a larger      
transaction pursuant to which he surrendered his 49% royalty interest in HNIPU, 
LEM, RubCon, AAdd and Poly-D additives for a payment to him of an aggregate of  
$235,000 and an agreement to pay him a royalty of 1% of gross revenues generated
by sales of products incorporating these technologies. On March 5, 2003, Dr.    
Figovsky surrendered to us the remaining revenue rights he held in Firesil(TM)  
(and certain other technologies described elsewhere herein) and will receive    
shares of HomeCom at the closing of our transaction with HomeCom in             
consideration thereof.                                                          

COMMERCIALIZATION. We successfully adopted the formula for the
Firesil(TM) technology to the U.S. in 2001 and have produced the product for    
commercial sale in both 2001 and 2002 under an agreement with a manufacturer    
located in central Virginia. We continue to market Firesil(TM) directly to      
corporations that are prospective candidates for acquiring or licensing the     
technology. Discussions have also been held with U.S. government agencies and   
insurance companies. Firesil(TM) was tested by an accredited lab to ASTM        
protocol and passed with superior results.                                      

6.       KAUTON - AN OIL AND GAS INDUSTRY PIPELINE SPECIALTY COATING            

     BACKGROUND. Kauton is an advanced semi-ebonite two-component liquid
rubber based coating for corrosion protection of oil and gas pipelines. It      
contains specialized anticorrosion components and has vulcanization temperature 
50% less than conventional liquid ebonite materials, which allows for easier    
application and manufacture. Kauton would provide enhanced protection to weld   
joints of large diameter pipelines.                                             

        INTELLECTUAL PROPERTY. We acquired the intellectual property rights to
this technology from Dr. Figovsky in 2000. The technology is protected by trade 
secret.                                                                         

    INVESTMENT. Kauton was independently developed by Dr. Figovsky. We
acquired a 99% interest pursuant to an agreement with Dr. Figovsky dated as of  
February 27, 2000 for a purchase price of $5,000 pursuant as part of a larger   
transaction pursuant to which he surrendered his 49% royalty interest in        
HNIPU,LEM, RubCon, AAdd and Poly-D additives for a payment to him of an         
aggregate of $235,000 and an agreement to pay him a royalty of 1% of gross      
revenues generated by sales of products incorporating these technologies. On    
March 5, 2003, Dr. Figovsky surrendered to us the remaining revenue rights he   
held in Kauton (and certain other technologies described elsewhere herein) and  
will receive shares of HomeCom at the closing of our transaction with HomeCom in
consideration thereof.                                                          

       COMMERCIALIZATION. At present, we are not engaged in the marketing of
Kauton other than via our website.                                              

7.       HYPOCORR - SPECIALIZED WATER BASED CRACK RESISTANT COATING             

        BACKGROUND. Hypocorr is a water-based crack-resistant coating based on
chlorine-sulphonated polyolifines with novel cross-linked agents. As such, this 
coating is believed to be more environmentally friendly at half the expense of  
conventional crack resistant coatings.                                          

        INTELLECTUAL PROPERTY. We acquired the intellectual property rights to
this technology from Dr. Figovsky in 2000.                                      

      INVESTMENT. Hypocorr was independently developed by Dr. Figovsky. We
acquired a 99% interest pursuant to an agreement dated as of February 27, 2000  
for a purchase price of $5,000 as part of a larger transaction pursuant to which
he surrendered his 49% royalty interest in HNIPU, LEM, RubCon, AAdd and Poly-D  

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additives for a payment to him of an aggregate of $235,000 and an agreement to  
pay him a royalty of 1% of gross revenues generated by sales of products        
incorporating these technologies. On March 5, 2003, Dr. Figovsky surrendered to 
us the remaining revenue rights he held in Hypocorr (and certain other          
technologies described elsewhere herein) and will receive shares of HomeCom at  
the closing of our transaction with HomeCom in consideration thereof.           

       COMMERCIALIZATION. At present, we are not engaged in the marketing of
Hypocorr other than via our website.                                            

8.       POLYDIENE URETHANE ADHESIVES - ELECTRONIC GLUES FOR RUGGEDIZED         
APPLICATIONS                                                  

   BACKGROUND. Polymeric adhesives are widely used in the electronic
industry, mainly to protect electronic devices against conditions of vibration  
and impact, which can prevent the devices from functioning as designed. Our     
advanced polydiene urethane based (Poly-D adhesives) is specially designed to   
perform under rugged conditions. Poly-D adhesives used in conjunction with      
soldering increase the reliability of electronic devices by providing components
with excellent environmental stability and improved reliability. Other          
noteworthy attributes include:                                                  

o        Non-corrosive - limited to no corrosion of the bonded
electronic components;                      

      o        Non-adsorbent - will not be adsorbed into the components or
substrate;                                  

 o        Non-reactive - completely non-reactive toward electric
isolation during and after hardening; and   

        o        Non-disruptive - low internal stress to remain non-disruptive
to electronic parts                         

    INTELLECTUAL PROPERTY. Poly-D additives are protected through U.S.
Patent #5880203 which was assigned to us by Dr. Figovsky in 1998. Additional    
international patent protection activities were recently halted due to a        
reassessment of our intellectual property policy.                               

  INVESTMENT. Poly-D adhesives were independently developed by Dr.
Figovsky acquired by us pursuant to a technology purchase agreement dated       
January 1, 1998 for a purchase price of $15,000, plus royalties equal to 49% of 
our net revenues from sales or licenses of any products incorporating Poly-D    
adhesives, payable over a period of 15 years commencing on January 1, 1998. As  
of February 27, 2000, we entered into an amended agreement with Dr. Figovsky    
pursuant to which he surrendered his 49% royalty interest in HNIPU, LEM, RubCon,
AAdd and Poly-D additives for a payment to him of an aggregate of $235,000 and  
an agreement to pay him a royalty of 1% of gross revenues generated by sales of 
products incorporating these technologies. On March 5, 2003, Dr. Figovsky       
surrendered to us the remaining revenue rights he held in Poly-D (and certain   
other technologies described elsewhere herein) and will receive shares of       
HomeCom at the closing of our transaction with HomeCom in consideration thereof.

      COMMERCIALIZATION. We are marketing Poly-D adhesives through our web
site and direct industry requests. Presently, no additional marketing activities
are envisioned. Market analysis indicates a highly specialized niche market with
limited potential to provide adequate return on investment that would justify   
more aggressive marketing activities. We propose to attempt to license or sell  
this technology in its entirety.                                                

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ISRAELI TECHNOLOGY START-UP COMPANIES                                           

      The government of Israel has in place a program pursuant to which an
inventor/developer may submit to the office of the Chief Scientist a proposal to
develop specified technology. If the Chief Scientist approves the proposal,     
arrangements are made pursuant to which (i) an Israeli company is incorporated; 
(ii) the entrepreneur is allocated initially 50% of the company's equity in     
exchange for his technology; (iii) a local technology company is brought into   
the picture as incubator to furnish office and laboratory facilities and support
services for a period of two years in exchange for a further 20% of the equity; 
(iv) a venture capital partner, who is required to invest $60,000, becomes      
another 20% shareholder; and (v) the remaining 10% of the equity is made        
available to the start-up company's employees. Upon organization of the start-up
company, the Israeli government will make available to it grants of up to       
$300,000.                                                                       

        Over the years, we have worked with three Israeli technology incubator
companies (TEIC - Technion Entrepreneurial Incubator Co., Ltd; Ofek La'Oleh     
Jesre'el Valley Initiative Center; and ITEK Incubator for Technological         
Entrepreneurship, Kiryat Weizmann, Ltd.), which allowed us to act as the venture
capital partner in the incubation the seven start-up companies described above. 

       As provided by Israeli law and regulations, we received initially 20%
of each company's common equity in exchange for an initial investment of U.S.   
$60,000. Subsequently we made further investments in each of them for additional
equity. In certain instances the start-up company has developed its technology, 
the Company has secured its access to these technologies through licensing or   
ownership, and is awaiting the opportunity to further market and commercialize  
the technology. The current status of our investment in each of these companies 
is discussed in connection with our description of their respective technology. 

POLYMATE, LTD.                                                                  

       Dr. Oleg Figovsky and Mr. Alex Trossman, our two Israeli consultants,
jointly own a company called Polymate, Ltd., which conducts an operation called 
the Israeli Research Center. The Israeli Research Center consists of a          
laboratory, employing other scientists/ technicians, in the premises of the Ofek
La'Oleh - Jesre'el Valley Initiative Center. The function of the Israeli        
Research Center is to continue the development of the technologies that we      
purchased from Dr. Figovsky and to supervise the technology start-up companies  
in which we participate. We are under agreement to provide all of the funding   
for Polymate, Ltd. and the Israeli Research Center in the approximate aggregate 
amount of $22,000 per month, inclusive of consulting fees to Dr. Figovsky, Dr.  
L. Shapovalov and Mr. Trossman. During 2002, we were deliquent in certain of our
payments due under these arrangements and presently in negotiations to reach a  
settlement, which we expect will be finalized in the second quarter of 2003. Dr.
Figovsky and Mr. Trossman continue to be retained and compensated by us as      
consultants on a month-to-month basis. Their original consulting agreements have
expired. Peter Gulko, one of our significant shareholders and an advisor to our 
board of directors, plays a significant role in the management of our           
relationship with Polymate, Messrs. Figovsky and Trossman and with the          
development of our Israeli technologies.                                        

SECURITY & SAFEGUARDS DIVISION                                                  

  The terrorist attacks of September 11, 2001 have resulted in the
creation of a governmental agency to monitor Homeland Security. Our Security &  
Safeguard division, which is conducted through Markland as of December 2002,    
provides products and technologies which management believes can provide or be a
part of cost efficient and reliable solutions to these Homeland Security needs. 

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1.       CRYPTO.COM                                                             

 BACKGROUND. In February 2000, we organized Crypto.com., Inc., a
Delaware corporation, to develop cryptographic systems for secure communication.
At that time, we entered into a one-year employment/development contract,       
extendable by us, with a mathematician-inventor, in which he agreed to develop  
such a system and which would restrict his ability to work on related products  
even if the contract was not extended. We extended this agreement until February
2002 an have since been operating with the inventor on a month-to-month basis.  
The inventor believes that he can develop the mathematical concepts that can    
produce a series of secure communication products. The products' use would vary 
depending on the level of security and speed of the cryptographic system. The   
inventor's goal is to produce a product that allows secure communication. Secure
communications is a growing market that is fueled by the growth of the Internet,
by business use of intranets and by the growth of global electronic             
communications, all of which result in electronic movement of remotely processed
corporate files used in multiple locations. The products, when developed will,  
be targeted to the appropriate commercial entities. As in the case of all       
start-up development efforts, there can be no assurance that any commercially   
viable products will result from our development efforts. In December 2002, we  
transferred the assets of Crypto.com., Inc., including the registered trademark 
"crypto.com", to Markland.                                                      

         INTELLECTUAL PROPERTY. Although in the development stage, the potential
intellectual property assets will be protected by trade secrecy laws. We entered
into confidentiality agreements with the parties directly involved in the       
development process. Should commercially viable products be developed, we will  
then decide whether to patent one or more inventions or to continue to rely on  
trade secrecy. We also applied for and received trademark protection for the    
mark "crypto.com." We transferred all of our rights to these technologies to    
Markland in December 2002.                                                      

       INVESTMENT. In 2000, in addition to committing $10,000 to Crypto.com,
Inc.'s capital, we spent $220,462 to support the development of its technology. 
During 2001 and 2002, we spent $316,000 and 127,229, respectively, for the      
account of Crypto.com, Inc. Although we transferred all of Crypto's assets to   
Markland in December 2002, we continue to own 66.04 % of the equity of Crypto,  
with the technology inventor owning 18.87%, a consultant who introduced us to   
the inventor owning 9.43%, and certain current and former officers and directors
of the Company owning an aggregate of 5.66%.                                    

         COMMERCIALIZATION. The need for secure communications at varying speeds
and security levels is a rapidly growing market. Increasing computer power and  
software continue to defeat low-level and difficult-to-break cryptographic      
systems and thus increase the value and need for effective absolutely secure    
communications and higher speed cryptographic systems, which are difficult to   
break. The commercialization model depends on the speed and level of security of
the inventor's mathematical concepts. We envision that we would license such a  
product, if successfully developed, to many different companies.                

        During early 2001, the mathematical concepts developed by the inventor
were reviewed, analyzed, and evaluated in active interactions between the       
inventor and our third party experts. On the basis of successful preliminary    
evaluations of the concepts performed by our third party experts, the inventor  
undertook the further development of several variants of the mathematical       
concepts into cryptographic systems for technology demonstration purposes.      
During 2002, we initiated marketing efforts with regard to this technology and  
we expect that Markland will continue such efforts in 2003.                     

  While validation studies were being conducted by our third party
experts, we began marketing the technology concepts and cryptographic systems to
selected potential users. Limited demonstrations were carried out for several   
potential users, leading in the fourth quarter of 2001 to preliminary discussion
with a telecommunications company on possible licensing of one of the Crypto.com
encryption technology variants. These discussions resulted in a non-exclusive   

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licensing agreement to market, license and commercialize its cryptology         
technology dated as of December 31, 2001, between Crypto.com. and Etelix, Inc., 
or Etelix. Crypto granted a non-exclusive license and right to market for a     
period of five years. The agreement with Etelix was terminated in December,     
2002. Markland will continue to seek out potential commercial users for the     
Crypto.com technology for licensing or joint venture activities.                

2.       ACOUSTIC CORE NON-CONTACT INSPECTION TECHNOLOGY                        

BACKGROUND. In a July 2001 agreement, and an amendment to that
agreement, dated October 3, 2001, we entered into an agreement whereby we       
licensed from Trylon Metrics, Inc. their rights to certain technologies for     
certain markets for in-situ remote sensing of hazardous, toxic, explosive, and  
nuclear waste materials. One of the key technologies acquired is the Acoustic   
Core non-contact inspection technology that utilizes acoustic sensing to        
identify illicit and hazardous materials from their empirically determined      
acoustic properties. Completed research and development studies have shown that 
materials can be uniquely identified by their acoustic signatures. This includes
the highly explosive and difficult to detect C4 plastic explosive. We have      
prepared the engineering documentation for the rapid development of a screening 
portal for detecting illicit and dangerous materials on individuals entering    
secured areas such as public buildings, military reservations, and              
transportation terminals. In November 2002, our efforts led to our agreement    
with the Air Force pursuant to which we will develop this technology with them. 
In December, 2002, we agreed to license this technology to Markland.            

        INTELLECTUAL PROPERTY. The Acoustic Core technology is covered by U.S.
Patent 4,922,467. The rights to certain applications of Acoustic Core were      
licensed to us by Trylon Metrics, Inc. and we have subsequently agreed to       
sub-license one of those applications to Markland and the remaining applications
to HomeCom.                                                                     

         INVESTMENT. We issued 2,500,000 fully paid and non-accessible shares of
its restricted common stock, valued at $2,500,000, for the acquisition of the   
rights to certain technologies for in-situ remote sensing of hazardous, toxic,  
explosive, and nuclear waste materials. During third and fourth quarters of     
2001, we spent an additional $25,000 on development, refinement, and marketing  
of the Acoustic Core part of the acquired technologies. During 2002, we spent an
aggregate of $844,202 on Acoustic Core and EMR, of which $600,000 was           
capitalized. We agreed to license the illicit materials detection application to
Markland in December 2002 and remainder of our rights to HomeCom in March 2003. 

       COMMERCIALIZATION. The Acoustic Core technology has been validated in
tests on a variety of materials utilizing prototype instrumentation. Research,  
which began in 1997 in collaboration with the Battelle Memorial Institute,      
successfully demonstrated that Acoustic Core is capable of non-intrusively      
detecting C4 plastic explosives located within containers. These proof of       
concept tests have laid the technical foundations for the development and       
deployment of Acoustic Core based remote sensing security products. During the  
fourth quarter of 2001, we submitted proposals to an agency of the U.S.         
Government in response to a call for new technologies to address urgent homeland
security needs.                                                                 

   In addition, demonstrations of the prototype instrumentation were
conducted for interested commercial and governmental organizations. During 2002,
we funded the continued development of an illicit materials detection portal    
apparatus which was demonstrated to the Air Force, leading to a research a      
development agreement with the Air Force in November 2002. Markland will        
continue seek to enter into licensing, contracted, or joint venture developments
with organizations for the development, implementation, and operations of       
Acoustic Core based security products. Toward that end, Markland will continue  
our strategy of focusing marketing efforts on informing security related        
government, private, and commercial organizations of the potential of Acoustic  
Core based technologies to be a cost effective basis for a variety of remote    
sensing security products.                                                      

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PATENTS AND TRADEMARKS                                                          

        Many entities, including some developing technologies similar to ours,
now have and may in the future obtain patents and other intellectual property   
rights that cover or affect products or services directly or indirectly related 
to those that we offer. In general, if a court determines that one or more of   
our products infringes on intellectual property held by others, we would be     
required to cease infringes on intellectual property held by others, we would be
required to cease developing or marketing those products, to obtain licenses to 
develop and market those products from the holders of the intellectual property,
or to redesign those products in such a way as to avoid infringing the patent   
claims. If a competitor holds intellectual property rights, the entity might be 
predisposed to exercise its right to prohibit our use of its intellectual       
property in our products and services at any price, thus impacting our          
competitive position.                                                           

 We cannot assure you that we are aware of all patents and other
intellectual property rights that our products may potentially infringe. In     
addition, patent applications in the United States are confidential until the   
Patent and Trademark Office issues a patent and, accordingly, we cannot evaluate
the extent to which our products may infringe claims contained in pending patent
applications. Further, it is often not possible to determine definitively       
whether a claim of infringement is valid, absent protracted litigation, which we
may not have the resources to pursue.                                           

         We cannot estimate the extent to which we may be required in the future
to obtain licenses with respect to patents held by others and the availability  
and cost of any such licenses. Those costs, and their impact on the net income  
we might receive could be material. Damages in patent infringement cases can    
also include a tripling of actual damages in certain cases. To the extent that  
we are required to pay royalties to third parties to whom we are not currently  
making payments, these increased costs of doing business could negatively affect
our liquidity and operating results.                                            

In addition, there may be entities developing and marketing   
technologies which infringe on patents and intellectual property rights held by 
us. Patent infringement claims are protracted and costly. We may not have the   
resources to adequately protect our intellectual property. Any expenditures to  
pursue intellectual property rights by us could negatively affect our ability to
market and develop our existing technologies.                                   

COMPETITORS TO EUROTECH'S PRIMARY TECHNOLOGIES                                  

         Our technologies are targeted at highly competitive markets. Due to the
nature and size of some of the contracts that we bid for, including some of the 
larger governmental ones, there are sometimes other competitors who may have    
significantly greater name recognition and greater financial and other resources
than we do. We believe however, the proprietary nature of our products when     
partnered with our level of technical expertise and the quality of our services 
give us a competitive advantage against some of the entities listed below with  
respect to some of our primary technologies.                                    

EKOR(TM)                                                                        

        EKOR(TM) is a composite material based on a silicone polymer different
from other silicones produced by manufacturers such as GE Silicones and Dow     
Corning, because its performance qualities include resistance to chemical and   
radiation corrosion.                                                            

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HNIPU (HYBRID NON-ISOCYANATE POLYURETHANE)                                      

       HNIPU is a hybrid that outperforms other non-isocyanate polyurethanes
and should meet or exceed most of the performance characteristics of other      
polyurethanes currently available. Some of the major producers of polyurethanes 
used in coatings and finishes, sealants and adhesives include Akzo Nobel, Dow   
Chemical and Kansai.                                                            

ACOUSTIC CORE EXPLOSIVE DETECTION TECHNOLOGY                                    

         Major competitors of detection and screening equipment include InVision
Technologies and L3 Communications who have equipment installed in major        
airports for baggage screening.                                                 

CRYPTO.COM ENCRYPTION TECHNOLOGY                                                

         There are many communications and data security systems available today
that include encryption capability from public and private use to commercial and
government applications. One of the largest and most widely used is RSA         
Security, Inc.                                                                  

EMPLOYEES                                                                       

  As of December 31, 2002, we had four full-time employees and two
officers. As of December 31, 2002, we also had various consulting arrangements  
with individuals and corporations in the United States, Germany, Russia, and    
Israel to serve its limited additional staffing needs.                          

        On March 1, 2002, the Company hired Mr. Todd J. Broms as the President
and Chief Executive Officer. Mr. Broms resigned in August 2002.                 

     On April 2, 2003, we announced that Carey Naddell was appointed our
Chairman of the Board to replace Don V. Hahnfeldt, who stepped down as Chairman 
of the Board, President and CEO but who will continue to serve as a director of 
the Company. Mr. Naddell has served as an independent director of the Company   
since March 2002, and been chairman of the Audit Committee of our board of      
directors. It is expected that Mr. Naddell will serve as Chief Operating Officer
through a transition period up to three months, after which he will become our  
President and CEO. During such time, Mr. Hahnfeldt will continue as President   
and CEO in a transitional capacity.                                             

         None of our employees are covered by a collective bargaining agreement.
We consider our employee relations to be satisfactory and have not experienced  
any labor problems.                                                             

ITEM 2.  PROPERTIES.                                                            

    For our corporate headquarters, we rent an office suite with 7,861
square feet of space in Fairfax, Virginia under a lease that expires in 2005 and
calls for the payment of a monthly rent, including certain taxes and utilities, 
of $19,229.97, subject to customary escalation. We are currently in a dispute   
with our landlord regarding the property which is our corporate headquarters.   
See "Legal Proceedings" below.                                                  

ITEM 3.  LEGAL PROCEEDINGS.                                                     

        On February 14, 2003, SMII Fairfax, LLC, the landlord of our corporate
headquarters located at 10306 Eaton Place, Fairfax, Virginia, filed suit in the 
Fairfax County General District Court alleging breach of contract for unlawful  
detainer. Without admitting or denying liability, we have entered into          
negotiations with our landlord and expect that we will come to a settlement in  
the near future.                                                                

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  On October 21, 2002, our former legal counsel filed a Demand for
Arbitration before the American Arbitration Association seeking $288,755 dollars
in alleged unpaid legal fees from us. The dispute was subsequently resolved     
pursuant to a Settlement Agreement dated April 15, 2003 pursuant to which we are
to pay such counsel the sum of $310,581 by a combination of cash and stock in   
accordance with a schedule and on the terms set forth in the Settlement         
Agreement. The satisfaction of this payment obligation is to occur no later than
by December 22, 2003.                                                           

     We may, from time to time, be involved in actual or potential legal
proceedings that we consider to be in the normal course of our business. We do  
not believe that any of these proceedings will have a material adverse effect on
our business.                                                                   

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

        No matters were submitted to a vote of our security holders during the
fourth quarter of 2002.                                                         

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 PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. 

 Our common stock are listed for quotation on the OTC Pink Sheet
Electronic Quotation Service under the symbol "EUOT". Until December 24, 2002,  
our common stock was listed on the American Stock Exchange. The range of        
reported high and reported low sales prices per share for our common stock for  
each fiscal quarter since March 31, 2001, as reported by the American Stock     
Exchange or the OTC Pink Sheet Electronic Quotation Service, as applicable, are 
set forth below. The quotations merely reflect the prices at which transactions 
were proposed, and do not necessarily represent actual transactions.            

 QUARTERLY COMMON STOCK PRICE RANGES

------------------------------------------------------------------------------- 
QUARTER ENDED:                          COMMON STOCK            
------------------------------------------------------------------------------- 
                             HIGH                      LOW
------------------------------------------------------------------------------- 
March 31, 2001                 $2.75                     $1.10  
------------------------------------------------------------------------------- 
June 30, 2001                  $1.42                     $0.64  
------------------------------------------------------------------------------- 
September 30, 2001               $0.76                     $0.26    
------------------------------------------------------------------------------- 
December 31, 2001                $1.33                     $0.25    
------------------------------------------------------------------------------- 
March 31, 2002                 $1.10                     $0.35  
------------------------------------------------------------------------------- 
June 30, 2002                  $0.60                     $0.15  
------------------------------------------------------------------------------- 
September 30, 2002               $0.21                     $0.07    
------------------------------------------------------------------------------- 
December 24, 2002                $0.70                     $0.07    
------------------------------------------------------------------------------- 
December 26-31, 2002*              $0.30                     $0.20      
------------------------------------------------------------------------------- 

*        Denotes period following the delisting of our common stock from Amex   
  and the commencement of listing on the OTC Pink Sheet Electronic
Quotation Service.                                            

         As of April 23, 2003, we had approximately 489 holders of record of our
common stock. No cash dividends have been paid on the common stock to date. We  
currently intend to retain any earnings for further business development.       

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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS              

                                                        [Enlarge/Download Table]

                           NUMBER OF SECURITIES                                                      
                            TO BE ISSUED UPON           WEIGHTED-AVERAGE                             
                               EXERCISE OF              EXERCISE PRICE OF        NUMBER OF SECURITIES
                           OUTSTANDING OPTIONS,        OUTSTANDING OPTIONS,      REMAINING AVAILABLE 
   PLAN CATEGORY           WARRANTS AND RIGHTS         WARRANTS AND RIGHTS       FOR FUTURE ISSUANCE 
   -------------           -------------------         -------------------       ------------------- 
                                  (a)                          (b)                        (c)        
                                                                                                     
Equity compensation                                                                                  
approved by                                                                                          
plans approved by                                                                                    
security holders(*)               1,062,500                    1.65                     137,500      

Equity compensation                                                                                  
plans not approved by                                                                                
security holders                  6,075,333(**)                1.51                       n/a        
                       ------------------------------------------------------------------------------

Total                             7,137,833                    1.53                     137,500      

(*)      We intend to offer an appropriate amendment or restatement of our      
      option plan to be put before our shareholders for a vote at our next
    annual meeting. Our current option plan, an amendment to which was
  approved by our shareholders in 2000, allows for the issuance of
1,250,000 options as incentive stock options.                 

(**)     Consists of (i) 2,844,000 options which are not intended to be issued  
  pursuant to our 1999 Stock Option Plan and (ii) 3,231,333 shares
  underlying warrants which we've issued. Such options were issued
subject to shareholder approval.                              

RECENT SALES OF UNREGISTERED SECURITIES                                         

         On January 9, 2002, we issued 6,000,369 shares of its common stock from
the conversion of $3,000,000 principal amount of February 1998 Convertible      
Debentures, plus the amount of all accrued and unpaid interest, totaling        
$3,574,419.                                                                     

         On December 7, 2002, we issued 4,000,000 shares of its common stock for
capitalized technology development costs valued at $600,000.                    

    On December 12, 2002, we sold 5,000,000 shares of common stock for
$250,000 in connection with the private equity financing.                       

   On December 12, 2002, a warrant holder exercised its warrants and
purchased 5,000,000 shares of common stock. Proceeds from warrants exercised    
total $250,000.                                                                 

         As of December 31, 2002, we issued 70,145 shares of its common stock as
consideration for consulting services performed by various consultants, totaling
$318,234.                                                                       

As of January 3, 2003, we raised $275,000 from the issuance of
5,500,000 shares of common stock in connection with the private equity          
financing.                                                                      

        As of January 22, 2003, we raised $125,000 from a notes payable with a
private investor.                                                               

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    The issuances described above were deemed exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act as   
transactions by an issuer not involving a public offering. Certain issuances    
described above were deemed exempt from registration under the Securities Act in
reliance on Rule 701 promulgated thereunder as transactions pursuant to         
compensatory benefit plans and contracts relating to compensation. The          
recipients of securities in each such transaction represented their intention to
acquire the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed to
the share certificates and other instruments issued in such transactions. All   
recipients either received adequate information about us or had access, through 
employment or other relationships, to such information.                         

ITEM 6.  SELECTED FINANCIAL DATA                                                

The selected consolidated financial data set forth below for the five years in  
the period ended December 31, 2002 has been derived from our audited            
consolidated financial statements. This information should be read in           
conjunction with the audited consolidated financial statements and notes        
thereto.                                                                        

                                                        [Enlarge/Download Table]

                                                              YEAR ENDED DECEMBER 31,                                  
                                                              -----------------------                                  
                                               2002           2001              2000           1999           1998     
                                               ----           ----              ----           ----           ----     
                                                                                                                       
CONSOLIDATED STATEMENT OF                                                                                              
INCOME DATA:                                                                                                           
Revenues ................................. $     88,821   $     18,873      $    350,000   $    150,000   $         -- 
Cost of sales ............................        5,807          8,160                --             --             -- 
Other general and administrative                                                                                       
expenses .................................    3,475,562      3,435,381         3,427,588      2,057,398      1,263,174 
Loss on impairment of technology rights ..    3,084,947             --                --             --             -- 
Total costs and expenses .................   12,043,867      8,801,839        10,120,410      5,300,724      3,018,288 
Minority interest in subsidiary ..........       64,369             --                --             --             -- 
Net loss .................................  (12,443,396)    (8,760,235)       (9,872,789)    (6,492,312)    (7,814,143)
Preferred stock dividends-non cash .......    3,625,359             --                --             --             -- 
Net loss Attributable to common                                                                                        
stockholders .............................  (16,068,755)    (8,760,235)       (9,872,789)    (6,492,312)    (7,814,143)
Basic and diluted net loss per share .....         (.23)          (.18)             (.23)          (.27)          (.40)
Weighted average number of common shares                                                                               
outstanding ..............................   70,129,726     48,835,959        42,750,339     24,477,178     19,323,098 

CONSOLIDATED BALANCE SHEET DATA:                                                                                       
Current assets ........................... $    607,248   $    719,186      $  4,281,381   $  3,547,211   $      8,058 
Property and equipment, net ..............      138,938        193,661           181,413         24,750         31,846 
Technology rights ........................    2,450,112      6,961,957         6,304,022      7,913,559             -- 
Total assets .............................    3,215,612      8,119,910        11,017,263     11,519,844         76,403 
Accounts payable and accrued expenses ....    3,117,763        885,207         1,439,543      3,139,204      1,716,809 
Current portion of convertible debentures            --      3,000,000           500,000      2,660,000             -- 
Long-term Obligations ....................      375,000        202,091         3,000,000      3,900,000      6,970,000 
Total liabilities ........................    4,141,354      4,087,298         5,164,543     10,374,204      8,911,809 
Minority interest ........................    3,967,130             --                --             --             -- 
Total stockholders' (deficiency) equity ..   (4,892,872)     4,032,612         5,852,720      1,145,640     (8,835,406)

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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND        
RESULTS OF OPERATION.                                         

      THE FOLLOWING IS A DISCUSSION OF OUR FINANCIAL CONDITION, RESULTS OF
OUR OPERATIONS AND LIQUIDITY. THIS DISCUSSION SHOULD BE READ TOGETHER WITH OUR  
FINANCIAL STATEMENTS AND NOTES INCLUDED IN THIS REPORT IN RESPONSE TO ITEM 8    
BELOW.                                                                          

         CERTAIN INFORMATION IN THIS REPORT, INCLUDING THE FOLLOWING DISCUSSION,
MAY INCLUDE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE 
SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. WE INTEND THE DISCLOSURE IN 
THESE SECTIONS AND THROUGHOUT THIS REPORT TO BE COVERED BY THE SAFE HARBOR      
PROVISIONS FOR FORWARD-LOOKING STATEMENTS. ALL STATEMENTS REGARDING OUR EXPECTED
FINANCIAL POSITION AND OPERATING RESULTS, OUR BUSINESS STRATEGY, OUR FINANCING  
PLANS, AND THE OUTCOME OF ANY CONTINGENCIES ARE FORWARD-LOOKING STATEMENTS.     
THESE STATEMENTS CAN SOMETIMES BE IDENTIFIED BY THE COMPANY'S USE OF            
FORWARD-LOOKING WORDS SUCH AS "MAY," "BELIEVE," "PLAN," "WILL," "ANTICIPATE,"   
"ESTIMATE," "EXPECT," "INTEND" AND OTHER PHRASES OF SIMILAR MEANING. KNOWN AND  
UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS COULD CAUSE THE ACTUAL RESULTS  
TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY THE STATEMENTS. THE             
FORWARD-LOOKING INFORMATION IS BASED ON VARIOUS FACTORS AND WAS DERIVED USING   
NUMEROUS ASSUMPTIONS.                                                           

   YOU SHOULD CAREFULLY CONSIDER THE ASSUMPTIONS DESCRIBED BELOW AND
ELSEWHERE IN THIS REPORT. IF FORWARD-LOOKING STATEMENTS FAIL TO ACTUALLY OCCUR, 
OUR BUSINESS, BUSINESS PROSPECTS, FINANCIAL CONDITION OR OPERATING RESULTS MAY  
BE HARMED. IN THAT CASE, THE TRADING PRICE OF OUR COMMON STOCK MAY DECLINE OR WE
MAY BE FORCED OUT OF BUSINESS AND YOU COULD LOSE YOUR ENTIRE INVESTMENT IN US.  

 IF WE ARE UNABLE TO ADEQUATELY PROTECT OR ENFORCE OUR RIGHTS TO
INTELLECTUAL PROPERTY OR MAINTAIN RIGHTS TO THIRD-PARTY PATENTS, WE MAY LOSE    
VALUABLE RIGHTS, EXPERIENCE REDUCED MARKET SHARE, ASSUMING ANY, OR INCUR COSTLY 
LITIGATION TO PROTECT SUCH RIGHTS.                                              

       OUR FINANCIAL STATEMENTS WERE PREPARED ON THE ASSUMPTION THAT WE WILL
CONTINUE AS A GOING CONCERN, AND OUR INDEPENDENT ACCOUNTANT HAS EXPRESSED A     
SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.             

   As a result of our losses from operations and our limited capital
resources, investors should be aware that there are serious risks of us not     
being able to continue as a going concern. In the event that we are unable to   
raise additional funds from private as well as public sources and/or do not     
achieve our planned growth in revenue, we may be required to discontinue some or
all of our operations, to reduce the development of some or all of our products,
or to reduce our workforce, all of which would materially adversely effect our  
business. There can be no assurance that such capital would be available to us, 
or, if it is available to us, that it would be on terms favorable to us.        

GENERAL                                                                         

     Commencing in January of 2003, we are no longer a development stage
company as a result of Markland's acquisition of Ergo Systems, Inc. in January  
2003 (see Note 13 to consolidated financial statements).                        

   See the "Business" section of this Form 10-K for a description of
management's plan with respect to each technology.                              

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OUR RESULTS OF OPERATIONS                                                       

COMPARISON OF 2002 AND 2001                                                     

        For the year ended December 31, 2002 and year ended December 31, 2001,
we incurred operating losses of $11,955,046 and $8,782,966 respectively. The    
losses result principally from expenses incurred in the acquisition and         
development of our technologies, consulting costs, general and administrative   
expenses and the absence of revenues. The larger loss in the 2002 period        
resulted principally from an increase in compensatory element of stock issuances
for consulting expenditures and an impairment loss associated with our EKOR(TM) 
technology.                                                                     

         In 2002, we recognized approximately $89,000 in revenue from operations
relating to demonstrations of EKOR(TM), Security and Safeguards, and QAS        
Products. Revenue for 2001 was from our demonstrations of EKOR(TM) and          
Firesil(TM) Products.                                                           

         Research and development expenses increased by $165,788 to $912,861 for
the year ended December 31, 2002 from $747,073 for the year ended December 31,  
2001.                                                                           

      Consulting expenses decreased by $306,504 to $2,405,375 for the year
ended December 31, 2002 from $2,711,879 for the year ended December 31, 2001,   
which includes $1,270,075 for 2002 and $535,031 for 2001 of compensatory element
of stock issuances pursuant to consulting and other agreements.                 

   Other general and administrative expenses increased by $40,181 to
$3,475,562 for the year ended December 31, 2002 from $3,435,381 for the year    
ended December 31, 2001.                                                        

       Depreciation and amortization increased by $259,969 to $2,159,315 for
the year ended December 31, 2002 from $1,899,346 for the year ended December 31,
2001, of which $1,610,000 in each period was for the amortization of acquired   
EKOR(tm) technology rights and related to our November 1999 purchase of         
technology rights from the company now called Advanced Technology Industries,   
Inc. ("ATI"). This amortization will not re-occur due to EKOR(TM)'s impairment  
during December 2002. The increase is attributable to the amortization of       
Acoustic Core technology rights of our July 2001 license of technology rights   
from Trylon Metrics, Inc.                                                       

        As a result of this assessment of EKOR(TM)'s sales performance and the
unpredictability of future delays of funding that may continue to affect        
EKOR(TM), we recorded an impairment and wrote down its asset value to zero in   
the fourth quarter of 2002.                                                     

         Interest expense/other expense increased by $56,712 to $33,981 for year
ended December 31, 2002 from interest income/other income of $22,731 for the    
year ended December 31, 2001.                                                   

COMPARISON OF 2001 AND 2000                                                     

        For the year ended December 31, 2001 and year ended December 31, 2000,
we incurred operating losses of $8,782,966 and $9,770,410 respectively. The     
losses result principally from expenses incurred in the acquisition and         
development of our technologies, consulting costs, general and administrative   
expenses and the absence of revenues. The smaller loss in the 2001 period       
resulted principally from a reduction in research and development expenditures. 

       In 2001, we recognized $19,000 in revenue from operations relating to
demonstrations of EKOR(TM) and Firesil(TM) Products. For the year ended December
31, 2000, we had $350,000 of revenue from our completion of our sale of the     
TetraPak and Re-sealable Can Technologies to Advanced Technology Industries,    
Inc. (ATI, formerly the Kurchatov Research Holdings, Ltd.) pursuant to an       
agreement we entered into in 1999.                                              

       Research and development expenses decreased by $2,263,000 to $747,000
for the year ended December 31, 2001 from $3,010,000 for the year ended December
31, 2000. During 2001, we spent $400,000 on further EKOR(TM) development and    
$374,000 on development of other technologies. We are continuing to fund the    
commercialization of EKOR(TM), including variants and product improvements,     
developed and being developed in Russia by scientists and researchers at        
Kurchatov Institute and members of Euro-Asian Physical Society (EAPS). During   

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2001, we paid consulting fees to and travel expenses for several EAPS members to
arrange for EKOR(TM) performing testing at Chernobyl in Ukraine and to transfer 
the key EKOR(TM) technology to our manufacturing partner in California.         

      Consulting expenses increased by $661,000 to $2,712,000 for the year
ended December 31, 2001 from $2,051,000 for the year ended December 31, 2000,   
which includes $535,000 for 2001 and $926,000 for 2000 of compensatory element  
of stock issuances pursuant to consulting and other agreements. The increase in 
consulting expense resulted principally from an increase in the number of       
consultants working in the EKOR(TM) business development area.                  

  Other general and administrative expenses increased by $7,000 to
$3,435,000 for year ended December 31, 2001 from $3,428,000 for the year ended  
December 31, 2000. The increase is attributable principally to increases in fees
associated with securing capital financing, SEC filings, office rent, employee  
benefits, patents and trademark expenses.                                       

       Depreciation and amortization increased by $268,000 to $1,899,000 for
the year ended December 31, 2001 from $1,631,000 for the year ended December 31,
2000, of which $1,610,000 in each period was for the amortization of acquired   
EKOR(TM) technology rights and related to our November 1999 purchase of         
technology rights from the company now called Advanced Technology Industries,   
Inc. ("ATI"). The increase is attributable to the amortization of Acoustic Core 
technology rights of our July 2001 license of technology rights from Trylon     
Metrics, Inc.                                                                   

       Interest income/other income increased by $125,110 to $22,731 for the
year ended December 31, 2001 from interest expense/other expense of $102,379 for
the year ended December 31, 2000. The increase is from recognizing revenue as   
other income due to the fact that the Company has fulfilled all of its          
obligations under the January 28, 1997 agreement with American Autopark, Ltd.   
Interest expense decreased by $121,000 to $294,000 for year ended December 31,  
2001 from $415,000 for the year ended December 31, 2000. This decrease was due  
principally to the conversion of $2,160,000 principal amount convertible        
debentures, and the repayment in cash of $500,000 principal amount, of          
previously outstanding convertible debentures.                                  

LIQUIDITY AND CAPITAL RESOURCES                                                 

SUMMARY OF WORKING CAPITAL AND STOCKHOLDERS' DEFICIENCY/EQUITY                  

 As of December 31, 2002, we had a working capital deficiency of
approximately $3,159,106 and Stockholders' Deficiency of $4,892,872 compared    
with a working capital deficiency of $3,166,021 and Stockholders' Equity of just
under $4,033,000 as of December 31, 2001. Stockholders' Equity declined mainly  
for three reasons. First, our operating losses increased due primarily to the   
fact that we increased the number of consultants working in the EKOR(TM)        
business development area and in the financial consulting area. Second, we were 
unable to obtain infusions of additional capital in amounts sufficient to fund  
our operating and impairment losses and our other uses of cash described in our 
financial statements and otherwise discussed below. But, the losses also        
resulted from the lack of significant sales, transfers or licensing of our      
technology.                                                                     

LIQUIDITY                                                                       

SOURCES OF WORKING CAPITAL                                                      

       Since our inception, our primary sources of working capital have been
the net proceeds of:                                                            

o        $842,000 from a limited offering of our common stock;

   o        $2,000,000 from a bridge financing completed in 1996 and
subsequently repaid;                        

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        o        $3,000,000, $3,000,000 and $1,000,000 from private placements
              of our 8% convertible debentures completed November, 1997,
February, 1998 and July, 1998, respectively;

         o        $450,000 from a secured financing obtained in January 1999 and
repaid in January 2000;                     

       o        $2,508,000 from private offerings of 7,205,000 shares of our
              common stock during the year ended 1999 (these shares were
                 sold at deep discounts from market quotations for outstanding
                shares because of the large number of shares placed compared
          with the size of quotations in the market; the trading
         restrictions on the shares placed; and our precarious
      financial condition at the time of the placement);

         o        $2,832,000 from the issuance on December 31, 1999 of 1,882,353
                  shares and of a warrant to buy an additional 200,000 shares of
our common stock to Woodward LLC;           

     o        $6,000,000 from the issuance on March 2, 2000 of 1,200,000
shares of our common stock to Woodward LLC; 

        o        $9,500,000 (later increased to $10,687,500) from the issuance
                 on April 25, 2000 of 2,000,000 shares and of a warrant to buy
                an additional 500,000 shares of our common stock to Woodward
LLC;                                        

         o        $2,840,000 from the issuance as of March 30, 2001 of 1,333,333
shares of our common stock to Woodward LLC; 

o        $972,400 from the issuance as of September 6, 2001 of
                3,000,000 shares of our common stock to five (5) individuals
and one corporation; and                    

       o        $2,350,380 from the issuance as of August 23, 2002 of 25,000
                  shares of Series A 3% Convertible Preferred Stock to Woodward,
LLC.                                        

     o        $175,000 from the purchase as of September 30, 2002 of 175
      shares of Series B 5% Convertible Preferred stock.

o        $250,000 from the issuance as of December 12, 2002 of
           5,000,000 shares of common stock in connection with the
private equity financing.                   

         o        $250,000 from the exercise as of December 12, 2002 of warrants
   and purchased 5,000,000 shares of common stock.

       o        $318,234 from the issuance as of December 31, 2002 of 70,145
              shares of its common stock as consideration for consulting
services performed by various consultants.  

        o        $275,000 from the issuance as of January 3, 2003 of 5,500,000
                shares of common stock in connection with the private equity
financing.                                  

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CONVERTIBLE DEBENTURES                                                          

       During the years ended December 31, 1999, debenture holders converted
$410,000 of principal and $161,788 of accrued interest into 1,204,665 shares of 
common stock.                                                                   

During the year ended December 31, 2000, the obligation under 
convertible debentures totaling $902,276 was satisfied for cash payment of      
$451,138 and issuance of 289,655 shares of common stock valued at $451,138.     

During the year ended December 31, 2000, the obligation under 
convertible debentures dated July 1998 of $900,000, plus accrued interest of    
$123,600, was satisfied by the issuance of 965,661 shares of common stock.      

During the year ended December 31, 2000, the obligation under 
convertible debentures dated November 1997 of $2,160,000, plus accrued interest 
of $117,120, was satisfied by the issuance of 827,412 shares of common stock.   

   We paid in cash, after maturity, the remaining $500,000 principal
amount of the November 1997 convertible debenture, together with accrued        
interest of $43,000 in the first quarter of 2001.                               

     The remaining $3,000,000 principal amount of debentures held by JNC
Opportunity Fund Ltd., or JNC, along with any outstanding charges and interest, 
were converted into 6,000,369 non-restricted, shares of common stock. In        
addition, we issued a Warrant to purchase 500,000 shares of common stock at     
$1.00, and reimbursed JNC for legal fees up to $25,000.                         

SECURED FINANCING                                                               

         On January 6, 1999, Dr. David Wilkes, then our Chairman, and the holder
of most of our then outstanding convertible debentures between them provided    
$450,000 of short-term financing to us, evidenced by $50,000 and $400,000       
secured promissory notes, respectively. Each secured promissory note bore       
interest at 13% per annum and was due January 6, 2000. The promissory notes were
collateralized by our intangible assets and could be exchanged for 8%           
convertible debentures under terms similar to the current outstanding           
debentures. We repaid the $400,000 note on its due date from the proceeds of the
December 31, 1999, $3,000,000 stock and warrant issue. Dr. Wilkes converted his 
$50,000 note plus accrued interest into 200,000 shares of our common stock.     

TREASURY STOCK                                                                  

        During 2000, we expended a total of $8,477,721 to repurchase 3,531,976
previously issued shares of common stock, of which we spent $4,350,000 to buy   
2,500,000 shares in private transactions and the balance of which we spent to   
buy 1,131,976 shares in the market.                                             

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.            

         As of December 31, 2002 and the date of this Report, we had no exposure
to market risk associated with activities in derivative financial instruments,  
other financial instruments, or derivative commodity instruments because we did 
not engage in any such activities during the past fiscal year.                  

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                           

Our Consolidated Financial Statements and Notes thereto and the report of Marcum
& Kliegman LLP, our independent certified public accountant, are set forth on   
pages F-1 through F-69 of this Report.                                          

 EUROTECH, LTD. AND SUBSIDIARIES
 (A DEVELOPMENT STAGE COMPANY)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

                                                                          PAGE
                                                                           NO.
                                                                          ----

INDEPENDENT AUDITORS' REPORT.............................................  F-2  
CONSOLIDATED BALANCE SHEETS                                                     
At December 31, 2002 and December 31, 2001.............................  F-3
CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended                       
December 31, 2002, 2001 and 2000                                            
For the Period from Inception (May 26, 1995) to December 31, 2002......  F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY                    
For the Period from Inception (May 26, 1995) to December 31, 2002......  F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended                       
December 31, 2002, 2001 and 2000                                            
 For the Period from Inception (May 26, 1995) to December 31, 2002......  F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...............................  F-24 
SELECTED FINANCIAL DATA                                                         
 For the Five Years Ended December 31, 2002.............................   (*)

(*) Included in Part II, Item 6 of the Form.                                    

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND        
FINANCIAL DISCLOSURE.                                         

None.                                                         

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PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.                   

         Our directors and executive officers and their ages as of April 1, 2003
are as follows:                                                                 

                                                        [Enlarge/Download Table]

------------------------------------- ----------- ----------------------------------------------------------------
                NAME                     AGE                               POSITION(S) HELD                       
                ----                     ---                               ----------------                       
------------------------------------- ----------- ----------------------------------------------------------------
                                                                                                                  
Don V. Hahnfeldt                          58      Chief Executive Officer, President and Director                 
------------------------------------- ----------- ----------------------------------------------------------------

Carey Naddell                             60      Chairman of the Board and Chief Operating Officer               
------------------------------------- ----------- ----------------------------------------------------------------

Dr. Randolph A. Graves, Jr.               64      Vice President, Secretary, Chief Financial Officer and Director 
------------------------------------- ----------- ----------------------------------------------------------------

Dr. Leonid Khotin                         71      Director                                                        
------------------------------------- ----------- ----------------------------------------------------------------

   There are no family relationships between any director, executive
officer, or person nominated or chosen to become a director or executive        
officer.                                                                        

        DON V. HAHNFELDT, 58, serves as a member of our board of directors and
as our President and Chief Executive Officer. He has served as a member to our  
Board of Directors since January 15, 2000 and served as Chairman of the Board   
until late March 2003. He joined Eurotech on July 7, 1999 following a           
twenty-nine year career in public and government service. Mr. Hahnfeldt served  
as our Chief Executive Officer from July 7, 1999, until February 28, 2002 and   
again from August 20, 2002 to present. From September 1998 to July 1999, Mr.    
Hahnfeldt served as City Manager of Sunnyside, Washington. Prior to that, he    
served in the U.S. Navy, retiring in July 1998 as the Commodore of a Trident    
Submarine squadron. Mr. Hahnfeldt received a B.S. in Business Administration    
from Roosevelt University, an equivalent M.S. in Nuclear Engineering from the   
U.S. Navy Nuclear Power School, an M.S. in Operations Research from the Navy    
Post Graduate School, and an M.P.A. from Valdosta State University.             

      CAREY NADDELL, 60, serves as our Chairman of the Board and our Chief
Operating Officer. From April 2002 until late March 2003, Mr. Naddell served as 
a director of our company. He is a graduate of Brooklyn College with a degree in
economics. From 1960 to 1981, he was associated with Murphy & Durieu, a New York
Stock Exchange member investment firm, where he held several positions,         
including managing partner. From 1981 to April 2002, when he joined our board,  
Mr. Naddell was a private financial consultant. He is a past member of the      
Securities Traders Association and the former President of the Polo Club of Boca
Raton, Florida. He is currently an active supporter of cancer research,         
especially kidney cancer.                                                       

     DR. RANDOLPH A. GRAVES, JR., 64, serves as a member of our board of
directors and as Secretary, Chief Financial Officer and Vice President. He has  
been a member of our Board of Directors from our incorporation to January 23,   
1998, February 4, 1999 to July 10, 2001, and again since August 8, 2001 to the  
present. He was a consultant to the aerospace, computing and small business     
communities through Graves Technology, Inc., a company he founded in 1991. He is
currently a member of George Washington University National Advisory Council for
the School of Engineering Applied Science. From 1963 to 1980, Dr. Graves was    
employed by NASA's Langley Research Center in a number of research and research 
management positions before moving to NASA Headquarters where he served as      
Director of Aerodynamics from 1980 to 1989. He served on numerous managerial and
technical panels and committees including a member of the White House's Federal 
Coordinating Council on Science Engineering and Technology Subcommittee on High 

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Performance Computing from 1983 to 1989, and as NASA's member of NATO's Advisory
Group on Aerospace Research and Development Fluid Dynamics Panel from 1984 to   
1989. Dr. Graves holds B.S. and M.S. degrees in Mechanical Engineering from     
Virginia Tech, a Doctor of Science degree in Mechanical Engineering from George 
Washington University, and a M.S. degree in Management from Stanford (Sloan     
Fellowship).                                                                    

         DR. LEONID KHOTIN, 71, serves as a member of our board of directors. He
was elected to our Board of Directors at the 1999 Annual Stockholders Meeting.  
Since 1986, he has been a researcher at the University of California's Center   
for Slavic and East European Studies. Since 1981, he has been the               
Editor-in-Chief, Informatics and Prognostics, Publishing House, Monterey,       
California.                                                                     

CODE OF ETHICS                                                                  

      The Sarbanes-Oxley Act of 2002 requires public companies to disclose
whether they have adopted a Code of Ethics. As of the date of this Report, we   
have not adopted a Code of Ethics as a result of several transactions we have   
been working on in late 2002 and early 2003. We intend to adopt such a policy   
and comply with applicable regulatory requirements relating thereto.            

CHANGES IN BOARD OF DIRECTOR COMPOSITION                                        

         On February 26, 2002, our board of directors approved the nomination of
Don V. Hahnfeldt to become Chairman and Mr. Chad A. Verdi (until that time      
Chairman) to become Vice Chairman, effective March 1, 2002. At our Annual       
Meeting of its shareholders held on March 29, 2002, the shareholders added Mr.  
Todd Broms and Mr. Carey Naddell as directors. Mr. Broms resigned in August of  
2002.                                                                           

    Effective November 15, 2002, Mr. Nemzow resigned from our board of
directors. Effective April 2, 2003, Mr. Verdi resigned from our board of        
directors and Carey Naddell was appointed Chairman of the Board to replace Mr.  
Hahnfeldt, who will remain a director.                                          

ITEM 11.  EXECUTIVE COMPENSATION.                                               

 The following table shows the compensation of the current Chief
Executive Officer, former Chief Executive Officer, and the four most highly     
compensated executive officers other than the Chief Executive Officer. Other    
than the executive officers listed below, no other executive officer was        
compensated in excess of $100,000 during 2002.                                  

                                                        [Enlarge/Download Table]

---------------------------------- ---------- -------------- -------------- ------------------- --------------- --------------
            NAME AND                YEAR(b)    SALARY ($)      BONUS($)        OTHER ANNUAL       RESTRICTED    STOCK OPTION/ 
      PRINCIPAL POSITION(a)                        (c)            (d)          COMPENSATION         STOCK          WARRANT    
                                                                                  ($)(e)          AWARDS(f)       AWARDS(g)   
---------------------------------- ---------- -------------- -------------- ------------------- --------------- --------------
                                                                                                                              
Todd J. Broms                        2000           -              -                -                 -               -       
Former President and CEO (1)         2001           -              -                -                 -            100,000    
                                     2002        $93,115           -                -                 -               -       
---------------------------------- ---------- -------------- -------------- ------------------- --------------- --------------
Don V. Hahnfeldt,                    2000       $142,231        $78,000             -                 -            100,000    
President and CEO (2)                2001       $138,091     $28,000 (aa)        $12,215              -            100,000    
                                     2002       $119,492           -             $15,677              -           1,000,000   
---------------------------------- ---------- -------------- -------------- ------------------- --------------- --------------
Dr. Randolph A. Graves, Jr.,                                                                                                  
Chief Financial Officer, Vice        2000        $78,547           -                -                 -               -       
President, Secretary, and            2001        $77,879           -                -                 -               -       
Director (3)                         2002        $73,384           -              $6,800              -               -       
---------------------------------- ---------- -------------- -------------- ------------------- --------------- --------------

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---------------------------------- ---------- -------------- -------------- ------------------- --------------- --------------
Teofil Grochowski, Jr.,              2000        $42,845           -              $3,155              -            75,000     
Director of Business Development     2001       $126,190           -             $11,810              -                       
(4)                                  2002       $126,057           -             $11,943              -                       
---------------------------------- ---------- -------------- -------------- ------------------- --------------- --------------
Jeffrey W. Stephen,                  2000       $103,385           -             $80,621              -            325,000    
Former Senior Vice President and     2001       $121,436           -             $33,020              -               -       
COO (5)                              2002           -              -                -                 -               -       
---------------------------------- ---------- -------------- -------------- ------------------- --------------- --------------
Jon W. Dowie,                        2000        $99,385        $30,000             -            $11,000(bb)       100,000    
Former Vice President, Treasurer     2001       $159,923           -              $7,339              -               -       
and CFO (6)                          2002           -              -                -                 -               -       
---------------------------------- ---------- -------------- -------------- ------------------- --------------- --------------
Paul Childress, Former Vice          2000           -              -                -                 -               -       
President, Nuclear and               2001       $151,596           -              $9,654              -            50,000     
Environmental Division (NETS) (7)    2002        $52,800           -              $6,046              -            75,000     
---------------------------------- ---------- -------------- -------------- ------------------- --------------- --------------

(aa)     During 2001, Mr. Hahnfeldt received payment of $28,000 of the $78,000  
deferred bonus, leaving $50,000 in a deferred status.         

(bb)     Mr. Dowie owned 10,000 restricted shares as of the fiscal-year-end     
         December 31, 2001. The value of his restricted shares are calculated by
       multiplying 10,000 shares by the December 31, 2001's closing price of
$1.10.                                                        

(1)      Mr. Broms served as our President and Chief Executive Officer until    
       August 2002. His employment agreement granted him an annual salary of
     $210,000. His designee, Broms Holdings LLC also received a ten-year
        option to purchase 1,300,000 shares, of which 775,000 shares will have
     vested as of June 1, 2002 with the rest to vest at a rate of 25,000
shares per month, at a price equal to the closing price of the
    Company's stock on the date of the grant, which was $.50. Upon Mr.
         Broms resignation, his ten-year option to purchase 1,300,000 shares was
     revoked. Before becoming President and Chief Executive Officer, Mr.
         Broms served as advisor to the Company (October 1, 2001 to February 28,
         2002) primarily advising its former Chairman and former Chief Executive
   Officer about matters including corporate finance and governance;
   development of financial and non-financial reporting; the further
      implementation of corporate development; operations; contract review
   and negotiation. For these services, the Company granted to him a
       warrant to purchase 100,000 shares of its Common Stock at an exercise
       price of $.34 and paid him $39,000 from October 2001 through February
       2002. The warrants vested immediately and expire in 10 years from the
grant date.                                                   

(2)      Upon the resignation of Mr. Todd Broms, the Board of Directors         
  appointed Mr. Hahnfeldt as our acting President and CEO. His new
 employment agreement, which supercedes and terminates all prior
      agreements, grants him an annual salary of $180,000, $6,000 annually
      for automobile allowance, and $4,800 annually for medical and dental
    coverage. He also received a ten-year option to purchase 1,000,000
         shares, of which 580,000 shares will have vested as of June 1, 2002 and
       the rest will vest at a rate of 20,000 per month, at a price equal to
    the closing price of the Company's stock on the date of the grant,
       which was $.50 at the date of purchase. Mr. Hahnfeldt will receive an
 annual bonus to be determined at the discretion of the Board of
      Directors to be paid on or before December 31 of each year. Prior to
        assuming the duties of Executive Vice President, Mr. Hahnfeldt was our
         President and CEO, serving since July 15, 1999. He was initially paid a
    salary of $104,000 per year, beginning on the date on which he was
 employed by us and took office as President. He also received a
    five-year warrant to purchase 50,000 shares of our Common Stock at
         $0.75 per share. On September 1, 1999, Mr. Hahnfeldt was awarded, under
     the 1999 Stock Option Plan, an option to purchase 150,000 shares at
   $0.71. In November, 1999, Mr. Hahnfeldt entered into a three-year
        employment contract with us that provided for base compensation in the
       first contract year of $104,000; in the second contract year, the sum

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    of that amount plus the bonus awarded to him in the first contract
  year; and in the third contract year, that amount plus the bonus
    awarded to him in the second contract year. The bonus to which Mr.
    Hahnfeldt was entitled in each contract year was an amount, not to
       exceed 50% of base salary, determined by applying to that year's base
         salary the percentage by which the market price of our Common Stock had
       increased between the beginning and the end of the contract year. The
         first contract year ended on November 5, 2000, but no bonus was paid to
        Mr. Hahnfeldt which respect to that year because he deferred his bonus
   of $78,000. In addition, for each contract year Mr. Hahnfeldt was
     issued a five-year warrant to purchase 100,000 shares of our Common
     Stock for $1.00, $2.00, and $3.00 per share, successively. In July,
         2000, our Board of Directors increased Mr. Hahnfeldt's salary to $3,700
per week, where it remained until February 28, 2002.          

(3)      Dr. Graves serves as our Chief Financial Officer and Vice President.   
Dr. Graves' 2002 salary was $73,384 along with $6,800 of other
    compensation. From June 2001 to December 2001, Dr. Graves deferred
$26,921 of his 2001 annual compensation.                      

(4)      Mr. Grochowski is our current Director of Business Development,        
       effective August 28, 2000. He was initially paid a salary of $138,000
       per year and on August 28, 2001, he was awarded, under the 1999 Stock
   Option Plan, an option to purchase 25,000 shares at $3.00, 25,000
     shares at $3.50, and 25,000 shares at $4.00. In September 2002, Mr.
Grochowski agreed to defer approximately 48% of his annual    
compensation.                                                 

(5)      Mr. Stephen was our Senior Vice President and Chief Operating Officer, 
     having joined us on May 3, 2000. During 2000, his annual salary was
   $160,000, and we paid him $80,621 in connection with his move and
         relocation to Company headquarters. During 2000, Mr. Stephen was issued
         ten-year non-qualified stock options to purchase a total 325,000 shares
       of our Common Stock. Mr. Stephens resigned from the company effective
June 30, 2001.                                                

(6)      Mr. Dowie was our Vice President, Treasurer, and Chief Financial       
       Officer, having joined us on February 7, 2000. He was initially hired
     at an annual salary of $100,000 and was granted an initial bonus of
       10,000 shares of our Common Stock and $10,000 cash. His annual salary
       was increased to $140,000 on September 15, 2000, and he was awarded a
 bonus of $20,000. On January 1, 2001, Mr. Dowie was issued two,
       five-year incentive stock options to purchase 100,000 shares in total
       (50,000 shares for each option). Mr. Dowie's contract was not renewed
      and he subsequently resigned from the company effective December 31,
2001.                                                         

(7)      Mr. Childress was our Vice President, Nuclear and Environmental        
         Division, until August 2002. He was initially paid a salary of $175,000
      per year and awarded, under the 1999 Stock Option Plan, an option to
      purchase 50,000 shares at $2.50. Starting October 1, 2001 and ending
    November 30, 2001 (nine weeks), thirty-three percent of his $6,731
       bi-weekly salary was deferred, $10,096 in total. Starting December 1,
    2001, his annual salary was decreased to $96,000, and he will also
       receive 1.75 percent of gross revenue of NETS with a markup of thirty
    percent or greater, or 0.75 percent of gross revenue with a markup
between zero to thirty percent.                               

DIRECTOR COMPENSATION                                                           

       On October 12, 2000, our board of directors approved compensation for
non-employee directors (Mr. Chad A. Verdi, Mr. Simon Nemzow, and Dr. Leonid     
Khotin) in the amount of $6,600 per calendar quarter, which was to be paid in   
monthly installments of $2,200. The employee members of our board of directors, 
Dr. Graves and Mr. Hahnfeldt, receive $3,000 per calendar quarter for their     
services on the board of directors, which is paid in monthly installments of    

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$1,000. As of June 1, 2002, Chad Verdi, Don Hahnfeldt, Dr. Randolph Graves and  
Simon Nemzow, agreed to defer receiving their board fee until further notice.   
Dr. Leonid Khotin agreed to defer half of his board fee, or $1,100.             

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND     
RELATED STOCKHOLDER MATTERS.                                  

The following table sets forth, as of April 1, 2003, certain  
information as to the stock ownership of each person known by us to own         
beneficially 5% or more of our outstanding common stock, by each of our named   
officers and directors who owns any shares and by all officers and directors as 
a group. For the purpose of calculating the ownership percentages, we have      
considered to be outstanding both the total number of shares actually           
outstanding on April 1, 2003, which is 94,923,797, and the total number of      
shares that various people then had the right to acquire within 60 days.        

                                         NUMBER OF SHARES OF       PERCENTAGE OF
                                           COMMON STOCK            OUTSTANDING
           NAME                          OWNED BENEFICIALLY        COMMON SHARES
           ----                          ------------------        -------------

Randolph A. Graves, Jr.                                                         
Officer and Director                                                            
3299 Villanova Ave.                                                             
San Diego, CA 92122                            600,000                      *   

Encore Capital Management Inc.               6,996,798(1)               7.37%   

Teofil Grochowski                                                               
Officer                                                                         
215 Jefferson Woods Drive                                                       
Forest, VA 24551                                50,000(2)                   *   

Don V. Hahnfeldt                                                                
Officer and Director                                                            
8201 Roxborough Loop                                                            
Gainesville, VA  20155                         200,000                      *   

Leonid Khotin                                                                   
Director                                                                        
755 Anderson Avenue, Apt. 2F                                                    
Cliffside Park, NJ 07010                        45,000(3)                   *   

Carey Naddell                                                                   
Officer and Director                                                            
5155 Suffolk Drive                                                              
Boca Raton, FL 33496                           300,000                      *   

Woodward LLC                                 2,450,000(4)               1.84%   

Directors and officers as a group            1,195,000(5)               1.18%   
---------------------------------                                               
* Less than 1%                                                                  

41

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(1)      Includes 6,000,369 shares owned of record and beneficially after       
      conversion, on January 9, 2002, of $3 million convertible debentures
        owned by JNC Opportunity Fund Ltd., and 750,000 shares that it has the
        right to acquire upon exercise of an immediately exercisable warrants,
for all of which Encore Capital Management, Inc., a registered
        investment adviser, serves as investment manager. There is a provision
       in the warrant agreement that prohibits the conversion of warrants if
       exercising those warrant would result in them owning more than 9.999%
of the issued and outstanding shares of Common Stock.         

(2)      Includes 50,000 shares that Mr. Grochowski has the right to acquire    
upon exercise of an immediately exercisable option.           

(3)      Includes 25,000 shares that Dr. Khotin has the right to acquire upon   
        exercise of an immediately exercisable warrant. Includes 20,000 shares
owned by his wife.                                            

(4)      Includes 700,000 shares that Woodward, LLC has the right to acquire    
upon exercise of an immediately exercisable warrants.         

(5)      Six people.                                                            

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                        

   During 2002, we were party to the following transactions with the
following persons and entities:                                                 

  Prior to the his resignation from our board of directors and the
termination of his consulting agreement in April 2003, Chad A. Verdi was a party
to an agreement with us effective on February 1, 2002, through Verdi            
Consultants, Inc., which superceded and terminated all prior consulting         
agreements. Mr. Verdi provided consulting services to us in the area of         
corporate finance. For these services, Verdi Consultants, Inc. was compensated  
at the rate of $15,000 per month and received $750 per month for automobile and 
$2,000 per month for rent and other expenses to maintain an office in Rhode     
Island. Of this total $15,000 compensation, Verdi Consultants deferred $5,000   
per month until the time this agreement was terminated on April 5, 2003. Verdi  
Consultants also received a ten-year option to purchase 1,000,000 shares at a   
price equal to the closing price of our common stock at the date of grant, which
was $.50 per share. Pursuant to this option grant, 125,000 shares are           
immediately exercisable and an additional 375,000 will vest immediately upon    
shareholder approval to increase the authorized capital of the company and the  
options to purchase the remaining 500,000 shares will then vest in equal monthly
installments for the duration of the term of the company's consulting agreement 
with Verdi Consultants, Inc.                                                    

       Prior to February 1, 2002, Mr. Verdi was a party to an agreement with
us to provide consulting services in the area of corporate finance. For these   
services, he was compensated at the rate of $1,000 per week, and granted the    
right through warrants to purchase up to an aggregate of 375,000 shares of our  
common stock, of which 225,000 were issued: a five-year warrant issued on       
October 1, 1999 to purchase 75,000 shares at $1.00 per share; a five-year       
warrant issued on October 1, 2000 to purchase 75,000 shares at $2.00 per share; 
a five-year warrant to be issued on October 1, 2001 to purchase 75,000 shares at
$3.00 per share and the remaining warrants issuable under the prior consulting  
agreements were superceded and terminated by the new agreement. On October 12,  
2000, the Board approved alternative deferred compensation of $104,000 for 2000 
for Mr. Verdi for his services as a full-time consultant to be paid in 2001, and
his weekly compensation for these consulting services was increased to $3,000.  
During 2001, Mr. Verdi was paid $104,000 of deferred compensation.              

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Crypto.com, Inc. is a Delaware corporation and a subsidiary of
Eurotech. Crypto was organized to develop cryptographic systems for secure      
communication. Eurotech owns 66.04% of the outstanding equity of Crypto and the 
remaining equity is owned as follows: the inventor owns 18.87%; Peter Gulko, one
of the holders of more than 5% of our common stock and a former officer and     
director owns 9.43%; Jeffery W. Stephen, a former officer, owns 1.89%; John W.  
Dowie, a former officer, owns 0.94%; Don V. Hahnfeldt, a current officer and    
director, owns 0.94%; Randolph A. Graves, a current officer and director, owns  
0.94%; and Chad A Verdi, a former director and consultant, owns 0.94%. All of   
the assets of Crypto were transferred to Markland in December 2002.             

ITEM 14. CONTROLS AND PROCEDURES.                                               

        Our Chief Executive Officer and Chief Financial Officer (collectively,
the "Certifying Officers") are responsible for establishing and maintaining     
disclosure controls and procedures for the Company. Such officers have concluded
(based on their evaluation of these controls and procedures as of a date within 
90 days of the filing of this report) that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by 
the Company in this report is accumulated and communicated to the Company's     
management, including its principal executive officers as appropriate, to allow 
timely decisions regarding required disclosure. The Certifying Officers also    
have indicated that there were no significant changes in the Company's internal 
controls or other factors that could significantly affect such controls         
subsequent to the date of their evaluation, and there were no corrective actions
with regard to significant deficiencies and material weaknesses.                

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.      

(a)      The exhibits list on the exhibit pages hereto are filed with or        
incorporated by reference into this Report.                   

(b)      Reports on Form 8-K. We filed the following Current Reports on Form 8-K
during the fourth quarter of 2002.                            

    (i)      Form 8-K/A as of September 9, 2002 (filed with the SEC on
October 7, 2002).                           

   (ii)     Form 8-K as of September 24, 2002 (filed with the SEC on
October 7, 2002).                           

   (iii)    Form 8-K as of September 25, 2002 (filed with the SEC on
October 7, 2002).                           

  (iv)     Form 8-K as of November 15, 2002 (filed with the SEC on
December 13, 2002).                         

  (v)      Form 8-K as of December 19, 2002 (filed with the SEC on
December 23, 2002)                          

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 EUROTECH, LTD. AND SUBSIDIARIES
 (A DEVELOPMENT STAGE COMPANY)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

                                                                          PAGE
                                                                           NO.
                                                                          ----

INDEPENDENT AUDITORS' REPORT.............................................  F-2  
CONSOLIDATED BALANCE SHEETS                                                     
At December 31, 2002 and December 31, 2001.............................  F-3
CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended                       
December 31, 2002, 2001 and 2000                                            
For the Period from Inception (May 26, 1995) to December 31, 2002......  F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY                    
For the Period from Inception (May 26, 1995) to December 31, 2002......  F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended                       
December 31, 2002, 2001 and 2000                                            
 For the Period from Inception (May 26, 1995) to December 31, 2002......  F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...............................  F-24 
SELECTED FINANCIAL DATA                                                         
 For the Five Years Ended December 31, 2002.............................   (*)

(*) Included in Part II, Item 6 of the Form.                                    

F-1 

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Board of Directors and Stockholders                                             
Eurotech, Ltd.                                                                  

INDEPENDENT AUDITORS' REPORT
----------------------------

We have audited the accompanying consolidated balance sheets of Eurotech, Ltd.  
and Subsidiaries (the "Company") (a development stage company) as of December   
31, 2002 and 2001 and the related consolidated statements of operations,        
stockholders' (deficiency) equity, and cash flows for the years ended December  
31, 2002, 2001 and 2000 and for the period from inception (May 26, 1995) to     
December 31, 2002. These consolidated financial statements are the              
responsibility of the Company's management. Our responsibility is to express an 
opinion on these consolidated financial statements based on our audits.         

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and       
perform the audit to obtain reasonable assurance about whether the consolidated 
financial statements are free of material misstatement. An audit includes       
examining, on a test basis, evidence supporting the amounts and disclosures in  
the consolidated financial statements. An audit also includes assessing the     
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We     
believe that our audits provide a reasonable basis for our opinion.             

In our opinion, the consolidated financial statements referred to above present 
fairly, in all material respects, the financial position of Eurotech, Ltd. and  
Subsidiaries (a development stage company) at December 31, 2002 and 2001 and the
results of its operations and its cash flows for each of the three years ended  
December 31, 2002, 2001 and 2000 and for the period from inception (May 26,     
1995) to December 31, 2002, in conformity with accounting principles generally  
accepted in the United States of America.                                       

The accompanying consolidated financial statements have been prepared assuming  
that the Company will continue as a going concern. As shown in the consolidated 
financial statements, the Company incurred net losses of approximately          
$12,443,000, $8,760,000 and $9,873,000 during the years ended December 31, 2002,
2001 and 2000, respectively. As of December 31, 2002, the Company had a working 
capital deficiency of approximately $3,159,000. These conditions raise          
substantial doubt about the Company's ability to continue as a going concern.   
Management's plans in regard to these matters are described in Note 1. The      
consolidated financial statements do not include any adjustments that might     
result from the outcome of this uncertainty.                                    

/s/ Marcum & Kliegman LLP                                                       

New York, New York                                                              
March 22, 2003 (except for Note 13,                                             
which is dated April 15, 2003)                                                  

F-2 

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                                    EUROTECH, LTD. AND SUBSIDIARIES                                   
                                     (A Development Stage Company)                                    

                                      CONSOLIDATED BALANCE SHEETS                                     


                                                ASSETS                                                
                                                ------                                                

                                                                                  At December 31,     
                                                                            --------------------------
                                                                               2002            2001   
                                                                            -----------    -----------
                                                                                                      
CURRENT ASSETS:                                                                                       
  Cash and cash equivalents                                                 $  386,835     $  465,346 
  Prepaid expenses and other current assets                                    220,413        253,840 
                                                                            -----------    -----------
      TOTAL CURRENT ASSETS                                                     607,248        719,186 

PROPERTY AND EQUIPMENT - NET                                                   138,938        193,661 

OTHER ASSETS:                                                                                         
  Technology rights (EKOR) - net                                                    --      4,694,484 
  Technology rights (Acoustic Core) - net of accumulated amortization                                 
    of $724,888 and $232,527 at December 31, 2002 and 2001,                                           
    respectively                                                             2,450,112      2,267,473 
  Patent costs - net                                                            19,314         21,067 
  Other assets                                                                      --        224,039 
                                                                            -----------    -----------
      TOTAL ASSETS                                                          $3,215,612     $8,119,910 
                                                                            ===========    ===========

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

                                                 F-3                                                  

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                                           EUROTECH, LTD. AND SUBSIDIARIES                                          
                                            (A Development Stage Company)                                           

                                             CONSOLIDATED BALANCE SHEETS                                            


                                  LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY                                 
                                  -------------------------------------------------                                 

                                                                                             At December 31,        
                                                                                     -------------------------------
                                                                                         2002               2001    
                                                                                     -------------     -------------
                                                                                                                    
CURRENT LIABILITIES:                                                                                                
  Accounts payable and accrued liabilities                                           $  3,117,763      $    885,207 
  Current portion of notes payable - related parties                                      473,591                -- 
  Current portion of convertible debentures                                                    --         3,000,000 
  Advance on sale of common stock                                                         175,000                -- 
                                                                                     -------------     -------------
      TOTAL CURRENT LIABILITIES                                                         3,766,354         3,885,207 

NOTES PAYABLE - RELATED PARTIES                                                                --           202,091 

SECURED CONVERTIBLE PROMISSORY NOTE - Less debt discount of $125,000                                                
  at December 31, 2002                                                                    375,000                -- 
                                                                                     -------------     -------------
      TOTAL LIABILITIES                                                                 4,141,354         4,087,298 
                                                                                     -------------     -------------

Minority Interest                                                                       3,967,130                -- 
                                                                                     -------------     -------------

COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Notes 1, 3, 6, 10, 12, and 13)                                        

STOCKHOLDERS' (DEFICIENCY) EQUITY:                                                                                  
  Series A non-voting 3% Convertible Preferred stock - $.01 par value; 25,000                                       
    and -0- shares authorized at December 31, 2002 and 2001, respectively;                                          
    25,000 and -0- shares issued and outstanding at                                                                 
    December 31, 2002 and 2001, respectively                                                  250                -- 
  Series B non-voting 5% Convertible Preferred stock - $.01 par value;                                              
    25,000 and -0- share authorized at December 31, 2002 and 2001, respectively;                                    
    11,450 and -0- shares issued and outstanding                                                                    
    December 31, 2002 and 2001, respectively                                                  114                -- 
  Common stock - $0.00025 par value; 100,000,000 shares authorized;                                                 
    91,723,891 shares issued and 88,191,915 shares outstanding                                                      
    at December 31, 2002; 59,673,377 shares issued and 56,141,401                                                   
    outstanding at December 31, 2001                                                       22,933            14,919 
  Additional paid-in capital                                                           69,087,322        61,998,255 
  Unearned compensation                                                                   (86,085)         (131,911)
  Deficit accumulated during the development stage                                    (65,439,685)      (49,370,930)
  Treasury stock, at cost; 3,531,976 shares at December 31, 2002                                                    
    and 2001, respectively                                                             (8,477,721)       (8,477,721)
                                                                                     -------------     -------------
      TOTAL STOCKHOLDERS' (DEFICIENCY) EQUITY                                          (4,892,872)        4,032,612 
                                                                                     -------------     -------------
      TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY                        $  3,215,612      $  8,119,910 
                                                                                     =============     =============

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

                                                        F-4                                                         

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                                      EUROTECH, LTD. AND SUBSIDIARIES                                       
                                       (A Development Stage Company)                                        

                                   CONSOLIDATED STATEMENTS OF OPERATIONS                                    


                                                                                            For the Period  
                                                 For the Years Ended December 31,           from Inception  
                                       -------------------------------------------------  (May 26, 1995) to 
                                           2002               2001              2000       December 31, 2002
                                       -------------     -------------     -------------   -----------------
                                                                                                            
REVENUES                               $     88,821      $     18,873      $    350,000      $    607,694   
                                       -------------     -------------     -------------     -------------  
COSTS AND EXPENSES:                                                                                         
  Cost of sales                               5,807             8,160                --            13,967   
  Research and development                  912,861           747,073         3,010,391         9,408,872   
  Consulting fees                         1,135,300         2,176,848         1,125,477         6,306,242   
  Compensatory element of stock                                                                             
    and options issuances for                                                                               
    consulting fees                       1,270,075           535,031           925,717         6,514,729   
  Other general and administrative                                                                          
    expenses                              3,475,562         3,435,381         3,427,588        15,488,985   
  Depreciation and amortization           2,159,315         1,899,346         1,631,237         5,848,254   
  Loss on impairment of technology                                                                          
    rights                                3,084,947                --                --         3,084,947   
                                       -------------     -------------     -------------     -------------  
    TOTAL COSTS AND EXPENSES             12,043,867         8,801,839        10,120,410        46,665,996   
                                       -------------     -------------     -------------     -------------  
OPERATING LOSS                          (11,955,046)       (8,782,966)       (9,770,410)      (46,058,302)  
                                       -------------     -------------     -------------     -------------  
OTHER EXPENSES/(INCOME):                                                                                    
  Interest expense                           40,663           294,106           415,425         2,205,815   
  Interest income                            (6,682)          (91,837)         (313,046)         (412,029)  
  Amortization of deferred and                                                                              
    unearned financing costs                     --                --                --        13,276,591   
  Debt conversion expense                   390,000                --                --           390,000   
  Litigation settlement in shares                                                                           
    of stock                                     --                --                --           456,278   
  Other income                                   --          (225,000)               --          (225,000)  
  Minority interest in subsidiary            64,369                --                --            64,369   
                                       -------------     -------------     -------------     -------------  

    TOTAL OTHER EXPENSES/(INCOME)           488,350           (22,731)          102,379        15,756,024   
                                       -------------     -------------     -------------     -------------  
NET LOSS                                (12,443,396)       (8,760,235)       (9,872,789)      (61,814,326)  

PREFERRED STOCK DIVIDENDS -                                                                                 
  NON-CASH                                3,625,359                --                --         3,625,359   
                                       -------------     -------------     -------------     -------------  
NET LOSS ATTRIBUTABLE TO COMMON                                                                             
  STOCKHOLDERS                         $(16,068,755)     $ (8,760,235)     $ (9,872,789)     $(65,439,685)  
                                       =============     =============     =============     =============  
BASIC AND DILUTED NET LOSS PER SHARE                                                                        
  (Notes 2, 10 and 11)                 $       (.23)     $       (.18)     $       (.23)                    
                                       =============     =============     =============                    
WEIGHTED AVERAGE COMMON SHARES                                                                              
  USED IN BASIC AND DILUTED NET LOSS                                                                        
  PER SHARE (Notes 2, 10 and 11)         70,129,726        48,835,959        42,750,339                     
                                       =============     =============     =============                    

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

                                                    F-5                                                     

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                                   EUROTECH, LTD. AND SUBSIDIARIES                                                  
                                    (A Development Stage Company)                                                   

                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                                          

                  FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002                                 


                                                                 Common Stock               Additional              
                                                         -----------------------------       Paid-in                
                                                           Shares            Amount          Capital                
                                                         -----------       -----------      -----------             
                                                             (1)                                                    

Period Ended December 31, 1995:                                                                                     
-------------------------------                                                                                     

                                                                                                                    
Founder shares issued                                                                                               
  ($0.00025 per share)                                    4,380,800        $    1,095       $   (1,095)             
Issuance of stock for offering                                                                                      
  consulting fees ($0.0625 per share)                       440,000               110           27,390              
Issuance of stock                                                                                                   
  ($0.0625 and $0.25 per share)                           4,080,000             1,020          523,980              
Issuance of stock for license                                                                                       
  ($0.0625 per share)                                       600,000               150           37,350              
Issuance of stock options for                                                                                       
  offering legal and consulting fees                          -                 -               75,000              
Offering expenses                                             -                 -             (105,398)             
Net loss                                                      -                 -                -                  
                                                         -----------       -----------      -----------             
Balance - December 31, 1995                               9,500,800        $    2,375       $  557,227              
                                                         ===========       ===========      ===========             

                                                                                           Deficit                  
                                                                                         Accumulated                
                                                                          Unearned       During the                 
                                                      Due from            Financing      Development                
                                                    Stockholders            Costs           Stage           Total   
                                                    ------------         -----------     -----------     -----------

Period Ended December 31, 1995:                                                                                     
-------------------------------                                                                                     

Founder shares issued                                                                                               
  ($0.00025 per share)                              $     -              $    -          $    -          $    -     
Issuance of stock for offering                                                                                      
  consulting fees ($0.0625 per share)                     -                   -               -              27,500 
Issuance of stock                                                                                                   
  ($0.0625 and $0.25 per share)                          (3,000)              -               -             522,000 
Issuance of stock for license                                                                                       
  ($0.0625 per share)                                     -                   -               -              37,500 
Issuance of stock options for offering                                                                              
  legal and consulting fees                               -                   -               -              75,000 
Offering expenses                                         -                   -               -            (105,398)
Net loss                                                  -                   -            (513,226)       (513,226)
                                                    ------------         -----------     -----------     -----------
Balance - December 31, 1995                         $    (3,000)         $    -          $ (513,226)     $   43,376 
                                                    ============         ===========     ===========     ===========

(1) Share amounts have been restated to reflect the 4 for 1 stock split on June 1, 1996.                            

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

                                                           F-6                                                      

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                                        EUROTECH, LTD. AND SUBSIDIARIES                                                
                                         (A Development Stage Company)                                                 

                                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                                        

                       FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002                               


                                                                Common Stock                Additional                 
                                                         -----------------------------        Paid-in                  
                                                           Shares            Amount           Capital                  
                                                         ------------      ------------      ------------              
                                                             (1)                                                       
Year Ended December 31, 1996:                                                                                          
-----------------------------                                                                                          
                                                                                                                       
Balance - January 1, 1996                                  9,500,800       $     2,375       $   557,227               

Issuance of stock ($0.25 per share)                        1,278,000               320           319,180               
Exercise of stock options                                    600,000               150                 -               
Issuance of stock for consulting fees                                                                                  
  ($0.06 to $1.82 per share)                               4,345,036             1,086         1,208,391               
Issuance of stock pursuant to bridge                                                                                   
  financing ($1.81325 per share)                           1,500,000               375         2,719,500               
Amortization of unearned financing costs                       -                 -                 -                   
Repayment by stockholders                                      -                 -                 -                   
Net loss                                                       -                 -                 -                   
                                                         ------------      ------------      ------------              
Balance - December 31, 1996                               17,223,836       $     4,306       $ 4,804,298               
                                                         ============      ============      ============              

                                                                                            Deficit                    
                                                                                          Accumulated                  
                                                                          Unearned        During the                   
                                                      Due from            Financing       Development                  
                                                    Stockholders            Costs            Stage             Total   
                                                    ------------         ------------     ------------     ------------

Year Ended December 31, 1996:                                                                                          
-----------------------------                                                                                          

Balance - January 1, 1996                           $    (3,000)         $     -          $  (513,226)     $    43,376 

Issuance of stock ($0.25 per share)                       -                    -                -              319,500 
Exercise of stock options                                 -                    -                -                  150 
Issuance of stock for consulting fees                                                                                  
  ($0.06 to $1.82 per share)                              -                    -                -            1,209,477 
Issuance of stock pursuant to bridge                                                                                   
  financing ($1.81325 per share)                          -               (2,719,875)           -               -      
Amortization of unearned financing costs                  -                  226,656            -              226,656 
Repayment by stockholders                                 3,000                -                -                3,000 
Net loss                                                  -                    -           (3,476,983)      (3,476,983)
                                                    ------------         ------------     ------------     ------------
Balance - December 31, 1996                         $     -              $(2,493,219)     $(3,990,209)     $(1,674,824)
                                                    ============         ============     ============     ============

(1) Share amounts have been restated to reflect the 4 for 1 stock split on June 1, 1996.                               

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

                                                           F-7                                                         

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                                        EUROTECH, LTD. AND SUBSIDIARIES                                
                                         (A Development Stage Company)                                 

                                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                        

                       FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002               


                                                                    Common Stock            Additional 
                                                           ------------------------------    Paid-in   
                                                             Shares            Amount        Capital   
                                                           ------------      ------------  ------------
                                                                                                       
Year Ended December 31, 1997:                                                                          
-----------------------------                                                                          

Balance - January 1, 1997                                   17,223,836       $     4,306   $ 4,804,298 

Issuance of stock for consulting fees                                                                  
  ($2.50 to $5.45 per share)                                   162,000                40       667,510 
Issuance of stock pursuant to penalty                                                                  
  provision of bridge financing                                                                        
  ($5.45 per share)                                            500,000               125     2,724,875 
Value assigned to conversion feature of                                                                
  Convertible Debentures                                         -                 -         1,337,143 
Value assigned to issuance of warrant to                                                               
  purchase 127,500 shares in                                                                           
  consideration for interest and                                                                       
  placement fees in connection with                                                                    
  Convertible Debentures                                         -                 -           284,480 
Value assigned to issuance to                                                                          
  shareholder of warrant to purchase                                                                   
  399,000 shares for consulting services                         -                 -           902,268 
Issuance of stock for consulting fees                                                                  
  ($4.00 per share)                                             43,000                11       171,989 
Accrual of stock issued January 1998                                                                   
  pursuant to penalty provision of                                                                     
  bridge financing ($2.00 per share)                         1,000,000               250     1,999,750 
Amortization of unearned financing costs                         -                 -             -     
Net loss                                                         -                 -             -     
                                                           ------------      ------------  ------------
Balance - December 31, 1997                                 18,928,836       $     4,732   $12,892,313 
                                                           ============      ============  ============

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

                                                           F-8                                         

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                                   EUROTECH, LTD. AND SUBSIDIARIES                                
                                    (A Development Stage Company)                                 

                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                        

                  FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002               


                                                                       Deficit                    
                                                                     Accumulated                  
                                                   Unearned          During the                   
                                                   Financing         Development                  
                                                    Costs              Stage            Total     
                                                 ------------       -------------    -------------

                                                                                                  
Year Ended December 31, 1997:                                                                     
-----------------------------                                                                     

Balance - January 1, 1997                        $(2,493,219)       $ (3,990,209)    $ (1,674,824)

Issuance of stock for consulting fees                                                             
  ($2.50 to $5.45 per share)                           -                   -              667,550 
Issuance of stock pursuant to penalty                                                             
  provision of bridge financing                                                                   
  ($5.45 per share)                               (2,725,000)              -                -     
Value assigned to conversion feature of                                                           
  Convertible Debentures                          (1,337,143)              -                -     
Value assigned to issuance of warrant to                                                          
  purchase 127,500 shares in consideration                                                        
  for interest and placement fees in                                                              
  connection with Convertible Debentures            (284,480)              -                -     
Value assigned to issuance to shareholder of                                                      
  warrant to purchase 399,000 shares for                                                          
  consulting services                               (902,268)              -                -     
Issuance of stock for consulting fees                                                             
  ($4.00 per share)                                    -                   -              172,000 
Accrual of stock issued January 1998                                                              
  pursuant to penalty provision of bridge                                                         
  financing ($2.00 per share)                     (2,000,000)              -                -     
Amortization of unearned financing costs           8,426,793               -            8,426,793 
Net loss                                               -             (12,441,242)     (12,441,242)
                                                 ------------       -------------    -------------
Balance - December 31, 1997                      $(1,315,317)       $(16,431,451)    $ (4,849,723)
                                                 ============       =============    =============

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

                                                 F-9                                              

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                                            EUROTECH, LTD. AND SUBSIDIARIES                        
                                             (A Development Stage Company)                         

                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                

                           FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002       


                                                              Common Stock              Additional 
                                                       ----------------------------      Paid-in   
                                                         Shares          Amount          Capital   
                                                       ------------    ------------    ------------
                                                                                                   
Year Ended December 31, 1998:                                                                      
-----------------------------                                                                      

Balance - January 1, 1998                               18,928,836     $     4,732     $12,892,313 

Issuance of stock for consulting fees                                                              
  ($0.32 to $2.58 per share)                               468,044             117         515,833 
Issuance of stock pursuant to penalty                                                              
  provision of bridge financing                                                                    
  ($1.0625 per share)                                      500,000             125         531,124 
Value assigned to conversion feature of                                                            
  Convertible Debentures and warrant to                                                            
  purchase 185,000 shares issued as                                                                
  additional interest                                        -               -           1,575,000 
Cancellation of stock issued for                                                                   
  consulting fees                                         (375,000)            (94)        (93,656)
Issuance of stock for conversion of                                                                
  debenture payable ($0.32 per share)                      100,002              25          32,169 
Amortization of unearned financing costs                     -               -               -     
Net loss                                                     -               -               -     
                                                       ------------    ------------    ------------
Balance - December 31, 1998                             19,621,882     $     4,905     $15,452,783 
                                                       ============    ============    ============

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

                                                      F-10                                         

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                                   EUROTECH, LTD. AND SUBSIDIARIES                                
                                    (A Development Stage Company)                                 

                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                        

                  FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002               


                                                                       Deficit                    
                                                                     Accumulated                  
                                                   Unearned          During the                   
                                                   Financing         Development                  
                                                    Costs              Stage            Total     
                                                 ------------       -------------    -------------

                                                                                                  

Year Ended December 31, 1998:                                                                     
-----------------------------                                                                     

Balance - January 1, 1998                        $(1,315,317)       $(16,431,451)    $ (4,849,723)

Issuance of stock for consulting fees                                                             
  ($0.32 to $2.58 per share)                           -                   -              515,950 
Issuance of stock pursuant to penalty                                                             
  provision of bridge financing                                                                   
  ($1.0625 per share)                               (531,249)              -                -     
Value assigned to conversion feature of                                                           
  Convertible Debentures and warrant to                                                           
  purchase 185,000 shares issued as                                                               
  additional interest                             (1,575,000)              -                -     
Cancellation of stock issued for                                                                  
  consulting fees                                      -                   -              (93,750)
Issuance of stock for conversion of                                                               
  debenture payable ($0.32 per share)                  -                   -               32,194 
Amortization of unearned financing costs           3,374,066               -            3,374,066 
Net loss                                               -              (7,814,143)      (7,814,143)
                                                 ------------       -------------    -------------
Balance - December 31, 1998                      $   (47,500)       $(24,245,594)    $ (8,835,406)
                                                 ============       =============    =============

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

                                                 F-11                                             

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                                        EUROTECH, LTD. AND SUBSIDIARIES                           
                                         (A Development Stage Company)                            

                                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                   

                       FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002          


                                                             Common Stock              Additional 
                                                      ----------------------------      Paid-in   
                                                        Shares          Amount          Capital   
                                                      ------------    ------------    ------------
                                                                                                  

Year Ended December 31, 1999:                                                                     
-----------------------------                                                                     

Balance - January 1, 1999                              19,621,882     $     4,905     $15,452,783 

Issuance of stock on consulting fees                                                              
  ($0.77 to $2.04 per share)                            1,286,561             322       1,202,301 
Issuance of stock on conversion of                                                                
  debenture payable ($0.35 per share)                     987,201             247         341,029 
Issuance of stock for finder's fee                                                                
  ($0.77 to $1.94 per share)                              112,098              27         110,029 
Value assigned to conversion feature of                                                           
  Convertible Debentures and warrant to                                                           
  purchase 94,750 shares issued as                                                                
  additional interest                                       -               -             175,425 
Value assigned to additional                                                                      
  consideration for financing activities                                                          
  ($0.72 per share)                                       100,000              25          71,975 
Issuance of stock ($0.25 to $0.50 per share)            7,205,000           1,802       2,505,698 
Issuance of stock in settlement of                                                                
  litigation ($2.51 per share)                            181,784              45         456,233 
Issuance of stock on exercise of                                                                  
  warrants ($1.50 per share)                              200,000              50         299,950 
Acquisition of 6,795,000 shares of ATI,                                                           
  previously Kurchatov Research                                                                   
  Holdings, Ltd. ($1.07 per share)                      4,530,000           1,133       4,840,305 
Acquisition from ATI of EKOR technology                                                           
  interest ($1.069 per share)                           2,000,000             500       2,137,000 
Issuance of stock to retire debt of ATI                                                           
  assumed with purchase of EKOR                                                                   
  technology interest ($1.06 per share)                 1,000,000             250       1,068,500 
Issuance of stock on exercise of                                                                  
  warrants ($0.36 per share)                               75,000              19          26,981 
Issuance of stock on conversion of                                                                
  debenture note payable, interest and                                                            
  penalties ($0.36 per share)                             217,464              54         230,458 
Issuance of stock in private sale                                                                 
  ($1.59 per share)                                     1,882,353             471       2,831,529 
Modification of warrants issued                             -               -             123,500 
Amortization of unearned financing costs                    -               -               -     
Net loss                                                    -               -               -     
                                                      ------------    ------------    ------------
Balance - December 31, 1999                            39,399,343     $     9,850     $31,873,696 
                                                      ============    ============    ============

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

                                                     F-12                                         

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                                   EUROTECH, LTD. AND SUBSIDIARIES                                
                                    (A Development Stage Company)                                 

                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                        

                  FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002               


                                                                       Deficit                    
                                                                     Accumulated                  
                                                   Unearned          During the                   
                                                   Financing         Development                  
                                                    Costs              Stage            Total     
                                                 ------------       -------------    -------------

                                                                                                  
Year Ended December 31, 1999:                                                                     
-----------------------------                                                                     

Balance - January 1, 1999                        $   (47,500)       $(24,245,594)    $ (8,835,406)

Issuance of stock for consulting fees                                                             
  ($0.77 to $2.04 per share)                           -                   -            1,202,623 
Issuance of stock on conversion of                                                                
  debenture payable ($0.35 per share)                  -                   -              341,276 
Issuance of stock for finder's fee                                                                
  ($0.77 to $1.94 per share)                           -                   -              110,056 
Value assigned to conversion feature of                                                           
  Convertible Debentures and warrant to                                                           
  purchase 94,750 shares issued as                                                                
  additional interest                               (175,425)              -                -     
Value assigned to additional consideration                                                        
  for financing activities ($0.72 per share)         (72,000)              -                -     
Issuance of stock ($0.25 to $0.50 per share)           -                   -            2,507,500 
Issuance of stock in settlement of                                                                
  litigation ($2.51 per share)                         -                   -              456,278 
Issuance of stock on exercise of warrants                                                         
  ($1.50 per share)                                    -                   -              300,000 
Acquisition of 6,795,000 shares of ATI,                                                           
  previously Kurchatov Research Holdings,                                                         
  Ltd. ($1.07 per share)                               -                   -            4,841,438 
Acquisition from ATI of EKOR technology                                                           
  interest ($1.069 per share)                          -                   -            2,137,500 
Issuance of stock to retire debt of ATI                                                           
  assumed with purchase of EKOR technology                                                        
  interest ($1.06 per share)                           -                   -            1,068,750 
Issuance of stock on exercise of warrants                                                         
  ($0.36 per share)                                    -                   -               27,000 
Issuance of stock on conversion of                                                                
  debenture note payable, interest and                                                            
  penalties ($0.36 per share)                          -                   -              230,512 
Issuance of stock in private sale                                                                 
  ($1.59 per share)                                    -                   -            2,832,000 
Modification of warrants issued                        -                   -              123,500 
Amortization of unearned financing costs             294,925               -              294,925 
Net loss                                               -              (6,492,312)      (6,492,312)
                                                 ------------       -------------    -------------
Balance - December 31, 1999                      $     -            $(30,737,906)    $  1,145,640 
                                                 ============       =============    =============

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

                                                F-13                                              

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                                        EUROTECH, LTD. AND SUBSIDIARIES                       
                                         (A Development Stage Company)                        

                                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY               

                       FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002      


                                                                          Common Stock        
                                                                   ---------------------------
                                                                      Shares          Amount  
                                                                   -----------      ----------
                                                                                              

For the Year Ended December 31, 2000                                                          
------------------------------------                                                          

Balance - January 1, 2000                                          39,399,343       $   9,850 

Issuance of stock for consulting fees                                                         
  ($1.93 to $5.00 per share)                                          140,674              34 
Issuance of stock ($5.00 to $5.37 per share)                        3,200,000             800 
Issuance of stock in payment of note payable and                                              
  related interest ($0.28 per share)                                  200,000              50 
Issuance of stock for interest on convertible                                                 
  debentures ($1.56 per share)                                        289,655              74 
Issuance of stock and warrants to settle                                                      
  penalties of convertible debentures                                                         
  ($2.00 per share)                                                   300,000              75 
Issuance of stock on conversion of                                                            
  debentures and interest ($1.06 to $2.75 per share)                1,793,073             449 
Accrual of shares under reset provisions                            8,500,000           2,125 
Issuance of stock for price reset                                     741,085             185 
Issuance of stock on exercise of warrants                                                     
  ($1.00 to $2.00 per share)                                          320,000              79 
Compensatory element of options to purchase                                                   
  337,500 shares issued to employee as                                                        
  additional compensation                                               -               -     
Value assigned to warrants issued to consultants                        -               -     
Compensatory element of warrants issued to                                                    
  employees                                                             -               -     
Exercise of stock options                                              50,000              13 
Shares repurchased                                                      -               -     
Amortization of unearned compensation                                   -               -     
Net loss                                                                -               -     
                                                                   -----------      ----------
Balance - December 31, 2000                                        54,933,830       $  13,734 
                                                                   ===========      ==========

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

                                                     F-14                                     

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                                        EUROTECH, LTD. AND SUBSIDIARIES                                             
                                         (A Development Stage Company)                                              

                                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                                     

                       FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002                            


                                                               Treasury Stock              Additional               
                                                        -----------------------------       Paid-in       Unearned  
                                                          Shares            Amount          Capital     Compensation
                                                        -----------      ------------     ------------  ------------

                                                                                                                    
For the Year Ended December 31, 2000                                                                                
------------------------------------                                                                                

Balance - January 1, 2000                                    -           $     -          $31,873,696   $     -     

Issuance of stock for consulting fees                                                                               
  ($1.93 to $5.00 per share)                                   174               348          582,144         -     
Issuance of stock ($5.00 to $5.37 per share)                 -                 -           16,749,170         -     
Issuance of stock in payment of note                                                                                
  payable and related interest                                                                                      
  ($0.28 per share)                                          -                 -               56,343         -     
Issuance of stock for interest on                                                                                   
  convertible debentures ($1.56 per share)                   -                 -              451,064         -     
Issuance of stock and warrants to settle                                                                            
  penalties of convertible debentures                                                                               
  ($2.00 per share)                                          -                 -            1,119,925         -     
Issuance of stock on conversion of                                                                                  
  debentures and interest ($1.06 to $2.76                                                                           
  per share)                                                 -                 -            3,300,271         -     
Accrual of shares under reset provisions                     -                 -               (2,125)        -     
Issuance of stock for price reset                            -                 -                 (185)        -     
Issuance of stock on exercise of warrants                                                                           
  ($1.00 to $2.00 per share)                                 -                 -              437,421         -     
Compensatory element of options to                                                                                  
  purchase 337,5000 shares issued to                                                                                
  employee as additional compensation                        -                 -              206,375      (187,750)
Value assigned to warrants issued to                                                                                
  consultants                                                -                 -              204,718         -     
Compensatory element of warrants issued to                                                                          
  employees                                                  -                 -               78,125         -     
Exercise of stock options                                    -                 -               16,487         -     
Shares repurchased                                      (3,532,150)       (8,478,069)           -             -     
Amortization of unearned compensation                        -                 -                -            41,723 
Net loss                                                     -                 -                -             -     
                                                        -----------      ------------     ------------  ------------
Balance - December 31, 2000                             (3,531,976)      $(8,477,721)     $55,073,429   $  (146,027)
                                                        ===========      ============     ============  ============

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

                                                         F-15                                                       

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                                   EUROTECH, LTD. AND SUBSIDIARIES                           
                                    (A Development Stage Company)                            

                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                   

                  FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002          


                                                              Deficit                        
                                                            Accumulated                      
                                                            During the                       
                                                            Development                      
                                                              Stage                 Total    
                                                           -------------         ------------

                                                                                             

For the Year Ended December 31, 2000                                                         
------------------------------------                                                         

Balance - January 1, 2000                                  $(30,737,906)         $ 1,145,640 

Issuance of stock for consulting fees                                                        
  ($1.93 to $5.00 per share)                                      -                  582,526 
Issuance of stock ($5.00 to $5.37 per share)                      -               16,749,970 
Issuance of stock in payment of note payable                                                 
  and related interest ($0.28 per share)                          -                   56,393 
Issuance of stock for interest on convertible                                                
  debentures ($1.56 per share)                                    -                  451,138 
Issuance of stock and warrants to settle                                                     
  penalties of convertible debentures                                                        
  ($2.00 per share)                                               -                1,120,000 
Issuance of stock on conversion of                                                           
  debentures and interest ($1.06 to $2.75 per share)              -                3,300,720 
Accrual of shares under reset provisions                          -                    -     
Issuance of stock for price reset                                 -                    -     
Issuance of stock on exercise of warrants                                                    
  ($1.00 to $2.00 per share)                                      -                  437,500 
Compensatory element of options to purchase                                                  
  337,500 shares issued to employee as                                                       
  additional compensation                                         -                   18,625 
Value assigned to warrants issued to                                                         
  consultants                                                     -                  204,718 
Compensatory element of warrants issued to                                                   
  employees                                                       -                   78,125 
Exercise of stock options                                         -                   16,500 
Shares repurchased                                                -               (8,478,069)
Amortization of unearned compensation                             -                   41,723 
Net loss                                                     (9,872,789)          (9,872,789)
                                                           -------------         ------------
Balance - December 31, 2000                                $(40,610,695)         $ 5,852,720 
                                                           =============         ============

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

                                            F-16                                             

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                                        EUROTECH, LTD. AND SUBSIDIARIES                                  
                                         (A Development Stage Company)                                   

                                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                          

                       FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002                 


                                                       Common Stock                 Treasury Stock       
                                                -------------------------     ---------------------------
                                                   Shares        Amount          Shares         Amount   
                                                -----------    ----------     -----------    ------------
                                                                                                         
For the Year Ended December 31, 2001                                                                     
------------------------------------                                                                     

Balance - January 1, 2001                       54,933,830     $  13,734      (3,531,976)    $(8,477,721)

Compensatory element of warrants to                                                                      
  purchase 210,000 shares issued to                                                                      
  consultant as compensation                         -             -               -               -     
Issuance of stock for consulting fees                                                                    
  ($0.35 to $2.15 per share)                       194,894            49           -               -     
Exercise of warrants ($1.10 per share)              50,000            13           -               -     
Issuance of stock ($2.25 per share)              1,333,333           333           -               -     
Modification of warrants issued                      -             -               -               -     
Issuance of stock for acquisition of                                                                     
  Acoustic Core Technology ($1.00 per                                                                    
  share)                                         2,500,000           625           -               -     
Shares issued under repricing                                                                            
  agreements for March 2000 financing            2,279,463           570           -               -     
Shares issued under repricing                                                                            
  agreements for April 2000 financing            1,352,566           338           -               -     
Issuance of stock ($.33 per share)               3,000,000           750           -               -     
Compensatory element of warrants to                                                                      
  purchase 500,000 shares issued to                                                                      
  consultant as additional compensation              -             -               -               -     
Compensatory element of warrants to                                                                      
  purchase 455,000 shares issued to                                                                      
  consultants as compensation                        -             -               -               -     
Issuance of stock for consulting fees                                                                    
  ($.345 per share)                                 29,291             7           -               -     
Shares issued under repricing                                                                            
  agreements for April 2000 financing            2,500,000           625           -               -     
Reversal of December 2000 accrual under                                                                  
  repricing agreements                          (8,500,000)       (2,125)          -               -     
Amortization of unearned compensation                -             -               -               -     
Net loss                                             -             -               -               -     
                                                -----------    ----------     -----------    ------------
Balance - December 31, 2001                     59,673,377     $  14,919      (3,531,976)    $(8,477,721)
                                                ===========    ==========     ===========    ============

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

                                                         F-17                                            

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                                        EUROTECH, LTD. AND SUBSIDIARIES                                              
                                         (A Development Stage Company)                                               

                                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY                                      

                       FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002                             


                                                                                           Deficit                   
                                                                                          Accumulated                
                                                       Additional                         During the                 
                                                        Paid-in           Unearned        Development                
                                                        Capital         Compensation         Stage          Total    
                                                      ------------      -----------      --------------  ------------
                                                                                                                     
For the Year Ended December 31, 2001                                                                                 
------------------------------------                                                                                 

Balance - January 1, 2001                             $55,073,429       $ (146,027)      $ (40,610,695)  $ 5,852,720 

Compensatory element of warrants to purchase                                                                         
  210,000 shares issued to consultant as                                                                             
  compensation                                            182,400            -                   -           182,400 
Issuance of stock for consulting fees                                                                                
  ($0.35 to $2.15 per share)                              128,966            -                   -           129,015 
Exercise of warrants ($1.10 per share)                     54,987            -                   -            55,000 
Issuance of stock ($2.25 per share)                     2,839,667            -                   -         2,840,000 
Modification of warrants issued                            29,000            -                   -            29,000 
Issuance of stock for acquisition of Acoustic                                                                        
  Core Technology ($1.00 per share)                     2,499,375            -                   -         2,500,000 
Shares issued under repricing agreements for                                                                         
  March 2000 financing                                       (570)           -                   -             -     
Shares issued under repricing agreements for                                                                         
  April 2000 financing                                       (338)           -                   -             -     
Issuance of stock ($.33 per share)                        999,250            -                   -         1,000,000 
Compensatory element of warrants to purchase                                                                         
  500,000 shares issued to consultant as                                                                             
  additional compensation                                  90,000          (90,000)              -             -     
Compensatory element of warrants to purchase                                                                         
  455,000 shares issued to consultants as                                                                            
  compensation                                             90,500          (38,000)              -            52,500 
Issuance of stock for compensation                                                                                   
  ($.345 per share)                                        10,089            -                   -            10,096 
Shares issued under repricing agreements for                                                                         
  April 2000 financing                                       (625)           -                   -             -     
Reversal of December 2000 accrual under                                                                              
  repricing agreements                                      2,125            -                   -             -     
Amortization of unearned compensation                       -              142,116               -           142,116 
Net loss                                                    -                -              (8,760,235)   (8,760,235)
                                                      ------------      -----------      --------------  ------------
Balance - December 31, 2001                           $61,998,255       $ (131,911)      $ (49,370,930)  $ 4,032,612 
                                                      ============      ===========      ==============  ============

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

                                                          F-18                                                       

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                                                 EUROTECH, LTD. AND SUBSIDIARIES                                     
                                                  (A Development Stage Company)                                      

                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY                      
                                FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002                    


                                                                 Preferred Stock                 Common Stock        
                                                             ------------------------     ---------------------------
                                                              Shares        Amount          Shares           Amount  
                                                             ---------    -----------     -----------     -----------
                                                                                                                     
For the Year Ended December 31, 2002:                                                                                
------------------------------------                                                                                 

Balance - January 1, 2002                                          -     $        -      59,673,377    $     14,919  

Issuance of stock on conversion of                                                                                   
  convertible debentures including                                                                                   
  interest ($.60 per share)                                        -              -       6,000,369           1,500  
Value assigned to warrants issued on                                                                                 
  conversion of convertible debentures                             -              -               -               -  
Issuance of preferred stock                                                                                          
  ($100 per share)                                            25,000            250               -               -  
Issuance of stock for price reset                                  -              -       6,000,000           1,500  
Value assigned to options issued to                                                                                  
  consultants                                                      -              -               -               -  
Modification of warrants issued                                    -              -               -               -  
Issuance of stock for consulting services                                                                            
  ($0.21 to $0.64 per share)                                       -              -          16,145               5  
Value assigned to options issued for                                                                                 
  legal services                                                   -              -               -               -  
Offering cost - preferred stock                                    -              -               -               -  
Issuance of stock for price reset                                  -              -       4,350,000           1,088  
Value assigned to options issued for                                                                                 
  consulting services                                              -              -               -               -  
Cancellation of warrants issued                                    -              -               -               -  
Cancellation of shares accrued but not                                                                               
  issued ($.001 per share)                                         -              -        (120,000)            (30) 
Issuance of stock for consulting services                          -              -          54,000              13  
Issuance of stock in connection with                                                                                 
  private financing agreement                                                                                        
  ($.05 per share)                                                 -              -       5,000,000           1,250  
Exercise of warrants ($.05 per share)                              -              -       5,000,000           1,250  
Issuance of stock for technology rights                                                                              
  ($.15 per share)                                                 -              -       4,000,000           1,000  
Issuance of stock for price reset                                  -              -       1,750,000             438  
Sale of Series B Convertible Preferred                                                                               
  Stock                                                       11,450            114               -               -  
Obligation satisfied by issuance of                                                                                  
  Markland stock                                                   -              -               -               -  
Amortization of unearned compensation                              -              -               -               -  
Effect of exchange agreement with                                                                                    
  Markland                                                         -              -               -               -  
Effect of exchange agreement with Markland -                                                                         
  Markland preferred stock                                         -              -               -               -  
Common stock of Markland issued for                                                                                  
  directors compensation                                           -              -               -               -  
Preferred stock dividends - parent                                 -              -               -               -  
Preferred stock dividends - Markland                               -              -               -               -  
Gain on sale of Markland common stock                              -              -               -               -  
Net loss                                                                                                             
                                                            ---------    -----------     -----------     ----------- 
                                                              36,450     $      364      91,723,891      $   22,933  
Balance - December 31, 2002                                 =========    ===========     ===========     =========== 

Series A 3% Convertible Preferred Stock                       25,000     $      250                                  
Series B 5% Convertible Preferred Stock                       11,450            114                                  
                                                            ---------    -----------                                 
                                                              36,450     $      364                                  
                                                            =========    ===========                                 

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

                                                              F-19                                                   

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                                               EUROTECH, LTD. AND SUBSIDIARIES                                             
                                                (A Development Stage Company)                                              

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY                              
                              FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002                            


                                                                    Treasury Stock               Additional                
                                                              -----------------------------        Paid-in       Unearned  
                                                                 Shares          Amount            Capital     Compensation
                                                              ------------    -------------      ------------  ------------
                                                                                                                           
For the Year Ended December 31, 2002:                                                                                      
------------------------------------                                                                                       

Balance - January 1, 2002                                     (3,531,976)     $(8,477,721)       $61,998,255   $  (131,911)

Issuance of stock on conversion of                                                                                         
  convertible debentures including interest                                                                                
  ($.60 per share)                                                      -                -         3,572,919             - 
Value assigned to warrants issued on                                                                                       
  conversion of convertible debentures                                  -                -           390,000             - 
Issuance of preferred stock ($100 per share)                            -                -         2,499,750             - 
Issuance of stock for price reset                                       -                -            (1,500)            - 
Value assigned to options issued to                                                                                        
  consultants                                                           -                -           490,000      (490,000)
Modification of warrants issued                                         -                -            77,000             - 
Issuance of stock for consulting services                                                                                  
  ($0.21 to $0.64 per share)                                            -                -             6,392             - 
Value assigned to options issued for                                                                                       
  legal services                                                        -                -            47,250             - 
Offering cost - preferred stock                                         -                -          (149,620)            - 
Issuance of stock for price reset                                       -                -            (1,088)            - 
Value assigned to options issued for                                                                                       
  consulting services                                                   -                -            66,270       (66,270)
Cancellation of warrants issued                                         -                -           (13,345)       13,345 
Cancellation of shares accrued but not                                                                                     
  issued ($.001 per share)                                              -                -               (90)            - 
Issuance of stock for consulting services                               -                -           311,824             - 
Issuance of stock in connection with                                                                                       
  private financing agreement                                                                                              
  ($.05 per share)                                                      -                -           248,750             - 
Exercise of warrants ($.05 per share)                                   -                -           248,750             - 
Issuance of stock for technology rights                                                                                    
  ($.15 per share)                                                      -                -           599,000             - 
Issuance of stock for price reset                                       -                -              (438)            - 
Sale of Series B Convertible Preferred                                                                                     
  Stock                                                                 -                -           174,886             - 
Obligation satisfied by issuance of                                                                                        
  Markland stock                                                        -                -           300,000             - 
Amortization of unearned compensation                                   -                -             9,960       588,751 
Effect of exchange agreement with                                                                                        - 
  Markland                                                              -                -        (1,854,201)            - 
Effect of exchange agreement with Markland -                                                                               
  Markland preferred stock                                              -                -        (3,918,750)            - 
Common stock of Markland issued for                                                                                        
  directors compensation                                                -                -             4,000             - 
Preferred stock dividends - parent                                      -                -         3,625,359             - 
Preferred stock dividends - Markland                                    -                -            15,989             - 
Gain on sale of Markland common stock                                   -                -           340,000             - 
Net loss                                                                -                -                 -             - 
                                                              ------------    -------------      ------------  ------------
Balance - December 31, 2002                                    (3,531,976)    $ (8,477,721)      $69,087,322   $   (86,085)
                                                              ============    =============      ============  ============

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

                                                            F-20                                                           

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                                  EUROTECH, LTD. AND SUBSIDIARIES                                
                                   (A Development Stage Company)                                 

                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIENCY) EQUITY                 
                 FOR THE PERIOD FROM INCEPTION (MAY 26, 1995) TO DECEMBER 31, 2002               


                                                        Deficit Accumulated                      
                                                             During the                          
                                                         Development Stage              Total    
                                                           -------------            -------------
                                                                                                 
For the Year Ended December 31, 2002:                                                            
------------------------------------                                                             

Balance - January 1, 2002                                 $(49,370,930)              $ 4,032,612 

Issuance of stock on conversion of                                                               
  convertible debentures including interest                                                      
  ($.60 per share)                                                    -                3,574,419 
Value assigned to warrants issued on                                                             
  conversion of convertible debentures                                -                  390,000 
Issuance of preferred stock                                                                      
  ($100 per share)                                                    -                2,500,000 
Issuance of stock for price reset                                     -                        - 
Value assigned to options issued to                                                              
  consultants                                                         -                        - 
Modification of warrants issued                                       -                   77,000 
Issuance of stock for consulting services                                                        
  ($0.31 to $0.64 per share)                                          -                    6,397 
Value assigned to options issued for                                                             
  legal services                                                      -                   47,250 
Offering cost - preferred stock                                       -                 (149,620)
Issuance of stock for price reset                                     -                        - 
Value assigned to options issued for                                                             
  consulting services                                                 -                        - 
Cancellation of warrants issued                                       -                        - 
Cancellation of shares accrued but not issued                                                    
  ($.001 per share)                                                   -                     (120)
Issuance of stock for consulting services                             -                  311,837 
Issuance of stock in connection with                                                             
  private financing agreement                                                                    
  ($.05 per share)                                                    -                  250,000 
Exercise of warrants ($.05 per share)                                 -                  250,000 
Issuance of stock for technology rights                                                          
  ($.15 per share)                                                    -                  600,000 
Issuance of stock for price reset                                     -                        - 
Sale of Series B Convertible Preferred                                                           
  Stock                                                               -                  175,000 
Obligation satisfied by issuance of                                                              
  Markland stock                                                      -                  300,000 
Amortization of unearned compensation                                 -                  598,711 
Effect of exchange agreement with                                                                
  Markland                                                            -               (1,854,201)
Effect of exchange agreement with Markland -                                                     
  Markland preferred stock                                            -               (3,918,750)
Common stock of Markland issued for                                                              
  directors compensation                                              -                    4,000 
Preferred stock dividends - parent                           (3,625,359)                       - 
Preferred stock dividends - Markland                                  -                   15,989 
Gain on sale of Markland common stock                                 -                  340,000 
Net loss                                                    (12,443,396)             (12,443,396)
                                                           -------------            -------------
Balance - December 31, 2002                                $(65,439,685)            $ (4,892,872)
                                                           =============            =============

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

                                               F-21                                              

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                                             EUROTECH, LTD. AND SUBSIDIARIES                                           
                                              (A Development Stage Company)                                            

                                          CONSOLIDATED STATEMENTS OF CASH FLOWS                                        


                                                                                                       For the Period  
                                                            For the Years Ended December 31,           from Inception  
                                                   -------------------------------------------------  (May 26, 1995) to
                                                       2002               2001             2000       December 31, 2002
                                                   -------------     -------------     -------------  -----------------
                                                                                                                       
CASH FLOWS FROM OPERATING ACTIVITIES                                                                                   
  Net loss                                         $(12,443,396)     $ (8,760,235)     $ (9,872,789)    $(61,814,326)  
  Adjustments to reconcile net loss to                                                                                 
    net cash used in operating activities:                                                                             
      Depreciation and amortization                   2,159,315         1,899,346         1,631,237        5,848,254   
      Amortization of deferred and                                                                                     
        unearned financing costs                             --                --                --       13,276,619   
      Loss on impairment of technology                                                                                 
        rights (EKOR)                                 3,084,947                --                --        3,084,947   
      Stock issued for license                               --                --                --           37,500   
      Compensatory element of stock                                                                                    
        issuances                                     1,270,075           535,031           925,717        6,514,729   
      Modification of warrants issued                        --                --                --          123,500   
      Issuance of stock in settlement                                                                                  
        of litigation                                        --                --                --          456,278   
      Debt conversion expense                           390,000                --                --          390,000   
      Minority interest in subsidiary                    64,369                --                --           64,369   
   Changes in assets (increase) decrease:                                                                              
      Prepaid expenses and other current                                                                               
         assets                                          33,427          (191,565)          (62,075)        (220,413)  
       Other assets                                     224,039             3,588          (217,876)              --   
   Changes in liabilities increase (decrease):                                                                         
        Accounts payable and accrued                                                                                   
          liabilities                                 1,339,273          (342,149)          118,242        4,062,523   
        Deferred revenue                                     --          (225,000)               --               --   
                                                   -------------     -------------     -------------    -------------  
   NET CASH USED IN OPERATING ACTIVITIES             (3,877,951)       (7,080,984)       (7,477,544)     (28,176,020)  
                                                   -------------     -------------     -------------    -------------  
CASH FLOWS FROM INVESTING ACTIVITIES                                                                                   
  Capital expenditures                                     (940)          (67,776)         (176,610)        (287,518)  
  Patent costs                                               --                --                --          (31,358)  
                                                   -------------     -------------     -------------    -------------  
   NET CASH USED IN INVESTING ACTIVITIES                   (940)          (67,776)         (176,610)        (318,876)  
                                                   -------------     -------------     -------------    -------------  
CASH FLOWS FROM FINANCING ACTIVITIES                                                                                   
  Advance on sale of common stock                       175,000                --                --          175,000   
  Proceeds from sale of Series B 5%                                                                                    
    Convertible Preferred stock                         175,000                --                --          175,000   
  Proceeds from exercise of stock options                    --                --            16,500           16,650   
  Net proceeds from sale of common                                                                                     
    stock                                               250,000         5,090,000        15,499,970       27,026,970   
  Net proceeds from issuance of Series A                                                                               
    3% Convertible Preferred Stock                    2,350,380                --                --        2,350,380   
  Proceeds from notes payable                           260,000                --                --          710,000   
  Proceeds from exercise of warrants                    250,000            55,000           437,500        1,069,500   
  Offering costs                                             --                --                --           (2,898)  
  Repayment by stockholders                                  --                --                --            3,000   
  Repayment of notes payable                                 --                --          (400,000)        (400,000)  
  Proceeds from bridge notes                                 --                --                --        2,000,000   
  Repayment of bridge notes                                  --                --                --       (2,000,000)  

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

                                                          F-22                                                         

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                                           EUROTECH, LTD. AND SUBSIDIARIES                                            
                                            (A Development Stage Company)                                             

                                        CONSOLIDATED STATEMENTS OF CASH FLOWS                                         


                                                                                                      For the Period  
                                                             For the Years Ended December 31,         from Inception  
                                                      ---------------------------------------------  (May 26, 1995) to
                                                          2002             2001           2000       December 31, 2002
                                                      -------------    -----------    -------------  -----------------
                                                                                                                      
CASH FLOWS FROM FINANCING ACTIVITIES                                                                                  
  (Continued)                                                                                                         
    Proceeds from sale of common stock                                                                                
      of Markland subsidiary                          $    340,000     $       --     $         --    $    340,000    
    Proceeds from Convertible Debentures                        --             --               --       7,000,000    
    Repayment of Convertible Debentures                         --       (500,000)              --        (500,000)   
    Borrowings from stockholders                                --             --               --         561,140    
    Repayment to stockholders                                   --             --               --        (561,140)   
    Deferred financing costs                                    --             --               --        (604,150)   
    Purchase of treasury stock                                  --             --       (8,477,721)     (8,477,721)   
                                                      -------------    -----------    -------------   -------------   
   NET CASH PROVIDED BY FINANCING                                                                                     
     ACTIVITIES                                          3,800,380      4,645,000        7,076,249      28,881,731    
                                                      -------------    -----------    -------------   -------------   
(DECREASE) INCREASE IN CASH                                (78,511)    (2,503,760)        (577,905)        386,835    

CASH - BEGINNING                                           465,346      2,969,106        3,547,011              --    
                                                      -------------    -----------    -------------   -------------   
CASH - ENDING                                         $    386,835     $  465,346     $  2,969,106    $    386,835    
                                                      =============    ===========    =============   =============   

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                                     

  Cash paid during the year for:                                                                                      
    Interest                                          $         --     $   43,889     $    508,244    $    824,691    
                                                      =============    ===========    =============   =============   
    Income taxes                                      $         --     $       --     $         --    $         --    
                                                      =============    ===========    =============   =============   

SUPPLEMENTAL DISCLOSURE OF FINANCING INFORMATION:                                                                     

  Consulting, legal, financing costs,                                                                                 
    commissions and accrued expenses                                                                                  
    satisfied by issuance of common stock                                                                             
    and stock options                                 $         --     $       --     $         --    $  2,555,733    
                                                      =============    ===========    =============   =============   
  Acquisition of technology rights by                                                                                 
    issuance of common stock                          $         --     $       --     $         --    $ 10,547,688    
                                                      =============    ===========    =============   =============   
  Conversion of convertible debentures and                                                                            
    interest to common stock                          $  3,574,419     $  691,857     $         --    $  5,475,840    
                                                      =============    ===========    =============   =============   
  Notes payable and accrued interest                                                                                  
    satisfied by issuance of common stock             $         --     $       --     $         --    $     66,489    
                                                      =============    ===========    =============   =============   
  Increase of technology rights by                                                                                    
    issuance of common stock                          $    675,000     $       --     $         --    $    675,000    
                                                      =============    ===========    =============   =============   
  Assumption of indebtedness and preferred                                                                            
    stock related to Markland Exchange                $  5,772,951     $       --     $         --    $  5,772,951    
                                                      =============    ===========    =============   =============   

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

                                                        F-23                                                          

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 EUROTECH, LTD. AND SUBSIDIARIES
 (A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  1 - BUSINESS DESCRIPTION, GOING CONCERN AND MANAGEMENT PLANS              

Eurotech, Ltd. and Subsidiaries (the "Company") is a development stage          
technology transfer, holding, marketing and management company, formed to       
commercialize new or existing but previously unrecognized technologies, with a  
particular current emphasis on technologies developed by prominent research     
institutes and individual researchers in the United States, former Soviet Union 
and in Israel, and to license those technologies for business and other         
commercial applications principally in the United States, Western and Central   
Europe, Ukraine, and Russia. Since the Company's formation, it has acquired     
development and marketing rights to a number of technologies by purchase,       
assignments, and licensing arrangements. The Company's portfolio of             
technologically advanced products includes: (a) proprietary materials created to
specifically solve the serious problems of how nuclear and other hazardous      
wastes are cost effectively contained, (b) advanced performance materials for   
use in industrial products such as coatings and paints, (c) acoustic core       
technologies, including nuclear remediation sites, marine dredging, oil         
exploration sites, illicit material detection and (d) cryptographic systems for 
secure communications, all of which can be used in homeland and environmental   
security. The Company intends to commercialize its technologies using various   
financial and transactional vehicles such as technology transfers, licensing,   
joint ventures, strategic alliances, and distribution agreements. To date, the  
Company has not generated any substantial revenues from operations.             

The accompanying consolidated financial statements have been prepared in        
conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern.      
However, for the years ended December 31, 2002, 2001 and 2000, the Company      
incurred net losses of approximately $12,443,000, $8,760,000 and $9,873,000,    
respectively, and as of December 31, 2002, had a working capital deficiency of  
approximately $3,159,000. The Company has limited finances and requires         
additional funding in order to accomplish its growth objectives and marketing of
its products and services. There is no assurance that the Company can reverse   
its operating losses, or that it can raise additional capital to allow it to    
expand its planned operations. These factors raise substantial doubt about the  
Company's ability to continue as a going concern. Management's plan in this     
regard is to obtain other debt and equity financing until profitable operation  
and positive cash flows are achieved and maintained.                            

The Company funded its operations during 2002, 2001 and 2000 through sales of   
its Series A non-voting 3% Convertible Preferred stock, Series B non-voting 5%  
Convertible Preferred stock, common stock, sale of a subsidiary's common stock, 
proceeds from notes and convertible notes and the exercise of options and       
warrants, resulting in approximate net proceeds to the Company of               
$3,800,000, $5,145,000 and $15,954,000, respectively. The Company is            
exploring other financing alternatives, including private placements,           
acquisitions through the Company's public consolidated subsidiary and other     
offerings.                                                                      

The Company's ability to continue as a going concern is dependent upon obtaining
additional financing. These financial statements do not include any adjustments 
relating to the recoverability of recorded asset amounts that might be necessary
as a result of the above uncertainty.                                           

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                            

Consolidation Policy                                                            
--------------------                                                            

The accompanying consolidated financial statements include the accounts of      
Eurotech, Ltd. (a district of Columbia corporation) and its subsidiaries,       
Crypto.com, Inc. ("Crypto"), and commencing December 19, 2002 Markland          
Technologies, Inc. ("Markland") and its subsidiary, Secured Technology, Inc.    
("STI"). All significant intercompany accounts and transactions have been       
eliminated in consolidation.                                                    

Exchange Agreement - Markland                                                   
-----------------------------                                                   

On December 19, 2002, the Company completed an exchange agreement with Markland,
a publicly-held, development-stage emerging technologies firm based in New      
Haven, Connecticut, pursuant to which the Company agreed to license all of its  
rights to the Acoustic Core technology relating to illicit materials detection  
and exchange all rights related to certain cryptology technology held by Crypto 
for 239,927,344 shares of Markland, representing approximately 80% of the       
outstanding common shares at the time of closing.                               

The exchange has been accounted for as an asset transfer from the Company to its
Markland subsidiary. At the date of the exchange, Markland had no revenue from  
continuing operations and the carrying value of its assets was $-0- and its     
liabilities approximated $1.8 million. In addition, at the date of the exchange,
Markland had outstanding 5,225 shares of Preferred Stock with a liquidation     
preference of $5,225,000 (see Note 10). The liquidation preference, less        
$1,306,250 attributed to the value of a beneficial converstion feature, was     
recorded at the date of the exchange as minority interest. The effect of the    
Markland exchange on the consolidated balance sheet was to increase minority    
interest by $3.9 million, increase liabilities by approximately $1.8 million and
decrease additional paid-in capital by $5.7 million. The Company includes the   
results of operations of Markland from the exchange date, December 19, 2002. No 
proforma financial information has been provided due to the insignificant       
historical continuing operations of Markland.                                   

Equity Method of Accounting for Unconsolidated Foreign Affiliates               
-----------------------------------------------------------------               

Investment in companies in which the Company has a 20% to 50% interest and has  
the ability to exercise significant influence over operating and financial      
policies are accounted for on the equity method. In addition, investments in    
Israeli-based technology companies, in which the Company has a 52% to 57%       
interest in, have been accounted for under the equity method because the Company
does not have sufficient control in order to consolidate such entities,         
including, among other things, no control over management, board of directors   
and financial decisions. However, as of December 31, 2002, such investees do not
have any revenue nor any significant assets and liabilities. (See Note 3d)      

F-25

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                

Equity Method of Accounting for Unconsolidated Foreign Affiliates (Continued)   
-----------------------------------------------------------------               

At December 31, 2002, investments in companies accounted for under the equity   
method consist of the following foreign companies, which are located in Israel: 

 Chemonol, Ltd. ("Chemonol")               57%
 Rademate, Ltd. ("Rademate")               52%
 Comsyntech, Ltd. ("Comsyntech")           52%
 Remptech, Ltd. ("Remptech")               50%
 Sorbtech, Ltd. ("Sorbtech")               52%
 Amsil, Ltd. ("Amsil")                     52%
 Corpem, Ltd. ("Corpem")                   20%

Gain on Issuance of Stock by Subsidiaries                                       
-----------------------------------------                                       

At the time a subsidiary sells its stock to unrelated parties at a price in     
excess of its book value, the Company's net investment in that subsidiary       
increases. If at that time the subsidiary is not a newly-formed, non-operating  
entity, nor a research and development, start-up or development stage company,  
nor is there question as to the subsidiary's ability to continue in existence,  
the Company records the increase in its consolidated statements of operations   
operations. Otherwise, the increase is reflected in additional paid-in capital  
in the Company's consolidated statements of stockholders' (deficiency) equity.  

Cash and Cash Equivalents                                                       
-------------------------                                                       

The Company considers all short-term highly liquid investments with a maturity  
date of three months or less when purchased to be cash equivalents.             

Property and Equipment                                                          
----------------------                                                          

The cost of property and equipment is depreciated over the estimated useful     
lives of the related assets. Leasehold improvements are amortized over the      
lesser of the term of the related lease or the estimated useful lives of the    
assets. Depreciation is computed on the straight-line method for financial      
accounting purposes over 5 to 7 years. Maintenance and repairs are charged to   
operations when incurred. Betterments and renewals are capitalized. When        
machinery and equipment are sold or otherwise disposed of, the asset account and
related accumulated depreciation account are relieved, and any gain or loss is  
included in operations.                                                         

Patent Costs                                                                    
------------                                                                    

Patent costs are being amortized on a straight-line basis over 17 years, which  
represent both the statutory and economic lives of the patents.                 

F-26

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                

Income Taxes                                                                    
------------                                                                    

Income taxes are accounted for in accordance with Statement of Financial        
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". SFAS No.  
109 employs an asset and liability method of accounting for income taxes. Under 
the asset and liability method, deferred income taxes are recognized for tax    
consequences of temporary differences by applying enacted statutory tax rates   
applicable to future years to the difference between the financial statement    
carrying amounts and the tax bases of existing assets and liabilities. Under    
SFAS No. 109, the effect on deferred income taxes of a change in tax rates is   
recognized in the period that includes the enactment date.                      

Use of Estimates                                                                
----------------                                                                

The preparation of financial statements in accordance 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.  

Revenue Recognition                                                             
-------------------                                                             

The Company expects that it will derive substantially all of its revenue from   
the sale, licensing and sub-licensing of technology. Revenue from the sale of   
technology will be recognized in the year of sale. Revenue from licensing and   
sub-licensing will be recognized in the periods when the fees have been earned. 

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

Research and development expenditures are charged to expense as incurred, unless
they are reimbursed under specific contracts. The Company capitalizes costs     
related to acquired technologies that have achieved technological feasibility   
and have alternative uses. Acquired technologies, which are in-process at the   
date of acquisition or have no alternative uses are expensed as research and    
development costs. Losses incurred on the equity basis in the Company's interest
in seven Israeli research and development companies are included in research and
development expense. The Company's share of losses from its Israeli investees   
approximates the funding payments under various agreements discussed in Note 3e.
The Company recognizes its share of losses from Israeli investees during the    
quarter that the funding payments are made. In addition, expenditures in        
connection with technology licensing agreements concluded during the years ended
December 31, 2002, 2001 and 2000, aggregate $-0-, $-0- and $250,000,            
respectively, and were charged to research and development (see Note 3).        

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                

Capitalized Software Development Costs                                          
--------------------------------------                                          

Capitalization of computer software development costs begins upon the           
establishment of technological feasibility. Technological feasibility for the   
Company's computer software is generally based upon achievement of a detail     
program design free of high-risk development issues and the completion of       
research and development on the product hardware in which it is to be used. The 
establishment of technological feasibility and the ongoing assessment of        
recoverability of capitalized computer software development costs requires      
considerable judgment by management with respect to certain external factors,   
including, but not limited to, technological feasibility, anticipated future    
gross revenue, estimated economic life and changes in software and hardware     
technology.                                                                     

Amortization of capitalized computer software development costs commences when  
the related products become available for general release to customers.         
Amortization is provided on a product by product basis. The annual amortization 
is the greater of the amount computed using (a) the ratio that current gross    
revenue for a product bears to the total of current and anticipated future gross
revenue for that product, or (b) the straight-line method over the remaining    
estimated economic life of the product.                                         

The Company periodically performs reviews of the recoverability of such         
capitalized software costs. At the time a determination is made that capitalized
amounts are not recoverable based on the estimated cash flows to be generated   
from the applicable software net realizable value, any remaining capitalized    
amounts are written-off.                                                        

Advertising                                                                     
-----------                                                                     

Advertising costs are charged to operations when incurred. Advertising expense  
was $-0-, $2,405 and $8,732, respectively, for the years ended December 31,     
2002, 2001 and 2000, respectively.                                              

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                

Stock-Based Compensation                                                        
------------------------                                                        

The Company follows SFAS No. 123, "Accounting for Stock-Based Compensation."    
SFAS No. 123 establishes accounting and reporting standards for stock-based     
employee compensation plans. This statement allows companies to choose between  
the fair value based method of accounting as defined in this statement and the  
intrinsic value based method of accounting as prescribed by Accounting          
Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to     
Employees."                                                                     

The Company has elected to continue to follow the accounting guidance provided  
by APB 25, as permitted for stock-based compensation relative to the Company's  
employees. Stock and options granted to other parties in connection with        
providing goods and services to the Company are accounted for under the fair    
value method as prescribed by SFAS 123.                                         

In December 2002, the Financial Accounting Standard Board ("FASB") issued SFAS  
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - 
an Amendment of SFAS Statement No. 123". This statement amends SFAS No. 123 to  
provide alternative methods of transition for a voluntary change to the fair    
value-based method of accounting for stock-based employee compensation. In      
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to    
require prominent disclosures in both annual and interim financial statements   
about the method of accounting for stock-based employee compensation and the    
effect of the method used on reported results. SFAS No. 148 also requires that  
those effects be disclosed more prominently by specifying the form, content, and
location of those disclosures. We have adopted the increased disclosure         
requirements of SFAS No. 148 for the fiscal year ended December 31, 2002.       

The additional disclosures required by SFAS No. 148 are as follows:             

                                                        [Enlarge/Download Table]

                                                                        Years Ended December 31,           
                                                                2002              2001            2000     
                                                           -------------      ------------    -------------
                                                                                                           
Net loss attributable to common stockholders, as reported  $(16,068,755)      $(8,760,235)    $ (9,872,789)
Add:  Stock-based employee compensation expense                                                            
        included in reported net loss applicable to                                                        
        common stockholders                                      62,580            65,580           41,723 
Less: Total stock-based employee compensation expense                                                      
        determined under the fair value-based method of                                                    
        all awards                                             (980,000)         (172,500)      (5,024,011)
                                                           -------------      ------------    -------------
Proforma Net Loss Attributable to Common Stockholders      $(16,986,175)      $(8,867,155)    $(14,855,077)
                                                           =============      ============    =============
Basic and Diluted net loss attributable to common                                                          
  stockholders:                                                                                            
    As reported                                                                                            
    Proforma                                               $       (.23)      $      (.18)    $       (.23)
                                                           =============      ============    =============
                                                           $       (.24)      $      (.18)    $       (.33)
                                                           =============      ============    =============

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                

Amortization of Unearned Financing Costs and Debt Discounts                     
-----------------------------------------------------------                     

Financing costs and beneficial conversion features related to debt financings   
are being amortized over the period of the related debt agreements.             

Loss Per Common Share                                                           
---------------------                                                           

Basic loss per common share is computed based on weighted average shares        
outstanding and excludes any potential dilution. Diluted loss per share reflects
the potential dilution from the exercise or conversion of all dilutive          
securities into common stock based on the average market price of common shares 
outstanding during the period. No effect has been given to outstanding options, 
warrants or convertible preferred stock in the diluted computation, as their    
effect would be antidilutive.                                                   

Fair Value of Financial Instruments                                             
-----------------------------------                                             

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments" requires  
that the Company disclose estimated fair values of financial instruments. The   
carrying amounts reported in the consolidated balance sheets for current assets 
and current liabilities qualifying as financial instruments are a reasonable    
estimate of fair value. The carrying amount of long-term debt is estimated to   
approximate fair value based on the current rates offered to the Company for    
debt of the same remaining maturities.                                          

Segment Reporting                                                               
-----------------                                                               

SFAS No. 131, "Disclosures About Segments of an Enterprise and Related          
Information", requires a new basis of determining reportable business segments, 
i.e., the management approach. This approach requires that business segment     
information used by management to assess performance and manage company         
resources be the source for information disclosure. On this basis, the Company  
is organized and operates as one business segment to acquire and manage the     
commercialization of advanced technologies from research institutes and         
individual inventors worldwide and to select the optimum approach to            
commercialization from acquiring technologies through licensing, joint venture, 
spinning-out or sale.                                                           

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                

Impairment of Long-Lived Assets                                                 
-------------------------------                                                 

Pursuant to SFAS No. 144, "Accounting for the Impairment or Disposal of         
Long-Lived Assets", the Company evaluates its long-lived assets, including      
property and equipment, intangibles and technology rights, for financial        
impairment and continues to evaluate them as events or changes in circumstances 
indicate that the carrying amount of such assets may not be fully recoverable.  

The Company evaluates the recoverability of long-lived assets by measuring the  
carrying amount of the assets against the estimated undiscounted future cash    
flows associated with them. At the time such evaluations indicate that the      
future undiscounted cash flows of certain long-lived assets are not sufficient  
to recover the carrying value of such assets, the assets are adjusted to their  
fair values.                                                                    

During the year ended December 31, 2002, the Company recorded an impairment loss
of $3,084,947 related to its EKOR technology rights (see Note 3a).              

Reclassifications                                                               
-----------------                                                               

Certain prior year balances have been reclassified to conform to the current    
year presentation.                                                              

Impact of Recently Issued Accounting Standards                                  
----------------------------------------------                                  

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statement No.  
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections".   
SFAS No. 145 requires that gains and losses from extinguishment of debt be      
classified as extraordinary items only if they meet the criteria in Accounting  
Principles Board Opinion No. 30 ("Opinion No. 30"). Applying the provisions of  
Opinion No. 30 will distinguish transactions that are part of an entity's       
recurring operations from those that are unusual and infrequent that meet the   
criteria for classification as an extraordinary item. The Company is required to
adopt SFAS No. 145 no later than the first quarter of fiscal 2003, although     
early adoption is allowed. The Company has not yet evaluated the impact from    
SFAS No. 145 on its financial position and results of operations.               

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)                

Impact of Recently Issued Accounting Standards (Continued)                      
----------------------------------------------                                  

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated    
with Exit or Disposal Activities." SFAS No. 146 addresses financial accounting  
and reporting for costs associated with exit or disposal activities and         
nullified Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for 
Certain Employee Termination Benefits and Other Costs to Exit an Activity       
(including certain costs incurred in a restructuring." SFAS No. 146 requires    
that a liability for a cost associated with an exit or disposal activity be     
recognized when the liability is incurred. These costs include lease, costs to  
consolidate facilities or relocate employees, and certain termination benefits  
provided to employees that are involuntarily terminated under the terms of a    
one-time benefit arrangement. A fundamental conclusion reached by the FASB in   
this statement is that an entity's commitment to a plan, by itself, does not    
create a present obligation to others that meets the definition of a liability. 
SFAS No. 146 also establishes that fair value is the objective for initial      
measurement of the liability. The provisions of this statement are effective for
exit or disposal activities that are initiated after December 31, 2002, with    
early application encouraged. The Company has not yet determined the impact of  
SFAS No. 146 on its financial position and results of operations, if any.       

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of    
Indebtedness of Others" ("FIN 45"). FIN 45 requires a company, at the time it   
issues a guarantee, to recognize an initial liability for the fair value of     
obligations assumed under the guarantee and elaborates on existing disclosure   
requirements related to guarantees and warranties. The initial recognition      
requirements of FIN 45 are effective for guarantees issued or modified after    
December 31, 2002 and adoption of the disclosure requirements are effective for 
the Company as of December 31, 2002. Adoption of the disclosure requirements on 
FIN 45 did not have a significant impact on the Company's consolidated statement
of financial position or results of operations. The Company does not expect the 
adoption of the recognition requirements of FIN 45 will have a significant      
impact on its consolidated financial position or results of operations.         

In January 2003, the FASB issued FASB Interpretation No. 46 (" FIN 46"),        
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51." 
FIN 46 requires certain variable interest entities to be consolidated by the    
primary beneficiary of the entity if the equity investors in the entity do not  
have the characteristics of a controlling financial interest or do not have     
sufficient equity at risk for the entity to finance its activities without      
additional subordinated financial support from other parties. FIN 46 is         
effective for all new variable interest entities created or acquired after      
January 31, 2003. For variable interest entities created or acquired prior to   
February 1, 2003, the provisions of FIN 46 must be applied for the first interim
or annual period beginning after June 15, 2003. The Company is currently        
evaluating the effect that the adoption of FIN 46 will have on its results of   
operations and financial condition.                                             

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  3 - TECHNOLOGY, RESEARCH, COLLABORATION, INVESTMENTS, TRANSFER AND        
LICENSING AGREEMENTS                                        

a)  EKOR Technology                                                             
---------------                                                         

The Company funds the commercialization of certain technologies developed in the
former Soviet Union by scientists and researchers at the I.V. Kurchatov         
Institute ("Kurchatov"), other institutes associated therewith, and the         
Euro-Asian Physical Society ("EAPS"), collectively the "Scientists."            

Pursuant to an agreement dated August 26, 1996, with Advanced Technology        
Industries, Inc. ("ATI"), a Delaware corporation, which at such time was        
beneficially owned by ERBC Holdings, Ltd. ("ERBC") and individual Russian       
scientists, researchers and academics, who were affiliated with Kurchatov and   
EAPS, the Company agreed to pay ATI 50% of the net profits (after deducting     
development costs and related expenses) derived from the sale, license or       
commercialization of a silicon geopolymer compound technology known as EKOR. The
managing director and one former business representative of ERBC were then      
stockholders of the Company.                                                    

In September 1996, the Company entered into a licensing agreement with ERBC,    
whereby ERBC sublicensed to the Company its license to use and exploit the EKOR 
technology in the United States, Ukraine, Canada, China, Japan, Republic of     
Korea and all European countries who are members of the European Patent         
Agreement. The term of the license expires on August 1, 2014. Under this        
agreement, the Company is obligated to pay royalties equal to 3%, increasing in 
May of 2005 to 3.1% of its revenue from such technology. In addition, the       
Company agreed to continue to fund EAPS $10,000 per month until May 15, 2005.   

Disbursements made by the Company related to the above described collaboration  
arrangement, including expenses related to the EKOR technology, are charged to  
research and development expenses and amounted to approximately $289,000,       
$400,000 and $979,000, respectively, during the years ended December 31, 2002,  
2001 and 2000.                                                                  

In an agreement, dated as of November 30, 1999, the Company purchased all of the
rights in EKOR held by ATI.                                                     

The total consideration provided to ATI for the acquired technology interest in 
EKOR totaled $8,047,687 and was being amortized over a 5-year period commencing 
November 30, 1999. Amortization expense related to this intangible asset was    
$1,609,537, $1,609,537 and $1,609,538 for the years ended December 31, 2002,    
2001 and 2000, respectively.                                                    

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  3 - TECHNOLOGY, RESEARCH, COLLABORATION, INVESTMENTS, TRANSFER AND        
LICENSING AGREEMENTS (Continued)                            

a)  EKOR Technology (Continued)                                                 
---------------                                                         

Loss on Impairment of EKOR Technology Rights                            
--------------------------------------------                            

At December 31, 2002, management concluded that certain conditions and events   
were such that impairment testing was required to be performed with respect to  
the technology rights of EKOR. In December of 2002, management reevaluated its  
estimated cash flows from the EKOR technology. Due to the absence of current    
sales and sales contracts and due to governmental budget constraints and lack of
funding available to the Company, the Company recorded an impairment loss of    
$3,084,947 during the quarter ended December 31, 2002.                          

The following table presents the carrying amounts of the technology rights of   
EKOR at December 31, 2002 and 2001:                                             

                                       2002             2001
                                       ------------     ------------

  Technology rights - EKOR            $ 8,047,687      $ 8,047,687

   Less:  Accumulated amortization      (4,962,740)      (3,353,203)

  Less:  Loss from impairment          (3,084,947)              --
                                       ------------     ------------
Total                                     
                                      $        --      $ 4,694,484
                                       ============     ============

b)  Acoustic Core                                                               
-------------                                                           

In an Agreement dated as of July 2001, and amended in October 2001, the Company 
acquired the rights to certain technologies for certain markets that are in-situ
remote sensing of toxic, nuclear waste material and explosives. To evaluate     
these technologies, the Company relied on an evaluation performed and completed 
by a certified independent third party appraisal firm. In connection with this  
transaction, the Company issued 2,500,000 fully paid and non-accessible shares  
of its restricted common stock, valued at $2,500,000, and is being amortized    
over a five-year period (life of long-term government contracts) commencing July
2001. Amortization expense related to this intangible asset was $492,361 and    
$232,527 for the years ended December 31, 2002 and 2001, respectively.          

During the year ended December 31, 2002, the Company capitalized software       
development costs of $675,000 for product enhancements related to this          
technology.                                                                     

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  3 - TECHNOLOGY, RESEARCH, COLLABORATION, INVESTMENTS, TRANSFER AND        
LICENSING AGREEMENTS (Continued)                            

c)  Exchange Agreement - Markland                                               
-----------------------------                                           

On December 19, 2002, in connection with the Exchange Agreement dated as of     
December 9, 2002, by and among Eurotech, Markland, Crypto, STI, ipPartners,     
Inc., Market LLC and James LLC (the "Exchange"), Eurotech agreed to license and 
transfer certain intellectual property to a newly-formed subsidiary of Markland,
STI, in exchange for 239,927,344 shares of Markland's newly issued common stock 
(the "Exchange Shares"). The Exchange Shares, on December 9, 2002, constituted  
80% of Markland's outstanding common stock making Markland a majority-owned     
subsidiary of Eurotech. In addition, as part of the agreement, ipPartners was   
issued 29,990,917 shares of Markland's common stock, valued at $300,000, in     
exchange for their forgiveness and discharge of certain obligations owed to     
ipPartners with respect to the property transferred to STI.                     

As a result of the Exchange and other subsequent stock issuances, the Company   
owned 78.12% of Markland's voting securities at December 31, 2002. Prior to the 
Exchange, Market LLC and James LLC controlled Markland. The Company's ownership 
interest in Markland will be diluted as Markland issues additional common shares
and in the event Markland's Series C Preferred Stock is converted into common   
shares.                                                                         

The rights licensed from Eurotech in the Exchange consist of certain proprietary
technology known as Acoustic Core used to detect illicit substances, and certain
cryptology technology held by the Company's subsidiary, Crypto.                 

d)  Investments in Israeli Technology Companies                                 
-------------------------------------------                             

During 1997 and 1998, the Company acquired a 20% interest in six separate       
Israeli technology, research and development companies. The Company made        
additional investments in these entities during 2002, 2001 and 2000 and,        
accordingly, increased its ownership interest in such investees. During 2001,   
the Company acquired a 20% interest in one additional Israeli investee. The     
Company's share of losses incurred from these research companies has been       
accounted for on the equity basis and is included in research and development   
expenses. The amount charged to research and development for the years ended    
December 31, 2002, 2001 and 2000 approximated $610,816, $344,393 and $1,781,006,
respectively, which reduced the Company's investment in these seven companies to
zero. The payments remitted to such investees were used to fund the investees'  
operating expenses for the corresponding period of each payment. The Company has
the right to suspend the payments under the agreements at any time.             

All seven of these investees' technologies are in the development stage and have
not generated any significant revenues to-date. During 2002 and 2001, the       
Company has temporarily curtailed five of the seven investees' operations.      

Six of the seven investees have each received research grants of $300,000 under 
an Israeli-backed incubator program. Each investee is to pay a royalty based on 
revenue generated from each technology up to a maximum of $300,000.             

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  3 - TECHNOLOGY, RESEARCH, COLLABORATION, INVESTMENTS, TRANSFER AND        
LICENSING  AGREEMENTS (Continued)                           

d)  Investments in Israeli Technology Companies (Continued)                     
-------------------------------------------                             

A summary of the investments in the seven Israeli technology research and       
development companies are as follows:                                           

                                                        [Enlarge/Download Table]

                                                                        Ownership                    
                          Year of            Description of            Interest at   Investments Made
                          Initial          Development-Stage           December 31,    During Last   
                         Investment            Company                     2002        Three Years   
                         ----------        -----------------           ------------  ----------------
                                                                                                     
Chemonol, Ltd.             1997      Hybrid non-isocyanate                  57%       2002 - $ -0-   
                                       polyurethane                                   2001 - $ 95,000
                                                                                      2000 - $265,000

Rademate, Ltd.    *        1998      Rapid biodegradable composite          52%       2002 - $ -0-   
                                       materials                                      2001 - $ -0-   
                                                                                      2000 - $370,000

Comsyntech, Ltd.  *        1997      Continuous combustion synthesis        52%       2002 - $ -0-   
                                       and continuous action reactor                  2001 - $ -0-   
                                                                                      2000 - $200,000

Remptech, Ltd.    *        1997      Cobalt and nickel powders              50%       2002 - $ -0-   
                                                                                      2001 - $ -0-   
                                                                                      2000 - $ 80,000

Amsil, Ltd.       *        1998      Highly stable organomineral            52%       2002 - $ -0-   
                                       polymers based on quarternary                  2001 - $ -0-   
                                       ammonium silicates                             2000 - $230,000

Sorbtech, Ltd.    *        1998      High capacity absorbent                52%       2002 - $ -0-   
                                                                                      2001 - $ -0-   
                                                                                      2000 - $260,000

Corpem, Ltd.     **        2001      Sulfochlorinated polyethylene          20%       2002 - $ 15,000
                                       coatings                                       2001 - $ 30,000
                                                                                      2000 - -0-     

For all seven investees              Common charges funded by Company                 2002 - $418,816
                                                                                      2001 - $219,393
                                                                                      2000 - $376,006

* Due to limited working capital, management decided to temporarily curtail the 
funding of the operations and further development of the technologies for five  
of the Israeli-based technology companies, Comsyntech, Ltd., Remptech, Ltd. and 
Sorbtech, Ltd. during year ended December 2001 and Rademate, Ltd. and Amsil,    
Ltd. during the first quarter of 2002. The Company may or may not choose to     
resume the funding of these five companies in the future.                       

** The Company has failed to make the 4th and last payment of $15,000 during    
2002 and upon notice will forfeit its interest in the incubator.                

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  3 - TECHNOLOGY RESEARCH, COLLABORATION, INVESTMENTS, TRANSFER AND         
LICENSING AGREEMENTS (Continued)                            

e)  Cryptology Technology                                                       
---------------------                                                   

During February 2000, the Company entered into an employment/development        
agreement with an individual to develop a cryptology technology. The Company    
formed Crypto.com, Inc. for the purpose of funding the development and          
commercialization of such technology. The Company is a 66% controlling          
shareholder of Crypto.                                                          

At December 31, 2001, the Company, through its subsidiary, Crypto, entered into 
a five year agreement to market, license and commercialize its cryptology       
technology. During the year ended December 31, 2002, Crypto terminated such     
licensing agreement relating to Crypto's technology with mutual consent.        

On December 9, 2002, in connection with the exchange agreement, the cryptology  
technology was transferred to Markland in exchange for certain shares of        
Markland's newly issued common stock (see Note 3(c)).                           

NOTE 4 - PROPERTY AND EQUIPMENT                                                 

Property and equipment consisted of the following:                              

                                    December 31,
                                   -------------------------
                                   2002           2001
                                   ----------     ----------

Machinery and equipment             $ 248,150      $ 247,210  
Leasehold improvements                 39,369         39,369  
                                   ----------     ----------
                                    287,519        286,579
Less:  Accumulated depreciation                               
        and amortization            (148,581)       (92,918)
                                   ----------     ----------
                                  $ 138,938      $ 193,661
                                   ==========     ==========

Depreciation expense for the years ended December 31, 2002, 2001 and 2000       
amounted to $55,663, $55,528 and $19,947, respectively.                         

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - PATENT COSTS                                                           

Patent costs consisted of the following:                                        

                                December 31,
                              --------------------
                              2002        2001
                              --------    --------

Cost of patents                     $31,358     $31,358       
Less:  Accumulated amortization      12,044      10,291       
                              --------    --------

                             $19,314     $21,067
                              ========    ========

Patent costs capitalized represent legal and other costs related to filing of   
patent applications in various countries.                                       

Amortization expense for the years ended December 31, 2002, 2001 and 2000       
amounted to $1,753, $1,753 and $1,753, respectively.                            

NOTE 6 - NOTES PAYABLE                                                          

Related Parties                                                                 
---------------                                                                 

On December 23, 2001, the Company converted accrued salaries and accrued        
consulting fees into five promissory notes with three employees and two         
consultants, totalling $212,187. The Company agreed to pay the principal and the
interest, at a rate per annum equal to 3.23%, on February 1, 2003. On December  
28, 2001, the Company issued 29,291 shares of its common stock valued at $.345  
per share to one of the consultants for the payment of one note. As of December 
23, 2002, the remaining principal balance was $202,091.                         

On August 1, 2002, the Company converted accrued salaries into two promissory   
notes, with two Israeli employees, totaling $164,000. The Company agreed to pay 
the principal and the interest at a rate per annum equal to 5% on August 1,     
2003.                                                                           

On November 1, 2002, the Company converted accrued salaries into two promissory 
notes, with two Israeli employees, totalling $96,000. The Company agreed to pay 
the principal and the interest at a rate per annum equal to 5% on November 1,   
2003.                                                                           

On December 4, 2002, Markland entered into a note payable agreement with Market 
LLC for the principal amount of $11,500. Principal, together with interest,     
which accrues at the rate of 10% per annum, are both due upon demand. As of     
December 31, 2002, accrued interest under this note was approximately $100.     

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 - NOTES PAYABLE (Continued)                                              

Secured Convertible Promissory Note                                             
-----------------------------------                                             

On December 10, 2002, Markland entered into a Restated and Amended Secured      
Convertible Revolving Credit Note Agreement for $500,000. Interest under this   
note accrues at an annual interest rate of 6% per annum. The principal and      
accrued interest under this note is due on June 30, 2004, however, may be       
prepaid by the Company at any time without penalty. As of December 31, 2002,    
approximately $2,000 of interest has been accrued on this note and is included  
in accrued expenses on the consolidated balance sheet.                          

The note may be converted at any time, in whole or in part, into shares of      
Markland's common stock. The total number of shares of common stock issuable    
upon conversion will be determined by dividing the principal amount of this note
being converted by 80% of the closing bid price of Markland's common stock based
on the average of the five trading days immediately preceding the date of       
conversion. The value of the beneficial conversion feature of $125,000 will be  
amortized as interest expense over the period ending June 30, 2004.             

NOTE 7 - 8% CONVERTIBLE DEBENTURES                                              

On February 23, 1998, the Company sold in a private placement a principal amount
of $3,000,000, 8% Convertible Debentures (the "Debentures"), originally due     
February 23, 2001.                                                              

The Debenture agreements permit the holders of the Debentures to convert the    
debt into shares of common stock at beneficial conversion rates based on the    
timing of the conversion.                                                       

On February 20, 2001, the Company entered into an agreement with the holders of 
the Debentures to extend the original due date of February 23, 2001 by one year 
to February 23, 2002.                                                           

On January 9, 2002, the Company converted $3,000,000 principal amount of the    
Debentures, plus the amount of all accrued and unpaid interest aggregating      
$574,419, into 6,000,369 shares of the Company's common stock in full           
satisfaction of the Debentures. In connection with the conversion, the Company  
issued a warrant to purchase 500,000 shares of common stock at an exercise price
of $1.00 per share. The warrants are exercisable over five years. The warrants  
were valued at $390,000 based on the Black-Scholes option pricing model and such
amount was recorded as a debt conversion expense during the year ended December 
31, 2002.                                                                       

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                              

Accounts payable and accrued liabilities consist of the following:              

                                                      December 31,
                                                      --------------------------
                                                     2002           2001
                                                      -----------    -----------

Liabilities from discontinued former                          
          subsidiary of Markland (a)                 $1,298,713     $       --
        Interest                                         26,956        547,953
        Insurance                                       113,644             --
        Professional fees                               746,857         53,475
        Rent                                             59,562             --
        Consulting fees                                 534,432        138,420
        Deferred compensation and board fees (b)        163,246             --
        Other                                           174,353        145,359
                                                      -----------    -----------
                                                     $3,117,763     $  885,207
                                                      ===========    ===========

(a) Represents liabilities related to two former subsidiaries of Markland, CWTel
and Quest Net Corp. The Company is currently determining which of the           
liabilities were discharged in the CWTel bankruptcy. Any adjustments as a result
of this review will be credited to paid-in capital.                             

(b) During the year ended December 31, 2002, three employees of the Company     
agreed to defer a certain percentage of their salaries, totaling $112,946.      
During the year ended December 31, 2002, six board members of the Company agreed
to defer their board fees totaling $50,300.                                     

NOTE 9 - INCOME TAXES                                                           

The components of deferred tax assets and liabilities are as follows:           

                                                  December 31,
                                                 -------------------------------
                                                 2002               2001
                                                 -------------     -------------

Deferred Tax Assets:                                          
          Net operating losses carryforwards    $ 17,600,000      $ 14,500,000
          Technology rights                        1,900,000           811,000
Capitalized research and                                  
            development expenses                   1,100,000         1,100,000
Compensatory element of stock                             
            issuances                                432,000           182,000
                                                 -------------     -------------
             Total Gross Deferred Tax Assets      21,032,000        16,593,000

           Less:  Valuation allowance             (21,032,000)      (16,593,000)
                                                 -------------     -------------
                 Net Deferred Tax Assets        $         --      $         --
                                                 =============     =============

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE  9 - INCOME TAXES (Continued)                                              

The net change in the valuation allowance for deferred tax assets was an        
increase of approximately $4,439,000.                                           

As of December 31, 2002, the Company had available approximately $51,872,000 of 
net operating losses ("NOL") for income tax purposes that may be carried forward
to offset future taxable income, if any. The NOL carryforwards for December 31, 
1997 and prior expire during the year 2011 through 2012, and the NOL subsequent 
to 1997 expire, if unused, 20 years from the year of loss. Pursuant to Section  
382 of the Internal Revenue Code, substantial restrictions are imposed on the   
utilization of net operating loss carryforwards in the event of an ownership    
change.                                                                         

           Year             Net Operating Losses
           ----             --------------------

        2011                  $  2,372,000
        2012                    12,423,000
        2018                     8,191,000
        2019                     5,443,000
        2020                     9,039,000
        2021                     7,834,000
        2022                     6,570,000
                               -------------
                              $ 51,872,000
                               =============

A reconciliation between the statutory federal income tax rate (34%) and the    
Company's effective rate is as follows:                                         

                                                   Year Ended December 31,
                                                  2002       2001       2000
                                                  -------     -------    -------

          Federal statutory rate                  (34.0)%     (34.0)%    (34.0)%
        Non-deductible expenses and losses        2.0         1.0        1.0
        Increase in valuation allowance          32.0        33.0       33.0
                                                  -------     -------    -------
             Effective rate                         -0- %       -0- %      -0- %
                                                  =======     =======    =======

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY                                     

Series A 3% Convertible Preferred Stock                                         
---------------------------------------                                         

On February 1, 2002, the Company amended its Articles of Incorporation to       
designate 25,000 of its 5,000,000 authorized preferred stock as a "Series A 3%  
Convertible Preferred Stock," par value $.01 per share, with a liquidation      
preference of $100 per share. In February 2002, the Company entered into a      
securities purchase agreement with Woodward LLC to purchase 25,000 shares of    
Series A 3% Convertible Preferred Stock for $2,500,000. Through December 31,    
2002, the Company received, from the sale of such Preferred Stock, $2,500,000,  
less commissions and expenses of $149,620.                                      

The holder of the Series A 3% Convertible Preferred Stock is entitled to receive
dividends at a rate of three percent per annum of the liquidation preference of 
$100 per share, which is fully cumulative. The dividends on the Series A 3%     
Convertible Preferred stock accrue from the date of issuance of each share and  
are payable semi-annually on June 30 and December 30 of each year, commencing on
June 30, 2002. The dividends on the Series A 3% Preferred Stock are payable only
when, as and if, declared by the Board of Directors out of funds legally        
available.                                                                      

At December 31, 2002, cumulative dividends in arrears on the Series A 3%        
Convertible Preferred Stock was $57,700.                                        

Pursuant to a registration rights agreement dated February 1, 2002, the         
purchaser of the Series A 3% Convertible Preferred stock was granted mandatory  
registration rights, which required the Company to complete the registration of 
such shares by August 20, 2002. The purchaser agreed to suspend this obligation 
until November 30, 2003.                                                        

The holder of the Series A 3% Convertible Preferred Stock has no voting rights. 
As of September 1, 2002, each Series A 3% Preferred Stock can be converted to   
fully paid and non-assessable shares of common stock, at the option of the      
holder by dividing $.50 into the liquidation preference. At the Company's       
option, all accrued or declared, but unpaid dividends on the Series A 3%        
Convertible Preferred Stock may be paid in cash or in common stock. Under a     
repricing rights agreement dated February 1, 2002, common shares issued upon    
conversion were subject to monthly repricing on or after October 1, 2002, if the
average bid price for any of the lowest five business days during the repricing 
period were not equal or greater than $3.618.                                   

On September 30, 2002, the Company entered into a termination and modification  
agreement with Woodward LLC, with respect to the repricing rights agreement, and
all repricing rights with respect to the Series A Convertible Preferred stock   
were satisfied in full in exchange for 17,000 shares of Series B 5% Convertible 
Preferred stock of the Company.                                                 

Under certain circumstances, the Company, at its option, may redeem the Series A
3% Convertible Preferred Stock at $732.60 per share.                            

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY (Continued)                         

Series A 3% Convertible Preferred Stock (Continued)                             
---------------------------------------                                         

In accordance with EITF Issue 00-27, "Application of EITF Issue No. 98-5 to     
Certain Convertible Instruments", in the third quarter of 2002, the Company     
recorded a non-cash preferred stock dividend in the amount of $2,350,380,       
representing the beneficial conversion feature that the holder of the Series A  
3% Convertible Preferred Stock received in connection with the repricing rights.
The pronouncement limits the amount of the beneficial conversion feature to the 
net proceeds received under the financing.                                      

On March 27, 2003, in connection with an exchange agreement, the Company agreed 
to retire all shares of its outstanding Series A 3% Convertible Preferred Stock 
(see Note 13, Subsequent Events).                                               

Series B 5% Convertible Preferred Stock                                         
---------------------------------------                                         

On October 8, 2002, the Company amended its Articles of Incorporation to        
designate 25,000 of its 5,000,000 authorized preferred stock as a "Series B 5%  
Convertible Preferred stock", par value $.01 per share, with a liquidation      
preference of $1,000 per share.                                                 

The holder of the Series B 5% Convertible Preferred stock is entitled to receive
dividends at a rate of five percent per annum of the liquidation preference of  
$1,000 per share, which is fully cumulative. The dividends on the Series B 5%   
Convertible Preferred stock accrue from the date of issuance of each share and  
are payable annually.                                                           

As discussed above, on September 30, 2002, the Company agreed to issue to       
Woodward LLC 17,000 shares (reduced by 5,725 shares as discussed in Note 10) of 
its Series B 5% Convertible Preferred stock in exchange for the cancellation of 
all repricing rights with respect to the Series A 3% Convertible Preferred      
Stock. In addition, during the year ended December 31, 2002, Woodward LLC       
purchased 175 shares of Series B 5% Convertible Preferred stock for $175,000.   

At December 31, 2002, cumulative dividends on the Series B 5% Convertible       
Preferred stock was $148,279.                                                   

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY (Continued)                         

Series B 5% Convertible Preferred Stock (Continued)                             
---------------------------------------                                         

At the option of the Company, each share of the Series B Preferred stock is     
redeemable by the Company for $1,000. The Series B Preferred stock was          
convertible by the holder at various prices as defined in the agreement.        
However, on March 27, 2003, in connection with an exchange agreement with       
Woodward LLC, the Company agreed to retire the rights of Woodward LLC to receive
shares of the Company's Series B 5% Convertible Preferred stock (see Note 13,   
Subsequent Events).                                                             

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY (Continued)                         

Sale of Common Stock - March 2, 2000                                            
------------------------------------                                            

On March 2, 2000, under the agreement with Woodward LLC, the Company sold       
1,200,000 shares of its common stock for net proceeds of $6,000,000. The        
agreement, pursuant to which these shares were sold, provides that the Company  
may be required to issue to Woodward LLC additional shares of common stock in   
the event that the average bid price in the market for outstanding Eurotech     
shares during September and October 2000 is below $6.58. On September 30, 2000, 
both parties agreed to amend its March 2000 agreement solely with respect to the
number of reset periods. It was agreed that there will be four reset periods,   
each of one calendar month duration (20 trading days) starting September 5,     
2000. Each reset period covers 25% of the shares originally sold previous to    
this agreement. All repricing rights have been satisfied. See below.            

Sale of Common Stock - April 24, 2000                                           
-------------------------------------                                           

On April 24, 2000, under the agreement with Woodward LLC, the Company sold to   
Woodward LLC 2,000,000 of its common shares, together with a warrant to purchase
500,000 shares at $10 per share, for $10,749,970 and certain other              
consideration. The agreement, pursuant to which these shares were sold, provides
that the Company may be required to issue to Woodward LLC additional shares of  
common stock under a repricing provision after March 31, 2001, if the average   
bid price of outstanding Eurotech shares is not then at least $9.375. The       
parties amended this agreement on June 29, 2000 to provide for the payment by   
Woodward LLC of a further $1,250,000. The Company received the $1,250,000 on    
March 13, 2001. All repricing rights have been satisfied. See below.            

Sale of Common Stock - March 31, 2001                                           
-------------------------------------                                           

The Company entered into an additional common stock purchase agreement with     
Woodward LLC on March 31, 2001. Pursuant to this agreement, the Company sold to 
Woodward LLC 1,333,333 shares for a payment of $3,000,000, less related expenses
of $160,000. The shares were subject to repricing after March 1, 2002, if the   
bid price of outstanding Eurotech shares for any lowest five business days      
during the repricing period is not equal to greater than $3.15. All repricing   
rights have been satisfied. See below.                                          

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY (Continued)                         

Modification and Amendments to Woodward LLC Agreements                          
------------------------------------------------------                          

On February 1, 2002, the Company and Woodward LLC entered into an agreement to  
extend and modify their existing agreement as further amended and modified      
effective as of April 12, 2002 as follows:                                      

- On February 1, 2002, the Company issued to Woodward LLC 6,000,000 shares of   
its common stock in satisfaction of the fourth and fifth repricing period from  
the April 2000 Agreement. On April 12, 2002, the Company committed to issue an  
additional 6,100,000 shares of its common stock in satisfaction of the sixth and
final repricing period pursuant to the April 2000 Agreement, of which 4,350,000 
shares were issued in April of 2002. During the quarter ended December 31, 2002 
the Company issued an additional 1,750,000 shares of common stock to complete   
this agreement.                                                                 

- The exercise price of the two warrants that were previously issued to Woodward
LLC for 200,000 and 500,000 shares, respectively, was reduced to $1.00 per      
share.                                                                          

On September 30, 2002, the Company and Woodward LLC entered into an agreement   
that provided for the termination of the outstanding repricing rights associated
with the common stock purchase agreement dated as of March 30, 2001. The Company
will issue to Woodward LLC 10,000,000 additional shares of common stock in full 
and complete satisfaction of canceling all outstanding repricing rights         
associated with the March 2001 agreement. In addition, subsequent to signing the
restructuring agreements, Woodward LLC has agreed to defer receiving the        
10,000,000 shares, subject to the approval by stockholders of an increase in the
Company's authorized capital.                                                   

On March 27, 2003, in connection with an exchange agreement with Woodward LLC,  
the Company agreed to exchange $1.069 million worth of Series G Preferred stock 
of HomeCom Communications, Inc. (see Note 13) in exchange for the cancellation  
of the obligation to issue to Woodward LLC 10 million shares of the Company's   
common stock (see Note 13, Subsequent Events).                                  

In accordance with EITF Issue 00-27, during the quarter ended December 31, 2002,
the Company recorded a non-cash preferred stock dividend in the amount of       
$1,069,000, representing the beneficial conversion feature related to the       
Company's obligation to issue 10 million shares of the Company's common stock.  
The beneficial conversion feature (preferred dividend) was recorded during the  
quarter ended December 31, 2002 because the contingency was eliminated.         

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY (Continued)                         

Pledge and Security Agreement                                                   
-----------------------------                                                   

On December 19, 2002, the Company executed a definitive Pledge and Security     
Agreement with Woodward LLC, pursuant to which Woodward LLC surrendered its     
rights to receive 5,725 shares of the Company's Series B 5% Convertible         
Preferred stock, in exchange for a security interest in the shares of Markland  
common stock. In addition, Woodward LLC was granted the right to receive 50% of 
the proceeds generated by the Company from the sale of Markland common stock as 
a payment against the liquidation preference of the Series A and Series B       
Convertible Preferred Stock held by Woodward LLC. The Company subsequently      
agreed with Woodward, LLC to terminate the Security Arrangement.                

Terminated Equity Agreement                                                     
---------------------------                                                     

In February of 2002, the Company entered into a Private Equity Agreement with an
investor under which the Company, at its option, could put shares to the        
investor to sell up to $10 million of its common shares. The common shares to be
sold must be registered to commence the sales of common stock under this        
agreement.                                                                      

As of December 31, 2002, the Company was notified that the above equity         
agreement was terminated.                                                       

Other Significant Common Stock Issuances During 2002                            
----------------------------------------------------                            

On January 9, 2002, the Company issued 6,000,369 shares of its common stock from
the conversion of $3,000,000 principal amount of February 1998 Convertible      
Debentures, plus the amount of all accrued and unpaid interest, totaling        
$3,574,419.                                                                     

On December 12, 2002, the Company sold 5,000,000 shares of common stock for     
$250,000 in connection with the private equity financing.                       

On December 12, 2002, a warrant holder exercised its warrants and purchased     
5,000,000 shares of common stock. Proceeds from warrants exercised total        
$250,000.                                                                       

On December 7, 2002, the Company issued 4,000,000 shares of its common stock for
capitalized technology development costs valued at $600,000.                    

As of December 31, 2002, the Company issued 70,145 shares of its common stock as
consideration for consulting services performed by various consultants, totaling
$318,234.                                                                       

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY (Continued)                         

Minority Interest in Subsidiary                                                 
-------------------------------                                                 

On December 9, 2002, Markland entered into an Exchange Agreement with Market LLC
and James LLC who agreed to exchange a note payable in the amount of $3,812,000 
and $1,413,000, respectively ($5,225,000 in value) of convertible promissory    
notes, inclusive of accrued interest for 5,225 shares (8,000 authorized, $.0001 
par value, $1,000 per share liquidation preference) of Markland's newly issued  
Series C Cumulative Convertible Preferred Stock, ("Series C Preferred Stock").  

The holders of the Series C Preferred Stock are entitled to receive dividends on
each share of preferred stock, which shall accrue on a daily basis at the rate  
of 5% per annum on the sum of the liquidation preference plus all accumulated   
and unpaid dividends thereon. These dividends shall accrue whether or not they  
have been declared or there are legally available funds with which to pay them, 
and at the option of the holders are payable either in cash or in unrestricted  
Markland common stock.                                                          

The Series C Preferred Stock is redeemable at any time by Markland, and cannot  
be converted by the holders without written permission for a period of 6 months 
following the issuance of the shares and then only 10% may be converted per     
month thereafter. The Series C Preferred Stock is convertible at the option of  
the holder at a conversion price ranging from 65% to 80% of the Markland common 
stock's market price at the time of the conversion, subject to an adjustment    
pursuant to any stock split. The amount of the associated discount is dependent 
upon the market price at the time of the conversion.                            

As of the date of issuance in accordance with EITF 98-5, "Accounting for        
Convertible Securities with Beneficial Conversion Features or Contingently      
Adjustable Conversion Ratios," the Company calculated that as of the date of    
issuance there was a beneficial conversion feature in the amount of $1,306,250. 
In accordance, with the EITF, Markland has recorded a deemed dividend of        
$48,380, in the quarter ended December 31, 2002, relating to the accretion of   
the beneficial conversion feature of the Series C Preferred Stock, which was    
included in minority expense. The deemed dividend increases the loss            
attributable to common stockholders in the calculation of basic and diluted net 
loss per common share and is included in stockholders' deficiency as a charge to
deficit accumulated during the development stage and a credit to additional     
paid-in capital. As the Series C Preferred Stock is convertible in stages over a
period of 16 months, Markland will record the accrual of the deemed dividend of 
the beneficial conversion feature over this same period.                        

In addition, Markland has determined that the maximum potential exposure under  
the beneficial conversion feature using the assumption that the fair market     
value of the Markland common stock is $.15 at the date of conversion and,       
accordingly, a conversion price at 65% of market value should be used, amounts  
to approximately $2,800,000.                                                    

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY (Continued)                         

Minority Interest in Subsidiary (Continued)                                     
-------------------------------------------                                     

For the quarter ended December 31, 2002, dividends of approximately $16,000 were
accrued for the Preferred Stock and were included in minority interest expense. 

The holders are not subject to any limitations on the number of conversions of  
Series C Preferred Stock or subsequent sales of the corresponding Markland      
common stock that they can effect, other than a prohibition on any holder having
a beneficial ownership of more than 9.999% of the outstanding shares of         
Markland's common stock.                                                        

Sale of Markland Common Stock                                                   
-----------------------------                                                   

In December of 2002, Markland sold 6,800,000 of its common shares for net       
proceeds of $340,000. In connection with this transaction, the Company          
recognized a gain of $340,000, which has been reflected in additional paid-in   
capital.                                                                        

Other Significant Common Stock Issuances During 2001                            
----------------------------------------------------                            

On January 31, 2001, the Company issued 5,574 shares of its common stock as     
consideration for consulting services performed by two consultants at $2.15 per 
share, totaling $12,000.                                                        

On September 6, 2001, pursuant to the Registration Statement on Form S-3 with   
the Securities and Exchange Commission, which became effective on February 14,  
2001, the Company issued 3,000,000 shares of its shelf-registered common stock  
to five individuals and one corporation at $.33 per share for $1,000,000.       

As of December 31, 2001, the Company issued 12,000 shares of its common stock as
consideration for consulting services performed by a consulting company for     
3,000 shares per quarter, totaling $9,655.                                      

In June 2001, the Company issued 120,000 shares of its restricted common stock  
at $.73 per share for consulting services, totaling $87,600.                    

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY (Continued)                         

Warrants                                                                        
--------                                                                        

As part of a consulting agreement with the Company's Chairman of the Board,     
during 2000 the Company granted warrants to purchase 375,000 common shares over 
the 5-year term of the agreement, of which 75,000 warrants become exercisable   
each year at exercise prices of $1.00, $2.00, $3.00, $4.00 and $5.00,           
respectively. In February 2002, the remaining unvested 150,000 warrants were    
cancelled.                                                                      

As part of an employment agreement with an officer, during 2000 the Company     
granted warrants to purchase 300,000 common shares over the 3-year term of the  
agreement, of which 100,000 warrants become exercisable each year, at exercise  
prices of $1.00, $2.00 and $3.00, respectively.                                 

Pursuant to the settlement of penalties related to convertible debentures, the  
Company issued to the placement agent warrants to purchase 250,000 shares of    
common stock at $3.00 per share. The warrants may be exercised over a four-year 
period ending March 2004. The warrants were valued at $250,000 and were charged 
to operations during the year ended December 31, 2000.                          

In April of 2000, as part of the sale of the Company's securities, a warrant to 
purchase 500,000 shares of the Company's common stock was issued at an exercise 
price of $10.00. The warrants are exercisable over a five-year period. On May   
18, 2001, the exercise price was reduced to $4.00, resulting in a charge to     
operations of $29,000 for the year ended December 31, 2001.                     

In June of 2000, two consultants were granted warrants to purchase a total of   
58,000 common shares at an exercise price of $1.00 per share. The warrants were 
valued at $204,718 and were charged to operations during the year ended December
31, 2000. The warrants are exercisable over a three-year period.                

During the year ended December 31, 2000, two consultants were granted warrants  
to purchase a total of 50,000 shares of common stock at an exercise price of    
$1.00. The warrants are exercisable over a six-year period. The warrants were   
valued at $78,125 and were charged to operations during the year ended December 
31, 2001.                                                                       

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY (Continued)                         

Warrants (Continued)                                                            
--------                                                                        

In January 2001, a consultant was granted warrants to purchase a total of       
150,000 common shares at an exercise price of $2.00 per share. The warrants are 
exercisable over a five-year period. The fair value of the stock warrants       
estimated on the date of grant using the Black-Scholes option pricing model was 
$0.94, totalling $141,000, which was charged to operations during the year ended
December 31, 2001.                                                              

In February 2001, a consultant was granted warrants to purchase a total of      
60,000 common shares at an exercise price of $3.00 per share. The warrants      
vested on the grant date and are exercisable over a five-year period. The fair  
value of the stock warrants on the date of grant using the Black-Scholes option 
pricing model was $.69, or $41,400, which was charged to operations during the  
year ended December 31, 2001.                                                   

On July 10, 2001, the Company elected an individual as a director of the Company
and as Co-Chairman of the Board. The Company agreed in connection with a        
consulting agreement the Company issued five-year warrants to purchase 500,000  
shares of the Company's common stock at $.70 per share, 50% issued upon signing 
the agreement and the balance issued quarterly over a 24-month period. The      
warrants are exercisable over a five-year period. The individual subsequently   
left the Board and became Chairman of the Advisory Board. The fair market value 
of the warrants on the date of grant using the Black-Scholes option pricing     
model was $.18, or $90,000, of which $66,868 were charged to operations during  
the year ended December 31, 2001. In June 2002, due to the resignation of the   
individual, warrants to purchase 166,667 shares of the Company's common stock   
were cancelled.                                                                 

On October 1, 2001, the Company granted a consulting company warrants to        
purchase 100,000 shares of its common stock at an exercise price of $.34. The   
warrants vested on the grant date and expire 10 years from the grant date. The  
fair value of stock warrants estimated on the date of grant using the           
Black-Scholes option pricing model was $.27, or $27,000, which was charged to   
operations during the year ended December 31, 2001.                             

On October 26, 2001, the Company granted a consulting firm warrants to purchase 
280,000 shares of its common stock between $1.00 and $5.00. The warrants vested 
on the grant date and expire five years from the grant date. The fair value of  
stock warrants estimated on the date of grant using the Black-Scholes option    
pricing model ranging from $.09 to $.20 totaled $38,000, of which $12,667 was   
charged to operations during the year ended December 31, 2001 and $25,333 was   
charged to operations during the year ended December 31, 2002.                  

On October 26, 2001, the Company granted a law firm warrants to purchase 75,000 
shares of its common stock at an exercise price of $.60. The fair value of the  
warrants estimated on the date of grant using Black-Scholes option pricing model
was $25,500 and were charged to operations during the year ended December 31,   
2001.                                                                           

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY (Continued)                         

Warrants (Continued)                                                            
--------                                                                        

In January 2002, in connection with the conversion of the February 1998         
convertible debentures, the Company issued warrants to purchase 500,000 shares  
of its common stock at an exercise price of $1.00. The warrants vested          
immediately and expire five years from the grant date. The fair value of stock  
warrants estimated on the date of grant using the Black-Scholes option pricing  
model was $390,000, which was charged to debt conversion expense during the year
ended December 31, 2002.                                                        

At December 31, 2002, the Company had outstanding warrants to purchase 3,231,333
shares of the Company's common stock at prices ranging from $0.34 to $5.00 per  
share.                                                                          

The following table summarizes the common stock warrant transactions during the 
three years ended December 31, 2002:                                            

                                                        [Enlarge/Download Table]

                                          Number of Warrants  Exercise Prices  Expiration Date
                                          -----------------   ---------------  ---------------
                                                                                              
Balance outstanding at January 1, 2000        1,171,250       $ .75 - $5.02    12/00 - 12/04  
  Granted                                     1,533,000       $1.00 - $5.00    03/04 - 10/07  
  Exercised                                    (320,000)      $1.06 - $2.30                   
  Cancelled/Expired                            (441,250)      $ .36 - $5.02                   
                                            ------------                                      
Balance outstanding at December 31, 2000      1,943,000       $ .75 - $5.00                   
  Granted                                     1,165,000       $ .34 - $5.00    01/06 - 10/11  
  Exercised                                           -                   -                   
  Cancelled/expired                                   -                   -                   
                                            ------------                                      
Balance outstanding at December 31, 2001      3,108,000       $ .34 - $5.00                   
  Granted                                     5,500,000       $ .05 - $1.00    09/04 - 01/07  
  Exercised                                  (5,000,000)              $ .05                   
  Cancelled/expired                            (376,667)      $ .70 - $5.00                   
                                            ------------                                      
Balance outstanding at December 31, 2002      3,231,333                                       
                                            ============                                      

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY (Continued)                         

Warrants (Continued)                                                            
--------                                                                        

The following table summarizes information about stock warrants outstanding at  
December 31, 2002:                                                              

                                                        [Enlarge/Download Table]

                                      Warrants Granted                   Warrants Exercisable   
                           --------------------------------------      -----------------------  
                                          Weighted      Weighted                      Weighted  
                                           Average      Average                       Average   
                             Number       Remaining     Exercise         Number       Exercise  
Ranges of Exercise Prices  Outstanding   Life (Years)    Price         Exercisable     Price    
-------------------------  -----------   -----------    --------       -----------    --------  
                                                                                                
              $ .34           100,000          10             $ .34      100,000          $ .34 
     $ .35 to $. 75           408,333          5.3            $ .64      408,333          $ .64 
     $ .76 to $1.00           863,000          4.9            $1.00      863,000          $1.00 
     $1.01 to $2.00           475,000          4.7            $1.84      475,000          $1.84 
     $2.01 to $3.00           585,000          4.6            $2.90      585,000          $2.90 
              $4.00           700,000           4             $4.00      700,000          $4.00 
              $5.00           100,000           5             $5.00      100,000          $5.00 
                            ----------       -----            ------  -----------         ------

                            3,231,333         4.9             $2.18    3,231,333          $2.18 
                            ==========       =====            ======  ===========         ======

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - STOCKHOLDERS' (DEFICIENCY) EQUITY (Continued)                         

Earnings Per Share                                                              
------------------                                                              

Securities that could potentially dilute basic earnings per share ("EPS") in the
future, and that were not included in the computation of diluted EPS because to 
do so would have been anti-dilutive for the periods presented, consist of the   
following:                                                                      

Common shares potentially issuable in connection          
with conversion of the Series A and B preferred       
         stock (see Note 13)                                         (A)

          Options to purchase common stock                           3,906,500

          Warrants to purchase common stock                          3,231,333

Repricing rights provisions under common stock            
            sales (see Note 13, Subsequent Events)                  10,000,000

                                                                    ------------
                                                                    17,137,833
                                                                    ============
Substantial issuances after December 31, 2002             
through April 1, 2003:                                

          Conversion of Series A Preferred stock                       703,800
                                                                    ============
          Private equity financing                                   5,500,000
                                                                    ============
          Settlement agreement                                         528,082
                                                                    ============

(A) The potential dilution of the Series A and Series B Convertible Preferred   
stock as of December 31, 2002 is not reflected above since as of March 27, 2003,
all Series A and Series B Convertible Preferred shares have been retired        
pursuant to an exchange agreement dated March 27, 2003 (see Note 13).           

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - STOCK OPTION PLANS                                                    

Stock Option Plans                                                              
------------------                                                              

The Company's 2002 Stock Option Plan was adopted by the Board of Directors of   
the Company on April 30, 2002 subject to stockholders' approval. Under the      
Option Plan, a total of 6,000,000 shares of the Company's common stock, subject 
to certain adjustments, are reserved for issuance upon the exercise of options. 
The Plan shall be administered by the Board or a Committee, or a combination    
thereof, as determined by the Board. The Plan may be administered by different  
administrative bodies with respect to different classes of participants and, if 
permitted by the applicable laws, the Board may authorize one or more officers  
(who may (but need not) be officers) to grant options to employees, outside     
directors and consultants.                                                      

The Company's 1995 Stock Option Plan was adopted by the Board of Directors and  
stockholders of the Company on November 12, 1995. The Company's 1999 Stock      
Option Plan was adopted by the Board of Directors during August 1999 and        
approved by the stockholders in June 2000. Under the Option Plans, a total of   
1,250,000 shares of the Company's common stock, subject to certain adjustments, 
are reserved for issuance upon the exercise of options. Options granted under   
the Option Plans may be either (i) options intended to constitute incentive     
stock options under Section 422 of the Internal Revenue Code of 1986, as        
amended, or any corresponding provisions of succeeding law (the "Code") or (ii) 
non-qualified stock options. Incentive stock options may be granted under the   
Option Plans to employees (including officers) of the Company or a subsidiary   
corporation thereof on the date of grant. Non-qualified options may be granted  
to (i) non-employees of the Company or a subsidiary thereof on the date of the  
grant, and (ii) consultants or advisors who do not provide bonafide services,   
and such services must not be in connection with the offer or sale of securities
in a capital raising transaction.                                               

By its terms, the Option Plans are to be administered by a committee (the       
"Committee") appointed by the Board of Directors which shall consist of either  
the entire Board of Directors, or by a committee of two or more persons (who may
or may not be directors), and who serve at the discretion of the Board of       
Directors. Subject to the provisions of the Option Plans, the Committee has the 
authority to determine the persons to whom options will be granted, the exercise
price, the term during which options may be exercised and such other terms and  
conditions as it deems appropriate.                                             

Any options granted under the Option Plans will be at the fair market value of  
the common stock on the date of the grant (or 110% of the fair market value in  
the case of employees holding ten percent or more of the voting stock of the    
Company). Options granted under the Option Plans will expire not more than ten  
years from the date of the grant subject to earlier termination under the Option
Plans. The term of an incentive stock option granted to a 10% shareholder shall 
be no more than 5 years from the date of the grant. The 1995 Option Plan will   
terminate on November 12, 2005 and the 1999 Option Plan will terminate in August
of 2009.                                                                        

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - STOCK OPTION PLANS (Continued)                                        

On August 28, 2000, the Company granted options to a Vice-President under the   
1999 Option Plan to purchase 75,000 shares of common stock. The exercise price  
is from $3.00 to $3.50, exercisable equally on the anniversary date over the    
next three years. These options expire in five years from the grant date.       

On December 1, 2000, the Company granted options to its General Manager of      
Business Development to purchase 12,500 shares of common stock. The exercise    
price is $4.00. The Options expire in five years from the grant date.           

During the year ended December 31, 2000, a retiring officer exercised options   
and purchased 50,000 shares of the Company's stock for $16,500.                 

In January 2001, the Company granted options to its Chief Operating Officer     
under the 1999 Option Plan to purchase 275,000 shares of common stock. The      
exercise price is from $2.50 to $3.50, with 50,000 vesting and exercisable      
immediately and the remaining 225,000 vesting and exercisable equally on the    
anniversary date over the next three years. These options expire in five years  
from the grant date.                                                            

In January 2001, the Company granted options to its former Chief Financial      
Officer under the 1999 Option Plan to purchase 100,000 shares of common stock.  
The exercise price is from $1.50 to $2.50, with 50,000 vesting and exercisable  
immediately and the remaining 50,000 exercisable on June 30, 2001. These options
expire in five years from the grant date.                                       

Options Granted Outside of the Plan                                             
-----------------------------------                                             

In February 2002, pursuant to employment agreements, two employees were issued  
non-qualified stock options to purchase a total of 2,300,000 common shares at an
exercise price of $.50 per share. The options are exercisable over a ten-year   
period. During August 2002, one of the above employees resigned, which by doing 
so forfeited his interest and rights to 1,300,000 non-qualified stock options.  

In February 2002, pursuant to a one-year consulting agreement, a consultant was 
issued non-qualified stock options to purchase a total of 1,000,000 common      
shares at an exercise price of $.50 per share. The options are exercisable over 
a ten-year period. The fair value of stock options estimated on the date of     
grant using the Black-Scholes option pricing model was $0.49, or $490,000, of   
which $423,894 was charged to operations during the year ended December 31,     
2002.                                                                           

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11- STOCK OPTION PLANS (Continued)                                         

In March 2002, in connection with legal services provided, the Company issued to
a law firm options to purchase 225,000 shares of common stock at an exercise    
price of $.44. The fair value of the stock options estimated on the date of     
grant using the Black-Scholes option pricing model was $0.21, or $47,250, which 
was charged to operations during the year ended December 31, 2002. The warrants 
are exercisable over a ten-year period and vested at the grant date.            

In April 2002, pursuant to a consulting agreement, a consulting company was     
issued non-qualified stock options to purchase a total of 249,000 common shares 
at an exercise price of $.28. The options vested at the grant date and are      
exercisable over a ten-year period. The fair value of stock options estimated on
the date of grant using the Black-Scholes option pricing model was $67,230,     
which was charged to operations during the year ended December 31, 2002.        

In May 2002, pursuant to a consulting agreement, a consultant was issued        
non-qualified stock options to purchase a total of 45,000 common shares at an   
exercise price of $0.31. The options vested at the grant date and are           
exercisable over a ten-year period. The fair value of the stock options         
estimated on the date of grant using the Black-Scholes option pricing model was 
$0.20, or $9,000, which was charged to operations during the year ended December
31, 2002.                                                                       

On May 3, 2000, the Company granted to its then Chief Operating Officer         
non-qualified stock options, outside of the Company's stock option plans, to    
purchase a total of 325,000 shares of common stock. Of the options granted,     
options on 25,000 shares vested immediately at $1.00 per share and 100,000      
shares will vest on each subsequent anniversary date at exercise prices of      
$2.50, $3.00 and $3.50, respectively. All stock options expire on May 2, 2010.  
The Company recorded a total of $187,750 as unearned stock compensation during  
the year ended December 31, 2000, based on the excess of the closing price of   
the common stock at the date of the grant over the exercise price of the        
options. The unearned stock compensation is being amortized over the vesting    
periods. During the years ended December 31, 2002, 2001 and 2000, the Company   
recorded $62,580, $62,580 and $41,723 of compensation expense related to such   
stock options, respectively.                                                    

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11- STOCK OPTION PLANS (Continued)                                         

A summary of the Company's stock option activity and related information for the
three years ended December 31, 2002 is as follows:                              

                                                        [Enlarge/Download Table]

                                                                                     Weighted 
                                                     Weighted       Outside the      Average  
                                 Under the Plans     Average            Plans        Exercise 
                                  Stock Options   Exercise Price    Stock Options      Price  
                                 ---------------  --------------  ----------------  ----------
                                                                                              
Balance at January 1, 2000             650,000         $ .69                 -      $      -  

Options granted:                                                                              
  In the 1999 plan                      87,500          3.57                 -             -  

Options granted:                                                                              
  Outside the option plan                    -             -           325,000          2.85  

Options exercised in the 1995                                                                 
  Plan                                 (50,000)          .33                 -             -  
                                    -----------        ------       -----------      -------- 
Outstanding - December 31, 2000        687,500          1.07           325,000          2.85  

Options granted:                                                                              
  In the 1999 plan                     375,000          2.72                 -             -  
                                    -----------        ------       -----------      -------- 
Outstanding - December 31, 2001      1,062,500         $1.65           325,000          2.85  

Options granted:                                                                              
  Outside the option plan                    -             -         3,819,000           .47  

Options cancelled:                                                                            
  Outside the option plan                    -             -        (1,300,000)         (.50) 
                                    -----------        ------       -----------      -------- 
Outstanding - December 31, 2002      1,062,500         $1.65         2,844,000       $   .75  
                                    ===========        ======       ===========      ======== 

                                                        [Enlarge/Download Table]

                                       Options Outstanding                   Options Exercisable  
                          -------------------------------------------       --------------------  
                                               Weighted                                           
                                               Average            Weighted                Weighted
                                               Remaining          Average                 Average 
                                              Contractual         Exercise                Exercise
Range of Exercise Prices    Shares           Life in Years         Prices    Shares        Prices 
------------------------  ----------         -------------        --------  ---------     --------
                                                                                                  
      $0.31 - $0.71        3,119,000              9.4              $0.52    3,119,000      $0.52  
      $1.00 - $1.50           75,000              5.3              $1.33       75,000      $1.33  
      $2.50 - $3.00          475,000              6.1              $2.75      400,000      $2.70  
      $3.50 - $4.00          237,500              4.6              $3.58       37,500      $3.67  
                           ---------                                        ---------             
                           3,906,500              8.6              $0.99    3,631,500      $0.81  
                           =========                                        =========             

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11- STOCK OPTION PLANS (Continued)                                         

At December 31, 2002, -0-, 137,500 and 6,000,000 options are available under the
1995 plan, 1999 plan and 2002 plan, respectively.                               

The weighted average fair value of exercised options during the year ended      
December 31, 2000 was $1.07.                                                    

As disclosed in Note 2, the fair value of options and warrants at date of grant 
was estimated using the Black-Scholes option-pricing model using the following  
assumptions:                                                                    

                                               Year Ended December 31,
                                             -------------------------------
                                            2002        2001        2000
                                             -------     -------     -------

Expected stock price                                      
         volatility                        130-143%       57%       138%
       Risk-free interest rate                   5%        5%         5%
Expected option life in                                   
           years                             10 years    5 years     3 years
       Expected dividend yield                0%           0%         0%

NOTE 12 -  COMMITMENTS, CONTINGENCIES AND OTHER MATTERS                         

Office Lease and Required Security Deposit                                      
------------------------------------------                                      

On August 30, 2000, the Company entered into a lease agreement for office space 
in Fairfax, Virginia for a period of five years. Under the lease agreement,     
annual rent approximates $224,000 subject to certain escalation adjustments. In 
connection with this lease, the Company is required to provide the landlord with
a stand-by letter of credit in the amount of $224,038. The stand-by letter of   
credit is to be renewed annually and at September 1, 2002, the Company did not  
renew this stand-by letter of credit.                                           

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 -  COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)             

Office Lease and Required Security Deposit (Continued)                          
------------------------------------------                                      

The Company's future minimum lease payments are as follows:                     

               Year Ending December 31,                     Amount
                -----------------------                   ----------

                         2003                             $  240,059
                         2004                                247,261
                         2004                                168,105
                                                          ----------
                              Total                       $  655,425
                                                          ==========

Rent expense for all premise operating leases was $255,299, $245,794 and        
$180,468 for the years ended December 31, 2002, 2001 and 2000, respectively.    

The landlord, SMII Fairfax, LLC, as of December 31, 2002, claims that the       
Company owes back rent of $59,562 which has been accrued by the Company. On     
February 14, 2003, the landlord filed suit in the Fairfax County General        
District Court alleging breach of contract for unlawful detainer. Without       
admitting or denying liability, the Company is currently negotiating with the   
landlord and expects a settlement in the near future.                           

Employment/Consulting Agreements                                                
--------------------------------                                                

During January 2001, the Company entered into an employment agreement with an   
individual to provide services as a general manager of its Nuclear and          
Environmental Division. The Company agreed to pay $175,000 annually, plus a     
five-year option to purchase 275,000 shares of common stock, at prices ranging  
from $2.50 to $3.50 per share.                                                  

On February 28, 2002, the Company entered into an employment agreement with its 
then Chairman, Don Hahnfeldt. Under the terms of the agreement, the Company is  
to pay to Mr. Hahnfeldt a salary equal to $15,000 per month, plus benefits. The 
agreement is for a term of two years and provides for a severance payment in the
amount of $180,000 and immediate vesting of all stock options in the event his  
employment is terminated without cause. Mr. Hahnfeldt was granted options to    
acquire 1,000,000 shares of the Company's common stock at an exercise price of  
$.50 per share, of which 500,000 vested at the grant date and the remaining     
500,000 shall vest equally over a 24 month period beginning March 1, 2002 and   
are exercisable only in the event that the Company increases the number of      
authorized shares of common stock to at least 130,000,000 shares. These stock   
options expire on February 28, 2012.                                            

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)              

Employment/Consulting Agreements (Continued)                                    
--------------------------------                                                

On February 28, 2002, the Company entered into a consulting agreement with one  
of the board of directors' companies, Verdi Consultants, Inc. Under the terms of
the agreement, the Company is to pay to Verdi Consultants, Inc. a consulting fee
equal to $15,000 per month plus benefits. The agreement is for a term of three  
years and provides for a severance payment in the amount of $180,000 and        
immediate vesting of all stock options in the event the consulting agreement is 
terminated without cause. Verdi Consultants, Inc. was granted options to acquire
1,000,000 shares of the Company's common stock at an exercise price of $.50 per 
share, of which 125,000 vested at the grant date and the remaining 875,000 shall
vest equally over a 24 month period beginning March 1, 2002 and are exercisable 
only in the event that the Company increases the number of authorized shares of 
common stock to at least 200,000,000 shares. These stock options expire on      
February 28, 2012. Commencing August 8, 2002, Verdi Consultants, Inc. has agreed
to defer $5,000 per month of its consulting fees subject to future cash         
availability.                                                                   

Employee Benefit Plan                                                           
---------------------                                                           

The Company adopted a non-contributory 401(k) plan effective January 1, 2000.   
The plan covers all employees who are at least 21 years of age with no minimum  
service requirements. The contributions to the plan for the years ended December
31, 2002, 2001 and 2000 totalled $15,537, $23,300 and $12,400, respectively.    

Effective February 13, 2003, the Company suspended its 401(k) plan.             

Software Development Agreement                                                  
------------------------------                                                  

In July 2002, the Company signed agreements and subsequently issued 4,000,000   
shares of common stocks to ipPartners, Inc., an affiliate of Trylon Metrics,    
Inc., for development of prototypes based upon the Company's Acoustic Core      
technology. These shares were valued at $600,000 and such amount was capitalized
as software development costs related to the Acoustic Core technology rights.   

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)              

Joint Technology Development Agreement                                          
--------------------------------------                                          

The Company entered into a Joint Technology Development Agreement (the "JTDA")  
with Logstor Ror A/S ("Logstor"), a Danish corporation, dated as of September   
24, 2002.                                                                       

The Company and Logstor will act as independent contractors to develop a foam   
incorporating the Company's proprietary HNIPU binder for use in pre-insulated   
pipes manufactured by Logstor. The Company and Logstor will initially           
collaborate to tailor the foam chemistry according to Logstor's specifications. 
Logstor has exclusive worldwide rights to specific defined markets to           
incorporate this technology into its product line and will pay the Company a    
royalty fee. In return for worldwide exclusivity, Logstor has committed to      
convert its production facilities to use of HNIPU in its product line based on  
successful achievement of the technical and cost criteria.                      

Pursuant to the JTDA, Logstor and the Company will jointly own all intellectual 
property rights resulting from work performed under the Agreement. The Company  
will retain sole ownership of rights to other forms, applications and markets of
HNIPU preceding and or independent of the Agreement.                            

Termination of Acquisition of Swissray International, Inc.                      
----------------------------------------------------------                      

The Company entered into a non-binding letter of intent with Hillcrest Avenue   
LLC ("Hillcrest") to acquire Hillcrest's majority controlling interest in       
Swissray International, Inc. ("Swissray") (OTC Bulletin Board: SRMI.OB) in an   
all stock transaction. Swissray is engaged in the design, manufacturing and     
marketing of proprietary direct digital radiography (ddR) technology. This      
technology is radiographic images in seconds and at a lower cost than           
conventional radiography.                                                       

During October 2002, both parties decided not to take any further actions       
regarding this acquisition.                                                     

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)              

Risk of Environmental Liability; Present Lack of Environmental Liability        
------------------------------------------------------------------------        
Insurance                                                                       
---------                                                                       

The Company's radioactive contaminant technology is subject to numerous national
and local laws and regulations relating to the storage, handling, emission,     
transportation and discharge of such materials, and the use of specialized      
technical equipment in the processing of such materials. There is always the    
risk that such materials might be mishandled, or that there might be equipment  
or technology failures, which could result in significant claims for personal   
injury, property damage, and clean-up or remediation. Any such claims against   
the Company could have a material adverse effect on the Company. The Company    
does not presently carry any environmental liability insurance, and may be      
required to obtain such insurance in the future in amounts that are not         
presently predictable. There can be no assurance that such insurance will       
provide coverage against all claims, and claims may be made against the Company 
(even if covered by insurance policies) for amounts substantially in excess of  
applicable policy limits. Any such event could have a material adverse effect on
the Company.                                                                    

Concentration of Credit Risk                                                    
----------------------------                                                    

The Company maintains cash balances in two financial institutions. The balances 
are insured by the Federal Deposit Insurance Corporation up to $100,000 per     
institution. From time to time, the Company's balance may exceed these limits.  
At December 31, 2002 and 2001, uninsured cash balances were approximately       
$113,000 and $718,000, respectively. The Company believes it is not exposed to  
any significant credit risk for cash.                                           

Business Risks                                                                  
--------------                                                                  

The Company requires additional funds to commercialize its technologies and     
continue research and development efforts. Until the commencement of sales, the 
Company will have no operating revenues, but will continue to incur substantial 
expenses and operating losses. No assurances can be given that the Company can  
complete development of any technology, not yet completely developed, or that   
with respect to any technology that is fully developed, it can be manufactured  
on a large-scale basis or at a feasible cost. Further, no assurance can be given
that any technology will receive market acceptance. Being a start-up stage      
entity, the Company is subject to all the risks inherent in the establishment of
a new enterprise and the marketing and manufacturing of a new product, many of  
which risks are beyond the control of the Company.                              

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - SUBSEQUENT EVENTS                                                     

Series A 3% Convertible Preferred Stock                                         
---------------------------------------                                         

On January 16, 2003, Woodward LLC converted 3,519 shares of Series A 3%         
Convertible Preferred stock with a liquidation preference of $351,900 into      
703,800 shares of common stock at a conversion price of $.50 per share.         

Private Placements                                                              
------------------                                                              

During January 2003, the Company entered into private placements with four      
individuals and sold 5,500,000 shares of the Company's common stock for a price 
of $.05 per share. The Company during December 2002 received advances against   
these private placements in the amount of $175,000. The Company recorded these  
advances at December 31, 2002 as an advance on sale of common stock.            

Settlement Agreement - Related Party                                            
------------------------------------                                            

On February 24, 2003, the Company entered into a creditor settlement agreement  
with a company owned by the Chairman of the Board. The Company agreed to issue  
528,082 restricted shares of the Company's common stock in satisfaction of      
$84,493 owed by the Company to Verdi Consultants, Inc.                          

Exchange Agreements                                                             
-------------------                                                             

On March 27, 2003, the Company entered into a license and exchange agreement    
with HomeCom Communications, Inc. ("HomeCom"). As part of the agreement, HomeCom
agreed to issue 11,250 shares of Series F Convertible Preferred stock of        
HomeCom, $.01 par value per share, which will represent, upon conversion, 75% of
the issued and outstanding shares of HomeCom stock, par value $.001 per share,  
subject to dilution related to common stock issuable upon conversion of         
HomeCom's outstanding Series B-E Convertible Preferred stock and warrants or    
options, and the Series G Convertible Preferred stock of HomeCom convertible    
into common stock. The Company has agreed to license the rights it owns to the  
EKOR, HNIPU and Electro Magnetic Radiography (EMR) technologies to HomeCom. The 
Company and HomeCom plan to file a proxy to authorize the issuance of the       
additional shares. Upon the closing of the sale of the HomeCom's exiting web    
hosting business (which also requires stockholder approval), the Company will   
have rights to majority control of the HomeCom Board of Directors and           
responsibility for the assignment of any new executive management positions in  
HomeCom. The proposed transactions are subject to the satisfaction of certain   
conditions set forth in the transaction documents.                              

On March 27, 2003, the Company entered into an exchange agreement with Markland.
As an owner of 239,927,344 restricted shares of Markland's common stock, the    
Company agreed to exchange 100 million shares of Markland's common stock for    
16,000 shares of Series D Convertible Preferred stock of Markland having a      
liquidation value of $16 million.                                               

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - SUBSEQUENT EVENTS (Continued)                                         

Exchange Agreements (Continued)                                                 
-------------------                                                             

The preferred stock is convertible into shares of Markland's common stock at a  
variable percentage of the then current market price, subject to certain        
adjustments. If the market price of Markland common stock is less than, or equal
to $0.05, it is convertible at 80% of the market price. If the market price is  
greater than $0.05, but less than or equal to $0.10, at 75% of the market value.
If the market price is greater than $0.10, but less than or equal to $0.15, at  
70% of the market price. And if the market price is greater than $0.15, at 65%  
of the market price.                                                            

Markland can redeem the Series D Preferred according to the following schedule. 
During the first 180 days after the closing, it can be redeemed at 120% of the  
stated value and accrued dividends. From 181 days until 270 days, it can be     
redeemed for 125% of the stated value and dividends. From 271 days and ending   
360 days after the closing, it can be redeemed for 135% of the stated value and 
dividends.                                                                      

On March 27, 2003, the Company entered into an exchange agreement with Woodward 
LLC. The Company agreed to cancel the obligation to issue Woodward LLC 10       
million shares of the Company's common stock due to the price reset, and in     
exchange for $1.069 million worth of HomeCom Series G Preferred stock. In       
addition, the Company agreed to retire all shares of its outstanding Series A 3%
Convertible Preferred stock held by Woodward LLC and the rights of Woodward LLC 
to receive shares of the Company's Series B 5% Convertible Preferred stock in   
exchange for 16,000 shares of Series D Convertible Preferred stock of Markland. 

Intellectual Property Sales Agreement                                           
-------------------------------------                                           

On March 5, 2003, the Company acquired from Polymate, Ltd. the remaining 1%     
ownership in the following technologies acquired or developed by Polymate, Ltd. 
- HNIPU, Firesel, RAD-Y, Rubcon, Electronic Glues, Liquid Ebonite Materials     
("LEM"), Kauton and Hypocorr. As part of the above March 27, 2003 license and   
exchange agreement with Homecom, Polymate, Ltd. will receive 1,500 shares of    
Homecom Series F Convertible Preferred stock for the relinquishment of its      
rights to the above technologies.                                               

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - SUBSEQUENT EVENTS (Continued)                                         

Acquisition of Ergo Systems, Inc.                                               
---------------------------------                                               

On January 14th, 2003, Markland completed the acquisition of Ergo Systems, Inc.,
a Virginia corporation ("Ergo") from Ocean Data Equipment Corporation, a        
Delaware corporation ("ODEC"). Markland agreed to pay ODEC $400,000 in cash,    
payable without interest over a period of one year. The purchase price was      
determined through arms-length negotiations, and was based on estimated future  
earnings from the contract.                                                     

Ergo's only asset is a US government General Services Administration multi-year 
contract to provide border security logistic support and product development    
services to the United States Government. Markland will continue to provide     
these support services to five US Border ports of entry in the states of        
California, Texas, Michigan and New York.                                       

New Compensation Agreements                                                     
---------------------------                                                     

Effective January of 2003, Markland entered into four new compensation          
agreements with its two officers and two consultants, which provide for         
aggregate monthly remuneration of $47,500.                                      

In addition, these agreements provide for the issuance of 7.07% of Markland's   
outstanding common stock and 2.4% of Markland's outstanding common stock, of    
which 4.67% is scheduled to be issued by October 31, 2003, and 2.4% is issuable 
after the first anniversary of the compensation agreements. Based on the total  
common shares outstanding as of December 31, 2002, a total of approximately     
21,705,000 shares of Markland's common stock are issuable under these           
compensation agreements.                                                        

On March 28, 2003, the Company entered into a two-year employment agreement with
Carey Naddell. Under the terms of the agreement, Mr. Naddell shall be the       
Company's Chief Operating Officer during the transition period which will be    
completed within three months. After that, he will assume the office of the     
President and Chief Executive Officer and any additional duties assigned by the 
Board of Directors. The Company agreed to pay a salary of $10,000 per month and 
1,000,000 shares of the Company's common stock.                                 

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - SUBSEQUENT EVENTS (Continued)                                         

Technology Purchase Agreement                                                   
-----------------------------                                                   

On March 19, 2003, Markland and ASI Technology Corporation, a Nevada            
corporation, ("ASI") entered into a Technology Purchase Agreement (the          
"Agreement"). Under the Agreement, ASI agreed to sell and Markland agreed to    
purchase certain assets relating to ASI's gas plasma antenna technology,        
including patents, patent applications, equipment, government contract rights   
and other intellectual property rights. The closing of the transaction will     
occur on the earlier of the date the last of the government contracts are       
assigned to Markland or ninety days after the date of the Agreement (June 17,   
2003). ASI will be responsible for the performance of its obligations under the 
contracts until they are assigned to Markland and will pay Markland all of its  
revenues from the contracts billed for periods after April 1, 2003. Markland has
agreed to use its best efforts to manage and administer the contracts during    
this period prior to closing and to pay ASI a fee of $2,500 per month for       
administrative support.                                                         

In consideration, Markland agreed to pay ASI $1,150,000. $150,000 in cash,      
$10,000, of which was paid on execution of the Agreement and $10,000 of which is
payable every thirty days following the date of execution of the Agreement until
the closing, at which time the remaining balance is due and payable. In addition
to the cash payment, Markland is required to issue to ASI, on closing,          
$1,000,000 worth of Markland common stock at the then current market price. In  
the event that Markland fails to register such stock on behalf of ASI, Markland 
will have to issue an additional $150,000 of stock to ASI.                      

ASI may be entitled to receive additional shares of Markland common stock in    
certain circumstances if Markland effects a reverse split of its outstanding    
stock within 18 months after the closing date, or if a registration statement   
for the shares is delayed.                                                      

In connection with the Agreement, ASI and Markland entered into a registration  
rights agreement entitling ASI to include its shares of Markland common stock in
future registration statements filed by Markland under the Securities Act of    
1933 in connection with public offerings of Markland common stock.              

Also in connection with the Agreement, ASI and Markland entered into a          
sublicense agreement pursuant to which ASI has sublicensed to Markland the right
to develop and sell products to certain government, military and homeland       
security customers in the United States and Canada using the Company's plasma   
sterilization and decontamination technology.                                   

The closing of the sale of the plasma antenna technology is subject to a number 
of conditions and the Agreement may be terminated prior to closing under certain
circumstances.                                                                  

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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - SUBSEQUENT EVENTS (Continued)                                         

Options/Warrants Cancellation Agreement                                         
---------------------------------------                                         

In March 2003, in order to assist the Company to raise additional working       
capital, the Company entered option/warrant cancellation agreements with three  
individuals cancelling 1,075,000 options with exercise prices ranging from $.50 
to $.71 and cancelling 525,000 warrants with exercise prices ranging from $1.00 
to $3.00. The Company agreed to issue those options and warrants back to three  
individuals once the filing of all necessary amendments to the Articles of      
Incorporation of the Company to authorize an increase in the number of          
authorized shares of common stock to at least 200,000,000 shares.               

Legal Settlement Agreement                                                      
--------------------------                                                      

On October 21, 2002, the Company's former legal counsel filed a Demand for      
Arbitration before the American Arbitration Association seeking $288,755 in     
alleged unpaid legal fees from the Company. The dispute was subsequently        
resolved pursuant to a Settlement Agreement dated April 15, 2003 pursuant to    
which the Company is to pay such counsel the sum of $310,581 by a combination of
cash and stock in accordance with a schedule and on the terms set forth in the  
Settlement Agreement. The satisfaction of this payment obligation is to occur no
later than by December 22, 2003. The entire settlement amount was accrued as of 
December 31, 2002.                                                              

NOTE 14 - QUARTERLY RESULTS (UNAUDITED)                                         

                                                        [Enlarge/Download Table]

                                                   Quarter Ended                                            
                          ------------------------------------------------------------------                
                             March 31          June 30        September 30       December 31    Total Year  
                          -------------     -------------     -------------     -------------  -------------
                                                                                                            
2002:                                                                                                       
-----                                                                                                       
Revenues                  $     55,585      $     23,236      $         --      $     10,000   $     88,821 
Net loss attributable to                                                                                    
common stockholders         (3,061,153)       (2,006,547)       (4,464,818)       (6,536,237)   (16,068,755)
Loss per share - basic                                                                                      
  and diluted (a)         $       (.05)     $       (.03)     $       (.06)     $       (.09)  $       (.23)

2001:                                                                                                       
-----                                                                                                       

Revenues                  $         --      $         --      $     10,215      $      8,160   $     18,873 
Net loss attributable to                                                                                    
  common stockholder        (2,901,268)       (2,332,679)       (2,462,801)       (1,063,487)    (8,760,235)
Loss per share - basic                                                                                      
  and diluted (a)         $       (.05)     $       (.05)     $       (.05)     $       (.04)  $       (.18)


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EUROTECH, LTD. AND SUBSIDIARIES 
(A Development Stage Company) 

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(a) Per common share amounts for the quarters and full year have been calculated
separately. Accordingly, quarterly amounts do not add to the annual amount      
because of differences in the weighted average common shares outstanding during 
each period due to the effect of the Company issuing shares of its common stock 
during the year.                                                                

  F-69

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SIGNATURES

    Pursuant to the requirements Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.                       

                      EUROTECH, LTD.

Date: May 6, 2003                           By: /s/ Don V. Hahnfeldt            
                                         -------------------------
                                      Name: Don V. Hahnfeldt
                                         Title:  CEO and President

    Pursuant to the requirements Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.   

                                                        [Enlarge/Download Table]

                PERSON                                   CAPACITY                     DATE  
                                                                                            

/s/ Don V. Hahnfeldt                                                                        
-----------------------------------  President, Chief Executive Officer and      May 6, 2003
     Don V. Hahnfeldt                Director (Principal Executive Officer)                 

/s/ Randolph A. Graves, Jr.          Vice President, Secretary, Chief Financial  May 6, 2003
-----------------------------------  Officer and Director (Principal Accounting             
     Randolph A. Graves, Jr.         Officer)                                               

/s/ Carey Naddell                                                                           
-----------------------------------  Chairman of the Board, Chief Operating      May 6, 2003
     Carey Naddell                   Officer and Director                                   

/s/ Leonid Khotin                                                                           
-----------------------------------                                                         
     Leonid Khotin                   Director                                    May 6, 2003

                               S-1

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 CERTIFICATION

I, Randolph A. Graves, Jr., hereby certify that:              

     1. I have reviewed the Annual Report on Form 10-K of Eurotech, Ltd.
(the "Registrant");                                                             

   2. Based on my knowledge, this annual 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 my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;         

         4. The Registrant's other certifying officers and I 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     
annual report (the "Evaluation Date"); and                                      

c) presented in this annual 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 and I 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 and I have indicated in
this annual report whether 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 6, 2003                                                               
                                           /s/ Randolph A. Graves, Jr.
                                             -----------------------------
                                       Randolph A. Graves, Jr.
                                             Vice President, Secretary and
                                       Chief Financial Officer

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 CERTIFICATION

I, Don V. Hahnfeldt, hereby certify that:                     

     1. I have reviewed the Annual Report on Form 10-K of Eurotech, Ltd.
(the "Registrant");                                                             

   2. Based on my knowledge, this annual 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 my knowledge, the financial statements, and other financial
information included in this Annual 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 annual report;         

         4. The Registrant's other certifying officers and I 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     
annual report (the "Evaluation Date"); and                                      

c) presented in this annual 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 and I 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 and I have indicated in
this annual report whether 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 6, 2003                                                               

    /s/ Don V. Hahnfeldt
                               -----------------------------------------------
Don V. Hahnfeldt
                               Chairman, President and Chief Executive Officer

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 EXHIBIT INDEX

     The following exhibits are filed with, or incorporated by reference
into, this Annual Report on Form 10-K.                                          

                                                        [Enlarge/Download Table]

                                                                                                             Location 
Exhibit                                           Description                                                Reference
-------                                           -----------                                                ---------
No.                                                                                                                   
---                                                                                                                   
                                                                                                                      
  2.1     Technology  Transfer Agreement dated July 13, 2001,  between Eurotech,  Ltd., and Trylon Metrics,           
          Inc.,                                                                                                  15   

2.1.1     Amendment,  dated October 3, 2001, to Technology  Transfer Agreement dated July 13, 2001, between           
          Eurotech, Ltd., and Trylon Metrics, Inc.,                                                              23   

3.1.1     Articles of Incorporation of Eurotech, Ltd. and amendment thereto                                       1   

3.1.2     Articles of Amendment adopted June 20, 2000 and corresponding Certificate of Amendment dated                
          June 21, 2000                                                                                          10   

3.1.3     Articles of Amendment to the Articles of Incorporation to state the terms of the Series A 3%                
          Convertible Preferred Stock dated February 1, 2002                                                     20   

3.2.1     Bylaws of Eurotech Ltd.                                                                                 1   

3.2.2     Amendment to Bylaws adopted February 23, 2000 to fix the number of directors at 5.                      9   

3.2.3     Amendment to Bylaws adopted on August 27, 2001 to fix the number of directors at 7                     23   

4.1       Form of Common Stock certificate                                                                        1   

10.1.1    License Agreement dated September 6, 1996 between Euro-Asian Physical Society and ERBC Holding,             
          Ltd.                                                                                                    1   

10.1.2    Sub-License Agreement dated September 16, 1996 between ERBC Holding, Ltd. and Eurotech, Ltd.                
                                                                                                                  1   

10.1.2.1  EKOR Agreement dated as of May 15, 2000 between Euro-Asian Physical Society and Eurotech, Ltd.              
          Modifying the EKOR license                                                                             12   

10.1.3    Agreement dated January 28, 1997 between Eurotech, Ltd. and Kurchatov Research Holdings, Ltd.               
                                                                                                                  1   

10.1.4    Memorandum of Intent among Chernobyl Nuclear Power Plant, I. V. Kurchatov Institute, Ukrstroj               
          and Eurotech, Ltd.                                                                                      1   

10.1.5    Agreement dated December 10, 1996 between Ukrstroj and Chernobyl Nuclear Power Plant (in past               
          filings, this agreement was identified as dated December 6, 1996 when in fact the agreement is              
          dated December 10, 1996)                                                                                1   

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10.1.6    Agreement dated December 11, 1996 among Ukrstroj, Eurotech, Ltd. and Euro-Asian Physical Society        1   

10.2.1    Technology Purchase Agreement between Eurotech, Ltd. and Oleg L. Figovsky                               2   

10.2.2    Technology Purchase Agreement between Eurotech, Ltd. and Oleg L. Figovsky                               2   

10.2.3    Technology Purchase Agreement between the Company and Oleg L. Figovsky                                  2   

10.2.4    Agreement dated February 27, 2000 between Eurotech, Ltd. and Oleg L. Figovsky (acquisition of               
          the rights to 49% of net profits)                                                                       8   

10.3      Preliminary EKOR (Component A)/Block Copolymer manufacturing licensing agreement between                    
          Eurotech, Ltd. and NuSil Technology                                                                     9   

10.4.1    Agency Contract dated May 19, 2000 between Eurotech, Ltd. and McPhee Environmental Supply              10   

10.4.2    McPhee Environmental Supply Cancellation dated March 14, 2001                                          12   

10.5.1    Share Purchase Agreement dated June 29, 2000 between Zohar Gendler and Eurotech, Ltd. (Rademate             
          Ltd.)                                                                                                  10   

10.5.2    Share Purchase Agreement dated June 29, 2000 between Technion Entrepreneurial Incubator Co.,                
          Ltd. and Eurotech, Ltd. (Rademate Ltd.)                                                                10   

10.5.3    Investment Agreement date July 23, 2000 between Sorbtech Ltd. and Eurotech, Ltd. (in past                   
          filings, this agreement was identified as "share purchase agreement" when in fact it is titled              
          "Investment Agreement")                                                                                10   

10.5.4    Investment Agreement entered into in May, 2000 between Amsil, Ltd. and Eurotech, Ltd.                  10   

10.6.1    Form of Agreement among Eurotech, Ltd., V. Rosenband and C. Sokolinsky, and Ofek Le-Oleh                    
          Foundation                                                                                              2   

10.6.2    Equity Sharing Agreement between the Company, V. Rosenband and C. Sokolinsky                            2   

10.6.3    Voting Agreement among Eurotech, Ltd., V. Rosenband and C. Sokolinsky                                   2   

10.7.1    Investment Agreement between Eurotech, Ltd. and Chemonol, Ltd.                                          2   

10.7.2    Equity Sharing Agreement between the Company and Leonid Shapovalov                                      2   

10.7.3    Voting Agreement between Eurotech, Ltd. and Leonid Shapovalov                                           2   

10.8.1    Agreement between Eurotech, Ltd. and Separator, Ltd.                                                    2   

10.8.2    Equity Sharing Agreement between Eurotech, Ltd. and Efim Broide                                         2   

10.8.3    Voting Agreement between Eurotech, Ltd. and Efim Broide                                                 2   

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10.9.1    Form of Agreement among Eurotech, Ltd., Ofek Le-Oleh Foundation and Y. Kopit                            2   

10.9.2    Equity Sharing Agreement among Eurotech, Ltd., Y. Kopit and V. Rosenband                                2   

10.9.3    Voting Agreement among Eurotech, Ltd., Y. Kopit and V. Rosenband                                        2   

10.10     Form of License Agreement between the Company and ERBC Holdings, Ltd.                                   2   

10.11.1   Cooperation Agreement between Eurotech, Ltd. and Forschungszentrum Julich GmbH                          2   

10.11.2   Agreement among Eurotech, Ltd., Forschungszentrum Julich and two other entities for the testing             
          of EKOR in Germany                                                                                      7   

10.11.3   Letters of cancellation of German EKOR testing agreement                                               12   

10.12.1   Convertible Debenture Purchase Agreement among Eurotech, Ltd., JNC Opportunity Fund, Ltd. and               
          Diversified Strategies Fund, L.P.                                                                       2   

10.12.2   Escrow Agreement among Eurotech, Ltd., JNC Opportunity Fund, Ltd. and Diversified Strategies                
          Fund, L.P. and Robinson, Silverman, Pearce, Aronsohn & Berman, LLP                                      2   

10.12.3   Registration rights Agreement among Eurotech, Ltd., JNC Opportunity Fund, Ltd. and Diversified              
          Strategies Fund, L.P.                                                                                   2   

10.12.4   Form of 8% Convertible Debenture Due November 27, 2000 issued by Eurotech, Ltd. to JNC                      
          Opportunity Fund, Ltd.                                                                                  2   

10.12.5   Form of 8% Convertible Debenture Due November 27, 2000 issued by Eurotech, Ltd. to Diversified              
          Strategies Fund, L.P.                                                                                   2   

10.12.6   Warrant No. 1 issued by Eurotech, Ltd. to JNC Opportunity Fund, Ltd.                                    2   

10.12.7   Warrant No. 2 issued by Eurotech, Ltd. to Diversified Strategies Fund, L.P.                             2   

10.12.8   Warrant No. 3 issued by Eurotech, Ltd. to Diversified Strategies Fund, L.P.                             2   

10.13.1   Convertible Debenture Purchase Agreement between Eurotech, Ltd. and JNC Opportunity Fund, Ltd.          2   

10.13.2   Escrow Agreement among Eurotech, Ltd., JNC Opportunity Fund, Ltd. and Robinson, Silverman,                  
          Pearce, Aronsohn and Berman, LLP                                                                        2   

10.13.3   Registration Rights Agreement between Eurotech, Ltd. and JNC Opportunity Fund Ltd.                      2   

10.13.4   Form of 8% Convertible Debenture Due February 23, 2001 issued by Eurotech, Ltd. to JNC                      
          Opportunity Fund, Ltd.                                                                                  2   

10.13.5   Warrant No. 3 issued by Eurotech, Ltd. to JNC Opportunity Fund Ltd.                                     2   

10.14.1   Debenture Purchase Agreement between Eurotech, Ltd. and JNC Strategic Fund Ltd.                         2   

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10.14.2   Form of 8% Convertible Debenture No.1 Due July 20, 2001 issued by Eurotech, Ltd. to JNC                     
          Strategic Fund Ltd.                                                                                     3   

10.14.3   Form of 8% Convertible Debenture No.2 Due February 23, 2001 issued by Eurotech, Ltd. to JNC                 
          Opportunity Fund, Ltd.                                                                                  3   

10.14.4   Warrant No. 4 issued by Eurotech, Ltd. to JNC Strategic Fund Ltd.                                       3   

10.14.5   Registration Rights Agreement issued by Eurotech, Ltd. to JNC Strategic Fund Ltd.                       3   

10.14.6   Amended and Revised 8% Convertible Debenture No.1 Due February 23, 2001issued by Eurotech, Ltd.             
          to JNC Opportunity Fund, Ltd.                                                                           3   

10.14.7   Amended and Revised 8% Convertible Debenture No.2 Due July 20, 2001 issued by Eurotech, Ltd. to             
          JNC Strategic Fund Ltd.                                                                                 3   

10.14.8   Amended and Revised 8% Convertible Debenture No.13 Due November 27, 2000 issued by Eurotech,                
          Ltd. to JNC Opportunity Fund, Ltd.                                                                      3   

10.14.9   Amended and Revised 8% Convertible Debenture No.14 due November 27, 2000 issued by Eurotech,                
          Ltd. to Diversified Strategies Fund, L.P.                                                               3   

10.14.10  Agreement dated February 25, 2000 regarding conversion price                                            8   

10.14.11  Agreement dated February 21, 2001 regarding extension of maturity                                      12   

10.15.1   Agreement between Eurotech, Ltd. and David Wilkes                                                       3   

10.15.2   Secured Promissory Note issued by Eurotech, Ltd. to JNC Strategic Fund Ltd.                             3   

10.15.3   Secured Promissory Note issued by Eurotech, Ltd. to David Wilkes                                        3   

10.15.4   Secured Promissory Note issued by Eurotech, Ltd. to David Wilkes                                        3   

10.15.5   Escrow Agreement among the Company, JNC Strategic Fund Ltd. and Encore Capital Management, L.L.C.       3   

10.15.6   Security Agreement by Eurotech, Ltd. in favor of JNC Strategic Fund Ltd. and David Wilkes               3   

10.15.7   Warrant issued by Eurotech, Ltd. to JNC Strategic Fund Ltd.                                             3   

10.15.8   Warrant issued by the Company to David Wilkes                                                           4   

10.15.9   Form of 8% Convertible Debenture Due Three Years from Original Issue Date issued by Eurotech,               
          Ltd. to JNC Strategic Fund Ltd.                                                                         4   

10.15.10  Employment Agreement between Eurotech, Ltd. and Frank Fawcett                                           4   

10.15.11  Disengagement Agreement between Eurotech, Ltd. and Frank Fawcett                                        7   

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10.16.1   Employment Agreement between Eurotech, Ltd. and Don V. Hahnfeldt                                        4   

10.16.2   Revised employment agreement between Eurotech, Ltd. and Don V. Hahnfeldt                                7   

10.17     Agreement dated September 9, 1999 between Eurotech, Ltd. and Peter Gulko (acquisition of KRHL               
          shares)                                                                                                 5   

10.18.1   Agreement dated as of November 30, 1999 between Eurotech, Ltd. and Kurchatov Research Holdings,             
          Ltd.                                                                                                    7   

10.18.2   Agreement dated June 20, 2000 between Eurotech, Ltd. and Advanced Technology Industries, Inc.               
          (formerly Kurchatov Research Holdings, Ltd.)                                                           10   

10.19     Agreement dated as of December 15, 1999 between Eurotech, Ltd. and Spinneret Financial Systems,             
          Inc.                                                                                                    7   

10.20.1   Common Stock Purchase Agreement dated December 31, 1999 between Eurotech, Ltd. and Woodward LLC         7   

10.20.2   Warrant issued by Eurotech, Ltd. to Woodward LLC on December 31, 1999                                   7   

10.20.3   Registration Rights Agreement dated December 31, 1999 between Eurotech, Ltd. and Woodward LLC           7   

10.20.4   Commitment Agreement ($22,000,000) between Eurotech, Ltd. and Woodward LLC                              7   

10.20.5   Escrow Agreement dated December 31, 1999 among Eurotech, Ltd., Woodward LLC and Krieger & Prager        7   

10.20.6   Common Stock Purchase Agreement dated as of March 1, 2000 between Eurotech, Ltd. and Woodward               
          LLC                                                                                                     9   

10.20.7   Common Stock Purchase Agreement dated as of April 24, 2000 between Eurotech, Ltd. and Woodward              
          LLC                                                                                                    10   

10.20.8   Registration Rights Agreement dated as of April 17, 2000 between Eurotech, Ltd. and Woodward LLC            
                                                                                                                 10   

10.20.9   Warrant issued by Eurotech, Ltd. to Woodward LLC on June 22, 2000                                      10   

10.20.10  Amendment Agreement dated June 29, 2000 between Eurotech, Ltd. and Woodward LLC, amending April             
          24, 2000 Common Stock Purchase Agreement and Registration Rights Agreement and December 31,                 
          2000 Commitment Agreement                                                                              10   

10.20.11  Amendment Agreement dated September 28, 2000 between Eurotech, Ltd. and Woodward LLC, amending              
          March 1, 2000 Common Stock Purchase Agreement                                                          11   

10.20.12  Modification Agreement dated as of February 28, 2001, amending March 1 and April 24, 2000                   
          Common Stock Purchase Agreements                                                                       12   

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10.20.13  Common Stock Purchase Agreement as of March 30, 2001 between Eurotech, Ltd. and Woodward LLC           13   

10.20.14  Registration Rights Agreement dated as of March 30, 2001 between Eurotech, Ltd. and Woodward LLC       13   

10.20.15  Modification Agreement dated as of May 18, 2001, amending March 1, 2000, April 24, 2000, and                
          March 30, 2001 Common Stock Purchase Agreements                                                        14   

10.20.16  Securities Purchase Agreement as of February 1, 2002 between Eurotech, Ltd. and Woodward LLC           20   

10.20.17  Repricing Rights Agreement dated as of February 1, 2002 between Eurotech, Ltd. and Woodward LLC        20   

10.20.18  Registration Rights Agreement dated as of February 1, 2002 between Eurotech, Ltd. and Woodward              
          LLC                                                                                                    20   

10.20.19  Letter Agreement dated December 28, 2001 between Eurotech, Ltd. and Woodward LLC                       20   

10.20.21  Private Equity Agreement dated February 22, 2002, between Eurotech, Ltd. and Jenks & Kirkland,              
          Ltd                                                                                                    21   

10.20.22  Registration  Rights Agreement dated as of February 22, 2002 between Eurotech,  Ltd. and Jenks &            
          Kirkland, Ltd.                                                                                         21   

10.20.23  Restated  Amendment To Repricing Rights Agreement And Securities  Purchase Agreement dated as of            
          May 7, 2002 between Eurotech, Ltd. and Woodward LLC                                                    24   

10.21     Technology Acquisition and Development Agreement related to Cypto.Com, Inc.                             9   

10.22.1   Investment Banking Consulting Agreement dated January 15, 2001 between Eurotech, Ltd. and                   
          Adolph Komorsky Investments, together with addendum thereto                                            12   

10.22.2   Cancellation of Investment Banking Consulting Agreement dated March 30, 2001 between Eurotech,              
          Ltd. and Adolph Komorsky Investments                                                                   13   

10.23.1   Consulting Agreement as of January 18, 2001 between Eurotech, Ltd. and Davis Manafort, Inc.            13   

10.23.2   Second Consulting Agreement dated April 25, 2001 between Eurotech, Ltd. and Davis Manafort, Inc.       13   

10.24     Consulting Agreement dated April 25, 2001 between Eurotech, Ltd. and Harborstone Financial                  
          Group, Inc.                                                                                            13   

10.25     Consulting Agreement dated March 23, 2001 between Eurotech, Ltd. and Robert Tarini/ip Partners         13   

10.26     Consulting Agreement dated October 22, 2001 between Eurotech, Ltd. and Race Rock Design Partners       18   

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10.27     Employment Agreement between Eurotech, Ltd. and Todd J. Broms dated February 28, 2002                  23   

10.27.1   Stock Option Grant for Broms Holding LCC dated February 28, 2002                                       23   

10.27.2   Employment Agreement between Eurotech, Ltd. and Don V. Hahnfeldt dated February 28, 2002               23   

10.27.3   Stock Option Grant for Don V. Hahnfeldt dated February 28, 2002                                        23   

10.27.4   Consultant Agreement between Eurotech, Ltd. and Verdi Consultants, Inc. dated February 28, 2002        23   

10.27.5   Stock Option Grant for Verdi Consultants, Inc. dated February 28, 2002                                 23   

10.27.6   Lease Agreement between SMII FAIRFAX, LLC and Eurotech, Ltd dated August 30, 2000                      23   

10.27.7   Consultant Agreement between Eurotech, Ltd. and EB Associates, LLC dated April 29, 2002                24   

10.27.8   Stock Option Grant for EB Associates, LLC dated April 29, 2002                                         24   

10.27.9   Technology  Development Agreement between Eurotech,  Ltd. and ipPartners,  Inc. dated as of July            
          24, 2002                                                                                               27   

10.27.10  Acknowledgment  and Release  Agreement by and between Eurotech,  Ltd, Trylon Metrics,  Inc., and            
          ipPartners, Inc. dated as of July 24, 2002                                                             27   

10.27.11  Letter Agreement between Eurotech, Ltd. and Trylon Metrics, Inc. dated as of July 24, 2002             27   

10.27.12  Letter  Agreement  by  and  between  Eurotech, Ltd., ipPartners, Inc. and Robert Tarini,                    
          individually dated as of July 24, 2002                                                                 27   

10.27.13  Joint Escrow Instructions Agreement dated July 30, 2002                                                27   

10.27.14  Letter Agreement between Eurotech,  Ltd. and Woodward LLC Suspending Certain  Obligations of the            
          Company Pending Negotiations of Definitive Restructuring Agreement                                     28   

10.27.15  Letter  Agreement  between  Eurotech,   Ltd.  and  Spinneret   Financial  Services   Terminating            
          Spinneret's Fees                                                                                       28   

10.28     Joint Technology Development Agreement between Eurotech, Ltd. and Lostor Ror A/S dated as of                
          September 24, 2002                                                                                     32   

10.29     USAF CRADA Number  02-263-AMWC-02  Cooperative  Research and Development  Agreement between USAF            
          Air Mobility Battlelab and the Company.                                                                35   

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10.30.1   Exchange  Agreement,  dated as of December 9, 2002 by and among the Company,  Crypto.com,  Inc.,            
          Markland  Technologies,  Inc., Security Technology,  Inc., and, solely with respect to Article V            
          and Article XI thereof,  ipPartners,  Inc. and, solely with respect to Article VI and Article XI            
          thereof, Markland LLC and James LLC.                                                                   35   

10.30.2   First Amendment to Exchange Agreement,  dated as of December 19, 2002, by and among the Company,            
          Crypto.com,  Inc., Markland Technologies,  Inc., Security Technology,  Inc.,  ipPartners,  Inc.,            
          Markland LLC and James LLC.                                                                            36   

10.30.3   Pledge  and  Security  Agreement,  dated as of  December  19,  2002,  by and among the  Company,            
          Woodward LLC and Krieger & Prager, LLP, as agent.                                                      36   

10.30.4   Assignment and Assumption  Agreement,  dated as of December 19, 2002, between  Crypto.com,  Inc.            
          and Security Technology, Inc.                                                                          36   

10.31     Termination and Modification to Repricing Rights Agreement (Common Stock)                                   
          by and between Eurotech, Ltd. and Woodward LLC, dated September 30, 2002                               33   

10.31.1   License and Exchange Agreement, dated as of March 27, 2003, by and between Eurotech Ltd.,                   
          Homecom Communications, Inc. and, solely with respect to Article V and Article XI thereof,                  
          Polymate, Ltd. and Greenfield Capital Partners LLC                                                     37   

10.31.2   Exchange Agreement, dated as of March 27, 2003, by and between Eurotech Ltd. and Markland                   
          Technologies, Inc.                                                                                     37   

10.31.3   Exchange Agreement, dated as of March 27, 2003, by and between Eurotech Ltd. and Woodward LLC               
          (relating to Markland Series D Stock)                                                                  37   

10.31.4   Exchange Agreement, dated as of March 27, 2003, by and between Eurotech Ltd. and Woodward LLC               
          (relating to HomeCom Series G Stock)                                                                   37   

10.32     Securities Exchange and Purchase Agreement by and between Eurotech, Ltd.                                    
          and Woodward LLC, dated September 30, 2002                                                             33   

10.33     Registration Rights Agreement, dated September 30, 2002                                                33   

10.34     Certificate of Designation of Eurotech, dated September 30, 2002                                       33   

16.1      Letter dated  September 10, 2002,  from Grassi & Co. CPA's,  P.C. to the Securities and Exchange            
          Commission regarding change in certifying accountants.                                                 31   

21.1      Subsidiaries of the Registrant                                                                          *   

99.1      Certification  Pursuant To 18 U.S.C.  Section  1350,  As Adopted  Pursuant To Section 906 Of The            
          Sarbanes-Oxley Act Of 2002 - Mr. Don V. Hahnfeldt, President and Chief Executive Officer                *   

99.2      Certification  Pursuant To 18 U.S.C.  Section  1350,  As Adopted  Pursuant To Section 906 Of The            
          Sarbanes-Oxley Act Of 2002 - Dr. Randolph A. Graves, Chief Financial Officer and Vice President         *   

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Legend:                                                                         
-------                                                                         

*        Filed herewith.                                                        

1        Incorporated by reference to such Exhibit filed with our registration  
  statement on Form 10 on file with the SEC, file number 000-22129

2        Incorporated by reference to such Exhibit filed with Pre-Effective     
     Amendment No. 2 to our registration statement on Form S-1, File No.
333-26673, on file with the SEC                               

3        Incorporated by reference to such Exhibit filed with our current report
         on Form 8-K dated August 3, 1998, on file with the SEC as of August 25,
1998                                                          

4        Incorporated by reference to such Exhibit filed with Post-Effective    
     Amendment No. 1 to our registration statement on Form S-1, File No.
333-26673, on file with the SEC                               

5        Incorporated by reference to such Exhibit filed by Peter Gulko with his
Statement on Schedule 13D                                     

6        Incorporated by reference to such Exhibit filed with our current report
on Form 8-K as of November 30, 1999, on file with the SEC     

7        Incorporated by reference to such Exhibit filed with Post-Effective    
     Amendment No. 2 to our registration statement on Form S-1, File No.
333-26673, on file with the SEC                               

8        Incorporated by reference to such Exhibit filed with our annual report 
         on Form 10-K for the year ended December 31, 1999, on file with the SEC

9        Incorporated by reference to such Exhibit filed with our quarterly     
        report on Form 10-Q for the quarter ended March 31, 2000, on file with
the SEC                                                       

10       Incorporated by reference to such Exhibit filed with our quarterly     
       report on Form 10-Q for the quarter ended June 30, 2000, on file with
the SEC                                                       

11       Incorporated by reference to such Exhibit filed with our quarterly     
       report on Form 10-Q for the quarter ended September 30, 2000, on file
with the SEC                                                  

12       Incorporated by reference to such Exhibit filed with our annual report 
         on Form 10-K for the year ended December 31, 2000, on file with the SEC

13       Incorporated by reference to such Exhibit filed with our quarterly     
        report on Form 10-Q for the quarter ended March 31, 2001, on file with
the SEC                                                       

14       Incorporated by reference to such Exhibit filed with our quarterly     
       report on Form 10-Q for the quarter ended June 30, 2001, on file with
the SEC                                                       

15       Incorporated by reference to such Exhibit filed on Form 8-K as of      
September 21, 2001 (filed with the SEC on October 5, 2001)    

16       Incorporated by reference to such Exhibit filed on Form 8-K as of      
October 5, 2001 (filed with the SEC on October 11, 2001)      

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17       Incorporated by reference to such Exhibit filed on Form 8-K as of      
November 9, 2001 (filed with the SEC on November 13, 2001)    

18       Incorporated by reference to such Exhibit filed with our quarterly     
       report on Form 10-Q for the quarter ended September 30, 2001, on file
with the SEC                                                  

19       Incorporated by reference to such Exhibit filed on Form 8-K as of      
December 30, 2001 (filed with the SEC on January 25, 2002)    

20       Incorporated by reference to such Exhibit filed on Form 8-K as of      
February 1, 2002 (filed with the SEC on March 1, 2002)        

21       Incorporated by reference to such Exhibit filed on Form 8-K as of      
February 22, 2002 (as filed with the SEC on March 5, 2002)    

22       Incorporated by reference to such Exhibit filed on Form 8-K as of March
29, 2002 (filed with the SEC on the same date)                

23       Incorporated by reference to such Exhibit filed with our annual report 
         on Form 10-K for the year ended December 31, 2001, on file with the SEC

24       Incorporated by reference to such Exhibit filed with our annual report 
      on Form 10-Q for the year ended March 31, 2002, on file with the SEC

25       Incorporated by reference to such Exhibit filed on Form 8-K as of May  
17, 2002 (filed with the SEC on the same date)                

26       Incorporated by reference to such Exhibit filed on Form 8-K as of June 
13, 2002 (filed with the SEC on June 17, 2002)                

27       Incorporated by reference to such Exhibit filed on Form 8-K as of 24   
July, 2002 (filed with the SEC on August 6, 2002)             

28       Incorporated by reference to such Exhibit filed with our quarterly     
        report on Form 10-Q for the year ended June 30, 2002, on file with the
SEC                                                           

29       Incorporated by reference to such Exhibit filed on Form 8-K as of 23   
August, 2002 (filed with the SEC on August 26, 2002)          

30       Incorporated by reference to such Exhibit filed on Form 8-K as of 26   
August, 2002 (filed with the SEC on August 30, 2002)          

31       Incorporated by reference to such Exhibit filed on Form 8-K/A as of 9  
September, 2002 (filed with the SEC on October 7, 2002)       

32       Incorporated by reference to such Exhibit filed on Form 8-K as of 24   
September, 2002 (filed with the SEC on October 7, 2002)       

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33       Incorporated by reference to such Exhibit filed on Form 8-K as of 25   
September, 2002 (filed with the SEC on October 7, 2002)       

34       Incorporated by reference to such Exhibit filed with our quarterly     
         report on Form 10-Q for the year ended September 30, 2002, on file with
the SEC                                                       

35       Incorporated by reference to such Exhibit filed on Form 8-K as of      
November 15, 2002 (filed with the SEC on December 13, 2002)   

36       Incorporated by reference to such Exhibit filed on Form 8-K as of      
December 19, 2002 (filed with the SEC on December 23, 2002)   

37       Incorporated by reference to such Exhibit filed on Form 8-K as of March
27, 2003 (filed with the SEC on April 7, 2003)                

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		8/1/14		78
		2/28/12		105		106
		5/2/10		102
		11/12/05		100
		5/15/05		78
		6/30/04		84
		3/31/04		4
		12/22/03		29		113
		11/30/03		87
		11/1/03		83
		10/31/03		111
		8/1/03		83
		6/17/03		112
		6/15/03		77
Filed on:		5/6/03		115		117
		4/23/03		30
		4/15/03		2		113
		4/7/03		128					8-K
		4/5/03		44
		4/2/03		5		40
		4/1/03		39		112
		3/28/03		111					NT 10-K
		3/27/03		5		128			8-K
		3/22/03		47
		3/19/03		112
		3/5/03		19		110
		2/24/03		109
		2/14/03		28		105			5,  SC 13G/A
		2/13/03		106
		2/1/03		77		83
		1/31/03		77					S-2/A
		1/22/03		31
		1/16/03		109
		1/3/03		31		36
For Period End:		12/31/02		1		113			5,  NT 10-K
		12/24/02		4		30
		12/23/02		45		128			8-K
		12/19/02		5		128			8-K
		12/17/02		4
		12/13/02		45		128			8-K
		12/12/02		4		92
		12/10/02		4		84
		12/9/02		80		125
		12/7/02		31		92
		12/4/02		83					3,  SC 13G
		11/26/02		4					8-K
		11/15/02		40		128			NT 10-Q
		11/1/02		83
		10/21/02		29		113
		10/8/02		88
		10/7/02		45		128			8-K,  8-K/A
		10/1/02		87					8-K
		9/30/02		30		128			10-Q,  8-K,  NT 10-Q
		9/25/02		45					8-K
		9/24/02		45		107			8-K
		9/10/02		125
		9/9/02		45					8-K,  8-K/A
		9/1/02		87		104
		8/30/02		127					8-K
		8/26/02		127					8-K
		8/23/02		36					8-K
		8/20/02		39		87
		8/8/02		106
		8/6/02		127					8-K
		8/1/02		83
		6/30/02		2		127			10-Q,  NT 10-Q
		6/17/02		127					8-K
		6/13/02		127					8-K
		6/1/02		41		43
		5/17/02		127					8-K
		5/7/02		123
		4/30/02		100
		4/12/02		91
		3/31/02		30		127			10-Q
		3/29/02		40		127			8-K,  DEF 14A
		3/5/02		127					8-K
		3/1/02		28		127			8-K
		2/28/02		39		106
		2/26/02		40
		2/23/02		84
		2/22/02		123		127			8-K
		2/1/02		44		127			8-K
		1/25/02		127					8-K
		1/9/02		31		92
		1/8/02		18
		1/1/02		64		66
		12/31/01		26		127			10-K,  10-K/A
		12/30/01		127					8-K
		12/28/01		83		123
		12/23/01		83
		12/11/01		18
		12/1/01		42
		11/30/01		42
		11/13/01		127					8-K
		11/9/01		127					8-K
		10/26/01		96
		10/22/01		123
		10/16/01		20
		10/11/01		126					8-K
		10/5/01		126					8-K
		10/3/01		11		118
		10/1/01		41		96
		9/30/01		30		127			10-Q
		9/25/01		17
		9/21/01		126					8-K
		9/11/01		6		24
		9/6/01		36		94			POS AM,  S-3/A
		8/28/01		42
		8/27/01		118
		8/8/01		39
		7/20/01		121
		7/13/01		118
		7/10/01		39		96
		6/30/01		30		126			10-Q
		5/18/01		95		123
		4/25/01		123
		3/31/01		30		126			10-Q,  NT 10-Q
		3/30/01		36		123
		3/23/01		123
		3/13/01		90
		2/28/01		122
		2/23/01		84		121
		2/21/01		121
		2/20/01		84					POS AM
		2/14/01		94					S-3/A
		1/31/01		94
		1/18/01		123
		1/15/01		123
		1/1/01		42		63
		12/31/00		34		126			10-K,  5
		12/1/00		101
		11/27/00		120		121
		11/5/00		42
		10/12/00		42		44
		10/1/00		44
		9/30/00		90		126			10-Q
		9/28/00		122
		9/19/00		19
		9/15/00		42
		9/5/00		90
		8/30/00		104
		8/28/00		42		101			8-A12B,  SC 13G
		7/23/00		119
		6/30/00		126					10-Q
		6/29/00		90		122
		6/20/00		118		122
		5/19/00		119
		5/15/00		118					10-Q
		5/3/00		42		102
		4/25/00		36
		4/24/00		90		123
		4/17/00		122
		3/31/00		126					10-K,  10-Q,  NT 10-K
		3/28/00		16
		3/2/00		36		90
		3/1/00		122		123
		2/27/00		19		119
		2/25/00		121
		2/23/00		118
		2/7/00		42
		2/4/00		14
		1/15/00		39
		1/6/00		37
		1/1/00		60		106
		12/31/99		36		126			10-K,  10-K/A,  NT 10-K
		12/15/99		122
		11/30/99		8		126			8-K
		11/24/99		13
		10/1/99		44					424B3
		9/9/99		122					POS AM
		9/1/99		41
		7/21/99		13
		7/15/99		41
		7/12/99		15
		7/7/99		39
		7/2/99		14
		5/16/99		18
		3/23/99		8
		2/4/99		39
		1/24/99		18
		1/14/99		13
		1/6/99		37
		1/1/99		58
		12/31/98		55		56			10-K405,  NT 10-K
		11/17/98		16
		9/23/98		17
		8/25/98		126					8-K
		8/3/98		126					8-K
		2/23/98		84
		1/23/98		39
		1/1/98		19		56
		12/31/97		53		86			10-K,  10-K/A,  NT 10-K
		12/25/97		13
		1/28/97		35		118
		1/1/97		54
		12/31/96		52
		12/11/96		119
		12/10/96		118
		12/6/96		118
		9/16/96		118
		9/6/96		118
		8/26/96		78
		6/1/96		51		52
		1/1/96		52
		12/31/95		51
		11/12/95		100
		5/26/95		4		68
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